Restrictive Covenants
Tackling Racial Discrimination in Housing
By Kent Pelt
The title insurance industry often assumes a leadership role in or has a front-row seat to paradigm shifts and legal and regulatory changes impacting the U.S. housing market. One such area in which we are working to make an impact is addressing unlawful covenants that contain race restrictions.
In the early 20th Century, discriminatory, private, restrictive covenants were widely used in the United States. These private restrictions were designed to prevent people of color from moving into certain neighborhoods. Although these restrictions against protected classes are now illegal and unenforceable, they are still memorialized in many recorded documents.
While history cannot be rewritten, its mistakes can sometimes be legally corrected. This is the goal of evolving laws around striking unlawful restrictive covenants from recorded documents. In this way, the title industry, once again, is leading the way to establishing fairness in housing.
When is a restrictive covenant unenforceable?
Covenants, conditions and restrictions that violate public policy – or are unconstitutional – are unlawful and unenforceable in all U.S. courts of law. Courts will not enforce restrictions based upon criteria that have no rational relationship to a legitimate purpose. Such restrictions arbitrarily discriminate against a member of a certain class of people by treating those people differently from people who are not within the class.
The elements of unlawful and unenforceable discriminatory restrictions are found in both federal and state legislation, as well as in case law.
Federal law prohibiting unlawful restrictions
Under federal law, the following statutes and cases form the basis for the unlawful application of restrictions:
1) 42 U.S.C. §3604:
Prohibits discrimination in the sale or rental of housing based upon the criteria of race, color, religion, sex, handicap, familiar status or national origin.
2) 42 U.S.C. §3605:
Prohibits discriminations by any person or entity engaged in residential real estate related transactions based upon the criteria of race, color, religion, sex, handicap, familial status or national origin.
3) 42 U.S.C. §3607:
Provides certain exemptions from the foregoing regulations, particularly as the restrictions relate to religious organizations, private clubs, number of occupants, older people or people convicted of making or distributing controlled substances.
4) Shelley v. Kraemer:
(68 S. Ct. 836, 334 U.S. 1, A.L.R. 2d 441, 92 L. Ed. 1161)
In 1948, the U.S. Supreme Court struck down state judicial enforcement of a restrictive covenant aimed at preventing any person not of the Caucasian race from purchasing property in a particular subdivision – thus discriminating against an individual class of people based upon the criteria of race and color.
State laws prohibiting unlawful restrictions
State law can go even further than federal law. In California, for example, the following statutes expand the definitions of protected classes beyond what federal law mandates:
1) California Civil Code §51 (also known as the Unruh Civil Rights Act):
Provides in subsection (b) that all persons within the jurisdiction of this state are free and equal, and no matter what their sex, race, color, religion, ancestry, national origin, medical condition, genetic information, marital status, sexual orientation, citizenship, primary language or immigration status are, they are entitled to the full and equal accommodations, advantages, facilities, privileges or services in all business establishments of every kind whatsoever. Subsection (e) defines many of the foregoing characteristics, including sex, which includes a person’s gender and gender identity, and gender expression along with genetic information.
2) CA Government Code §12956.1: Recognizing that unlawful restrictions still exist in recorded documents, the state legislature amended state law, effective January 1, 2022, to provide the following:
a. If a title insurance company, escrow company or certain other parties provide a copy of a declaration of restrictions, a governing document in a common interest development, or a deed to any person, that copy must have a cover page or stamp thereon reciting the following language in at least 14-point, boldface type:
If this document contains any restriction based on race, color, religion, sex, gender, gender identity, gender expression, sexual orientations, familial status, disability, veteran or military status, genetic information, national origin, source of income as defined in subdivision (p) of Section 12955, or ancestry, that restriction violates state and federal fair housing laws and is void, and may be removed pursuant to Section 12956.2 of the Government Code by submitting a “Restrictive Covenant Modification” form, together with a copy of the attached document with the unlawful provision redacted to the county recorder’s office.
The “Restrictive Covenant Modification” form can be obtained from the county recorder’s office and may be available on its internet website. The form may also be available from the party that provided you with this document. Lawful restrictions under state and federal law involving the age of occupants in senior housing, or housing for older persons, shall not be construed as restrictions based on familial status.
The California law also requires title and escrow companies to provide procedural information for processing “Restrictive Covenant Modification” forms. As a result of these efforts, California permits property owners to effectively erase offensive, unlawful restrictions from the public record.
It is important to note that other states, like Washington, have adopted a different approach. In that state, removing a restrictive covenant requires a lawsuit in Superior Court, as well as a declaratory judgment that strikes the void provisions from the public records. A certified copy is then recorded. However, the “historical” property records are maintained while the plaintiff/property owner now has separate historic record for their future property transactions.
Kent Pelt is Vice President, Deputy Chief Underwriting Counsel for the Western region of Doma Title Insurance, Inc.