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5 Red Flags To Spot Hidden Non-Compete Agreements

As a real estate business owner, these agreements can restrict your ability to practice your trade and limit competition in the marketplace.

There’s so much noise out there on how to navigate a challenging market. This April, let Inman help you cut through the clutter to make smart business decisions in real time. All month long, we’re taking it Back to Basics and finding out how real estate pros are evolving their systems and investing personally and professionally to drive growth.

As a real estate business owner, it is important to be aware of non-compete agreements that may be hidden in employment contracts or other agreements. These agreements can restrict your ability to practice your chosen trade and limit competition in the marketplace. Here are five red flags to look out for when reviewing contracts:

  1. Overly broad confidentiality agreements: Confidentiality agreements are common in business and can be useful in protecting trade secrets and sensitive information. However, some companies use these agreements to restrict competition by including broad terms like “but not limited to” and “know how” that could potentially cover any type of knowledge or information. Be wary of any confidentiality agreement that seems overly broad and limits your ability to work in your chosen field.
  2. Undefined restrictive time periods: Non-compete agreements should have clear and defined time periods. If the time period is left open-ended or undefined, this can be a red flag that the company is trying to limit your ability to work indefinitely.
  3. Mandatory arbitration clauses: Companies often include mandatory arbitration clauses in contracts as a way to keep disputes out of the public record and to shift legal fees onto individuals. If you sign a contract with a mandatory arbitration clause, you may be unable to challenge any non-compete provisions in court.
  4. Out-of-state venue clauses: Companies may include clauses that require disputes to be litigated in a specific state that allows non-compete provisions. This can make it difficult for individuals to challenge non-compete agreements, as they may have to travel to another state or pay for out-of-state legal representation.
  5. Overly broad non-solicitation clauses: Non-solicitation clauses are often included in contracts to prevent employees from soliciting their former employer’s clients or customers after leaving the company. However, some companies use these clauses to limit competition by including broad language that could prohibit you from working in any capacity with any of the company’s clients or customers.

These types of non-compete agreements harm both workers and consumers by limiting competition and innovation. Large companies can weaponize the legal system by overwhelming potential competitors with the burden of defending themselves in court. As a real estate business owner, it is important to be aware of these red flags when reviewing contracts and to seek legal advice if you are unsure about any of the terms.

In conclusion, non-compete agreements can have a significant impact on your ability to work in your chosen field and on competition in the marketplace. By being aware of the red flags listed above, you can protect yourself and ensure that you are not signing away your rights to work in the future. Remember, it is always important to carefully review any contract before signing and to seek legal advice if you have any concerns.

Specializing in residential investment properties, Donald “Dek” Bake brings a wealth of real estate expertise and unmatched negotiation skills to the Fair Trade Real Estate team. Follow him on Facebook and LinkedIn.

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