HUD Adopts New Rules Clarifying Associations' Liability for Harassment and Third Party Conduct Under the Fair Housing Act
The U.S. Department of Housing and Urban Development recently adopted new federal rules, pursuant to its authority under the federal Fair Housing Act (“FHA”), which will potentially have a significant impact on community associations. These new rules took effect on October 14, 2016. This alert will outline the new rules, their significance for community associations, and some initial recommendations for actions that associations can take in response.
New HUD Rules:
In the new rules, HUD emphasizes that housing providers, such as community associations, have no new or enhanced liability under the FHA, and that the intention is only to formalize certain standards for liability. While this may be accurate, the reality is that few community associations have faced or even considered having liability under the FHA in the areas for which HUD now seeks to establish standards.
The new rules include two areas of particular concern for community associations: new rules related to harassment claims and to third party liability. 24 CFR § 100.600 prohibits quid pro quo and hostile environment harassment under the FHA. Quid pro quo harassment refers to an unwelcome request or demand to engage in conduct where submission to the request or demand, either explicitly or implicitly, is made a condition related to the provision of services or facilities. The most typical example of quid pro quo harassment is when a housing provider or property manager demands sexual favors in exchange for certain rights to use the services or facilities in the community.
Hostile environment harassment is defined as unwelcome conduct that is sufficiently severe or pervasive as to interfere with the provision or enjoyment of services or facilities. If a resident, attempting to make use of an association's services or facilities, is subjected to conduct that interferes with his use or enjoyment of those services or facilities, based on such resident's race, color, religion, sex, familial status, national origin or handicap, then such resident will have a claim for hostile environment harassment under the FHA.
The new liability rules found in 24 CFR § 100.7 provide that not only does the housing provider have liability for its own conduct, it is also liable for:
- Failing to take prompt action to correct and end discriminatory housing practice by its employee or agent, where it knew or should have known of the discriminatory conduct;
- Failing to take prompt action to correct and end a discriminatory housing practice by a third party, where it knew or should have known of the conduct and had the power to correct it; and
- Vicarious liability for a discriminatory housing practice by its agent or employee, regardless of whether the housing provider knew or should have known of the discriminatory housing practice.
Under these liability rules, “prompt action to correct and end” a discriminatory housing practice means taking every action available to the housing provider to end the discrimination and to keep going until the discrimination stops. When it comes to the obligation to end discrimination by a third party, the housing provider's “power to correct” will depend upon the extent of such housing provider's control or other legal responsibility for the third party.
Impact for Associations:
Despite HUD's protestations that these new rules do not change community associations' liability under the FHA, it is difficult not to see these changes as opening the door to a significant number of new claims against community associations. To date, associations have almost exclusively dealt with FHA claims related to facially discriminatory rules they adopted or to improperly handling a request for a reasonable accommodation or modification for a disabled owner.
Under the new rules, associations now need to be prepared for claims that their board members, agents or employees have created a hostile environment that harasses a resident who is a member of a protected class. If, for example, the association's security guards enforce the rules governing use of the common areas more strictly against children, the association will be open to a claim. If an owner believes that he is being treated in a hostile manner because residents of another race are getting preferences he is not getting, the association might face a claim. The real danger of a harassment cause of action for associations is not that their board members, agents or employees are actually creating a hostile environment, but that disgruntled residents may latch onto this type of FHA claim as a way to protest a policy, rule or enforcement procedure of the association that they dislike.
Of even greater concern is the third party liability established by these rules. A claim may arise against an association if a third party, such as another resident or contractor, is discriminating against one of its residents in the provision of services or facilities of the association. If one resident is harassing another resident at the pool on the basis of race, the association can be held responsible if it fails to promptly correct and end the discrimination. This rule becomes even more onerous for the association when it is understood that the aggrieved owner does not need to complain to the association for the association to be liable. An association could be liable for third party discrimination it knows or should have known about. For example, if a board member or lifeguard observes the harassment at the pool and the association takes no action to end the discrimination, a claim may arise against an association.
Action by the association to correct and end the discrimination by a third party must be prompt, and the association must use all means available to it to end the discrimination. For community associations this can include notices of violation, monetary charges, suspension of privileges, and litigation to seek injunctive relief against the offending resident. In order to avoid liability under the FHA, an association may have to involve itself in disputes between owners and it may have to file an injunctive lawsuit to stop the discriminatory conduct of one resident towards another.
If there is good news, it is that the association is only responsible for third parties over which it has some control or other legal responsibility. But all residents in the community and all contractors hired by the association will fall into this category.
Recommendations:
How then do associations protect themselves from claims under these new rules? HUD offers some guidance. It recommends that housing providers do the following:
- Educate board members, employees and managers about the FHA and the types of discrimination about which they should be aware and on the look out for;
- Develop and publish anti-discrimination policies for the association;
- Act promptly to address complaints from residents;
- Mediate disputes between residents; and,
- Use enforcement provisions under bylaws to correct and end discriminatory conduct.
If you would like to schedule fair housing training for your association or to discuss developing an anti-discrimination policy for your association, please feel free to contact any of our community association attorneys.
Still Have Additional Questions or Need Clarification?
Contact Marla J. Diaz directly at (703) 280-9131