Real Estate Practice Unit 2: Ethics, Fair Housing, Trust Funds & Other Legal Issues

the state act that specifically prohibits discrimination in business establishments is the (a) Unruh Act (b) Rumford Act (c) Holden Act (d) Civil Rights Act of 1968

(a) Unruh Act p.76

Three brokers agreed that they would not let a third broker show any of their listings. This action would be regarded as (a) a group boycott (b) price fixing (c) market allocations (d) a tie-in agreement

(a) a group boycott (prohibited by the Sherman Act) p.81

A broker with a disabled employee widened the doorway to the restroom to accommodate a wheelchair. This work was performed to comply with the (a) Civil Rights Act of 1866 (b) Americans with Disabilities Act (c) Rumford Act (d) Fair Housing Amendment Act of 1988

(b) Americans with Disabilities Act p. 73

Ethics' relationship to law is that (a) if an act is illegal it is also unethical (b) ethics tends to precede the law (c) ethics and the law both set minimum standards for behavior (d) what is ethical is legal

(b) ethics tends to precede the law p. 63

A broker refused to show a young Hispanic family of five a condo that they asked to see. His action would be proper if: (a) the broker considered the condo too small for the family (b) there were no other children in the development (c) the development had an age exemption because it was a retirement community for 55+ (d) 70% of the units are occupied by the elderly

(c) the development had an age exemption because it was a retirement community for 55+ p.72

How much of a broker's personal funds may be contributed to a client's trust fund bank account to offset any bank service charges? (a)$25.00, or the amount of charges by the bank (b)$100.00 (c)$200.00 (d)nothing

(c)$200.00 Since banks sometimes have service charges, out of necessity, the broker is allowed to maintain up to $200 of personal funds in a trust account to cover these type of bank charges. Trust funds may not be used to pay for these types of expenses. The better practice is to have the bank charge the broker's office or general account for the trust account fees and charges.

A broker showed African American prospective buyers homes in African American and racially mixed neighborhoods. He would show them homes in predominantly Caucasian areas only if they requested those areas. His actions are described as: (a) illegal (b) unethical (c) steering (d) all of these

(d) all of these p.71

A landlord can properly refuse to accept an applicant because the applicant (a) has a guide dog and the apartment is on the fourth floor (b) is a single but obviously pregnant woman (c) appears to be gay and the landlord is afraid of catching AIDS (d) none of these

(d) none of these p.72

Which of the following phrases would be considered nondiscriminatory in an advertisement for a rental? (a) Christian family (b) prefer working married couple (c) just two blocks to St. Michaels (d) none of these

(d) none of these, they are all discriminatory p. 71

Which of the following actions dealing in trust funds would be a violation of the law? (a) giving trust funds received to a principal (b) placing depository trust funds directly into escrow (c) placing trust funds in a trust account (d) placing trust funds in the personal care of a bonded employee

(d) placing trust funds in the personal care of a bonded employee (this violates the law) p.82-83

The Civil Rights Act of 1866 specifically covers what type of discrimination? (a) sex (b) marital status (c) age (d) race

(d) race p.68

To avoid gray areas that could be perceived as sexual harassment, one should avoid (a)sexually oriented jokes and anecdotes. (b)patting, hugging, and touching others. (c)dating co-workers. (d)all of the above.

(d)all of the above.

Section 2782: Duty to Supervise.

A broker shall take reasonable steps to be familiar with, and to familiarize his or her salespersons with, the federal and state laws pertaining to prohibition of discriminatory process.

advertising terms that might be considered discriminatory

Advertising that a property is close to a particular house of worship or a place that has a racial connotation (such as "Martin Luther King Hospital") has been held to be discriminatory, as have ads that indicate a preference for a particular race or marital status or ads that indicate a member of a protected category is not welcom

Regarding sexual harassment, what should be avoided?

Avoid sexually oriented jokes and anecdotes. Don't use "cute," double-meaning terms. Never discuss your love life or that of others in the workplace. Avoid patting, hugging, and touching others. What you might regard as a sign of "friendship" might be regarded differently by others. Allow others space. While in some cultures it is acceptable to talk to others with your face just inches from the other person, many people regard this closeness as intimidating and/or sexual harassment. Avoid romantic overtures or entanglements in the workplace. Avoid asking a co-worker for a date. If repeated on numerous occasions, it could be regarded as harassment. If a romantic relationship gets started in the workplace, a difficult working relationship will normally be the result should the romantic relationship end. Whenever possible, avoid one-on-one encounters in other than an open area. Some problem tenants have made multiple claims of sexual harassment by owners and property managers.

California Fair Housing Laws

California's prohibitions against discrimination generally have been broader than the federal government's. California has several fair housing laws as well as administrative regulations dealing with discrimination. A single act could be a violation of more than one state and/or federal law or regulation.

1988 Fair Housing Amendments Act

Extended civil rights protection to familial status and to individuals with physical and mental handicaps. Familial status protection refers to persons under the age of 18 living with a parent or guardian, persons in the process of obtaining legal custody as well as pregnant persons.

ethics has nothing to do with?

Legality -laws can change but ethics remain constant (if conduct is wrong, it remains wrong) -ethics tends to precede the law (ex rent skimming)

Executive Order 11063

On November 21, 1962, President John F. Kennedy issued an order that prohibited discrimination in housing wherever federal funds were involved. The order affected property sales involving FHA and VA loans, as well as other government-subsidized programs benefits there under are made available to all Americans without regard to their race, color, creed, or national origin.

Regulations of the Real Estate Commissioner Section 2780: Discriminatory Conduct as the Basis for Disciplinary Action.

Prohibited discriminatory conduct by real estate licensees based on race, color, sex, religion, physical handicap, or national origin includes: a. refusing to negotiate for the sale, rental, or financing; b. refusing or failing to show, rent, sell, or finance; c. discriminating against any person in the sale or purchase, collection of payments, or performance of services; d. discriminating in the conditions or privileges of sale rental or financing; e. discriminating in processing applications, referrals, or assigning licenses; f. representing real property as not available for inspection; g. processing an application more slowly; h. making any effort to encourage discrimination; i. refusing to assist another licensee; j. making an effort to obstruct, retard, or discourage a purchase; k. expressing or implying a limitation, preference, or discrimination; l. coercing, intimidating, threatening, or interfering; m. soliciting restrictively; n. maintaining restrictive waiting lists; o. seeking to discourage or prevent transactions; p. representing alleged community opposition; q. representing desirability of particular properties; r. refusing to accept listings; s. agreeing not to show property; t. advertising in a manner that indicates discrimination; u. using wording that indicates preferential treatment; v. advertising selectively; w. maintaining selective pricing, rent, cleaning, or security deposits; x. financing in a discriminatory manner; y. discriminating in pricing; z. discriminating in services; aa. discriminating against owners, occupants, or guests; ab. making an effort to encourage discrimination; ac. implementing discriminatory rule in multiple listings and other services; and ad. assisting one who intends to discriminate.

Unruh Act

Prohibits discrimination in all business establishments applies to real estate brokers, salespersons, and anyone managing an apartment building or other business establishment. Business discrimination includes housing discrimination based on sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status, familial status, and sexual orientation. ADA provisions have been incorporated into the act. A violation of the Unruh Act can result in a court award of a maximum of three times actual damages, but not less than $4,000. In addition, the violation could result in a civil penalty up to $25,000. expanded to apply to age discrimination in rental apartments and condominium properties. Housing developed and designed for the special needs of senior citizens is exempt from this act.

The following exemptions apply to the Civil Rights Act of 1968 but are not exemptions under the Civil Rights Act of 1866 or under California fair housing laws:

Religious groups, which can discriminate in providing nonprofit housing, provided that the religion is open to all, regardless of race, sex, color, or national origin Private clubs, which can discriminate or give preference to members when selling or leasing housing for noncommercial purposes Owners of single-family homes, who can discriminate when selling or renting without an agent, provided that they do not own more than three such homes and are not in the business of renting Owners of one to four residential units who occupy a unit and who can discriminate if an agent is not used in renting

steering vs blockbusting vs redlining

Steering is directing based on group, blockbusting is inducing panic selling, and redlining is refusal to loan in designated areas.

Jones v. Mayer

The 1968 decision of the U.S. Supreme Court that upheld the Civil Rights Act of 1866 -congress could regulate sale of private property to prevent discrimination involved a seller who refused to sell a home to an African American. Both the district court and the court of appeals ruled that the Civil Rights Act of 1866 prohibited discrimination by the state but not by individuals. The Supreme Court reversed, ruling that the Civil Rights Act of 1866 applied to private property and could be enforced by the party discriminated against. The court based its decision on the 13th Amendment. because the act was passed before the 14th Amendment.

Civil Rights Act of 1964

The Civil Rights Act of 1964 made the 1962 executive order law and is considered among the first of the modern civil rights acts. While it prohibited discrimination in all federally assisted programs, prior and later acts are far more comprehensive. This act made racial, religious, and sex discrimination by employers illegal and gave the government the power to enforce all laws governing civil rights, including desegregation of schools and public places.

ethics

The system of moral principles and rules that become standards for conduct. Golden Rule: "Do unto others as you would have them do unto you."

some general rules for trust funds include:

Trust accounts must be in the name of the broker as a trustee. Unless otherwise agreed, in cooperative sales, listing brokers deposit the funds in their trust account. In the absence of written permission from the client, a broker may not receive a commission or consideration of any kind for placement of the trust monies. A separate record must be kept of all trust funds received that are not deposited in a trust account (example: checks returned to offeror when offer is rejected). Accounts must be balanced daily and reconciled with bank records monthly. Accounts must be demand deposits (non-interest-bearing that can be withdrawn without notice) with the exception that accounts may be kept in an interest-bearing account with a federally insured lender at the direction of the owner of the funds. The broker may not benefit as to interest earned. Drawing interest on trust funds for the benefit of the principal can cause an accounting challenge. Interest earned must be prorated if one trust account contains funds for multiple beneficiaries. A broker may keep no more than $200 of broker funds in the trust account. This is to cover bank charges. Any greater amount of nontrust money in the account would subject the broker to disciplinary action. Earned commissions must be withdrawn from the account within 30 days. Columnar records must be kept (double entry) with separate records for each beneficiary and transaction. The account must be open for inspection by the Department of Real Estate. Should a BRE audit reveal a violation of the law the broker will be assessed the cost of the audit as well as being subject to disciplinary action which could be revocation of the broker's license. The broker can designate another person to withdraw trust funds from the trust account but if that person is not licensed, a bond is required. However, the broker bears liability for any improper action. Records must be kept for three years. Computer programs are available for trust fund accounting. See Figure 2.4 for a sample Trust Bank Account Record for Trust Funds Deposited and Withdrawn. There are additional regulations and reporting requirements for trust monies received by mortgage loan brokers. --Penalties for trust fund violations include the following: -A financial penalty -Suspension or revocation of license -Imprisonment

Business and Professions Code

What is commonly referred to as Real Estate Law is actually Division 4 of the California Business and Professions Code. -governs real estate licensees' behavior, in addition to federal and state fair housing laws. The code provides detailed antidiscrimination material, including a definition of the term discrimination as used within the code, and sections detailing behavioral guidelines for licensees and grounds for disciplinary action in cases of noncompliance. Section 125.6: Disciplinary Provisions for Discriminatory Acts. Under Section 125.6, every person who holds a license under the provisions of the code is subject to disciplinary action if he or she refuses to perform the licensed activity or makes any discrimination or restriction in the performance of the licensed activity because of an applicant's race, color, sex, religion, ancestry, physical handicap, or national origin. Section 10177(l): Further Grounds for Disciplinary Action. Discrimination occurs if a licensee "solicited or induced the sale, lease, or the listing for sale or lease, of residential property on the ground, wholly or in part, of loss of value, increase in crime, or decline of the quality of the schools, due to the presence or prospective entry into the neighborhood of a person or persons of another race, color, religion, ancestry, or national origin."

The broker can hold a check uncashed at the direction of the buyer, when?

before acceptance of an offer and at the direction of the seller after acceptance.

Should a broker misappropriate trust funds for personal or any other use than designated, the act would be considered ___________________, which is a criminal offense.

conversion

what is the #1 reason for disciplinary action against real estate licensees?

improprieties regarding trust funds

REALTORS® Code of Ethics

is based on the golden rule and is an excellent guide to ethical behavior -adopted by the real estate commissioner

California Omnibus Housing Nondiscrimination Act

makes all of CA nondiscr. acts consistent with the CA Fair Employment and Housing Act as to coverage. All of the acts apply to discrimination as to national origin, ancestry, race, color, gender, religion, marital status, familial status, disability, source of income, and sexual orientation.

Trust funds refer to

money or anything of value received by an agent, but not belonging to the agent, held for the benefit of another.

Equal Credit Opportunity Act.

prohibits discrimination on the basis of race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or good faith exercise of any rights under the Consumer Credit Protection Act.

Real Estate Settlement Procedures Act (RESPA)

prohibits kickbacks from service providers to brokers. It makes illegal what was a common but unethical practice of "taking care" of agents who steered business to service providers.

At Home With Diversity program

the National Association of REALTORS® and the U. S. Department of Housing and Urban Development created the "At Home with Diversity" program to expand home ownership opportunities for more Americans by training real estate professionals to actively and aggressively seek out potential home buyers from all racial and cultural backgrounds. Licensees who take this diversity training program, sponsored by the NAR, will learn how attending diverse cultural and community events can expand their client base, find out how simple multicultural etiquette can lead to success with new clients and customers, and develop sound diversity strategies to incorporate into their overall business plan.

When a broker receives funds for a transaction, the broker must:

within three days of receipt of the funds, do one of the following: Give the funds to the principal. Deposit the funds directly into escrow. Place the funds in the broker's trust account. (A broker who does not receive funds in trust does not need to have a trust account.)

Sherman Antitrust Act

First federal action against monopolies/businesses that conspired to control prices and/or competition prohibits: Price-fixing (brokers cannot agree on minimum fees to be charged) Market allocation (it's illegal to divide a marketplace geographically or by type of service as it reduces competition) Group boycotting (firms may not agree to refuse to do business with a firm or individual) Tie-in agreements (agreements that require a client to buy additional goods or services as a condition of doing business or cooperating)

Advertising Terms Acceptable by HUD:

HUD has indicated that use of the following terms and phrases are not discriminatory: master bedroom, rare find, desirable neighborhood, kosher meals available, apartment complex with chapel, Santa Claus, Easter Bunny, St. Valentine's Day, Merry Christmas, Happy Easter, mother-in-law suite, bachelor apartment, great view, fourth-floor walkup, walk-in closets, jogging trails, walk to bus stop, nonsmoking, sober, two-bedroom, family room, no bicycles allowed, and quiet streets.

The Declaration of Independence is not________?

Law While inspiring, the Declaration of Independence is not law. Had it been law, there likely would not have been the necessity for most of the federal and state antidiscrimination laws. When an attempt was made to include antislavery language in the Constitution, the attempt failed. In fact, the Constitution provided that a slave should be considered as being only three-fifths of a person in determining the Congressional representation of a state.

Section 2781: Panic Selling.

Section 2781 prohibits discriminatory conduct that creates fear or alarm to induce sale or lease because of the entry into an area of persons of another race, color, sex, religion, ancestry, or national origin.

Civil Rights Act of 1968

The Civil Rights Act of 1968 prohibited discrimination in housing based on national origin, race, religion, and color. (Sexual discrimination was added in 1974.) The act prohibits the following: -Discrimination by brokers toward clients and customers -Refusal to show, rent, or sell through the false representation that a property is not available -Discrimination as to access to multiple listing services -Discriminatory sales or loan terms -Steering, the act of directing people of different races, religions, etc., away from or toward particular areas -Blockbusting, the process of inducing panic selling by representing that prices will drop or crime will increase because of the possible entrance of minority group members to the area -Redlining, the refusal to loan within an area -Retaliatory acts against persons making fair-housing complaints and intimidation to discourage complaints -Discriminatory advertising, which is prohibited even when related to activities exempt from the act

Rumford Fair Housing Act

aka Fair Employment and Housing Act (California's Fair Housing Law) prohibits discrimination in supplying housing accommodations on the basis of sex, color, race, religion, marital status, family status, sexual orientation, disability, source of income, ancestry, or national origin. Anyone selling, renting, leasing, or financing housing must comply with the Rumford Act. While the Unruh Act applies to discrimination by businesses, the Rumford Act applies to all housing discrimination by individuals as well as businesses. Unlike the Unruh Act, it applies only to housing.

Americans with Disabilities Act (ADA)

prohibits discrimination that would deny the equal enjoyment of goods, services, facilities, and accommodations in any existing place of public accommodation, based on an individual's physical or mental disabilities. A "place of public accommodation" applies to stores, offices, and other nonresidential, commercial facilities open to the public. Owners and operators of such establishments (including property management firms) must make the facilities accessible to the extent readily achievable (easily accomplished without a great deal of expense) Employers having 15 or more employees must alter their workplaces to provide reasonable accommodations for handicapped employees unless it creates an undue hardship on the business. civil penalties $75,000 for 1st discriminatory act, $150,000 each subsequent act

Holden Act- Housing Financial Discrimination Act of 1977

prohibits financial institutions (banks, savings & loans, or other financial institutions, including mortgage loan brokers, mortgage bankers and public agencies) from engaging in discriminatory loan practices. Activities covered under this act include awarding building, improvement, purchase, or refinancing loans using the criteria of race, color, national origin, ancestry, sex, religion, or marital status. Discrimination based on the ethnic composition of the area surrounding a property (redlining) is also illegal.

The best test of ethics is?

the golden rule