The use of social media sites to market real estate has exploded during the past several months. Social media offers an opportunity for instant, personalized two-way communication between developers, sales agents and prospective real estate purchasers. As the number of people using social media increases, so does the likelihood that companies engaged in real estate transactions will utilize social media as a secondary storefront or that representatives of such companies will discuss their real estate endeavors on social media. When used appropriately, social media can be an effective, inexpensive way to facilitate real estate transactions. Social media, however, also opens the door to legal liability. For example, if land sales laws are not followed, a brief entry could become the basis of a major lawsuit.
Legal issues are complex, in part, because the law has not kept up with advances in communications technology. This article provides a quick overview of the potential pitfalls and emphasizes the importance of a comprehensive training program and policy to minimize legal risks when using social media to market real estate.
Legal Representations
Social media entries by company representatives can be documented representations about real estate products. While companies can more readily control the content of printed brochures and Web sites, controlling the content of entries on Twitter or Facebook is more difficult. A company may have legal counsel reviewing marketing programs, but counsel is not likely reviewing every communication on a social networking site. Consumers expect a rapid response to social media, but if an agent posts a claim before verifying it, the result could be an unintentional misrepresentation that becomes problematic in future litigation.
No Jurisdictions
The sales and marketing of residential, resort and hospitality-related real estate is regulated by the Interstate Land Sales Full Disclosure Act and state land sales statutes. The increased interactivity of social media can lead to significant and unforeseen legal issues. For example, if a resident of New York, a jurisdiction with significant state land sales regulations and requirements, inquires about a real estate project in Florida on a Facebook page and detailed interaction follows on the page between the agent and the prospect, this could invoke New York’s jurisdiction into the offering of real estate.
In 1997, New York’s Office of the Attorney General issued guidelines that say a developer may advertise residential real estate over the Internet without registering them in New York only if, among other conditions, (i) the offer indicates, directly or indirectly, that the offer is not being made to residents of the state of New York, and (ii) the offer is not specifically directed to any person or entity in the state of New York. Under these guidelines, if open, back-and-forth communication between an agent of a developer and a New York resident occurs on Facebook or Twitter, this could be construed to be an offer that invokes the state law. Social media could lead to inadvertently invoking state land sales laws, which is why policies must be implemented to govern state land sales compliance. Also, to the extent practicable, real estate disclaimers should be incorporated as part of the social media communications. Finally, any representations that are documented on a social media site must be consistent with the terms of the project offering statement that may be required under applicable law.
Communications Policy
With the increased use of social media, every real estate company needs to have a social media networking policy and social media training for all employees. Policies and training sessions should be used to identify the personnel that are authorized to represent the company on social networking platforms and to restrict communications by employees about work-related items on their personal social networking sites. In litigation, items on the firm's social networking sites and the business communications of its employees could become the subject of discovery requests. This further emphasizes the importance of implementing a thorough policy and enforcing it consistently.
In this challenging real estate market, social networking sites offer a cost-effective opportunity to reach customers and inform them about real estate opportunities. If a company elects to make social networking part of its marketing program, it must understand and comprehend the legal significance of the communications made on the company’s behalf. Even if the firm is not engaging in social networking marketing, each employee should be informed of limitations on the use of social networking when communicating about work-related or industry-related items.
— Louis M. Oliverio focuses on distressed real estate and the development of resort, hospitality and healthcare properties in the Atlanta office of Epstein Becker and Green.