2.3.3 fair housing act

Transcription

3 B.R.E. Approved Credit Hours
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PREFACE:
This is the textbook for our course, Fair Housing, 2nd Edition. It is one of
the five, three-hour courses required by the BRE for licensees renewing for
the first time. Licensees renewing after the first time must take these same
courses OR take an eight-hour survey course that covers these same
topics (we do not offer a survey course). The five three hour courses are:
1.
Ethics: Describes the real estate license law enforced by the BRE
and the Code of Ethics and Professional Conduct as practiced by
members of the National Association of REALTORS®
2.
Agency: Explains the common law of agency as applied to
California real estate brokerage.
3.
Trust Funds: Details the fiduciary responsibilities of brokers when
acting as escrows for their clients’ real estate transactions.
4.
Fair Housing: Describes the federal and California fair housing
and lending laws.
5.
Risk Management: Provides licensees with the knowledge needed
to avoid costly disputes with their clients arising from professional
errors and omissions in the performance of their duties.
To save space and make the text more readable, we use the following
abbreviations and terms:
BPC
BRE
CAR®
CC
The Business and Professional Code of California.
Bureau of Real Estate
California Association of REALTOR®s.
The Civil Code of California
You can find the complete California codes at
www.leginfo.ca.gov/calaw.html. Unless otherwise stated, all cases are
California cases. In citing cases, we specify only the names of the litigants
and the year of the decision.
The forms cited in this course are from the California Association of
REALTORS®.
In addition to the above terms and abbreviations, we also follow a few
typographic conventions.
This is a “margin note” used for
definitions and footnotes.
We use margin notes to provide definitions and short footnotes. We use the
symbol  to direct your attention to an adjacent margin note.
Side bars like this one are used for long notes. Content in the margin
notes, side bars, and in the appendices is not tested in the final exam.
Fair Housing, 2nd Edition
TABLE OF CONTENTS
1
Introduction
1.1
1.2
1.3
1.4
1.5
2
Overview
Terminology
Laws
Protected Classes
Federal vs. State Law
Fair Housing
2.1
2.2
2.2.1
2.2.2
2.2.2.1
2.2.2.2
2.2.2.3
2.2.3
2.2.3.1
2.2.3.2
2.3
2.3.1
2.3.2
2.3.3
2.3.3.1
2.3.3.2
2.3.3.3
2.3.4
2.4
2.4.1
2.4.2
2.4.3
2.4.4
2.4.5
3
3.1
3.1.1
3.1.1.1
3.1.1.2
3.1.1.3
3.2
3.2.1
3.2.1.1
3.2.1.2
3.2.1.3
Enforcement Agencies
Forms of Discrimination
Traditional Concept of Neighborhood
Overt Discrimination
Racial Zoning
Discriminatory Restrictive Covenants
Blockbusting
Covert Discrimination
Steering
Discrimination via Agency
Federal Laws
Overview
Civil Rights Act of 1866
Fair Housing Act
Purpose
Reasonable Accommodation
Exemptions
Americans with Disabilities Act
California Laws
Unruh Civil Rights Act
Disabled Persons Act
Fair Employment and Housing Act
BRE Regulations
AIDS Disclosure Exception
1
1
1
2
3
6
8
8
9
9
9
9
10
11
11
11
12
13
13
13
14
14
14
18
19
20
21
22
22
23
24
Fair Lending
25
Overview
25
Discriminatory Lending Practices
Redlining
Subprime Lending
Predatory Lending
Federal
Equal Credit Opportunity Act
Origins
Purpose
What Creditors May Ask
2014 45HoursOnline, All Rights Reserved
25
25
26
26
27
27
27
27
28
Page i
3.2.1.4
3.2.1.5
3.2.2
3.3
3.3.1
4
Creditor Notifications
Consumer Remedies
Home Mortgage Disclosure Act
California
Housing Financial Discrimination Act
Fair Housing Compliance
4.1
4.2
4.2.1
4.2.2
4.2.3
4.3
General Recommendations
Avoiding Discriminatory Advertising
Exemptions
Selective Use of Advertising Media
Equal Housing Logo
Fair Housing Partnership Agreement
29
29
29
30
30
31
31
32
33
33
33
34
Page ii
1 INTRODUCTION
Federal and state laws prohibit discrimination in the sale, rental, and
financing of real estate when based on legally-prohibited considerations
called “protected classes.” These are the “fair housing and lending laws,”
the subject of this course.
This course also covers the laws which provide the disabled with access to
public accommodations and facilities. The disability laws are relevant to
licensees who run brokerages or manage commercial properties; whereas
the fair housing and lending laws are relevant to all practicing residential
brokers and salespersons.
1.1 OVERVIEW
The remainder of this section summarizes the laws covered in this course,
defines the “protected classes,” and describes the relationship between
federal and state law.
Section 2 describes the fair housing and the disability laws.
Section 3 describes both federal and state fair lending laws.
Section 4 describes actions to assure compliance with the fair housing
laws.
1.2 TERMINOLOGY
When we do not qualify the term “discrimination,” we mean “discrimination
on a prohibited basis”; that is any action taken for or against an individual
based on the individual’s “protected class.”
Consider the protected class of religion. If you broadly define a religion as a
set of beliefs concerning a “higher power”; then there are innumerable ways
by which you could categorize individuals based on religion:

By adherence to a holy book – Christians, the Old and New
Testaments; Jews, the Pentateuch; Mormons, The Book of Mormon;
and so on.

By belief in God – theists, agnostics, and atheists.

By conception of God – monotheists polytheists, animists, deists.

By belief in supernatural systems – astrology, reincarnation,
guardian angels, voodoo, witchcraft, etc..
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No matter how you categorize an individual by religion, it is illegal to take
into consideration that individual’s religious beliefs when brokering real
estate properties or loans. Thus, all of the following actions are illegal:

An agent intentionally sells homes with bad Feng Shui to buyers he
dislikes.

A Mormon mortgage broker gives better terms to Mormon borrowers
than to gentiles.

A property manager prefers Pastafarian over Rastafarian tenants.

A devout Christian refuses to show properties to Yaqui shamans.
The term “protected class” has several variants used both in the laws and
the literature about the laws, all of which are equivalent; these include
“protected classifications,” “protected categories,” “protected groups,” and
the term, “discrimination on a prohibited basis.”
Remember, the “state classes”
include the “federal classes”
We refer to two sets of protected classes: one federal, the other state.
There are seven federally protected classes (race, color, religion, sex,
national origin, familial status, and disability) and five additional state
protected classes (sexual orientation, marital status, ancestry, source of
income, and age). Rather than enumerate the protected classes each time
we need to refer to them, we use the term “federally protected classes” and
“State protected classes.”
1.3 LAWS
The fair housing law is comprised of federal, state, and local statutes;
regulations, and case law. In this course, we cover only the federal and
state fair housing laws. Depending on where you sell real estate, however,
the fair housing law may include municipal statutes that expand the State
fair housing laws to include additional protected groups. For example, in
the County of San Francisco, municipal statutes append to the State
protected classes those of gender identity, weight, height, and place of birth
(source).
The fair housing laws covered in this course are summarized below:
1866
1968
1975
Federal Law
Summary
Civil Rights Act of 1866
All citizens regardless of race have equal property rights.
42 USC §1982
Commonly regarded as the original fair housing law. It prohibits discrimination based on race.
Fair Housing Act (FHA)
Discrimination in housing and lending is prohibited.
42 USC §3601 et seq
The most important fair housing law. It includes three statutes (1) Title VI of the Civil Rights Act,
1968; (2) Fair Housing Amendments Act, 1988; (3) Housing for Older Persons Act of 1995
Equal Credit
Opportunity Act
Financial institutions may not discriminate in lending.
An important law for mortgage brokers and other licensees when acting as “arrangers of credit.”
1975
Home Mortgage
Disclosure Act
Residential lenders licensed by the state must report the outcome of
each loan application by protected class.
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1990
1959
Americans with
Disabilities Act (ADA)
Title I: Employers may not discriminate against the disabled.
Title III: Public accommodations must be accessible to the disabled.
42 USC §12101-12213
Applies to any business or reception area open to the public.
State Law
Summary
Businesses may not discriminate. Provides protections for the
disabled. Incorporates by reference the ADA.
CC §51–51.3
This law and the next two have been certified by HUD as “substantially equivalent” to the FHA.
1963
Fair Employment &
Housing Act
Government §12900-12906
Disabled Persons Act
CC §54-55.1
Real estate licensees may not discriminate.
This is California’s primary fair housing law. The most relevant portion are §§12955-12956.1
(“Housing Discrimination”) aka, the “Rumford Act.”
It is almost entirely redundant with disability protections in the Unruh
Civil Rights Act and, like that act, incorporates by reference the ADA.
It is very similar to the ADA.
Commissioner’s Article
10: “Discrimination and
Panic Selling”
This article details thirty discriminatory activities that if performed by a
licensee may lead to the suspension or revocation of his license.
CFR §2780
1977
Housing Financial
Discrimination Act
(Holden Act)
Prohibits discriminatory practices by financial institutions, especially
redlining.
Very similar to the federal Equal Credit Opportunity Act.
Health & Safety §35800-35803
1.4 PROTECTED CLASSES
Discrimination: Treatment or
consideration based on class or
category rather than individual
merit.
Federal fair housing laws recognizes seven protected classes; state fair
housing laws, twelve. The federally protected classes are race, color,
religion, sex, national origin, familial status, and disability. The State
protected classes include the seven federally protected classes with five
additional classes: sexual orientation, marital status, ancestry, source of
income, and age.
A “non-protected” class does not refer to a non-minority such as a
white/male. White/males belong to two protected classes: race and sex. A
“non-protected” class is a classification of people not in any federal or state
protected class. Examples of non-protected classes are “trumpet players,”
“cigar smokers,” and “people with FICO scores below 650.”
The twelve protected classes are explained below. The state protected
class names are in blue. These classes and remarks about their legal
definitions follow:
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California 2010 Census Data
1.
Race/Ethnicity: Generally refers to one’s genetic ancestry from
ancient times. The usual categories are Hispanic, White, Asian,
Black, and Native American.
2.
Color: Similar to race but broader in its meaning. Examples:
Northern Italians discriminating against darker-skinned Sicilians;
light-skinned Blacks discriminating against dark-skinned blacks; and
discrimination against albinos.
3.
Religion: The protected characteristic of religion or belief includes
any religion and any religious or philosophical belief. It also includes
a lack of any such religion or belief.
4.
Sex/Gender: These terms are synonymous. “Sex” is the term used
in federal fair housing law; “gender” in the California law. Sexual
harassment is considered a form of gender discrimination.
In 2012, Governor Jerry Brown signed into law the Gender
Nondiscrimination Act which expands the meaning of gender to
include “gender identity” (a person’s deeply felt internal sense of
being male or female) and “gender expression” (one’s behavior,
mannerisms, appearance and other characteristics that are
perceived to be masculine or feminine) (source).
5.
National Origin/Ancestry: California law enumerates “national
origin” and “ancestry” as separate protected classes while federal
law refers only to “national origin.” But the Department of Justice
defines national origin to include “either the country of an
individual’s birth [national origin] or where his or her ancestors
originated [ancestry]”. Therefore the federal term “national origin”
includes the California classes of national origin and ancestry.
6.
Familial Status: Families with children including fetuses.
The Fair Housing Act (FHA), with some exceptions, prohibits
discrimination in housing against families with children under 18. In
addition to prohibiting an outright denial of housing to families with
children, the Act also prevents housing providers from imposing any
special requirements or conditions on tenants with custody of
children. For example, landlords may not locate families with
children in any single portion of a complex, place an unreasonable
restriction on the total number of persons who may reside in a
dwelling, or limit their access to recreational services.
In 2009, 19.5 million people, or
9.9% of the civilian noninstitutionalized population aged
16 to 64, had a disability (source).
7.
Handicap/Disability: This protected class, called “handicap” in
federal law, is the most complicated of all of the protected classes
and is the basis for most fair housing complaints  (source).
]
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As defined by federal law, a handicap is a physical or
mental impairment which substantially (California law omits
“substantially”) limits one or more of a person’s major life
activities, or a record of having had such impairment (e.g., a
“reformed alcoholic”), or one regarded as having such
impairment. Excepted from this definition are those
disabled by illegal drugs or as a result of any other illicit
activity
2009 Non-institutionalized population, 16 to 64 (source)
The California definition is stricter than the federal definition
referring to any physical and mental impairments that are
“disabling, potentially disabling, or mistakenly perceived as
disabling or potentially disabling” (Government §12926). The
California definition also includes “medical condition.”
The term “mental” or “physical impairment” may include conditions
such as blindness, hearing impairment, mobility impairment, HIV
infection, mental retardation, alcoholism, drug addiction, chronic
fatigue, learning disability, head injury, and mental illness. The term
“major life activity” may include seeing, hearing, walking, breathing,
performing manual tasks, self-care, learning, speaking, or working.
The FHA also protects persons who have a record of having an
impairment or are regarded as having such an impairment.
8.
Sexual Orientation: Sexual orientation means the attraction a
person feels towards one sex or another (or both), which determines
who they form intimate relationships with or are attracted to.
9.
Marital Status: An individual’s state of marriage, non-marriage,
divorce or dissolution, separation, widowhood, annulment, or other
marital state.
10.
Ancestry: Similar to the protected class of Nationality but more
inclusive as it includes descent from stateless people such as Jews,
Romanis, and Kurds.
12.
Source of Income: When State legislators included this class they
had in mind individuals receiving federal or state relief such as
AFDC or SSI. This class is now considered to include any lawful
source of income or even a mysterious but verifiable source of
income.
12.
Age: Age is not a federally protected class but is a State protected
class except for legally designated senior communities (CC §51.2)
(more later).
Illegal Immigrants
AB 976, the bill which created
Effective January 2008, immigrants and foreign citizens acquired limited
these protections, was signed
protections against housing discrimination. Specifically landlords may not
October 10, 2007. The law (CC
discriminate based on either immigration or citizenship status. Landlords
§1940.3) also prohibits any
California city and/or county from are prohibited from making any inquiry into immigration or citizenship status
requiring landlords to make such or requiring any prospective tenant to make a statement about his
inquiries or to provide or report
immigration or citizenship status.
information about the immigration
or citizenship status of their
The law permits landlords to request social security numbers and other
Page 5
tenants.
documentation needed to verify credit worthiness.
Liability Realities
The vast majority of fair housing complaints
are based on just two of the twelve protected
classes – disability and race  . In 2010,
there were 10,155 housing discrimination
complaints filed with HUD and its Fair
Housing Assistance Program partners
(FHAP)  ; 45% for disability and 34% by
race and the gap between them has been
growing every year (source).
“FHAP Partners” are the non-profit and government agencies certified by
HUD’s Office of Fair Housing and Equal Opportunity (FHEO) to enforce
local fair housing laws which are substantially equivalent to the FHA. In
California this includes the Department of Fair Employment and Housing
(DFEH), the largest civil rights enforcement agency in the United States,
and also numerous small, non-profit fair housing groups (list) which receive
funding from HUD to enforce and promote fair housing at the municipal
level. These fair housing groups form the National Fair Housing Alliance –
a consortium of more than 220 private, non-profit fair housing
organizations.
1.5 FEDERAL VS. STATE LAW
For the most part, federal fair housing laws are a subset of State fair
housing laws; in-other-words, State law is more restrictive than federal law.
For example, as has already been pointed out, State law has twelve
protected classes while federal law has just seven. Then why, may you
ask, do we need to know both sets of laws? There are two reasons.
First, because violators of both federal and State fair housing laws
can be sanctioned by either federal or State authorities, victims may
sue violators in either a federal or State court, and both federal and
State regulators can compel you to adhere to their mandates.
Second, under the judicial doctrine of “preemption,” federal
legislation trumps state legislation of the same subject matter. This
means that where federal and State fair housing laws conflict,
federal law takes precedence. Fortunately, these two bodies of law
do not conflict in any important way.
Since federal fair housing violations are de facto state fair housing
violations with comparable enforcement procedures and remedies, HUD
subsidizes California’s Department of Fair Employment and Housing
(DFEH) to enforce its fair housing laws. Consequently, it is rare that HUD
adjudicates the federal laws in California.
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An important, albeit rare exception, are “pattern-or-practice” cases filed by
HUD and prosecuted by the Department of Justice (DOJ). These cases
involve major investigations against prominent offenders. In 2010, for
example, the DOJ had only 46 pattern-or-practice cases (source).
In this course, we discuss the federal fair housing laws in detail. Only those
aspects of the State laws which augment the federal laws are described.
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2 FAIR HOUSING
This chapter describes the federal and state fair housing laws. It is
organized into four sections.
This section gives an overview of the fair housing laws. It defines “fair
housing,” details impediments to fair housing, and describes the agencies
which enforce the fair housing laws.
The second section, describes the three major federal fair housing laws:
(1) the Civil Rights Act of 1866, and (2) the Fair Housing Act (FHA), and (3)
The American with Disabilities Act (ADA).
The third and last section describes the major state fair housing laws:


California Fair Employment and Housing Act

CC §54: “Blind and Other Physically Disabled Persons”

BRE’s Article 10: “Discrimination and Panic Selling”
2.1 ENFORCEMENT AGENCIES
The agency charged with enforcing the fair housing laws at the State level
is the Department of Employment and Fair Housing (DFEH). At the federal
level, there are two agencies which enforce these laws: (1) HUD’s Office of
Fair Housing and Equal Opportunity and (2) the Department of Justice
(DOJ).
The DOJ plays a small but important role in the enforcement of the federal
fair housing laws; that role is to use its immense legal resources to
prosecute complex “pattern-or-practice” lawsuits against major
organizations such as banks, state governments, and Fortune 500
companies. In these cases, the DOJ attempts to show that the defendant
has systematically engaged in discriminatory activities by means of its
policies and procedures.
In California, HUD has delegated its enforcement of the fair housing laws to
the DFEH (California’s fair housing laws are substantially equivalent to the
federal fair housing laws).
DFEH’s mandate is to protect the people of California from discrimination in
employment, housing and public accommodations pursuant to the
California Fair Employment and Housing Act, the Unruh Civil Rights Act,
and the Ralph Civil Rights Act (which concerns victims of hate crimes).
The California Supreme Court affirmed that DFEH hearing officers,
although not part of the legal system, have the right to award monetary
damages for emotional distress (Konig v. FEHC, 2002).
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2.2 FORMS OF DISCRIMINATION
With important exceptions to be presented later, the fair housing laws
compel you to ignore your client’s “protected attributes.” These laws
require you to not discriminate positively or negatively, directly or indirectly,
overtly or covertly, individually or systematically.
2.2.1TRADITIONAL CONCEPT OF NEIGHBORHOOD
Racial and religious discrimination in housing before 1970
was considered socially beneficial because it promoted
the traditional concept of neighborhood. That concept
conceived the ideal neighborhood as culturally
homogenous with its members sharing a common
ancestry, religion, values, and economic level.
Traditional Concept of Neighborhood
Real estate and lending professionals, in cooperation with
government, worked together to keep neighborhoods
culturally homogenous. This resulted in the
discriminatory practices described in this section, namely:
steering, racial zoning, redlining, and restrictive
covenants. From the perspective of the real estate
industry before 1970, these discriminatory practices were
desirable because they maximized home values.
2.2.2OVERT DISCRIMINATION
The overt discriminatory acts of racial zoning, discriminatory covenants,
and blockbusting discussed in the following sub-sections are illegal and,
today, rare. Generations ago, their use was commonplace and to a large
extent these overt forms of discriminatory acts account for the patterns of
de facto segregation which still exist today.
2.2.2.1RACIAL ZONING
Racial zoning was used to separate the races through the turn of the
century and well into the 1900’s. The following 1912 Virginia statute was
typical for its time:
The map so prepared and certified and corrected shall be prima
facie evidence of the boundaries and racial designation of such
districts ... Nothing contained herein shall preclude persons of
either race employed as servants by person of the other race from
residing upon the premises of which said employer is the owner or
occupier (source).
For a detailed description of racial Racial zoning laws were declared unconstitutional in 1917 (Buchanan v.
zoning and other institutional
Warley) when the U.S. Supreme Court decided these laws interfered with the
methods used to enforce
segregation, see chapter 6 of Jim rights of owners to dispose of their property to whomever they pleased.
Crow Guide: The Way it Was, by After the 1917 decision, other means of perpetuating racial zoning were
Stetson Kennedy.
found. Real estate boards and commissions adopted policies, some written
Page 9
but most un-written, of refusing to rent or sell to non-Christians in Christian
neighborhoods or to non-Caucasians in Caucasian neighborhoods. Here, is
an example of a written discriminatory policy from the 1948 Code of Ethics
of the Real Estate Board of Washington, D.C.:
No property in a white section should ever be sold, rented,
advertised, or offered to colored people (source).
Examples of unwritten discriminatory policies designed to continue racial
zoning, include zoning techniques which, without mentioning race, were
designed to reinforce the separate racial patterns. Most prevalent among
these was the use of higher density zoning (e.g., multi-family) within areas
formerly designated as “Negro,” and the use of very low density and
otherwise restrictive zoning where blacks were not wanted (exclusionary
zoning). These discriminatory policies, made illegal decades ago,
established segregated neighborhoods that persist today.
2.2.2.2DISCRIMINATORY RESTRICTIVE COVENANTS
Restrictive covenants, which were private, court-enforceable discriminatory
conditions included in housing titles, were very effective in depriving
minorities of free choice in housing. The FHA and VA required participating
lending institutions, builders, and real estate brokers to maintain
segregated housing patterns. The FHA furnished builders with a model
restrictive covenant with space left blank for the builder to fill in the
prohibited races and religions.
Here is a typical racially restrictive covenant from a 1925 abstract of title for
a home in Lake County, Illinois (source)
Illegal restrictive covenants as they may still be recorded in existing
property documents (grant deeds, declarations of covenants, CC&Rs, etc.)
are, of course, void and unenforceable. But buyers reading such legacy
documents may not know this and become alarmed. To make their
illegality clear to new buyers, Sacramento passed a law (Government
§12956.1(b)(1)) which requires anyone who provides any property document
must provide a notice informing the recipient that any restrictive covenant
based on any prohibited consideration is void and that property owners
have the right to have such language removed. To remove such
covenants, property owners apply to DFEH. If the DFEH determines that
the restrictive covenant is unlawful, the applicant may strike it and cause
the modified document to be recorded.
Page 10
2.2.2.3BLOCKBUSTING
Blockbusting, also called “panic selling,” is a strategy for reducing a
neighborhood’s home values. It generally was implemented in these steps:
(1) find an ethnically homogenous neighborhood, (2) move into that
neighborhood members of another race, (3) circulate the claim that because
members of the other race have moved in, property values will decrease
and crime increase, (4) when property values drop, buy as many of the
properties in the neighborhood as possible, (5) move the neighbors of the
other race out of the neighborhood, (6) when property values increase, sell
Blockbusting was well illustrated
in this 1971 episode of All in the properties for a big profit. The strategy was sometimes employed by
the “members of the other race” to make big profit from bigotry .
the Family on Youtube.
2.2.3COVERT DISCRIMINATION
The discriminatory actions described in this section are often performed
innocently and may even be well intentioned.
2.2.3.1STEERING
Steering is the discriminatory practice of directing a client to a particular
community, neighborhood, or development based on the client’s protected
class. For example, should an agent only show a Farsi-speaking buyer
only properties in Persian neighborhoods, then that agent would be guilty of
discriminatory steering. He would be guilty even if the Persian buyer
requested to be shown only properties in Farsi-speaking neighborhoods
(more later). Remember, with only certain narrow exceptions, you must be
blind to your client’s protected attributes even if your client is not.
The motivation for steering may be racist, helpful, or innocent. Regardless
of the motive, steering based on protected class is prohibited by the fair
housing laws. These laws seek “to ensure that individuals of similar
income have a like range of choices available in the housing market
regardless of their protected class.”
HUD pays the NFHA to conduct
fair housing investigations and
the NFHA has standing to sue
violators on behalf of a protected
group. (The NFHA is described in
more detail in Section 4.)
From RealtyTimes in an article
by Blanche Evans.
Provision of School and Demographic Information
The National Fair Housing Alliance (NFHA)  has charged that provision of
unsubstantiated opinions from brokers about schools and school districts is
racial steering. In testing financed by HUD, NFHA found many instances in
which brokers told White buyers that schools in certain neighborhoods were
bad while not mentioning the same fact to their Black buyers.
Minneapolis real estate attorney Brian Larson  suggests four ways to
provide buyers with school, crime, and other demographic information
without breaking fair housing laws: Brokers should …
1.
ask all buyers the same questions; e.g., “are you interested in the
quality of schools?”
2.
collect and distribute objective information.
3.
encourage buyers to visit schools and do their own research.
4.
collect information on all neighborhoods they serve.
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Buyer’s Agent Issue
What should be your response should your client ask you to show him only
properties in neighborhoods primarily occupied by specified protected
classes? For example, what should you do if a Mexican-American couple
requests to only see properties in predominantly Spanish-speaking
neighborhoods?
Or what should be your response should a prospective buyer ask you for
information about the ethnic mix or some other prohibited characteristic of a
neighborhood? For example, if your buyer asked how many children lived
in the neighborhood? What should be your response?
Here are some sample responses from a HUD publication:

To the Orthodox Jew who states that he must live within walking
distance of a synagogue, say:
I’m sure we can accommodate your housing needs. Here is a list of
as many houses of worship as I could find in this community taken
from the yellow pages. It includes, I believe, every synagogue. I
will be happy to show you any listing which meets your
requirements. You select the synagogues, and I’ll see what listings
are available near the ones you select.
If the buyer came to the agent with a list of areas within walking
distance of a temple, it wouldn’t be steering since the selection of
neighborhoods is made by the buyer and not the agent. Similarly, in
the case of the Persian buyer, if the agent complied with his Farsispeaking client’s request to only be shown homes in “Little Tehran,”
it wouldn’t be steering. It’s only steering when the agent chooses
the neighborhoods based on some prohibited attribute such as
“ancestry.”

Remember, someone in the HUD
office in Washington DC wrote
this idealized reply.
To the buyer who requests to see homes only in Asian
neighborhoods, say.
I’m sorry but this office is not permitted to list or sell property on a
racial basis . We can do one of two things. We can proceed with
a qualifying interview and I can provide you with listings which meet
your other stated needs. You then can accept or reject them as you
see fit. Or, you can determine the area in which you wish to live,
give me boundaries, communities, or neighborhoods and then we
can see what is available to meet your needs. For your information
the Fair Housing Act, passed in 1968, is intended to discourage the
buying and selling of real estate on the basis of race, color, religion,
sex, national origin, familial status, and handicap. The choice of
where you wish to live is yours, but I cannot facilitate your search if it
requires any potentially discriminatory practice or procedure.
2.2.3.2DISCRIMINATION VIA AGENCY
What should you do if your client wants you to discriminate on his behalf?
The following questions and answers address this concern and are from
the North Carolina’s Real Estate Commission’s web site:
Q:
May an agent discriminate at the direction of the owner?
Page 12
A:
No. Even if a real estate agent has no discriminatory intent, the
agent is in violation of the fair housing laws when discriminating
against persons from one of the protected categories at the direction
of the owner or lessor. Likewise, an agent is in violation if he or she
knows that members of protected categories may be unlawfully
rejected by the owner or lessor.
Q:
What should a real estate agent do if he or she finds out that
the seller or landlord intends to discriminate?
A:
The agent should immediately terminate the agency relationship
with the seller or landlord. The agent should then send a letter to
the seller or landlord stating that the relationship has been
terminated and explaining why. Next, the agent should inform any
other agents or other parties to the transaction that he or she no
longer represents the seller or landlord.
Q:
Can a real estate agent answer questions about the protected
characteristics of a neighborhood?
A:
No.
2.3 FEDERAL LAWS
2.3.1OVERVIEW
There are three federal fair housing laws of relevance to licensees: (1) the
Fair Housing Act, (2) the Civil Rights Act of 1866 and (3) the American with
Disabilities Act.
2.3.2CIVIL RIGHTS ACT OF 1866
The Civil Rights Act of 1866 (CRA) gave specific rights to freed slaves
following the end of the American Civil War. It is remarkably succinct:
All citizens of the United States shall have the same right, in every
State and Territory, as is enjoyed by White citizens thereof to inherit,
purchase, lease, sell, hold, and convey real and personal property.
(42 USC §1982)
The CRA is regarded as the original fair housing law; however, not until
June 1968, three months after the passage of the Fair Housing Act (FHA)
did the Supreme Court rule (Jones v. Alfred H. Mayer Co.) that the Act prohibited
racial discrimination in private housing. Before the ruling, the courts
interpreted the CRA to apply only to federal government housing.
The CRA prohibits only racial discrimination whereas the FHA prohibits
discrimination based on all seven of the federally protected classes
including race. The FHA also prohibits racial discrimination in advertising
and lending whereas the CRA applies only to real estate transfers and
leases.
Page 13
2.3.3 FAIR HOUSING ACT
2.3.3.1PURPOSE
The purpose of the FHA in the act’s own words are (42 USC §3604):
It shall be unlawful for any person:
(a)
To refuse to sell or rent after the making of a bona fide offer, or
to refuse to negotiate for the sale or rental of, or otherwise
make unavailable or deny, a dwelling to any person because
of race, color, religion, sex, familial status, or national origin
[see below note].
(b)
To discriminate against any person in the terms, conditions, or
privileges of sale or rental of a dwelling, or in the provision of
services or facilities in connection therewith, because of race,
color, religion, sex, familial status, or national origin.
(c)
To make, print, or publish, or cause to be made, printed, or
published any notice, statement, or advertisement, with
respect to the sale or rental of a dwelling that indicates any
preference, limitation, or discrimination based on race, color,
religion, sex, handicap, familial status, or national origin, or an
intention to make any such preference, limitation, or
discrimination.
(d)
To represent to any person because of race, color, religion,
sex, handicap, familial status, or national origin that any
dwelling is not available for inspection, sale, or rental when
such dwelling is in fact so available.
(e)
For profit, to induce or attempt to induce any person to sell or
rent any dwelling by representations regarding the entry or
prospective entry into the neighborhood of a person or
persons of a particular race, color, religion, sex, handicap,
familial status, or national origin.
In the (a) and (b) declarations the prohibited class of “handicap” (or
“disability”) is omitted since the rights of the disabled are specifically
described in three pages of details (declaration ‘f’) which we have omitted.
2.3.3.2REASONABLE ACCOMMODATION
No part of the Fair Housing Act (FHA) gets more attention than its
“Reasonable Accommodations” provision. It reads “Discrimination
includes: …”
(a)
a refusal to permit, at the expense of the handicapped person,
reasonable modifications of existing premises occupied or to be
occupied by such person if such modifications may be necessary to
afford such person full enjoyment of the premises, except that, in
the case of a rental, the landlord may where it is reasonable to do
so condition permission for a modification on the renter agreeing to
restore the interior of the premises to the condition that existed
before the modification, reasonable wear and tear excepted;
Page 14
(b)
a refusal to make reasonable accommodations in rules, policies,
practices, or services, when such accommodations may be
necessary to afford such person equal opportunity to use and enjoy
a dwelling; or
(c)
in connection with the design and construction of covered
multifamily dwellings for first occupancy a failure to design and
construct those dwellings in such a manner [that its essential
features be accessible to a person in a wheel chair].
About 60% of all FHA complaints are for discrimination based on disability.
Of these, a substantial portion alleges that a provider failed to make a
reasonable accommodation to the complainant’s disability. Since often
money, privilege, suspicion, and the discomfiture of other residents is a
factor in whether to provide a disabled person’s requested accommodation
and since the most important terms used in the law are subjective, it’s not
hard to understand why this provision causes so much litigation.
Moreover, this provision puts the burden of proof for denying an
accommodation squarely on the shoulders of the housing provider.
In response for the need of housing providers for clarification of the
reasonable accommodations provision, HUD and the DOJ jointly published
a Reasonable Accommodations under the Fair Housing Act from which
the following extract is taken:
Q:
Who must comply with the FHA’s reasonable accommodation
requirements?
A:
Courts have applied the Act to individuals, corporations, associations,
and others involved in the provision of housing and residential
lending, including property owners, housing managers, homeowners
and condominium associations, lenders, and real estate agents.
Under specific exceptions to the FHA, the reasonable accommodation
requirements of the Act do not apply to a private individual owner who
sells his own home or to owner-occupied buildings that have four or
fewer dwelling units.
Q:
Does the Act protect juvenile offenders, sex offenders, persons who
illegally use controlled substances, and persons with disabilities who
pose a significant danger to others?
A:
No, juvenile offenders and sex offenders, by virtue of that statute, are
not persons with disabilities protected by the Act.
Additionally, the Act does not protect an individual with a disability
whose tenancy would constitute a “direct threat” to the health or safety
of other individuals or result in substantial physical damage to the
property of others unless the threat can be eliminated or significantly
reduced by reasonable accommodation.
Q:
What is a “reasonable accommodation” for purposes of the Act?
A:
A “reasonable accommodation” is a change, exception, or adjustment
to a rule, policy, practice, or service that may be necessary for a
person with a disability to have an equal opportunity to use and enjoy
a dwelling, including public and common use spaces. Since rules,
Page 15
policies, practices, and services may have a different effect on
persons with disabilities than on other persons, treating persons with
disabilities exactly the same as others will sometimes deny them an
equal opportunity to use and enjoy a dwelling.
Example: A housing provider has a “no pets” policy. A deaf tenant
requests that the provider allow him to keep a dog as a reasonable
accommodation. The tenant explains that the dog is an assistance
animal that will alert him to several sounds, including knocks at the
door, sounding of the smoke detector, the telephone ringing, and cars
coming into the driveway. The housing provider must make an
exception to its “no pets” policy to accommodate this tenant [and
placate his neighboring tenants].
Support Dog
Q:
Are there any instances when a provider can deny a request for a
reasonable accommodation without violating the Act?
A:
Yes. A request for a reasonable accommodation may be denied if
providing the accommodation is not reasonable – i.e., if it would
impose an undue financial and administrative burden on the housing
provider or it would fundamentally alter the nature of the provider’s
operations. The determination of undue financial and administrative
burden must be made on a case-by-case basis involving various
factors […].
Q:
What is a “fundamental alteration”?
A:
A “fundamental alteration” is a modification that alters the essential
nature of a provider’s operations.
Q:
What happens if providing a requested accommodation involves some
costs on the part of the housing provider?
A:
Courts have ruled that the Act may require a housing provider to grant
a reasonable accommodation that involves costs, [if] the reasonable
accommodation does not pose an undue financial and administrative
burden and the requested accommodation does not constitute a
fundamental alteration of the provider’s operations. [Criteria omitted.]
Q:
What happens if no agreement can be reached?
A:
A failure to reach an agreement on an accommodation request is in
effect a decision by the provider not to grant the requested
accommodation. If the individual who was denied an accommodation
files an FHA complaint to challenge that decision, then the agency or
court receiving the complaint will review the evidence in light of
applicable law and decide if the housing provider violated that law.
Q:
What inquiries, if any, may a housing provider make of current or
potential residents regarding the existence of a disability when they
have not asked for an accommodation?
A:
Under the FHA, it is usually unlawful for a housing provider to (1) ask
if an applicant … has a disability … or (2) ask about the nature or
severity of such persons’ disabilities. Housing providers may,
Page 16
however, make the following inquiries, provided these inquiries are
made of all applicants, including those with and without disabilities:

An inquiry to determine if an applicant is a current illegal
abuser or addict of a controlled substance;

An inquiry to determine if an applicant qualifies for a dwelling
legally available only to persons with a disability …; and

An inquiry to determine if an applicant qualifies for housing
that is legally available on a priority basis to persons with
disabilities or to persons with a particular disability.
Q:
What kinds of information, if any, may a housing provider request from
a person with an obvious or known disability who is requesting a
reasonable accommodation?
A:
A provider is entitled to obtain information that is necessary to
evaluate if a requested reasonable accommodation may be necessary
because of a disability. If a person’s disability is obvious or otherwise
known … and if the need for the requested accommodation is also
readily apparent or known, then the provider may not request any
additional information about the requester’s disability or the disabilityrelated need for the accommodation.
If the requester’s disability is known or readily apparent to the
provider, but the need for the accommodation is not readily apparent
or known, the provider may request only information that is necessary
to evaluate the disability-related need for the accommodation.
Q:
If a disability is not obvious, what kinds of information may a housing
provider request in support of a requested accommodation?
A:
A housing provider may not ordinarily inquire as to the nature and
severity of an individual’s disability. However, in response to a
request for a reasonable accommodation, a housing provider may
request reliable disability-related information that (1) is necessary to
verify that the person meets the Act’s definition of disability …, (2)
describes the needed accommodation, and (3) shows the relationship
between the … disability and the need for the … accommodation.
Q:
If a person believes she has been unlawfully denied a reasonable
accommodation, what should that person do if she wishes to
challenge that denial under the Act?
A:
When a person with a disability believes that he has been subjected
to a discriminatory housing practice, including a provider’s wrongful
denial of a request for reasonable accommodation, he may file a
complaint with HUD {or in California with the DFEH} within one year
after the alleged denial or may file a lawsuit in federal district court
within two years of the alleged denial. If a complaint is filed with HUD,
HUD will investigate the complaint at no cost to the person with a
disability.
Page 17
2.3.3.3EXEMPTIONS
The Fair Housing Act (FHA) allows four exemptions: (1) senior housing, (2)
religious non-profits, (3) private clubs, and (4) owner occupants.
Buildings means any HOA
governed by CC&Rs.
Senior Housing
The senior housing exemption allows buildings  to exclude children under
the following conditions:
1.
All occupants are 62 years of age or older with two exceptions: a)
resident managers and maintenance personnel and b) occupants
since 1989.
2.
Buildings where at least 80% of the units are occupied by one
person 55 years of age or older and the building has significant
facilities and services designed to meet the physical or social needs
of older persons.
Religious Nonprofits
Qualified religious organizations may limit the sale or rental of dwellings to
persons of that religion providing they do not otherwise discriminate. The
religious organizations must be nonprofit.
Private Clubs
A private club that is not open to the public and provides lodging that it
owns or operates for noncommercial purposes may limit rental or
occupancy to its members or give preference to its members.
Owner-Occupants
The most famous exemption under the FHA is known as the “Mrs. Murphy
Exemption.” This exemption is based upon a hypothetical elderly widow,
Mrs. Murphy, who wants to rent one or more rooms or units in her
household to a boarder/tenant.
An interesting state-by-state list of
exceptions to FHA’s Mrs. Murphy
Exemption is given here.
Under the FHA, the Mrs. Murphy Exemption applies to any owner-occupant
of a “dwelling” where “dwelling” is a residence comprised of four or less
units (e.g., a “four-plex”). But this exemption is more strictly applied in
California (Government Code §12927(2)(a)). Under California’s fair housing law , the
Mrs. Murphy Exemption applies only to an owner-occupant renting a room
to a single boarder living within the same household where “household” is
defined as a single-family residence in which all occupants share living
areas (e.g., a kitchen).
For example, an eighteen year old girl may openly refuse to rent her extra
bedroom to a 55 year-old alcoholic bachelor. However, if that same girl
owned a duplex, she would be in violation of California’s fair housing laws if
she refused to rent her other unit to that same man because he was male
(gender discrimination), or because he was a bachelor (family status
discrimination), or because he was drunk (disability discrimination).
The Mrs. Murphy exemption does not include an exemption for illegal
discriminatory advertising. Owners must not publish any advertisement or
notice for boarders or roomers giving preference to applicants on any
prohibited basis EXCEPT for sex – this exception only applies to
Page 18
advertising for boarders. Thus, the 18-year girl could advertise for a female
boarder but not for a “young, single, and sober woman” boarder as age,
marital status, and disability are protected characteristics.
2.3.4AMERICANS WITH DISABILITIES ACT
The Americans with Disabilities Act of 1990 (ADA) prohibits discrimination
against the disabled in employment (Title I), places of public
accommodation and commercial facilities (Title III), and provides minimum
standards for ensuring accessibility when designing and constructing new
facilities. The Act does not apply to residential housing unless the housing
is used to meet the public for commercial transactions nor does it apply to
the residents-only portion of common interest subdivisions such as
condominium projects and planned developments.
You need to know the law if you employ 14 or more people, have an office,
or if you manage commercial properties.
The act protects individuals with either physical or mental disabilities.
California’s Unruh and Disabilities Act (described later) incorporates the
same prohibitions and mandates as does the ADA and is slightly more
restrictive.
Brokers’ Responsibilities as Employers
Employers may not discriminate against the disabled. If an applicant is
qualified, reasonable accommodations must be made.
Brokers’ Responsibilities as Service Providers
Title III of the ADA requires most places of public accommodation and
commercial facilities including brokerage offices to be designed,
constructed, or altered to comply with accessibility standards for the
disabled. All buildings need to ramp the curb or steps, lower a front counter
for wheel chair access, install grab bars in washrooms, add a paper cup
dispenser by a water fountain, and make other changes outlined in the
Accessibility Guidelines for Buildings and Facilities (ADAAG). There is no
exemption for small businesses.
Buildings constructed after January 26, 1993 must be constructed to the
ADA standard, older buildings must be altered to provide access to “primary
A primary function area is any
area where a major activity takes function” areas . Elevators are not required in some buildings having less
place such as a customer service than 3,000 square feet or having only one or two stories.
area. The route to a primary
function area must also be
accessible.
Particularly affected are brokers who manage commercial properties since
they may be held responsible for ADA compliance. Properties which must
comply with the Act include office buildings, shopping malls, restaurants,
hospitals, convention centers, banks, depots, and galleries.
Licensees also must disclose any known ADA infringements to buyers,
sellers, or lessees. If suit is brought under the ADA alleging discrimination
against a disabled person, brokers or their agents may be held liable for
damages if they failed to disclose known ADA infringements.
Page 19
Injunctive Relief: A court order
demanding a party carry out a
particular action.
Enforcement
The ADA provides two avenues for enforcement of Title III: (1) private
lawsuits by individuals for injunctive relief , and (2) lawsuits by the
Department of Justice (DOJ) whenever it has reasonable cause to believe
there is a pattern or practice of discrimination that raises an issue of general
public importance.
Unlike the ADA which provides only for injunctive relief in private right of
actions, California’s Unruh Civil Rights Act (CC §52 et seq.) and its largely
redundant Disabled Persons Act (CC § 54 et seq.) provides for different minimum
penalties for each violation. Both acts incorporate by reference the ADA
thus making any violation of the ADA also a violation of either act.
Grab bars shot by the author in
Guadalajara Zoo, Mexico.
One difference between the two acts is of importance to property managers.
The Unruh act permits a minimum penalty of $4,000 to be paid to a disabled
plaintiff who suffers as a result of a business owner’s violation of the ADA.
Prior to 2008 this provision was notorious for vexatious lawsuits from
disabled persons hunting profits rather than seeking to recover damages
resulting from ADA violations. Subsequently case law and legislative
reforms have largely eliminated the abuses of this Act. These reforms will
described in the below section, “Unruh Civil Rights Act.”
2.4 CALIFORNIA LAWS
There are two California fair housing laws which prohibit housing
discrimination: (1) the Unruh Act prohibits discrimination from businesses
which provide public accommodations (apartments, motels, hotels, etc.);
and (2) the California Fair Housing Law which prohibits discrimination in
residential real estate transactions.
Before discussing the details of these two laws, you should recall the
following facts about federal vs. state fair housing laws:
1.
HUD has declared that California’s fair housing laws are
“substantially equivalent” to the FHA.
2.
The enforcement agency for California’s fair housing laws is not
HUD but the Department of Fair Employment and Housing (DFEH).
3.
HUD refers nearly all fair housing complaints to the DFEH.
4.
An victim of discrimination can seek redress under the State’s
administrative law enforced by the DFEH or he can file his own
private suit under state or federal law but not both.
5.
State protected classes include all of the federally protected classes
plus five additional classes: sexual orientation, marital status,
ancestry, source of income, and age.
Page 20
2.4.1UNRUH CIVIL RIGHTS ACT
The Unruh Civil Rights Act (Unruh Act) prohibits discrimination by
businesses that serve the public. It is of primary interest to brokers who run
brokerage offices and to licensees who manager commercial real estate.
History
Jesse Unruh was elected to the California State Assembly in 1954 and
served as Speaker of the Assembly from 1961 to 1968. In 1959 he
authored the Unruh Civil Rights Act which placed California in the front
ranks of a revolution in civil rights taking place throughout the nation.
Jesse Unruh with Willie Brown
(background).
Initially the law applied only to race but later it was expanded by the
legislature to include marital status (1976), pregnancy (1978), and sexual
orientation (1999). In 2005 it was amended to include protection from
discrimination for people regardless of their sexual orientation, gender
identity, or marital status. Presently, it includes protection for all 12 of the
State protected classes. Moreover, the California Supreme Court
interpreted the Unruh Act (Marina Point, Ltd. v. Wolfson (1982)) as barring all “arbitrary”
discrimination.
The purpose of the law is stated in CC §51(b):
All persons within the jurisdiction of this state are free and equal,
and no matter what their sex, race, color, religion, ancestry, national
origin, disability, medical condition, marital status, or sexual
orientation are entitled to the full and equal accommodations,
advantages, facilities, or services in all business establishments of
every kind whatsoever.
Government Code §4459(c)
requires that the State’s Building
Standards Code shall not be less
than the application and scope of
accessibility requirements of the
ADA.
Click here for a video and article
describing a disabled attorney
who has filed over 1000 lawsuits
for ADA violations.
The Unruh Civil Rights Act provides for damages from anyone who “denies,
aids, or incites a denial” (CC § 53(a)) of this Act ranging from a minimum of
$4,000 to a maximum of three times the actual damages plus attorneys fees
per discriminatory occurrence (CC § 52).
Until 2006, this provision was notorious for its use by a few disabled
persons who made a living suing businesses for multiple infractions of the
complex accessibility requirements of the ADA . A ruling by the California
Supreme Court in 2006 (Gunther v. Lin) reduced the abuse by requiring ADA
violations to be intentional but in 2009 the Court reversed itself (Munson v. Del
Taco, Inc.). But by this time, California had enacted in 2008 and put into full
effect in /2009 SB 1608. This statute radically reforms the process in which
private ADA enforcement suits may be conducted and it does so favor of
business owners.
Page 21
SB 1608 allows building owners to inoculate their businesses against ADA
lawsuits by proactively seeking and obtaining a CASp (Certified Access
Specialist) Inspection certificate . Owners of buildings that have passed a
CASp inspection are entitled to display a CASp Window Certificate.
Moreover, if the owner of a building which has passed a CASp inspection is
sued for one or more ADA violations, the law provides the defendant a
unique legal process which makes it difficult and time consuming for his
plaintiff to prevail.
SB 1608 ensures that damages may be claimed only for plaintiffs who have
personally encountered and suffered harm from a violation on a single
occasion. Prior to SB 1608, plaintiffs could hunt for ADA violations and
seek a payment for each violation found even if found over multiple visits
and even if the the plaintiff was never personally inconvenienced by the
violations (source).
2.4.2 DISABLED PERSONS ACT
In the Civil Code, this act is
entitled “Blind and other
Physically Disabled Persons”.
The Disabled Persons Act (CC §54-55.1) is especially explicit in extending rights
to the visually impaired including their right to be accompanied by guide
dogs without unreasonable interference. It is also largely redundant with
the disability protections provided in the Unruh Civil Rights Act.
Both acts incorporate the ADA by reference; which means that any violation
of the ADA is also a violation under both acts.
2.4.3 FAIR EMPLOYMENT AND HOUSING ACT
The 1963 Fair Employment and Housing Act (Government Code §§12900 – 12996)
created the Department of Fair Employment and Housing (DFEH)  .
The DFEH is the proxy enforcement authority for HUD’s Fair Housing
Act (FHA).
The “Housing Act” portion of the California Fair Employment and
Housing Act is also known as the Rumford Act.
The Rumford Act has been amended several times to make it
“substantially equivalent” to the FHA. The Rumford Act is more
expansive than the FHA in that it includes the five additional State
protected classes (sexual orientation, marital status, ancestry, source
of income, and age).
Page 22
History
In 1963, five years before the passage of the FHA, the California legislature
passed the Rumford Act. The Rumford act prohibits discrimination in all
aspects of housing. It is named after the man most responsible for its
passage, William Byron Rumford – a pharmacist/Assemblyman from
Oakland/Berkeley.
William Byron Rumford
The California Real Estate Association (now CAR®) led an effort to repeal
the Rumford Act. This effort resulted in Proposition 14. This initiative
proposed a Constitutional amendment which in effect would have nullified
all housing acts – especially the Rumford Act – and would have spelled out
in the Constitution the unrestricted freedom of owners to sell their properties
to whomever they pleased.
In November 1964, Proposition 14 was put before the voters. The voters
approved it by a 2 to 1 majority.
In 1966 the California Supreme Court found Proposition 14
unconstitutional. Its decision was appealed to the U.S. Supreme Court and
on May 29th 1967, a year later, in a 5/4 decision the U.S. Supreme Court
upheld the California Supreme Court’s decision which declared Proposition
14 unconstitutional.
And still the effort to repeal the Rumford Act was not over. When Ronald
Reagan ran for governor, one of his key campaign slogans was “Repeal the
Rumford Act!” A final legislative effort in 1967 to repeal the Rumford Act
was blocked by one of the three Republican assemblymen that had
originally voted for it – William Bagley.
Over the years, additional fair housing measures have been passed so that
today, California’s fair housing laws are very similar to federal laws.
2.4.4BRE REGULATIONS
Article 10 of the BRE Regulations (CCR §2780) is: “Discrimination and Panic
Selling.” It lists 30 examples of discriminatory actions against protected
groups which, if violated by a licensee, may result in disciplinary action from
the Commissioner.
As previously stated, licensees should perform as if blind to the State
protected classes; however, the regulations do permit a few exceptions:

Licensees may refuse to show, rent, or sell property to a disabled
person if it is unsafe for the disabled person but otherwise safe for
an able bodied person (CCR §2780(b)).

Licensees may advise and advertise the existence or absence of
services which may be important to the disabled (§2780.(q, t, u)).

Licensees may note an individual’s protected class status if required
on official government forms (§2780(x)).
Page 23
2.4.5 AIDS DISCLOSURE EXCEPTION
Although California law requires that licensees disclose any death which
occurred on a property three years or less before lease or sale, it makes an
exception for a death caused by AIDS (CC §1710.2):
No cause of action arises against an owner of real property or his or
her agent, or any agent of a transferee of real property, for the
failure to disclose to the transferee the occurrence of an occupant’s
death upon the real property or the manner of death where the
death has occurred more than three years prior to the date the
transferee offers to purchase, lease, or rent the real property, or that
an occupant of that property was afflicted with, or died from, [AIDS].
It is not illegal to disclose an AIDS death; disclosure is optional.
Page 24
3 FAIR LENDING
3.1 OVERVIEW
While the federal Fair Housing Act (FHA) prohibits discriminatory lending,
by 1974 it was considered inadequate for this purpose: (1) the Act did not
originally include the protected classes of “sex” (added in 1974) or “marital
status” (added in 1988), (2) Congress believed neither HUD nor DOJ were
an appropriate enforcement agency due to their unfamiliarity with the
finance industry, and (3) the Women’s Movement (at its apex at that time)
exerted greater pressure on Congress to provide protections for women.
Hence the Equal Credit Opportunity Act (“ECOA”) was passed in 1974.
ECOA makes it illegal for lenders to discriminate against protected groups.
In 1975 Congress passed the Home Mortgage Disclosure Act (“HMDA”)
which requires financial institutions to collect and submit lending data to aid
enforcement authorities, fair housing organizations, and others to
determine if lenders are in compliance with ECOA.
Two years later, the California legislature enacted the Housing Financial
Discrimination Act (“Holden Act”). The purpose of this legislation is to
prevent the discriminatory lending practice known as “redlining” and,
secondarily, to improve housing and financing in minority communities.
In this chapter, we begin by describing the discriminatory lending practices
that the fair lending laws were designed to prohibit; then we provide
additional details about each of the fair lending laws.
3.1.1DISCRIMINATORY LENDING PRACTICES
The FHA & ECOA prohibit the following actions when based on prohibited
characteristics:

refusal to make a mortgage loan,

refusal to provide information regarding loans,

imposing different terms or conditions on a loan,

refusing to purchase a loan, or

setting different terms or conditions for purchasing a loan.
3.1.1.1REDLINING
Redlining on a racial basis has been held by the courts to be
prohibited by the FHA (Laufman v. Oakley Building and Loan Company).
Redlining is the practice of denying loans for housing in certain
neighborhoods even though an individual applicant may be
otherwise eligible for credit. The term “redlining”  refers to the
presumed practice in mortgage lending of drawing red lines on a
Page 25
map to show disfavored neighborhoods.
Redlining is unlawful under both the federal FHA and California’s Holden
Act when based on any prohibited consideration. The terms “racial
redlining” refers to the practice of basing loan, insurance, or investment
criteria on the racial characteristics of the people who live in a particular
neighborhood because of a perception of risk arising from the racial or
social composition of the population or changes in this composition.
Redlining can be a rational response to a real risk; for example, property
located in a flood plain. Redlining practices are said to gain an impropriety
when the perceptions of risk upon which they are based are unrealistic,
inaccurate, or arbitrary; or when the boundaries of the affected area are
overbroad.
Racial redlining has been held to be unlawful by the courts. In addition,
Fannie Mae and Freddie Mac dictate that the racial composition of an area
must not be considered in appraisals.
Denying loans or granting loans on more stringent terms and conditions
must be based solely on economic factors without regard to any prohibited
considerations concerning the prospective borrowers or residents of the
neighborhood.
3.1.1.2SUBPRIME LENDING
Legally, a mortgage broker is the
fiduciary of the borrower (CC §
2923.1). This means that a
mortgage broker (not a mortgage
lender) can be sued if he steers a
borrower to a subprime loan who
could otherwise qualify for a
prime loan.
While the subprime mortgage market serves a legitimate role, these loans
tend to cost more and have less advantageous terms than prime market
loans. HUD data shows Blacks are much more likely than Whites to get a
subprime loan and that many of the borrowers who take out these loans
could qualify for loans with better rates and terms. Consequently it is
unethical and illegal  for licensees and other arrangers-of-credit to steer
applicants to subprime lenders who could otherwise obtain prime loans and
it is illegal if the referrals are made on a prohibited basis.
3.1.1.3PREDATORY LENDING
Some lenders, often referred to as “predatory lenders,” saddle borrowers
with loans that come with outrageous terms and conditions, often through
deception. Elderly women and minorities frequently report that they have
been preyed upon by these lenders. The typical predatory loan is: (1) in
excess of those available to similarly situated borrowers from other lenders
elsewhere in the lending market, (2) not justified by the creditworthiness of
the borrower or the risk of loss, and (3) secured by the borrower’s home.
According to HUD, anecdotal information suggests predatory lending is
concentrated in poor and minority communities where better loans are not
readily available.
Among the factors that contribute to predatory lending are the steering of
minorities toward the subprime market, even when they qualify for prime
loans with better terms, an inadequate number of prime lending institutions
in minority neighborhoods, and a general lack of information in minority
communities about available mortgage products.
Page 26
As with subprime lending, it is unethical for licensees to steer applicants to
predatory lenders and illegal to do so on any prohibited consideration.
3.2 FEDERAL
Both the Fair Housing Act (FHA) passed in 1968 and the Equal Credit
Opportunity Act (ECOA) passed six years later prohibit discrimination in
mortgage lending. This section discusses ECOA, the more specific and
influential of the two federal fair lending laws and the Home Mortgage
Disclosure Act (HMDA) which requires lending agencies to provide data to
regulators for the purpose of detecting discriminatory lending practices.
3.2.1EQUAL CREDIT OPPORTUNITY ACT
3.2.1.1ORIGINS
The Fair Housing Act (FHA) covers every form of mortgage lending.
Nevertheless it had a minimal impact on fair lending in its early years
because: (1) the original act did not cover discrimination based on sex or
marital status, (2) it was oriented primarily towards fair housing and not fair
lending, (3) HUD had failed to develop adequate regulations to ensure fair
lending, and (4) Congress did not believe HUD had the institutional
knowledge needed to regulate the credit industry.
ECOA, as implemented by the Federal Reserve Board’s Regulation B, is as
broad as the FHA. It requires that all credit transactions (not just
mortgages) be processed without regard to legally-prohibited
considerations.
Enforcement is shared by state and federal financial regulatory agencies,
federal housing agencies, the Federal Trade Commission, and the Justice
Department. In addition, civil and criminal actions in federal courts are
available to a consumer, or class of consumers, whose fair mortgage
lending rights have been violated.
3.2.1.2PURPOSE
The ECOA states that:
It shall be unlawful for any creditor to discriminate against any
applicant with respect to any aspect of a credit transaction:
1.
on the basis of race, color, religion, national origin, sex, marital
status, or age;
2.
because all or part of the applicant’s income derives from any
public assistance program; or
3.
because the applicant has in good faith exercised any right
under [the law].
All commercial organizations who regularly participate in credit decisions
must comply with ECOA.
Page 27
3.2.1.3WHAT CREDITORS MAY ASK
Married, Unmarried, Separated
On an application for separate credit, a creditor may not ask an applicant
about his marital status except when the credit is to be secured by property
in which the applicant’s spouse has a legal interest. The creditor may then
use only the terms “married,” “unmarried,” or “separated.”
If the applicant is a married woman, she may use her birth name in
applying for credit.
In the case of a couple, either member may get separate credit provided he
or she is creditworthy. When this occurs, finance charges and loan ceilings
must be determined individually.
Information about the applicant’s spouse may be requested and used only
when the applicant’s:

spouse will be permitted to use the credit;

spouse will be liable for repayment;

spouse’s income will be relied on for repayment; or

spouse has a legal interest in the property involved.
A creditor may not ask a woman about her childbearing plans. A creditor
may not assume a young woman will stop working to bear children.
Income
A creditor may ask and consider whether an applicant’s income is pledged
to paying alimony or child support. A creditor may also ask to what extent
the applicant relies upon alimony or child support to make repayment
provided the creditor informs the applicant that it is not necessary to list
such income if the applicant does not intend to use it for repayment.
A creditor must consider part-time or public assistance income but may
evaluate the probability this income will continue.
Changed Circumstances
Open-End Account: An account A creditor may not require the applicant to reapply, alter the terms, or
in which the creditor expects
terminate an open-end account  solely because the applicant change’s
repeated transactions; e.g., a
his name or marital status, reaches a certain age, or retires.
home equity line of credit.
Credit Reporting
When reporting payment histories of married people to credit bureaus, the
creditor must identify which accounts are held individually and which are
jointly held so that credit bureaus may compile individual credit ratings for
married creditors.
Age
A creditor may only ask an applicant if he is over 18.
A creditor who uses a credit-scoring system may include the applicant’s
age if the applicant is 62 or over only to favor the applicant’s score.
Page 28
A creditor may consider age to determine how long the applicant might
continue to work and at what level of income.
Age alone cannot prevent someone from qualifying even when an
applicant’s life expectancy is considerably less than the term of the
mortgage. A lender may not even deny a 30-year mortgage to an applicant
because he is a centenarian (source).
3.2.1.4CREDITOR NOTIFICATIONS
Within 30 days after an application is completed, the creditor must notify
the applicant whether or not credit has been approved. If the application is
denied, the creditor must provide: (1) a statement of the applicant’s rights
under ECOA, (2) the name and address of the federal agency enforcing
ECOA compliance, and (3) a disclosure of the applicant’s right to know the
reasons for his denial.
3.2.1.5CONSUMER REMEDIES
If an applicant has questions about a creditor’s compliance with ECOA, he
should contact the federal agency given in the creditor’s notification.
Equitable Relief: Court
remedies which require the
performance of specific acts.
Declaratory Relief: A judge’s
determination of a party’s right
under a contract or statute.
If the applicant believes he has been discriminated against under ECOA, he
may file suit against the creditor within two years after having been denied
credit. If he prevails, the law permits him to recover compensatory
damages, attorney’s fees, court costs, and equitable and declaratory relief.
The law even provides for punitive damages although these are capped at
$10,000.
3.2.2HOME MORTGAGE DISCLOSURE ACT
As of 2008, about 8,400
companies are covered by
HMDA.
The Home Mortgage Disclosure Act (HMDA) was enacted by Congress in
1975. Every March it requires federally-regulated mortgage lenders  to
submit home lending reports to a special interagency body empowered by
HMDA. These reports are made public and reveal the number, amount,
race, gender, census tract, outcome, and other details for each loan
application considered by the lender. These reports are used:

in determining whether financial institutions are serving the housing
needs of their communities;

by public officials in distributing public-sector investments for
attracting private investment to areas where it is needed;

and in identifying possible discriminatory lending patterns.
Page 29
3.3 CALIFORNIA
3.3.1 HOUSING FINANCIAL DISCRIMINATION ACT
The Housing Financial Discrimination Act (“The Holden Act”) was authored
by State Senator, Nate Holden  in 1977. It is California’s residential fair
lending law (applies to residential buildings of four or less units).
Its objectives are written into the law (Health & Safety, §35802) as follows:
State Senator, Nate Holden
(1977)S
(a)
To prevent discrimination in the provision of financial assistance for
financing or refinancing the purchase, construction, rehabilitation, or
improvement of housing accommodations because of conditions,
characteristics, or trends in the neighborhood or geographic area
surrounding the security property.
(b)
To encourage increased lending in neighborhoods or geographic
areas in which conventional residential mortgage financing has been
unavailable.
(c)
To increase the availability of housing accommodations to
creditworthy persons.
(d)
To ensure the supply of decent, safe housing.
(e)
To prevent the … decay of neighborhoods and geographic areas
To ensure that borrowers are aware of their rights under the Holden Act, all
lenders must notify applicants of their rights when they receive their
completed loan applications. The notice to inform applicants must include
the address where complaints may be filed and where detailed information
is available. The notice (see below paragraph) must be in at least 10-point
type and must also be posted in a conspicuous location in the lender’s
place of business.
The Housing Financial Discrimination (Holden) Act of 1977 -- FAIR LENDING NOTICE:
It is illegal to discriminate in the provision of or in the availability of financial assistance because of the consideration of:
1.
Trends, characteristics or conditions in the neighborhood of geographic area surrounding a housing accommodation, unless
the financial institution can demonstrate in the particular case that such consideration is required to avoid an unsafe and
unsound business; or
2.
Race, color, religion, sex, marital status, national origin or ancestry.
It is illegal to consider the racial, ethnic, religious or national origin composition of a neighborhood or geographical area surrounding a
housing accommodation or whether or not such composition is undergoing change, or is expected to undergo change, in appraising a
housing accommodation or in determining whether or not, or under what terms and conditions, to provide financial assistance.
These provisions govern financial assistance for the purpose of the purchase, construction, rehabilitation or refinancing of one-to-four
unit family residences occupied by the owner and for the purpose of the home improvement of any one-to-four unit family residence.
If you have questions about your rights, or if you wish to file a complaint, contact the management of this institution or: Bureau of
Real Estate; 2201 Broadway; P.O. Box 187000; Sacramento, CA 95808-7000
Page 30
4 FAIR HOUSING COMPLIANCE
This section describes actions you can take to improve your compliance
with the fair housing laws. We also describe the 1996 Fair Housing
Partnership Agreement between NAR® and HUD.
4.1 GENERAL RECOMMENDATIONS
Having read up to this point, you have already taken the most important
step in complying with the fair housing and lending laws – learning their
details.
To reduce your chances of violating these laws and to make your services
attractive to buyers and sellers from every protected class, consider taking
the following affirmative actions:
1.
Make every effort to treat all prospective buyers the same.
2.
Use a checklist for obtaining information from your clients.
3.
Market your properties to everyone in the communities you serve.
4.
Allow buyers to select their own neighborhoods.
5.
Contact local fair housing organizations for information about
compliance, self testing, and the availability of speakers.
National Fair Housing Alliance (NFHA)
Real estate professionals should be familiar with the resources available
from National Fair Housing Alliance (NFHA). NFHA is a consortium of more
than 220 private, non-profit fair housing organizations, state and local civil
rights agencies, and individuals from throughout the United States. Its
purpose is to “battle against housing discrimination.”
NFHA and its member organizations conduct national and regional
investigations, funded by HUD, of discriminatory rental, sales and lending
practices. They also provide conferences, workshops, and in-service
training programs for combating housing discrimination.
Private fair housing agencies authorized by HUD are empowered to
perform private enforcement activities. Under this authority, these agencies
may sue fair housing violators and retain out-of-court settlements or courtawarded damages for their own use. According to MJ Borelli, executive
director of the Fair Housing Council of Central California, any money
collected or awarded to a Council is used to affirmatively further fair
housing.
Click here for Ms. Evan’s criticism
of the enforcement powers
granted to fair housing groups.
Blanch Evans, Editor of RealtyTimes.com saw it differently  : she wrote
that it’s “sickening that the U.S. government empowers bounty-hunting
nonprofit organizations to be in the position of judge, jury, and dealmaker
over fair housing violations” and “there’s just something unsavory about
Page 31
pointing the finger with one hand and holding the other hand out to be paid”.
4.2 AVOIDING DISCRIMINATORY ADVERTISING
According to Federal Fair Housing Act (FHA), you may not discriminate in
advertising. The wording from that act is (42 USC 3604):
It shall be unlawful to make, print, or publish, or cause to be made,
printed, or published any notice, statement, or advertisement, with
respect to the sale or rental of a dwelling that indicates any
preference, limitation, or discrimination based on race, color,
religion, sex, handicap, familial status, or national origin, or an
intention to make any such preference, limitation, or discrimination.
Discriminatory advertising includes any statement or inference in any
medium which conveys a preference or disfavor for any protected class.
In March 2008, a Federal Court of
Not only can the advertiser be held liable for a discriminatory ad, but so can
Appeals ruled that third-party
publishers such as Craigslist can your ad’s publisher . Consequently, you shouldn’t be surprised if your
not be held responsible for
publisher reads your ads and rejects ads or wording (e.g., “empty nesters”)
discriminatory ads.
which he believes are discriminatory.
Obviously it is illegal to publish ads which blatantly state preferences for
protected classes (e.g., “Discount for coeds!”) but many ads obliquely and
often innocently express illegal preferences such as …

A classified ad in an English-language newspaper under the
heading, “Apartments for Rent” reading: “北京サービスアパートメント”.

A history of advertising showing only Persian models.

Ads written in Korean in publications read mainly by non-Koreans.
In determining whether advertising constitutes a discriminatory housing
practice, courts have generally applied a “reasonable person” standard:
Liability is incurred by an advertiser who indicates a preference for specific
protected classes of prospects (e.g., “Straight Christians”) and that
preference is readily apparent to an ordinary reader.
On the other hand, based on HUD’s belief that descriptions of properties
and services are generally permitted, the agency has determined that ads
containing such descriptions as “chapel on the grounds” and “kosher meals
available” do not on their face state a preference for persons likely to make
use of those facilities so as to violate the FHA.
In addition to the “reasonable person” standard, you should also consider
the following rule-of-thumb when advertising the sale or rental of a dwelling:
DESCRIBE THE PROPERTY, NOT THE PERSON.
Page 32
4.2.1EXEMPTIONS
Ads relating to the sale or rental of residences may lawfully express limited
preferences. These exemptions are specific and should be carefully
considered before being applied:
Housing for Older Persons: Ads for residences designated as
housing for older persons may indicate a limitation on age.
Private Clubs: Ads for the sale or rental of property owned or
operated by private clubs may express a preference for members if
membership is not restricted by any other prohibited basis.
Religious Organizations: Ads for residences owned or operated
by religious organizations may express a preference for members of
the same religion provided that membership is not restricted by any
other prohibited basis.
Shared-Living Housing: Ads for housing where living areas are
shared by occupants, such as roommates in an apartment or
dormitory facilities, may indicate a preference based on sex only.
Even though under certain conditions the sale or rental of single family
homes and units in buildings intended for occupancy by four or fewer
families are exempt from housing discrimination laws, ads for such sales or
rentals may not express prohibited preferences or limitations.
4.2.2SELECTIVE USE OF ADVERTISING MEDIA
Advertisers who use only media geared toward selective groups run the
risk of violating the FHA. Advertisers cannot target a particular segment of
the population such as Blacks without directing additional advertising to
other groups as well. Even the selective use of racially mixed models by a
developer of multiple communities may be viewed as preferential. For
example, if the developer uses Black models to advertise a community in a
neighborhood with a large Black population and only White models
elsewhere, the advertisements as a whole would likely be discriminatory.
4.2.3EQUAL HOUSING LOGO
Real estate firms must prominently display a fair housing poster at all
places of business which participate in activities covered by the Act.
Page 33
The official Equal Opportunity statement is:
We are pledged to the letter and spirit of U.S. policy for the
achievement of equal housing opportunity throughout the Nation.
We encourage and support an affirmative advertising and
marketing program in which there are no barriers to obtaining
housing because of race, color, religion, sex, handicap, familial
status, or national origin.
Businesses that subscribe to this pledge may use the
Equal Housing Opportunity logo.
Advertisers are also obligated to certain requirements:
At the beginning of the real estate advertising section,
publishers should print a statement about laws
prohibiting discrimination in the sale, rental, or financing
of homes. The HUD guidelines require this statement:
All real estate advertised herein is subject to the Federal Fair
Housing Act, which makes it illegal to advertise ‘any preference,
limitation, or discrimination because of race, color, religion, sex,
handicap, familial status, or national origin, or intention to make
any such preference, limitation, or discrimination’ We will not
knowingly accept any advertising for real estate which is in
violation of the law. All persons are hereby informed that all
dwellings advertised are available on an equal opportunity basis.
4.3 FAIR HOUSING PARTNERSHIP AGREEMENT
In 1972, NAR® issued its Code for Equal Opportunity in Housing. It
recognized basic fair housing obligations governing REALTORS®. In 1974
NAR® adopted this code as Article 10 of its Code of Ethics.
In 1975, NAR® entered into an agreement with HUD called the Voluntary
Affirmative Marketing Agreement (VAMA) whereby HUD and NAR®
committed to develop programs of voluntary compliance and enforcement.
By 1995 almost all real estate boards had signed onto VAMA.
In 1996, NAR® and HUD signed a new agreement (replacing VAMA), Fair
Housing Partnership Agreement (FHPA). In this agreement, both
organizations pledged to work together to identify and address fair housing
issues and concerns and to promote fair housing. NAR®’s website
describes the agreement as follows:
The partnership is based on … understanding that all parts of the
housing community share a responsibility for … fair housing.
NAR® supports voluntary compliance with fair housing laws and the
principles of the Fair Housing Partnership. NAR® encourages the
development of local partnerships and encourages REALTORS® to
publicly support and implement fair housing in their day-to-day
business. The [Agreement] envisions cooperation with all parts of
the housing community.
Housing discrimination adversely impacts the ability of REALTORS®
Page 34
to do business. In addition, violation of fair housing laws can result
in stiff penalties. A cooperative, partnership approach to addressing
fair housing issues both helps to eliminate discrimination … and
lessens the likelihood that complex issues will be decided through
litigation. Public and private fair housing enforcement agencies at
the state and local level have the ability to enforce fair housing laws
which have an impact similar to that of the Fair Housing Act. These
local agencies can provide valuable information to REALTORS® on
fair housing practices and can participate in partnership efforts to
promote fair housing.
Page 35

2.3.3 fair housing act

Transcription

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