Edina Realty pays $3.5M to settle AG allegations of improper payments for home security warranties

The Minnesota Attorney General’s Office on Tuesday announced Edina Realty will pay $3.5 million to settle the agency’s investigation into allegations the real estate broker had accepted payments from a home warranty company in exchange for selling warranties to clients.

The AG will use the settlement money to provide refunds to clients who purchased the warranties. The settlement also bans Edina from entering such partnerships again and prohibits the company from licensing its name or trademark to any third party that could market its services to homebuyers and sellers.

The AG alleged Edina breached its fiduciary duty to clients by failing to disclose it received payments from Home Security of America (HSA) while promoting HSA’s home warranties. State investigators also alleged Edina led consumers to believe the home warranties were its own products and contained benefits they did not have.

Edina disputed the allegations and denied it violated any laws. The company argued advertising agreements like these are common in the real estate industry, and it provided written disclosures to customers about the HSA warranties and the fixed monthly fee Edina took in exchange.

“We worked cooperatively with the Attorney General’s Office to answer their questions and explain our industry, our company and how we do business,” an Edina Realty spokesman said in a statement. “At issue in this settlement is an advertising relationship with a third-party warranty company, a peripheral issue to our core business. 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.”

Edina customers who purchased a home warranty on or after July 1, 2018, can recover the first year premium they paid to HSA if they had a denied claim or no claims during that time. The AG believes thousands of such customers exist. A claims administrator will contact those who are eligible.

Current first-year premiums for warranties start at $545, according to HSA’s website.

“Buying a home is the most expensive and significant financial decision most Minnesotans will ever make,” Attorney General Keith Ellison said in a release. “Real estate brokers like Edina are legally required to act in the best interests of their clients. ... 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.”

Realtors’ relationships with their clients have come under scrutiny this year, with the National Association of Realtors settlement changing the way real estate agents receive compensation. That class-action lawsuit alleged buyers and sellers had been paying their Realtors too much, and the settlement made it so buyers have to sign a representation agreement with an agent before seeing any houses, and Realtors can’t advertise their commission rate.