Rockwell publishing real estate law chapter 19

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© 2009 Rockwell Institute

California Real Estate Law

Lesson 19:
Civil Rights and
Fair Housing Laws

© Copyright 2007 Rockwell Publishing, Inc.

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


1


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


2


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
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


3

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


4

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


Enforcement
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


Summary

l State action
l Civil Rights Act of 1866
l “Appropriate legislation”
l “Badge of slavery”


5

Federal Fair Housing Act
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 also prohibits
discrimination in:
l advertising
l lending
l real estate brokerage
l certain other services connected with
residential transactions


Application
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.


6

Fair Housing Act exemptions
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
Sale or rental by private owner
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.


Rental in owner-occupied dwelling
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


7

Religious organizations and private clubs
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.

Housing for older persons
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.


Prohibited acts
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

8

Prohibited acts (cont.)

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
Redlining
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


9

Prohibited Acts
Steering
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


Prohibited Acts
Blockbusting
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

Enforcement
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


10

Enforcement
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.


11

Enforcement
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)


Summary

l Title VIII of Civil Rights Act of 1968
l Protected class
l Redlining
l Steering
l Blockbusting


Fair lending laws
In addition to federal Fair Housing Act, other laws
prohibiting discrimination in lending include:
l Equal Credit Opportunity Act (ECOA)


12

Fair Lending Laws
Home Mortgage Disclosure Act
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.


Fair Lending Laws
ECOA
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.


Fair Lending Laws
ECOA
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


13

Summary
Fair Lending Laws

l ECOA
l Consumer credit


Equal access to facilities
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
Fair Housing Act requirements
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. © Copyright 2007 Rockwell Publishing, Inc.

14

Fair Housing Act Requirements
Reasonable accommodations
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 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.


New multi-family construction
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


15

New multi-family construction
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

Americans with Disabilities Act
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

ADA requirements
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


16

ADA requirements (cont.)

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

Enforcement
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


Summary

l Americans with Disabilities Act
l Reasonable modifications
l Disability
l Public accommodation
l Readily achievable


17

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
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


18

Application
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
Landlords:
l required to make reasonable accommodations
or modifications
l may ask for medical verification of disability
and need


19

Application
Service animals
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


Application
Service animals
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


Exemptions
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)


20

Enforcement
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.

Unruh Civil Rights Act
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.


21

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


Expanded protection
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

22

Expanded protection
Unruh doesn’t prohibit all discrimination.
l economic discrimination permissible, as long
as it applies to everyone equally


Housing Financial Discrimination Act
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


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

23

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

Violator may have to:
l make the loan
l pay damages


Real Estate License Law
Real estate licensees also need to be aware of
antidiscrimation provisions in:
l Real Estate Law
l Real Estate Commissioner’s regulations


Under the Real Estate Law, discriminatory action
can result in:
l discipline from Department of Real Estate
l sanctions including license suspension,
revocation


24

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


25

The Right to Sue
Testers
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

The Right to Sue
Testers
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


Summary

l Rumford Act
l Unruh Civil Rights Act
l Arbitrary discrimination
l Housing Financial Discrimination Act
l Testers and sandwich test


26

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


Advertising
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


27

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


Selling and renting
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


Lending
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


28

Zoning
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

Employment by brokers
Broker may not discriminate in:
l hiring sales associates
l determining commission splits
l assigning work
l determining other terms and conditions
of employment


MLS practices
Discrimination charges may result from
l denial of access


29

Summary

l Exclusionary zoning
l Disparate impact


30

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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