Frequently Asked Legal Questions 

More detailed information on these topics and more is available through Tax & Legal MasterSource.

Prepared by Richard H. Mansfield
Mansfield & Associates

Edited by Tristan North
Worldwide ERC® Government Affairs Advisor
Current as of December, 2015


Q.  What areas of law are important for the mobility professional to be aware of?

That depends, in part, on the individual’s job function. In these FAQs we will look at the specialized topics which everyone should be aware of. Depending on one’s actual area of employment, more or less knowledge may be relevant. More detailed information on all of these topics can be found in Worldwide ERC®’s MasterSource. This knowledge is critical in two very important business areas: risk management and compliance.

Risk management refers to the knowledge of relevant laws, regulations, and court decisions which apply to business decisions. Many of these are discussed in these FAQs. For example, there are several federal regulations which mandate privacy and safekeeping of private, personally identifiable financial information, exactly the type of information normally collected by employee mobility programs. Identifying the information that a company collects, devising a program in accordance with the federal regulations, and overseeing its operation, are examples of risk management.

Compliance is similar to, but less broad than risk management. It is the business function which reviews operations and makes certain that the proper information, procedures, and record keeping, as called for in a risk management plan, are followed.
In most cases, non-lawyer mobility professionals need be aware of legal requirements of both kinds, and in many cases, may devise the risk management and compliance strategies. Complicated issues should be reviewed by counsel. However, even experienced corporate and outside counsels are often unfamiliar with the complexities and interrelations common in our industry.


Q. What are the privacy laws which apply to financial data collected during a relocation?

A. There are several federal requirements which apply to personal financial information collected from the transferring employee during a relocation, and during a pre-decision counseling program. The most familiar are those mandated by the Gramm-Leach-Bliley Act, which includes the Privacy Rule and the Safeguards Rule.

The Privacy Rule is the more restrictive of the two, and may not apply to every segment of the employee mobility industry. However, courts and regulators have interpreted them broadly, so a detailed analysis of coverage is appropriate in many cases. This rule is primarily aimed at allowing the owner of the personal financial information – the consumer – to determine collection and dissemination of his or her private financial data, and to inform the consumer about the steps the collecting entity has in place to protect that data.

The Safeguards Rule is much broader and arguably applies to any private financial information collected from an employee or a transferee. It is aimed at physically protecting both written and electronic records.

Finally, since January 1, 2011, a regulation called the Red Flags Rule, applies to private financial information collected from employees or transferees. This rule requires specific steps be taken to protect consumer financial information from identity theft.

Q. What are the requirements and coverage of the FTC Privacy Rule?

A. The Privacy Rule was designed to protect private financial information collected by “financial institutions”. However, for the purposes of this law, a financial institution is defined very broadly, and includes, for example, finance companies, mortgage brokers, non-bank lenders, account servicers, collection agencies, credit counselors and similar financial advisors, tax preparation firms, and investment advisors. Specifically-covered companies in our industry include mortgage brokers and real estate settlement services. Many relocation programs include aspects of these services. For example, a home sale program which includes bridge loans or equity advances may be covered. The Rule also covers non-public personal financial information which is collected from other, non-affiliated companies.

Once an organization has determined it is covered by this Rule, the company must establish three categories of internal policies: (i) to assure the security and confidentiality of non-public personal information, (ii) to protect against anticipated threats or hazards to the security or integrity of such information, and (iii) to protect against unauthorized access or use of such information which could result in substantial harm or inconvenience to a customer.

In our industry, the “consumer” or “customer” is a transferring employee and his or her family from whom the information is being collected. In many cases, the information is already in the corporate database. Nevertheless, by allowing a relocation department or relocation management company access to the data triggers the application of the Rule.

The required policies must be disclosed to new transferees and to all still in the program annually thereafter, in a “Privacy Notice”. Transferees must have the ability to “opt-out;” that is, to deny permission to share such information with unaffiliated third parties. It is not uncommon for transferees to attempt to keep their information from being shared beyond the entity collecting it, for all sorts of reasons. However, if the inability to share information with broker, for example, keeps a home sale program from operating, it is permissible to drop the employee from the program for this reason.

There are some exceptions to the opt-out provisions which permit sharing customer information with unaffiliated third parties regardless of customer consent; the most important is that the information may be shared with certain affiliated businesses or joint ventures of the collecting company, if the joint venture has in place the policies required by the Privacy Rule.

The best practice is to adopt policies under this Rule for any personal financial information collected by your company during a relocation.

For more information visit Gramm-Leach-Bliley Act, which includes the Privacy Rule and the Safeguards Rule

Q.  What are the requirements and coverage of the FTC Safeguards Rule?

A. Coverage of businesses by the Safeguards Rule is broader than the already-broad definition of financial institutions found in the Privacy Rule. According to the FTC, this Rule also applies to companies providing many other types of financial products and services to consumers. Among these services are lending, brokering or servicing any type of consumer loan, transferring or safeguarding money, providing financial advice or credit counseling, providing residential real estate settlement services (including brokers and other settlement service providers), collecting consumer debts and an array of other activities, including appraising real estate.

It does not apply to the federal government as an entity, but it does apply to government contractors supplying relocation services to government employees. Separately, the e-Government Act of 2002, the Privacy Act of 1974, and other laws and regulations require privacy and data protection an integral part of overall program management by the federal government itself.
The Safeguards Rule requires each covered institution to develop, implement, and maintain a “comprehensive information security program” that is “written in one or more readily accessible parts”, and that includes “administrative, technical and physical safeguards” to protect the security and confidentiality of customer records. It recognizes that each institution’s information security program will vary, based on its size and complexity, the nature and scope of its activities, and the sensitivity of the customer information.

Every organization collecting any type of private, non-public financial information from a transferring employee should have a strong safeguard policy in place, which should include policies for protecting physical files, notes, and hard information, as well as an IT program which is designed to protect electronic data. The plan must be written, there must be a designated administrator, and employees must be educated on its requirements.

For more information visit Gramm-Leach-Bliley Act, which includes the Privacy Rule and the Safeguards Rule

Q. What are the requirements and coverage of the FTC Red Flags Rule?

A. The basic requirements, not including the coverage, are defined by a statute which was already in place. The Rule is aimed at protecting consumers’ information from identity theft.

This Rule was developed under to the Fair and Accurate Credit Transactions (FACT) Act of 2003, not GLB. That law requires financial institutions and creditors with “covered accounts” to put in place identity theft prevention programs to detect, and respond to patterns, practices, or specific activities that could indicate identity theft.

The Rule defines a creditor as a business that regularly grants loans, arranges for loans or the extension of credit, or makes credit decisions; examples in the Rule include finance companies, mortgage brokers, and real estate agents. The complete definition is quite broad, and any company collecting financial or similar information should carefully review the Rule to ascertain whether it is a covered entity.

If a company determines it is subject to the Rule, it must then determine if it has “covered accounts”, of which there are two types. The first is a consumer account that is primarily for personal purposes involving multiple payments. Examples include: credit card accounts, mortgage loans, utility accounts, and checking accounts, among others. Although some relocation policies provide a miscellaneous expense allowance to be paid by credit or debit card, there are relatively few managed move activities which fall under this definition.

The second type of covered account is “any other account that a financial institution or creditor or maintains for which there is a reasonably foreseeable risk from identity theft, including financial, operational, compliance, reputation, or litigation risks.” Here the Rule is including single transaction consumer accounts that may be vulnerable to identity theft. Unlike consumer accounts designed to permit multiple payments – they are always “covered accounts” – other these types of accounts are “covered accounts” only if the risk of identity theft is reasonably foreseeable. Because it is difficult to determine whether a transaction is a foreseeable identity risk, these may be more common in our industry. Programs which include loans or equity advances, and companies which bill the transferee, either directly or through the employer are examples.

Once a company determines that it has covered accounts, the Rule requires that it adopt a written policy designed to 1) identify the red flags of identity theft that the company is likely to come across, 2) set up procedures to detect those red flags in its day-to-day operations, 3) if red flags are identified, the procedure must respond appropriately to prevent and mitigate any harm done, and 4) the procedure must be updated regularly and must include staff education.

The expansive definitions currently included in the draft Rule has brought many companies under its coverage. If there is doubt, it is always safer to err on the side of caution. That is good risk management.

For more information visit the FTC Red Flag Rules.

Q. What are the penalties for violating the Privacy Rules?

A. The FTC maintains an active enforcement posture, including a complaint hot line and website where consumers can notify it of alleged violations. The FTC has aggressively investigated several high profile violations, often in mortgage broker and other financial areas. The Gramm-Leach-Bliley Act provides for civil penalties for minor violations, and often these fines are accompanied with a promise on the part of the wrongdoer to adopt the proper privacy policies.

Perhaps the greatest risk, however, is that of a civil action brought by a person whose private financial information, or identity, has been stolen and used against his or her interests. Defending a case where the company which lost the data did not have the proper safeguards in place is much more difficult than defending one which has followed the FTC Privacy Rules.

Real Estate Settlement Procedures Act (RESPA)

Q. What is RESPA and why is it important?

A. Although there are several federal laws affecting U.S. domestic residential real estate transactions, the one which relocation practitioners most commonly deal with is the Real Estate Settlement Procedures Act (RESPA), which regulates “settlement service providers” providing services in a sale financed by “federally related mortgage” loans.

The Act regulates disclosure of settlement costs and fees, and referral and other fees paid among settlement service providers.
RESPA deals with disclosure by mandating that standardized forms are supplied to the buyer before and at settlement (closing).  The rules regarding referral fees (known as “kickbacks” when they are in violation of the Act) were not subject to the modifications, but have been changing by virtue of regulation and court cases over the years. 

The Dodd-Frank Wall Street Reform and Consumer Protection Act transferred enforcement of RESPA, TILA (Truth In Lending Act), and many federal consumer laws to the Consumer Financial Protection Bureau (CFPB) which officially began operations late in January 2012. RESPA had been enforced by the U.S. Department of Housing and Urban Development (HUD). The Bureau has taken an active role in investigating RESPA issues, and constitutes yet another reason for industry members to make certain their compliance mechanisms are in place and active.

While the CFPB enforces RESPA, states can enact their own laws regulating real estate settlements, so long as their laws are not less stringent than RESPA. Most states do have laws or regulations on real estate settlements but in the vast majority of cases, it is RESPA which applies.

RESPA also allows for two methods of enforcement in addition to the normal administrative enforcement powers inherent in the agency. The statute specifically provides that individuals may bring private law suits, including class action suits, against alleged violators; indeed the past decade has witnessed dozens of these suits, not all of which have been successful, of course. Since the statute authorizes the court to award treble (triple) damages and attorney fees to victorious plaintiffs, class action suits are common. In addition to authorizing civil suits, certain sections of the act carry criminal penalties for violations with fines up to $10,000 per violation, and imprisonment up to one year upon conviction.

Thus, it is clear that a basic knowledge of the mandates of RESPA is important to relocation professionals who deal with real estate transactions.

For more information visit U.S. Department of Housing and Urban Development (HUD) Releases Final Rule on RESPA Reform 

Q.  What real estate sales are covered by RESPA?

A. Almost all U.S. residential real estate transactions, including refinancing, are covered by RESPA because it regulates those which involve a “federally related mortgage,” defined as one which has one or more of the following characteristics: 1) a federally regulated lender, 2) a government-assisted lender (e.g., FHA, VA), 3) a lender which intends to sell the mortgage to a regulated agency, or 4) a Truth in Lending creditor. Basically this covers the vast majority of sales and refinancing, including home equity lines of credit and home improvement loans. Because of the breadth of coverage, it is easier to list those areas not covered; but even in these cases, any doubt should trigger a review by an expert.

For more information visit U.S. Department of Housing and Urban Development (HUD) Releases Final Rule on RESPA Reform

Q. Are there any exceptions to the RESPA requirements?

A. Yes.  Exempt from the RESPA requirements are:

  • cash sales
  • sales where the seller takes back the mortgage
  • rental property transactions (more than four units)
  • temporary financing (e.g., construction financing in most cases, but not construction to permanent loans)
  • vacant land
  • properties of 25 acres or more (even if there is a residence on it)
  • some mortgage assumptions and conversions (generally where the lender has no rights to approve the assumptions)
  • commercial and agricultural property.

For more information visit U.S. Department of Housing and Urban Development (HUD) Releases Final Rule on RESPA Reform

Q.  If the employer assumes the mortgage of a transferring employee, is this subject to RESPA?

A. No. In the relocation industry, it is common for the employer or Relocation Management Company (RMC) to guarantee and pay the mortgage of the transferring employee in a tax protected home sale transaction. In this case, the RESPA regulations do not apply to that transaction, although they do apply to the second sale of the property to the ultimate purchaser (unless one of the exemptions listed above applies).

For more information visit U.S. Department of Housing and Urban Development (HUD) Releases Final Rule on RESPA Reform

Q. Who is covered by RESPA?

 A. Although there may be many suppliers involved in the sale and purchase of a residence, RESPA only regulates settlement service providers. Further, in its regulation of “kickbacks”, it only regulates those settlement service providers which offer another settlement service provider a “thing of value” pursuant to an agreement or understanding. All settlement service providers, however, are subject to the disclosure requirements discussed below (to the extent they provide services and are compensated for them).

Settlement service providers include:

  • lenders
  • mortgage brokers
  • title companies and title insurers
  • closing services
  • real estate brokers
  • appraisers
  • home warranty companies
  • credit reporting agencies
  • home and pest inspection companies
  • other provider of services which apply to the actual transaction of sale.

Not included, as a general rule, are companies providing services after the closing and companies providing service or repair to the property.

For more information visit U.S. Department of Housing and Urban Development (HUD) Releases Final Rule on RESPA Reform

Q.  What disclosure requirements are required by RESPA?

New Disclosure Forms and Requirements

Mandatory effective October 3, 2015, a lender and/or broker must use the new “lending estimate” loan form which is provided to the borrower within three days of the of the borrower submitting the loan application.  This form replaces the early Truth in Lending statement as well as the Good Faith Estimate.  The lender must also use the new “closing disclosure” form which the borrower must receive at least three days before closing on the loan.  This form replaces the final Truth in Lending statement as well as the HUD-1 settlement statement.

For a sample copy of the “lending estimate” form please go to: and for a sample copy of the “closing disclosure” form please go to:

Many of the former disclosure requirements remain in effect with the new disclosure forms.  However, there are a few notable new requirements.  The “closing disclosure” statement must be provided to the borrower three days prior to the closing of the loan at the time of settlement on the home.  A new form needs to be issued and settlement potentially delayed if there is a significant change to the form.  Under the final rule, a significant change is defined as a rate change of one-eighth of one percent or more for loans with irregular payments or periods, a change in the product type or the addition of a prepayment penalty.  Also, the lender and settlement agent may decide amongst themselves as to which will provide the “closing disclosure” form at settlement with the lender responsible for the content.

The proposed rule on the new disclosure requirements had changes over $100 triggering the need for a new “closing disclosure” form and the lender being the only one who would provide the form at settlement. The proposed rule would have also required that lenders must maintain completed “loan estimate” and “closing disclosure” forms in a paper or electronic format that is machine readable.  The “machine readable” language as well as the “all-in” APR provision capturing the full cost of the loan were dropped in the final rule.

Disclosures before settlement occurs: 

An Affiliated Business Arrangement (AfBA) Disclosure is required whenever a settlement service provider involved in a RESPA covered transaction refers the consumer to a provider with whom the referring party has an ownership interest. The referring party must give the AfBA disclosure to the consumer at or prior to the time of referral. The disclosure must describe the business arrangement that exists between the two providers and give the borrower an estimate of the second provider's charges.

However, except in cases where a lender refers a borrower to an attorney, credit reporting agency or real estate appraiser to represent the lender's interest in the transaction, the referring party may not require the consumer to use the particular provider being referred.

The “Closing Disclosure” form is now the required standard form that lists all charges imposed on borrowers and sellers in connection with the settlement. RESPA requires that the borrower receives the form three days before the actual settlement. The lender or settlement agent must then provide the borrowers with a completed form based on information known to the agent at that time.

Disclosures at settlement:

The “Closing Disclosure” form shows the actual settlement costs of the transaction. Separate forms may be prepared for the borrower and the seller.   The Initial Escrow Statement itemizes the estimated taxes, insurance premiums and other charges anticipated to be paid from the escrow account during the first twelve months of the loan. It lists the Escrow payment amount and any required cushion. Although the statement is usually given at settlement, the lender has 45 days from settlement to deliver it.

Disclosures after settlement:

Loan servicers must deliver to borrowers an Annual Escrow Statement once a year. This document summarizes all escrow account deposits and payments during the servicer's twelve month computation year. It also notifies the borrower of any shortages or surpluses in the account and advises the borrower about the course of action being taken regarding them.

A Servicing Transfer Statement is required if the loan servicer sells or assigns the servicing rights to a borrower's loan to another loan servicer. Generally, the loan servicer must notify the borrower 15 days before the effective date of the loan transfer. As long as the borrower makes a timely payment to the old servicer within 60 days of the loan transfer, the borrower cannot be penalized. The notice must include the name and address of the new servicer, toll-free telephone numbers, and the date the new servicer will begin accepting payments.

For more information about current disclosure requirements, see U.S. Department of Housing and Urban Development (HUD) Releases Final Rule on RESPA Reform and Know_Before_You_Owe

Q. What are the tolerances allowed a lender when it provides the GFE to a borrower?

A. Perhaps the largest substantive change to RESPA in 2010 was the mandate that once a lender disclosed loan costs to a potential borrower, it could only change that estimate in certain circumstances and within certain limits.

The actual tolerances for variations in the GFE are specifically set out in the rule. Loan origination and lender costs are subject to a zero tolerance, i.e., they cannot be changed at all after the GFE is issued. Settlement services recommended by the lender are subjected to a ten percent tolerance between the issuance of the GFE and closing. Title charges are subject to this tolerance if the lender-recommended title company is chosen by the borrower. The tolerance applies to the sum of all the included settlement services. Individual services may exceed the tolerance as long as the total does not exceed ten percent. Recording fees are now part of the ten percent category while transfer taxes remain in the zero tolerance category.
However, the rule also provides a loan originator with an opportunity to cure any violation of the tolerance by reimbursing the borrower any amount by which the tolerances were exceeded. This reimbursement may be made at settlement or within 30 calendar days after settlement. In most cases, HUD expects that violations will be identified at or before settlement when completing the revised HUD-1 form, which provides a clear format for comparing the charges estimated on the GFE with those actually imposed at settlement.

For more information see, U.S. Department of Housing and Urban Development (HUD) Releases Final Rule on RESPA Reform and the Consumer Financial Protection Bureau.

Q. What are the anti-kickback prohibitions found in RESPA?

A. In addition to the disclosure requirements discussed above, RESPA contains strict prohibitions against the payment of unearned fee splitting and referral fees in section 8 of the Act, which also contains exceptions to the prohibitions.

Unearned fee splitting is defined by the Act as follows:

“No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section. The source of the payment does not determine whether or not a service is compensable. Nor may the prohibitions of this part be avoided by creating an arrangement wherein the purchaser of services splits the fee.”

A close reading shows that fees may be split so long as an actual good or service is provided; there is much law on the details of what exactly constitutes a proper payment for a good or service, and in some cases the Federal Circuit Courts are split on what is legal and what is not.

The Act defines a referral fee as:

“A referral includes any oral or written action directed to a person which has the effect of affirmatively influencing the selection by any person of a provider of a settlement service or business incident to or part of a settlement service when such person will pay for such settlement service or business incident thereto or pay a charge attributable in whole or in part to such settlement service or business. A referral also occurs whenever a person paying for a settlement service or business incident thereto is required to use a particular provider of a settlement service or business incident thereto. “

Basically, the law defines referral fees, a common form of business to business payment, as a “kickback”, and bans them among settlement service providers except in certain highly regulated circumstance.

Although the law and court cases involving referral fees becomes more complex in actual application, the basic rule is that there must be four elements in a business transaction for it to be an illegal referral fee: 1) it must involve a federally related mortgage, 2) it must consist of a settlement service, 3) a “thing of value” must be received for a referral, and 4) an agreement or understanding must exist that the “thing of value” is in return for a referral. Each of these terms have specific definitions based on the statute and court cases, which is one of the reasons that expert legal assistance is often required when examining specific cases. “Federally related mortgages” and “settlement services” have been defined above; a “thing of value” in practice means exactly what it says: anything of any value whatsoever is included.

Needless to say, there are several exceptions to the anti-referral fee prohibitions contained in section 8 of RESPA, the most common of which include payments to:

  • attorneys
  • duly appointed agents
  • promotional and educational activities
  • affiliated businesses
  • pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and real estate brokers (real estate referral fees).

Perhaps the most common of these exempted transactions in relocation transactions is the referral fee between brokers. Since broker-to-broker referral fees are a very common part of most domestic home purchase programs, making certain that the broker to broker nature of the fees paid is essential so as not to run afoul of RESPA.

For more information visit, RESPA Enforcement .

Q. What is an Affiliated Business Relationship?

A. Affiliated businesses are cross-owned companies which provide services to a home purchaser or seller during the sale; some of the most common are mortgage companies owned by a real estate brokerage, or loan servicers owned by banks.

Referral fees paid from one affiliated business to another are exempt from RESPA’s anti-kickback provisions. AfBAs are popular with consumers and settlement service providers because they can offer borrowers one stop shopping for settlement services, and lower costs; they also allow settlement service providers to be more efficient by integrating their activities in providing those services. However, they are highly regulated entities and subject to very high penalties if they are not in full compliance with RESPA regulations.

While the rules for setting up and running an AfBA are the realm of specialists, the basic rule is that the only thing of value which can be paid or transferred among affiliated business is a return on ownership interest, and then only if the following disclosures have been made in writing to the consumer: 1) the affiliation, 2) the cost of services of the affiliated provider, 3) that the consumer is not required to use the affiliated entity. In 1992 HUD cleared up some ambiguities: 1) an employer may pay an employee for referral activities to an affiliated entity and, 2) discounts or rebates to consumers to entice them to use AfBAs are permissible, but the relationship must still be disclosed.

Besides RESPA, the Dodd-Frank Financial Reform Act also affects how AfBas will need to be organized and operated. One of the most immediate changes was the transfer of regulation from HUD to the Consumer Financial Protection Bureau.

For more information visit, RESPA Enforcement .


Q. What is the Sarbanes-Oxley Act, and how does it apply to relocation?

A. Sarbanes-Oxley (SOX) is a law passed in 2002 which changed the governance structure of publicly traded companies, and put in place new accounting and disclosure regulations for those companies. It was the result of the bursting of the tech stock bubble in 2001. The law was intended to bolster public confidence in capital markets and imposed new duties and significant penalties for non-compliance on public companies and their executives, directors, auditors, attorneys and securities analysts.

In the ensuing decade, all publicly traded companies have adopted a SOX culture which varies from ultra conservative to basic compliance. Since the law makes the CEO and other senior officers and directors subject to personal liability and increased disclosure, the incentives for getting it right are large. Some companies have extended SOX requirements, especially those involving disclosure, to high-level employees not actually covered by the law. Bottom line here is to make certain to check with the corporate compliance officer, especially when hiring or relocating a high-level employee.

Two provisions of the act have application to the mobility industry, section 402(a) which prohibits loans to senior officers and directors, and section 404 which contains internal auditing procedures.

The internal audit provisions are of mostly historic interest, because they are in place in every covered company by now. They were of interest because for the first time, publicly traded companies were required to prepare and implement audit controls at a very granular level. The outside auditor needed to certify to the existence and effectiveness of those controls. The object was to make certain that the financial reports shown to shareholders are as accurate as possible. The anti-loan restriction still applies. Generally, it is unlawful for the company to extend credit to any director or executive officer.

For more information visit, How the Sarbanes-Oxley Act affects the relocation industry.

Q. Which employees does SOX apply to?

A. It applies to Executive Officers and Directors. The real issue is to determine who is an executive officer (Directors are easy to spot – they are listed as such on company documents). Most companies agree that executive officers are those individuals listed on the company’s form 10K or 10Q which are filed with the Securities and Exchange Commission (SEC), but others have included individuals one step below that level, primarily because there are other provisions relating to those officers that the company wishes to make transparent.

For more information visit, How the Sarbanes-Oxley Act affects the relocation industry.

Q. Are bridge loans or equity advances to executive officers prohibited by SOX?

A. Many companies give bridge loans or equity advances to transferring employees, and some advance reimbursable expenses to them via debit or credit cards. Since SOX prohibits extending credit to executive officers and directors, one needs to examine the structure of these programs.

Bridge loans, which come in and out of favor as the economy waxes and wanes, are generally accompanied by a note and may or may not have a market interest rate. Clearly they are an extension of credit, and should be avoided in executive director moves or hires, unless vetted and approved by corporate counsel.

Equity advances, however, are arguably not extensions of credit; rather they are the payment of estimated equity to the homeowner during a part of the home sale transaction. These are likely not prohibited. But corporate counsel should be asked whether there are additional prohibitions due to the company’s SOX culture.

Credit and debit cards used to fund miscellaneous expenses and other reimbursable costs of a relocation are generally not considered an extension of credit, rather a method of disbursing money provided to the transferring employee.
One additional note, later SEC rules which require public reporting of the fringe benefits of executive officers and directors specifically includes the requirement to report all relocation costs paid to or on behalf of that class of employee. Thus, there is more scrutiny and another reason to properly account for all relocation expenses of high-level corporate management.

For more information visit, an Employer’s Sarbanes-Oxley Checklist.

Pre-decision Counseling Programs

Q. Are there any legal issues to watch for in pre-decision counseling programs (PDC)?

A. Yes. But these programs, if set up properly, produce little legal risk. There are three general legal categories to monitor; state employment law, the type and coverage of the program, and special circumstances of a particular employee or group of employees.
Every state and the federal government have anti-discrimination laws which prohibit an employer from making a hiring, firing, or promotion decision on the basis of an improper, discriminatory motive. This is law familiar to all, so it needs to be discussed only in passing here. Anti-discrimination policies must be built into PDC programs, too. In the past, there were some concerns that mandatory PDCs – programs which made the move contingent on certain financial criteria – could be discriminatory because of the potentially larger impact on certain classes of employees. There is no evidence that this has ever been raised judicially, and so long as a mandatory program is applied fairly according to its terms, such a claim, would be hard to support, at best.

State employment law also comes to play; all states except Montana are “at will” employment states which mean that unless there is an employment contract with an employee (such as an executive contract or a union collective bargaining agreement), companies are free to hire and fire for any reason, except for discrimination. But what constitutes a “contract” varies from state to state. Some hold that an employee manual or similar document can be a contract, while others say that only a specifically signed document counts.

The majority hold that even though there is a detailed manual regarding hiring, firing, promotions, and compensation (including relocation) policies, this does not rise to the level of a contract. But there are circumstances where a handbook can become a contract in a growing number of states, especially if the employee was improperly counseled or promised that its terms are “like a contract”. HR counsel should know and can advise of the actual state case law in this regard, and should always be asked to look over any published policy, especially if it is a mandatory PDC program. And promises should be avoided during the actual counseling process.

Q. Does the type of pre-decision counseling program matter when looking at risk management?

A. Yes, to some degree. Risk management considerations can vary with the type of PDC, mandatory or consultative. The latter are the easiest to deal with. These are the programs in which the employer is offering financial and other counseling to an employee to help him or her determine the ramifications of a move. Many educated and successful employees just have no clue about the actual costs and administrative burdens currently associated with any move, especially a home sale. This type of counseling can also be used to introduce employees to the concepts of short sales, and the federal programs which may allow their mortgages to be reduced or bought down by the lender.

The mandatory programs are the ones which need special scrutiny, because they are programs which actually determine whether the employee is eligible for entrance into the home sale program. These are becoming much more prevalent due to the high cost of moves, especially with companies offering loss on sale benefits.

Here, the written policy (and there must be a carefully thought out and explained policy, in my opinion) should contain the proper disclaimers so that the employee understands that the policy is not a contract but a process to a decision. Other factors, such as the economy, other candidates, plant closures, and the like, may be a part of the decision. This should be fully explained in the policy and at the first spoken contact with the counselor. Large and bold type may be called for.

Q.  What about contract employees?

A. Some employees may belong to classes of employees whose employment relationship is impacted by outside agreements or laws. The relationship between the company and the employee is determined by the terms of the contract. Union collective bargaining agreements probably constitute the largest class. There are many companies which have in place mandatory PDC programs for union members, but these are set up within the collective bargaining agreement, and may be subject to grievance or other procedural safeguards, dependent on the agreement. Counsel must be consulted in these programs.

Another class requiring special policies is the Sarbanes–Oxley-covered executive officers and directors. Because that act limits or requires special federal disclosure of compensation to this class, counsel should be notified if in fact they are included in a PDC program. Fortunately there are very few SOX covered employees, and their needs are most often met with special contracts and programs.

Q.  Do the privacy rules apply to pre-decision counseling programs?

A. Yes. Both types of PDC policies are concerned with gathering detailed financial data from an employee. Because of this, the federal requirements on data security, including the FTC regulations arising out of the Gramm – Leach –Bliley Act, have to be observed. Most relocation policies have proper policies in place for the data of transferring employees, and they should not be overlooked for the PDC programs, too.

Real Property Condition Disclosure

Q. Home sale programs involve two distinct sales. What do I need to know about the process?

A. The purchase and sale of a transferring employee’s home is usually the single largest cost in a domestic relocation. The costs are somewhat offset by real estate referral fees (discussed elsewhere), but the fact that the employer or RMC purchases the employee’s house before it is sold to the ultimate purchaser adds a very important risk management checkpoint to any program. Many of the issues arise out of the condition of the house sold to the ultimate purchaser; especially in good real estate markets (remember them?)

Effective risk management becomes even more important because suits and claims regarding property condition form a large part of legal actions arising from domestic relocations.

Regardless of the type of home sale program, the employer or RMC ends up in title of the house, and will be the selling entity to the ultimate purchaser. This is true regardless of the deed process (one deed or two), or the program type (amended value, BVO, or a composite). The employer’s knowledge of the condition of the house is garnered through the inspection report, appraisal, reports from the listing agent, and perhaps the employee’s disclosure reports. However, the employer has no firsthand knowledge to pass on to the prospective purchaser, and the employer can indeed be held liable for errors and omissions in disclosing significant property condition issues to the buyer, even if the employer is unaware of them.

This is therefore a very important area for active risk management. The cost of a lawsuit can easily eat up any referral fee income, even before the outcome.

For more information visit, Property Condition Disclosure.

Q. What is the general law of property condition disclosure?

A. At one time in our history, the concept of caveat emptor ("let the buyer beware") almost universally applied to real estate sales. The theory was that a buyer should carefully check out the house and grounds before committing to buy the property. But even in those days, hidden defects or defects which were fraudulently concealed from the buyer would subject the seller to liability. The usual measure of liability was the difference in value of the property with and without the defect. However, for issues of fraud and knowingly concealed defects, the jury could add exemplary or punitive damages which might increase the award by multiple times.

Those exceptions to caveat emptor morphed into a legal climate which presently provides much more protection for the buyer than in the past, and concomitantly places a much larger burden on sellers to disclose facts about the house they are selling.
The most significant change in disclosure law has been the adoption by at least 38 states of mandated property condition disclosure forms. These forms are a required part of the home sale transaction and are generally quite comprehensive; in fact, many are more stringent than the court-made law. Even in states where there is no statutory requirement, local or state real estate or REALTOR® groups supply similar forms to their members.

In most states, however, the common law (court-made law deriving from lawsuits) also applies, and the errant seller is still subject to suits based upon fraud or intentional misrepresentation. In many cases, claims are still made based upon an allegation of fraud, but fraud is extremely hard to prove in court, and few successful, modern reported cases of fraud in real estate sales are found today.

Besides sellers, the disclosure liability applies to real estate brokers, too. Here’s where it gets tricky; while many states statutorily absolve brokers of any liability after ensuring that the seller’s statement is passed on; others, e.g. Arizona, California, Colorado, Maine, Ohio, and Wisconsin hold brokers to independent standards of conduct. The California statute requires that a broker “conduct a reasonably competent and diligent visual inspection of the property offered for sale and to disclose to the prospective purchaser all facts materially affecting the value or desirability of the property that an investigation would reveal…” Thus the details of disclosure requirements are based upon the law where the property is located, making risk management more complex. The current California disclosure package includes dozens of different disclosures.

For more information visit,  Property Condition Disclosure and Evolution of Disclosure Liability.

Q. What types of defects need to be disclosed to prospective buyers?

A. Most disclosure issues involve the physical condition of the property, or the ownership and title issues regarding it. Often construction materials, such as asbestos or defective building materials are present and need to be disclosed.

There are other, intangible issues which are coming to the public’s awareness and which could potentially affect the value of a residence. These fall under the rubric of “stigmatizing factors” and include, for example proximity to registered sex offenders, murders or other deaths in the house, and similar public notoriety factors.

Buyers in most markets routinely obtain their own home inspections prior to purchase, and inspection contingencies area common part of purchase contracts. While many sellers feel that the resulting report becomes simply another negotiating tool, nevertheless, it certainly eases the disclosure burden. That does not mean that the seller can rely on the inspection report to replace or supplement his or her disclosures, but it does raise the threshold for liability because the buyer has had the chance for an independent professional look at the property prior to purchase. Most employers and relocation management companies insist on contractual language encouraging the buyer to inspect.

States routinely add or subtract items from their mandated property condition disclosure statements; for example, in 2009, Illinois added a specific question regarding the seller’s knowledge as to whether the property had ever been the site of an illegal methamphetamine manufacturing operation. While these specific questions are often inserted by the legislature to highlight newsworthy issues which have surfaced in the state, all state-mandated disclosure forms have at least one general question which should require the disclosure of known issues such as methamphetamine manufacture on the premises.

The individual state forms are for the most part available on line, and are easy to download for study. Real estate brokers, of course, have the most current for use in their transactions.

For more information visit, Property Disclosure: Stigmatized Properties.

Q.  Are all state-mandated property disclosure forms the same?

A. No. But most are quite similar. There are two important things to remember about state-mandated property condition disclosure forms. The first is that while each state's form is different, they all must be filled out completely and used in every covered transaction. Generally, the real estate broker will ensure that the form is properly used. Second, unless the statute specifically states otherwise, the state law as determined by the courts still applies. Thus, in some cases, disclosures may have to be made in addition to those required on the state-mandated form.

All disclosure forms, whether state-mandated or voluntary, are completed by the seller, because the seller knows the most about the property. In some jurisdictions such as California, the broker has additional obligations based on his or her expertise; but even in this case, the seller provides the basic information.

In relocation transactions, however, the seller often is the corporate employer or the relocation management company (RMC), neither of which is actually familiar with the home. Thus, the disclosure must come from the transferring employee and be passed on by the employer or relocation management company to prospective buyers, along with a statement of repairs it has made and notification that it has not occupied the property. There have been several state cases upholding the principle that the employer or RMC will escape liability for defects unknown to them by passing on the transferring employee’s disclosure to them at or before the sale to them.

Oklahoma has approved a disclaimer form which is available to sellers who have not lived in the property for two years preceding the sale. Tennessee provides an exemption to its disclosure form for sellers who have not occupied the property at all. But, in general, the employer or relocation management company must present a property condition disclosure statement even if the period of ownership was very short, whether or not they have actually lived in the property.

Virginia and Maryland give the seller the option of providing a disclosure or a disclaimer, which states that the seller is selling the property “as is” and is providing no additional disclosures.

For more information visit, State Disclosure Standards: The Case Law 

Q.  How does the employer or RMC find out about the condition of the transferee’s house?

A. In order to properly make the disclosures, the employer or relocation management company must ask the transferring employee about the property. In regular home purchase transactions, where the employer will be the seller of inventory property, the employer or RMC needs a great deal of information concerning the property because, as a "professional" seller, it may be held to a higher obligations to buyers than an ordinary, non-commercial seller. At the very least, the employee must supply the employer or relocation management company with a fully executed state-mandated property condition report.

The majority of claims against sellers in the relocation context involve undisclosed defects. This alone should be sufficient incentive to find out as much about the house as possible, prior to its purchase from the employee and sale to the ultimate purchaser. Each claim by a disaffected buyer, for whatever amount, consumes resources and complicates the relocation process, both of which add cost and complexity to an already costly and complex process.

Additionally, since federal tax law demands that the amount paid to the transferring employee be determined on an arm's length basis, the employer or relocation management company needs a complete picture of the property in order to ascertain its current fair market value. This information also is useful in preparing a strategy to sell the property.

For more information visit, Evolution of Disclosure Liability 

Q.  Does the property disclosure requirement vary with the type of home sale program?

A. Not really. In amended value sales and buyer value option transactions (BVOs), there is no less need for disclosure information from the transferee. Here, the employer or relocation management company has even less of a chance to view the home, because its ownership period is briefer than when a house goes into inventory. In these cases, unless there is a statute to the contrary, the employer or relocation management company should include the transferee's disclosure to it in the disclosure package given to the ultimate purchaser. And it should include any other reports it may have received concerning the condition of the house, including inspection reports.

For more information visit:

Q. What is the rule on stigmatized properties?

A. One of the most complicated disclosure issues is the duty, if any, to discover and disclose facts about stigmatized property. Stigmatized property is usually described as associated with unusual, distressing intangible features such as proximity to registered sex offenders, murders, suicides or other deaths, or with the alleged presence of ghosts or “poltergeists”, as one court called them. However, there are two other classes of properties which should be included when discussing the disclosure of unusual conditions: environmentally stigmatized and construction stigmatized properties. The common denominator is a public perception that the properties are or may be less desirable than similar properties, due to the stigmatizing factor.

During a weak housing market any stigmatization may result in a large diminution of the value of the house. An occasionally seen legal claim is that the seller’s failure to disclose the stigmatizing information was a material misrepresentation or omission that warrants rescission, i.e., the court orders the house transferred back to the seller with all costs awarded to the buyer. Fortunately, published decisions dealing with rescission or misrepresentation claims based on property stigmatization are rare, perhaps because of the trend in state legislatures to address the issue statutorily.
For more information visit:

Q. Are there state statutes regarding stigmatized property?

 A. At least 24 states have adopted statutes directly addressing stigmatizing issues in one way or another.
Generally they deal only with stigmatization of the murder or poltergeist kind, and fall into two categories. The first, and easiest to describe is exemplified by South Dakota, which requires the disclosure of all known homicides or any other felony against a person that was committed on the property; it allows the purchaser to cancel the purchase contract based on the disclosure, and provides immunity from liability to the seller for truthful disclosure.

The second category generally removes any duty to disclose; e.g., a Tennessee statute states: “… no cause of action shall arise against an owner of real estate or a real estate licensee for failure to disclose that an occupant of the subject real property, was afflicted with HIV or other disease which has been determined by medical evidence to be highly unlikely to be transmitted through the occupancy of a dwelling place; or that the real estate was the site of an act … which had no effect on the physical structure of the real property, its physical environment or the improvements located thereon; a homicide, felony or suicide.” Other states’ statutes specifically list AIDS or communicable diseases as issues which need not or cannot be disclosed, and since AIDS is considered a disability under the Federal Fair Housing Act, its disclosure may constitute a violation of that law, too, regardless of the state statute.

None of these statutes relieve the seller and the agent from the duty of honestly responding to questions. Some suggest that the best course of action is not to respond to a question at all. In any case, an incorrect response gives the buyer a cause of action in most states, whether based on mistake or not

For more information visit:

Q. How about environmentally stigmatized houses?

A. While most statutes on stigmatized properties deal with the poltergeist factor, recently legislators have been looking at environmental factors as creating stigma. These issues can include toxic and chemical factors, both on and off property, and crime and similar neighborhood factors. Generally, the seller and agent must make a judgment based upon the law of the jurisdiction of the sale. In the majority of cases, it will probably entail deciding whether there are any potentially stigmatizing factors which must be listed in the “catch all” provisions found in almost all of the state-mandated disclosure forms, or in some states, whether disclosures in excess of the state-mandated form must be made.

For example, in a house is known to have been the site of a meth lab (manufacture of methamphetamine, and illegal drug), there is a real possibility of chemical contamination due to the use of toxic materials in the process. Since these chemicals and their potential residues are not readily discoverable to even the most diligent buyer, it is likely that this fact must be disclosed in just about every state. Effective 2009, Illinois became the first state to add a question regarding the known manufacture of methamphetamines to its mandated property condition disclosure report.

For more information visit, Effects on the Law of Disclosure of Environmental Hazards

Q. How about houses built with faulty construction products?

A. There is potential stigma based upon construction factors, for example, the presence of polybutylene pipe, which is known to deteriorate over time, and which was the subject of a billion dollar settlement between the manufacturers and a class action suit on behalf of homeowners whose houses were built using that type of water pipe. In this instance, the state disclosure statutes and common law must be examined as to the duty to disclose. The reality, of course, is that many state-mandated forms ask specifically for known or alleged defective construction materials, and buyers’ home inspectors are adept at listing the common ones. Basically, absent a direct question asked by the buyer or the state disclosure form, the decision should be based upon the general state disclosure law (as it applies both to the seller and broker).

That being said, it is not the stigma attached to those houses which detracts from their value, it is the replacement costs, and thus the loss in value, that forms the basis of most legal actions. For the most part, these issues become known because of class action lawsuits against product manufacturers.  As the case with defective imported drywall, the lawsuits are often settled with a small remuneration going to owners of houses affected by the deteriorating or substandard building material.

In all cases, it is extremely important for mobility risk management programs to be aware of, and to search for, houses built with defective materials before a house goes into a home sale program. At the least, the value of a home is certainly diminished by the presence of these materials, and in some cases such as defective drywall, the house may be worthless in a depressed market. No intelligent business decision can be made regarding these houses without accurate and current information regarding both the material and the market.

For more information visit: "Unhealthy Home" Issues: Asbestos Insulation and Building Materials

Q. How about houses built near or containing toxic or unhealthy materials?

A. Many courts have been reluctant to impose a very heavy burden on sellers for nondisclosure of minor defects because, in most cases, the damages suffered are small in relation to the value of the transaction. But where there are serious undisclosed structural defects, buyers can universally recover damages. Where the broker is in complicity with a deceiving seller, both can be found liable. The presence of unhealthy or toxic materials in a residence is, by anyone’s standards, a defect.

Fortunately there have been only a few reported cases involving the disclosure of allegedly toxic substances in relocation transactions. Most of the mold cases, for example, involve insurance claims or claims against condominium associations. They have not been filed against sellers. However, this does not mean that a thorough risk analysis should not be done regarding the testing for, and disclosing of the presence of toxic substances in relocation properties.

State-mandated property disclosure statements in almost every case provide a question concerning indoor and outdoor environmental pollutants. These questions themselves often cause more uncertainty than they cure because of the manner in which they are posed. As an example, the South Carolina form asks if the property has: “Environmental hazards (substances, materials or products) including asbestos, formaldehyde, radon gas, methane gas, lead-based paint, underground storage tank, toxic mold or other hazardous or toxic material (whether buried or covered), contaminated soil or water, or other environmental contamination?”

The question regarding whether the house has “toxic mold” present probably cannot be answered without an examination by an expert. Even if the seller knows that there is mold in the house – it can be found somewhere in most houses -- which mold, if any, are “toxic” is certainly outside of the knowledge of the average seller. A similar situation arises with regard to formaldehyde, especially since many new fabrics and carpets give off gas formaldehyde when they are new.

There is no obligation to test for these items. All the seller needs to do is disclose what he or she knows. The presentation of the honestly completed property disclosure form to the potential buyer does get the seller and real estate broker off of the hook. For this reason, among others, it is prudent for relocation policies to be certain that the employee’s disclosures are as accurate and thorough as possible, and that they are fully communicated to the ultimate purchaser, since the employer or RMC will be presenting the same disclosure to the buyer.

The bottom line is that environmental concerns have subtly changed the risk management equation because of the potential for real damage awards, making a careful review of disclosure policies an important business requirement. There are few, if any, cases where too much disclosure has resulted in a settlement or judgment. The same cannot be said of too little disclosure.

For more information visit:

Q. What are the federal requirements for lead paint disclosure?

A. To protect buyers from exposure to lead from paint, dust, and soil, Congress passed the Residential Lead-Based Paint Hazard Reduction Act of 1992, also known as Title X. This law mandates the disclosure of information on lead-based paint hazards before the sale or lease of most housing built before 1978.

Before ratification of a contract for housing sale or lease, sellers and landlords must: 

  • Give the buyer or renter an EPA information pamphlet lead-based paint hazards ("Protect Your Family From Lead In Your Home")
  • Disclose any known information concerning lead-based paint in the property. The seller or landlord must also disclose information such as the location of the lead-based paint and/or other lead-based paint hazards, and the condition of the painted surfaces
  • Provide any records and reports on lead-based paint and/or lead-based paint hazards which are available to the seller or landlord (for multi-unit buildings, this requirement includes records and reports concerning common areas and other units, if such information was obtained as a result of a building-wide evaluation)
  • Include an attachment to the contract or lease which includes a Lead Warning Statement and confirms that the seller or landlord has complied with all notification requirements.
  • Allow buyers a 10-day period to conduct a paint inspection or risk assessment for lead-based paint. The parties may mutually agree, in writing, to lengthen or shorten the time period for inspection. Buyers may waive this inspection.

There are several exceptions to the disclosure and contingency rules, all of which are not usually relevant to relocation transactions.

All applicable real estate contracts should have this contingency language built in, and the only issue centers around the construction date of the house.

Since this law has been on the books for almost two decades, the requirements have become ingrained in the selling process. However, there are civil fines and the potential for lawsuits if it is overlooked, thus its requirements should continue to be an important part of any risk management program.

For more information visit, "Unhealthy Home" Issues: Federal Lead Paint Disclosure Requirements

Q.  How does Megan’s Law affect property sales?

A. Many of the disclosure issues discussed in previous questions have involved physical or legal aspects of the property. However, there are other intangible, demographic or stigmatization factors which may have to be disclose, or which in some states cannot be disclosed. Megan’s Law provides the most cogent current example.

Megan’s Law, an amendment to the Violent Crime Control and Law Enforcement Act of 1996, requires that communities be notified when a convicted sex offender moves into a neighborhood.

Megan’s Law originally left states a fair amount of discretion in the manner of community notification, and, not surprisingly, there were several different responses. Then, in 2006 the Adam Walsh Child Protection and Safety Act was passed, amplifying some of those provisions. One section required the U.S. Department of Justice to create an Internet-based national sex offender database that allows users to specify a search radius across state lines. The result was the Dru Sjodin National Sex Offender Public Website which aggregates the data from states’ databases. Every state, the District of Columbia, Guam, Puerto Rico, and most U.S. tribes now have public Internet databases, although their features vary.

Regarding further disclosure of known convicted sex offenders during the real estate sale, some states such as Alaska, California, Louisiana, Montana and Virginia, require real estate brokers to direct buyers to the state websites. In Minnesota and Wisconsin, real estate agents have no duty to disclose any actual knowledge regarding offenders in the neighborhood if they provide timely written notification of state websites, while in Montana agents must disclose known information about sex offenders as well as information regarding the state website. In Ohio, the local sheriff is required to provide written notice to neighbors if a sex offender resides or intends to reside in the area. If an agent of broker has or receives notice from the sheriff’s office pursuant to this law, they are required to disclose this fact to the buyer in the purchase contract.

Some states have addressed the issue of an independent broker duty regarding notification of convicted sex offenders in the neighborhood; these include Arizona, Georgia, Michigan, Nevada, North Dakota, Oklahoma, Oregon, Pennsylvania, South Dakota and Texas. However, most state laws have not addressed the issue of whether the broker has an independent duty from that of the seller. This ambiguity has created concerns among some brokers in these states as to what their ultimate duty with respect to disclosure of sex offenders is or if there is any independent duty at all.

All sellers and brokers, of course, remain liable in every state for intentional misrepresentation.

The disclosure requirements for each state are likely to evolve over time; therefore, relocation professionals should rely on their real estate brokers for up to date information. And brokers must continually be aware of new cases or statutes which may affect their representation of sellers and of buyers. The best advice is to point buyers to the state resources when asked.

For more information visit: Megan's Law and Disclosure.

Government Contracts

Q. How are relocation services sold to the federal government?

A. The federal government buys relocation services in several ways, all subject to the complicated law of government contracts. Some agencies contract directly with service providers, others buy off a pre-negotiated and pre-approved “schedule”. Individual contracts can vary significantly, while the rules regarding the schedule are less complex and more homogeneous.

One of the reasons that federal programs are not patterned exactly after commercial policies is because by law, the federal government itself is not allowed to buy an employee’s home, which is the hallmark of commercial home sale programs. This results in a shift in risk to relocation contractors in declining real estate markets, because the prohibition also does not allow the government to indemnify the contractor for losses incurred as a result of the home sale.

Most federal agencies contract for relocation services through a blanket agreement – known as the Schedule – published by the GSA. Even those agencies which sign separate relocation management contracts often incorporate some or all of the Statement of Work (SOW) contained in the GSA schedule. The Schedule was first adopted in 1992, and has undergone some revisions since then.

In July 2009 the GSA released a complete revision of the Statement of Work for Home Sale Services (SIN 653-1) and customized Home Sale Services (SIN 653-5). The revised SOW incorporates flexible options for services and prices, and allows federal agencies to contract for services which more closely resemble those offered to private employers.

The SOW for Home Sale Services was revised to include four optional service/pricing groups which can be contracted for by an agency; each option is based on a different set of services provided by the relocation management company, which can now bid on a known basket of services. The options more closely follow commercial practices.

The SOW also provides for special properties and “one off” situations, similar to many commercial relocation management contracts.

The options, each of which presents a different cost to the agency and a different risk to the RMC, range from full AV programs where the RMC immediately purchases the transferring government employee’s home, to a program similar to an open ended BVO.

For more information visit, U.S. General Services Administration (GSA) - Revision to Statement of Work (SOW).

Q. Are federal government agencies required to include the SOW into their contracts with RMCs?

A. The Statement of Work gives specific instructions regarding relocation services. Ordering agencies, however, are permitted to tailor these instructions to meet agency-specific goals, as long as the tailoring does not change the scope or purpose and intent of the document. Tailoring may have an impact on the resultant price but the price charged may not exceed the GSA Schedule price. Examples of tailoring that are permitted include altering time frames and eliminating the equity advance. The following SOW requirements may not be changed: required use of appraisers authorized by the relocation management company, requirement for mortgage payoff under all pricing options for VA/FHA loans, prohibition to use auction properties as comparables in appraisals, and employee choice of mortgage lenders.

The SOW modifications summarized above are of course more detailed and must be studied in their entirety by those providing services under them. They are accompanied by a GSA pricing schedule which sets the maximum charges the government will pay.

For more information visit, U.S. General Services Administration (GSA) - Revision to Statement of Work (SOW).

Miscellaneous Issues

Q. Are there any laws affecting guerrilla marketing of relocation services through social media?

A. The use of social media, including blogs, Facebook, Twitter and whatever will come next has become a ubiquitous method of advertising for individuals and companies, sometimes intermixed in the same post. Ads mixed with discussions and analyses are commonplace in Worldwide ERC®’s discussion boards along with those throughout the Internet.
There are some basic risk management issues surrounding these activities, of course, but in general the risk is slight once the basics are followed.

Perhaps the first issue to address is a companywide social media policy. Usually these are integrated among all parts of a company, and are formulated in that way. They are as different as companies themselves, dealing with the use of the company’s name, endorsement of products, and the like. Warnings against defamation and product disparagement are also often included, depending on the company’s philosophy and policy.

From a risk management perspective, employees discussing their company’s products, and nonemployees who are paid or given things of value for endorsing them, need to be aware of the Federal Trade Commission’s (FTC) Guides Concerning the Use of Endorsements and Testimonials in Advertising, which became effective December 1, 2009. While the Guides are not law, they provide the FTC’s view of the law prohibiting deceptive and unfair practices in advertising.

In general, they require advertisers to provide greater disclosure of “typical” product performance, and of connections between endorsers and advertisers. They also make clear that endorsers as well as advertisers may be liable for misleading advertising.
The Guides recognize that endorsements appear on an array of nontraditional advertising media, including social networking sites, message boards, and the like. Endorsers using blogs, Twitter, Facebook, and other forms of social media are specifically mentioned, and they are expected to disclose a connection with the advertiser if one exists. Employees who endorse their company’s products should also disclose their relationship to the company in these forums.

One of the requirements of the Guides requires that advertisements that feature a consumer and convey his or her experience with a product or service as typical, when that is not the case, will be required to disclose the results that consumers can generally expect. In contrast to the 1980 version of the Guides – which allowed advertisers to describe unusual results in a testimonial as long as they included a disclaimer such as “results not typical” – the revised Guides no longer contain this safe harbor.

The revised Guides also add new examples to illustrate the long standing principle that “material connections” (including payments or free products) between advertisers and endorsers – connections that consumers would not expect – must be disclosed. These examples address what constitutes an endorsement when the message is conveyed by bloggers or other “word-of-mouth” marketers. They specify that while decisions will be reached on a case-by-case basis, the post of a blogger who receives cash or in-kind payment to review a product is considered an endorsement. Thus, bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. Likewise, if a company refers in an advertisement to the findings of a research organization that conducted research sponsored by the company, the advertisement must disclose the connection between the advertiser and the research organization. And a paid endorsement – like any other advertisement – is deceptive if it makes false or misleading claims.

Today, everyone spends part of his or her time advertising themselves, their company, or both. Keeping these rules in mind will keep the legal risk to a minimum.

Q. What is the Dodd-Frank Act, and how will it affect the talent mobility industry?

A. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act or DFA), is a comprehensive 2,000 page law that mandates an overhaul of the entire U.S. financial regulatory regime. Among its changes, it established a new independent Consumer Financial Protection Bureau (Bureau) within the Federal Reserve Board to oversee mortgages, credit cards and other financial products, creates a new Financial Stability Council to identify and regulate systemic risks posed by large, complex companies, products and activities before they threaten the stability of the economy, and establishes new regulations for the over-the-counter derivatives markets.

It directly affects the employee mobility industry in several key areas; it adds The Mortgage Reform and Anti-Predatory Act, a comprehensive regulatory process for residential mortgages – and their underwriting and terms -- to the existing requirements of the Truth in Lending Act; it places jurisdiction for policing the requirements of this Act, RESPA, and other mortgage and settlement related laws under the newly created Bureau; and it potentially regulates the financial instruments used in domestic real estate and home purchase programs.

The Act heavily regulates the mortgage industry as a part of its regulatory scheme, and both the statute and other regulations changed the manner and method that residential mortgages are structured, underwritten and sold. Regulatory compliance adds to the price of any mortgage product.

This legislation is, however, merely the end of the first phase of radically changing financial regulatory system. The Act delegated a significant amount of authority by requiring a series of rule makings by various federal agencies, including the U.S. Securities and Exchange Commission (SEC), the Federal Reserve Board (Federal Reserve or FRB), the Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC). Regulations will undoubtedly be forthcoming for years to come from these agencies.

It also regulates the appraisal industry and prescribes a joint licensing and registration scheme with the states to regulate appraisal management companies (AMCs), one part of which will require federal registration of most appraisers.
As a risk management issue, requires constant review of new regulations, opinions, and procedures.

For more information visit, Dodd-Frank Act

The foregoing is intended as general information only. Regarding your specific situation, Worldwide ERC® suggests that you consult with your own tax or legal advisor as appropriate.