Antidiscrimination Laws & Marketing Regulations PDF

Antidiscrimination Laws 14 and Other Marketing Regulations Learning Objectives After completing this lesson, students should be able to... List the characteristics (race, color, etc.) that are protected classes under...

Antidiscrimination Laws 14 and Other Marketing Regulations Learning Objectives After completing this lesson, students should be able to... List the characteristics (race, color, etc.) that are protected classes under the federal Fair Housing Act Name the four types of transactions that are exempt from the Fair Housing Act Recognize examples of blockbusting, steering, and redlining Describe the Fair Housing Act’s requirements regarding discrimination based on disability and familial status Define “public accommodation” under the Americans with Disabilities Act (ADA) Identify the ADA’s three major requirements for places of public accommodation Explain how the California Fair Employment and Housing Act prohibits more forms of discrimination than the federal Fair Housing Act Define price fixing, group boycotts, tie-in arrangements, and market allocations Describe how marketing is restricted by the Do Not Call registry and federal anti-spam law Suggested Lesson Plan 1. Give students Exercise 14.1 to review the previous chapter, “Income Taxation and Real Estate.” 2. Provide a brief overview of Chapter 14, “Antidiscrimination Law and Other Marketing Regulations,” and review the learning objectives for the chapter. © 2021 Rockwell Publishing  Principles of California Real Estate Instructor Materials 3. Present lesson content: Federal Antidiscrimination Legislation – Civil Rights Act of 1866 – Civil Rights Act of 1964 – Fair Housing Act EXERCISE 14.2 Handling a seller who wants to discriminate EXERCISE 14.3 Fair Housing Act – Federal fair lending laws – Americans with Disabilities Act California Antidiscrimination Legislation – Unruh Civil Rights Act – Fair Employment and Housing Act – Housing Financial Discrimination Act – Real estate license law and regulations EXERCISE 14.4 Service animals Discriminatory Restrictive Covenants Antitrust Laws EXERCISE 14.5 Antitrust laws 4. End lesson with Chapter 14 Quiz. Chapter 14 Outline: Civil Rights and Fair Housing I. Federal Antidiscrimination Legislation A. The Civil Rights Act of 1866 prohibits discrimination in real property transactions on the basis of race or ancestry 1. The act was largely ignored until 1968, when the Supreme Court upheld the act in Jones v. Mayer 2. Someone who has been discriminated against may sue in federal court, and may receive an injunction, actual damages, and/or punitive damages B. The Civil Rights Act of 1964 prohibits discrimination based on race, color, religion, or national origin in many federal government programs related to housing C. The Fair Housing Act (Title VIII of the Civil Rights Act of 1968) makes it illegal to discriminate on the basis of race, color, religion, sex, national origin, disability, or familial status in the sale or lease of residential property (or vacant land for construc- tion of residences) 2  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations 1. Four types of transactions are exempt from the act: a. Sale or rental by owner transactions where no discriminatory ads are used and the owner does not own more than three such homes b. Rental of a unit or room in a dwelling with up to four units, provided one unit is owner-occupied, no broker is used, and no discriminatory ads are used c. Religious organizations and private clubs may limit occupancy or give prefer- ence to their own members in noncommercial transactions, provided that they don’t restrict membership based on race, color, or national origin 2. A fair housing poster must be prominently displayed at any place of business involved in the sale, rental, or financing of a dwelling 3. Prohibited acts include refusing to rent or sell property after receiving a bona fide offer, refusing to negotiate, changing terms of sale or lease for different buyers or tenants, using discriminatory advertising, representing that property is not avail- able when it is in fact available, and using discriminatory criteria in making a loan; also prohibited are blockbusting, steering, and redlining a. Blockbusting occurs when an agent induces homeowners to list properties by predicting that members of another race (or other protected class) will be moving into the neighborhood soon and property values will decline b. Steering refers to channeling buyers or tenants away from (or to) particular neighborhoods because of their race (or other protected class) c. Redlining is the refusal to make a loan in a particular neighborhood because of its racial or ethnic composition EXERCISE 14.2 Handling a seller who wants to discriminate 4. Disability and familial status a. A landlord must allow a disabled tenant to make modifications to a property at the tenant’s expense, if needed for the tenant’s full use of the premises b. Discrimination based on familial status: discrimination against a person for having (or being about to have) a child (under 18 years old) living with him or her c. Exemptions from the prohibition against “adults only” complexes are avail- able for properties that qualify as “housing for older persons” 5. HUD and enforcement a. The Fair Housing Act is enforced through the Department of Housing and Urban Development’s Office of Fair Housing and Equal Opportunity b. An aggrieved person may file a complaint with HUD within one year after the discriminatory act occurred or file a lawsuit in federal or state court c. The administrative judge or court may issue an injunction and award actual dam- ages and attorney’s fees EXERCISE 14.3 Fair Housing Act 3  Principles of California Real Estate Instructor Materials D. Federal Fair Lending Laws 1. The Equal Credit Opportunity Act prohibits discrimination on basis of race, color, religion, national origin, sex, marital status, age, or receipt of public assistance, in all consumer credit transactions (including home loans) 2. The Home Mortgage Disclosure Act requires lenders to make annual reports on their lending activities to help investigators find instances of redlining E. Americans with Disabilities Act 1. The Americans with Disabilities Act (ADA) is a federal law that seeks to provide equal access to public facilities for disabled persons 2. No one can be discriminated against on the basis of disability in any place of public accommodation (a nonresidential facility open to the public) 3. Architectural and communication barriers must be removed if it is “readily achievable” to do so II. California Antidiscrimination Legislation A. The Unruh Civil Rights Act prohibits discrimination in the provision of services by businesses, including real estate brokerages B. The Fair Employment and Housing Act (Rumford Act) prohibits discrimination in housing 1. The law includes protected classes that aren’t covered by the federal law, such as sexual orientation, marital status, and source of income 2. There is a limited exemption for shared living space: advertisements can specify that a male or female is preferred C. The Housing Financial Discrimination Act (Holden Act) prohibits redlining D. The California Real Estate Law and the commissioner’s regulations prohibit discrimi- nation by real estate licensees EXERCISE 14.4 Service animals III. Discriminatory Restrictive Covenants A. Discriminatory covenants were once common in deeds, but in 1948 the Supreme Court held that such covenants were unenforceable B. Although these covenants may still appear in deeds, they are unenforceable 1. Inclusion of illegal covenant won’t affect the validity of the conveyance 2. California law requires those receiving such documents to make it clear (by stamping the document or attaching a cover sheet) that the illegal covenant is void and can be removed IV. Antitrust Laws and Real Estate Licensees A. The Sherman Act is the main federal antitrust law, which prohibits conspiracies between two or more businesses that have the effect of creating an unreasonable restraint on trade 4  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations B. The act prohibits price fixing, which occurs when competing firms conspire to set prices or price ranges (such as commission rates) C. The act prohibits group boycotts, where two people agree to exclude a competitor from fair participation in the market D. The act prohibits tie-in arrangements, where an agreement to sell one product is conditioned on the purchase of another product (such as list-back agreements) E. The act prohibits market allocation, which occurs when competitors agree not to sell certain products or services in particular areas or markets V. Restrictions on Telephone and Electronic Marketing A. Agent cannot cold-call anyone on federal Do Not Call registry; penalty is substantial fine per incident 1. Exceptions: licensee may call current client, former client (within 18 months of last transaction), and someone who has asked to be contacted within the last three months B. Federal anti-spam law requires all commercial emails and text messages to include instructions for opting out of future messages EXERCISE 14.5 Antitrust laws Exercises EXERCISE 14.1 Review exercise To review Chapter 13, “Income Taxation and Real Estate,” read the following True/False questions aloud to students and have them jot their answers down on a piece of paper; discuss the answers together. 1. A taxpayer may deduct interest payments on mortgage debt of up to $750,000 on her personal residence. 2. A taxpayer filing an individual return can exclude a gain of up to $500,000 from the sale of his principal residence. 3. To qualify for the exclusion of gain on the sale of a principal residence, a taxpayer must have owned and lived in the home for at least two of the last five years. 4. A property owner may deduct the annual ad valorem taxes on her property from her taxable income. 5. Repair expenses incurred by a homeowner are fully deductible in the year of the repairs. 6. The cost of improvements on investment properties can be depreciated. 5  Principles of California Real Estate Instructor Materials 7. Allowable depreciation is deducted from a taxpayer’s initial basis in calculating the adjusted basis. 8. The owner of a condominium unit may deduct interest he pays on his share of a mortgage on the common areas. Answers: 1. TRUE. A taxpayer can deduct the interest on up to $750,000 in mortgage debt or home equity loan used to build, purchase, or refinance first and second homes. (The limit is $1,000,000 for loans originated before 2018.) 2. FALSE. A taxpayer filing an individual return can exclude a gain of up to $250,000; taxpayers filing a joint return can exclude up to $500,000. 3. TRUE. Because of this requirement, this exclusion may be used only once every two years. 4. TRUE. Mortgage interest and property tax deductions are attractive incentives for real estate ownership. 5. FALSE. Deductions for repair expenses may be taken for most categories of real estate, but not for principal residences and personal use property. 6. TRUE. Buildings wear out, so investment property owners can make annual depre- ciation claims on the improvements over a specified number of years. Remember that the land on which the improvements rest cannot be depreciated. 7. TRUE. To calculate adjusted basis, depreciation the taxpayer was allowed to deduct—whether or not she actually did so—is subtracted from the initial basis, resulting in a higher taxable gain when the property is sold. (The other step in calculating adjusted basis is adding capital expenditures. Adjusted basis = Initial basis – Depreciation + Capital expenditures.) 8. TRUE. While routine maintenance and upkeep costs for condominium common areas are not deductible, if there is a mortgage against the common areas, then a unit owner may deduct his portion of the interest for that mortgage. EXERCISE 14.2 Handling a seller who wants to discriminate Activity: Have students pair up or break into small groups for a role-playing exercise. Situation: The seller is discussing listing his house for sale with an agent. Participants: One person should play the role of the seller and one person should play the role of the seller’s agent. If there are more than two people in a group, the others can make suggestions and comment on how the agent handles the situation. 6  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations Analysis: The agent will usually begin by explaining how the listing will be marketed. The seller interrupts the agent to state that he only wants his home advertised to people who can actually afford to live in this neighborhood. He also says he doesn’t want his home shown to any potential buyers who wouldn’t fit in. The agent should explain to the seller that the listing must be marketed in a nondiscrimina- tory manner. She should also explain that although agents will probably show the home only to buyers who can afford to purchase it, agents can’t discriminate on the basis of characteristics such as race or national origin. Depending on how the seller reacts to the agent’s statements, the agent must decide whether to proceed with the listing. EXERCISE 14.3 Fair Housing Act Read the following True/False questions aloud to students and have them jot their an- swers down on a piece of paper; discuss the answers together. 1. A judge may award compensatory damages and attorney’s fees to a victim of discriminatory conduct. 2. The Fair Housing Act does not prohibit discrimination in commercial or industrial transactions. 3. A salesperson tells a client, “You probably wouldn’t be interested in looking at that house; it’s in a changing neighborhood.” This is an example of blockbusting. 4. Protection against discrimination on the basis of familial status is extended to those who have a child under 18 living with them, but not to pregnant women. 5. If an apartment has an established “No Pets” policy for tenants, the manager isn’t required to make an exception for a hearing-impaired person who has a service dog living with him. 6. Purchasing a home and then selling it on contract to a minority buyer, in order to frighten other homeowners in the neighborhood into selling, is an example of steering. 7. Under the Fair Housing Act, a property intended for and solely occupied by persons 62 years old or older is exempt from the prohibition against discrimination based on familial status. 8. The year in which the Supreme Court barred racial discrimination, both public and private, in the sale and rental of real property was 1968. 9. The refusal, for discriminatory reasons, to make loans on properties located in a particular neighborhood is called redlining. 7  Principles of California Real Estate Instructor Materials 10. The Fair Housing Act doesn’t apply to the rental of a unit or a room in a dwelling with up to four units, provided that the owner occupies one of the units, uses no discriminatory advertising, and does not employ a broker. Answers: 1. TRUE. A judge may order the violator to pay the victim compensatory damages and attorneys fees. 2. TRUE. The Fair Housing Act addresses discrimination only in residential transac- tions. 3. FALSE. It’s an example of steering. 4. FALSE. Familial status protection covers those who have children under 18 living with them, pregnant women, and those in the process of obtaining custody of a child. 5. FALSE. Landlords must make reasonable exceptions to their rules to accommodate disabled tenants. For example, even if they don’t allow pets, they can’t refuse to rent to someone with a service dog. 6. FALSE. It’s an example of blockbusting. 7. TRUE. Also exempt are properties developed under a government program to as- sist the elderly, and properties designed to meet the needs of older persons where at least 80% of the units are occupied by at least one person who is 55 or older. 8. TRUE. The Supreme Court ruled that the Civil Rights Act of 1866 applied to all sales or rentals of property in the 1968 case of Jones v. Mayer. 9. TRUE. It’s legal to reject a loan application based on the creditworthiness of the applicant or on the value of the property, but basing a lending decision on the racial or ethnic makeup of the neighborhood is illegal redlining. 10. TRUE. This is sometimes referred to as the Mrs. Murphy exemption. EXERCISE 14.4 Service animals Discussion Prompt: Under the ADA, disabled individuals have the right to keep service animals in rental housing. That law defines service animals as animals that perform actual work or tasks that benefit a disabled person. However, California’s Fair Employment and Housing Act has been interpreted to have a broader definition. Read the following hypothetical (based on an actual case) and ask the students for their opinions. 8  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations Jeffrey has been diagnosed with severe depression. His wife Maria suffers from chronic, debilitating pain as a result of an automobile accident. The couple finds that keeping a small dog helps to alleviate some of their symptoms. But their condominium association has a “No Pets” policy and orders them to get rid of the dog. The couple provides the association with a letter from their doctor recommending that they keep the dog, but the association refuses to make an exception to its policy, arguing that the dog wasn’t trained as a service animal. Was the association in compliance with fair housing laws? Analysis: No. The condo association was found to have denied the couple reasonable accommodation for mental disability under the Fair Employment and Housing Act. Animals that provide companionship, as well as those that perform tasks, can assist the disabled. An animal doesn’t have to be trained as a service animal to fulfill that role. EXERCISE 14.5 Antitrust laws Fill in the blank in the sentences below with the correct term. (Terms may be used more than once.) Group boycott Price fixing Tie-in arrangement Sherman Act 1. If a developer refused to sell a lot to a builder unless the builder also entered into a list-back agreement, that would be an example of an illegal ______________. 2. A federal antitrust law that can lead to both criminal and civil penalties is called the ______________. 3. A listing form that contains pre-printed commission rates can be interpreted as ______________, an antitrust violation. 4. If a broker tells clients that he won’t do business with a certain competing firm, that may be construed as a ______________, which is a violation of antitrust law. 5. A broker consults with several competing firms in order to develop a brokerage fee schedule. This could be considered ______________. Answers: 1. Tie-in arrangement 4. Group boycott 2. Sherman Act 5. Price fixing 3. Price fixing 9  Principles of California Real Estate Instructor Materials Chapter 14 Quiz 1. When a deed contains racial covenants, they 4. A seller lists his home at a price about 10% can be removed and a new grant deed drafted: above fair market value, requiring minority A. if the language is offensive and/or restric- buyers to pay the listed price, but allowing his tive broker to negotiate with other buyers to pay B. only upon action at law lower amounts. This: C. only if the deed was executed prior to 1978 A. does not violate the Fair Housing Act be- D. only if the title company deems the lan- cause minority buyers are not asked to pay guage offensive and/or restrictive more than the listed price B. would violate the Fair Housing Act only if an FHA or VA loan is involved 2. A seller lists her home for sale, and her broker C. subjects only the property owners to penal- subsequently submits to her a full-price offer ties for violation of the Fair Housing Act from a ready, willing, and able buyer. The seller D. is unlawful and could make the broker liable refuses the offer and tells the broker it’s because for money damages the buyer is black. The broker may: A. tell the seller that she is in violation of the Fair Housing Act 5. A residential loan application asks for informa- B. sue the seller for his full commission tion regarding race and marital status. A loan C. inform the buyer of his right to file a com- applicant: plaint with HUD A. must answer the questions before the lender D. All of the above will process the application B. should file a complaint with the appropriate state Attorney General 3. A broker brings his seller an offer from a po- C. may refuse to provide this information tential buyer. If the seller inquires into the race D. could sue the lender for asking information of the potential buyer, the broker: prohibited by the fair housing laws A. must disclose this information to the seller B. may disclose this information as long as it will not affect the seller’s decision 6. Knowing that a factory in a certain area of C. may disclose the information after obtain- town employs mostly women, the owner of a ing permission from the buyer local property management company decides D. may not disclose this information because to create a specific sales program for that area. to do so would violate the Rumford Act He tells his employees to target their efforts towards female renters. He also encourages them to charge higher rents to women. Which of the following statements is correct? A. Targeting efforts specifically toward female buyers is a violation of the fair housing laws B. Charging higher rents to women is a viola- tion of the fair housing laws C. Both of the above are true D. Neither of the above is true 10  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations 7. Which of the following methods of advertising 10. In an integrated urban neighborhood, rising is legal? crime rates have caused a number of white A. Only advertising in an ethnic newspaper families to move. Observing this trend, a broker B. Only asking current tenants, who are mostly begins actively soliciting listings from white white, to refer friends families, providing discounted commission C. Only asking current tenants to refer minor- rates and frequent reminders that neighborhood ity friends values are declining. In doing so, the broker is: D. Only asking current white tenants to refer A. using legal, effective marketing tech- their friends niques B. staying within the requirements of the Fair Housing Act 8. Broker Bill specializes in listings in a particu- C. violating the Fair Housing Act by engaging lar neighborhood. He may lawfully refuse to in blockbusting accept a listing in that area for which of the D. violating the Fair Housing Act by engaging following reasons? in racial steering A. The seller’s price is substantially above fair market value B. The seller is a minority and most of the 11. Amuezca is buying a house. The broker recom- residents in that area are white mends a lender. When Amuezca meets with C. The home is listed in a particular area with the lender, the loan application asks for the mostly minority residents applicant’s race and marital status. Amuezca D. All of the above should: A. fully disclose his race and marital status so the application can be processed 9. In 1935, Simmons divided his property into B. refuse to disclose his race and marital sta- several parcels and sold them. Each deed con- tus tained a restriction that the land could not be C. sue both the broker and the lender for violat- sold or leased to “non-Caucasians” at any time ing fair housing/lending laws before 2035. Which of the following is true? D. file a complaint with the Real Estate Com- A. The restrictions are valid as long as Sim- missioner mons is living B. The restrictions are unenforceable because they violate the U.S. Constitution 12. Under the Fair Housing Act, an apartment C. The restrictions are illegal and cause the owner is permitted to do all but which of the deeds to be invalid following? D. The restrictions may be enforced at the A. Check references from previous landlords choice of the current owners B. Run credit reports on applicants C. Require security deposits D. Require only single tenants to have a lease co-signor 11  Principles of California Real Estate Instructor Materials 13. The purpose of the Equal Credit Opportunity Act is to: A. prevent lenders from discriminating against credit applicants B. lower the cost of obtaining financing C. standardize the requirements for obtaining credit D. increase the amount of credit available to individual borrowers 14. Broker Beatrice obtains a full-price offer on a home from a Latino buyer, as well as a lower price offer from a white buyer. She presents both offers to the seller, who accepts neither and instead sells to a neighbor, through Beatrice. The neighbor tells Beatrice and the seller he is buying the house because he is uncomfortable with minorities moving into the neighborhood. Who has not violated the Fair Housing Act? A. Beatrice B. The seller C. The white buyer D. The neighbor 15. A licensee persuades several families to list their homes for sale by telling them that neighborhood values are declining due to a recent influx of minority residents. This tactic is called: A. good business practices B. racial steering C. blockbusting D. blind advertising 12  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations Answer Key 1. B. A racially restrictive covenant is auto- 8. A. A broker is entitled to refuse a listing if matically considered unenforceable, so the seller’s asking price is substantially no action is necessary to remove such above the fair market value of the a covenant from a deed. However, in property. But a broker cannot refuse a order to totally remove the covenant listing based on race. and begin with a new deed, a legal ac- tion would have to be pursued in court. 9. B. Race restrictions in deeds are void and unenforceable. However, the inclusion 2. D. The seller has violated the Fair Hous- of such a restriction does not invalidate ing Act. She also owes her broker the the deed itself. commission, since he did locate a suit- able buyer. 10. C. Both of his marketing techniques constitute illegal acts under the Fair 3. D. The Fair Employment and Housing Housing Act. Act is also known as the Rumford Act. It prohibits discrimination in the sale, 11. B. According to the Housing Financial rental, leasing, or financing of housing. Discrimination Act, it is illegal for a lender to discriminate on the basis 4. D. Requiring minorities to pay higher of race or marital status, and an ap- prices than others is unlawful discrimi- plicant does not need to disclose his nation under the Fair Housing Act. The race or marital status on an applica- broker may be liable for money dam- tion. Complaints are pursued through ages. the Department of Fair Housing and Employment, not the Real Estate Com- 5. C. By law, information on race and mari- missioner. tal status may only be requested, not required. 12. D. Requiring only single tenants to have co-signors constitutes discrimination 6. C. Targeting rental efforts toward women on the basis of marital status, and is a violates the fair housing laws, as does violation of the Fair Housing Act. charging women higher rent. 13. A. The Equal Credit Opportunity Act was 7. B. Asking current tenants to refer their enacted to bar lenders from discrimi- friends is permissible. But asking only nating against credit applicants based white tenants, or inquiring about only on race, color, religion, sex, marital minority friends, would be illegal. status, and age (provided the applicant Advertising in an ethnic newspaper is of legal age). is legal as long as the landlord also advertises in a newspaper of general circulation. 13  Principles of California Real Estate Instructor Materials 14. C. The neighbor has violated the Fair Housing Act by acting to prevent a minority from moving into the neigh- borhood. The seller and Beatrice have violated the act by cooperating with the neighbor when they were aware of his intentions. The white buyer has done nothing to violate the act. 15. C. This licensee is engaging in “block- busting,” also called “panic selling.” This practice is unlawful under the Fair Housing Act. 14  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations PowerPoint Thumbnails Use the following thumbnails of our PowerPoint presentation to make your lecture notes. Principles of California Real Estate Lesson 14: Antidiscrimination Law and Other Marketing Regulations © 2021 Rockwell Publishing 1 Introduction Federal and state laws prohibit discrimination: ⚫ based on race, religion, sex, and other characteristics ⚫ applies to most real estate transactions Laws vary in: ⚫ groups protected ⚫ activities and transactions covered © 2021 Rockwell Publishing 2 Federal Antidiscrimination Laws Civil Rights Act of 1866 Civil Rights Act of 1866: ⚫ prohibits discrimination on basis of race or color ⚫ applies to all types of real estate transactions: ⚫ residential or commercial ⚫ improved or unimproved © 2021 Rockwell Publishing 3 15  Principles of California Real Estate Instructor Materials Federal Antidiscrimination Laws Civil Rights Act of 1866 Act was passed right after Civil War, but widely ignored until 1968 Supreme Court decision Jones v. Mayer: ⚫ Court held that act prohibits “all racial discrimination, private or public, in sale and rental of property.” © 2021 Rockwell Publishing 4 Federal Antidiscrimination Laws Civil Rights Act of 1968 Title VIII of Civil Rights Act of 1968 is known as federal Fair Housing Act. ⚫ Does not apply to nonresidential transactions (such as sale of commercial properties). ⚫ Applies to sale or lease of: ⚫ residential property ⚫ vacant land to be used for residential construction © 2021 Rockwell Publishing 5 Fair Housing Act Protected classes Fair Housing Act prohibits discrimination based on: ⚫ race ⚫ color ⚫ religion ⚫ sex ⚫ national origin ⚫ disability ⚫ familial status © 2021 Rockwell Publishing 6 16  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations Fair Housing Act Scope of law In residential transactions, Fair Housing Act prohibits discrimination in: ⚫ advertising (including real estate ads) ⚫ lending ⚫ brokerage (broker asked to violate act should decline the listing) ⚫ other services © 2021 Rockwell Publishing 7 Fair Housing Act Exemptions: Sale/rental by owner Law doesn’t apply to single-family home rented or sold by its owner if: ⚫ owner owns no more than 3 such homes ⚫ no real estate broker is employed ⚫ no discriminatory advertising used If owner isn’t most recent occupant, she may use this exemption only once every 24 months. © 2021 Rockwell Publishing 8 Fair Housing Act Exemptions: Residential rental Law doesn’t apply to rental of room or unit in dwelling with up to four units if: ⚫ owner resides in one of the units ⚫ no real estate broker employed ⚫ no discriminatory advertising used © 2021 Rockwell Publishing 9 17  Principles of California Real Estate Instructor Materials Fair Housing Act Exemptions: Religious orgs/private clubs Religious organizations and private clubs may limit occupancy to members when dealing with their own property, so long as membership isn’t restricted based on race, color, or national origin. ⚫ Only allowed in noncommercial transactions. © 2021 Rockwell Publishing 10 Fair Housing Act Real estate licensees Fair Housing Act always applies to any transaction involving real estate agent. ⚫ Exemptions aren’t permitted when agent is involved. ⚫ Agent may never discriminate. CA fair housing law is stricter and offers even fewer exemptions. © 2021 Rockwell Publishing 11 Fair Housing Act Display poster Fair housing poster must be prominently displayed at any place of business involved in sale, rental, or financing of dwellings. ⚫ Includes real estate offices, lenders’ offices, apartment buildings, condominiums, and model homes. ⚫ If fair housing complaint is filed, failure to display poster may be treated as evidence of discriminatory practices. © 2021 Rockwell Publishing 12 18  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations Fair Housing Act Prohibited actions ⚫ Refusal to rent or sell residential property after receiving good faith offer. ⚫ Refusal to negotiate for sale or rental of residential property. ⚫ Any other action that would make residential property unavailable. © 2021 Rockwell Publishing 13 Fair Housing Act Prohibited actions ⚫ Discriminating in terms of sale or rental of residential property. ⚫ Discriminatory advertising that indicates a preference or limitation. ⚫ Representing that property is not available for inspection, rent, or sale when it is in fact available. ⚫ Using discriminatory loan criteria. © 2021 Rockwell Publishing 14 Fair Housing Act Prohibited actions Federal Fair Housing Act also prohibits: ⚫ blockbusting ⚫ steering ⚫ redlining © 2021 Rockwell Publishing 15 19  Principles of California Real Estate Instructor Materials Prohibited Actions Blockbusting Blockbusting: When someone tries to induce homeowners to sell by predicting that: ⚫ members of minority groups will be moving into neighborhood ⚫ property values and quality of life will suffer as a result Also known as panic selling. © 2021 Rockwell Publishing 16 Prohibited Actions Steering Steering: Channeling prospective buyers or tenants to or away from particular neighborhoods based on their race, ethnicity, or other protected characteristic. © 2021 Rockwell Publishing 17 Prohibited Actions Steering If buyer asks about neighborhood demographics, must answer honestly. May be best to refer buyer to official sources of information. © 2021 Rockwell Publishing 18 20  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations Prohibited Actions Redlining Redlining: When lender refuses to make mortgage loans in particular neighborhood because of its racial or ethnic composition. © 2021 Rockwell Publishing 19 Fair Housing Act Disability 1988 amendments to Fair Housing Act added disability and familial status as protected categories. Disability: Physical or mental impairment that substantially limits one or more major life activities. ⚫ Includes mental health and addiction issues (but not use of illegal substances). © 2021 Rockwell Publishing 20 Disability Reasonable accommodations Under law, landlord must: ⚫ make reasonable exceptions to rules for disabled tenants, and ⚫ allow disabled tenants to make reasonable modifications at their own expense. Landlord isn’t required to modify property for tenant, and tenant can be required to restore property to original condition when tenancy ends. © 2021 Rockwell Publishing 21 21  Principles of California Real Estate Instructor Materials Fair Housing Act Familial status Familial status refers to adults who have, or will have, children under 18 living with them. It’s generally illegal to refuse to rent or sell to someone because: ⚫ she is pregnant ⚫ he/she has children ⚫ he/she is about to adopt or gain custody of children © 2021 Rockwell Publishing 22 Fair Housing Act Enforcement Discrimination complaints may be pursued: ⚫ with HUD’s Office of Fair Housing and Equal Opportunity ⚫ via lawsuit in state or federal court © 2021 Rockwell Publishing 23 Fair Housing Act Enforcement HUD complaint must be filed within 1 year of discrimination. ⚫ HUD will investigate and attempt to have parties resolve issues. If parties cannot reach conciliation agreement, and neither party decides to have case heard in court, administrative hearing will be held. © 2021 Rockwell Publishing 24 22  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations Enforcement Penalties If discrimination is found, administrative law judge or court might order: ⚫ injunction against discriminatory activity ⚫ affirmative steps to correct violation ⚫ compensatory and/or punitive damages, including attorney’s fees © 2021 Rockwell Publishing 25 Federal Antidiscrimination Laws Equal Credit Opportunity Act ECOA applies to all credit used for personal, family, or household purposes (example: residential mortgage loans). © 2021 Rockwell Publishing 26 Federal Antidiscrimination Laws Equal Credit Opportunity Act Prohibits lenders from discriminating against credit applicants on basis of: ⚫ race ⚫ color ⚫ religion ⚫ national origin ⚫ sex ⚫ marital status ⚫ age ⚫ receipt of public assistance © 2021 Rockwell Publishing 27 23  Principles of California Real Estate Instructor Materials Federal Antidiscrimination Laws Home Mortgage Disclosure Act Requires large institutional lenders in metropolitan areas to report statistics of loans they originate. ⚫ Information is analyzed to determine whether redlining is occurring. © 2021 Rockwell Publishing 28 Federal Antidiscrimination Laws Americans with Disabilities Act ADA makes it illegal to discriminate against persons with disabilities in places of public accommodation or commercial facilities. ⚫ Public accommodation includes real estate offices, stores, law offices, etc. ⚫ Act doesn’t cover residential buildings (but Fair Housing Act does). © 2021 Rockwell Publishing 29 Federal Antidiscrimination Laws Americans with Disabilities Act ADA requires, where “readily achievable”: ⚫ Removal of architectural and communication barriers. ⚫ Provision of auxiliary aids and services. ⚫ Accessibility of new commercial construction. © 2021 Rockwell Publishing 30 24  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations Summary Federal Antidiscrimination Laws Civil Rights Act of 1866 Civil Rights Act of 1968 Fair Housing Act Steering Blockbusting Redlining Familial status Equal Credit Opportunity Act ADA © 2021 Rockwell Publishing 31 State Antidiscrimination Laws California’s antidiscrimination laws include: ⚫ Unruh Civil Rights Act ⚫ Fair Employment and Housing Act ⚫ Housing Financial Discrimination Act ⚫ Real Estate Law and regulations © 2021 Rockwell Publishing 32 State Antidiscrimination Laws Unruh Civil Rights Act Law guarantees full use of services provided by business establishment, regardless of: race sex color medical condition religion disability ancestry genetic information national origin marital status (cont.) © 2021 Rockwell Publishing 33 25  Principles of California Real Estate Instructor Materials State Antidiscrimination Laws Unruh Civil Rights Act sexual orientation citizenship primary language immigration status In housing transactions, age and familial status are protected categories (in addition to those above). © 2021 Rockwell Publishing 34 Unruh Act Business establishments All business establishments are subject to Unruh Act. This includes: ⚫ real estate brokerages (and licensees) ⚫ apartment buildings ⚫ condominium and homeowner associations © 2021 Rockwell Publishing 35 Unruh Act Penalties Violators of Unruh Act may have to pay: ⚫ compensatory and punitive damages, ⚫ attorney’s fees, and ⚫ fines. © 2021 Rockwell Publishing 36 26  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations State Antidiscrimination Laws Fair Employment and Housing Act Fair Employment and Housing Act (Rumford Act) prohibits housing discrimination based on: race national origin color ancestry religion familial status sex gender gender identity gender expression source of income sexual orientation disability marital status genetic information veteran/military status © 2021 Rockwell Publishing 37 Fair Employment and Housing Act Prohibitions Prohibits discrimination in sale, leasing, or financing of any type of housing. ⚫ Applies to real estate agents and property managers as well as sellers and landlords. Unlawful for seller or landlord to ask whether buyer or tenant belongs to protected class, but may verify identity and financial capacity. © 2021 Rockwell Publishing 38 Fair Employment and Housing Act Prohibitions The act also prohibits anyone from advertising housing for sale or rent in discriminatory terms. © 2021 Rockwell Publishing 39 27  Principles of California Real Estate Instructor Materials Fair Employment and Housing Act Enforcement Discrimination complaints can be submitted to state’s Department of Fair Employment and Housing. ⚫ If DFEH determines complaint should be pursued, it will require parties to participate in no-cost mediation. ⚫ If mediation is ineffective, DFEH will file lawsuit in superior court. © 2021 Rockwell Publishing 40 Fair Employment and Housing Act Enforcement If discrimination found, violator may have to: ⚫ sell or lease property or similar property to injured party ⚫ pay damages to injured party ⚫ pay civil penalty to state © 2021 Rockwell Publishing 41 State Antidiscrimination Laws Housing Financial Discrimination Act Also known as Holden Act. Prohibits residential lenders from discriminating based on: ⚫ neighborhood characteristics (racial, ethnic, religious, or national origin composition) © 2021 Rockwell Publishing 42 28  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations State Antidiscrimination Laws Housing Financial Discrimination Act ⚫ borrower’s race, color, religion, sex, gender, gender identity, gender expression, sexual orientation, marital status, national origin, ancestry, familial status, source of income, disability, or genetic information This kind of discrimination is called redlining. © 2021 Rockwell Publishing 43 State Antidiscrimination Laws Real Estate Law California’s Real Estate Law and Commissioner’s regulations also prohibit discrimination by real estate licensees. Any violation of federal or state fair housing or civil rights laws is grounds for disciplinary action under Real Estate Law. ⚫ Real Estate Commissioner could revoke or suspend violator’s license. © 2021 Rockwell Publishing 44 Discriminatory Restrictive Covenants Covenants prohibiting sale or lease of property to non-whites or non-Christians were once common. 1948 U.S. Supreme Court decision Shelley v. Kraemer: ⚫ Unconstitutional for state or federal courts to enforce racially restrictive covenants. © 2021 Rockwell Publishing 45 29  Principles of California Real Estate Instructor Materials Discriminatory Restrictive Covenants This type of covenant may still appear in chain of title of some older properties. Such a covenant does not invalidate deed, although covenant itself is unenforceable. ⚫ Conveyance can proceed, but restriction has no effect. © 2021 Rockwell Publishing 46 Summary State Laws and Restrictive Covenants Unruh Civil Rights Act Fair Employment and Housing Act Housing Financial Discrimination Act Real Estate License Law Discriminatory restrictive covenants © 2021 Rockwell Publishing 47 Antitrust Laws Federal and state antitrust laws limit anticompetitive behavior in marketplace. ⚫ Primary federal antitrust law: Sherman Act, passed in 1890. ⚫ California’s main antitrust law: Cartwright Act, passed in 1907. © 2021 Rockwell Publishing 48 30  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations Antitrust Laws Antitrust laws prohibit any agreement or activity that creates unreasonable restraint of trade. ⚫ Conspiracy: When two or more entities participate in common scheme with effect of restraining trade. © 2021 Rockwell Publishing 49 Antitrust Laws Penalties Real estate agent who violates antitrust laws may be subject to civil and criminal actions. Penalties for Sherman Act violations: ⚫ Individual: fine of up to $1M, and/or 10 years of imprisonment. ⚫ Corporation: fine of up to $100M. © 2021 Rockwell Publishing 50 Antitrust Laws Prohibited practices Antitrust laws prohibit these business practices and activities: ⚫ price fixing ⚫ group boycotts ⚫ tie-in arrangements ⚫ market allocation © 2021 Rockwell Publishing 51 31  Principles of California Real Estate Instructor Materials Antitrust Laws Prohibited practices Price fixing: Cooperative setting of prices or price ranges by two or more competitors. ⚫ No pre-printed commission rate. ⚫ Never tell client rate is non-negotiable. ⚫ Don’t discuss rate with competitors. ⚫ Broker can discuss rate with own salespersons. © 2021 Rockwell Publishing 52 Antitrust Laws Prohibited practices Group boycott: Agreement between two or more competitors to exclude other competitors from fair participation in marketplace. © 2021 Rockwell Publishing 53 Antitrust Laws Prohibited practices Tie-in arrangement: Agreement to sell one product only on condition that buyer also purchases different (or tied) product from seller. © 2021 Rockwell Publishing 54 32  Chapter 14: Antidiscrimination Laws and Other Marketing Regulations Antitrust Laws Prohibited practices Market allocation: Agreement between competitors to divide up market, in terms of products, customers or service areas. ⚫ Illegal between competitors. ⚫ Okay for broker to do for salespersons. © 2021 Rockwell Publishing 55 Telephone and Email Marketing Do Not Call registry FTC maintains “Do Not Call” registry. ⚫ A fine for cold-calling registered numbers. OK to call even though registered if: ⚫ current client ⚫ former client within 18 months of last transaction ⚫ someone who asked to be contacted within last 3 months © 2021 Rockwell Publishing 56 Telephone and Email Marketing Anti-spam laws Commercial emails without instructions for opting out of receiving future emails from sender violate: ⚫ federal CAN-SPAM Act ⚫ state Consumer Protection Act Commercial faxes subject to similar federal requirements. © 2021 Rockwell Publishing 57 33  Principles of California Real Estate Instructor Materials Summary Antitrust Laws Sherman Act Prohibited practices Price fixing Group boycotts Tie-in arrangements Market allocation Do Not Call Registry and anti- spam law © 2021 Rockwell Publishing 58 34