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Is a ROT still relevant in real estate?

MAIN IMAGE: Jim Alexander, Area Manager of Property Time in Mossel Bay; André Kritzinger of Realtors Group

Danie Keet

“This practice, Restraint of Trade (ROT), is rotten, morally reprehensible, and in-humane. And I am being kind here, even ‘restrained’.”

These are the feelings of Jim Alexander, Area Manager of Property Time in Mossel Bay about a legal requirement restraining property practitioners from starting new careers.

According to Alexander, much has been written about ROT in the real estate industry from a legal or quasi-legal viewpoint. Sadly, there is much less that has been written from a moral viewpoint.

Alexander says the practice is disgusting and should be vehemently discouraged and banned by popular demand.

“In simple terms a ROT usually restrains someone in a geographical area and for a particular time-period. A typical ROT would be for a period of 6 months and cover a particular suburb, town or even an entire province, believe it or not. From a legal standpoint, ROTs can be valid and justified where the agency has a ‘protectable interest.’ For example, trade secrets and confidential information.

“The digital developments that have taken place in our industry, effectively mean that there are very few, if any secrets around and most buyers and sellers are known to many agents and agencies,” he argued.

Alexander says in reality there is nothing to protect.

“One could argue that customer loyalty is something to protect, that the agent leaving could take buyers and sellers with them to their new agency. Ironically, if the agency proffers this argument, they are effectively admitting that the high commission taken from the agent, based on the value of services provided and perceived customer attraction and retention because of the brand, is not justified.”

He says that while there might be some, it is his experience that many agency principals or managers do not  take into account the well-being of the agent, many of whom have worked tirelessly for the agency for an extended period of time and earned them lots of commission. How much consideration is given to their need to earn a living and provide for their families, is a question to be asked when considering this practice. The ROT is typically used as a blunt instrument to beat them emotionally and financially and threaten their livelihoods and seen as a great practitioner’s retention strategy.

“I would encourage every agent to check their contract to ascertain if there is a ROT clause included. And, if there is, either try to negotiate your way out of that particular clause or start planning your exit strategy from that agency now.

According to André Kritzinger of Realtors Group, a restraint of trade can very easily be perceived in a negative context, but the motive in implementing a ROT remains important in the property industry.

“I believe that a restraint of trade in an employment contract is good practice, not to forbid an agent from uprooting their career but to rather protect the company’s methods which enable the company to keep on providing their unique services to their valued clients.

“The main question however persists. Can enforcing a restraint of trade be morally justified? The answer is, yes it can, but it has to be implemented in an ethical manner which provides both the employer and employee with comfort once an employment contract has been signed,” Kritzinger says.

He says intellectual property (IP) can be protected by enforcing a restraint of trade, with the sole intention of protecting the company’s unique marketing methods, ways of working and factors that differentiates a real estate company from another local company, such as a unique CRM or CMA System.

Protecting the company’s IP in a vast business, including the property industry, has become essential, but in the same breath, providing practitioners with an environment to learn, grow and build on their knowledge, for them to be prepared for a future of which they can choose a direction they wish to prosper in. Richard Branson said it best, “Train people well enough so they can leave, but treat them well enough so they don’t want to.”

“The Realtors Group has a unique selling strategy that encourages our 57 + practitioners to work together and with 26 years of successfully selling properties, it has become important for us to implement a restraint of trade in order to protect our unique strategies, which in turn make Realtors who we are in today’s market,” Kritzinger concluded.

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