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No Love Lost: Federal Court Rules Ban on Real Estate "Love Letters" Unconstitutional by Adam Manaa

No Love Lost: Federal Court Rules Ban on Real Estate “Love Letters” Unconstitutional

by Adam Manaa

For decades, real estate agents have encouraged prospective homebuyers to write persuasive notes to sellers introducing themselves and describing why they are the perfect match. These notes, known in the real estate industry as “love letters,” have come under scrutiny in recent years for their potential to discriminate against buyers from diverse backgrounds. In 2020, the National Association of Realtors went so far as to issue a warning to real estate agents that engaging in the practice could implicate sellers to claims of discrimination in violation of the Fair Housing Act.

In 2021, citing the need for sellers to “avoid selecting a buyer based on the buyer’s race, color, religion, sex, sexual orientation, national origin, marital status or familial status,” the Oregon state legislature took a stand against this longstanding tradition by passing a bill that required sellers’ agents to “reject any communication other than customary documents in a real estate transaction, including photographs, provided by a buyer.” However, real estate brokers from Total Real Estate Group, LLC quickly objected to the law and brought suit against Steve Strode, Oregon’s Real Estate Commissioner, and Ellen Rosenblum, the state’s Attorney General, alleging the law was unenforceable under the First Amendment. In March of 2022, just two months after the law took effect, the court granted the brokerage firm’s motion for a preliminary injunction against its enforcement in Total Real Estate Group, LLC v. Strode.

Throughout the case, the state of Oregon rendered several pertinent observations regarding the past and current state of discrimination in real estate transactions. They provided three types of evidence that shed light on the unfortunate realities of how different aspects of the real estate transactional process affect people of diverse backgrounds: (1) the history of housing discrimination in Oregon; (2) the prevalence of protected characteristics in “love letters;” and (3) evidence showing how personal information in “love letters” influences which offers sellers select. Chief among the first type of evidence were clauses from Oregon’s Constitution of 1857 that prohibited “Black Americans and immigrants of Chinese descent” from owning real property. As to the second form of evidence, Oregon introduced expert testimony from a professor at the Massachusetts Institute of Technology that found that 93% of the “love letters” produced by the plaintiff in the case disclosed at least one of the personal characteristics referenced in the law. Finally, the defense introduced additional expert testimony that the use of “love letters” in a real estate transaction was “likely to create a number of discriminatory outcomes.”

To assess the validity of the statute under the First Amendment, the court applied the four-part test for commercial speech established in Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, primarily focusing on the fourth step of the test, namely, whether the law is “narrowly drawn to achieve a governmental interest.” While noting the bill’s prohibition of “all non-customary” documents was too overinclusive, the court also stipulated that even if the bill prohibited “love letters” alone, it would still have not been adequately tailored because the plaintiff proved the letters contained “significant amounts of speech beyond references to a buyer’s personal characteristics.” Additionally, the plaintiffs offered several alternative methods the state could have employed to address the problem of housing discrimination without infringing on the plaintiffs’ protected speech. Among the suggested alternatives, the court most vigorously endorsed: (1) requiring that agents redact client “love letters;” (2) prohibiting the inclusion of photographs in “love letters;” (3) requiring a fair housing disclosure in real estate transactions; and (4) increasing fair housing training for real estate agents.

Considering the analysis the court undertook in Strode, it appears unlikely that laws regulating the language of “love letters” will be able to pass constitutional muster in federal courts throughout the United States. While this may be considered a blow to those seeking to build a more just real estate transaction system, the alternative suggestions endorsed by the court provide a path forward for state legislatures across to country to address the enduring societal problem of housing discrimination.

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