In the Hopper: Restrictive covenants, bar mix, data breaches

By Kevin Featherly

President Lyndon B. Johnson presents a souvenir pen to Mr. and Mrs. Lupe Arzola, Aug. 1, 1968 in Washington, during the signing of the Fair Housing Act outside the Department of Housing and Urban Development. The Arzolas are residents of the oldest federally subsidized public housing project in Austin, Tex., which was located in the home district of the president when he was a House member 30 years ago. Johnson later took the Arzolas to the White House for a visit. (AP Photo)

Restrictive covenants: The Minnesota House on Monday unanimously stood behind Rep. Jim Davnie, DFL-Minneapolis, in the first floor vote of the young legislative session.

House File 51 allows homeowners with restrictive covenants written into their properties’ historical abstracts to attach an affidavit forswearing that antiquated segregationist practice. The bill swiftly passed the House Monday in a 128-0 vote. There was no debate.

“It’s a good way to start the session,” Davnie said with a smile after Monday’s abbreviated floor session. “It won’t stay that way.”

HF 51 amends Minnesota Statutes Section 507.18. It creates an affidavit form for property owners to fill out and submit to county recorders. The affidavit would reject any existing covenant.

It would then be attached to the abstract without changing the abstract’s content — Davnie says that could cloud a property’s title and make it harder to transfer. The affidavit would simply make clear that the present owner condemns racially restrictive covenants.

Covenants — which Davnie said were mostly used to keep African-Americans out of white neighborhoods — were once commonly imposed by developers. And the National Association of Real Estate Brokers’ code of ethics instructed members not to do business with “any race or nationality … whose presence will clearly be detrimental to property values in that neighborhood.” That obsolete clause remained effect from 1924 to 1950.

“There was then a public acceptance for saying, ‘This is a white neighborhood,’” Davnie said.

In 1948, the U.S. Supreme Court’s Shelley v. Kraemer decision barred states from enforcing covenants. It did not outlaw them — covenants were still allowed if enforced privately. But citing the 14th Amendment, justices ruled 6-0 — with three recusals — that states could not use their powers to enforce them.

The 1968 Fair Housing Act later legislatively barred the practice. Still, it wasn’t until 1977’s federal Community Reinvestment Act that Congress completely outlawed racial redlining — in which banks commonly refused to do business in black neighborhoods.

Since restrictive covenants have been unenforceable for generations, Davnie’s bill is semi-symbolic. But he said it’s meaningful, in effect, to attach an asterisk to the historical abstract saying that today’s owner rejects covenants. Davnie found one in the abstract of his own Minneapolis home, resulting in what he calls a “moral injury.”

“I was horrified,” he said. “So this bill provides people with an opportunity to respond and to make a statement clearly rejecting that covenant.”

The same language was passed last year and included in the ill-fated Omnibus Prime megabill, which Gov. Mark Dayton vetoed. The Davnie bill’s companion, Senate File 465, was authored by Sen. Jeff Hayden, DFL-Minneapolis. It was referred to Senate Judiciary, but is not yet scheduled for a hearing.

Bar mix: A Minnesota State Bar Association bill, scheduled for a Feb. 6 Senate committee hearing, contains a mix of proposals from the bar’s Tax and Probate & Trust Law sections.

Senate File 526, authored by Sen. Jerry Relph, R-St. Cloud, has four provisions. According to the state bar, it would:

  • Attribute ownership to a surviving spouse, after the other spouse dies, for purposes of a three-year holding requirement in the qualified farm- and small-business estate tax exemption.
  • Allow married farm couples who hold their property in two linked trusts to maintain agriculture homestead status.
  • Remove a state-only, six-year time limit for an innocent spouse to request tax liability separation after the other spouse gets in trouble with tax authorities. “Attorneys see the time-limit as problematic,” said Bryan Lake, a Bar Association lobbyist. “Especially in domestic abuse cases, where the abused spouse doesn’t get out of the marriage fast enough.” The provision would align state law with federal law, which has no similar limitation.
  • Create a new form of “equitable relief” for Minnesota taxpayers who qualify for innocent spouse relief under federal law. Minnesota has a tie-in that automatically qualifies innocent spouses for so-called “traditional relief,” if they qualify for that relief federally. This provision would make federal equitable relief similarly automatic under state law. “Basically the standard would be, if it is good enough for the IRS, it should be good enough for Minnesota,” Lake said.

The first two provisions were identified as problems last year by Greater Minnesota members of the state bar’s probate section, Lake said. The changes were included in the 2018 tax bill, but Dayton vetoed that bill.

“What we are basically trying to do is treat married spouses as a single economic unit, as they are in most other areas of the law,” Lake said of the bill’s first two provisions.

A fifth provision was expected to be removed in committee Wednesday. It would simplify service requirements for property tax petitions, multiple copies of which currently must be submitted to several county offices.

“We’ve just met with assessors and county attorneys trying to work out language that they are comfortable with,” Lake said. “That will be moved as a separate bill, because it will have to go through the Judiciary committees in each chamber as well as the Taxes committee. So it would be easier to do it separately.”

Wednesday’s hearing in the Senate Taxes Committee took place after this story’s deadline.

Data breaches: Another bill scheduled for a Feb. 6 hearing would alter the definition of a government data breach and change the terms under which those affected must be notified.

Under a Minnesota law, Minn. Stat. sec. 13.055, unauthorized access of government data is considered a breach that requires notification only if the data’s recipient intends to use it for “nongovernmental purposes.” The bill would delete the latter clause.

To the bill’s author, Rep. Peggy Scott, R-Andover, that means that if an agency screws up and releases private data out into the wild, the agency somehow must intuit what the recipient will use it for.

“You can’t know that,” Scott said. “So what you have now is a group of lawyers trying to decide what the intent was before they call it a breach and notify people.”

Her bill was heard in House Judiciary on Jan. 30 and was set to sail directly to the general register for a possible House floor vote. But it met with resistance and was at least briefly delayed.

Laurie Beyer-Kropuenske, the Department of Administration’s director of community services, said her agency hoped to offer an amendment to resolve issues that the state Data Practices Office identified, which “uniquely impact state agencies.”

“The executive branch agrees with the goals of the bill to ensure that individuals are notified when their data has been released, when it poses a risk to them,” Beyer-Kropuenske said. “State agencies are just looking to clarify when those notices are required.”

Kristi Lahti-Johnson, Hennepin County’s data compliance officer, said she doesn’t oppose the bill, either. But she said it should be changed to allow counties or other government agencies to do risk assessments prior to notifying anyone about a breach.

The goal of the risk assessment would be “to find out whether notification would be appropriate,” Lahti-Johnson said.

Speaking on Feb. 4, Scott said she has received amendment language to that effect. While she wouldn’t commit to either accepting or rejecting it prior to Wednesday’s hearing, she was skeptical of the proposed addition.

“It’s doing the same exact thing that’s happening now, where we have this group of lawyers decide do we contact the people or don’t we,” Scott said. “That’s my concern from it.”

The Senate companion bill is authored by Sen. Warren Limmer, R-Maple Grove, who served as Scott’s vice chair on the Data Practices Commission, the panel that vetted the issue over the interim months last year. His bill, which repeats Scott’s language, is scheduled for a hearing at Senate Judiciary on Feb. 11.

Realtors should be prepared to work with any community as a matter of good business sense, Nguyen said. Asians-Americans, she said, “are the fastest growing demographic in the U.S. and there is a ton of buying power.”

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