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Wednesday, September 12, 2007

Law - "Brokers welcome in Kentucky: Ruling opens state for real estate deals"

Here is a story the ILB missed last week -- the Louisville Courier Journal reported:

In a sweeping ruling that frees up Kentucky real estate to the national market, U.S. District Judge Charles R. Simpson III has overturned a state law banning brokers not licensed in Kentucky from doing deals in the state.

Kentucky was one of a handful of states, including New Jersey and Nebraska, with real estate "turf laws," restricting state-licensed brokers from sharing information or splitting fees with out-of-state brokers. * * *

The law that Simpson rejected as unconstitutional on Tuesday said an out-of-state broker could refer a client to a Kentucky-licensed broker, who would handle the transaction from that point. The law allowed a Kentucky broker to pay a referral fee to an out-of-state broker for passing on a client.

In ruling for plaintiffs River Oaks Management Co., a client of Marcus & Millichap, a national brokerage firm, Simpson wrote that the state prohibitions "constrain interstate commerce … isolating Kentucky from the national brokerage market."

The law was designed to protect consumers from unscrupulous or unlicensed brokers from outside Kentucky and is enforced by the five-member state Real Estate Commission, whose members are appointed by the governor to serve four-year terms.

Simpson suggested a remedy in his order. The judge wrote that Kentucky's goal "can be accomplished by requiring an out-of-state broker to partner with a Kentucky licensed broker who would oversee the transaction and be responsible for the actions of the out-of-state broker."

The WSJ Blog writes about the opinion this afternoon, in this entry, that concludes:
Believe it or not, this isn’t the only Kentucky dormant commerce clause we’re following. In its upcoming term, the Supreme Court will examine the constitutionality of a Kentucky law that exempts interest on bonds issued within Kentucky while taxing interest on most non-Kentucky municipal bonds. The case has major implications for the muni bond market, as most states with an income tax have similar laws.

Posted by Marcia Oddi on September 12, 2007 03:19 PM
Posted to General Law Related