Supreme Court rules against business that refers tenants

The Missouri Supreme Court upheld an order barring an apartment search website from accepting money for tenant referrals without a real estate license.

Now the founders of Kansas City Premier Apartments Inc. plan to appeal to the U.S. Supreme Court.

They are uplifted by the fact that two judges who dissented from the Tuesday ruling said the state’s restrictions run afoul of the First Amendment. Judge Michael A. Wolff and Chief Justice Richard Teitelman also likened the licensing of real estate businesses to a “state-created cartel.”

Kansas City Premier Apartments’ website connected rental property owners with hopeful tenants. Property owners paid KCPA for each new tenant who verified he or she was referred by the company. KCPA offered a $100 gift card to each prospect that resulted in a payment to the Kansas City business.

The Missouri Real Estate Commission sought to bar KCPA from performing some of its activities because the commission said it believed KCPA needed a real estate license.

A Platte County judge last year ordered KCPA to stop taking money for tenant referrals without a license and also ordered the business to stop giving $100 gift cards to signing tenants.

In its appeal, KCPA argued that its business fell under an exemption of Missouri real estate rules. The provision in question says a person can be exempt from holding a license if he or she is employed or retained to manage property for an agent or owner and if the person’s conduct is limited to certain activities.

Kansas City Premier Apartments co-owners Tiffany Lewis and Ryan Gran challenged the Missouri Real Estate Commission. File photo by Matt Frye

But Missouri’s high court ruled that KCPA’s “broad interpretation” of the exemption ignores the plain meaning of the broker statute. The court also said KCPA’s activities, such as offering the services of rental advisers, are not limited enough to fit under the exemption.

In its First Amendment argument, KCPA claimed the state is restricting the business from sharing knowledge of real estate and limiting a renter’s ability to receive this knowledge.

But the court, in an opinion written by Judge Zel Fischer, said KCPA did more than provide information and the business crossed over the line into activities limited to those who require a real estate license.

Agreeing with Fischer were Judges Patricia Breckenridge, William Ray Price Jr., Laura Denvir Stith and Mary Russell.

Dissenting, Wolff said the state’s restrictions violate the First Amendment. He also said the licensing provisions are analogous to “merchants’ guilds of medieval times” that serve to decrease competition.

“The Missouri legislature has limited the abilities of Missourians to make a living,” wrote Wolff, whose opinion Teitelman joined. “By providing licensed real estate agents with a government-sanctioned cartel or monopoly on realty information, it is limiting the quality and quantity of information provided to consumers.

“The state’s paternalistic view that only licensed real estate agents somehow possess accurate and valid information may be insulting to consumers and unlicensed persons but that is not the point — the point is that the regulation violates the First Amendment,” Wolff wrote.

But the Missouri Attorney General’s office, which argued against KCPA, indicated that the state has a responsibility in such licensing.

“The state has an interest in assuring that individuals engaging in the practice of skilled professions have the education and qualifications necessary to assure they can provide quality services to the public,” said spokeswoman Nanci Gonder, in a statement after the ruling. “The Attorney General’s office welcomes the decision.”

Dave Roland, the attorney representing KCPA, said the majority’s ruling is directly contrary to a number of recent U.S. Supreme Court decisions aiming to protect speech.

“The U.S. Supreme Court has held that the First Amendment protects nude dancing, burning the American flag, and images of animals being crushed to death,” Roland said in a statement Tuesday. “But today the Missouri Supreme Court has ruled that you can be thrown in jail for helping a friend find an apartment.”

Roland is providing free legal counsel for the KCPA owners on behalf of the Freedom Center of Missouri. The center, founded last year, aims to defend free speech rights.

As she prepares to take her case to the nation’s highest court, Tiffany Lewis, one of the KCPA founders, is still operating KCPA but with limited business activity in Missouri. The website is not offering any more gift cards to tenants in Missouri or collecting any payments from Missouri property owners.

Meanwhile, KCPA’s business on the Kansas side of the border is unaffected and has kept KPCA afloat during the ongoing legal battle that started in 2007, Lewis said.

“It’s been a real struggle because we’re operating for free on the Missouri side,” she said. “You can see where it can be a strain for a small business.”

Lewis said KCPA had to lay off five rental advisers and has just two now.

KCPA’s problems would not be solved if its owners did obtain real estate licenses. Among other obstacles, they would be prohibited from giving out the $100 reward to tenants if they had licenses, Roland said.

The case is Kansas City Premier Apartments, Inc. v. Missouri Real Estate Commission, SC91125.