Non-Compete Clauses in Real Estate: Which States Ban Them Now?
In the competitive world of real estate, agents and brokers often rely on non-compete clauses to protect their business interests. These clauses prohibit real estate professionals from working for a competing company for a certain period of time after leaving their current agency. However, not all states allow the use of non-compete clauses in real estate contracts. In fact, some states have banned them altogether. So, which states currently have a ban on non-compete clauses in the real estate industry? Let’s take a closer look.
The Controversy Surrounding Non-Compete Clauses in Real Estate
The use of non-compete clauses in the real estate industry has been a subject of controversy for many years. On the one hand, proponents argue that these clauses protect the investments made by agencies in their agents and brokers, while also preventing them from sharing trade secrets with competitors. On the other hand, opponents argue that these clauses restrict competition and limit job opportunities for professionals in the industry.
Despite the ongoing debate, several states have taken action to regulate the use of non-compete clauses in real estate contracts. Let’s explore which states have banned them completely.
The States with a Ban on Non-Compete Clauses
California
In 2016, California became the first state to pass a law that banned non-compete clauses in all industries. This includes the real estate industry. The law, which is known as the “California Business and Professions Code §16600”, states that “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” This means that any non-compete clauses entered into by real estate professionals in California are unenforceable.
Oregon
Six years later, Oregon followed suit and passed its own “Oregon Revised Statute 653.295”. This law prohibits employers from enforcing non-compete clauses for employees who earn less than the median income for a family of four in Oregon. This typically includes real estate professionals and other low-wage workers.
Colorado
In 2018, Colorado passed the “Colorado Revised Statutes §8-2-113”, which limits the use of non-compete clauses in real estate contracts. The law states that these clauses are only enforceable if the employee is a sales person, an executive, or a manager of a company. Real estate agents and brokers, who are typically not considered sales people or executives, are therefore not subject to the restrictions of non-compete clauses in Colorado.
North Dakota
North Dakota also has a ban on non-compete clauses that was implemented in 2019. The “North Dakota Cent Code §9.08.06” states that “every contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is to that extent void.” This law applies to all industries and prohibits the use of any type of non-compete clauses, including those used in real estate contracts.
Conclusion
While the debate over the use of non-compete clauses in the real estate industry continues, the trend seems to be moving towards a ban on these restrictive contracts. In addition to the states mentioned above, other states such as Illinois, New Hampshire, Oklahoma, and Texas have also enacted laws that restrict the use of non-compete clauses in certain industries. As real estate professionals, it is important to stay informed about the laws and regulations in your state regarding non-compete clauses, to ensure that your rights and job opportunities are protected.
In conclusion, non-compete clauses in real estate contracts are becoming less prevalent, as an increasing number of states move towards banning them. If you are a real estate professional, it is important to consult with a legal professional before signing any non-compete clauses to ensure that the terms of the contract are fair and within the laws of your state.
