Can your HOA end neighbor on neighbor housing discrimination?

By Deborah Goonan, Independent American Communities

As explained in a previous post, in 2016, HUD published a rule that clarified that association-governed boards and their managing agents have legal duty to prevent housing discrimination in their communities.

Some industry leaders, including members of trade group Community Associations Institute (CAI), expressed strong disapproval of the Quid Pro Quo/Hostile Environment Rule. Some professional were spreading misinformation, insisting that HUD expected homeowners, condominium, and cooperative association leaders to intervene in all neighbor disputes.

But HUD’s rule applies only to housing discrimination and violations of federal Fair Housins Acts, directed toward protected classes. (Includes race, color, national origin, religion, sex, disability and the presence of children, also referred to as familial status).

Opponents of HUD’s rule complained it was “overreach” indicative of a “nanny state.” There were dire predictions of doom and gloom for association-governed communities.

Since then, two years have passed, and the dust has settled a bit. HUD’s new rule has not been the end of the world for community associations.

But there are still some important concerns and considerations for housing consumers.

In June (2018), Community Associations Institute (CAI) Federal Legislative Action Committee published a white paper on the subject, entitled Community Associations and Third-Party Harassment Association Obligations to Intervene in Resident Disputes.

In their report, the 15-member CAI committee highlights several important points that they believe HUD needs to address.

After and introductory summary of the CAI’s role in protecting the interests of the community association industry, which I won’t address in this post, the paper introduces HUD’s controversial rule:

On September 14, 2016, the U.S. Department of Housing and Urban Development (the Department) published in The Federal Register a final rule entitled, Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices Under the Fair Housing Act (the rule).12 The Department’s intent in promulgating the rule was to “provide for uniform treatment of Fair Housing Act claims in judicial and administrative forums.”13

Pursuant to the rule, a housing provider is directly liable for the illegal, discriminatory practices of a third-party if the provider (1) knew or should have known of the discriminatory housing practice; (2) had the power to correct the discriminatory housing practice; and, (3) failed to take prompt action to end such practice. A housing provider’s authority to end a discriminatory practice is deemed a function of the provider’s control over the discriminating third-party and any legal obligation the provider may have to end discriminatory housing practices.14

12 Federal Register, Volume 81, No. 178 (Washington, DC, September 16, 2016), p. 63054. 13 Ibid.
14 24 CFR § 100.7(a)(iii)

HOA industry’s stance on HUD’s Quid Pro Quo/Hostile Environment Rule

In this excerpt, CAI summarizes its concerns and recommendations for policymakers to change or clarify HUD’s rule with respect to association-governed communities.

Association Liability and HUD Quid Pro Quo/Hostile Environment Rule

A 2016 regulation imposing on community associations liability under the Fair Housing Act for the discriminatory actions of third-parties is highly concerning to CAI members. This paper discusses the legal and practical sources of these concerns, offering information and recommendations for the consideration of federal policymakers to ensure those responsible for fair housing violations are liable for their actions.

This paper does not propose community associations be exempted from liability for hostile environment discrimination. Community association boards are liable for the actions of board members and managers that create a hostile housing environment.

A community association should be liable where its actions create a hostile environment and is a direct party to the harassing behavior. A community association should not be liable where the harassing behavior is committed by a third-party where there is no agent relationship.

In light of these considerations, CAI respectfully requests and urges that the Department review the information and discussion presented herein that form the basis of the following recommendations—

CAI recommends:

1. Policy realignment so liability for discriminatory housing practices lies with the perpetrators of such acts. CAI urges revision of the Quid Pro Quo/Hostile Environment regulation to achieve consistency with long-standing judicial precedent, confirmed by the U.S. Supreme Court as recently as 2015, that a defendant must have acted with discriminatory motive or intent to be liable for hostile environment housing discrimination.

2. Official guidance from the Department of Housing and Urban Development’s Office of General Counsel. Absent a realignment of policy consistent with well-established precedent, the Department must provide reliable legal guidance concerning reasonable actions a community association volunteer board may take based on association authority under State statute to comply with the 2016 rule. Such guidance should contain ascertainable standards that must—a. clearly communicate an association’s sources of liability under the rule;
b. describe lawful actions an association may take to comply with the rule; and,
c. describe any extraordinary actions the Department does not intend for associations
to undertake in pursuit of compliance.

Source:

Community Associations and Third-Party Harassment Association Obligations to Intervene in Resident Disputes (June 2018
Community Associations Institute Federal Legislative Action Committee)

The committee then goes onto explain, in detail, CAI’s objections to the current rule, as written. The white paper is a bit technical, and the committee cites case law to make its points.

In essence, in my reading of the white paper, these are CAI’s major points and concerns:

(1) CAI concedes that board members and agents of the association cannot stand idly by when a fellow board member or manager engages in discriminatory behavior. To do so would expose the association to legal liability under the Fair Housing Acts.

(2) However, CAI argues that it is impractical and inappropriate to make the association liable for discrimination between two or more neighbors who reside in the community.

The committee points out that, unless a board member or managing agent is intentionally conspiring with a resident to discriminate against another resident, the association should not be held responsible.

(3) For the association to “end” discriminatory behavior by one resident over another resident, CAI says the association would need to have enforcement authority and powers.

For example, the governing documents would have to be amended to provide the legal authority of the association to impose fines or to “evict” a resident who engages in housing discrimination.

But most governing documents do not address housing discrimination, and do not grant associations the authority to enforce local, state, or federal laws. HOAs are limited to enforcing their own covenants and restrictions.

(4) CAI repeatedly notes that HUD conflates the relationship of an association-governing board to its member homeowners with that of a landlord to its tenants. In fact, the AARP filed an Amicus Brief in one lawsuit, making the same erroneous comparison.

(Although, it could be argued that the comparison does apply to a housing cooperative.)

The problem, according to CAI, is that homeowners and condominium associations cannot evict property owners, because property owners are not tenants.

Without the power of eviction, CAI concludes, it is virtually impossible for the association to “end” discrimination.

(Pixabay.com free image)

Why is resolution of HUD’s Quid Pro Quo/Hostile Environment Rule important to housing consumers?

Reading between the lines, if HUD responds to CAI’s request, might take one of two forms. Depending upon HUD’s response, housing consumers might be harmed, or they might benefit.

 

HUD could force legal authorization of association-governed communities to enforce anti-discrimination policies.

This might result in new state laws expanding the powers of HOAs to impose fines and other penalties against residents engaging in housing discrimination.

Taken to its extreme, could HUD authorize, as a last resort to enforcement, the association industry’s closest equivalent to tenant eviction — HOA foreclosure?

If a resident is a tenant, and not an owner, could state law enable HOAs to evict a tenant if the owner of the unit fails to do so?

You see, this path to curbing housing discrimination in association-governed communities makes life much more complicated for residents as well as HOAs.

This option would also require HOA board members and managers to take on the role of Fair Housing investigators.

CAI makes the valid argument that associations are private governance organizations, and volunteer board members are ill-suited to conduct a thorough and fair investigation.

I would also argue that empowering HOAs with enforcement of Fair Housing Acts creates state action. In other words, HUD is effectively making association governing boards and management agents the right arm of the law — public-private discrimination police, if you will.

As a nation, do we really want to hand over more power to HOAs — making them state actors in housing discrimination disputes? Think of the potential abuses of power, not to mention legal liabilities for the association.

Perhaps this is not the best option. Here’s another, better option:

 

HUD could limit an association-governed community’s role when it comes to neighbor on neighbor housing discrimination

HUD might simply clarify that the association’s duty in third party complaints of discrimination.  HUD could require actions such as sending a written cease and desist notice to the offender(s), or reporting discriminatory behavior to the appropriate authorities.

HUD could require the HOA to report incidents to the local police or fair housing agency, or both, depending on the nature of the hostility or harassment.

The advantage of this option is that it requires proper legal authorities to investigate discrimination complaints, prosecute in a court of law when necessary, and ultimately enforce the law, in cooperation with the association. 

It would relieve homeowners, condominium, and cooperative associations of a serious responsibility, and avoid handing HOAs more power than they can responsibly handle.

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