Purchase Of Real Estate - Property

Rules

1. Amend. XIV. Under the Equal Protection Clause, state courts may not enforce racial covenants (restrictive land-use agreements). Shelley v. Kraemer (U.S. 1948).

2. Civil Rights Act, 42 U.S.C. §1982 (1866). Prohibits all racially discriminatory interference with property rights. Jones v. Alfred H. Mayer Co. (U.S. 1968).

   1. “Racially discriminatory.” Includes discrimination and racially motivated vandalism of property, according to what “race” meant in 1866 (e.g. against Jews). Shaare Tefila Congregation v. Cobb (U.S. 1987).

3. Fair Housing Act, 42 U.S.C. §3604 (1968). The following four practices are unlawful.

   1. Rental or sale discrimination. “To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate...or otherwise make unavailable or deny, a dwelling to any person because of race, ... religion, sex, familial status, or national origin.”

      1. “Familial status.” This does not incorporate numerical occupancy limits that maintain value of property, even if this has disparate impact on families with children. Pfaff v. HUD (9th Cir. 1966). O may not refuse to rent 2br. apartment to adult with three kids. Glover v. Crestwood Lake §1 Holding Corps. (S.D.N.Y. 1990).

      2. Unmarried couple. Not renting to unmarried dating couple is okay unless practice has disproportionate racial, gender, or religious impact.

      3. Gay people. Discrimination re: sexual orientation is not covered.

   2. Terms discrimination. “To discriminate against any [such] person in the terms, conditions, or privileges of sale or rental... .”

      1. Harassment. O who rents to single woman and harasses her with demands for sex violates FHA. Grieger v. Sheets (N.D. Ill. 1988).

   3. Discrimination in advertising. “To make...[any] advertisement, which respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination....”

      1. “Any advertisement.” Question asked is whether an “ordinary reader” would feel welcome; covers O who advertises rental of basement unit in “private white home,” United States v. Hunter (9th Cir. 1972), or to persons “only speaking Polish,” Holmgren v. Little Vill. Cmty. Reporter (N.D. Ill. 1971).

   4. Handicap discrimination. To “make unavailable or deny, a dwelling to any buyer or renter because of a handicap.” Discrimination includes “a refusal to permit, at the expense of the handicapped person, reasonable modifications of existing premises...if such modifications may be necessary to afford such person full enjoyment of the premises.” Also includes “failure to design and construct” new multifamily dwellings that handicapped persons cannot access.

      1. Diseases. An illness like AIDS counts as a handicap, Baxter v. City of Belleville (S.D. Ill. 1989), unless tenant’s condition directly threatens the health and safety of others—O must make reasonable accommodations if possible. Roe v. Hous. Auth. of City of Boulder (D. Colo. 1995).

      2. Pets. No-pets policy OK if T does not need pet re: handicap and reasonable accommodation possible. HUD v. Riverbay (HUD 1994).

   5. Exemptions

      1. §3603(b). Nothing in §3604 applies to (1) “any single-family house sold or rented by an owner” who (A) “does not own more than three such single-family houses” at any time and (B) does not use “any real estate broker, agent or salesman” or “any advertisement or written notice”; or (2) “units in dwellings containing living quarters occupied...by no more than four families living independently of each other, if the owner actually maintains and occupies one of such living quarters as his residence.”

      2. §3607. Nothing in §3604 applies to religious organizations, elderly homes, or private clubs.

4. State anti-discrimination laws. Many states have stricter antidiscrimination laws than FHA.

   1. Unmarried couples. First Amendment does not protect L who wishes to rent only to married couples where California prohibits discrimination based on marital status. Smith v. Fair Emp’t & Hous. Comm’n (Cal. 1996).

   2. Lawyers. Most states allow Ls to discriminate by occupation (e.g. lawyers), even if T is black divorcee. Kramarsky v. Stahl Mgmt. (N.Y. Sup. Ct. 1977).

5. Litigation.

   1. Under the CRA (1866). Π must establish discriminatory intent (i.e. similarly situated white person would have been treated differently); does not apply to advertising; only applies to race.

   2. Under the FHA (1968). Π must establish discriminatory impact or disparate treatment. Then, Δ may justify actions in light of a bona fide, compelling governmental purpose, with no less discriminatory options or alternatives. Starrett City Assocs.

      1. Attorney’s fees. Πs may recover fees if successful, and Δs get fees if Π litigated in bad faith. Sassover v. Field (2d Cir. 1992). If Δ is government, Π recovers if Δ’s position not “substantially justified.”

      2. Compelling governmental purposes. FHA, Title VII, Amend. XIV, etc. all allow purposes of “antidiscrimination” or “integration,” but antidiscrimination is prioritized. Affirmative action policy is permissible only when (1) there is an ending or termination point; (2) it remedies prior racial discrimination; and (3) it benefits minorities. Public housing authorities, however, have duty to fulfill goal of open, integrated housing. Starrett City Assocs.

Analysis

1. State anti-discrimination laws. Similar to other forms of federalism in which federal government mandates floor that states may raise with their own laws and constitutions. See Error! Reference source not found., Error! Reference source not found..

2. Compelling governmental purposes. Reagan administration wanted to eliminate racial quotas and affirmative action programs, so its DOJ emphasized goal of “antidiscrimination” over integration. Precedent to Starrett City, Otero, allowed public authority to allow sale to new people for rebuilt project when it realized selling to removed residents would result in 80% black project. Starrett City distinguished because (1) Otero was one-off and impermanent, and (2) Starrett involved quotas.

3. CRA v. FHA. CRA is broader than the FHA (covers all forms of property discrimination) and narrower (only covers race; requires intent; no advertising).

Major Cases

1. United States v. Starrett City Assocs. (2d. Cir 1988) (Supp. IV, 5)

   1. (Miner, J.) Δ was federally subsidized housing developer that prevented white flight with 35% minority max. After Δ settled with blacks, DOJ sued. Since policy does not fit within permissible aff. action program, invalid.

   2. (Newman, J., dissenting) Purpose of statute is to maintain integration, and ruling violates the purpose, forcing integrated project to become segregated.

Rules

1. Sequence of events. (1) Buyer (B) gets preapproved for loan. B meets with broker. Commission for broker usually paid by seller (S). (2) B & S negotiate purchase and sale agreement—usually form contract—with promise to buy/sell a “good & merchantable title”; “equitable conversion” occurs. (3) After an executory period of 60–90 days, closing; deed is transferred, possibly after being held by escrow company. (4) Title is recorded with government.

   1. The practice of law. In many states, only lawyers (and not corporations) may practice law; conveyancing, preparing title abstracts, handling closings, and mailing or carrying recording instruments all involve law and must be supervised by attorneys. Buyers Serv.

   2. Good & merchantable title. Title that a reasonable purchaser with prudence of reasonable businessman willing and eager to buy would accept. Title need not be free from all defects, but if resting on parol evidence, must be demonstrated to reasonable degree of certainty that evidence cannot be easily contradicted, and will be easily available in future. Messer-Johnson.

      1. Adversely possessed title. This may be merchantable, but burden of proof is on vendor. Messer-Johnson.

   3. “Time is of the essence” clauses. Contractual deadlines are strictly enforced. 15 minutes late for closing may be too late.

   4. Fraud. An affirmative representation of material fact intending to deceive which causes damage. This is difficult to prove.

2. Equitable conversion. If specific performance is possible for the sale of land before closing, equity regards “as done which ought to be done.” B becomes owner (with “equitable” title), and S has “legal” title as “trustee” for B with right to purchase price. Equitable conversation is therefore a conveyance that severs a JT. B may transfer equitable title to others or to a trust.

   1. Fortuitous loss. If property burns to ground during this period, two possible rules.

      1. B bears loss. Burden of loss is on B, as equitable owner, but if S is insured, S holds proceeds for B’s behalf as trustee. Paine v. Miller (Eng. 1807).

      2. S bears loss. In Mass., burden is on S if loss is substantial, although abatement in price may be remedy. See also Brush Grocery Kart, Inc. v. Sure Fine Mkt., Inc. (Colo. 2002).

   2. Intestacy. If equitable conversion occurs, S holds personal property in sale price, and B has real property in land. In re Pickett (Miss. App. Ct. 2004). This is relevant if the real property was held as TBTE, as personal property may not be held as TBTE.

Analysis

1. The practice of law. The purpose of these restrictions is to protect public from unethical or incompetent legal advice. If B relies on bank’s lawyer or broker’s lawyer, B is not fully protected—e.g. neighbor might have easement over property, and the bank/broker will not care but B would. Corporations are barred because there may be a conflict of interest...