## Facts

- Homeowners in the Shirley Park subdivision in Chico, California, owned property subject to recorded restrictive covenants adopted in 1960 and amended in 1963.
- The covenants limited lots to one detached single-family “private residence” and barred uses associated with multi-family or institutional living (including boarding houses and rest homes).
- Butte Home Health, Inc., a nonprofit public benefit corporation, operated a residential care facility for elderly disabled persons in a single-family home within the subdivision beginning in 1995.
- In 1993, California amended Government Code § 12955 and enacted Government Code § 12955.6 to prohibit disability-based housing discrimination through enforcement of restrictive covenants against group homes for disabled persons.
- The parties proceeded on a stipulated factual record, and the neighborhood impacts of the facility were found to be minimal.

## Issues

1. Whether applying Government Code §§ 12955 and 12955.6 to preexisting restrictive covenants unconstitutionally impairs contractual obligations under the federal and state Contracts Clauses.
2. Whether any impairment from limiting enforcement of the covenants is “substantial” when measured against the nature of the use and the effects on neighboring owners.
3. Whether the state’s interest in preventing housing discrimination against disabled persons justifies limiting enforcement of the covenants.

## Decision

- The Court of Appeal reversed the permanent injunction and remanded with directions to enter judgment for Butte Home Health.
- The court held that applying Government Code §§ 12955 and 12955.6 to bar enforcement of the covenants against the group home did not violate the Contracts Clause.
- Any impairment of the homeowners’ covenant-based expectations was not substantial because the facility’s actual effect on neighboring property rights was de minimis.
- The state’s compelling interest in ensuring adequate housing for disabled persons supported the statutes as a valid exercise of the police power.

## Legal Principles

- A law affecting contractual rights violates the Contracts Clause only if it results in a substantial impairment; the existence of impairment does not end the analysis.
- The state may, through its police power, restrict enforcement of private agreements to prevent discrimination in housing, including discrimination against disabled persons requiring group living arrangements.
- Government Code §§ 12955 and 12955.6 can be applied to preexisting residential restrictive covenants to prevent their use as a mechanism for disability-based housing discrimination.
- Where the challenged residential use produces minimal practical interference with neighboring owners’ property interests, limiting covenant enforcement is less likely to constitute a substantial impairment.

## Conclusion

The court held that fair-housing statutes prohibiting disability discrimination may be applied to prevent enforcement of older “private residence” restrictive covenants against a small residential care facility for elderly disabled persons, because the resulting impairment is not substantial and is justified by the state’s strong interest in preventing discriminatory housing exclusion.


Hall v. Butte Home Health, Inc., 60 Cal. App. 4th 308 (Cal. Ct. App. 1997)