Q: I understand that CAR is rolling out a special new form in October regarding Fair Housing Discrimination. Why is CAR taking this step? Is it a required form and, if so, when should I use it?
Are there provisions in this new form that I should pay special attention to before using it?
A: In recognition of the ongoing Fair Housing issues that can harm consumers and real estate professionals, the California Association of REALTORS® is taking the unique step of issuing a new form in October (rather than with the normal form releases in June and December). This Tip will focus on why the form is needed, its use and the issues that Agents need to be aware of whether or not they are using this form.
I. Fair Housing Basics
Despite the fact that federal and state Fair Housing Laws have been in existence since the 1960’s, there is significant evidence that systemic racism continues to exist in our country and that people are being harmed by unfair real estate practices. Discriminatory lending and housing practices have predominantly been aimed at Blacks and Latinos; however, others have also been harmed.
The Fair Housing Laws and regulations are clear that illegal discrimination exists when there is bias for or against anyone based upon that person’s belonging to, association with, or even the perceived membership in specified classifications. It does not matter if that bias was unconscious or that there was no intent to discriminate; what matters is whether the person was harmed by discriminatory behavior.
The California Department of Fair Employment and Housing issued several new regulations that went into effect on January 20, 2020 which expanded the list of “suspect classifications” to 22 bases including, but not limited to source of income (i.e., Section 8 and other government voucher programs), criminal history (non-relevant convictions) and military/veteran status.
See Weekly Practice Tip: Overview of New DFEH Fair Housing Regulations (2/14/20)
To underscore the importance of equal housing for all, CAR is rolling out its new Advisory entitled Fair Housing & Discrimination Advisory (“FHDA”).
II. Why Do We Need a Form?
Under DRE Regulations, Brokers must make sure that all Agents affiliated with their Brokerage are familiar with the Fair Housing Laws. This is best achieved by having legal training classes on Fair Housing; however, it is always good to have a summary available to Agents which reinforces the information provided in a Fair Housing training class.
Real Estate Licensees are not the only people who need to know the Fair Housing Laws. Sellers, Landlords, HOAs, Property Managers and Lenders are just some of the people who are required to comply with the Fair Housing Laws. It is not appropriate for Agents to provide their clients or others with legal advice or training regarding compliance with the law but Agents will face potential liability if their clients violate the Fair Housing Laws.
The best way to make sure that Agents and their clients are properly advised about the Fair Housing Laws is to have a form that (a) details the relevant requirements; (b) provides examples of illegal or improper housing conduct; and (c) explains where additional information can be obtained. The new CAR Advisory not only provides this information to Agents and Clients, it also establishes that Brokers who require use of this form are serious about their ethical commitment to Fair Housing.
III. Use of the Fair Housing & Discrimination Advisory (“FHDA”)
CAR will be bundling the FHDA form with all residential Listing Agreements, Purchase Contracts and Leases. The best practice will be to use the FHDA with your clients whether they are involved in a residential purchase/sale or a residential lease. It is not designed for use in connection with commercial transactions or vacant land sales.
Seller/Landlord Agents: Listing Agents should provide the FHDA to Sellers and Landlords at the time they take the listing, preferably before the client signs the Listing Agreement (in other words at the same time as the Agency Disclosure form is provided).
Buyer/Tenant Agents: Agents working with Buyers and Tenants should provide the FHDA to their clients at the same time that they provide the Agency Disclosure form which is best done when there is “more than a casual relationship” with the client and no later than the commencement of writing an Offer or Lease.
Since the FHDA is an Advisory that does not contain any property-specific information, it is not necessary that both sides of the transaction sign the same form. The form can be signed in counterpart. There is also no statutory or case law obligation to get another Broker’s clients to sign the FHDA but there is no harm in having a company policy that it is to be provided to all Sellers, Landlords, Buyers and Tenants in your transactions regardless of who you represent.
IV. CAR’s Recommended Practices for Fair Housing Compliance
Brokers and Agents need to carefully study the Examples of Unlawful or Improper Housing Conduct section of the FHDA (Paragraph 9). Many of the listed examples detail the long-standing prohibited acts under federal law, such as blockbusting, redlining, steering or having inconsistent requirements for tenant applicants based upon their protected class. Paragraph 8 contains examples of conduct that may not be motivated by discriminatory intent but could, nonetheless, have a discriminatory effect.
Brokers and Agents should take special note of the following practices that need to be avoided to comply with the Fair Housing Laws:
A. Statements or Advertisements that indicate any Preference, Limitation or Discrimination: Specifying that a property is “perfect for” singles or families, or that a neighborhood is exclusive or private has been recognized by the National Association of REALTORS® as showing a preference for specific types of Buyers.
B. Support Letters with Photographs: Providing a letter from potential buyers, especially one with a photograph, is designed to influence the Seller’s decision as to who will be chosen to buy the property. The mere fact that the Seller is being influenced to choose the Buyer based upon subjective factors such as who they are rather than the objective nature of the offer has the potential to create a discriminatory effect. Sellers who make a choice regarding which buyer they will sell to that is based upon protected status information will face potential liability for a Fair Housing claim from those buyers whose offers were rejected.
C. Inquiring about Protected Characteristics of Tenants or Buyers It may seem friendly and caring to ask if people are married or where they are from, but these inquiries may be offensive to prospective tenants or buyers and could create unconscious bias depending upon the answers.
PRACTICE TIPS
- Brokerages should develop a policy regarding how and when the Fair Housing & Discrimination Advisory should be used and then all Agents affiliated with that Brokerage should make sure that they are following company policy on that issue.
- There is no statutory or case law obligation to get another Broker’s clients to sign the FHDA but there is no harm in providing it if your brokerage adopts a policy that it is to be provided to all Sellers, Landlords, Buyers and Tenants in your transactions regardless of who you represent. The form can be signed in counterpart.
- Brokerages should develop a policy as to whether or not to specify in their listings that prospective Buyers or Tenants should not submit any support letters, especially those with photographs and then all Agents affiliated with that Brokerage should make sure that they are following company policy on that issue.
- Agents should carefully study all of the examples in Paragraphs 8 A & B and Paragraphs 9 A-O in the Fair Housing & Discrimination Advisory and avoid all of those practices.
- Agents should carefully study all of the examples in Paragraphs 10 A-E in the Fair Housing & Discrimination Advisory and implement all of those practices.
- When representing Sellers or Landlords who let you know, or you have reason to suspect, that they will violate the Fair Housing Laws, Agents should immediately notify their Broker or Branch Manager and seriously consider walking away from that client. Brokers and Agents face liability under the Fair Housing Laws if they silently allow their clients to discriminate.
- If, after receiving the Fair Housing & Discrimination Advisory, your clients have any additional questions or concerns, your clients should be referred to a “qualified California fair housing attorney, or, if applicable, landlord-tenant attorney” as specified in Paragraph 11F of the new form.
DO NOT FORWARD TO SELLERS OR BUYERS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
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