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REAL ESTATE

Kickback suits may lead to $100 refunds

Brokerage firms settle litigation over hazard reports. They deny wrongdoing.

August 09, 2008|Peter Y. Hong | Times Staff Writer

Hundreds of thousands of Californians could be eligible for $100 payments under the proposed settlement of a class-action lawsuit against some of the nation's largest residential real estate brokerages. The lawsuit accused the real estate brokers of taking kickbacks from a firm that provides hazard reports for properties in areas with heightened risk of floods, fire, earthquakes and landslides.

The settlement agreement is pending final approval by a U.S. district judge in Los Angeles.

Similar allegations were made against the same firms by the U.S. Department of Housing and Urban Development.

On Friday, HUD announced a settlement with brokers Realogy Corp., Cendant Corp., Pickford Realty Ltd., HomeServices of California Inc. and Roch Enterprises, as well as the hazard report firm Property I.D. Corp. of Los Angeles.

The brokers were parent companies for real estate offices operating under the Coldwell Banker, Century 21, ERA, ReMax and Pickford brand names, said Barry Himmelstein, attorney for the class plaintiffs. HUD had alleged that the brokers and Property I.D. set up straw companies as a way to disguise kickbacks.

Brian Montgomery, assistant Housing secretary and federal housing commissioner, said the settlement "should be a warning to anyone who sets up sham affiliated business arrangements designed to collect improper referral fees that HUD is willing and able to seek these remedies in federal court."

The firms denied wrongdoing, but they agreed that natural-hazard reports are covered by the federal law prohibiting kickbacks in real estate closings.

Andy Gilford, Property I.D.'s attorney, said the settlement with HUD clarified an ambiguous law.

"We've long urged HUD to make a clear and unequivocal statement," Gilford said.

Attorneys for Realogy, the largest real estate brokerage in the country, could not be reached for comment.

The HUD and class-action lawsuits alleged that Property I.D. and the brokerages jointly set up the straw companies to produce the natural-hazard reports. The suits allege that the brokers received about $25 for every client steered to one of the companies.

The class-action settlement, which the firms and the plaintiffs have agreed to, would allow people who bought the reports with alleged hidden kickback fees to get a full refund -- typically about $100.

Himmelstein said that potentially hundreds of thousands could be eligible to file claims. The settlement, which could be as much as $35 million, covers transactions from 1996 to 2006, he said.

If the settlement is approved, a court-appointed administrator will mail claims applications to people who bought hazard reports and may be eligible for a refund. A toll-free telephone information number and a website will also be established, according to the settlement.

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peter.hong@latimes.com

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