September 17, 2008
Updated December 19, 2008

Legislative Committee
Equal Opportunity Committee (Information)

(This material is for discussion purposes only and has not been approved by the Legislative, Equal Opportunity or Executive Committees nor by the Board of Directors)

Issue:
Should C.A.R. sponsor legislation setting up a pilot program to encourage a county recorder to test the use of software programs to remove historic unconstitutional restrictions from real property records?

Action:
Optional

Options:
1. Do Nothing. Existing policy would oppose legislation requiring removal at time of sale.
2. Support legislation of others. Both the California Land Title Association and the county clerks association have expressed interest in proactive legislation to “scrub” title records in a way that does not add prohibitive costs to the recording process.
3. Sponsor or Co-Sponsor C.A.R. legislation to either mask or redact the offensive covenants.
4. Other

Status/Summary:
The title records of older housing stock sometimes contain offensive restrictive covenants that attempt to impose a "whites only" ownership limitation, or other unconstitutional limitations, on ownership or occupancy. While these covenants have been illegal for decades and unenforceable since the 1950s, they may none the less give offense to owners or prospective owners that discover them in the course of researching title. This year C.A.R. successfully opposed legislation (AB 2204, De La Torre) imposing a time of sale purging requirement that was estimated to cost hundreds of millions of dollars. Absent some resolution of the issue, similar legislation is likely to continue to be proposed. C.A.R. has been approached to consider co-sponsoring title "clean-up" legislation with the California Land Title Association.

At the October 2008 Committee meeting staff was directed to explore collaborating with other groups on legislation creating a proactive alternative to time of sale redacting proposals that have been defeated in the past. CLTA is unwilling to sponsor legislation, but will support a C.A.R. proposal. A medium sized county recorder is willing to test a software approach (with a $1 per document fee). The question remains as to whether C.A.R. should sponsor legislation to create the pilot program.

Discussion:

The AB 1168 Approach. In 2007 Assemblyman Jones introduced legislation, which eventually became law, that required county recorders to use a new software program to "scrub" their electronic records and remove Social Security Numbers (SSNs). The legislation effectively creates a new property data base that is made available to the public, and which will not include the SSN in a reported title document. In light of the potentially enormous cost of hand processing property records to remove unconstitutional covenants, some recorders have speculated that the same sort of software might be used to screen out illegal covenants as well. At least one county recorded has indicated that he would be willing to attempt such a process on a pilot basis.

It also appears that the CLTA is unwilling to sponsor legislation creating the program, but would be supportive of legislation of others (i.e. C.A.R. or the recorders assn.) to do so.

The question for REALTORS is whether the issue is important enough C.A.R. to sponsor if it is not important enough for CLTA (which is even more immediately effected) to sponsor.

The History. Restrictive covenants have been the subject of corrective action since 1948, when racially restrictive covenants were struck down by the U.S. Supreme Court as unconstitutional.

The issue has been the subject of frequent legislation as well. In fact, C.A.R. was the first interest group in California to successfully sponsor legislation (SB 716, Lockyer, Chap. 500, Stat.s of 1987) on the subject. That legislation, by operation of law, eliminated racial restrictions from real estate documents. Unfortunately, the illegal restrictions are still in the historical record, and continue to inspire legislation. Indeed, just since 1999 the legislature has passed at least four different measures on the subject. The area appears ripe for further activity, because appearances continue to trump legal reality.

Existing law (Government Code 12956.1) requires deeds, governing documents and other documents delivered in a transaction to have a cover sheet or stamp that says:

"If this document contains any restriction based on race, color, religion, sex, sexual orientation, familial status, marital status, disability, 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. Lawful restrictions under state and federal law on the age of occupants in senior housing or housing for older persons shall not be construed as restrictions based on familial status."

Existing law also provides a standardized form for a property owner to use in recording a corrected set of CC&Rs that eliminates the restrictive covenant.

Recent Legislation. The problem presented by recent legislation is twofold:
First, they attempt to "fix" the problem at time of sale, and don't take a comprehensive approach that avoids burdening escrows with untimely delays and costs.
Second, no matter what, the old illegal documents are ultimately discoverable in the property record if the owner wants to search back far enough.

Possible guiding principles for a legislative solution. An ideal solution for protecting the sensibilities of property owners and activists would have (at least) the following features:

1. It would be comprehensively applied, and not be triggered by a transfer.
2. It would not excessively increase costs or create delays of title or transfers. Sponsors will have to decide what level of cost is acceptable, but a $1 or $2 per document cap has been suggested.
3. It will actually “redact” or remove the offensive language from the public data base, and not just put additional language on top of it in the chain of title.
4. It will not unduly burden county recorders and result in costs that ultimately fall to transactions.
5. It will be self-executing and not require property owner intervention.

What about other restrictions on access to property records? If recorders were to develop an automated system that is powerful enough to detect racial restrictions, it might prove valuable for other sorts of searches too. For example, current law forbids the release of a government official’s home address over the internet. Because there is no practical way for recorders to keep track of and restrict just those records, they have been forced to restrict internet access for all. If government officials that wished to mask their home address could do so by request, it could free up significant resources of the recorder by making the public database available on line. With appropriate controls, an electronic public database could also lend itself to requests to mask the home address not only of officials, but public safety employees and victims of stalking or domestic violence as well.

A final note on the value of history - the restrictive covenants that exist today are artifacts of an earlier, less enlightened time. They are potentially offensive reminders of conduct that is now neither allowed nor enforceable. Is it appropriate to remove these evidences of the past, or should they be preserved as reminders of a past that should not be repeated? C.A.R. has no policy on the point, but the question has been raised in previous discussions.

Should C.A.R. take any action at this time?