AUSTIN, Texas (CN) - A Texas company demands punitive damages from the National Association of Realtors, claiming it reneged on a partnership agreement and stole referrals and trade secrets for Chinese business.
Austin-based China United Real Estate Group sued the National Association of Realtors (NAR) in Federal Court Friday in 15 causes of action, including fraudulent inducement, misappropriation of trade secrets, deceptive trade practices and breach of contract.
China United claims that NAR sought its help because the association wanted its real estate business to "get going" in China. It says that NAR had had little success there, but China United had "substantial credentials and experience in doing business in China."
The Chinese government's easing of restrictions on foreign investment has led to massive investments in U.S. residential and commercial property. Chinese investors have focused on coastal "gateway cities" such as New York, San Francisco and Los Angeles.
An NAR report estimates that Chinese buyers spent $22 billion on U.S. properties from March 2013 to March 2014, up from $12.8 billion the year before.
China is the fastest-growing source of foreign clients for U.S. property sales.
Appreciation of the yuan has made U.S. property more affordable for the Chinese, and U.S. credit standards favor buyers who pay with cash. About 76 percent of the purchases by Chinese investors from March 2013 to March 2014 were cash only.
The NAR 2014 report says Chinese buyers favor urban-suburban areas, and that half of the U.S. purchases were for vacation and/or residential or rental purposes.
Chinese buyers bought mainly detached single-family housing, but only 39 percent planned to use the property as a primary residence.
The United States-China Economic and Security Review Commission said in a February report that Chinese buyers can exacerbate housing bubbles by buying U.S. homes as investment properties.
In China United's 43-page lawsuit, it says the NAR needed it "specifically to promote defendant's global programs, recruit overseas members, sell 'international Realtor memberships', increase sales of its educational products, and increase the connections and referrals between Chinese real estate agents and buyers with U.S. Realtors."
China United says it was "well suited" to carry out NAR's China-U.S. Objectives because of its 20 years of experience doing business in China. It says it was surprised that NAR, a "large wealthy national trade association," wanted a much smaller company such as China United to substantially fund and finance the NAR's China-U.S. Objectives.
China United says it gave NAR a presentation of "key elements and conditions" to be met before it would commit to financing and implementing a strategy for the China objectives. Its specific requirements included: (a) exclusivity for China United regarding China-U.S. business; (b) the right to develop and sell NAR's educational programs in China; and (c) NAR's "bona fide cooperation" in directing referral business to China United, so it could receive referral business income.
China United hoped that by being positioned in the middle of "the China buyer side" and "U.S. seller side," it could develop a solid business through receipt of referral business income.