A recent civil discrimination case filed against the Roman Catholic Diocese of Worcester illustrates how easily brokers and agents can get swept up in litigation when a client’s sale conditions brush up against a protected class.

In the case, plaintiffs James Fairbanks and Alain Beret entered into a purchase and sale agreement with the diocese to acquire a property called “Oakhurst.” Formerly a retreat center for the church, Beret and Fairbanks – a gay couple – had plans to use it as a wedding resort. The plaintiffs allege that the diocese pulled out of the sale when it discovered that gay marriages might be permitted on the premises.

A chain of emails to the buyers from the diocese’s broker mistakenly included an email from Rev. Msgr. Thomas J. Sullivan, director of fiscal affairs for the diocese, who had been negotiating on behalf of the church. According to filings, Sullivan wrote: “I just went down the hall and discussed it with the bishop. Because of the potentiality of gay marriages there, something you shared with us yesterday, we are not interested in going forward with these buyers. I think they’re shaky anyway. So, just tell them that we will not accept their revised plan and the diocese is making new plans for the property. You find the language.”

Calls to the Worcester diocese seeking comment for this story were not returned by press time.

Murky Ground

For its part, the church says it was the couple’s failure to obtain financing that drove their decision to pull out. Beret and Fairbanks’ attorneys, Carvajal & Nielsen P.C., are seeking an unspecified amount of damages, claiming that canceling the sale for this reason constitutes discrimination on the basis of sexual orientation.

But the Worcester diocese isn’t the only entity caught up in the suit. The diocese’s brokerage, Eastern Alliance Realty LLC of Shrewsbury, and its principals, LiSandra Rodriguez-Pagan and Angel L. Pagan, have also been named as defendants.
The outcome of the case is far from certain. Though discriminating on the basis of sexual orientation is clearly prohibited under Massachusetts law, this appears to be the first such case to take up the issue of whether declining to sell a property because it may be used for gay weddings constitutes such discrimination, legal experts said.

Though restrictive covenants prohibiting sale of a property to people of a certain race or religion are illegal, many other kinds of restrictions on the future use of a property are acceptable. These include requiring that a piece of land be preserved as open ground or a home only be sold to buyers who meet affordable housing definitions.

“Restrictions that say the property can never be used [for a certain purpose], that happens all the time,” said Michael D. MacClary, partner at Burns & Levinson LLP and president-elect of the Real Estate Bar Association. “There’s always the possibility that 20, 30 years from now it might turn out to be unenforceable, but there’s nothing stopping you from doing it as of right now. As long as the parties negotiate it, it’s doable.”

Clear Intentions

In the Worcester case – where there wasn’t a covenant written into the purchase and sale agreement, merely a reason given to pull out of the sale – the legal requirements are murkier. But best practice for any agent or broker looking to stay out of court is to make sure the client makes their intentions crystal clear – and be willing to back out of a deal if those requirements skirt the law.

“If [the client says] ‘we don’t want to sell to some class of people because we don’t like them,’ or whatever the case may be, if what they’re asking the agents would be a violation of fair housing law, the legal duty would in those cases trump the fiduciary duty that they owe to their clients,” said Michael McDonagh, general counsel for the Massachusetts Association of Realtors.

“If there’s any question about what the instructions are or what the intentions are, you really need to clarify with the client what it is they’re trying to accomplish,” he continued. “If it’s a clear cut case where the agent says, ‘I know what they’re asking me to do is illegal,’ then you need to tell the client, ‘I can’t do that, that’s against the law.’ If the client refuses to hear that response, or follow the advice of the agent, [then drop the listing].”

If a broker came seeking advice on such a case, “I’d say, ‘this has trouble written all over it,’” said Frank A. Smith III, chair of the Massachusetts Bar Association’s committee on Individual Rights & Responsibilities. “If that’s a restriction that people want to place on you, it guarantees that if something goes wrong you’re going to be named as a defendant,” even in cases where the basis for the allegation is a conversation or interaction between the clients to which the broker was privy.

There is some precedent for a middleman in a property transaction being held liable for civil rights violations that occur during in a transaction. The Massachusetts Commission on Discrimination filed a complaint in 2010 against the New Bedford Standard Times, Harmon Law Offices and Home Loan Services Inc. for republishing a foreclosure notice which included a restrictive covenant in the deed barring non-Caucasians from buying it. The complaint was settled earlier this year.

Barbara Green, a spokeswoman for the commission, warns that there’s an affirmative duty on agents to prevent a sale from going forward if it violates fair housing law. Even though such a covenant would never hold up in court today, “it still has to come out because a deed is a legal instrument,” said Green, and it was the responsibility of the law office and the newspaper to correct this before publication.