Untitled California Attorney General Opinion ( 1990 )

OFFICE OF THE ATTORNEY GENERAL
State of California
JOHN K. VAN DE KAMP
Attorney General
______________________________________
OPINION :
: No. 89-902
of :
: March 14, 1990
JOHN K. VAN DE KAMP :
Attorney General :
:
RODNEY O. LILYQUIST :
Deputy Attorney General :
:
__________________________________________________________________
THE HONORABLE MILTON MARKS, MEMBER OF THE CALIFORNIA
STATE SENATE, has requested an opinion on the following question:
Is a licensed real estate agent required or permitted to
disclose the location of a licensed care facility serving six or
fewer people to prospective buyers of residential property?
CONCLUSION
A licensed real estate agent is not required to disclose
the location of a licensed care facility serving six or fewer
people to prospective buyers of residential property. Disclosure
in response to an inquiry is permitted if it is factual, not
intended to aid discrimination against or segregation of licensed
care facilities within the community, and in fact does not have
that effect.
ANALYSIS
The Legislature has enacted the California Community Care
Facilities Act (Health & Saf. Code, §§ 1500-1567.9)1 "to establish
a coordinated and comprehensive statewide service system of quality
community care for mentally ill, developmentally and physically
disabled, and children and adults who require care or services . .
. ." (§ 1501, subd. (a); see Barrett v. Lipscomb (1987) 194
Cal. App. 3d 1524, 1529; McCaffrey v. Preston (1984) 154 Cal. App. 3d
1
All references hereafter to the Health and Safety Code are
by section number only.
1. 89-902
422, 428-429; Welsch v. Goswick (1982) 130 Cal. App. 3d 398, 406-408.)
As part of this legislation, "each county and city shall
permit and encourage the development of sufficient numbers and
types of residential care facilities as are commensurate with local
need." (§ 1566.) If these residential facilities are limited to
serving six or fewer persons, they are to be considered as a
residential use of the property under local ordinances and treated
as any other single family dwelling in the same area. (§§ 1566.2­
1566.5.)2
The question presented for resolution is whether a real
estate agent is required or permitted to disclose to prospective
home buyers that a licensed care facility is located in the
neighborhood. We conclude that such disclosure is not required and
indeed is only permissible in extremely narrow circumstances.
In the landmark case of Easton v. Strassburger (1984) 152
Cal. App. 3d 90, the Court of Appeal stated:
"Despite the absence of privity of contract, a real
estate agent is clearly under a duty to exercise
reasonable care to protect those persons whom the agent
is attempting to induce into entering a real estate
transaction for the purpose of earning a commission.
[Citations.]" (Id., at p. 98, fn. 2.)
With respect to facts known by the real estate agent, the court
summarized the applicable rule of law as follows:
"It is not disputed that current law requires a
broker to disclose to a buyer material defects known to
the broker but unknown to and unobservable by the buyer.
(Cooper v. Jevne (1976) 56 Cal. App. 3d 860, 866; Lingsch
v. Savage (1963) 213 Cal. App. 2d 729, 733; see also
regulations of the Department of Real Estate set forth in
Cal. Admin. Code, tit. 10, § 2785, subd.. (a)(3).) The
Cooper case contains the most complete judicial
articulation of the rule: 'It is the law of this state
that where a real estate broker or agent, representing
the seller, knows facts materially affecting the value or
the desirability of property offered for sale and these
facts are known or accessible only to him and his
2
Similarly, the Legislature has provided in Welfare and
Institutions Code section 5116 that a "licensed family care home,
foster home, or group home serving six or fewer mentally disordered
or otherwise handicapped persons or dependent and neglected
children . . . shall be a permitted use in all residential zones
for single-family dwellings." (See City of Los Angeles v.
Department of Health (1976) 63 Cal. App. 3d 473, 477-478.)
2. 89-902
principal, and the broker or agent also knows that these
facts are not known to or within the reach of the
diligent attention and observation of the buyer, the
broker or agent is under a duty to disclose these facts
to the buyer. (Lingsch v. Savage [1963] 213 Cal.App.2d
. . .).' (56 Cal.App.3d at p. 866.) If a broker fails
to disclose material facts that are known to him he is
liable for the intentional tort of 'fraudulent
concealment' or 'negative fraud.' (Warner Const. Corp.
v. City of Los Angeles (1970) 2 Cal. 3d 285, 293-294;
Cooper v. Jevne, supra, 213 Cal.App.2d at p. 735-736.)"
(Id., at p. 99.)
The court then announced a new principle of law regarding the
disclosure of facts previously unknown by the real estate agent.
The court held that the agent had a duty to inspect the residential
property and disclose what such an investigation would reveal. The
court concluded:
"In sum, we hold that the duty of a real estate
broker, representing the seller, to disclose facts,
includes the affirmative duty to conduct a reasonably
competent and diligent inspection of the residential
property listed for sale and to disclose to prospective
purchasers all facts materially affecting the value or
desirability of the property that such an investigation
would reveal." (Id., at p. 102, fn. omitted.)
Easton, as well as the two principle cases upon which it relied,
Cooper v. Jevne (1976) 56 Cal. App. 3d 860 and Lingsch v. Savage
(1963) 213 Cal. App. 2d 729, dealt with defects in the particular
property offered for sale.
The Legislature has now codified the Easton decision in
Civil Code section 2079-2079.6. (See Stats. 1985, ch. 223, § 4
["The Legislature . . . declares that the provisions of this act
are, and shall be interpreted as, a definition of the duty of care
found to exist by Easton v. Strassburger, and the manner of its
discharge"].) The basic statutory duty is for a real estate agent
"to conduct a reasonably competent and diligent visual inspection
of the property offered for sale and to disclose to [a] prospective
purchaser all facts materially affecting the value or desirability
of the property that such an investigation would reveal." (Civ.
Code, § 2079.) That the disclosure requirement is limited to the
particular property site offered for sale is made clear in Civil
Code section 2079.3, which provides: "The inspection to be
performed . . . if the property comprises a unit in a planned
development as defined in Section 11003.1 of the Business and
Professions Code, a condominium as defined in Section 783, or a
stock cooperative as defined in Section 11003.2 of the Business and
Professions Code, does not include an inspection of more than the
unit offered for sale . . . ." Accordingly, Easton and its
3. 89-902
statutory codification do not require disclosures of off-site
conditions such as the presence of a licensed care facility in the
neighborhood.
Another case meriting discussion is Reed v. King (1983)
145 Cal. App. 3d 261. In Reed, the real estate agent failed to
disclose that a woman and her four children had been murdered in a
house 10 years prior to its being offered for sale. The buyer
claimed that the disclosure was required. The court stated:
"The murder of innocents is highly unusual in its
potential for so disturbing buyers they may be unable to
reside in a home where it has occurred. . . . Murder is
not such a common occurrence that buyers should be
charged with anticipating and discovering this
disquieting possibility. . .
" . . . . . . . . . . . . . . . . . . . . . .
"Reputation and history can have a significant
effect on the value of realty. 'George Washington slept
here' is worth something, however physically
inconsequential that consideration may be. Ill-repute or
'bad will' conversely may depress the value of a
property. Failure to disclose such a negative fact where
it will have a foreseeably depressing effect on income
expected to be generated by a business is tortious. (See
Rest.2d Torts, § 551, illus. 11.) Some cases have held
that unreasonable fears of the potential buying public
that a gas or oil pipeline may rupture may depress the
market value of land and entitle the owner to incremental
compensation in eminent domain. (See Annot., Eminent
Domain: Elements and Measure of Compensation for Oil or
Gas Pipeline Through Private Property (1954) 38 A.L.R. 2d
788, 801-804.)
"Whether Reed will be able to prove her allegation
the decade-old multiple murder has a significant effect
on market value we cannot determine. If she is able to
do so by competent evidence she is entitled to a
favorable ruling on the issues of materiality and duty to
disclose."
The Reed court carefully limited its holding to the
unique set of facts presented. It was not concerned with off-site
circumstances. The Legislature has further limited Reed by
enacting Civil Code section 1710.2 [no duty "to disclose. . . the
occurrence of an occupant's death upon the real property. . . where
the death has occurred more than three years prior to the date the
transferee offers to purchase, lease or rent the real property"].
Under these particular circumstances, we find that Reed does not
require disclosures of off-site conditions such as the presence of
a licensed care facility in the neighborhood.
4. 89-902
With respect to whether a particular fact "materially"
affects the value or the desirability of property offered for sale,
we look to all the facts of the particular case. ( Saporta v.
Barbagelata (1963) 220 Cal. App. 2d 463, 475.) As stated in Lingsch
v. Savage, supra, 213 Cal. App. 2d 729, 737:
"It should be pointed out that whether the matter
not disclosed by the seller or his agent is of sufficient
materiality to affect the value or desirability of the
property, and thus make operative the rule announced by
the foregoing authorities, depends on the facts of the
particular case. Some idea can be obtained of the reach
of the foregoing rule and of the vitiating character of
the particular nondisclosure from the holding of some of
the cases cited above. Thus nondisclosure of the fact
that a lot was filled with debris thereafter covered over
(Clauser v. Taylor, supra, 44 Cal. App. 2d 453) or that a
lot contained filled ground to a substantial depth
(Rothstein v. Janss Investment Corp., supra, 45 Cal. 2d
64) or that the house sold was constructed on filled land
(Burkett v. J. A. Thompson & Son, supra, 150 Cal. App. 2d
523) or that improvements were added without a building
permit and in violation of zoning regulations (Barder v.
McClung, supra, 93 Cal. App. 2d 692) or in violation of
building codes (Curran v. Heslop, supra, 115 Cal. App. 2d
476) has been held to be of sufficient substantiality to
cause the duty of disclosure to arise."
None of the examples given in Lingsch would support the conclusion
that the location of a nearby licensed care facility would be a
material fact in the purchase of a particular residential property.
In a somewhat related situation concerning the issue of
materiality, we concluded in 53 Ops.Cal.Atty.Gen. 196 (1970) that
the race of a prospective buyer was not a material fact to be
disclosed to the seller ["race is not a material fact and thus need
not be disclosed"]. (Id., at p. 199.)
In 58 Ops.Cal.Atty.Gen. 154 (1975), we were asked whether
a real estate broker could answer an inquiry from a prospective
home buyer concerning the ethnic composition of a residential
neighborhood. Our conclusion was:
"A real estate broker's response to an inquiry from
a prospective buyer as to the ethnic composition of
various areas which is factual and in good faith, does
not violate the Rumford Fair Housing Act (Health & Saf.
Code § 35700 et. seq.). A violation would occur if the
broker either has the intent to aid in a plan to keep
neighborhoods segregated or makes differing responses
5. 89-902
based on the race of the prospective purchaser." (Id.,
at p. 155.)3
The Legislature has prohibited licensed real estate
agents (as well as other persons holding licenses under the
provisions of the Business and Professions Code) from practicing
"any discrimination, or restriction in the performance of the
licensed activity" due to a person's "race, color, sex, religion,
ancestry, physical handicap, marital status, or national origin."
(Bus. & Prof. Code, § 125.6.) "Physical handicap" is defined for
purposes of this statutory prohibition as including "impairment of
physical ability because of amputation or loss of function or
coordination, or any other health impairment which requires special
education or related services." (Ibid.)
Under Business and Professions Code section 10177, the
license of any real estate licensee may be suspended or revoked if
the licensee has "[w]ilfully disregarded or violated any of the
provisions . . . of the rules and regulations of the commissioner
for the administration and enforcement of the Real Estate Law . .
. ." Regulation 2780 (Cal. Code of Regs., tit. 10, § 2780)
prohibits "discriminatory conduct" by a real estate licensee, which
it defines as follows:
"Prohibited discriminatory conduct by a real estate
licensee based upon race, color, sex, religion, ancestry,
physical handicap, marital status or national origin
includes, but is not limited to, the following:
" . . . . . . . . . . . . . . . . . . . . . . .
"(h) Making any effort to encourage discrimination
against persons because of their race, color, sex,
religion, ancestry, physical handicap, marital status or
national origin in the showing, sale, lease or financing
of the purchase of real property.
" . . . . . . . . . . . . . . . . . . . . . . .
"(j) Making any effort to obstruct, retard or
discourage the purchase, lease or financing of the
purchase of real property by persons whose race, color,
sex, religion, ancestry, physical handicap, marital
status or national origin differs from that of the
majority of persons presently residing in a structural
improvement to real property or in an area in which the
real property is located.
3
The Rumford Fair Housing Act has been repealed, and its
subject matter is now covered in the California Fair Employment and
Housing Act (Gov. Code, §§ 12900-12996).
6. 89-902
" . . . . . . . . . . . . . . . . . . . . . . .
"(k) Performing any acts, making any notation,
asking any questions or making or circulating any written
or oral statement which when taken in context, expresses
or implies a limitation, preference or discrimination
based upon race, color, sex, religion, ancestry, physical
handicap or national origin;...
" . . . . . . . . . . . . . . . . . . . . . . .
"(o) Making any effort to discourage or prevent the
rental, sale or financing of the purchase of real
property because of the presence or absence of occupants
of a particular race, color, sex, religion, ancestry,
physical handicap, marital status or national origin, or
on the basis of the future presence or absence of a
particular race, color, sex, religion, ancestry, physical
handicap, marital status or national origin, whether
actual, alleged or implied.
" . . . . . . . . . . . . . . . . . . . . . . .
"(q) Providing information or advice to any person
concerning the desirability of particular real property
or a particular residential area(s) which is different
from information or advice given to any other person with
respect to the same property or area because of
differences in the race, color, sex, religion, ancestry,
physical handicap, marital status or national origin of
such persons.
" . . . . . . . . . . . . . . . . . . . . . . .
"(t) Making, printing or publishing, or causing to
be made, printed or published, any notice, statement or
advertisement concerning the sale, rental or financing of
the purchase of real property that indicates any
preference, limitation or discrimination because of race,
color, sex, religion, ancestry, physical handicap,
marital status or national origin, or any intention to
make such preference, limitation or discrimination.
" . . . . . . . . . . . . . . . . . . . . . . .
"(u) Using any words, phrases, sentences,
descriptions or visual aids in any notice, statement or
advertisement describing real property or the area in
which real property is located which indicates any
preference, limitation or discrimination because of race,
color, sex, religion, ancestry, physical handicap,
marital status or national origin.
7. 89-902
" . . . . . . . . . . . . . . . . . . . . . . . .
"(y) Advising a person of the price or value of real
property on the basis of factors related to the race,
color, sex, religion, ancestry, physical handicap,
marital status or national origin of residents of an area
or of residents or potential residents of the area in
which the property is located.
" . . . . . . . . . . . . . . . . . . . . . . ."
Similarly, the California Fair Employment and Housing Act
prohibits real estate agents from practicing arbitrary
discrimination in the sale, rental, lease, or acquisition of
housing accommodations. Government Code section 12948 provides:
"It shall be an unlawful practice under this part for a person to
deny or to aid, incite, or conspire in the denial of the rights
created by Section 51 or 51.7 of the Civil Code." Civil Code
section 51 creates the rights of "full and equal accommodations,
advantages, facilities, privileges, or services in all business
establishments of every kind whatsoever," regardless of a person's
"sex, race, color, religion, ancestry, national origin, or
blindness or other physical disability." (Emphasis added.) Under
this Civil Code provision, read in conjunction with Government Code
section 12948, a real estate agent is prohibited from practicing
any arbitrary discrimination in the services he or she renders,
including arbitrary discrimination with respect to a person having
a physical disability. (See Lee v. O'Hara (1962) 57 Cal. 2d 476,
478; 59 Ops.Cal.Atty.Gen. 223, 224 (1976); 58 Ops.Cal.Atty.Gen.
608, 609-610 (1975); 58 Ops.Cal.Atty.Gen. 154, 155 (1975); 53
Ops.Cal.Atty.Gen. 196, 196-197 (1970).)
Federal law also prohibits discriminatory practices in
the real estate industry. The Fair Housing Act (42 U.S.C. §§ 3601­
3631) generally makes it unlawful:
"To make, print, or publish, or cause to be made,
printed, or published any notice, statement, or
advertisement, with respect to the sale or rental of a
dwelling that indicates any preference, limitation, or
discrimination based on race, color, religion, sex,
handicap, familial status, or national origin, or an
intention to make any such preference, limitation, or
discrimination." (42 U.S.C. § 3604 (c); emphasis added.)
For purposes of the federal legislation, "handicap" is defined to
include "a physical or mental impairment which substantially limits
one or more of such person's major life activities." (42 U.S.C. §
3602 (h)(1).
The express prohibition against discrimination based upon
handicap was added to the federal law in 1988. The Secretary of
8. 89-902
Housing and Urban Development has issued regulations implementing
the recent federal statutory amendments, including 24 Code of
Federal Regulations, section 100.70 (1989):
"(a) It shall be unlawful, because of race, color,
religion, sex, handicap, familial status, or national
origin, to restrict or attempt to restrict the choices of
a person by word or conduct in connection with seeking,
negotiating for, buying or renting a dwelling so as to
perpetuate, or tend to perpetuate, segregated housing
patterns, or to discourage or obstruct choices in a
community, neighborhood or development.
" . . . . . . . . . . . . . . . . . . . . . .
"(c) Prohibited actions under paragraph (a) of this
section, which are generally referred to as unlawful
steering practices, include, but are not limited to:
"(1) Discouraging any person from inspecting,
purchasing or renting a dwelling, because of race, color,
religion, sex, handicap, familial status, or national
origin, or because of the race, color, religion, sex,
handicap, familial status, or national origin of persons
in a community, neighborhood or development.
"(2) Discouraging the purchase or rental of a
dwelling because of race, color, religion, sex, handicap,
familial status, or national origin, by exaggerating
drawbacks or failing to inform any person of desirable
features of a dwelling or of a community, neighborhood,
or development.
"(3) Communicating to any prospective purchaser that
he or she would not be comfortable or compatible with
existing residents of a community, neighborhood or
development because of race, color, religion, sex,
handicap, familial status, or national origin.
" . . . . . . . . . . . . . . . . . . . . . . ."
24 Code of Federal Regulations, section 100.135 (1989) also
provides:
"(a) It shall be unlawful for any person or other
entity whose business includes engaging in the selling,
brokering or appraising of residential real property to
discriminate against any person in making available such
services, because of race, color, religion, sex,
handicap, familial status, or national origin.
9. 89-902
"(b) For the purposes of this section, the term
appraisal means an estimate or opinion of the value of a
specified residential real property made in a business
context in connection with the sale, rental, financing or
refinancing of a dwelling or in connection with any
activity that otherwise affects the availability of a
residential real estate-related transaction, whether the
appraisal is oral or written, or transmitted formally or
informally. The appraisal includes all written comments
and other documents submitted as support for the estimate
or opinion of value.
"(c) Nothing in this section prohibits a person
engaged in the business of making or furnishing
appraisals of residential real property from taking into
consideration factors other than race, color, religion,
sex, handicap, familial status, or national origin.
"(d) Practices which are unlawful under this section
include, but are not limited to, using an appraisal of
residential real property in connection with the sale,
rental, or financing of any dwelling where the person
knows or reasonably should know that the appraisal
improperly takes into consideration race, color,
religion, sex, handicap, familial status, or national
origin."
Our prior conclusions reached in 53 Ops.Cal.Atty.Gen. 196
(1970) and 58 Ops.Cal.Atty.Gen. 154 (1975) relied upon various
state and federal laws for support. Pertinent here with respect to
the disclosure of the location of a licensed care facility is the
following analysis in 53 Ops.Cal.Atty.Gen. 196 (1970):
"The materiality of the fact of race is negated by
the formidable complex of Federal and State legislation
prohibiting discrimination in housing, which renders
illegal the use of the race of a prospective buyer or
tenant as a determinant in decisions involving the sale
or rental of any housing. And in order for a fact to be
material it `must be such that the contract would not
have been entered into without it.' Adkins v. Wykoff,
152 Cal. App. 2d 684, 689 (1957). Cf. Anderson v. Martin,
375 U.S. 399 (1964). But even if the fact of race were
deemed material for some purposes, a specific statutory
prohibition against disclosing racial information must be
regarded as controlling over any common law duty to the
contrary. See Lawman v. Stafford, 226 Cal. App. 2d 31, 39
(1964). And since, as noted, the Fair Housing Act
prohibits such disclosures by real estate agents, any
conflicting common law duty of disclosure is no longer
operative." (Id., at pp. 199-200, fn. omitted.)
10. 89-902
As we preliminarily noted herein, the Legislature has
declared a strong public policy in favor of developing licensed
care facilities throughout the state (§ 1566) and treating them as
any other single family dwelling in the same area (§§ 1566.2­
1566.5). The Legislature has also prohibited real estate agents
from practicing discrimination based upon a person's physical
handicap. (Bus. & Prof. Code, § 125.6; Civ. Code, § 51; Gov. Code,
§ 12948.)
Following our prior opinions, then, we conclude that the
location of a licensed care facility is not a material fact
required to be disclosed under California law. Indeed,
volunteering information concerning the presence of a licensed care
facility could violate state and federal law prohibiting
discrimination based upon a person's physical handicap, especially
the prohibition against "[u]sing any words . . . describing . . .
the area in which real property is located which indicates any . .
. discrimination because of . . . physical handicap" (Cal. Code of
Regs., tit. 10, § 2780, subd. (u)) and "[d]iscouraging any person
from . . . purchasing . . . a dwelling . . . because of the . . .
handicap . . . of persons in a community" and "[c]ommunicating to
any prospective purchaser that he or she would not be comfortable
or compatible with existing residents of a community, neighborhood
or development because of . . . handicap . . . " (24 C.F.R. §
100.70(c)(1), (3) (1989)). Similarly, volunteering information
about the price or value of property with respect to the presence
or location of a nearby licensed care facility could violate state
and federal law, particularly the prohibition against "[a]dvising
a person of the price or value of real property on the basis of
factors related to the . . . physical handicap . . . of residents
of an area . . . in which the property is located" (Cal. Code of
Regs., tit. 10, § 2780, subd. (y)) and "using an appraisal of
residential real property . . . where the person knows or
reasonably should know that the appraisal improperly takes into
consideration . . . handicap . . . " (24 C.F.R. § 100.135(d)
(1989)). Disclosure intended to prejudice the selection of a site
for a residential care facility or to prevent those living in such
facilities from residing in the area of their choosing is
forbidden. While it is doubtful that a real estate agent could
volunteer information concerning the location of a licensed care
facility without violating state or federal law, disclosure in
response to an inquiry would be permissible if it is factual, not
intended to foster discrimination against or segregation of
licensed care facilities within a community, and in fact does not
have that effect.
We thus conclude in answer to the question presented that
a licensed real estate agent is not required to disclose the
location of a licensed care facility serving six or fewer people to
prospective buyers of residential property. Disclosure is
permitted if it is factual, not intended to foster discrimination
11. 89-902
against or segregation of licensed care facilities within the
community, and in fact does not have that effect.
* * * * *
12. 89-902