Legal
Regional Multiple Listing Services Face Increased Exposure To Fair Housing Liabilityby Robert D. Butters
Regional multiple listing services are forming at an increasing rate. More and more local MLSs are realizing the cost savings that can be realized through efficiencies resulting from spreading the costs of computerized information management across several, if not dozens, of previously independent multiple listing services.
But as MLSs grow, and the volume of listings contained in a single database increases from thousands to tens of thousands, it becomes increasingly difficult, if not impossible, for the MLS to monitor the content of the listing information submitted to the data base. Indeed, most MLSs have long since adopted "broker load" as the method of inputting listing data. In "broker load" systems, the MLS itself or its staff do not play any role in the data entry process.
While the volume of information processed by MLSs is increasing, and the role of the MLS itself in monitoring the content of that information is decreasing, the federal Fair Housing Act is being interpreted in a manner that is creating serious risks of liability for MLSs as the technology driven trend toward regionalization continues.
Among the discriminatory housing practices prohibited by the Fair Housing Act is the publication of any advertisement or notice that indicates a preference, limitation or discrimination on the basis of race, color, religion, sex, handicap, familial status or national origin. This provision of the Act has been interpreted to apply to newspapers and advertising agencies who create and publish advertising that may contain words or phrases that suggest that a property owner or landlord is appealing to potential buyers or tenants based upon criteria prohibited by the Act.
Most real estate brokers are well aware that explicit appeals to racial, religious or ethnic groups are impermissible in their advertising. In 1988, however, Congress amended the Fair Housing Act Amendments to add familial status and handicap to the list of criteria prohibited as a basis for marketing residential real estate for sale or rent. The inclusion of "familiar status" has resulted in a prohibition of "adults only" restrictions, except in very rare circumstances where a dwelling qualifies for an exemption from the "familial status" provision of the Act as "housing for older persons." In market areas where "adults only" properties were numerous, some brokers, and many property owners, may be slow to comprehend the full scope of recent Fair Housing Act amendments. Some brokers and agents in those markets may still be accustomed to using words or phrases in their advertising that suggest that families with children may not be favored occupants for certain dwellings. The same brokers or agents may use these dangerous terms in the listing data they "broker load" into a regional MLS.
This fact scenario became a reality in a suburban regional MLS on the East Coast. On her own initiative, HUD's Assistant Secretary for Fair Housing and Equal Opportunity commenced an investigation in early 1993 to determine if the MLS violated the Fair Housing Act by permitting terms to be used in broker loaded MLS listing information that allegedly indicated a preference, limitation, or discrimination on the basis of race, color, religion, sex, handicap, familial status or national origin.
During its investigation, HUD reviewed several years worth of MLS compilations containing thousands of individual listings. Because the MLS is "broker load," the MLS staff did not review the listing data entered directly into the computer database by the individual broker participants. One of these listings contained the words "adults only" in the remarks section of the property data form. Such a reference violated Section 804(c) of the Fair Housing Act because the property did not otherwise qualify as "housing for older persons."
As a result of this single violation, HUD issued a formal Complaint against the MLS on March 10, 1993. Shortly thereafter, HUD proposed terms for a Conciliation Agreement to resolve the Complaint. These terms included the following provisions:
1. The MLS must appoint an "Agreement Administrator" who shall report directly to the officers of the MLS. The Administrator shall devote twenty-five percent (25%) of his or her time to implementing the Agreement.
2. The Administrator shall arrange for annual training in the requirements of the Fair Housing Act for all of the MLS' employees, participants, and all of the participants' agents and brokers.
3. The Administrator shall monitor the MLS' process for accepting listings to ensure compliance with the Fair Housing Act, and shall maintain a log of all listings for sale or rent. The log shall be periodically submitted to HUD for evaluation.
4. The MLS shall implement a nondiscrimination policy and shall issue written procedures for the acceptance of listings that will ensure that all listing data will comply with the Fair Housing Act.
5. Within 60 days of the effective date of the Agreement, the MLS must design and submit to HUD for approval, a training course for its employees and participants, and their agents, regarding compliance with the section of the Fair Housing Act dealing with discriminatory advertising. The training must be completed within 45 days after it is commenced.
6. Within 60 days of the effective date of the Agreement, the MLS must furnish a letter to each participant summarizing the terms of the Agreement and its procedures for accepting listings. The MLS shall also secure a written acknowledgement from each participant and each agent that they have read and understand the content of the letter.
7. The MLS shall develop a process that will ensure that discriminatory listings are screened out prior to publication in the MLS.
8. The MLS shall pay $10,000 annually for three years to a local private fair housing organization selected by the MLS and approved by HUD. The money shall be used to fund testing by the organization of the sales and rental practices of MLS participants. The fair housing organization, HUD and the testers retain the right to file lawsuits against the MLS or any of its participants as a result of the tests.
9. The MLS shall permanently endow an annual scholarship of $2,500 to be awarded to a local law student who commits to a curriculum that will lead to a specialization in fair housing enforcement.
It should be understood that the terms outlined above are those proposed by HUD. It is highly unlikely that all of these terms will ultimately be incorporated into a final Conciliation Agreement. But the proposed terms clearly demonstrate what the current HUD administration believes to be appropriate relief to be imposed upon an MLS that publishes current listing data that contains allegedly discriminatory words or phrases. It is also important to note that HUD demanded this relief even though the listing data was entered into the MLS database directly by the individual participants ("broker load").
It is clear from the proposed Conciliation Agreement that HUD considers an MLS to be responsible for the content of its MLS database, even if the MLS did not exercise any direct control over the listing information that MLS participants enter into the database. An analogy can be drawn to the liability imposed upon newspapers for discriminatory advertisements submitted by advertisers, even though the newspaper did not compose the offending advertisement. The publisher of the newspaper is deemed responsible for monitoring the content of the advertising it prints. If it chooses not to exercise a review function, it will nevertheless be held liable for content of the advertising.
In summary, the HUD proposed Conciliation Agreement highlights the potential fair housing liability faced by MLSs for the content of the listing information in their database. This liability will only increase as MLSs continue the trend toward regionalization and database consolidation. To minimize this liability, MLSs should explore technological solutions such as "lock out" software that will bar certain words or phrases from being entered into the database. But MLSs and their computer vendors should also be sure to include fair housing issues in the standard training programs they offer participants and users on the use of the MLS computer system. Individual agent sensitivity is the best protection against this new liability threat.
-----------------
Robert D..Butters. All right reserved. For information contact Frog Pond at 800.704.FROG(3764) or email susie@frogpond.com.
