                  OFFICE OF THE ATTORNEY GENERAL


                        State of California



                       JOHN K. VAN DE KAMP


                         Attorney General



             ______________________________________

           OPINION             :


                               :         No. 89-902


               of              :


                               :         March 14, 1990


      JOHN K. VAN DE KAMP      :


        Attorney General       :


                               :


      RODNEY O. LILYQUIST      :


    Deputy Attorney General    :


                               :


__________________________________________________________________

          THE HONORABLE MILTON MARKS, MEMBER OF THE CALIFORNIA


STATE SENATE, has requested an opinion on the following question:



          Is a licensed real estate agent required or permitted to


disclose the location of a licensed care facility serving six or


fewer people to prospective buyers of residential property?



                            CONCLUSION



          A licensed real estate agent is not required to disclose


the location of a licensed care facility serving six or fewer


people to prospective buyers of residential property. Disclosure


in response to an inquiry is permitted if it is factual, not


intended to aid discrimination against or segregation of licensed


care facilities within the community, and in fact does not have


that effect. 


                             ANALYSIS



          The Legislature has enacted the California Community Care


Facilities Act (Health & Saf. Code, §§ 1500-1567.9)1 "to establish


a coordinated and comprehensive statewide service system of quality


community care for mentally ill, developmentally and physically


disabled, and children and adults who require care or services . .


. ." (§ 1501, subd. (a); see Barrett v. Lipscomb (1987) 194


Cal.App.3d 1524, 1529; McCaffrey v. Preston (1984) 154 Cal.App.3d




    1

       All references hereafter to the Health and Safety Code are


by section number only.


                                1.                            89-902

422, 428-429; Welsch v. Goswick (1982) 130 Cal.App.3d 398, 406-408.)



            As part of this legislation, "each county and city shall


permit and encourage the development of sufficient numbers and


types of residential care facilities as are commensurate with local


need." (§ 1566.) If these residential facilities are limited to


serving six or fewer persons, they are to be considered as a


residential use of the property under local ordinances and treated


as any other single family dwelling in the same area. (§§ 1566.2­

1566.5.)2



          The question presented for resolution is whether a real


estate agent is required or permitted to disclose to prospective


home buyers that a licensed care facility is located in the


neighborhood. We conclude that such disclosure is not required and
 

indeed is only permissible in extremely narrow circumstances.



          In the landmark case of Easton v. Strassburger (1984) 152


Cal.App.3d 90, the Court of Appeal stated:
 


          "Despite the absence of privity of contract, a real


     estate agent is clearly under a duty to exercise


     reasonable care to protect those persons whom the agent


     is attempting to induce into entering a real estate


     transaction for the purpose of earning a commission.


     [Citations.]" (Id., at p. 98, fn. 2.)



With respect to facts known by the real estate agent, the court
 

summarized the applicable rule of law as follows:



          "It is not disputed that current law requires a


     broker to disclose to a buyer material defects known to


     the broker but unknown to and unobservable by the buyer.


     (Cooper v. Jevne (1976) 56 Cal.App.3d 860, 866; Lingsch


     v. Savage (1963) 213 Cal.App.2d 729, 733; see also


     regulations of the Department of Real Estate set forth in


     Cal. Admin. Code, tit. 10, § 2785, subd.. (a)(3).) The


     Cooper case contains the most complete judicial
 

     articulation of the rule: 'It is the law of this state


     that where a real estate broker or agent, representing


     the seller, knows facts materially affecting the value or


     the desirability of property offered for sale and these


     facts are known or accessible only to him and his



      2

         Similarly, the Legislature has provided in Welfare and


Institutions Code section 5116 that a "licensed family care home,


foster home, or group home serving six or fewer mentally disordered


or otherwise handicapped persons or dependent and neglected


children . . . shall be a permitted use in all residential zones


for single-family dwellings." (See       City of Los Angeles v.


Department of Health (1976) 63 Cal.App.3d 473, 477-478.)


                                 2.                           89-902

     principal, and the broker or agent also knows that these


     facts are not known to or within the reach of the


     diligent attention and observation of the buyer, the


     broker or agent is under a duty to disclose these facts


     to the buyer. (Lingsch v. Savage [1963] 213 Cal.App.2d


     . . .).' (56 Cal.App.3d at p. 866.) If a broker fails


     to disclose material facts that are known to him he is


     liable   for  the   intentional   tort  of   'fraudulent
  

     concealment' or 'negative fraud.' (Warner Const. Corp.


     v. City of Los Angeles (1970) 2 Cal.3d 285, 293-294;


     Cooper v. Jevne, supra, 213 Cal.App.2d at p. 735-736.)"
 

     (Id., at p. 99.)



The court then announced a new principle of law regarding the


disclosure of facts previously unknown by the real estate agent.


The court held that the agent had a duty to inspect the residential


property and disclose what such an investigation would reveal. The


court concluded:



          "In sum, we hold that the duty of a real estate


     broker, representing the seller, to disclose facts,


     includes the affirmative duty to conduct a reasonably


     competent and diligent inspection of the residential


     property listed for sale and to disclose to prospective


     purchasers all facts materially affecting the value or


     desirability of the property that such an investigation


     would reveal." (Id., at p. 102, fn. omitted.) 


Easton, as well as the two principle cases upon which it relied,
 

Cooper v. Jevne (1976) 56 Cal.App.3d 860 and Lingsch v. Savage


(1963) 213 Cal.App.2d 729, dealt with defects in the particular
 

property offered for sale. 


          The Legislature has now codified the Easton decision in


Civil Code section 2079-2079.6. (See Stats. 1985, ch. 223, § 4


["The Legislature . . . declares that the provisions of this act
 

are, and shall be interpreted as, a definition of the duty of care


found to exist by Easton v. Strassburger, and the manner of its


discharge"].) The basic statutory duty is for a real estate agent


"to conduct a reasonably competent and diligent visual inspection


of the property offered for sale and to disclose to [a] prospective


purchaser all facts materially affecting the value or desirability


of the property that such an investigation would reveal." (Civ.


Code, § 2079.) That the disclosure requirement is limited to the


particular property site offered for sale is made clear in Civil


Code section 2079.3, which provides: "The inspection to be


performed . . . if the property comprises a unit in a planned


development as defined in Section 11003.1 of the Business and


Professions Code, a condominium as defined in Section 783, or a


stock cooperative as defined in Section 11003.2 of the Business and


Professions Code, does not include an inspection of more than the


unit offered for sale . . . ." Accordingly,         Easton and its


                                3.                            89-902

statutory codification do not require disclosures of off-site


conditions such as the presence of a licensed care facility in the


neighborhood. 


          Another case meriting discussion is Reed v. King (1983)


145 Cal.App.3d 261. In Reed, the real estate agent failed to


disclose that a woman and her four children had been murdered in a


house 10 years prior to its being offered for sale.      The buyer


claimed that the disclosure was required. The court stated:



          "The murder of innocents is highly unusual in its


     potential for so disturbing buyers they may be unable to


     reside in a home where it has occurred. . . . Murder is


     not such a common occurrence that buyers should be


     charged   with   anticipating   and   discovering   this
     

     disquieting possibility. . . 

          " . . . . . . . . . . . . . . . . . . . . . . 


           "Reputation and history can have a significant


     effect on the value of realty. 'George Washington slept


     here'    is   worth   something,    however    physically
  

     inconsequential that consideration may be. Ill-repute or
 

     'bad will' conversely may depress the value of a


     property. Failure to disclose such a negative fact where
 

     it will have a foreseeably depressing effect on income


     expected to be generated by a business is tortious. (See
 

     Rest.2d Torts, § 551, illus. 11.) Some cases have held


     that unreasonable fears of the potential buying public


     that a gas or oil pipeline may rupture may depress the


     market value of land and entitle the owner to incremental


     compensation in eminent domain.     (See Annot., Eminent


     Domain: Elements and Measure of Compensation for Oil or


     Gas Pipeline Through Private Property (1954) 38 A.L.R. 2d


     788, 801-804.)



          "Whether Reed will be able to prove her allegation


     the decade-old multiple murder has a significant effect


     on market value we cannot determine. If she is able to


     do so by competent evidence she is entitled to a


     favorable ruling on the issues of materiality and duty to


     disclose." 


          The Reed court carefully limited its holding to the


unique set of facts presented. It was not concerned with off-site


circumstances. The Legislature has further limited         Reed by


enacting Civil Code section 1710.2 [no duty "to disclose. . . the


occurrence of an occupant's death upon the real property. . . where


the death has occurred more than three years prior to the date the


transferee offers to purchase, lease or rent the real property"].


Under these particular circumstances, we find that Reed does not


require disclosures of off-site conditions such as the presence of


a licensed care facility in the neighborhood.


                                4.                            89-902

          With respect to whether a particular fact "materially"


affects the value or the desirability of property offered for sale,


we look to all the facts of the particular case. ( Saporta v.


Barbagelata (1963) 220 Cal.App.2d 463, 475.) As stated in Lingsch


v. Savage, supra, 213 Cal.App.2d 729, 737:
 


          "It should be pointed out that whether the matter


     not disclosed by the seller or his agent is of sufficient


     materiality to affect the value or desirability of the


     property, and thus make operative the rule announced by


     the foregoing authorities, depends on the facts of the


     particular case. Some idea can be obtained of the reach


     of the foregoing rule and of the vitiating character of


     the particular nondisclosure from the holding of some of


     the cases cited above. Thus nondisclosure of the fact


     that a lot was filled with debris thereafter covered over


     (Clauser v. Taylor, supra, 44 Cal.App.2d 453) or that a
 

     lot contained filled ground to a substantial depth


     (Rothstein v. Janss Investment Corp., supra, 45 Cal.2d


     64) or that the house sold was constructed on filled land


     (Burkett v. J. A. Thompson & Son, supra, 150 Cal.App.2d
 

     523) or that improvements were added without a building


     permit and in violation of zoning regulations (Barder v.


     McClung, supra, 93 Cal.App.2d 692) or in violation of
 

     building codes (Curran v. Heslop, supra, 115 Cal.App.2d
 

     476) has been held to be of sufficient substantiality to


     cause the duty of disclosure to arise."



None of the examples given in Lingsch would support the conclusion


that the location of a nearby licensed care facility would be a
 

material fact in the purchase of a particular residential property.




          In a somewhat related situation concerning the issue of


materiality, we concluded in 53 Ops.Cal.Atty.Gen. 196 (1970) that


the race of a prospective buyer was not a material fact to be


disclosed to the seller ["race is not a material fact and thus need


not be disclosed"]. (Id., at p. 199.)



          In 58 Ops.Cal.Atty.Gen. 154 (1975), we were asked whether


a real estate broker could answer an inquiry from a prospective


home buyer concerning the ethnic composition of a residential


neighborhood. Our conclusion was:



          "A real estate broker's response to an inquiry from


     a prospective buyer as to the ethnic composition of


     various areas which is factual and in good faith, does


     not violate the Rumford Fair Housing Act (Health & Saf.


     Code § 35700 et. seq.). A violation would occur if the


     broker either has the intent to aid in a plan to keep


     neighborhoods segregated or makes differing responses



                                5.                            89-902

     based on the race of the prospective purchaser."   (Id.,


     at p. 155.)3



          The Legislature has prohibited licensed real estate


agents (as well as other persons holding licenses under the


provisions of the Business and Professions Code) from practicing


"any discrimination, or restriction in the performance of the


licensed activity" due to a person's "race, color, sex, religion,


ancestry, physical handicap, marital status, or national origin."


(Bus. & Prof. Code, § 125.6.) "Physical handicap" is defined for


purposes of this statutory prohibition as including "impairment of


physical ability because of amputation or loss of function or


coordination, or any other health impairment which requires special


education or related services." (Ibid.) 


           Under Business and Professions Code section 10177, the


license of any real estate licensee may be suspended or revoked if


the licensee has "[w]ilfully disregarded or violated any of the
 

provisions . . . of the rules and regulations of the commissioner


for the administration and enforcement of the Real Estate Law . .


. ."    Regulation 2780 (Cal. Code of Regs., tit. 10, § 2780)


prohibits "discriminatory conduct" by a real estate licensee, which


it defines as follows:



          "Prohibited discriminatory conduct by a real estate


     licensee based upon race, color, sex, religion, ancestry,


     physical handicap, marital status or national origin


     includes, but is not limited to, the following:



          " . . . . . . . . . . . . . . . . . . . . . . .



          "(h) Making any effort to encourage discrimination


     against persons because of their race, color, sex,


     religion, ancestry, physical handicap, marital status or


     national origin in the showing, sale, lease or financing


     of the purchase of real property.



          " . . . . . . . . . . . . . . . . . . . . . . .



          "(j) Making any effort to obstruct, retard or


     discourage the purchase, lease or financing of the


     purchase of real property by persons whose race, color,


     sex, religion, ancestry, physical handicap, marital


     status or national origin differs from that of the


     majority of persons presently residing in a structural


     improvement to real property or in an area in which the


     real property is located.



     3

         The Rumford Fair Housing Act has been repealed, and its


subject matter is now covered in the California Fair Employment and


Housing Act (Gov. Code, §§ 12900-12996).


                                6.                            89-902

     " . . . . . . . . . . . . . . . . . . . . . . .



     "(k) Performing any acts, making any notation,


asking any questions or making or circulating any written


or oral statement which when taken in context, expresses


or implies a limitation, preference or discrimination


based upon race, color, sex, religion, ancestry, physical


handicap or national origin;...



     " . . . . . . . . . . . . . . . . . . . . . . . 


     "(o) Making any effort to discourage or prevent the


rental, sale or financing of the purchase of real


property because of the presence or absence of occupants


of a particular race, color, sex, religion, ancestry,


physical handicap, marital status or national origin, or


on the basis of the future presence or absence of a


particular race, color, sex, religion, ancestry, physical


handicap, marital status or national origin, whether


actual, alleged or implied.



     " . . . . . . . . . . . . . . . . . . . . . . . 


     "(q) Providing information or advice to any person


concerning the desirability of particular real property


or a particular residential area(s) which is different


from information or advice given to any other person with


respect to the same property or area because of
 

differences in the race, color, sex, religion, ancestry,


physical handicap, marital status or national origin of


such persons.



     " . . . . . . . . . . . . . . . . . . . . . . . 


     "(t) Making, printing or publishing, or causing to


be made, printed or published, any notice, statement or


advertisement concerning the sale, rental or financing of


the purchase of real property that indicates any
 

preference, limitation or discrimination because of race,


color, sex, religion, ancestry, physical handicap,
 

marital status or national origin, or any intention to


make such preference, limitation or discrimination.



     " . . . . . . . . . . . . . . . . . . . . . . .



     "(u)   Using   any   words,   phrases,   sentences,
   

descriptions or visual aids in any notice, statement or


advertisement describing real property or the area in


which real property is located which indicates any


preference, limitation or discrimination because of race,


color, sex, religion, ancestry, physical handicap,
 

marital status or national origin.


                           7.                            89-902

          " . . . . . . . . . . . . . . . . . . . . . . . .



          "(y) Advising a person of the price or value of real


     property on the basis of factors related to the race,
 

     color, sex, religion, ancestry, physical handicap,
 

     marital status or national origin of residents of an area


     or of residents or potential residents of the area in
 

     which the property is located.



          " . . . . . . . . . . . . . . . . . . . . . . ." 


          Similarly, the California Fair Employment and Housing Act


prohibits   real   estate   agents    from  practicing    arbitrary
     

discrimination in the sale, rental, lease, or acquisition of


housing accommodations. Government Code section 12948 provides:


"It shall be an unlawful practice under this part for a person to


deny or to aid, incite, or conspire in the denial of the rights


created by Section 51 or 51.7 of the Civil Code."       Civil Code


section 51 creates the rights of "full and equal accommodations,


advantages, facilities, privileges, or services in all business


establishments of every kind whatsoever," regardless of a person's


"sex, race, color, religion, ancestry, national origin, or


blindness or other physical disability." (Emphasis added.) Under


this Civil Code provision, read in conjunction with Government Code


section 12948, a real estate agent is prohibited from practicing


any arbitrary discrimination in the services he or she renders,


including arbitrary discrimination with respect to a person having


a physical disability. (See Lee v. O'Hara (1962) 57 Cal.2d 476,


478; 59 Ops.Cal.Atty.Gen. 223, 224 (1976); 58 Ops.Cal.Atty.Gen.


608, 609-610 (1975); 58 Ops.Cal.Atty.Gen. 154, 155 (1975); 53


Ops.Cal.Atty.Gen. 196, 196-197 (1970).)



          Federal law also prohibits discriminatory practices in


the real estate industry. The Fair Housing Act (42 U.S.C. §§ 3601­

3631) generally makes it unlawful:



          "To make, print, or publish, or cause to be made,


     printed, or published any notice, statement, or
 

     advertisement, with respect to the sale or rental of a


     dwelling that indicates any preference, limitation, or


     discrimination based on race, color, religion, sex,


     handicap, familial status, or national origin, or an


     intention to make any such preference, limitation, or


     discrimination." (42 U.S.C. § 3604 (c); emphasis added.)
 


For purposes of the federal legislation, "handicap" is defined to


include "a physical or mental impairment which substantially limits


one or more of such person's major life activities." (42 U.S.C. §


3602 (h)(1).



          The express prohibition against discrimination based upon


handicap was added to the federal law in 1988. The Secretary of


                                8.                             89-902

Housing and Urban Development has issued regulations implementing


the recent federal statutory amendments, including 24 Code of


Federal Regulations, section 100.70 (1989):



          "(a) It shall be unlawful, because of race, color,


     religion, sex, handicap, familial status, or national


     origin, to restrict or attempt to restrict the choices of


     a person by word or conduct in connection with seeking,


     negotiating for, buying or renting a dwelling so as to


     perpetuate, or tend to perpetuate, segregated housing


     patterns, or to discourage or obstruct choices in a


     community, neighborhood or development.



          " . . . . . . . . . . . . . . . . . . . . . . 


          "(c) Prohibited actions under paragraph (a) of this


     section, which are generally referred to as unlawful


     steering practices, include, but are not limited to:



          "(1) Discouraging any person from inspecting,
 

     purchasing or renting a dwelling, because of race, color,


     religion, sex, handicap, familial status, or national


     origin, or because of the race, color, religion, sex,


     handicap, familial status, or national origin of persons


     in a community, neighborhood or development.



          "(2) Discouraging the purchase or rental of a


     dwelling because of race, color, religion, sex, handicap,


     familial status, or national origin, by exaggerating


     drawbacks or failing to inform any person of desirable


     features of a dwelling or of a community, neighborhood,


     or development.



          "(3) Communicating to any prospective purchaser that


     he or she would not be comfortable or compatible with


     existing residents of a community, neighborhood or


     development because of race, color, religion, sex,


     handicap, familial status, or national origin.



          " . . . . . . . . . . . . . . . . . . . . . . ." 


24 Code of    Federal   Regulations,   section   100.135   (1989)   also


provides:



          "(a) It shall be unlawful for any person or other


     entity whose business includes engaging in the selling,


     brokering or appraising of residential real property to


     discriminate against any person in making available such


     services, because of race, color, religion, sex,
 

     handicap, familial status, or national origin.




                                 9.                                 89-902

          "(b) For the purposes of this section, the term


     appraisal means an estimate or opinion of the value of a


     specified residential real property made in a business


     context in connection with the sale, rental, financing or


     refinancing of a dwelling or in connection with any


     activity that otherwise affects the availability of a


     residential real estate-related transaction, whether the


     appraisal is oral or written, or transmitted formally or


     informally. The appraisal includes all written comments
 

     and other documents submitted as support for the estimate


     or opinion of value.



          "(c) Nothing in this section prohibits a person


     engaged in the business of making or furnishing
 

     appraisals of residential real property from taking into


     consideration factors other than race, color, religion,


     sex, handicap, familial status, or national origin.



          "(d) Practices which are unlawful under this section


     include, but are not limited to, using an appraisal of


     residential real property in connection with the sale,


     rental, or financing of any dwelling where the person


     knows or reasonably should know that the appraisal


     improperly takes into consideration race, color,
 

     religion, sex, handicap, familial status, or national


     origin." 


          Our prior conclusions reached in 53 Ops.Cal.Atty.Gen. 196


(1970) and 58 Ops.Cal.Atty.Gen. 154 (1975) relied upon various


state and federal laws for support. Pertinent here with respect to
 

the disclosure of the location of a licensed care facility is the


following analysis in 53 Ops.Cal.Atty.Gen. 196 (1970):



          "The materiality of the fact of race is negated by


     the formidable complex of Federal and State legislation


     prohibiting discrimination in housing, which renders


     illegal the use of the race of a prospective buyer or


     tenant as a determinant in decisions involving the sale


     or rental of any housing. And in order for a fact to be


     material it `must be such that the contract would not
 

     have been entered into without it.' Adkins v. Wykoff,


     152 Cal.App.2d 684, 689 (1957). Cf. Anderson v. Martin,


     375 U.S. 399 (1964). But even if the fact of race were


     deemed material for some purposes, a specific statutory


     prohibition against disclosing racial information must be


     regarded as controlling over any common law duty to the


     contrary. See Lawman v. Stafford, 226 Cal.App.2d 31, 39
 

     (1964).   And since, as noted, the Fair Housing Act


     prohibits such disclosures by real estate agents, any


     conflicting common law duty of disclosure is no longer


     operative." (Id., at pp. 199-200, fn. omitted.) 


                                10.                          89-902

          As we preliminarily noted herein, the Legislature has


declared a strong public policy in favor of developing licensed
 

care facilities throughout the state (§ 1566) and treating them as


any other single family dwelling in the same area (§§ 1566.2­

1566.5). The Legislature has also prohibited real estate agents


from practicing discrimination based upon a person's physical


handicap. (Bus. & Prof. Code, § 125.6; Civ. Code, § 51; Gov. Code,
 

§ 12948.)



          Following our prior opinions, then, we conclude that the


location of a licensed care facility is not a material fact


required to be disclosed under California law.              Indeed,


volunteering information concerning the presence of a licensed care


facility could violate state and federal law prohibiting
 

discrimination based upon a person's physical handicap, especially


the prohibition against "[u]sing any words . . . describing . . .


the area in which real property is located which indicates any . .


. discrimination because of . . . physical handicap" (Cal. Code of


Regs., tit. 10, § 2780, subd. (u)) and "[d]iscouraging any person


from . . . purchasing . . . a dwelling . . . because of the . . .


handicap . . . of persons in a community" and "[c]ommunicating to


any prospective purchaser that he or she would not be comfortable


or compatible with existing residents of a community, neighborhood


or development because of . . . handicap . . . " (24 C.F.R. §


100.70(c)(1), (3) (1989)).    Similarly, volunteering information


about the price or value of property with respect to the presence


or location of a nearby licensed care facility could violate state


and federal law, particularly the prohibition against "[a]dvising


a person of the price or value of real property on the basis of


factors related to the . . . physical handicap . . . of residents


of an area . . . in which the property is located" (Cal. Code of
 

Regs., tit. 10, § 2780, subd. (y)) and "using an appraisal of


residential real property . . . where the person knows or


reasonably should know that the appraisal improperly takes into


consideration . . . handicap . . . " (24 C.F.R. § 100.135(d)


(1989)). Disclosure intended to prejudice the selection of a site


for a residential care facility or to prevent those living in such


facilities from residing in the area of their choosing is


forbidden. While it is doubtful that a real estate agent could


volunteer information concerning the location of a licensed care


facility without violating state or federal law, disclosure in


response to an inquiry would be permissible if it is factual, not


intended to foster discrimination against or segregation of


licensed care facilities within a community, and in fact does not


have that effect.



          We thus conclude in answer to the question presented that


a licensed real estate agent is not required to disclose the


location of a licensed care facility serving six or fewer people to


prospective buyers of residential property.          Disclosure is
 

permitted if it is factual, not intended to foster discrimination



                               11.                           89-902

against or segregation of licensed care facilities within the


community, and in fact does not have that effect. 


                         * * * * * 





                             12.                        89-902


