14.1 Risk Reduction Policies #
The Company advocates and encourages the concept of risk reduction. A majority of claims filed against real estate agents and brokers allege some form of misrepresentation or fraud. The trend of the law in the real estate industry is for more and more disclosure. Accordingly, the Company has the following policies regarding risk reduction and disclosure.
14.2 Compliance with All Laws, Rules, and Regulations #
As an agent of the Company, each person assumes the obligation of strict compliance with all laws, rules, and regulations which govern real estate licensees in your local State.
14.3 Compliance with This Policy Manual #
As an Associate of the Company, each person agrees to comply with all policies as stated in this manual and its additions, changes, and amendments as published from time to time by management of the Company. Failure to comply with the policies herein subjects the agent or staff member to disciplinary action which may include termination of association with the Company.
14.4 Physical Condition of Property #
In accordance with the REALTOR® Code of Ethics, Real Estate Commission Rules, and the State real estate licensing law, the policy of the Company is to disclose to all appropriate parties any known material facts of a property. This applies whether the Company is the listing agent, subagent, or buyer’s agent. (See section 8 of this Manual captioned “Disclosure of Material Facts” for a discussion of what constitutes a “material fact.”)
14.5 “Stigmas” on Property #
Most state laws require that sellers disclose the fact that a property was occupied by a person who died in the property. Most state laws also require a Megan’s Law disclosure. Check your State laws for details. If a prospective buyer asks an agent whether there are any sex offenders living near the property and the agent does not have any reason to believe that a sex offender lives nearby, the appropriate answer should be “I’m not aware of any” rather than a definitive “no,” since the agent can never be certain that a sex offender does not live nearby. In such cases, the agent should inform the buyer that detailed information about registered sex offenders is available from the local sheriff’s department. The agent should also make the buyer aware of the existence of the statewide registry of sex offenders usually maintained by the state Department of Justice (access to which is available via the Internet – check your State for details). On the other hand, if the agent does have reason to believe that a sex offender might live nearby, the agent should avoid giving a definitive answer to the question without first checking the state Department of Justice sex offender registry or with the sheriff’s department to insure any information the agent has is accurate and up-to-date. The agent should understand that he/she is communicating information about a third person that could be detrimental to the reputation of the third person and that may stigmatize the property being sold. If the agent communicates inaccurate information, it opens up the possibility of liability to the third person or the owner of the stigmatized property. When asked the question, the agent should inform the prospective buyer of the existence of the sex offender registry and direct them to do their own research. The client should then check the registry to determine whether or not any registered sex offenders are listed as living nearby. If the agent is aware of the existence of the sex offender, the agent must disclose that information to the buyer (check your State for details as some States may not require this disclosure). The agent should document evidence of his/her findings (print the information from the state Department of Justice web site or get something in writing from the sheriff’s department), write the date and time the agent got the information on the written documentation itself, give the buyer a copy of the search results (whether or not those results indicate the presence of a sex offender in the neighborhood), and make a copy of whatever is given the buyer for the file.
Practical problems are inevitably “disclosed” by the neighbors; because of this, the policy of the Company is to discuss with the seller-client the inevitability of this disclosure and to recommend disclosure of such factors that may have an impact on a purchaser’s decision to buy. Recent violent crimes or suicides are specific examples of such events. If, after this discussion, the seller-client instructs the company not to disclose these factors voluntarily, the agent should consult company management to determine whether the listing will be accepted.
14.6 Documentation of Disclosure #
As is apparent, the Company advocates full disclosure in appropriate circumstances. However, all the disclosure in the world does no good if it cannot be proven. While it would be ideal to have every single disclosure as to every material item disclosed to the parties in writing with their acknowledgment of the disclosure, such is not usually possible.
The Company preferred policy is to have a written disclosure and acknowledgment as in the case of a “Transfer Disclosure Statement.”
Recognizing that this ideal cannot be attained in every situation, the policy of the Company is that the agent should document in his/her own personal notes and files each item which is disclosed in a transaction.
This simple policy can reduce risk and potentially save many thousands of dollars. It assumes that the agent has a regular, systematized method of organizing and keeping files. This is vitally important to a good documentation procedure.
The Company requires all documents to be uploaded to its online transaction document system for record retention and compliance. Agents are required to use this organization system as it has been developed to keep track of details, act as a transaction checklist and risk reduction method.
Disclosure is great, but documentation of the disclosure is the glue that seals the cracks.
14.7 Use of Experts and “Recommendations” #
The Company maintains a strong policy that agents not go beyond her/his area of expertise regarding a transaction. The company strongly recommends that an agent advise the use of an expert in situations where appropriate. For example, if questions arise with a buyer about the adequacy of the electrical system, the agent should advise that a building inspector, engineer, or licensed electrician be consulted.
However, an equally strong policy exists in NOT recommending any particular inspector, engineer, electrician, or other expert. While advising that AN expert be used is a good risk reduction technique, the benefits of this technique are lost if a specific expert is recommended. Recommendation of a specific expert could lead to liability if the expert fails to do her/his job and the agent was negligent in “recommending” that person.
The policy of the Company is to give the names of three experts in each field whenever asked for a recommendation. Do not fall into the trap of responding to a customer/client who insists that you make a specific recommendation. The agent should be firm in having the customer/client make the choice. If you are related to any of the inspectors on the list provided, or have a pre-existing relationship with any inspectors on the list, this must be disclosed in writing prior to using the services.
Some agents have found a helpful tool in keeping several sample reports from various building/mechanical inspectors, engineers, roofers, etc. When the customer/client asks for a recommendation, the agent gives the customer/client the samples and suggests that they choose the style and cost of the expert which fits their style and needs the best.
A related issue is ordering the report. The policy of the Company is that the agent should not order the report if at all possible. The company recognizes that certain situations require the agent to place the order, but, in general, the agent should have the customer/client place the order. This removes the company and agent from any involvement in the selection process and reduces the liability of possible negligence in “recommendation” of an expert.
14.8 Managing Risk and Liability Training #
As stated in other parts of this manual, training and education are integral parts of any risk reduction and professionalism program. All agents are expected to complete the Company’s initial training program and are strongly encouraged to take advantage of company, board, and association education programs.
14.9 Use of Legal Counsel #
Whenever an agent believes she/he requires legal assistance, the Broker or Manager should be contacted. The Company has legal counsel for appropriate legal questions and problems. In addition, most local and state Association of REALTORS® provide a free hotline for legal educational information for the Associates of the Company. The earlier a legal question or problem is brought to the attention of management, the earlier the problem can be solved. The Company’s position is that wisely spent legal fees early in a problem can save many thousands of dollars if a formal complaint or lawsuit arises.
14.10 Errors and Omissions Insurance #
The Company shall maintain Errors and Omissions Insurance coverage with an insurer designated by the Company. Currently, the Company charges a per transaction fee of $65.
The Company carries Errors and Omissions Insurance in the amount of $1,000,000 with a deductible of $15,000. All agents and staff of the company are covered by the policy. The policy is paid by the Company.
Errors and Omissions Insurance generally cover the negligent acts of the insured. It does not cover all possible damages for which the Company could be liable. For example, no errors and omissions insurance covers punitive damages. For other exceptions, contact the broker (sales manager) for a copy of the policy.
Errors and Omissions Insurance does cover defense costs, that is, the legal fees involved in defending a claim against the Company or Agent. This is very valuable coverage.
The policy of the Company is that each agent must notify the broker (sales manager) as soon as the agent is aware of a possible claim against the agent/broker. “Possible claim” means the potential of a disagreement which could lead to a lawsuit against the Company or Agent. Only in this way can the company properly invoke the errors and omissions coverage, if necessary.
14.11 Complaint Handling Procedures #
One of the simplest and most cost effective risk reduction methods is a good complaint handling process. Accordingly, the Company establishes the following procedures for handling complaints:
- If the complaint comes to an agent involved in a transaction, the agent will be the primary contact person to handle the complaint with whatever management assistance the agent requires. At a minimum, the agent should notify the broker (sales manager) of the complaint and the agent’s progress with the complaint.
- If the complaint comes in without specifying an agent, the Broker or Manager will handle the complaint. If a specific management person is requested (such as “I want to speak to the Owner or President!”), the person answering the call should courteously direct the call to the requested person, if available, or the Broker or Manager in the requested person’s absence. The caller should ALWAYS be assisted in some way. The person taking the call should not say “Oh, she isn’t here right now,” or “You’ll have to call him later,” or “Please call her office.” It is very important to handle an aggravated or upset caller with the utmost courtesy and care.
- Regardless of who takes the complaint, the key factor in handling the call is to LISTEN to what the caller’s complaint is. The most appropriate and helpful thing the call handler can do is give the person filing the complaint a full and fair airing of her/his grievance. Many times, simple listening to the complaint does much to alleviate the caller’s frustration. Sometimes, being listened to is all the person really wants. ACTIVE LISTENING is critical.
- Usually, the most successful way to handle the initial complaint call is to validate the caller’s concerns. In general, it is best not to challenge the caller or become defensive. GET THE FACTS! Simply try to get all necessary information from the caller’s perspective, even if the complaint handler knows it may not be 100% accurate. Remember to document the conversation in writing. Make notes or write a memo about the conversation as soon as possible and include the caller’s name, number, date, and time the complaint is made.
- Usually the call can be ended by assuring the caller that the matter will be investigated. The complaint handler should tell the caller what he/she can expect. For example, “Mr. Smith, I would hope you understand that I need to do some research. I will look into the matter, discuss it with Suzie and get back to you by Tuesday.” The caller should always be told what the complaint handler will do and by when. THEN DO IT!
The basic risk reduction techniques in this manual can contribute significantly to the safe and successful practice of the real estate business for the Company and each agent. The company appreciates each agent’s and staff member’s enthusiastic endorsement of these concepts.
14.12 Adoption and Enforcement of Written Policies #
The Company has adopted the following written policies and procedures that define the company’s agency representation policies, competitive practices, fair housing guidelines, personnel policies, communications policies, documentation and record keeping policies, and a statement of the company’s overall commitment to the ethical and legal practice of real estate. Once reviewed and adopted, these policies should become part of each Associates everyday practice and will be enforced on a consistent basis by the Company.
14.13 Sharing Current Legal Situations at Meetings #
Company policy is to educate all Associates by sharing current legal situations so they can learn from other Associate’s experience.
During meetings and normal business communication, the Manager or Broker may discuss current risk situations or legal situations so that other Associates may learn from the situation and mitigate future risk from similar situations. Client’s names and other agent’s names should always remain confidential. Agents have the option to discuss the situation themselves or have the Broker or Manager discuss the situation on their behalf. Associates agree to allow the Broker or Manager to share complaints, violations, transaction details, or any other relevant details of the Associates business dealings unless otherwise specified in writing and signed by the Broker.
14.14 Risk Anticipation #
Company policy is to anticipate risk, then work to minimize that risk by all ethical means. Risk anticipation refers to identifying typical or potential problems that may arise in a real estate transaction. Once identified, the licensee should establish a strategy or implement a set of procedures to ensure that the anticipated problems are avoided.
14.15 Documentation and Record Keeping #
Company policy is to document and record all communications with clients, customers, other agents, or any third party that is part of any transaction (complete or incomplete) that you work on.
Written observations created at the time an event occurred are usually regarded as very reliable evidence of the events that transpired. Associates must keep a communication/activity log file for each client and/or transaction or potential client and/or transaction, including memoranda about activities with respect to the client or prospect.
Keep records of the following:
- Document all sources of information received.
- Keep a telephone (communications) log that summarizes all business calls.
- Keep an electronic file of all email communications. You can create a pdf file of this from Google mail.
- Keep a complete transaction file that includes documentation relating to disclosures, disclaimers, and notes relating to relevant activities. This file is what the TC will prepare for any escrow you open.
- Keep dated records of the types of housing each prospective buyer asked to view, the types of housing options offered (manufactured, single family, condominiums, etc.), and all other services provided. This should be kept in our online transaction document system for record retention and compliance.
- Send the seller written updates about showing activity, as well as feedback relating to any listing you have, and save the updates in your Seller subfolder.
- Indicate on all correspondence who is receiving copies of the written or email correspondence. If you “cc” another individual, the best practice is to specify that individual’s name at the bottom of the written correspondence.
- Use confirmation letters to shift the burden of response to the other party. You can do so by requesting a receipt of an email read or certifying a written letter.
Continuous failure to keep proper records can result in fines or termination from the Company.
14.16 Risk Control #
Company policy is to control risk by all ethical means.
Of primary importance is dealing with any complaint or potential for complaint before it turns into litigation.
Risk control means addressing an issue when it first arises by attempting to find a solution as soon as possible. The ultimate solution or settlement may seem expensive, but a settlement made where liability is likely to occur is much cheaper than risking litigation. Even if the licensee wins the litigation, the legal fees and costs to achieve the win usually exceed a settlement amount agreed to prior to litigation.
14.17 Risk Shifting #
Company policy is to shift risk when possible and ethical.
Shifting risk from the licensee to another party is a desirable strategy to minimize risk. An example of shifting risk is in the event a licensee is involved in a car accident with a client and the licensee has the required auto liability coverage, the risk is shifted from the licensee to the insurance carrier. Associates must review all liability insurance policies to make sure that coverage is adequate per the Independent Contractor Agreement with the Company. For example, the minimum liability coverage requirements required by state law may be inadequate if a business passenger is seriously injured. Increased policy limits or umbrella liability policies should be explored.
14.18 Managing Internet Risks #
Company policy is to provide a Privacy Policy on any website that the Company or Associate is advertising.
14.19 Privacy Issues #
Company policy is to keep all information received by customers or clients completely confidential. Associates receiving and storing confidential personal information on a personal or office computer must make substantial efforts to protect it.
14.20 Common Areas of Risk #
The Company policy is to be aware of the most common areas of risk and report any risk to the Broker or Manager as soon as one is identified.
The majority of risk management issues arise out of licensee conduct. Conduct that triggers a problem may be intentional, unintentional, or even negligent. The following list is given to point out the most common areas of risk relating to real estate brokerage. This list is not all-inclusive, but does reflect common problem areas.
- Contract preparation.
- Property condition.
- Property ownership.
- Failures to research, investigate, and disclose material facts.
- Conflicts of interest.
- Negligent advice.
- Trust fund handling.
- Kickbacks and RESPA violations.
- Referrals to vendors and third parties.
- Lack of appropriate supervision of affiliated licensees.
14.21 Associate Supervision
#
The Company policy is to monitor and supervise any Associate working with the Company at all times. Proper supervision requires cooperation from the Associate so the management of the Company (Designated Brokers, Managing Brokers and Branch Managers) can supervise the Associate properly. This protects the Associates license and the Company license as well the reputation of both parties. Continuous lack of cooperation from Associates in following Company policies, procedures, or supervision will result in termination from the Company.
14.22 Avoiding the Unauthorized Practice of Law #
Company policy is that Associates are not to engage in the unauthorized practice of law. To do so is grounds for suspension or revocation of their real estate license. Real estate licensees are permitted to fill in the blanks in pre-printed, standardized forms with respect to transactions handled in the usual course of business. Accordingly, a real estate licensee may fill in the blanks of a purchase and sale agreement, a promissory note for earnest money, rental agreements, and most lease agreements. The licensee, however, is to fill in the blanks at the direction of a party to the transaction, such as the seller, buyer, landlord, or tenant. A licensee should not draft or assist in the preparation of a land sale contract (with financing terms), option contract, deed, or mortgage. All of these documents require the services of an attorney.
14.23 Contract Law Liability #
If the licensee fails to perform the contract as agreed, the licensee is in default or in breach of contract. The breach of a contract, in its most basic form, is the failure to perform a required contract duty.
14.24 Attorney’s fees #
Attorney’s fees, unless authorized in the contract or by statute, are usually not recoverable. The contract should state that attorney’s fees would be due to the prevailing party for any action brought in a trial court, or any appeal resulting from the trial. Many plaintiffs, although they may be able to recover damages for a breach, cannot afford to bring the action to recover them because the cost to pursue, without an attorney’s fee clause, may be more than the damages that may be recoverable.
14.25 Specific Performance #
Real estate licensees should note that personal service contracts cannot be enforced by specific performance by either party. Personal service contracts include listing agreements, property management agreements, and other employment agreements such as buyer’s agent contracts. This means that if a seller wants to cancel a listing contract, the listing licensee cannot sue for specific performance. However, the licensee may be able to recover any loss due to the wrongful cancellation by using the actual damages theory if the listing contract so stipulates.
14.26 Intentional Concealment #
- Non Disclosure of Material Fact (as opposed to False Representation)
- Intent to Deceive
- Misleading Statement was Relied Upon by Complainant
- Actual Damages Result
The most common intentional torts relating to the practice of real estate are intentional misrepresentation and intentional concealment.
14.27 Offering Opinions #
A licensee may notice a red flag that demands further investigation and comment to the buyer that the problem can be “easily solved.” In giving opinions, licensees expose themselves to liability.
14.28 Real Estate Settlement Procedures Act #
All Associates should be familiar with the laws and regulation of the Real Estate Settlement Procedures Act (RESPA).
14.29 Prohibited Settlement Practices: Kickbacks, Fee-Splitting, Unearned Fees #
RESPA prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan. Some examples of this are:
- Lenders giving a referral fee to a real estate agent for referring a purchaser.
- Title companies giving kickbacks to lenders who refer loans to them in exchange for something of value.
- Appraisers sharing the appraisal fee with the lender who ordered the appraisal for a borrower.
Violations of RESPA’s anti-kickback, referral fees, and unearned fees provisions are subject to criminal and civil penalties. If licensees are to receive fees from lenders, or other service providers involving the settlement process, legal counsel should be engaged to determine whether the fee arrangement meets the requirements of RESPA. For example, a lender may be able to provide a fee to a real estate agent if the agent prepares and collects the initial borrower information and provides this package of information to the lender. However, the rules and regulations regarding this type of activity are very specific and must be followed.
14.30 RESPA Section 9 – Seller Required Title Insurance #
RESPA Section 9 prohibits a seller from requiring the homebuyer to use a particular title insurance company, either directly or indirectly, as a condition of sale. Buyers may sue a seller who violates this provision for an amount that is equal to three times all charges made for the title insurance.
It has long been the practice for certain listing agents to indirectly (through the seller) require that a particular title company be used as a condition of the sale. This practice is prohibited under RESPA, Section 9. Although this is prohibited, this may be challenging to enforce under certain conditions such as multiple offers on a property or a seller who has title binders in place.
14.31 Real Estate Law #
As a part of any risk management program, a licensee must be familiar with real estate law and regulations. A licensee must also comply with record keeping requirements in the event that a complaint is filed against the licensee or the licensee is the subject of a routine audit.
Common violations of real estate law and regulations relate to such things as trust account handling violations, paying referral fees to unlicensed individuals, conducting real estate activity with an expired real estate license, not presenting all offers to a seller, failing to make required disclosures, etc. A thorough understanding of the real estate statutes and regulations governing real estate activity is a necessity as ignorance of the law is never a defense.
Licensees can be held liable for the violation of various laws ranging from agency disclosure laws, fair housing laws, antitrust laws to lending, and settlement practices laws. Depending on the law violated and the nature of the violation, the penalties can range from disciplinary action, to civil penalties or, if applicable, criminal action.
14.32 Potential Liabilities #
The following section should be read by all Associates to gather a general understanding of potential liabilities that exist to various policies and procedures covered throughout the manual.
14.33 Potential Liability Relating to Agency Relationships #
The Company permits disclosed dual agency. Therefore, certain pros and cons exist and as the associate, you should study and understand the risks involved.
- Pros: Allows for the greatest number of transaction possibilities in which the company may be involved and from which commissions may be derived.
- Cons: Requires the consent of all parties to the transaction, which many buyers and sellers may not want to give. This policy always poses the possibility of liability, even if consented to by the seller and buyer. As a result, the Associate must spend a great deal of resources and time monitoring transactions in which dual agency might occur or will occur.
14.34 Breach of Fiduciary Duties #
Care
If an agent represents a seller, care and skill may include assisting the seller in:
- Establishing a realistic market price.
- Advising the seller in making the property more marketable.
- Advising the seller on disclosure issues.
- Using available industry standard tools and techniques to market the property.
- Assisting the seller in evaluating terms and conditions of any offers.
- Preparing and explaining transaction documents and ensuring that all transaction deadlines are met.
If an agent represents a buyer, care and skill may include:
- Locating property meeting the buyer’s criteria.
- Assisting the buyer in evaluation of the property as to condition, value, and neighborhood.
- Assisting in locating financial alternatives available to the buyer.
- Explaining and preparing the terms and implications of the buyer’s offer and responses to counteroffers and other documents.
- Tracking and ensuring that transaction deadlines are met.
Loyalty
- Information relating to confidential matters gained from the principal may not be disclosed. A seller’s agent may not disclose the financial condition of the seller, the seller’s willingness to take a lesser price, the seller’s desperation to sell, etc., unless specifically authorized by the seller. Simply put, unless the principal desires that certain matters be disclosed to third parties, the agent is under a legal obligation to protect the confidentiality of those matters. However, there is a limitation imposed on this duty by statute and case law. The protection of confidential information does not include or permit a licensee to withhold material facts that must be disclosed as a matter of good faith and honest dealing. Because the concept of confidentiality is so intertwined with the duty of loyalty, it is viewed as one aspect of the duty of loyalty, rather than a separate fiduciary duty.
- The duty of loyalty prohibits a divided agency, also known as an undisclosed dual agency, where an agent acts on behalf of an adverse party without the principal’s knowledge or consent.
- The duty of loyalty requires an agent to disclose an ownership interest of 5% or more in a property for sale, and to disclose that he/she has a real estate license if he/she is making an offer on a property for his/her own account.
- The duty of loyalty prohibits competing with the principal either for another principal or for the agent’s own account in matters relating to the subject of the agency. A common example of this prohibited conduct would be for a licensee to take an under-priced listing and then purchase the property with full knowledge that it will sell for more. Any profit made on the resale of the property may be subject to a claim by the principal. Anything that an agent obtains by virtue of placing his/her interest above that of principal belongs to the principal.
The duty of loyalty requires the agent to place the interests of the principal above all others, particularly the agent’s own interest.
Accounting
At all times, the agent must be able to account for all funds received from or on behalf of the principal. For example, property management rent payments from a tenant. In addition, this duty requires the agent to keep accurate records of all documents relating to a transaction, an engagement to sell property, or agreements relating to the leasing of real property. Most states have specific requirements for record keeping that must be strictly adhered to.
Obedience
An agent must act according to the instructions and wishes of the principal unless it is illegal or unethical.
Disclosure
The duty of disclosure requires the agent to keep the principal informed of all material facts that the agent knows or should have known that may have an impact on the principal choosing a particular course of action. These facts may be either favorable or unfavorable to the principal. For example, a home inspection report from a buyer.
14.35 Potential Liability Relating to Fair Housing #
Company policy is to follow the Fair Housing laws at all times.
14.36 Prohibited Actions #
In the sale or rental of property, unless an exemption applies, no Associate may take any action that will discriminate against another in the seven protected classes listed in Section 14 above. Among the prohibited actions are the following examples:
- To refuse to rent or sell housing.
- To refuse to negotiate for housing.
- To make housing unavailable.
- To deny a dwelling.
- To process an application more slowly or otherwise act to delay, hinder or avoid the sale, rental, or financing of property.
- To set different terms, conditions or privileges for sale or rental of a dwelling.
- To provide differing housing services or facilities.
- To falsely deny that housing is available for inspection, sale, or rental.
- To channel or steer any person toward or away from a property.
- To “for profit” persuade owners to sell or rent (blockbusting).
- To deny anyone access or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing.
- To refuse to make a mortgage loan.
- To refuse to provide information regarding loans.
- To impose different terms or conditions on a loan, such as different interest rates, points, or fees.
- To discriminate in appraising property.
- To refuse to purchase a loan or to set different terms or conditions for purchasing a loan.
- To threaten, coerce, intimidate, or interfere with anyone exercising a fair housing right, or assisting others who exercise that right.
- To advertise any statement that indicates a limitation or preference based on the seven protected classes (this prohibition against discriminatory advertising applies to single family and owner-occupied housing that is otherwise exempt from the Fair Housing Act).
- To refuse to let a disabled person make reasonable modifications, at their expense, to a dwelling or common areas if necessary for the disabled person to use the housing.
- To refuse to make, if necessary, reasonable accommodations in rules, policies, practices, or services for the disabled person to use the housing.
14.37 The Role of Federal, State, and Local Governments in Fair Housing Law #
The Department of Housing and Urban Development (HUD) has been given the task of administering the federal fair housing laws. Rules and regulations developed by HUD have further defined and interpreted the provisions of those laws. Protected classes include Race, Color, National Origin, and Religion.
14.38 Disability
#
A disability for purposes of fair housing laws may be defined as a physical or mental impairment that substantially limits one or more major life activities.
14.39 Fair Housing Laws as Applied to Those with Disabilities #
Federal fair housing law, as set forth above, provides for the following with respect to persons with disabilities:
- It is unlawful to refuse to rent to someone with a disability.
- It is unlawful to apply special rules requiring extra deposits or rental charges.
- It is unlawful to make a false statement that housing is not available when the housing is available.
- It is unlawful to advertise in such a way that it limits housing available for persons with a disability.
- It is unlawful to restrict persons with a disability to a specific part of an apartment complex or neighborhood.
- It is unlawful to not make reasonable accommodations or modifications for those persons with disabilities.
Reasonable accommodations are changes in policies, rules, procedures, or practices and services that would enable a disabled person to have equal opportunity to enjoy and use the housing available.
Examples of reasonable accommodations that may have to be made are:
- Providing notes to visually impaired tenants in large print.
- Modifying a “no pet” policy to permit a guide dog.
- Giving a rent reminder call on the day before the rent is due for those with cognitive disabilities.
- Using alternative pest control methods for those with allergies.
- Using alternative cleaning agents for those with allergies.
- Providing a reserved parking spot near the disabled person’s unit in an apartment complex which has unassigned parking.
- It is unlawful not to permit or make building modifications. A disabled tenant has the right to make reasonable modifications to their living unit at their own expense so that they may be able to have full use and enjoyment of their housing.
Examples of modifications may include:
- Lowering cabinets for wheelchair persons.
- Installing grab bars in bathrooms.
- Changing door knobs for those that have disabilities affecting hands (round v. lever type knobs).
- Installing an electric range and oven as replacement for gas appliances for those allergic to gas fumes.
- Lowering light switches and/or thermostats for people in wheelchairs.
- Installing visual alarm systems for those with hearing impairments.
14.40 Familial Status #
The Fair Housing Amendments Act of 1988 added familial status as a protected class to the Federal Fair Housing Act of 1968. It is unlawful under this act to deny housing to families having children under the age of 18 living with their parents or legal custodians, or to any woman who is pregnant. The single exception to this rule is housing that meets the definition of housing for older persons.
MOBILE HOME PARKS – It is often assumed that mobile home parks may exclude families with children. This assumption is made because mobile homes are often the only affordable housing available to older persons and, consequently, older persons tend to have a high concentration in mobile home park communities. The federal law does not allow exclusion from a mobile home park on a basis of familial status (child under the age of 18 or pregnant woman) unless all of the required factors discussed above are met under the retirement community classification.
14.41 Fair Housing Practices (Definitions) #
Redlining
Refusing to make mortgage loans or issue insurance policies in specific geographical areas for reasons other than the qualification of the applicant is known as redlining.
Steering
Steering is the practice of discouraging buyers from considering certain neighborhoods or channeling buyers to particular neighborhoods based upon assumed buyer preferences regarding racial, religious, or national origin composition of a neighborhood.
Real estate agents must show available properties to a prospective purchaser in all neighborhoods where the housing price and type fits the purchaser’s parameters. The purchaser is the only one who can make the decision about a neighborhood.
Blockbusting
Blockbusting means that an agent encourages people to either sell or rent their houses by claiming that the character of a neighborhood is changing due to the entry of a protected class.
Real estate licensees, whether performing the actual blockbusting and making the subsequent profit, or simply assisting in the Blockbusting process by encouraging sellers to leave the area, are violating the Fair Housing laws.
Racial Tipping
Racial tipping means supplying truthful and factual information about the racial composition of a neighborhood in response to a buyer’s stated desire to live in a neighborhood of a particular racial composition. Racial tipping is not a prohibited activity.
Advertising
Licensee is advised as to which are acceptable words and phrases and which are not permitted in advertising. The following is only a partial list:
Acceptable Words and Phrases
- Close to downtown
- Den
- Family room
- Near (such as “near UCLA”)
- No smoking/drinking
- Number of bedrooms
- One apartment
- Play area
- Privacy
- Private setting
- School district
- Schools
- Secluded
- Security provided
- Senior discount
- Seniors (if certified by HUD as senior housing)
- Square Feet
- Townhouse
- Tradition (style of home)
- View
- Walking distance to…
Unacceptable Words and Phrases
- Adult (adult building, adult park, etc.)
- Adults only
- Bachelor pad
- Black
- Blind
- Board approval
- Catholic church
- Christian
- Couple (couples preferred, couples only, etc)
- Crippled
- Deaf
- Drinker(s)
- Ethnic landmarks
- Executive
- Exclusive
- Family (Great for families)
- Female
- Gay
- Gentleman’s Farm
- Grandma’s house
- Handicap limitations (not suitable for)
- Integrated
- Jewish
- Male
- Man
- Marital Status
- Membership approval
- Mentally handicapped
- Mentally ill
- Mentally retarded
- Mormon Temple
- Muslim
- Name of School
- Nationality (Oriental, Hispanic, etc)
- No children
- No play area
- Number of people
- Older person, senior citizen
- One child
- One person
- Oriental
- Physically fit person (idea for or limited to)
- Private
- Race
- Religious landmark
- Religious name
- Restricted
- Retired
- Sex (except in advertising for roommates)
- Single
- Single person
- Smoker(s)
- Student
- Traditional (settings)
- Two people
- White
- Words descriptive of dwelling landlord or tenants
Questionable Words and Phrases
- Female Roommate
- 55 or older (must meet HUD guidelines)
Fair Housing Practices
- Male Roommate
- Neighborhood
- Older persons
- Senior (must meet HUD guidelines)
Selective Use of Photographs or Illustrations of People
Selective use of models, photographs, illustrations of people in ad content can also be perceived as discriminating against a protected class. For example, a real estate brokerage represents a builder who has housing projects located throughout a metro area. One of the projects is in a predominantly minority community, the other is in a predominantly white community. In the minority community, African-American models are used in advertising. In the white community, Anglo-American models are used. Advertising in that manner would be viewed as indicating a preference for buyers based upon race and would be considered discriminatory.
Fair Housing Law Violation Consequences
One helpful practice that all licensees should adopt is to keep good records to demonstrate that fair housing laws were complied with in dealings with a customer or client. These records are the best defense against any potential fair housing violation claim.
Types of documentation that should be maintained for all clients and customers in your Google Drive
- Name, address, and telephone number of prospect
- Stated housing requirements, including price range
- Dates and addresses of properties offered and/or shown
Voluntary Affirmative Marketing Agreement
- The use of the Equal Opportunity logo and/or slogan in advertising.
- The display of the Fair Housing logo in real estate offices, lender offices, and title offices.
- Development of educational materials and training courses that promote fair housing practices and procedures.
- Recruitment of minority salaried employees for positions with the real estate industry.
14.42 Potential Liability Relating to Environmental Issues #
The real estate licensee’s responsibilities with regard to environmental issues are:
- To recognize common environmental hazards in residential properties such as peeling paint.
- To recognize environmental hazards in commercial, industrial, and agricultural properties such as strong odors.
- To recommend that the seller retain appropriate experts to identify and evaluate the scope of any potential environmental hazard.
- To have either the seller or buyer engage an attorney to draft appropriate disclosure documents regarding an identified hazard.
- To ensure that a property has been cleaned up and received an environmentally clean bill of health before the buyer takes title to a property, if representing a buyer.
Note: The potential liability resulting from taking title to a property with an environmental hazard is so great that a buyer should be encouraged not to take such a risk. If the buyer insists on purchasing such a property, the licensee should advise the buyer, in writing, not to proceed with the transaction without first consulting with an attorney.
14.43 Potential Liability Relating to Antitrust Law Violations #
Price Fixing
Due to the nature of a price fixing case, the best advice that can be given to any real estate licensee is NEVER DISCUSS WITH OTHER LICENSEES THE COMMISSIONS YOU OR YOUR COMPANY ARE CHARGING YOUR CLIENTS.
14.44 Reducing Antitrust Liability #
- When discussing commission rates with clients, licensees should use language clearly indicating that their firm sets their commission rates unilaterally and independently of competitors.
- Any licensee who finds himself/herself in the midst of a prohibited price fixing or commission rates discussion with competitors should take immediate steps to disavow any connections with the discussion. Mere silence may infer that the licensee participated in a price fixing conspiracy!
- Any preprinted forms should not contain any predetermined commission rates, listing periods, automatic renewal clauses, or predetermined protection periods. All of these items should be addressed by blanks that are to be filled in as negotiated between the licensee and client.
- NEVER use the following dangerous words and phrases. These are examples of words or phrases that would permit a judge or jury to find that a licensee had engaged in illegal antitrust activity. (Note: These phrases are taken from the Antitrust and Real Estate Compliance Program for REALTORS®.)
- “No one else will cooperate unless you accept the listing on these terms.”
- “Before you decide to list with XYZ Realty, you should know that because they are a discount broker, other REALTOR® board members would not show their listings.”
- “This is the rate every firm charges.”
- “If you valued your services as a professional, you wouldn’t cut your commissions.”
- “Before you list with XYZ Realty, you should know that nobody works on their listings”
- “I would like to lower the commission rate, but the board, as a rule…. “
- “This is the rate that everyone charges.”
- “The MLS will not accept less than a 120-day listing.”
- “I would like to lower the commission, but no one else in the MLS will show your house unless the commission is