Rentals and the Fair Housing Act

Rentals and the Fair Housing Act

By Ryan D. Poliakoff / Published July 2016

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Q

uestion:

 

I am on the board of my condominium, as I have been for more than a decade.  Our governing documents provide that all leases need to be approved by the board, and we have always rejected anyone with a criminal record.  Recently we were prepared to reject a rental applicant who was convicted of a minor felony six years ago, but our association manager told us that we could no longer restrict renters on the basis of criminal records.  She says that she checked with our attorney, and he agreed.  Did the law change?  We are a quiet, safe building, and I am nervous that we may have to let criminals live in our building. 

Signed C.B.

 

Answer:

Dear C.B.,

For many years it has been common for condominiums and HOAs with lease approval authority to run background checks on prospective tenants and to put at least some restriction on renters with criminal backgrounds.  But, your attorney is correct—boards that reject tenants on the basis of their criminal history now run the risk of running afoul of the Fair Housing Act and being liable for discrimination.

As you may be aware, there is a federal law called the Fair Housing Act that prohibits discrimination on the basis of race, color, religion, sex, national origin, familial status (having children), and disability.  Housing providers, such as condomi-nium associations and HOAs, are prohibited from creating or enforcing rules that discriminate against people on the basis of any of these categories.  For example, you could not enforce a rule prohibiting people born in Canada from living in your condominium—that would violate the Fair Housing Act.

However, in addition to prohibiting behavior that directly discriminates against particular classes of people, the Supreme Court, in an opinion last summer, ruled that a cause of action could be maintained when a rule or policy adversely affects a protected class of people, even if that rule is neutral on its face.  It remains to be seen exactly which neutral rules will be found to be discriminatory, but one obvious target will be rules that discriminate on the basis of criminal record.  It is a settled fact that African Americans and Hispanics are arrested, convicted, and incarcerated at greater rates than their share of the general population, so any rule prohibiting tenants or owners on the basis of their criminal record will, incidentally, disproportionately affect such minorities.  In a recent, very detailed opinion, the U.S. Department of Housing and Urban Development (HUD) explained that nearly one-third of U.S. adults have a criminal record of some form, and that having a prior arrest, or even a conviction, is a poor predictor of future bad behavior.  Because of the adverse impact such rules can have on minorities, any housing provider that wants to enforce a restriction based on criminal background will have to demonstrate that their rule is necessary to achieve a substantial, legitimate, nondiscriminatory interest.  The interest cannot be hypothetical—a HOA cannot ban renters with a felony background because the board suspects that felons make bad neighbors.  It is almost certain that blanket, indiscriminate criminal record restrictions, such as refusing to allow rentals to any person with a felony conviction, at any time in their past, violate the Fair Housing Act.  As HUD pointed out, a felony conviction for a minor crime many years ago is hardly a good predictor of future bad behavior by the individual.  At least, enforceable criminal record restrictions must be somewhat limited in time, and probably will have to be limited to certain types of crime, such as violent felonies or crimes against children.  As stated by HUD, a valid policy must consider the nature, severity, and recentness of the criminal conduct to have any chance of being enforceable.  And, if challenged in court, the rejected applicant will have an opportunity to demonstrate that the association’s interest can be served by another practice with a less discriminatory effect.  Overall, this will be a very high bar for associations to cross in order to justify and enforce otherwise neutral restrictions that may have an adverse impact on minorities or other protected groups.

The truth is, we won’t know for certain what types of restrictions are going to pass muster until they are tested in court.  We can also expect that other types of restrictions are likely to be called into question, such as restrictions on the basis of credit score (as we know that minorities, statistically, tend to be more financially disadvantaged). 

Until courts have considered how to evaluate different types of rental restrictions, particularly those based on criminal history, condominium and HOA boards should make sure that their regulations are as narrowly tailored as possible to achieve a legitimate, demonstrable interest in protecting the safety and welfare of the community and its residents.  The financial penalties for violating the Act can be significant, and it’s not worth risking a federal lawsuit for the possible benefit of preventing a renter with a minor indiscretion in their background that likely will have no impact on their value as a neighbor.

profile

Ryan D. Poliakoff

partner of Backer Aboud Poliakoff & Foelster

Ryan D. Poliakoff is a Partner of Backer Aboud Poliakoff & Foelster and serves as general counsel to condominiums, homeowners associations, and country clubs throughout South Florida. He is the co-author of New Neighborhoods—The Consumer’s Guide to Condominium, Co-Op, and HOA Living. In addition to representing associations, he is a frequent contributor at seminars and workshops for attorneys and board members, and he has written hundreds of articles for magazines and newspapers throughout the United States. He can be reached at rpoliakoff@bapflaw.com. For more information about his firm, visit www.bapflaw.com.