There are unfortunate consequences that face brokerages and agents when the relationships between Association shareholders in a regional MLS go bad. They get caught in the crosshairs as the Association shareholders wage war with each other. In many regional MLSs, the governance, vendor agreements, and data rights were not spelled out well enough to enable the regional break up. As a result, the regional MLS becomes a toxic battle of in fighting between Association shareholders that cripples the MLS from functioning.
Writing good governance agreements for the regional corporation is very difficult. The best approach is to craft governance like a pre-nuptial agreement. It should articulate the rights of each shareholder in the event that they want to get out.
It is a good practice for regional MLS boards to review their governance each year. Consider it corporate hygiene. Create a battery of test cases and run them against your governance to see what rights each shareholder would have in the event of changes in state of each shareholders’ interest in the corporation. These are pretty easy scenarios to construct – shareholder mergers, shareholder corporate dissolution, shareholder withdraw, etc. Is there a buy out?
Agreements with vendors need to be in line with the rights of shareholders. All to often the vendor agreements do not support modifications in the event that there are shareholder changes that may impact the service. For example, if a shareholder wants to withdraw from and MLS but keep the service and data share, do they have the right to have the same terms without a modification to the existing vendor agreement?
Too often, regional shareholder agreements fail as a result of not respecting data rights. If an Association wants to leave a regional MLS, there is no pre-assigned provision for taking a copy of the data with them and data share going forward so as not to disrupt the MLS life of participants and subscribers. Does your MLS have a separation policy that allows shareholder Associations to take a copy of the data and go?
Even today, we see newly formed regional MLSs accepting governance structure that is well suited around the epic stories that make sense in creating the regional. What is missing is the divorce pre-nup. Take a careful look while your relationship is healthy to avoid paralysis in the future when relationships fail.