Chapter 2: Ethics, Fair Housing and Trust Accounts Summary

Ethics in Real Estate 

Good ethical practices have to do with trustworthiness, honesty, and competence.

Duties to clients outlined in the Code:

• Protecting and promoting the interests of the client.
• Avoiding the concealment of pertinent facts.
• Informing sellers or purchasers of the licensee's interest in a property.
• Providing equal, non-discriminatory services to all persons.
• Being truthful and clear in advertising.
• Refraining from false or misleading statements about competitors.

Fair Housing Laws

Americans with Disabilities Act (ADA) mandates that persons with disabilities have equal access to jobs, public accommodations, government services, public transportation and telecommunications.

• Brokers must evaluate whether they need to make physical changes to their office space to comply with the law. 
• Licensees should inform their commercial and investor clients of the need to have their leases professionally evaluated and their offices inspected for compliance.

The protected classes of the Federal Fair Housing Act are race; religion; color; national origin; sex; handicap and familial status.

Fair Housing Law prohibits:

• Refusing to sell, rent or negotiate with any person.
• Stating or advertising that the property is restricted or using discriminatory advertising
• Denying membership in any multiple listing service (MLS) or any broker's organization.
• Blockbusting/Panic Selling (making a profit by inducing owners to sell by telling them that persons of a protected class are moving into a neighborhood).
• Steering (channeling homebuyers toward or away from homes in certain neighborhoods).
• Redlining (restricting the number of loans in certain areas of a community).

Brokers are encouraged to display the Equal Housing Opportunity poster in their offices.

The Fair Housing laws exemptions:

• If the owner does not own more than three homes at one time, does not use discriminatory advertising and does not use a real estate agent.
• Rental of units in an owner-occupied, one-to-four- family dwelling is exempt, if the owner does not use an agent to secure tenants. 
• Some specific religious organizations/private clubs/senior citizen housing

Fair Housing Enforcement

• Any person who believes he or she has been discriminated against may file a complaint with HUD within one yearof the alleged act OR file a suit in a state or federal court within two (2) years of the alleged violation.
• Conciliation: during the investigation period, HUD can attempt to resolve the complaint.

California Fair Housing

1. Unruh Civil Rights Act
   • Provides protection from discrimination by all business establishments.
   • Housing designated to meet the physical and social needs of senior citizens is exempt from this act.
   • Complaints must be filed within one year of the alleged discrimination.
2. Fair Employment and Housing Act prohibits:
   • Discrimination in the negotiation or financing of housing.
   • Eviction of a person in retaliation for seeking to uphold the rights under this act.
   • Refusal to reasonably accommodate a handicapped or disabled person.
3. Housing Financial Discrimination Act (Holden Act) prohibits financial institutions from discriminating in loan activities on various basis.

Trust Funds

All funds deposited into a trust account must be maintained in that account until the broker disburses those funds according to the instructions of the person who is entitled to receive the funds.

Commingling: if a broker deposits the funds of others in a business or personal account or holds the funds without authorization.

Rules for handling trust funds:

• Trust funds must be deposited within three (3) business days of the broker or the broker's salesperson receiving the funds.
• The trust account must be a demand (non-interest-bearing) account.
• A broker may deposit money into the trust account to cover reasonable service charges, but this cannot exceed $200. 
• Any broker-owned funds must be disbursed from the account within 25 days after deposit.
• All trust account records must be kept for three (3) years.