Real Estate Firm Says It Will Ignore State Opinion on Lottery

One of the largest real estate firms in the Santa Clarita Valley said Wednesday that it will ignore an opinion by the state attorney general’s office that said it is illegal to run a lottery as an incentive for agents to sell houses.

Officials of Realty Executives said their $10,000 contest cannot be construed as a lottery because prospective winners do not fund the prize money.

The prizes are funded by homeowners eager to sell their houses and by real estate brokers representing them.

“I never, ever, ever want to see the name of this company and the word lottery in the same sentence,” said Richard Grommon, president of Realty Executives. “It’s a marketing program.”

But Assistant Atty. Gen. Herschel Elkins said that no matter who pays for the prizes, the company is still running an illegal lottery and faces prosecution if it continues giving away $10,000 to real estate agents who sell participating houses.

Under the lottery system, homeowners or brokers representing the homeowners contribute $250 or more to a hopper, which is used to fund a drawing for real estate agents.

The prizes typically range from $10,000 to $50,000. Industry officials say the lotteries encourage agents to market houses aggressively.

“To quote from a 1936 decision, ‘the court looks not to the name, but to the game,’ ” Elkins said. “That decision also says: ‘The court will not tolerate subterfuge, however ingenious may be the scheme devised to evade the law.’ ”

Elkins said he is sending a warning notice to Realty Executives.

If the company fails to abide by the written warning, it could face civil penalties of up to $2,500 for each person whose business the firm solicited by promoting the lottery.

It’s doubtful that a court could determine just how many people signed with a firm because of the lottery, but a company violating the statute would face some fines, Elkins said.

Another Santa Clarita Valley firm, Remax of Valencia and Canyon Country, has already been warned and has canceled its lottery, Elkins said.