California Real Estate Chapter 14

15. The California Housing Financial Discrimination Act prohibits: A. redlining B. steering C. blockbusting D. panic selling

A. redlining

8. The Home Mortgage Disclosure Act helps to enforce the prohibition against: A. redlining B. steering C. blockbusting D. flipping

A. redlining

5. Title VIII of the Civil Rights Act of 1968 prohibits: A. discrimination in housing B. discrimination in residential lending C. Both a) and b) D. Neither a) nor b)

C. Both a) and b)

10. Under California law, it would be permissible for a landlord to refuse to rent to a prospective tenant because the tenant: A. has a child B. is blind C. can't afford the rent D. All of the above

C. can't afford the rent

2. Rental of a room or a unit in an owner-occupied dwelling is exempt from the federal Fair Housing Act if the dwelling contains: A. two or more units B. three units or less C. less than five units D. six units or more

C. less than five units

11. The Unruh Civil Rights Act prohibits discrimination by: A. lenders only B. real estate agents only C. all real estate related businesses D. any business entity

D. any business entity

Disability and Familial Status

Originally, the Fair Housing Act didn't prohibit discrimination based on disability or familial status; these classifications were added to the law in 1988, and it's very important for real estate agents to understand the implications of these additions..

Injunction

The court can issue an injunction ordering the defendant to stop the violations. This may include an order requiring the defendant to sell or lease the property to the plaintiff.

Public accommodation

Under the ADA, a public accommodation is a private entity with facilities that are open to the public and affect commerce. A private entity with facilities open to the public, if operation of the facilities affects commerce.

Holden Act

**See Housing Financial Discrimination Act

12. Which of the following is not covered by the federal Fair Housing Act? A. A commercial building leased to businesses that are open to the public B. An eight-unit multifamily dwelling C. A triplex listed for sale with a real estate broker D. A vacant lot intended for residential construction

A. A commercial building leased to businesses that are open to the public

California Antidiscrimination Legislation

Real estate agents, sellers, landlords, and others involved in real estate activities must comply not only with the federal laws we've covered, but also with state laws that prohibit discrimination. In California, -the Unruh Civil Rights Act, -the Fair Employment and Housing Act, -the Housing Financial Discrimination Act, and -the Real Estate Law all have provisions designed to promote fairness in real estate transactions.

Federal Fair Lending Laws

The Fair Housing Act prohibits discrimination in residential mortgage lending. It doesn't apply to other types of credit transactions, however.

Panic selling

**See Blockbusting

Redlining

It is illegal for a lender to refuse to make a loan because of the racial or ethnic composition of the neighborhood in which the property is located. Occurs when a lender refuses to make mortgage loans in a particular neighborhood because of its racial or ethic composition. The refusal to make a loan because of the racial or ethnic composition of the neighborhood in which the security property is located. Ex. A buyer applies to Community Savings for a loan to purchase a house located in the Cherrywood neighborhood. Cherrywood is a predominantly minority neighborhood. Community Savings rejects the loan application, because it fears that property values in Cherrywood may decline in the future because of recent racial tensions in the area. Community Savings is guilty of redlining. The prohibition against redlining is enforced through the Home Mortgage Disclosure Act

The Fair Housing Act

(Title VIII of the Civil Rights Act of 1968) (Application of the law) The Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, disability, or familial status in the sale, lease, or financing of residential property. The federal Fair Housing Act is also known as Title VIII of the Civil Rights Act of 1968. For home buyers and sellers, it is the most important federal antidiscrimination law. The Fair Housing Act applies to the sale or lease of residential property or vacant land used for the construction of residential buildings. In this sense, it is more limited than the Civil Rights Act of 1866, which applies to any real estate transaction. In another sense, the Fair Housing Act is much broader than the 1866 Act. The Fair Housing Act prohibits discrimination based on race, color, religion, sex, national origin, disability, or familial status, not just race or color. 1866 Act prohibits discrimination based on: -Race -Color Fair Housing Act prohibits discrimination based on: -Race -Color -Religion -Sex -National Origin -Disability -Family Status And in addition to prohibiting discrimination in residential sales or leases, the Fair Housing Act also prohibits discrimination in advertising, lending, brokerage, and other services connected with residential transactions. This law makes it illegal to discriminate on the basis of race, color, religion, sex, national origin, handicap, or familial status in the sale or lease of residential property or in the sale or lease of vacant land for the construction of residential buildings. The law also prohibits discrimination in advertising, lending, real estate brokerage, and other services in connection with residential real estate transactions. However, unlike the 1866 Civil Rights Act, the Fair Housing Act does not apply to nonresidential transactions, such as those involving commercial or industrial properties.

The Civil Rights Act of 1866

This law prohibits discrimination in real estate transactions on the basis of race or color. It was passed as part of a series of post-Civil War reforms. Unlike the Fair Housing Act, which applies only to residential property, the 1866 Civil Rights Act applies to any type of real estate—residential or commercial, improved or unimproved. The law states that "all citizens of the United States shall have the same right, in every state and territory as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold and convey real and personal property." The 1866 Civil Rights Act was largely ignored for a hundred years, but it gained new life during the civil rights movement of the 1960s. In the landmark 1968 case Jones v. Mayer, the U.S. Supreme Court upheld the constitutionality of the act and ruled that it prohibited "all racial discrimination, private or public, in the sale and rental of property." Someone who has been discriminated against in violation of the 1866 Civil Rights Act can sue the person who discriminated. There are three types of remedies available if the plaintiff wins the lawsuit. -Injunction -Compensatory Damages -Punitive Damages The Civil Rights Act of 1866 states that "all citizens of the United States shall have the same right, in every state and territory as is enjoyed by white citizens thereof to inherit, purchase, lease, sell, hold and convey real and personal property." In regard to property ownership and property transactions, the act prohibits any discrimination based on race or color. Enacted immediately after the Civil War, this law was largely ignored for almost a century. In the 1960s, during the civil rights movement, the act was challenged as an unconstitutional interference with private property rights. But the U.S. Supreme Court upheld the act in the landmark case of Jones v. Mayer, decided in 1968. The court ruled that the 1866 act "prohibits all racial discrimination, private or public, in the sale and rental of property," and that it is constitutional based on the Thirteenth Amendment to the U.S. Constitution, which prohibits slavery. Someone who has been discriminated against in violation of the Civil Rights Act of 1866 can sue in federal court. The court could issue an injunction ordering the defendant to stop discriminating or to take affirmative steps to correct the violation. This might involve an order requiring the defendant to sell or lease property to the plaintiff. The court could also order the defendant to pay the plaintiff both compensatory damages (to compensate for losses and suffering caused by the discrimination) and punitive damages (an additional sum to punish the defendant for wrongdoing).

Rumford Act

**See Fair Employment and Housing Act

Title VIII of the Civil Rights Act of 1968

**See The Fair Housing Act

Disability

(Handicap) Any physical or mental impairment that substantially limits one or more of an individual's major life activities (the same definition used for the Fair Housing Act).

Fair Employment and Housing Act

(Rumford Act) The Fair Employment and Housing Act is also known as the Rumford Act. It generally prohibits all housing discrimination in California based on race, color, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, disability, or source of income (receipt of public assistance). It's unlawful for an owner, landlord, assignee, managing agent, real estate licensee, or business establishment to discriminate in selling or renting any housing accommodation. The law specifically prohibits a seller or landlord from asking about the race, color, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, or disability of any prospective buyer or tenant. Landlords may, of course, request documentation to verify identity and financial qualification to rent. A real estate licensee should refuse to answer a prohibited question from a seller or landlord. A landlord is allowed to ask for documentation of an applicant's identity and financial qualification to rent. -Exemptions: The Fair Employment and Housing Act has very limited exemptions. The law does not apply to accommodations operated by nonprofit religious, fraternal, or charitable organizations. It also does not apply to the rental of part of a single-family, owner-occupied home to one boarder. Ex. Sarah Moore is an elderly woman who needs some extra income. She decides to rent out a bedroom in her home to a boarder, but she will only accept another older woman as a tenant. This is allowed under the Fair Employment and Housing Act. Note, too, that when a rental arrangement will involve shared living space, the advertising may state that it is available only to women, or only to men. -Enforcement: Someone who suspects that he is a victim of discrimination can submit a complaint to the Department of Fair Employment and Housing. The Department will investigate the complaint and try to work out a solution. If necessary, the Department will issue an accusation and hold a hearing. If found guilty, the violator may have to sell or lease the property or a similar property to the injured party. The violator may also have to pay actual damages to the injured party, plus a civil penalty ranging from $10,000 up to $50,000. Possible penalties: -Specific performance -Actual damages -Civil penalty The Fair Employment and Housing Act also specifically prohibits anyone from advertising housing for sale or rent in discriminatory terms. This includes any ad that suggests a preference for a particular group, such as a landlord's ad indicating a preference for women or married couples as tenants. The act also prohibits discrimination in the financing of housing. Under the act, it's unlawful for any bank, mortgage company, or other financial institution to discriminate against any person because of race, color, religion, sex, sexual orientation, marital status, national origin, ancestry, familial status, disability, or source of income. There are a few exemptions. The act does not apply to accommodations operated by nonprofit religious, fraternal, or charitable organizations. It also does not apply to the rental of a portion of a single-family owner-occupied home to one boarder. And when a rental arrangement will involve shared living space, it's permissible for the advertising to state that it is available only to women, or only to men. Housing discrimination complaints are submitted to the Department of Fair Employment and Housing. The complaints are investigated by the department's staff. If it appears that a violation has occurred, the department first tries to persuade the violator to stop or correct the violation. If those efforts fail, the department will issue an accusation and the Fair Employment and Housing Commission will hold a hearing on the accusation. Alternatively, the case may be heard in superior court. If found guilty, the violator may be ordered to: -sell or lease the housing in question to the injured party, if it's still available; -sell or lease similar property to the injured party, if available; or -provide financial assistance or other benefits previously denied. In addition, the violator may be required to pay the injured party actual damages, plus a civil penalty ranging from $10,000 up to $50,000. If the case is heard in superior court, the court may award punitive damages instead of a civil penalty.

Federal Antidiscrimination Legislation

Federal laws that prohibit discrimination in real estate transactions and related activities include: -the Civil Rights Act of 1866, -the Civil Rights Act of 1964, -the Fair Housing Act, -federal fair lending laws, and -the Americans with Disabilities Act

Section 8

One other important federal program you should know about is not an antidiscrimination law, but rather a program intended to make rental housing more affordable. The Department of Housing and Urban Development's Section 8 program authorizes the payment of housing assistance vouchers to landlords who offer rentals to low-income households.

Unruh Civil Rights Act

The Unruh Civil Rights Act prohibits California business establishments from discriminating against customers. Under California's Unruh Civil Rights Act, everyone is entitled to the full use of any services provided by a business establishment, regardless of sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status, or sexual orientation. In transactions related to housing, business establishments are also not allowed to discriminate based on age or familial status, except in qualified housing for senior citizens, as discussed below. The Unruh Act prohibits real estate licensees from discriminating in the performance of their work, since a brokerage firm is a business establishment. A broker can't refuse a listing or turn away a prospective buyer for discriminatory reasons. Apartment houses, homeowners and condominium associations, and real estate developments are also considered business establishments under the Unruh Act. Thus, the act makes it unlawful for most condominiums or apartment complexes to have a "No Children" rule. However, developments for senior citizens that fulfill certain qualifications may require at least one member of each household to be at least 55 or older and (with some exceptions) may exclude those younger than 45. Remember that this state law must be interpreted in conjunction with the federal rules concerning housing for older persons, discussed above. The state law may be applied to give more protection against discrimination than federal law, but not to give less protection. Someone held to have violated the Unruh Act will be required to pay the injured party's actual damages and attorney's fees. In addition, the violator may have to pay the injured party up to three times the amount of actual damages or $4,000, whichever is more. In some cases, civil penalties may be imposed as well. -Businesses in California are required to comply with the Unruh Civil Rights Act. This law states that all people are entitled to the full use of any services provided by a business establishment, regardless of sex, race, color, religion, ancestry, national origin, disability, medical condition, marital status, or sexual orientation. -Business establishments: Since a real estate brokerage is a business establishment, the Unruh Act makes it unlawful for a real estate broker to refuse a listing or turn away a buyer for discriminatory reasons. Apartment buildings, homeowners associations, condominium associations, and real estate developments are also considered to be business establishments under this law. The Unruh Act does not allow discrimination based on age or familial status in transactions related to housing. So it's generally unlawful for apartment or condominium complexes to have "No Children" rules. However, the act allows qualifying "senior citizen" developments to require that at least one member of each household be 55 or older, and (with some exceptions) to exclude anyone younger than 45. -Penalties: Someone found to have violated the Unruh Act will be required to pay the injured party's actual damages and attorney's fees. The violator may also have to pay the injured party up to three times the amount of actual damages or $4,000, whichever is more. -Actual damages -Attorney's fees -Penalty up to $4,000

Compensatory damages

To compensate for losses and suffering caused by the discrimination The court can order he defendant to pay compensatory damages (Actual damages) to the plaintiff. Compensatory damages cover the losses or expenses incurred, and may also include compensation for the emotional distress and humiliation suffered as a result of the discrimination.

Home Mortgage Disclosure Act

To help prevent redlining, the Home Mortgage Disclosure Act requires large mortgage lenders to submit annual reports about their residential lending to government regulators. Provides a way to evaluate whether lenders are fulfilling their obligation to serve the housing needs of the communities where they're located. The act facilitates the enforcement of federal laws against redlining. Under the Home Mortgage Disclosure Act, large institutional lenders in metropolitan areas must submit annual reports on the residential mortgage loans (both purchase and improvement loans) that they originated or purchased during the fiscal year. The information is categorized by number and dollar amount, type of loan (FHA, VA, other), and geographic location by census tract or county. The reports may reveal areas where few or no home loans have been made, alerting investigators to possible redlining. While ECOA is aimed at individual acts of discrimination, the Home Mortgage Disclosure Act is aimed at detecting redlining in particular neighborhoods. Under this law, larger lenders in metropolitan areas are required to submit annual reports to the government about the residential mortgage loans they make. The reports indicate the number and type of loans, their dollar amounts, and the locations of the mortgaged properties. If a lender has made few or no home loans in a particular neighborhood, the government will investigate to determine whether redlining is the explanation.

Enforcement - Disability and Familial Status

What can a person who has been the victim of discrimination do about it? Someone who believes she has been discriminated against, in violation of the Federal Fair Housing Act, may file a complaint with the Office of Fair Housing and Equal Opportunity. As an alternative, she may choose to file a lawsuit in state or federal court instead. The Office of Fair Housing and Equal Opportunity is part of the Department of Housing and Urban Development (called HUD). A complaint must be filed with HUD within one year after the discrimination occurred. A lawsuit must be filed within two years. Since California's state fair housing laws are very similar to the federal law, HUD may refer complaints to the California Department of Fair Employment and Housing. The Fair Housing Act is enforced by the Department of Housing and Urban Development (HUD), through its Office of Fair Housing and Equal Opportunity. An aggrieved person may file a lawsuit in federal or state court, or he may file a complaint with HUD. A complaint must be filed with HUD within one year after the discriminatory act occurred. The agency will investigate the case and attempt to confer with the parties in order to reconcile their differences and persuade the violator to abide by the law. If this doesn't resolve the dispute and the complainant's claims are found to have merit, an administrative hearing will be held (unless either party chooses to have the case decided in federal court instead). In an administrative hearing, HUD attorneys litigate the case on behalf of the complainant. If a case involves a "pattern or practice" of discrimination, the U.S. Attorney General can file suit in federal court. When someone is held to have violated the Fair Housing Act, the administrative law judge or the court may issue an injunction ordering the violator to stop the discriminatory conduct or to take affirmative steps to correct a violation. The violator may also be ordered to pay compensatory damages and attorney's fees to the complainant. A federal court can order the violator to pay punitive damages to the complainant. An administrative law judge can't impose punitive damages, but can impose a civil penalty to be paid to the government; the maximum penalty ranges from $16,000 for a first offense up to $65,000 for a third or subsequent offense. In a case litigated by the Attorney General, the court can impose a civil penalty ranging from a maximum of $55,000 for a first offense up to a maximum of $110,000 for a third or subsequent offense. In states such as California, where the state fair housing laws are very similar to the federal law, HUD may refer complaints to the equivalent state agency (in California, the Department of Fair Employment and Housing). -Conciliation: When HUD receives a complaint, the agency investigates the problem. If the complaint appears well founded, HUD tries to negotiate a conciliation agreement with the person responsible for the problem (the respondent). -Administrative hearing: If the respondent refuses to sign a conciliation agreement, an administrative hearing will be held—unless either the complainant or the respondent chooses to have the case decided in federal court instead. In an administrative hearing, HUD attorneys litigate on behalf of the complainant, and the case is decided by an administrative law judge. -Penalties: A court or an administrative law judge might issue an injunction ordering a person to stop activity that violates the Fair Housing Act. Or the violator could be ordered to take affirmative steps to correct a violation. In addition, a court could order the violator to pay both compensatory damages and punitive damages to the victim. An administrative law judge can order the violator to pay the victim compensatory damages, but not punitive damages. However, either a court or an administrative law judge can require the violator to pay a civil penalty to the federal government.

Panic peddling

**See Blockbusting

Punitive damages

An additional sum to punish the defendant for wrongdoing The defendant may be ordered to pay punitive damages instead of, or in addition to, compensatory damages. Punitive damages are intended to punish the defendant and discourge others from discriminating. In some discrimination cases the punitive damages are substantial, amounting to hundreds of thousands of dollars.

Prohibited Acts - The Fair Housing Act

"The Fair Housing Act prohibits the following acts if they are done on the basis of race, color, religion, sex, national origin, handicap (disability), or familial status: -refusing to rent or sell residential property after receiving a bona fide good faith offer; -refusing to negotiate for the sale or rental of residential property, or otherwise any action would making the residential property unavailable or deny it to any person; -changing the terms of sale or lease for different potential buyers or tenants by discriminating in the terms or conditions of any sale or rental of residential property. Ex. Charging lower rent to women than to men for the same apartments is unlawful discrimination under the Fair Housing Act.; -using discriminatory or any other notice advertising that indicates a limitation or preference or intent to discriminate Ex. An apartment building sign reading "Vacancy" and "Small children not welcome" violates the Fair Housing Act, even if the landlord actually rents apartments to families with children. An ad campaign targeted to a particular group that does not express a preference or limitation, though, is legal; -making any represention that property is not available for inspection, sale, or rent when it is in fact available; -using discriminatory criteria when making a housing loan; -limiting participation in a multiple listing service or similar service; -coercing, intimidating, threatening, or interfering with anyone on account of his or her enjoyment, attempt to enjoy, or encouragement or assistance to others in enjoying the rights granted by the Fair Housing Act. Real estate agents also need to be familiar with three terms connected with housing discrimination. Also prohibited are the discriminatory practices known as -blockbusting, -steering, and -redlining.

ADA

(Americans with Disabilities Act) The Americans with Disabilities Act (ADA), which has been in effect since 1992, is a federal law intended to ensure that people with disabilities have equal access to public facilities. The ADA requires any business or other facility open to the public to be accessible to people with disabilities. -Application of the act: Like the Fair Housing Act, the ADA defines a disability as any physical or mental impairment that substantially limits one or more major life activities. The ADA applies to all public accommodations. A public accommodation is any private entity with facilities open to the public, if operation of the facilities affects commerce. This definition means that the law applies to real estate offices, as well as banks, stores, hotels, office buildings, and so on. -Requirements: The ADA has three main requirements for public accommodations. Each of these objectives must be accomplished, if it is "readily achievable." 1. Architectural barriers and communication barriers must be removed. 2. Auxiliary aids and services must be provided, so that people with disabilities are not excluded, denied services, segregated, or otherwise treated differently from other individuals. 3. All new commercial construction must be accessible to the disabled, unless that would be structurally impractical. Ex. To comply with the ADA, the owner of a commercial building with stairs leading up to the entryway could be required to add a ramp for wheelchair access. If the doorways are not wide enough for wheelchairs, the owner might be required to widen them. The owner could avoid these requirements only if the changes were not readily achievable. Under the ADA, it's illegal to discriminate against anyone on the basis of disability in any place of public accommodation. A disability is defined as any physical or mental impairment that substantially limits one or more of an individual's major life activities (the same definition used for the Fair Housing Act). A public accommodation is a private entity with facilities open to the public, if the operation of the facilities affects commerce. Real estate offices are considered to be public accommodations, along with hotels, restaurants, retail stores, shopping centers, banks, and the offices of attorneys, accountants, and doctors. To ensure the accessibility of public accommodations, the ADA requires each of the following to be accomplished, as long as it is "readily achievable": -Both architectural barriers and communication barriers must be removed so that goods and services are accessible to people with disabilities. -Auxiliary aids and services must be provided so that no one with a disability is excluded, denied services, segregated, or otherwise treated differently from other individuals. -New commercial construction must be accessible to people with disabilities, unless that would be structurally impractical. Ex. The owner of a commercial building with no elevator may have to install automatic entry doors and a buzzer at street level so that the customers of a second-floor business can ask for assistance. A commercial building owner might also be required to alter the height of a pay phone to make it accessible to someone in a wheelchair, add grab bars to restroom stalls, and take a variety of other steps to make the building's facilities accessible.

Equal Credit Opportunity Act

(ECOA) ECOA prohibits lenders, loan originators, and others from discriminating against mortgage loan applicants based on race, color, religion, national origin, sex, marital status, age, or receipt of public assistance. A federal law which attempts to make the granting of credit fair by prohibiting the denial of credit based on the applicant's gender, race, age, marital status or national origin. It also prohibits discrimination against loan applicants because all or part of their income is derived from public assistance. The Equal Credit Opportunity Act (ECOA) applies to all credit transactions, including mortgage lending. The act prohibits lenders, loan originators, mortgage brokers, and others involved in financing from discriminating based on race, color, religion, national origin, sex, marital status, or age (as long as the applicant has reached the age of majority), or because the applicant's income is derived partly or wholly from public assistance.

Disability - Disability and Familial Status

(Handicap in the act) In the Fair Housing Act, disability refers to both physical and mental impairments that substantially limit one or more major life activities. In connection with residential property, it's a violation of the Fair Housing Act to discriminate against someone because he has a disability. A disability (called a handicap in the act) is defined as a physical or mental impairment that substantially limits one or more major life activities. This includes people suffering from either physical disabilities (such as blindness and paralysis) or mental disabilities (such as retardation and mental illness) chronic alcoholism, or HIV/AIDS are protected from discrimination. The law extends protection from discrimination to someone who suffers from chronic alcoholism, but not to someone who is a direct threat to the health or safety of others or who currently uses illegal drugs. The Fair Housing Act requires landlords to make reasonable exceptions to rules and policies to accommodate disabled tenants. A "no pets" rule can't be applied to a blind or deaf person who has a guide dog, for example. The Fair Housing Act doesn't require a landlord to modify property to accommodate disabled tenants, but she must allow a disabled tenant to make reasonable modifications at his own expense if they are necessary to his full use and enjoyment of the premises. At the end of the tenancy, the landlord can require the tenant to restore the property to its original condition. Since 1991, new residential construction with four or more units has had to comply with special wheelchair accessibility rules under the Fair Housing Act. These rules apply to buildings with four units or more. They must have entryways, hallways, kitchens, and bathrooms designed to accommodate wheelchairs, in addition to other special features. Ground-floor units in an apartment complex are required to be wheelchair-accessible. Units on the second floor and above must also be accessible if there is an elevator that would enable a tenant in a wheelchair to reach those floors. The broker is bound by the seller's instructions regarding when the house can be shown, as long as those instructions are not discriminatory. Under options B and C, the broker would be violating the Fair Housing Act. But the act doesn't protect those who are a direct threat to the health or safety of others, or who are currently using controlled substances. A residential landlord must allow a disabled tenant to make reasonable modifications to the property at the tenant's expense, as long as the modifications are necessary for the tenant's full use and enjoyment of the premises. (The tenant can be required to restore the premises to their original condition at the end of the tenancy, however.) Landlords must also make reasonable exceptions to their rules to accommodate disabled tenants. Ex. Even if they don't allow pets, they can't refuse to rent to someone because she has a guide dog.

Housing Financial Discrimination Act

(Holden Act) It prohibits lenders from basing mortgage lending decisions on neighborhood characteristics, except when necessary to avoid an unsound business practice. The California Housing Financial Discrimination Act (which is sometimes called the Holden Act) requires a lender to make lending decisions based on the merits of the borrower and the security property, rather than on the fact that the property is in a particular neighborhood. The act states that it's against California's public policy to deny mortgage loans or to impose stricter terms on loans because of neighborhood characteristics unrelated to the creditworthiness of the borrower or the value of the real property. A lender can't refuse to lend money simply because the borrower wishes to purchase a home in a neighborhood where nearly all of the residents belong to a particular minority group, for example. Under this law, financial institutions may not: -discriminate in the provision of financial assistance to purchase, construct, rehabilitate, improve, or refinance housing on the basis of the characteristics of the neighborhood surrounding the property, unless the lender can demonstrate that such consideration is necessary to avoid an unsound business practice; -consider the racial, ethnic, religious, or national origin composition of the neighborhood surrounding the property; or -discriminate in the provision of financial assistance for housing on the basis of race, color, religion, sex, marital status, national origin, or ancestry. California's Housing Financial Discrimination Act is also known as the Holden Act. Under this law, lenders must make their lending decisions based on the merits of the applicant and the value of the property offered as security. Lenders can't deny loans or impose different terms based on the fact that the property is located in a particular neighborhood.

Blockbusting

(Panic selling) (Panic peddling) It is illegal for a real estate agent to induce home owners to sell or list their homes by predicting that members of another race or ethnic group, or people suffering from some disability, will be moving into the neighborhood. Occurs when someone tries to induce homeowners to list or sell their homes by predicting that people of another race (or people who have certain disabilities, people with a particular ethnic background, etc.) will be moving into the neighborhood, and that this will have undesirable consequences such as lower property values. The blockbuster then profits by buying the homes at reduced prices or (in the case of a real estate agent) by collecting commissions on the induced sales. Ex. Right after an African-American family moves into an all-white neighborhood, real estate agents working for XYZ Realty start calling all the other homeowners in the neighborhood. The agents imply that several other black families are planning on buying homes there, and suggest that this will lead to a sharp increase in crime and a dramatic drop in property values. The agents warn the homeowners that within months it will be difficult to sell their homes at any price. Because of these calls, several homeowners immediately list their homes with XYZ Realty. XYZ and its agents are guilty of blockbusting.

4. The Gardenia Village condominium has a "No Kids" rule. This is not a violation of the federal Fair Housing Act: A. if the condo qualifies as "housing for older persons" under the terms of the law B. if no discriminatory advertising is used C. because the Fair Housing Act doesn't prohibit age discrimination D. because condominiums aren't covered by the Fair Housing Act

A. if the condo qualifies as "housing for older persons" under the terms of the law

1. When a real estate agent channels prospective buyers away from a particular neighborhood because of their race, it's called: A. blockbusting B. steering C. redlining D. clipping

B. steering

Real Estate Law and Regulations

Both the California Real Estate Law and the Real Estate Commissioner's regulations prohibit discriminatory behavior by licensees. Licensees who engage in discriminatory behavior are subject to disciplinary action, and may have their licenses suspended or revoked. Note that license suspension or revocation can be ordered only by the Real Estate Commissioner, not by a court. Brokers have the duty to supervise their affiliated licensees and take reasonable steps to make sure they are familiar with the requirements of both federal and state laws prohibiting discrimination.

9. To comply with the federal Fair Housing Act, a landlord is required to: A. permit a disabled tenant to make reasonable modifications to the property at the tenant's expense B. make reasonable exceptions to the landlord's rules to accommodate disabled tenants C. Both a) and b) D. Neither a) nor b)

C. Both a) and b)

13. A developer who intended to rent housing in a particular development only to persons 45 years of age or over would be in violation of the: A. Civil Rights Act of 1866 B. Civil Rights Act of 1964 C. Fair Housing Act D. Americans with Disabilities Act

C. Fair Housing Act

3. A real estate broker is helping the Jacksons sell their single-family home. Can this transaction be exempt from the federal Fair Housing Act? A. Yes, as long as the Jacksons own no more than three single-family homes B. Yes, as long as no discriminatory advertising is used C. No, because a real estate agent is involved D. No, the act applies to all residential sales transactions, without exception

C. No, because a real estate agent is involved

14. Under the Americans with Disabilities Act: A. real estate firms are exempt B. real estate firms may discriminate against people with disabilities when taking listings, if appropriate C. real estate offices must be accessible to people with disabilities D. only individual real estate agents are prohibited from discriminating against people with disabilities

C. real estate offices must be accessible to people with disabilities

7. A deed restriction created in 1920 that prohibits the sale of property to a non-white person until after 2020 is: A. valid until all the property owners agree to eliminate the restriction B. enforceable C. unenforceable D. covered by title insurance

C. unenforceable

6. Blockbusting is an acceptable practice: A.only under the supervision of real estate licensees B. only when approved in advance by either HUD or the Justice Department C. only if the seller and the buyer mutually agree to it D. under no circumstances

D. under no circumstances

Exemptions - The Fair Housing Act

Exemptions. While the Fair Housing Act applies to the majority of residential real estate transactions, four types of transactions are exempt from it. -For sale by owner: The Fair Housing Act doesn't apply to a single-family home sold or rented by a private individual, provided that the owner owns no more than three homes... No discriminatory advertising is used... and neither a real estate broker, nor anyone else in the business of selling or renting homes, is employed. If the owner isn't the most recent occupant of the home, she may only use this exemption once every 24 months. Provided: -Owns no more than 3 homes -No discriminatory advertising -Doesn't use a broker -Exemption allowed once every 24 months. -Owner-occupied rentals: The Fair Housing Act also doesn't apply to rental of a room or unit in a dwelling with up to four units, provided that the owner resides on the property... No discriminatory advertising is used... And a real estate broker isn't employed -Religious organizations The Fair Housing Act permits religious organizations dealing with their own property in noncommercial transactions... ...to limit occupancy or give preference to their own members, unless membership is restricted on the basis of race, color, or national origin. Provided: -Church's own property -Noncommercial transactions -Membership not restricted on basis of race, color, or national origin. -Private clubs: Private clubs with lodgings may restrict occupancy or give preference to their own members, as long as the lodgings are not open to the public and are not operated for a commercial purpose. Provided: -Not open to the public -Not operated for commercial purpose -Exemptions rarely apply: Remember, the Fair Housing Act applies to any transaction involving a real estate agent. It's never legal for a real estate agent to discriminate, and an agent who thinks a client is going to discriminate should withdraw from the transaction. In addition, the federal Fair Housing Act's exemptions are essentially irrelevant in a state like California, where the state fair housing law is stricter than the federal law. 1. The law doesn't apply to the sale or rental of a single-family home by its owner, provided that: -the owner doesn't own more than three such homes; -no real estate broker or agent is employed in the transaction; and -no discriminatory advertising is used. If the owner isn't the most recent occupant of the home, he may use this exemption only once every 24 months. 2. The law 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 as her residence; -no real estate broker or agent is employed; and -no discriminatory advertising is used. (This is sometimes called the Mrs. Murphy exemption.) 3. In dealing with their own property in noncommercial transactions, religious organizations or societies or affiliated nonprofit organizations may limit occupancy to or give preference to their own members, provided that membership isn't restricted on the basis of race, color, or national origin. 4. Private clubs with lodgings that aren't open to the public and that aren't operated for a commercial purpose may limit occupancy to or give preference to their own members. These limited exemptions apply very rarely. Remember that the 1866 Civil Rights Act prohibits discrimination based on race or color in any property transaction, regardless of any exemptions available under the Fair Housing Act. In addition, the exemptions don't apply in transactions involving a real estate licensee. Furthermore, the Fair Housing Act exemptions are essentially irrelevant in states like California, where the state civil rights laws are stricter than the federal law.

Familial Status - Disability and Familial Status

Familial status is a protected class including persons who have a child living with them. The protection also extends to persons who are pregnant or securing custody of a child. Familial status is another category that cannot be a basis for housing discrimination. Familial status refers to parents or guardians who have children under 18 years old living with them. It is generally illegal to refuse to rent or sell to someone because he has children, or is about to adopt or obtain custody of children. It's also illegal to refuse to rent or sell to a woman because she is pregnant. -Housing for older persons: The Fair Housing Act has an exemption from the general prohibition against discrimination based on familial status. Sellers and landlords are allowed to exclude families with children from "housing for older persons." To qualify as housing for older persons, a property must fit into one of the following three categories: 1. it was developed under a government program to assist the elderly; 2. it was intended for and is solely occupied by persons who are 62 years old or older; or 3. it adheres to policies that demonstrate an intent to house persons who are 55 or older, if at least 80% of the units are occupied by at least one person who is 55 or older. In determining whether a particular property was 'intended for' older persons, the design, facilities, and the advertisements are all taken into account. An owner cannot claim a project is intended for seniors while its advertisements are directed at a younger market. Discrimination on the basis of familial status refers to discriminating against someone because a child (a person under 18 years old) is or will be living with him or her. It also includes someone who is pregnant or is in the process of securing custody of a child. Parents, legal guardians, pregnant women, and those in the process of obtaining custody of a child are protected against discrimination on the basis of their familial status. While the Fair Housing Act doesn't override local laws limiting the number of occupants permitted in a dwelling, it's unlawful to discriminate in selling, renting, or lending money to buy residential property because the applicant is pregnant or lives with a child. "Adults only" apartment or condominium complexes are forbidden, and so are complexes divided into "adult" and "family" sections. However, the Fair Housing Act includes an exemption for properties that qualify as "housing for older persons." Children can be excluded from properties that fit into one of the following categories: 1. properties developed under a government program to assist the elderly; 2. properties intended for and solely occupied by persons who are 62 or older; or 3. properties that adhere to policies that demonstrate an intent to house persons who are 55 or older, if at least 80% of the units are occupied by at least one person who is 55 or older.

Steering

It is illegal for a real estate agent to channel prospective buyers or tenants toward or away from particular neighborhoods based on their race, religion, or national origin, in order to maintain or change the character of the neighborhoods. Steering refers to channeling prospective buyers or tenants toward or away from specific neighborhoods based on their race (or religion, national origin, etc.) in order to maintain or change the character of those neighborhoods. Ex. The agents at PQR Realty are "encouraged" to show Latino buyers only homes in the city's predominantly Latino neighborhood. Non-Latino buyers aren't shown homes there, except by specific request. The firm's justification for this policy is that Latino buyers would be more "comfortable" living in the Latino neighborhood, and non-Latino buyers would be "uncomfortable" there. PQR Realty is guilty of steering. One action that might seem instinctively to be a fair housing law violation, but that isn't, is to answer questions about the racial composition of neighborhoods. A real estate agent may truthfully respond to a buyer's questions about a neighborhood's demographics, even if the buyer chooses not to look at a property solely because of the answer. However, it's best to refer clients with such questions to objective sources, rather than risk saying something that might be construed as encouraging steering.

Chart - Antidiscrimination Legislation

Legislation -Prohibits Discrimination Civil Rights Act of 1866 -Based on race, for any type of property Civil Rights Act of 1964 -In some federal programs Fair Housing Act -In sale, lease, or financing of housing Americans with Disabilities Act -In any public accommodation Unruh Civil Rights Act -By any business establishment Fair Employment and Housing Act -In sale, lease, or financing of housing Housing Financial Discrimination Act -By lenders in residential transactions

Discriminatory Restrictive Covenants

Restrictive covenants prohibiting the sale or lease of a property based on race, religion, or other protected characteristics are legally unenforceable. A discriminatory covenant in a deed does not make the conveyance invalid, but the covenant has no legal effect. At one time in the United States it was common for a property's deed or a subdivision's CC&Rs to include a restrictive covenant prohibiting the sale or lease of the property to non-whites or non-Christians. These discriminatory restrictions were generally considered legal and enforceable until the Supreme Court decided the case of Shelley v. Kraemer in 1948. The court ruled that it was unconstitutional—a violation of the Fourteenth Amendment—for state or federal courts to be involved in the enforcement of racially restrictive covenants. As a result of the decision, those covenants became legally unenforceable. Today, although discriminatory restrictive covenants still appear in some older documents, it's a violation of both federal and state laws to attempt to enforce them or comply with them. Under California law, restrictive covenants are illegal if they discriminate based on race, color, religion, sex, sexual orientation, familial status, marital status, disability, national origin, source of income, or ancestry. State law imposes a requirement concerning illegal covenants on those who provide copies of recorded documents to others in the course of their work. This includes county recorders, title company employees, escrow agents, homeowners association representatives, and real estate agents. Whenever someone is given a copy of a previously recorded deed or declaration of restrictions that contains a discriminatory covenant, the person providing the copy must stamp the document or attach a cover page stating that the restriction is void and may be removed by recording a Restrictive Covenant Modification. Note that if an illegal restriction is included in a new deed, although the restriction is void and unenforceable, the conveyance is still valid. -Covenants prohibiting the sale or lease of a property to non-whites or non-Christians were once quite common. But in 1948, the U.S. Supreme Court decided a case called Shelley versus Kraemer. The Court ruled that it was unconstitutional for state or federal courts to enforce racially restrictive covenants. As a result, all such covenants became legally unenforceable. Discriminatory covenants still appear in the chain of title of some older properties. It is unlawful to comply with them. Under California law, restrictive covenants are illegal if they discriminate based on race, color, religion, sex, sexual orientation, familial status, marital status, disability, national origin, source of income, or ancestry. However, if a discriminatory covenant is included in a deed, it does not invalidate the conveyance, even though the covenant is unenforceable. State law imposes a requirement concerning illegal covenants on those who provide copies of recorded documents to others in the course of their work—for example, county recorders, title company employees, and real estate agents. When someone is given a copy of a recorded document that contains a discriminatory covenant, he must also be given a statement explaining that the restriction is void and that it may be removed by recording a Restrictive Covenant Modification. The statement must appear on a cover sheet attached to the copy or it must be stamped directly onto the copy.

The Civil Rights Act of 1964

The Civil Rights Act of 1964 was one of the federal government's first attempts to promote equal opportunity in housing. The act prohibited discrimination based on race, color, religion, or national origin in many programs and activities for which the federal government provided financial assistance. Some of these programs and activities pertain to housing. Unfortunately, this law had a very limited impact on housing discrimination, because it generally didn't apply to the federal programs that are most important to the housing market: the FHA loan program and the VA-guaranteed loan program. It was not until four years later, when the Civil Rights Act of 1968 was passed, that the federal government really addressed housing discrimination. Unfortunately, its effect on housing was extremely limited, because most FHA and VA loans weren't covered. In fact, it's estimated that less than 1% of all home purchases were covered by this law. It wasn't until the Civil Rights Act of 1968 that major progress was made toward fair housing goals.