Risk Management Toolkit Articles Archive - Page 17 of 18 - Oregon REALTORS®

The other Fair Housing category that can cause real estate licensees serious problems is “familial status.” Familial status means children. Unless a building or community qualifies as housing for older persons, it may not discriminate against families with one or more children under18. Familial status protection also applies to pregnant women and anyone with legal custody of a child under 18.

As mentioned above, housing for older persons is exempt from the Fair Housing prohibition against familial status discrimination. There are, however, strings attached to the exemption. Housing is exempt from the familial status discrimination provision if (1) the HUD Secretary has determined that it is specifically designed for and occupied by elderly persons under a Federal, State or local government program; or (2) It is occupied solely by persons who are 62 or older; or (3) It houses at least one person who is 55 or older in at least 80 percent of the occupied units, and adheres to a policy that demonstrates an intent to house persons who are 55 or older.

It is, of course, the 55 or older exemption that causes the most problems. For many years after the familial status category was added to the Fair Housing laws in 1988, the law required 55 and older housing to have “significant services and facilities specifically designed for its elderly residents.” That provision proved unworkable and has been eliminated by Congress.

There are now three requirements to qualify for the 55 and older exemption. First, at least 80 percent of the occupied units must be occupied by at least one person 55 years of age or older per unit. Second, the owner or management of the housing facility or community must publish and adhere to policies and procedures that demonstrate an intent to provide housing for persons 55 years or older. Finally, the facility/community must comply with rules issued by the Secretary for verification of occupancy through reliable surveys and affidavits.

Examples of policies and procedure that show intent to provide housing for persons 55 years of age or older include written rules, regulations, lease provisions, deed or other restrictions. They also include the actual practices of the owner, including the kind of advertising used to attract prospective residents. Operators of exempt facilities must have age verification procedures. Birth certificates, driver’s licenses, passports, immigration cards and the like are considered to be reliable for age verification. Self certification in a lease, application affidavit, or other document signed by an adult member of the household will also satisfy the requirement.

Fair Housing rules afford the disabled additional protection in rental housing. These protections apply to anyone with a physical or mental disability (including hearing, mobility and visual impairments, chronic alcoholism, chronic mental illness, AIDS, AIDS-Related Complex and mental retardation) that substantially limits one or more major life activities. Under the rules, a landlord may not refuse to let the disabled make reasonable modifications to a dwelling or common use areas, at the disabled person’s expense, if modification is necessary for the disabled person to use the housing.

Probably the single biggest right the disabled have under Fair Housing rules is that a landlord cannot refuse to make reasonable accommodations in rules, policies, practices or services if necessary for the disabled person to use the housing. For instance, a building with a “no pets” policy must allow a visually impaired tenant to keep a guide dog. In recent years, tenants have used claims of mental disability (typically depression or anxiety) in order to keep pets in rental units with “no pet” policies.

Accommodation of disabilities is a matter of reasonableness and, therefore, can be very hard to assess. For example, an apartment complex that offers tenants ample, unassigned parking must honor a request from a mobility-impaired tenant for a reserved space near her apartment if necessary to assure that she can have access to her apartment. When parking is scarce or already assigned or assignment only to the disabled person is convenient, problems arise. That is why a real estate agent should never give clients advice on Fair Housing issues. Always refer your client, whether landlord or tenant, to an attorney if they want to know if something is “legal” or “illegal” under the Fair Housing statutes.

The key to complying with the Fair Housing Act is having good company policies and following them. Real estate companies and their agents cannot engage in discriminatory practices or allow their clients to do so and need to be able to show that is the case. Proving you do not engage in discriminatory conduct or allow your clients to do so is not easy.

The following questions will allow you to assess your company’s exposure and suggest areas for improvement. If you answer “no” to any of the questions below, evaluate and adjust your office practices accordingly:

Do you have a written Fair Housing policy?
Do you publicize your commitment to Fair Housing in your office, in your advertising, and to sellers and buyers?
Is Fair Housing training required in your company?
Have you developed procedures to provide equal professional service?
Do you review your offices’ compliance with your procedures on a regular basis?
Do you have a corrective action policy?
Do you regularly review and modify your procedures to respond to changes in the law or new Fair Housing issues and to correct deficiencies in your office?
Do you have a mechanism for feedback from customers and prospects?

Help with developing written policies, implementing procedures, conducting training, and even handy forms are available from the National Association of REALTORS® (NAR) by visiting their website at www.realtors.org NAR recommends the following Fair Housing policy statement: “This company conducts business in accordance with all Federal, state, and local Fair Housing laws. It is our policy to provide housing opportunities to all persons regardless of race, color, religion, sex, familial status, handicap, or national origin. The company’s Fair Housing procedures are not recommendations. They must be followed by everyone associated with the company.”

Do you have a written Fair Housing policy?
Do you publicize your commitment to Fair Housing in your office, in your advertising, and to sellers and buyers?
Is Fair Housing training required in your company?
Have you developed procedures to provide equal professional service?
Do you review your offices’ compliance with your procedures on a regular basis?
Do you have a corrective action policy?
Do you regularly review and modify your procedures to respond to changes in the law or new Fair Housing issues and to correct deficiencies in your office?
Do you have a mechanism for feedback from customers and prospects?

ORS 659A.420 “Purchaser” defined for ORS 659A.421.
ORS659A.421 Discrimination in selling, renting or leasing real property prohibited.

Oregon’s housing discrimination statutes mirror Federal statutes. The mirroring is deliberate so that Oregon can benefit from Federal discrimination enforcement dollars. Oregon laws can be more restrictive or grant more rights than Federal laws, but not less. So, for instance, there is no exception under Oregon for laws for owners of single family residences or small landlords (< 5 units) as there are under Federal discrimination statutes. Oregon adds marital status, source of income and sexual orientation to the Federal list of protected classes. Cities and counties occasionally add classes locally, so always ask about local discrimination statutes if you are unfamiliar with an area.

In addition to Fair Housing provisions like those found in Federal law, Oregon law contains a unique disclosure prohibition that applies to AIDS. Under Oregon law, “no person shall disclose to any person that an occupant or owner of real property has or died from human immunodeficiency virus or acquired immune deficiency syndrome.” This prohibition applies to agents as well as homeowners and buyers.

Oregon law is also unique in the way it handles exceptions based on familial status and gender. Under Oregon law, those sections of ORS 659A.421 that prohibit actions based upon familial status or sex do not apply to the renting of space within a single-family residence if the owner actually maintains and occupies the residence as the owner’s primary residence and all occupants share some common space within the residence. This exception is the only one found in Oregon law and is much narrower than the exceptions applicable under Federal law.

Title VIII of the Civil Rights Act of 1968 prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status, and handicap (disability).

The Fair Housing Act covers most housing. The Federal Act (not the state) exempts owner-occupied buildings with no more than four units, single-family housing sold or rented without the use of a broker, and housing operated by organizations and private clubs that limit occupancy to members. For all other housing, no one, including an agent, may take any of the following actions based on race, color, national origin, religion, sex, familial status or handicap:

Refuse to rent or sell housing
Refuse to negotiate for housing
Make housing unavailable
Deny a dwelling
Set different terms, conditions or privileges for sale or rental of a dwelling
Provide different housing services or facilities
Falsely deny that housing is available for inspection, sale, or rental
For profit, persuade owners to sell or rent (blockbusting) or
Deny anyone access to or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing.

The Fair Housing Act also places restrictions on residential mortgage lending. No one may take any of the following actions based on race, color, national origin, religion, sex, familial status or handicap (disability):

Refuse to make a mortgage loan
Refuse to provide information regarding loans
Impose different terms or conditions on a loan, such as different interest rates, points, or fees
Discriminate in appraising property
Refuse to purchase a loan or
Set different terms or conditions for purchasing a loan.

In addition to these specific restrictions, it is illegal under the Act to threaten, coerce, intimidate or interfere with anyone exercising a Fair Housing right or assisting others who exercise that right. It is also illegal to advertise or make any statement that indicates a limitation or preference based on race, color, national origin, religion, sex, familial status, or handicap. This prohibition against discriminatory advertising applies to single-family and owner-occupied housing that is otherwise exempt from the Fair Housing Act and plays a large role in real estate advertising.

Recently, narrow exceptions have been carved out of the rule that CMAs and Letters of Opinion can only be done for the purpose of pursuing a listing or to aid a buyer. The exceptions, found in subsection (4) of OAR 863-015-0190, deal with what are called “lending collateral analysis;” or “default collateral analysis.” “Lending collateral analysis” means a real property market analysis where the purpose of the analysis is for use by a lending institution in support of a loan application. “Default collateral analysis” means a real property market analysis where the purpose of the analysis is for use by a lending institution in considering its actions with respect to a loan in default.

Lending collateral analysis and default collateral analysis are creatures of Federal law. They were originally exceptions to the appraisal requirements for Federally-backed real estate mortgages. Such analyses are not appraisals and under state or Federal law can be used only for the internal purposes of a financial institution when the loan is less than $250,000. OAR 863-015-0190(4) allows Oregon real estate licensees to do a lending collateral analysis or a default collateral analysis provided the analysis is for the internal purposes of a financial institution when the loan is less than $250,000.

Lending collateral analysis and default collateral analysis are often confused with CMAs and BPOs. They are, however, not the same thing at all. Basically, the Real Estate Agency has simply incorporated state and Federal appraisal law exceptions into real estate license law and grafted them onto the existing CMA/BPO rules. The appraisal exceptions, however, apply to anyone employed by a financial instruction to do such analysis for internal use.

Having a real estate license is irrelevant to the appraisal exceptions that allow financial institutions to use lending collateral analysis and default collateral analysis instead of appraisals. This explains why, unlike CMAs and BPOs, there are no real estate license law provisions that dictate the contents of such analysis when done by a real estate licensee. The administrative rule simply allows licensees to do what anyone employed by a financial institution can do. It is for that reason that banks often deal individually with agents and do not involve the agent’s broker or company. Agents involved in providing such analysis should be aware, however, that they must disclose their involvement if they later list or represent a buyer in the purchase of the property.

ORS 696.010(7) defines CMA. ORS 696.294 defines BPO.

For many years, “competitive market analysis” (CMA) and “letter of opinion” or “broker price opinion” (BPO) were terms of art used to describe the analysis and opinion used by real estate brokers when establishing a listing price. Competitive market analysis was intended to convey the idea that what was being analyzed was the housing market to determine a competitive listing price. Broker price opinion was used to distinguish the work of brokers from that of appraisers.

Eventually, “competitive market analysis” and “letter of opinion” (BPO) came to be defined in statute. According to ORS 696.010(7), “Competitive market analysis” means a method or process used by a real estate licensee in pursuing a listing agreement or in formulating an offer to acquire real estate in a transaction for the sale, lease, lease-option or exchange of real estate. “The object of a CMA must be “a recommended listing, selling or purchase price or a lease or rental consideration.” A “letter of opinion” is
‘a document that expresses a real estate licensee’s conclusion regarding a recommended listing, selling or purchase price or a rental or lease consideration of certain real estate and those results from the licensee’s competitive market analysis.”

Administrative rules have been used to flesh out these statutory definitions. All is thought necessary to distinguish a broker’s opinion on “price” from an appraiser’s opinion of “value.” As the real estate lending market heated up in the 1990’s, banks were able to successfully lobby Congress to loosen appraisal rules for residential lending. The federal rule change caused something of a legal dust-up between lenders and appraisers that untimely lead to an exception being carved out of the (brokers do price opinions and appraisers do value opinion) paradigm. This compromise and the traditional rules that distinguish BPO’s from appraisals are now found in a single administrative rule.

OAR 863-015-0190 contains the express legal authorization for a real estate licensee to provide competitive market analysis and letter of opinion in the normal course of their business.

OAR 863-015-0190 contains the express legal authorization for a real estate licensee to provide competitive market analysis and letter of opinion in the normal course of their business. The authority, however, is expressly limited to the “pursuit of a listing, to assist a potential buyer in formulating an offer or to provide a broker’s price opinion, whether or not done for a fee” This limitation applies whether the opinion is done for a fee or not.

The rule specifically declares that the term “value” when used in a CMA or letter of opinion is not intended to mean or imply “value” as used in appraisals. To make certain there is no confusion, the rule requires that a CMA or BPO be in writing and contain the following: “(a) A statement of purpose and intent; (b) A brief description of the property;

(c) The basis of reasoning used to reach the conclusion of value including the applicable market data and/or capitalization computation; (d) Any limiting conditions; (e) A disclosure of any existing or contemplated interest of the licensee in the subject property; (f) The signature of the licensee issuing the competitive market analysis or letter of opinion and the date of its issuance; (g) A disclaimer that, unless the real estate licensee is also licensed by the Appraiser Certification and Licensure Board, the report is not intended to meet the requirements set out in the Uniform Standards of Appraisal Practice; and (h) A disclaimer that the competitive market analysis or letter of opinion is not intended as an appraisal and that if an appraisal is desired, the services of a competent professional licensed appraiser should be obtained.” Click Here for a sample letter of opinion form.

CMAs and BPOs have become an ordinary part of professional real estate activity. If the dictates of OAR 863-015-0190 are followed, there are few problems. When the requirements of the rule are not followed, however, the result can be violations of real estate license law. It is, for instance, a violation of ORS 696.301(8) to accept employment or compensation “for the preparation of a competitive market analysis or letter of opinion that is contingent upon reporting a predetermined value or for real estate in which the licensee had an undisclosed interest.” But, far and away the most common violations result from agents doing CMAs and BPOs for purposes other than in “pursuit of a listing, to assist a potential purchaser in formulating an offer or to provide a broker’s price opinion in pursuit of a listing, to assist a potential purchaser in formulating an offer or to provide a broker’s price opinion.”

A common way in which the limitation placed on the authority to do CMAs and BPOs is to do them for a home owner challenging a property tax assessment or a lawyer in a divorce case or other real property action. It is not that CMAs and BPOs cannot be used in such context; rather it is that often the agents hired forget they cannot offer opinions of value and must use their CMA and letter of opinion authority only in pursuit of a listing or to aid a buyer in making an offer. A seller who received a letter of opinion in contemplation of selling the property might later use the letter to contest a property tax assessment, but the agent could not provide the letter for the purpose of contesting the property tax assessment. It is for this reason, that every letter of opinion should be accompanied by a cover letter that explains its purpose. Click here for a sample letter of opinion cover letter.

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