Oregon’s Real Estate ‘Love Letter’ Law Takes Effect As Court Challenge Awaits – Real Estate and Construction

In a hot real estate market, where buyers literally and
figuratively are lining up to make offers on a property, some
prospective buyers choose to add a personal touch to their offer by
submitting what’s commonly known as a “love letter”
to the seller. These letters typically describe what a prospective
buyer loves about the home and frequently emphasize perceived
commonalities between the seller and prospective buyer. Under a law
that took effect in Oregon on January 1, 2022, real estate agents
for sellers now must reject such love letters, although the law
does not bar a prospective buyer from submitting a love letter on
their own. The intent of the law is to reduce the opportunity for
discrimination in home sales due to race, color, national origin,
religion, sex, sexual orientation, gender identity, family status,
marital status, or disability, all of which are prohibited under
federal and state laws. A Bend, Oregon, realty company has filed a
legal challenge to the statute, and a federal judge will decide
later this month whether to put the statutory ban on hold pending a
trial.

 

Legislation

The Oregon legislature enacted House Bill 2550 to amend ORS
696.805, which relates to the duties of a seller’s agent in a
real estate transaction. The statute already requires that an agent
owes duties of good faith and honesty, to present all written
offers and other written communications, and to disclose material
facts known to the seller’s agent and not apparent or readily
ascertainable to a party. The amendment, however, now provides:

In order to help a seller avoid selecting a buyer based on the
buyer’s race, color, religion, sex, sexual orientation,
national origin, marital status or familial status as prohibited by
the Fair Housing Act (42 U.S.C. § 3601, et seq.), a
seller’s agent shall reject any communications other than
customary documents in a real estate transaction, including
photographs provided by a buyer.

Neither the statute nor rule define what “customary
documents” are, but the Oregon Real Estate Agency has
interpreted the term to mean “disclosure forms, sales
agreements, counteroffers, addenda, and reports.” Love letters
are not considered customary documents.

 

Plaintiffs’ Arguments

The realtors who filed the lawsuit assert that the statutory ban
on love letters amounts to an infringement on the First Amendment
rights of real estate brokers and agents, as well as the First
Amendment rights of the realtors’ clients. In their motion, the
plaintiffs argue that the ban on love letters is a prohibited
content-based regulation of speech. They argue that the statute
does not advance the state’s interests in preventing
discrimination because there is no evidence that love letters
contribute to discrimination and, even if they did, the law is
underinclusive because it does not stop a buyer from directly
writing to a seller and it does not prevent the seller’s agent
from conveying information to the seller if the seller’s agent
personally knows the buyer or conducts research on social media.
Finally, the plaintiffs say that enforcement of existing
anti-discrimination laws and/or narrowly targeting letters that
actually refer to a protected class would be less burdensome
alternatives.

 

State’s Arguments

The defendants in the lawsuit are the Oregon Real Estate
Commissioner, Steve Strode, and Oregon Attorney General, Ellen
Rosenblum. Their opposition to the realtors’ motion sets the
background by describing Oregon’s “centuries-long history
of severe, widespread public and private race discrimination in the
sale of residential real estate.” These practices date back to
territorial days when non-white citizens were barred from holding
real estate and excluded from homestead programs open to white
settlers, continuing through redlining practices created by the
Federal Home Loan Corporation in 1937 and local realtor
associations’ prohibitions on selling homes in predominantly
white neighborhoods to African American households. The result is
that stark disparities exist between Oregon homeownership, for
example, by white, non-Hispanics (65.1 percent), and Black or
African Americans (32 percent).

The defendants argue that love letters almost always reveal
information about the prospective buyer’s personal
characteristics. Of the 27 examples of love letters produced by the
plaintiff realtors in discovery, the defendants’ expert
concluded 25 of them revealed information about at least one
protected characteristic; 13 of the letters included photographs of
the prospective buyer that indicated information about race, color,
and sex or gender; 23 directly in the text or through a photograph
revealed information about familial status; 14 made specific
reference to marital status; and 12 revealed information about
sexual orientation. Consequently, the defendants say that the
evidence indicates a rational basis for the ban on love letters
because “it is not only plausible but highly likely that
requiring a seller’s agent to reject love letters will reduce
the likelihood that a seller’s decision will be influenced by a
buyer’s protected characteristic.”

The opposition to the motion argues that the realtors do not
have the standing to assert the rights of their clients and, even
if they did, love letters are commercial speech entitled to lesser
protection under the First Amendment than other constitutionally
protected expressions. As such, the defendants argue, the state has
a substantial interest in preventing housing discrimination, and
the ban on love letters advances that interest. Addressing the
plaintiffs’ argument that the statute is underinclusive, the
defendants cite case law holding that governments are entitled to
attack problems piecemeal and that the law directly targets real
estate agents who are key influencers in the transaction process
and often encourage and facilitate love letters.

 

Next Steps

The plaintiffs filed a motion for preliminary injunction with
the complaint in November and sought expedited consideration of
their motion, which the court denied. The plaintiffs’ reply
brief on their motion is due January 20, at which time the court
will take the motion under advisement. Until then, the love letter
ban is in effect, and seller’s agents now must reject any such
letters, photographs, or videos provided by a prospective
buyer.

https://www.mondaq.com/unitedstates/real-estate/1147516/oregon39s-real-estate-love-letter39-law-takes-effect-as-court-challenge-awaits