Could a Maryland real estate agent legally give homebuyers merchandise discount coupons without violating the ban on offering 'prizes' to influence a sale?

Plain-English summary

The Chairman of the Maryland Real Estate Commission asked whether Article 56, §224(o) of the Maryland Code, which barred real estate licensees from offering "prizes" to influence a purchaser, prohibited a Coldwell Banker marketing program in which every purchaser-client received the same "Home Buyer's Savings Book" entitling them to identical merchandise discounts at Sears. The opinion concluded the program was permitted, explaining that courts and dictionaries consistently treated chance, or unequal distribution among participants, as the defining feature of a "prize," distinguishing it from a "gift" given equally to everyone. Because every Coldwell Banker client received the same discount book with no contest, drawing, or element of chance involved, the coupons did not qualify as prohibited "prizes." The opinion expressly disagreed with and overruled a 1959 AG opinion that had found a similar free-gift program unlawful without ever analyzing the chance-versus-equal-distribution distinction, and found support in a Maryland Court of Appeals "gift enterprise" case and a comparable Oregon Supreme Court decision construing a similarly worded real estate statute.

Currency note

This opinion was issued in 1984. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Could a Maryland real estate agent legally give homebuyers merchandise discount coupons without violating the ban on offering "prizes" to influence a sale?
According to this 1984 opinion, yes, when every purchaser-client received an identical discount book with no contest or chance involved. The Attorney General concluded that Article 56, §224(o) did not prohibit the Coldwell Banker discount program because it lacked the chance element that defines a "prize."

What distinguishes a "prize" from a "gift" under this analysis?
The opinion explained that courts in multiple jurisdictions, and the Maryland Court of Appeals in a "gift enterprise" case, treated chance, meaning inequality in what different participants receive based on some uncertain future event, as the essential element of a "prize." A benefit given equally to every customer, with no element of competition or chance, is a gift rather than a prohibited prize.

Did this opinion conflict with an earlier Attorney General opinion?
Yes. The opinion expressly disagreed with 44 Opinions of the Attorney General 316 (1959), which had found that a licensee's free-gift advertising violated §224(o) without analyzing the distinction between prizes and gifts, and it concluded that the 1959 opinion had reached the wrong result on that point.

Background and statutory framework

Article 56, §224(o) of the Maryland Code barred real estate licensees from soliciting or selling property by offering "free lots," conducting lotteries or contests, or "offering prizes for the purpose of influencing a purchaser." The opinion drew on case law from Ohio, Georgia, and the Maryland Court of Appeals construing "prize" and "gift enterprise" statutes, all of which treated chance or unequal distribution as the touchstone of a prohibited prize, and on a comparable Oregon Supreme Court decision, Hodges v. Real Estate Div., Dep't of Commerce, construing a similarly worded Oregon real estate licensing statute to reach only inducements akin to lotteries, contests, and free lots, not straightforward equal-value discounts or reimbursements offered to all customers.

Citations

Statutes:

• Article 56, §224(o) of the Maryland Code (bars real estate licensees from offering prizes, lotteries, or free lots to influence a purchaser)
• Article 27, §369 of the Maryland Code (bars inducing sales through a "gift enterprise")
• Or. Rev. Stat. §696.301(9) (Oregon's similarly worded real estate licensee prohibition)

Cases:

• Great Atlantic & Pacific Tea Co., Inc. v. Cook, 240 N.E.2d 114 (Ohio 1968) (chance is a condition precedent to the existence of a prize; no lottery exists where every contestant receives something of identical value)
• Equitable Loan & Security Co. v. Waring, 44 S.E. 320, 326 (Ga. 1903) ("prize" comprehends something gained or lost by the operation of chance)
• Russel v. Equitable Loan & Security Co., 58 S.E. 881 (Ga. 1907) (following Equitable Loan & Security Co. v. Waring)
• Long v. State, 74 Md. 565 (1891) (Maryland's "gift enterprise" statute invalid as applied to gift enterprises not involving chance)
• Hodges v. Real Estate Div., Dep't of Commerce, 594 P.2d 1286 (Or. 1979) (Oregon's similarly worded statute reaches only lotteries, contests, prizes, and free lots, not commission reimbursements offered to all customers)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1984/Volume69_1984.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

REAL ESTATE COMMISSION

Real Estate Brokers/Salesmen-Merchandising Discounts-"Prizes"/"Gifts"-Prohibition Against Licensees' Giving Of "Prizes" Limited To Awards Involving Chance-Discount Coupons For Merchandise Given To All Purchaser-Clients Not Prohibited.

February 23, 1984

Mr. Donald E. Howard, Chairman,
Maryland Real Estate Commission

You have requested our opinion on whether a real estate licensee is prohibited by Maryland law from offering discounts on merchandise to persons who buy real property through the licensee. Specifically, you have asked whether a marketing program currently offered by Coldwell Banker is in violation of Article 56, §224(o) of the Maryland Code.

For the reasons given below, we have concluded that §224(o) does not prohibit a licensee from giving coupons for discounted merchandise through a marketing program that, like that of Coldwell Banker, is not a contest and does not involve an element of chance in order to receive the coupons.

In so concluding, we are aware that this response differs from that given in 44 Opinions of the Attorney General 316 (1959). Nevertheless, it is our view that the 1959 Opinion was wrong in this regard.

I
Background

A. The Discount Program

Sears Roebuck and Company is currently offering substantial discounts on merchandise to persons who buy real property through Coldwell Banker, a recently acquired real estate subsidiary of Sears.

Under this program, a real estate licensee associated with Coldwell Banker provides the purchaser-client at settlement with a "Home Buyer's Savings Book" and a validation card. These documents entitle the client to receive a discount of up to 25% when buying specified merchandise from Sears; many of the discounted items are of special interest to homeowners.

All Coldwell Banker purchaser-clients receive the same coupon books, and all coupon books entitle these clients to identical discounts. Thus, there is no difference in value received by any one or another client, except to the extent that a client might choose not to buy a particular discounted item.

B. The Statute

Article 56, §224(o) of the Maryland Code prohibits real estate licensees from "[s]oliciting, selling, or offering for sale real property by offering 'free lots' or conducting lotteries or contests, or offering prizes for the purpose of influencing a purchaser or prospective purchaser of real property".

Since there can be little doubt that the purpose of the discount program in question is to influence prospective homebuyers to deal with Coldwell Banker, the legal issue presented for resolution is simply stated: Do the proffered discounts on merchandise constitute prohibited "prizes" under §224(o)?

II
Analysis

A. The 1959 Opinion

The 1959 Opinion concluded, without any analysis, that a licensee who advertised free gifts contingent upon the purchase of a home through the licensee violated §224(o):

"It would seem that the practice of the real estate firms of offering free gifts . . . clearly violates the provisions of Section 224." 44 Opinions of the Attorney General 316, 316 (1959).

We believe that this conclusion was wrong, because the Opinion failed to consider a well-established distinction between "prizes" and "gifts", the element of competition or chance.

B. Chance as an Element of "Prize"

Cases considering this and similar issues have consistently identified chance as being a necessary element when designating a reward as an illegal "prize". For example, in Great Atlantic & Pacific Tea Co., Inc. v. Cook, 240 N.E.2d 114 (Ohio 1968), the court was asked to consider whether a contest constituted a prohibited lottery. It found:

"The courts are in general agreement that a prize is some advantage or inequality in amount or value, accruing to some, but not all, of the participants in the game or contest. No lottery exists if every contestant receives something of value of precisely the same nature .... Ordinarily, no element of chance exists if there is equality of distribution. Chance is a condition precedent to the existence of a prize. Inequality of distribution is therefore the very basis of the prize requirement." 240 N.E.2d at 118 (emphasis added).

Similarly, in Equitable Loan & Security Co. v. Waring, 44 S.E. 320, 326 (Ga. 1903), the court held that "the word 'prize' comprehends anything of value gained (or, correspondingly, lost) by the operation of chance". See Russel v. Equitable Loan & Security Co., 58 S.E. 881 (Ga. 1907). See also Webster's New International Dictionary of the English Language 1970 (2nd unabridged ed. 1953) (defining "prize" to mean "[s]omething offered or striven for in competition or in contests of chance ...; [t]hat which may be won by chance, as in a lottery"); Black's Law Dictionary 1080 (rev. 5th ed. 1979) (defining "prize" as "[a]nything offered as a reward of contest").

In Cook, the court held that the following circumstances were required in order for chance to become a factor:

"The element of chance is supplied by having the happening of some future event to determine who gets the prize or how much he gets. If the winner's success is due primarily to his own skill or ability, the contest is not a lottery, if, on the other hand, the winner's success is due to something beyond his control then 'chance' appears and becomes a part of the game or contest." 240 N.E.2d at 118.

The Maryland Court of Appeals has drawn a similar distinction in the context of so-called "gift enterprises". Under Article 27, §369 of the Maryland Code, it is unlawful to induce a sale of goods by means of a gift enterprise.1 In Long v. State, 74 Md. 565 (1891), the Court held this section to be invalid as to any gift enterprise that did not involve an element of chance.

In commenting on the purview of §369, the Court recognized chance as a distinguishing element normally associated with prizes:

"This broad and sweeping language would seem to include not only a lottery in which a valuable consideration is given for the chance to win a prize, but also a gratuitous distribution not involving the element of chance." 74 Md. at 571.

That is, the Court found, the term "gift enterprise" refers broadly to "'[a] business, as the selling of books or works of art, the publication of a newspaper, etc., in which presents are given to purchasers as an inducement'". 74 Md. at 571 (quoting Century Dictionary). Because "the words 'gift enterprise' [do not] necessarily imply a scheme involving chance", 74 Md. at 572, the Court found the statutory prohibition to be impermissibly broad:

"It follows that [the statute,] by reason of its general terms, including as it does all gift enterprises, those involving the element of chance, as well as those that do not, is invalid so far as it relates to gift enterprises not involving chance...." 74 Md. at 572-73.

C. Application

We believe that the distinguishing charcteristic of chance, recognized in other jurisdictions and by the Maryland Court of Appeals in Long, is dispositive of your inquiry.2

We have carefully reviewed the program offered by Coldwell Banker and find that it is not a contest and that there is no element of chance associated with the receipt of the discount coupons.3 At settlement, all clients receive a benefit of equal value in the form of a discount coupon book. There is, quite simply, no "inequality in amount or value" accruing to some, but not all, of the clients, nor is there the "happening of some future event" beyond the control of the client to determine who receives the coupons. We conclude, therefore, that these coupons do not constitute prohibited "prizes" under §224(o).

This conclusion, we find, is consistent with a recent court decision construing an Oregon statute that, while worded similarly to §224(o) and designed for the same purpose, was far broader in its reach. That statute provided for disciplinary action against any real estate licensee who has "solicited, sold or offered for sale real property by offering 'free lots' or conducted lotteries or contests, or offered prizes or other inducements for the purpose of influencing a seller or purchaser or prospective seller or purchaser of real property". Or. Rev. Stat., §696.301(9).

In Hodges v. Real Estate Div., Dep't of Commerce, 594 P.2d 1286 (Or. 1979), the court addressed the broad catchall phrase "or other inducements", not found in §224(o). The court noted that the other activities specifically identified in the statute, activities that are identically listed in §224(o), have a potential for abuse that might border on fraud. The court then concluded that a licensee's promise to reimburse the seller of realty for a portion of the sales commission, if the seller purchased a new home through the licensee, "does not fall within the class of activities the legislature sought to prohibit". 594 P.2d at 1289. The court explained:

"It is only those inducements which fall into the latter end of the spectrum which the legislature intended to prohibit: lotteries, contests, prizes, free lots. Such activities, and those of a similar type or class, fall within the statutory proscription to prevent persons from being induced to buy or sell by being misled by such schemes." Id.

In our view, the same principles underlie the enactment of §224(o). The program described in your inquiry, unlike promotional schemes for the sale of real estate that involve elements of competition and chance, is not fraught with the same potential for abuse or misleading the public. The discount coupons offered here are substantially little different than the commission reimbursements offered in Hodges and, therefore, as in Hodges, "d[o] not fall within the class of activities the legislature sought to prohibit".

Accordingly, it is our opinion that the Coldwell Banker program is outside the purview of §224(o).

III
Conclusion

In summary, it is our opinion that Article 56, §224(o) of the Maryland Code does not prohibit real estate licensees from offering prospective homebuyers a discount on merchandise through a marketing program in which all homebuyers receive the same discount coupons, on an equal basis, and no element of competition or chance is involved in their entitlement to the discounts offered under the program. We thus disagree with the contrary conclusion reached in 44 Opinions of the Attorney General 316 (1959).

Stephen H. Sachs, Attorney General

Robert deV. Frierson
Assistant Attorney General

Avery Aisenstark
Chief Counsel,
Opinions and Advice

1 Article 27, §369 provides: "No person or body corporate shall be permitted, either directly or indirectly, by agent or otherwise, to barter, sell or trade, or to offer for barter, sale or trade, by any publication, or in any way, any wares, goods or merchandise of any description, in package or bulk, holding out as an inducement for any such barter, sale or trade, or the offer of the same, any scheme or device by way of gift enterprise of any kind or character whatsoever".

2 We note that such a distinction also has been drawn by the Real Estate Commission in recent declaratory rulings. Compare In the Matter of David Vincent, Broker t/a David Vincent Realty (July 21, 1982) with Request for Declaratory Ruling by Albert M. Chasnow, Esquire, and Ingersoll and Block, Chartered (November 10, 1982).

3 Cf. 43 Opinions of the Attorney General 277 (1958) (prize offered by licensee to the first 10 persons solving a crossword puzzle is a "contest" prohibited by §224(o)).