FAIR HOUSING: IT'S THE LAW

By Daniel D. Addison, Assistant Director and Attorney for the NC Human Relations Council

The North Fair Housing Act has been in effect since 1983. The Act prohibits discrimination in residential housing on the basis of race, color, religion, sex, and national origin.

Most real estate agents find it easy to obey this law because they believe in it and because discrimination costs them money. What many real estate agents may not realize, however, is that even though they don't discriminate, agents can get into legal Double because of their clients' prejudice.

The North Carolina Fair Housing Act specifically states that it is no defense to a charge of discrimination that "the violation was requested, sought, Or otherwise procured by another person." What does this mean for real estate agents? Let's look at a couple of examples.

Suppose a homeowner lists his house for sale with a real estate agent. The owner tells the agent that he doesn't want to sell his house to any black people. The owner tells the agent that if any black people show an interest in the house, "talk them out of it." Suppose again that a homeowner hires a real estate agent to manage his house as rental property. The owner tells the agent he doesn't want any unmarried women renting his house, and that if any show up, to tell them it's already been rented.

In these examples, assume the agents go along with the owners' wishes and turn blacks and women away. Can these agents defend themselves from a charge of discrimination by claiming that they were not prejudiced, and that they were only carrying out their clients' orders?

The answer is no. These are just the kind of situations the fair housing law prohibits. It doesn't matter who asked the agents to violate that law. If the listing agent violates the law in any way, he or she is responsible. The owner may be sued along with the agent, but that's small comfort.

What should an agent do if an owner, like the ones just described, asks the agent to discriminate? Obviously, the agent should not follow the owner's request. The agent should make sure that all minorities and women who apply or express an interest are given an opportunity to buy or rent the property. All offers should be submitted to the owner. All rental applicants should be allowed to apply, and their applications should be handled the same way. If agents treat all inquirers in the same manner, at least they will be able to say that they did not discriminate at the owner's request.

But in those cases involving prejudiced owners, have real estate agents done enough to protect themselves by simply referring all minorities and women to the owner, knowing that the owner is going to reject the offerors and applicants, anyway?

Again, the answer is no. The North Carolina Fair Housing Act specifically states that real estate agents may not "Offal, solicit, accept, use, or retain a listing of real property with the understanding that any person may be discriminated against in a real estate transaction." What this means is that a real estate agent may not sell or rent property for a homeowner if the agent knows the homeowner is likely to discriminate. In practical terms, if an agent has reason to believe the owner may discriminate, this may mean not accepting listing, or then dropping an existing one.

Let's look again at some examples. Suppose a homeowner asks a real estate agent to sell his house for him. The owner explains that he doesn't want to sell the house to black people. If the agent accepts this listing, he has violated the law because he knows the owner may discriminate. It doesn't even matter if any black people ever make an offer. The act of accepting the listing in these circumstances is enough to violate the law.

What should the agent do? He has two choices. First, he should explain to the owner that he cannot accept the listing under these circumstances. The agent can try to get the owner to change his mind and agree that he will sell his house to any qualified buyer, regardless of race. If after doing this, the agent is 100% satisfied that the owner will not discriminate, the agent may accept the listing. If the owner won't agree not to discriminate, the agent has no choice but to refuse the listing.

What if the owner says he won't discriminate, but the agent is not convinced? The agent should reject the listing. It is better not to have to worry about what the owner will do the first time a minority makes an offer. If the self-professed "reformed" owner discriminates and rejects the offer, the agent may be liable. It is better to be safe than sorry.

The prejudiced owner situation is easiest to deal with before the listing agreement is ever signed. But suppose an owner has already listed his house with an agent. The owner said nothing about selling to minorities at the time of the listing. Now, after the agent begins showing the property, the owner tells her, "Oh, by the way, I forgot to mention this to you before, but I really don't want to sell the house to minorities."

What can the agent do? Again, some decisions have to be made. The agent can either talk the owner out of discriminating, or she can drop the listing. The same principle applies as before - if the agent isn't convinced the owner won't discriminate, it's best to drop the listing.

Now comes the worst scenario. Suppose an agent has a listing from an owner who has said nothing about selling to minorities. The agent presents the owner with an offer from a qualified minority. The owner then drops the bombshell, "Oh, I guess I forgot to tell you, I don't want to sell my house to minorities."

At this point, the agent's options are limited. She should either convince the owner to accept  the offer, or she should drop the listing.   Sometimes owners and agents in this kind of  situation reason that if the offer was not for the  full asking price of the house they can just tell  the offeror that the offer is rejected for that reason. The problem with this is that the "cat is  out of the bag." The agent already knows that the offeror's race is probably the real reason, or at least part of the reason, for the rejection. The law dearly says that if race plays any part in the decision to reject an offer, the rejection is illegal.

An agent is taking a big legal chance by retaining the listing of a dearly prejudiced owner who claims that he is rejecting a minority's offer for some other reason. If the offeror is suspicious, the agent is going to be sued anyway.

If the agent cannot convince the owner to sell, the agent should drop the listing. And it is important that the agent drop the listing immediately and unequivocally before doing anything else. If the agent informs the offeror of the rejection, and then gets around to dropping the listing a day or two later, she has still retained the listing after knowing of the owner's discriminatory intent, and she has technically violated the law.

To protect herself, the agent should tell the owner that she is no longer handling the listing. She should also write a dated letter to the owner stating the same thing, keeping a copy of the letter for her files. The agent may then let the owner inform the offeror of the rejection, or she may do so herself. If the agent has any more contact with the offeror, she should preface anything she says by telling the offeror that she has dropped the owner's listing and no longer represents him.

Should the agent tell the offeror that the owner has discriminated? That's up to her. There is nothing illegal in doing so. In fact, a good way to avoid this whole situation is to tell the owner that if he discriminates: 1) the agent will drop the listing; 2) the offeror will probably find out that the owner discriminated; and 3) the owner will be on his own in the ensuing lawsuit.

Incidentally, there is no contract problem with dropping a listing in these situations. An owner cannot make an agent, by contract or otherwise, violate the law. A good way to make sure the owner clearly knows this is to put a clause in all listing agreements stating that the agent will not discriminate, or represent anyone who does. That way, the owner is bound by contract not to ask the agent to discriminate.

The law is clear - real estate agents should not be involved in discriminatory transactions. If agents avoid any potentially discriminatory situations, they will not only protect themselves, but will also further the cause of fair housing.