JF1020: Your Real Estate Website Could be Illegal #SkillsetSunday

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Yes, you could have an illegal website. There could be items on your site that you are not able to back up or you need a license for. You have to be very careful in today’s day and age, and our guess is about to share with you how you can.

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Richard Chapo Real Estate Background:
– Internet law attorney with SoCalInternetLawyer.com
– Advising small and large online businesses how to best comply with internet laws
– 24 years of experience in providing legal services
– Based in San Diego, California
– Say hi to him at www.SoCalInternetLawyer.com

Click here for a summary of Richard’s Best Ever Advice: How to Avoid Lawsuits When Offering Real Estate Related Services

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.
I hope you’re having a best ever weekend. Because it is Sunday, we’ve got a special segment for you called Skillset Sunday, and holy cow, you’ve gotta pay attention… If you have a website – which I know you do – as a real estate investor (at least an active real estate investor, I know you do), then we have a guest who is going to identify the areas that you need to address within your website from a legal website. How are you doing, Richard Chapo?

Richard Chapo: Doing well, thank you for having me on.

Joe Fairless: My pleasure and nice to have you on the show. A little bit about Richard – he is an internet law attorney at SoCalInternetLawyer.com. He has been advising small and large online businesses on how to best comply with internet laws. He’s got 24 years of experience. Based in sunny San Diego, California… Richard, before we get into the details of identifying areas that need to be addressed for our website, can you give the Best Ever listeners a little bit more about your background just for some context?

Richard Chapo: Certainly. As you’d mentioned, I’m based in San Diego. I’ve been practicing law for 24 years; I originally started out in a litigation firm – I think it was called [unintelligible [00:03:40].01] dealing with complex business issues, construction products, things of that sort. In 1999 I headed off to  Russia for a year to teach. At that time Russia was still working through the whole process of going from a communist society into something more democratic, or whatever it is they have today.

I was there for a year, then I came back and I had a friend, an attorney who I partnered up with and we started getting into the internet field, because although it’s a major part of our lives today, in 2000 it was still pretty new. Google and those types of companies were really just starting to get rolling and there were a lot of interesting issues for us from a legal perspective.

I’ve been practicing since then… I represent everybody, from blogs to dating sites to software companies, both in California and around the world.

Joe Fairless: Alright, well you have quite a well-traveled background, and we’re fortunate to have you on the show. Let’s talk about — as active real estate investors, most of us have a website. We’re not experts – most of us, myself included – in 1) the programming or layouts, and also just the online approach that we need to take, but 2) we’re definitely – unless we’re lawyers – not privy to what type of disclaimers we need to have, what type of documents, or lines of copy or trademarks that we need to include on the website.

Help us understand what are the areas that we need to look at with our website in order to try and shore it up as much as possible?

Richard Chapo: Well, the interesting thing about a website, for the Best Ever listeners, is that it depends specifically on the functionality that you have on the site, but there are basic things that you wanna put in place that will help limit any risk that you would have operating online… Unlike brick and mortar businesses, there are some concerns that come up from a legal perspective that are unique to the web, and one of the biggest places to start with is privacy.

You need a privacy policy. Even if you don’t care at all about the legal ramifications, Google considers it a ranking factor; so if you’re trying to get rankings on the web, in the Google search results, you want one for that reason, if nothing else. But the bigger reason that you want one is we’re starting to see privacy become a serious issue for companies based on the type of tools that you use.

The states – particularly in the United States – there are privacy laws that require you to do things such as state whether you follow or do not track signals. What happens is some browsers – if you go on Google Chrome and other browsers – you can go into the settings and you can pick a position where you ask not to be tracked. Those browsers will send a signal to your website whenever you go to it, and the website then can either respond and stop tracking with cookies and web beacons and what have you, or not.

What’s happening with these laws is you have to make these disclosures in your privacy policy as to what your positions are.

Google Analytics is a free tool – extremely popular, extremely good tool, but Google tracks websites across a variety of websites, and what they’re really doing is they’re creating marketing profiles for users. They may not know their names, but they assign them an ID, they know the different websites they go to.

For the Best Ever listeners, if you think about it – say you’re interested in potentially buying a Toyota truck and you go to Toyota’s website, and then subsequently you go on Facebook or you go to these other sites, then suddenly there are all these Toyota ads popping up. That’s because of their tracking; that’s what they’re doing – they’re following you, they’re seeing where you’re going, and then they’re showing you ads based on your interest. The big question is “Well, should they be allowed to do that?” and in the United States the answer is yes. In the European Union, the answer is “Well, there should be a lot of disclosures and qualifiers”, and what’s happening is [unintelligible [00:07:20].21] trying to enforce those rules on Google and Facebook and these companies, regardless of where they are in the world. What that means for people that are using Google Analytics, and everything from Amazon to all these different little programs, is you need to include certain disclosures in your privacy policy. Those disclosures really should be something that you talk to a lawyer about; they have to be legalized, they have to be written in a specific form.

Basically, what they say is “We use these tools. These tools will track you across the web, and here are the links you can go to to block them.” That’s an important aspect to that.

The other thing with privacy policies that is important is that if you’re collecting information from users, one of the things that’s very common is people will say “We will not share, sell or rent your information with third-parties”, and it sounds like a noble concept. However, if you ever actually wanna sell your business or your website, that information is valuable. And on the web, if somebody wanted your site for some reason, it is usually THE most valuable thing… And you’ve just essentially barred yourself from selling the site.

Let me give you an example… True.com was a large dating site. True.com’s parent company had problems and went into bankruptcy, and True.com in their privacy policy has a statement “We will not sell, share or rent your information.” Another dating site called Plenty of Fish came along and tried to purchase True.com’s customer database for $700,000, and the attorney generals in Texas and in a variety of states objected saying “No, you said that you wouldn’t share or sell this information”, and the Court upheld that, and the transaction was terminated. So it was a significant effect for a little statement that you’ll see in privacy policies.

Joe Fairless: Yeah. Well, they shouldn’t have put “We won’t sell your info or share it with anyone else.” That’s something that I bet a lot of people don’t think of, myself included. I wouldn’t think of 20 years from now if I were to sell a certain portion of my company that since I have that statement – because I’m pretty sure I have it on my website – that I can’t do it.

Richard Chapo: I would say 90% of all websites have it. One of the beautiful things about the internet is everything is free, but one of the terrible things about the internet is legal documents are often free, and you can go get free privacy policies and things of this sort… They’re not written by lawyers, and they have these statements and they just kill companies.

Zappos… Zappos is a huge company, and Zappos’ terms were [unintelligible [00:09:41].04] by a court and it ended up costing them millions of dollars – a case where they were hacked – and they were using terms that anybody that was a first-year law student would have known never would have been enforced. This is a company that Amazon purchased for some huge amount of money, so even large companies have this problem.

As far as going back to — if we think about a real estate investing site, images… If you’re taking your own photos of properties, then you’re in perfect shape, there’s no issues there. But if you’re using photos from other sources, copyright is an issue, and you need to make sure that you have the right to use those photos. Now, if you’re pulling them from an MLS system or something of that sort, all you have to do is read through the license and there will be something in there about if you can use the photos, or just ask. But going out and pulling photos from other sites without asking or without getting permission could lead to copyright infringement claims, and you have seen this in the real estate industry where sites have gone after each other. It’s been the larger sites, because they’re pulling content from each other – it’s called scraping, and it’s very aggravating… And copyright infringement lawsuits are expensive to defend.

I realize most people aren’t gonna be doing this with nefarious intents or anything of that sort, but it is something you always wanna think about. “I have this image, I’m gonna put it up. Where did I get it from? Do I have permission to use it?” That will eliminate a lot of problems… Any kind of visual site. It’s true also with videos, it’s also true with the descriptions of the property… Anything that you’re copying from another site – make sure that you have permission for that.

Joe Fairless: What about royalty-free websites and just pulling images from there?

Richard Chapo: It sounds like a great concept; I’m always nervous about it… I have had clients that have had problems. They’ve received letter – Getty Images is kind of the famous predator online… So if the Best Ever listeners don’t know about this, Getty Images will send out these letters that basically say “You’re using this image without permission. Send us $5,000 or we’re gonna ruin your life.” They have these great predatory letters…

The problem with royalty-free sites is you just don’t know what the quality is. You always have to think about, well, okay, if I get sued and I turn around and I go back to the site and say “Hey, you told me I could use this”, well who is that site? If it’s an entity somewhere in Hong Kong or India, you’re out of luck.

So I’d prefer the paid options… The costs have really come down. There’s a company called Fotolia.com – they offer stock photos that are pretty cheap. But if we’re talking about real estate investing, obviously with the properties, if at all possible, you wanna take your own photos. You really want to take your own photos of yourself… It depends on what your unique selling position is and how you’re marketing yourself, but personalized photos is something applicable to you, your personal brand… They’re favorable over stock photos, regardless of royalties and where they come from.

When people see stock photos, they know they’re stock photos. They no longer carry the value that you’re hoping for.

Joe Fairless: I can tell you’ve got another point, so I’d love to hear it.

Richard Chapo: I was just gonna mention Terms & Conditions. Terms & Conditions, for anybody who has an iPhone or [unintelligible [00:12:36].00] but particularly Apple… Apple is infamous, they’re always requiring you to agree to the terms & conditions. With investing sites, if users aren’t required to do anything, meaning they can just browse through the site and leave, terms & conditions are difficult to enforce.

What terms & conditions are is they’re just a contract that governs the usage of the site. If you think about Netflix – Netflix is obviously streaming video… When you sign up, you agree to their terms and conditions that says you’re gonna be charged monthly, here’s how streaming will work, “We’ll get streaming to you as much as we can, however we can’t guarantee you it’s gonna be working 24/7 every possible day…” There’s all these little legal terms that you have.

What courts are saying basically at this point is that terms & conditions are not gonna be binding on your listeners or on anybody who’s using the site unless they click a box that says they essentially agree to the terms & conditions and privacy policy. This is why you see this now on various sites.

The reason for that is, if you think back to 2000 when legal issues were coming up on the internet for the first time and were being presented to judges, most of the judges didn’t even have e-mail. Judges now use the web just like anybody else, and they know full well that the chances of anybody ever scrolling down a website, all the way to the bottom, and clicking that link and reading those terms or reading the privacy policy is next to nil. It’s not a real world solution. So they’re very hesitant to enforce those on customers, when everybody knows they’re not being read.

So that check the box provision is really essentially a signature from the user, saying “Okay, I’ve read this.” Realistically, they haven’t read it still, but they know that it’s there and they know they’re agreeing.

So if any of your listeners are using a site where they’re causing somebody to do something, be it a purchase, be it joining a membership for advice or something of that sort where the user has to take an affirmative action, you wanna use that clause.

And it’s not even a legal [unintelligible [00:14:32].08] really. If the site is built on a WordPress template, there are plugins out there that will do that for you. If it’s built on another platform, there’s scripts [unintelligible [00:14:40].21] Javascript and what have you – that your web designer should be able to find and apply to the website. Once you do that, then the terms become binding on the users and it’s much better.

Here’s the reason why the terms are important. The beautiful thing about the internet is it’s worldwide. From a legal perspective, the danger of the internet is it’s worldwide. If a Best Ever listeners is in Florida and had investment properties, and they have a members area that they charge $9/month for, or something of that sort, if a member grows unhappy and that member is located in Seattle, if the member files a lawsuit in Seattle against the site, well, where is that lawsuit gonna be heard?

In the terms & conditions you can have something called a choice of forum clause. That clause simply says “Any and all legal disputes are gonna be heard in Florida”, or wherever the listener is located. Google uses this, Twitter, and they’re upheld about 75% if the time there’s an equity evaluation that a court will do… But they’re upheld about 75 % of the time, and just having that single clause and binding users to it can often eliminate lawsuits, because is a person in Seattle gonna go to Florida to pursue a lawsuit for something that maybe has the cost of $500? It’s pretty unlikely.

Joe Fairless: Right… It shields from the frivolous litigation. It wouldn’t from the big time stuff, but from the frivolous stuff it would eliminate some headaches just having that done.

Richard Chapo: Yes. However, there’s been a change in the law…

Joe Fairless: But wait, there’s more… [laughs]

Richard Chapo: Yes, there’s more. I’m always afraid of getting into too much of the technical area…

Joe Fairless: No, that’s good, we like it.

Richard Chapo: Okay. Well, for pretty much (I’m gonna say) about the last 80 years courts have not allowed businesses to limit the legal rights of consumers. By “limit”, I mean force consumers to enter into arbitration to litigate disputes, or waive their right to file a class action litigation. In 2011 the Supreme Court [unintelligible [00:16:32].04] we had a conservative majority; conservative judges tend to be more literal in their interpretation of law and they tend to be more business-friendly. So a case came up in 2011 called AT&T Mobility versus Concepcion, and it involved a mobile phone contract, and AT&T had an arbitration clause in there, and they were trying to enforce it.

Now, historically, that would not have been enforceable against consumers, but the Court overruled that and overruled the 80 years law, and instead they said that if something called the Federal Arbitration Act of 1925 – which to be honest, all of us lawyers had to go racing to the books to find out what the Federal Arbitration Act of 1925 was… Was binding, and its states could no longer pass laws on these issues.

So with your terms & conditions you can now include an arbitration clause and a class action waiver clause. The reason this is important is arbitrations tend to be very pro-business; they are not decided by juries, they are decided by retired judged or attorneys, so technical arguments which technically are the defenses that businesses make – and this would be true in real estate – are received better, if you will. They’re more persuasive and can lead to better results.

From an internet perspective, the class action waiver is really important. If we just go back to what we were just talking about, most transactions online (not the purchase of a home or an apartment building, but most other transactions, memberships and what have you) are for a finite dollar amount that’s fairly nominal, so to say. On Amazon you might spend $100, $200; on a membership you might spend $40/month… The dollar figures are not big, so most people are not gonna sue over those, just because it’s not worth it, and attorneys certainly aren’t gonna take the cases, because they wanna make money.

The way that you get around that problem in the U.S. is you file what’s called a class action lawsuit. Instead of just person filing — let’s say we have a defective product. Instead of one person [unintelligible [00:18:19].08] and filing an individual lawsuit, they’re all grouped together, so you end up with what’s called a class, which may be 50,000 people or 100,000. I think we’ve all been watching TV late at night when the attorney who looks like he’s on the Sopranos comes on and starts saying “Did you ever use this product? Call us at this number.”

Joe Fairless: Yeah… Is there a minimum number of people?

Richard Chapo: I believe it’s 5,000 these days. It depends if they’re bringing it under federal and state law… But that’s not the goal; the goal is to get a much larger group. Then at that point you can recover attorney’s fees…

Class action litigation has always been a little odd, because the attorneys [unintelligible [00:18:55].24], but because you have such a large class of people, they end up checks for six bucks, or something like that. So it’s been criticized for a long time.

With your terms & conditions now you can include a class action waiver clause, which say when you check that box saying “I agree to the terms and conditions and privacy policy”, you’re agreeing to these terms, and clause 23(a) says that you can’t pursue a class action lawsuit against us, you can’t participate in a class.

That clause, with the arbitration clause and with the choice of forum clause – those three clauses eliminate 85%-90% of potential lawsuits against online businesses. So you see large companies going ahead and putting these in, and some of the companies who are really on top of it in their legal departments (Instagram, for instance), they did it right away, and people sent out an e-mail saying “We’re making these changes”, and people read them and started saying “Wait, you’re essentially eliminating the ability to be sued, and we’re not happy”, and the blowback was immense. I believe Instagram actually changed their terms back at one point.

So there’s a question of do you wanna do it from a practical standpoint [unintelligible [00:20:03].22] all PR is good PR, and I think most of us know that’s not actually the case… But for companies that are starting, for small companies, small websites, real estate investors, most of the websites that the Best Ever listeners have, it would be something you would want to include if, again, there’s a situation where you can force the visitors to your site to check [unintelligible [00:20:24].08] those terms.

Joe Fairless: And those three clauses — will you summarize them? Just name those three one more time.

Richard Chapo: Sure. First one is the choice of forum clause; that’s gonna set wherever the lawsuit occurs. Second one is mandatory arbitration clause – that essentially forces the visitor to sue arbitration instead of a trial in court. Then the class action waiver clause; the class action waiver clause prevents the user from going ahead and joining a class, so it goes a long way to eliminating most serious lawsuits.

Joe Fairless: Choice of forum clause – that sets the location for the proceedings. The second one was…

Richard Chapo: A mandatory arbitration clause, and the third one would be the class action waiver clause.

Joe Fairless: Sweet. Mandatory arbitration means they have to try and get the solution outside of Court?

Richard Chapo: Yes, they would be barred from going to Court. In some situations, something that occurs in the legal [unintelligible [00:21:16].11] you’re talking about is the courts are backed up and say they will often send parties off to arbitration, if for no other reason, just to buy time. But those are not binding, so the parties will go to arbitration and they’ll present their cases and then the arbitrator will basically tell them, “Well, I think here’s how it would come out”, and try and talk reality to one side or the other. Those are not actually binding proceedings.
The clause that you would put into your terms and conditions would be binding, which would mean if the arbitration would occur, the arbitrator would render a decision and that is the decision.

Joe Fairless: So the first one, choice of forum clause, sets where it will take place if there is legal proceedings. The second one, mandatory arbitration clause, says you’re barred from going to Court, no matter where the location is. The third one, the class action waiver clause, says you can’t join a class action lawsuit.

Richard Chapo: Yes.

Joe Fairless: Well, those three clauses, Best Ever listeners, as Richard said, can eliminate up to 85% (roughly) of the lawsuits for online businesses. For us, as real estate investors, if you have a membership site, or if you just want to be super protected with your stuff, then you can include those three clauses. You can talk to Richard – we’re about to ask him where we can get in touch with him… But then one key thing that you said earlier, Richard, was to have the check box; it’s not just a passive document that’s a link at the very bottom of the website.

Richard Chapo: Correct, yes, and that’s very important. The user has to check that box and agree. If you just have a blog and there’s no area where anybody purchases anything, an eBook or anything of that sort, then those clauses are not applicable. However, if you just have a blog, chances of you being sued for anything are very low, unless you obviously go nuts and start defaming people, or something of that sort… So your risks of being sued are very low; again, copyright would probably be the only issue there. You just wanna make sure that whatever images you’re using, that you have the right to use those.

Joe Fairless: Richard, where can the Best Ever listeners get in touch with you?

Richard Chapo: They can reach me through my website, SoCalInternetLawyer.com. Mention this show and I’ll be happy to give you a free consult. If you can’t find me on the website for some reason, you can also get my name, Richard Chapo, through Google; you can always find me there. Chapo is also the name of a large drug kingpin in Mexico; I am not related to him, I just wanna make it absolutely clear. [laughter] I get asked that quite frequently, because it is an odd last name.

So use either of those sources to be able to get a hold of me and I’ll be happy to talk to you.

Joe Fairless: It’s also a name of a band that I like, although they spell with one more “p” than you… They spell it Chappo. They’ve got some good songs, they’re from Brooklyn. I saw them on a tour of — there was like a boat cruise thing around Manhattan when I lived in New York and I saw them a couple times, like in 2013… They’ve gotten a little bit bigger now. But obviously, they haven’t hit the West Coast yet, because you don’t know of them, and you know all about the music scene in indie rock.

Alright, Richard… It’s been a pleasure. Thanks for talking about the three clauses to eliminate up to 85% of lawsuits for our online businesses that I just recapped earlier, as well as areas to shore up with our website, including the images and videos. You gave a resource which I’m not familiar with that I’ll check out (Fotolia), and then the terms & conditions that we talked about, with making sure that they check the box, if that is the type of business that we’re in, because in some cases that’s just gonna be overkill. In my case, that’s gonna be overkill and it’s not necessary… But if I were to have an online membership site or something, maybe that would be the case.

Thanks for being on the show. I hope you have a best ever weekend, and we’ll talk to you soon.

Richard Chapo: Okay, thank you. I appreciate it!

 

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