Multiple Bids, Personal Letters, and Fair Housing Laws

As a result of Covid-19, the real estate market has gone through an increase in the demand for housing on the East End of Long Island and elsewhere, resulting in price wars, competitive bidding, and the use of personal letters intended to induce sellers to select their offers over others.

The use of these letters is not unlawful, but could have serious consequences for sellers and real estate brokers, depending upon their content. Intended or not, they may have the potential to violate federal, state, and local fair housing laws that could provoke lawsuits against sellers and their agents. The consequences for sellers could be financial awards to those bringing the suit, and loss of license for real estate agents as well as other disciplinary actions by the New York Department of State (DOS).

Given the focus on violations of fair housing laws by real estate agents on Long Island, New York State has passed new laws prohibiting discrimination, and new requirements for real estate agents’ educational training have been imposed.

Laws applying to fair housing are federal, state, and local. State and local laws may never be less than federal law, but may add protected classes in their laws. New York State and local governments have done so. Suffolk County Human Rights Laws exceed federal and New York State laws. Ignorance of these laws is not an acceptable defense, nor is unintentional discrimination. In fact, should an individual be discriminated against because the offender presumes that the person is a member of that protected class and it turns out that they are not, they are still in violation of the law and can be held accountable. If a member of a protected class brings an action in court accusing an individual of a fair housing violation, the burden of proof is on the individual charged to persuade the court or the municipal agency that they didn’t commit the violation.

Courts may award actual damages and punitive damages to victims of fair housing violations. In New York State, insurance companies are prohibited from compensating those who have been found guilty of fair housing violations for punitive damages, which may be up to twice the actual damages awarded. Punitive damages may be awarded even in the absence of actual damages.

In response to the revelations of fair housing discrimination, particularly on Long Island, New York State has increased the funding provided to the Department of State and non-profit organizations who “test” real estate brokers in order to detect discriminatory practices.

The Supreme Court has upheld the use of “testers” as being in the public interest, and may be compensated for expenses they incur providing this service.

Regardless of the good intentions of the sellers, buyers, and real estate agents, the acceptance of personal letters to encourage acceptance of a particular buyer’s offer is highly problematic.

NYSAR (New York State Association of Realtors) Legal Counsel S. Anthony Gatto recommends that real estate agents not accept nor submit letters of prospective buyers to the sellers.

These considerations would also apply to rentals.