The Office of Minnesota Attorney General Keith Ellison announced a $3.5 million settlement with Edina Realty Inc. to resolve a probe into the secret payments the brokerage received from Home Security of America Inc. (HSA) in exchange for promoting HSA’s home warranties to Edina’s clients.
The settlement funds will be used to provide refunds to Edina clients who purchased an HSA home warranty on or after July 1, 2018. The settlement also requires Edina to end contractual relationships with any third parties that paid the brokerage to promote their products to its clients and not enter into any new such relationships. Edina is also prohibited from licensing its name or trademark to any third parties that market their services to Edina’s clients.
Ellison stated that Edina violated its fiduciary duties of loyalty and disclosure, as well as Minnesota’s Deceptive Trade Practices Act and Minnesota’s Consumer Fraud Act.
“Buying a home is the most expensive and significant financial decision most Minnesotans will ever make,” Ellison said in a statement. “Real estate brokers like Edina are legally required to act in the best interests of their clients. After a careful investigation, my Office is alleging that Edina Realty violated that duty by secretly accepting substantial payments from Home Security of America to push their home warranty contracts on unsuspecting clients. This settlement will put an end to these practices and recover all the secret payments Edina received from HSA. Most importantly, today’s settlement will put this money back in the pockets of Edina’s customers who were misled into purchasing HSA warranties without ever being told that Edina was being paid handsomely to promote these problematic home warranties.”
Edina Realty issued a statement that stressed its “70-year history of serving our customers, our neighbors and communities” and added the matter was not related to its core business activities.
“At issue in this settlement is an advertising relationship with a third-party warranty company, a peripheral issue to our core business,” the company said. “As such, we are happy to have resolved this matter through a no-fault agreement that avoids the protracted distraction, expense and uncertainty of litigation. This business decision to resolve the matter allows us to devote our full attention to what we do best and what we’re known for: providing our customers with top-of-class service throughout the process of buying and selling homes.”
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