United States: Oregon's Real Estate ‘Love Letter' Law Takes Effect As Court Challenge Awaits

In a hot real estate market, where buyers literally and figuratively are lining up to make offers on a property, some prospective buyers choose to add a personal touch to their offer by submitting what's commonly known as a "love letter" to the seller. These letters typically describe what a prospective buyer loves about the home and frequently emphasize perceived commonalities between the seller and prospective buyer. Under a law that took effect in Oregon on January 1, 2022, real estate agents for sellers now must reject such love letters, although the law does not bar a prospective buyer from submitting a love letter on their own. The intent of the law is to reduce the opportunity for discrimination in home sales due to race, color, national origin, religion, sex, sexual orientation, gender identity, family status, marital status, or disability, all of which are prohibited under federal and state laws. A Bend, Oregon, realty company has filed a legal challenge to the statute, and a federal judge will decide later this month whether to put the statutory ban on hold pending a trial.
 

Legislation

The Oregon legislature enacted House Bill 2550 to amend ORS 696.805, which relates to the duties of a seller's agent in a real estate transaction. The statute already requires that an agent owes duties of good faith and honesty, to present all written offers and other written communications, and to disclose material facts known to the seller's agent and not apparent or readily ascertainable to a party. The amendment, however, now provides:

Neither the statute nor rule define what "customary documents" are, but the Oregon Real Estate Agency has interpreted the term to mean "disclosure forms, sales agreements, counteroffers, addenda, and reports." Love letters are not considered customary documents.
 

Plaintiffs' Arguments

The realtors who filed the lawsuit assert that the statutory ban on love letters amounts to an infringement on the First Amendment rights of real estate brokers and agents, as well as the First Amendment rights of the realtors' clients. In their motion, the plaintiffs argue that the ban on love letters is a prohibited content-based regulation of speech. They argue that the statute does not advance the state's interests in preventing discrimination because there is no evidence that love letters contribute to discrimination and, even if they did, the law is underinclusive because it does not stop a buyer from directly writing to a seller and it does not prevent the seller's agent from conveying information to the seller if the seller's agent personally knows the buyer or conducts research on social media. Finally, the plaintiffs say that enforcement of existing anti-discrimination laws and/or narrowly targeting letters that actually refer to a protected class would be less burdensome alternatives.

State's Arguments

The defendants in the lawsuit are the Oregon Real Estate Commissioner, Steve Strode, and Oregon Attorney General, Ellen Rosenblum. Their opposition to the realtors' motion sets the background by describing Oregon's "centuries-long history of severe, widespread public and private race discrimination in the sale of residential real estate." These practices date back to territorial days when non-white citizens were barred from holding real estate and excluded from homestead programs open to white settlers, continuing through redlining practices created by the Federal Home Loan Corporation in 1937 and local realtor associations' prohibitions on selling homes in predominantly white neighborhoods to African American households. The result is that stark disparities exist between Oregon homeownership, for example, by white, non-Hispanics (65.1 percent), and Black or African Americans (32 percent).

The defendants argue that love letters almost always reveal information about the prospective buyer's personal characteristics. Of the 27 examples of love letters produced by the plaintiff realtors in discovery, the defendants' expert concluded 25 of them revealed information about at least one protected characteristic; 13 of the letters included photographs of the prospective buyer that indicated information about race, color, and sex or gender; 23 directly in the text or through a photograph revealed information about familial status; 14 made specific reference to marital status; and 12 revealed information about sexual orientation. Consequently, the defendants say that the evidence indicates a rational basis for the ban on love letters because "it is not only plausible but highly likely that requiring a seller's agent to reject love letters will reduce the likelihood that a seller's decision will be influenced by a buyer's protected characteristic."

The opposition to the motion argues that the realtors do not have the standing to assert the rights of their clients and, even if they did, love letters are commercial speech entitled to lesser protection under the First Amendment than other constitutionally protected expressions. As such, the defendants argue, the state has a substantial interest in preventing housing discrimination, and the ban on love letters advances that interest. Addressing the plaintiffs' argument that the statute is underinclusive, the defendants cite case law holding that governments are entitled to attack problems piecemeal and that the law directly targets real estate agents who are key influencers in the transaction process and often encourage and facilitate love letters.

Next Steps

The plaintiffs filed a motion for preliminary injunction with the complaint in November and sought expedited consideration of their motion, which the court denied. The plaintiffs' reply brief on their motion is due January 20, at which time the court will take the motion under advisement. Until then, the love letter ban is in effect, and seller's agents now must reject any such letters, photographs, or videos provided by a prospective buyer.