rockwell publishing real estate law chapter 19

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© 2009 Rockwell Institute

1

California Real Estate Law

© Copyright 2007 Rockwell Publishing, Inc.

Lesson 19:Civil Rights and Fair Housing Laws


Introduction

This lesson will discuss:

l state action vs. private action

l federal antidiscrimination laws

l California antidiscrimination laws

l the right to sue

l antidiscrimination law and the real estate profession


State Action vs. Private Action

Earliest civil rights laws were originally interpreted to require state action.

State action: action by federal, state, or local government officials or entities

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Discriminatory state action includes:

l discriminatory laws and regulations

l discriminatory enforcement of the law by courts

l court orders to enforce discriminatory private covenants or restrictions



Since 1960s, legislatures and courts have expanded antidiscrimination laws.

l now prohibit discriminatory action by private parties as well as the state

This includes real estate agents.


Federal Antidiscrimination Laws

Federal antidiscrimination laws began with Thirteenth and Fourteenth Amendments to the Constitution.

l passed after Civil War

l abolished slavery

l guaranteed equal protection under the law

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Congress later passed:

l Civil Rights Act of 1866

l Title VIII of the Civil Rights Act of 1968 (Fair Housing Act)

l Equal Credit Opportunity Act

l Home Mortgage Disclosure Act

l Americans with Disabilities Act

All contain provisions prohibiting discrimination in real estate transactions.



Keep in mind that California has its own antidiscrimination laws.

l some are more strict than federal

l stricter law will apply



Civil Rights Act of 1866: prohibits discrimination based on race or color, giving all citizens of the United States the same rights to own and enjoy property as those held by white persons

l applies to all real estate transactions

l without exception

Civil Rights Act of 1866

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Constitutionality of act challenged and upheld in 1968 landmark case: Jones v. Alfred H. Mayer Co.

l soon after passage Civil Rights Act of 1968

Jones established three important points.




1. The right to buy or to lease property can be hindered just as much by private citizens as by government.

l 1866 Act prohibits all racial discrimination

l not just discrimination by state action




2. Congress has power to enforce Thirteenth Amendment (abolishing slavery) using “appropriate legislation.”

l 1866 Act addresses one of the “badges of slavery” (inability to own property)

l 1866 Act is therefore appropriate legislation


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3. 1866 Act is supplemented by—not replaced by—Civil Rights Act of 1968.




Person discriminated against in violation of 1866 Act may:

l bring lawsuit in federal court

l be entitled to injunctive relief, actual damages, punitive damages

Enforcement

Summary



l State action

l Civil Rights Act of 1866

l “Appropriate legislation”

l “Badge of slavery”

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Title VIII of the Civil Rights Act of 1968: prohibits discriminatory practices related to housing

l also known as Federal Fair Housing Act

l prohibits discrimination on the basis of race, color, national origin, religion, sex, handicap, and familial status (protected classes)

Familial status: families with minor children

Federal Fair Housing Act



Federal Fair Housing Act also prohibits discrimination in:

l advertising

l lending

l real estate brokerage

l certain other services connected with residential transactions




Federal Fair Housing Act covers most sales, rentals, or exchanges of residential property that:

l involves buildings or portions of buildings, or

l is intended to be occupied as a residence

Also includes vacant land, offered for sale or lease, that will be site of residential building.

Application

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Exemptions include:

l sale or rental by private owner

l rental in an owner-occupied dwelling

l sale or rental by religious organization or private club

l housing for older persons

Fair Housing Act exemptions


Fair Housing Act Exemptions

Law doesn’t apply when private individual sells or rents single-family home, as long as:

l owner has less than four homes

l no discriminatory advertising used

l no real estate broker involved

Exemption available only once every 24 months.

Sale or rental by private owner



Law doesn’t apply to rental of room or unit in dwelling with up to four units, as long as:

l owner lives in one unit

l no discriminatory advertising used

l no real estate broker involved

Rental in owner-occupied dwelling

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Religious organization or private club may limit accommodations to own members, as long as:

l providing accommodations is incidental to its primary purpose

Exemption unavailable if membership is restricted based on race, color, or national origin.

Exemption doesn’t apply to commercial transactions.

Religious organizations and private clubs



Children may be excluded from housing expressly designated for elderly if housing is:

l developed or provided through program to assist elderly,

l intended for and occupied only by people over the age of 62, or

l designed and developed to meet needs of people 55 or older and at least 80% of units occupied by at least one person 55 or older.

Housing for older persons



Federal Fair Housing Act makes it unlawful to engage in certain acts if based on race, color, religion, sex, familial status, national origin.

Prohibited acts include:

l refusing to sell or rent after making of bona fide offer, refusing to negotiate, or making unavailable or denying a dwelling

l discriminating against any person in terms, conditions, privileges of sale or rental, or in provision of services or facilities in connection with dwelling

Prohibited acts

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l making, printing, publishing any notice, statement, or advertising that indicates a preference, limitation, or discrimination in sale or rental

l representing that dwelling is not available when it is

l blockbusting

Prohibited acts (cont.)



l discriminating in making of loan for buying, building, repairing, improving, or maintaining a dwelling

l denying access to multiple listing service, or discrimination in terms or conditions for access

l coercing, threatening, interfering with anyone attempting to enjoy rights granted by Fair Housing Act

Prohibited acts (cont.)


Prohibited Acts

Redlining: refusal to make a loan based on racial or ethnic composition of neighborhood in which property is located

l occurs when lenders assume property values in minority-owned neighborhoods will decline

l loan refusals must be based on purely objective economic criteria

Redlining

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Prohibited Acts

Steering: channeling prospective buyers or renters into specific neighborhoods based on race or some other protected class

Example: agent showing white client homes only in white neighborhoods

Steering


Prohibited Acts

Blockbusting: agent tries to convince owners to sell by creating impression that neighborhood is declining due to influx of minority owners

Agent predicts:

l lower property values

l higher crime rates

l decline in school quality

Result: owners panic and list properties with agent, who profits from resulting sales

Blockbusting



A person who has been discriminated against in violation of Fair Housing Act may file complaint with Office of Fair Housing and Equal Opportunity (part of HUD).

l must file within one year of incident

l HUD may file complaint on own initiative

Enforcement

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HUD will investigate complaint and attempt to negotiate agreement.

If unsuccessful, dispute may be resolved by

l HUD

l federal court

HUD may also refer discrimination complaints to state agency.

Enforcement



Individual also has option to file lawsuit directly, in federal or state court.

l suit must be filed within two years of incident

Enforcement



Fair Housing Act penalties include:

l compensatory damages

l injunctions

l civil penalties ($16,000 for first offense, up to $65,000 for third offense)

Fair Housing Act is enforced by U.S. Attorney General.

Enforcement

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For continuing acts, or for issue of public importance, Attorney General may file suit in federal court, seeking:

l temporary injunctions

l permanent injunctions

l civil penalties ($55,000 for first violation, up to $110,000 for third violation)

Enforcement

Summary



l Title VIII of Civil Rights Act of 1968

l Protected class

l Redlining

l Steering

l Blockbusting



In addition to federal Fair Housing Act, other laws prohibiting discrimination in lending include:


l Equal Credit Opportunity Act (ECOA)

Fair lending laws

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Fair Lending Laws

Home Mortgage Disclosure Act: enacted in 1975, to help enforce federal laws against redlining

Act requires institutional lenders to report annually on loans they make or purchase each year.

l Government investigators look for areas where few or no loans made, and check for discriminatory practices.

Home Mortgage Disclosure Act


Fair Lending Laws

Equal Credit Opportunity Act (ECOA): passed in 1974, intended to provide consumers with equal access to credit

Law prohibits lender from discriminating against potential borrower based on race, color, religion, national origin, sex, marital status, age, or income from public assistance.

ECOA


Fair Lending Laws

Applies to:

l all residential real estate loans

l all consumer credit transactions

Consumer credit: credit given to individuals for personal, family, or household purposes

ECOA

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Summary


Fair Lending Laws


l ECOA

l Consumer credit



Federal laws now include handicapped persons as protected class.

l Federal Fair Housing act amended in 1988 to prevent housing discrimination

l Americans with Disabilities Act (ADA): effective in 1992, prohibits discrimination on basis of handicap in any business or facility open to public

Equal access to facilities


Equal Access to Facilities

Fair Housing Act prohibits discrimination:

l in terms, conditions, privileges of sale or rental of housing, or

l in provision of services or facilities related to housing

Requires landlord to permit reasonable accommodations or modifications that handicapped person needs to be able to use and enjoy housing unit.

Fair Housing Act requirements

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Fair Housing Act Requirements

Reasonable accommodations: landlord must make any reasonable accommodations to rules, policies, practices, and services if needed by handicapped person to use and enjoy housing unit

Applies to:

l public and common areas

l individual units

Reasonable accommodations



Reasonable modifications: landlord must allow handicapped person to make reasonable modifications to existing housing if modifications are necessary for full enjoyment

l Landlord can require tenant to pay for modifications.

l Landlord can require tenant to return premises to original condition if it’s reasonable to do so.




Certain design and construction requirements for multi-family dwellings (four or more residential units) built after 1991.

Applies to:

l ground floor units in buildings with no elevators

l all units in building with elevators

New multi-family construction

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Design and construction requirements:

l all public and common areas must be accessible and usable

l doors must be wide enough for wheelchairs

l light switches, outlets, thermostats must be accessible

l bathroom wall reinforced, to allow for installation of grab bars

l kitchens and bathrooms designed so wheelchair can maneuver about the space

New multi-family construction



ADA prohibits discrimination on basis of disability in any place of public accommodation.

Disability: any physical or mental impairment that substantially limits one or more of the individual’s major life activities

Public accommodation: any private entity that owns, operates, or leases a place open to the public, as long as the operation of the facility affects commerce

Americans with Disabilities Act



ADA requires each of following to be accomplished, if readily achievable:

l modifications in policies, practices, and procedures to make goods and services accessible

l removal of architectural, structural communication, or transportation barriers so that goods and services are accessible

ADA requirements

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l provision of auxiliary aids and services so that no individual excluded, denied services, segregated, or otherwise treated differently than others

l new commercial construction must be accessible unless structurally impossible

Readily achievable: action that can be easily accomplished without much difficulty or expense

ADA requirements (cont.)



Individual discriminated against may:

l bring civil action

l obtain temporary or permanent injunction or restraining order

l file complaint with U.S. Attorney General

Enforcement

Summary



l Americans with Disabilities Act

l Reasonable modifications

l Disability

l Public accommodation

l Readily achievable

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California Antidiscrimination Laws

California’s antidiscrimination laws are often much stricter than federal counterparts.

l include broader range of protected classes

l allow few, if any, exemptions



State laws designed to prohibit discrimination and promote fair housing include:

l Fair Employment and Housing Act

l Unruh Civil Rights Act

l Housing Financial Discrimination Act

l Real Estate Law



Fair Employment and Housing Act: passed in 1963, prohibits discrimination in the sale or lease of housing in California

l also known as “Rumford Act”

l protects more classes than federal Fair Housing Act

l fewer exemptions than federal Fair Housing Act

Fair Employment and Housing Act

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Fair Employment and Housing Act makes it illegal for any owner, landlord, assignee, managing agent, real estate broker or salesperson, or any business establishment to discriminate based on:

l race, color, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, source of income, or disability

Application



Law also prohibits:

l use of discriminatory terms when advertising housing

l discrimination in financing

l seller/landlord from even asking about protected class (if licensee is asked such a question, he should refuse to answer)

Application


Application

Landlords:

l required to make reasonable accommodations or modifications

l may ask for medical verification of disability and need


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Application

Under reasonable accommodation requirement:

l landlord with “no pets allowed” must make exception for service/companion animal

l no extra fees for animal

l tenant liable for any damage caused by animal

l same rule applies to people who train service animals

Service animals


Application

In California, animal doesn’t need to be trained as service animal to qualify as reasonable accommodation.

l animals prescribed as “companion animals” for mental illness/depression

Service animals



Fair Employment and Housing Act doesn’t apply:

l to accommodations operated by nonprofit religious, fraternal, or charitable organizations

l when a portion of a single-family owner-occupied home is rented out

l to housing for the elderly (familial status rules only)

Exemptions

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Discrimination complaints are handled by Department of Fair Employment and Housing.

Options:

l hearing by Department

l case heard in superior court

Enforcement



If found guilty, violator may be ordered to:

l sell or lease housing in question to injured party

l provide financial assistance or benefits previously denied

l pay actual damages

l pay civil penalty ($10,000 for first offense, up to $50,000 for third offense)

Superior court may order punitive damages instead of civil penalty.

Enforcement



Unruh Civil Rights Act: prohibits discrimination by business establishments:

l based on sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status, or sexual orientation

Business establishments also prohibited from discriminating in housing transactions based on age.

Unruh Civil Rights Act

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Brokerage firm is business establishment, so it:

l cannot discriminate in performance of duties

l cannot refuse listing or turn away prospective buyer for discriminatory reasons




Also included as business establishments:

l apartment houses

l homeowners and condominium owners associations

l other real estate developments




Courts have interpreted Unruh Act’s list of protected classes as “illustrative rather than restrictive.”

l all arbitrary discrimination prohibited

Arbitrary discrimination: based on individual characteristics, traits, or beliefs similar to those listed in the act

Example: families with children are protected class even though not mentioned in statute

Expanded protection

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Unruh doesn’t prohibit all discrimination.

l economic discrimination permissible, as long as it applies to everyone equally

Expanded protection



Housing Financial Discrimination Act: it’s against public policy to deny mortgage loans (or impose stricter terms) based on neighborhood conditions that are unrelated to borrower’s creditworthiness or to security property’s value

l also known as the “Holden Act”

l targets redlining

Housing Financial Discrimination Act



Holden Act makes it illegal to:

l discriminate in providing financial assistance to purchase, construct, rehabilitate, improve, or refinance housing on basis of neighborhood characteristics

l consider the racial, ethnic, religious, or national origin composition of neighborhood

l discriminate in providing financial assistance for housing on the basis of race, color, religion, sex, marital status, national origin, ancestry


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Complaints filed with state Secretary of Business, Transportation, and Housing.

Violator may have to:

l make the loan

l pay damages




Real estate licensees also need to be aware of antidiscrimation provisions in:

l Real Estate Law

l Real Estate Commissioner’s regulations

Real Estate License Law



Under the Real Estate Law, discriminatory action can result in:

l discipline from Department of Real Estate

l sanctions including license suspension, revocation


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Real Estate Commissioner’s regulations forbid real estate licensees from discriminating on basis of:

l race, color, sex, religion, ancestry, physical handicap, marital status, national origin




Examples of prohibited real estate actions (if actions involve discrimination) include:

l refusing to negotiate

l refusing or failing to show, rent, sell, or finance

l providing different services

l representing to any person that property is not available, when it is

l etc.




Real estate licensees have affirmative duty to familiarize themselves with laws.

Brokers have duty to supervise licensees


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The Right to Sue

Housing discrimination case may involve many plaintiffs/defendants.

l testers: people pretending to be housing applicants; used to help prove fair housing law violations

Sandwich test:

l white tester asks to see available housing

l followed by minority tester

l followed by another white tester

Testers


The Right to Sue

If white testers are shown units, but minority tester told none available ? sufficient evidence to prove discrimination

Example: African-American man claims racial discrimination in apartment complex; fair housing organization sends testers who use sandwich test

Testers

Summary



l Rumford Act

l Unruh Civil Rights Act

l Arbitrary discrimination

l Housing Financial Discrimination Act

l Testers and sandwich test

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Antidiscrimination in Real Estate

Violations may occur in:

l advertising

l selling or renting real property

l lending

l zoning and other regulatory actions

l brokers’ employment/business practices

l MLS membership and practices



Illegal under both federal and state law to use advertising that indicates preference, restriction, or intent to discriminate.

l even unintentional discrimination may be violation

Example: flyer describing a house as “Near local church and synagogue” may seem to indicate that Muslims are unwelcome

Advertising



Solicitations for potential buyers may have discriminatory effect if:

l solicitations used only in neighborhoods with residents of one race/religion/ethnicity

l persons in neighborhood of particular race/religion/ethnicity aren’t sent copies

l solicitation suggests recipient can control type/character of person who will buy property

Advertising

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Types of models used in advertising can also lead to charges of discrimination.

Advertising



Refusing to sell, rent, or negotiate is prohibited if membership in protected class is factor in decision

l includes straightforward refusal

l includes refusing to answer door

Example: apartment manager whose peephole shows front door, refuses to answer if minority applicant rings bell

Selling and renting



Discriminatory lending practices include:

l redlining

l using different foreclosure procedures for different parties

l using discriminatory criteria when determining application fees or finance charges

Lending

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Exclusionary zoning: zoning that prohibits or unreasonably restricts permits for multi-family or low -income family housing

Such zoning impacts some classes more than others (disparate impact).

Disparate impact: even though ordinance or regulation appears to be neutral, its effect is discriminatory because impact falls on one particular class more than others

Zoning



Broker may not discriminate in:

l hiring sales associates

l determining commission splits

l assigning work

l determining other terms and conditions of employment

Employment by brokers



Discrimination charges may result from

l denial of access

MLS practices

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Summary



l Exclusionary zoning

l Disparate impact

Legal Aspects of Real Estate Lesson 19 Cumulative Quiz

1. The 1866 Civil Rights act applies to discrimination based on:

A. race B. familial status C. handicap D. gender

2. Which of the following is not an example of state action?

A. A zoning ordinance passed by a city council B. Enforcement of noise regulations by a police officer C. Court enforcement of private restrictions in a deed D. Public advertising by a real estate agent

3. Which of the following is not available as a remedy when a plaintiff wins a discrimination suit under the Fair Housing Act?

A. Jail time for the offending party B. An injunction C. Compensatory damages D. Civil penalties

4. Under the Fair Housing Act, religious organizations may limit occupancy to their own members, provided membership isn't restricted on the basis of:

A. race B. gender C. national origin D. Both A and C

5. The refusal to make loans in certain neighborhoods for discriminatory reasons is called:

A. panic selling B. blockbusting C. redlining D. steering

6. Channeling prospective renters into specific neighborhoods based on race is an example of:

A. steering B. blockbusting C. panic selling D. public accommodation

© 2009 Rockwell Publishing 1

7. A real estate agent telling owners that an influx of minorities will adversely affect the schools in the neighborhood is an example of:

A. blockbusting B. panic selling C. Both of the above D. None of the above

8. The Home Mortgage Disclosure Act helps enforce the prohibition against:

A. redlining B. blockbusting C. steering D. All of the above

9. Title VIII of the Civil Rights Act of 1968 is also known as the:

A. Equal Credit Opportunity Act B. Home Mortgage Disclosure Act C. Americans with Disabilities Act D. Fair Housing Act

10. In an apartment complex built after 1991, the Fair Housing Act requirements for handicapped accessibility apply to the:

A. individual living areas B. common use areas C. public areas D. All of the above

11. Under the Fair Housing Act, someone who has been discriminated against may:

A. file a complaint with the Office of Equal Opportunity B. file a lawsuit in federal court C. file a lawsuit in state court D. All of the above

12. The Equal Credit Opportunity Act applies to:

A. real estate loans only B. consumer credit C. consumer and commercial credit D. all consumer credit excluding real estate loans


13. Modifications under the Americans with Disabilities Act must be:

A. made regardless of expense B. made if readily achievable C. made in all places of public accommodation D. Both B and C

14. Which California law prohibits discrimination by business establishments generally?

A. Fair Employment and Housing Act B. Housing Financial Discrimination Act C. Unruh Civil Rights Act D. Real estate license law

15. The Unruh Civil Rights Act does not prohibit:

A. arbitrary discrimination B. discrimination based on sexual orientation C. discrimination based on financial status D. racial discrimination

16. Compared to the federal Fair Housing Act, California's Fair Employment and Housing Act contains:

A. a narrower range of protected classes and fewer exemptions B. a wider range of protected classes and fewer exemptions C. a narrower range of protected classes and more exemptions D. a wider range of protected classes and more exemptions

17. Zoning practices that restrict multi-family houses may be considered:

A. restrictive B. disparate C. exclusionary D. unaccommodating

18. California's real estate license law:

A. does not address discrimination B. allows an affiliated licensee to follow instructions from her broker that result in discrimination C. prohibits assisting in a transaction if the agent believes her client intends to discriminate D. states that any discrimination will result in automatic license suspension

19. A common method of proving fair housing violations is through the:

A. disparate impact test B. exclusionary zone test C. sandwich test D. reasonable accommodation test


20. Which of the following is not a public accommodation under the ADA?

A. The home office of a school teacher B. The office of the local credit union C. A real estate office D. A property management office with only one employee


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