Lessons Learned from Recent Court Rulings on Fair Housing Law

This month, Fair Housing Coach reviews recent court decisions involving fair housing law. The rulings, all decided this year, address issues that you may have encountered: whether to allow a resident to sublet, when residents may be required to get rental insurance, how to deal with requests for assistance animals, and when you can enforce occupancy standards. The facts and circumstances are different, but they have one thing in common: They landed in court with the community defending itself from accusations of housing discrimination, in violation of the Fair Housing Act (FHA). But what led up to the dispute? And who won—and why?

In this lesson, we’ll review the facts of each case to determine what happened and how it landed in court. And we’ll explain how the court decided who should win—and, most important, point out the lessons to learn so that you’ll know what to do—or what not to do—the next time you’re faced with similar circumstances. Finally, you can take the COACH’s Quiz to see how much you’ve learned.

RACE

Owner Who Denied Sublet Request Accused of Race Discrimination

This case started with a request by residents for permission to sublet their rental housing—and ended in July 2013, when a federal court ordered the owner and property managers to pay more than $113,500 in damages and attorney’s fees for fair housing violations based on race.

WHAT HAPPENED: The case involved an African-American couple who owned several properties in Connecticut. The husband, who managed the properties, was the sole owner of a property management company.

After buying a new home, the couple put their house up for sale, but to no avail, so they decided to rent it out instead. The house was owned by the wife (we’ll call her the “owner”), but the husband (“property manager”) handled the details. He rented the house to a married couple with children; the husband (resident) was African American, and his wife was white.

Only a few weeks after moving in, the residents learned that they qualified for a low-interest mortgage loan and bought a house. The resident called to inform the property manager that they had to break their lease. The property manager objected, so the couple decided to sublet the house. After posting an online ad, the residents realized that their lease required prior approval to sublet the property.

An African-American woman wanted to sublet the house, so the resident called the property manager. Although skeptical at first, the manager agreed to the sublease after the resident assured him that the woman had a good job and rental history and could pay the rent.

When the resident asked for written permission, the manager asked whether the woman was black or white. When the resident said she was black, the manager said he didn’t want too many black people at the property and that he only rented to the resident because his wife was white. He told the resident to try to find some good white people who could afford the property because the woman wasn’t going to be able to pay.

The resident said he was shocked and upset that he had to tell the woman that what happened. Disappointed, the woman renewed her search and didn’t find comparable housing for another year. The resident also told his wife, who was also upset. The couple moved out on schedule but never received their security deposit back. A month later, the house was rented to a white couple.

Following a HUD complaint and investigation, the government sued on behalf of the former residents and the woman who was denied the subrental. The lawsuit accused the owner, the property manager, and his company of fair housing violations based on race.

DECISION: After a trial, the court ruled against the owner, property manager, and his company. They were ordered to pay damages for economic loss, emotional distress, and punitive damages totaling $31,750 to the former residents and $44,341 to the woman; and to pay $37,422 in attorney’s fees. They also received court orders to institute training, a nondiscrimination policy, and reporting requirements.

REASONING: The property manager was liable for unlawfully denying housing to the woman because of her race. He initially gave the residents permission to sublet the home, but changed his mind after inquiring about her race and learning that she was black. That amounted to clear evidence that it was her race that led to his decision to prevent her from subleasing the home. There was no evidence of a legitimate reason to refuse to allow the woman to sublet. In fact, he agreed, and only changed his mind once he learned of her race, showing that there could have been no other reason for the denial other than her race.

The property manager was also liable for making discriminatory statements based on race. It’s unlawful to make statements that indicate any preference, limitation, or discrimination based on race and other protected characteristics. His statements expressed an unlawful preference—he explicitly said he would prefer a tenant who was white rather than a tenant who was black, and that he rented to the resident only because his wife was white.

It didn’t matter that he made the statements only to the resident; he was liable for damages caused to all three. Even though she heard about the statements from the resident, not the manager, the woman was injured by the discriminatory attack against her. And the wife, who was white, could sue for emotional distress caused by the manager’s racially discriminatory statements, relayed by her husband.

The owner was liable for the manager’s discriminatory conduct committed by her husband because he was acting as her agent when he took the discriminatory actions. Though he handled the rental, he didn’t act alone—he discussed with her all the actions he was taking. By the same token, his company was also liable for his discriminatory conduct because he was acting as its agent when he rented the property and made the discriminatory statements.

The owner, property manager, and his company were jointly liable to pay compensatory damages, but the court found only the property manager liable for punitive damages. He had to pay punitive damages because his “conduct was, by its very nature, indicative of evil motive.”

And, in a separate ruling, the court ordered the defendants to pay attorney’s fees to the fair housing organization that represented the residents and the woman denied the sublease. The court also ordered the defendants to receive annual fair housing training, post nondiscrimination policies, and comply with reporting requirements.

• U.S. v. Hylton, July 2013

LESSONS LEARNED:

1.   Even if the lease requires residents to get prior approval to sublet their unit, you could face liability under fair housing law if you refuse permission for discriminatory reasons. In this case, the court found direct evidence that the only reason the property manager refused the resident’s request to sublet was the subtenant’s race.

2.   Watch what you say. Under fair housing law, it’s unlawful to make statements that express a preference for residents of one race—or preference against those of another race. The court ruled that the resident, his wife, and the woman denied the sublease were all entitled to damages based on proof of injury caused by the manager’s racially discriminatory statements.

3.   You could be liable for damages caused by discriminatory statements even if people only hear them secondhand. Even though she heard about the statements from the resident, not the manager, the woman was injured by the discriminatory attack against her. And the resident’s wife was entitled to damages based on evidence that she suffered significant emotional distress as a direct result of the discriminatory comments.

DISABILITY—DISCRIMINATORY TERMS AND CONDITIONS

Owner Required Disabled Resident to Get Extra Rental Insurance

This case started when a woman called to inquire about rental housing in West Virginia—and ended in July 2013, when a federal appeals court upheld a $34,000 HUD ruling against the owner for disability discrimination.

WHAT HAPPENED: A prospect called in response to an ad for a two-bedroom home for rent for herself and her 48-year-old brother, who had autism and mental retardation. When she told him about her brother, the owner allegedly said she would need to obtain a bond to protect his property as a condition of her tenancy.

While viewing the home, the sister mentioned that her brother had “severe autism.” Based on what he knew about aggressive behavior in children with autism, the owner said her comment raised a “red flag,” triggering concerns about liability risks. Despite her assurances that her brother had never been violent or aggressive, the owner allegedly insisted on meeting the brother in person and told her that, to continue with the rental process, she’d have to:

• Provide a note from the brother’s doctor stating that he wouldn’t pose a liability threat;
• Obtain a renter’s insurance policy with $1 million in liability coverage; and
• Assume responsibility for any damage the brother might cost to the property.

As she was leaving, the owner asked the sister whether she earned the $2,000 minimum monthly income that he regularly imposed as a prerequisite for renters, and she said that she did. She said she took an application, but didn’t submit it because she thought the owner wouldn’t have rented to her.

A week later, the owner rented the property to a woman and her son who are not disabled. He didn’t require them to provide a doctor’s note, obtain liability insurance, or meet the minimum monthly income requirement that he had quoted to the sister.

After she filed a complaint, HUD filed a charge of discrimination against the owner on her behalf. The owner denied the charge, arguing that he had a legitimate basis for refusing to rent to the sister because she didn’t meet the financial requirements.

The case went through a series of proceedings. The owner won the first round when an administrative law judge interpreted his statements as a reasonable request for information to determine whether the brother was a threat. On appeal, the ruling was reversed, and the owner was ordered to pay $9,000 in damages and penalties. Upon further appeal, the amount of damages was increased to $34,000—$18,000 in damages to the sister and $16,000 in civil penalties.

The owner appealed, asking the court to overturn the HUD decision; HUD asked for enforcement of its ruling.

DECISION: The federal appeals court upheld the HUD ruling against the owner.

REASONING: Enough evidence supported HUD’s ruling thatthe owner violated fair housing law by making discriminatory statements, making housing unavailable because of a disability, and imposing discriminatory terms and conditions because of a disability.

The owner was liable for making discriminatory statements. He admittedly imposed conditions on the proposed tenancy because of the brother’s disability. He also admitted that he made statements based on the assumption that the brother could pose a threat to neighbors or property due to his disability. It didn’t matter that he made the statements only after the sister voluntarily disclosed her brother’s severe autism and mental retardation. The law simply prohibits statements to renters that indicate a limitation based on a disability, and the owner admittedly made such statements.

The owner was also liable for imposing discriminatory conditions and making housing unavailable because of the brother’s disability. The owner admittedly imposed what amounted to discriminatory terms and obligations on his rental negotiations with the sister based on his fears about the brother’s disability. This admission alone supports the FHA violations: By imposing more burdensome application procedures and generally discouraging the sister’s application, the owner otherwise made housing unavailable to them because of the brother’s disability.

The owner argued that he would have been justified in refusing to rent to them because the sister did not, in fact, meet his income requirements. But that didn’t excuse his conduct. To begin with, her ability to pay couldn’t possibly have motivated the owner’s conduct, since he learned of her income only after imposing the discriminatory conditions. In any case, that was just an excuse to cover up his discriminatory conduct: He didn’t impose the $2,000 minimum income requirement on the nondisabled applicant to whom he subsequently leased the home.

Finally, the owner couldn’t justify imposing the extra conditions because of liability concerns. He had no objective evidence that the brother would pose a direct threat to persons or property. Even if his requests for a meeting with the brother and the doctor’s note was, as he argued, an attempt to get such evidence, the owner couldn’t justify the other discriminatory conditions based on unsubstantiated stereotypes about autistic people in general.

• Corey v. Secretary, July 2013

LESSONS LEARNED:

1.   Requiring additional renter’s insurance or other requirements on prospects because they, or members of their households, have certain types of disabilities could lead to fair housing trouble. Owners can be liable for violating fair housing law by imposing additional terms and conditions of tenancy because of a disability.

2.   Don’t allow stereotypes to influence leasing decisions. Fair housing law recognizes a limited exception to permit owners to reject individuals whose tenancy would pose a direct threat to the health or safety of other individuals or whose tenancy would result in substantial physical damage to the property of others. But the exception doesn’t apply if it’s used to exclude individuals with disabilities based on stereotypes instead of objective evidence that there’s cause for concern.

3.   Treat prospects and applicants consistently—regardless of disability and any other protected characteristic. Applying more burdensome application procedures or imposing additional requirements because of a disability can lead to fair housing trouble.

DISABILITY—ASSISTANCE ANIMALS

Community Denied Disabled Resident’s Request to Keep Assistance Animal

This case started when a community found out that a resident had a large dog in his unit, despite its policy restricting pets over 25 pounds—and ended in June 2013, when a federal court upheld a $5,000 jury award to the resident, but refused to issue a permanent injunction against the community.

WHAT HAPPENED: The resident lived in a Florida condominium community for several years before the dispute arose. As a result of his service in the U.S. Air Force, he allegedly developed post-traumatic stress disorder (PTSD). Although the community had a policy against keeping animals that weighed more than 25 pounds, he agreed to take the dog in 2008 from a coworker who couldn’t care for it anymore.

He had the dog for about two years when, in 2010, the community notified him that he had to remove the dog because it exceeded the weight limit. He responded with a letter from his treating doctor that he needed the dog as an emotional support animal to alleviate limitations regarding social interactions and coping with anxiety and stress due to mental illness. 

The community sent the first of three letters requesting additional information to evaluate his request, including the nature and extent of his disability, details about his treatment, the specific training the dog received, and why he needed a dog that exceeded the weight restrictions for an equal opportunity to use and enjoy his dwelling.

The resident responded with a second note from his doctor, stating that he was under treatment due to anxiety related to military trauma. The doctor explained that it limited his ability to work directly with other people, a major life activity, but that he was able to work at home with the assistance of his emotional support animal.

Around this time, the resident claimed an additional disability related to his knees. The community sent a second letter requesting detailed information about his disabilities, treatment, the dog’s training, and specifically why he needed an oversized animal for his disabilities. The resident didn’t respond.

A few months later, the community sent a third letter requiring a sworn statement by the treating doctor asking for even more detailed information about his alleged mental disability, medications, treatment, need for the oversized dog, and its specific training. He was given a month to respond or remove the dog; otherwise, the community would pursue arbitration.

In 2011, the resident filed a complaint with HUD and the state fair housing agency, and then sued the community for violating fair housing law. In April 2013, the case went to trial, resulting in a jury award of $5,000 in damages. Since then, both parties requested court rulings in their favor: The community asked the court to overturn the jury verdict and order a new trial, while the resident asked the court for a permanent court order to keep the dog.

DECISION: The court denied both requests.

REASONING: The court denied the community’s request to overturn the jury verdict, but refused the resident’s request for a permanent court order against the community.

In previous proceedings, the court ruled that the community had effectively denied the resident’s request to keep his dog as an assistance animal. From the three letters provided by his doctor, the court ruled that the community had enough information to evaluate his request. Yet, it sent another letter for information that clearly went beyond the scope of a reasonable inquiry into his disability-related need to keep the dog as an assistance animal. Although it never removed the dog or otherwise punished him for the dog’s presence, the community never granted a waiver and specifically demanded that he remove the dog. By persisting in its intrusive quest for more—and largely irrelevant—information, the community effectively denied his request.

In denying the request for a new trial, the court ruled that the jury had enough evidence to find that the resident was disabled. Although he was able to work, there was evidence that he had PTSD, with resulting depression and anxiety, which affected his ability to maintain any job that required social interaction. The evidence also showed that his requested accommodation was necessary. Both the resident and his doctor testified that the dog alleviated his anxiety and depression, allowing him to maintain employment in his home.

To prove the community liable for denying his requested accommodation, the resident didn’t have to show that the community knew or was reasonably expected to know of the existence of both his disability and his need for accommodation. The law required only that the community receive notice of the alleged disability and the ability to conduct a meaningful review. A reasonable jury could have found that the community was sufficiently on notice of the resident’s disability and need for the requested accommodation based on his statements and letters.

In a separate ruling, the court refused to issue the resident’s request for a permanent injunction against the community requiring it to allow him to keep his dog, to establish a nondiscrimination policy, and to require all employees to attend annual fair housing training. The court ruled that the case didn’t present the type of flagrant violation that, on its own, justified such a court order. There was no evidence that the community engaged in a pattern or practice of discrimination or bad faith. It took no affirmative action to remove the dog, and, several months after the dispute arose, but before the lawsuit was filed, the community specifically informed the resident that the dog could stay. The evidence suggested that the community “attempted to comply with the law and sought legal advice—which, in hindsight, was poor.”

• Bhogaita v. Altamonte Heights Condominium Association, Inc., June 2013

LESSONS LEARNED:

1.   Your community may establish policies restricting the size or type of pets, but you must consider making an exception to allow an individual with a disability to keep an assistance animal. Under fair housing law, an individual with a disability may be entitled to keep an assistance animal as a reasonable accommodation when necessary to afford him an opportunity to use and enjoy his home.

2.   Follow HUD guidelines for evaluating requests for assistance animals. In a notice issued in April 2013, HUD clarified the fair housing rules governing requests for assistance animals. Among other things, the guidelines state that, “breed, size, and weight limitations may not be applied to an assistance animal.”

3.   Don’t go overboard when requesting information in response to a disability-related request for a reasonable accommodation. A community may request reliable disability-related information that’s necessary to verify that the person meets the law’s definition of “disability,” describes the needed accommodation, and shows the relationship between his disability and the need for the requested accommodation. In most cases, however, it’s not necessary to ask for an individual’s medical records or detailed information about the nature of his disability.

FAMILIES WITH CHILDREN

Community Accused of Enforcing Overly Restrictive Occupancy Standards

This case started when a family of eight moved into a four-bedroom unit—but it’s still in litigation. In March 2013, a court refused to dismiss a fair housing claim against a Florida condo association for discrimination and harassment based on familial status. Though the decision was based on procedural grounds, the case shows how enforcement of occupancy standards can lead to fair housing trouble.

THE CHARGE: The government filed this lawsuit against a Florida condominium association and its former management company after the family filed a HUD complaint.

In 2006, according to the complaint, the couple rented a 1,500-square-foot, four-bedroom townhome for themselves and their six minor children in the 249-unit community. At the time, they said, they were unaware that the community’s rules allowed only six occupants in four-bedroom units. Allegedly, the community had similarly restrictive limitations on the number of people who could live in two- and three-bedroom units.

The complaint alleged that the community was subject to a county ordinance with its own occupancy limits, which were based on the square footage of the unit and the bedrooms. Based on its size and number of bedrooms, the government alleged, the family’s unit could legally house 11 occupants.

Six weeks later, the couple said, the community sent them a letter containing accusations against the children and threatening fines. When the wife called to discuss the letter, a representative of the management company allegedly said that having eight occupants in the home was “a problem” and a violation of community rules.

Soon after, the complaint alleged, the condo board and management company representatives met with their former attorney, who advised that the six-person occupancy limit was enforceable. Allegedly, the attorney sent the couple a letter that they were in violation of the community’s occupancy standards, and threatened eviction because of the number of occupants in the unit. Although they were allowed to remain for another year, the family claimed that they were subjected to harassment while living there.

After the family filed a HUD complaint, the Justice Department sued the community and the management company, alleging discrimination and harassment based on familial status. The lawsuit accused the community of a pattern or practice of violating fair housing law by adopting, maintaining, ratifying, and, along with the management company, enforcing overly restrictive occupancy standards.

The defendants asked the court to dismiss the case or, alternatively, add its former attorney to the suit.

DECISION: The court denied their requests.

REASONING: The court ruled that the case could go on without the former attorney. His involvement with the community or its enforcement of the occupancy limits ceased at the termination of his representation of the defendants. The fact that he acted as their “agent” didn’t make him a required party. Although an agent engaging in discriminatory conduct may be named as a defendant in a fair housing case, there was no requirement that each and every agent of the community that’s alleged to have discriminated against the victim be named as a defendant. The court wouldn’t require his addition or dismiss the case based on his absence.

• U.S. v. Townhomes of Kings Lake HOA, Inc., March 2013

Editor's Note: For an update on this case, click here.

LESSONS LEARNED:

1.   Make sure that your occupancy standards are reasonable. Communities can face accusations of discrimination based on familial status for enforcing overly restrictive occupancy policies that have the effect of excluding families with children under 18. “Housing providers may set occupancy standards but those standards cannot be so restrictive that they exclude families who, based on a home’s overall size and configuration, should be able to live there,” HUD Assistant Secretary for Fair Housing and Equal Opportunity John Trasviña said in statement announcing this lawsuit. “HUD and the Department of Justice are committed to taking action against anyone who unlawfully denies housing to families with children.”

2.   Review HUD guidelines in evaluating occupancy standards. As a general rule, HUD guidelines state that two people per bedroom—regardless of age or gender—is a reasonable occupancy standard, although it may be reasonable to depart from the two-person/bedroom limit, depending the size of the bedroom, size or configuration of the unit, the age of the children, and other factors.

3.   Comply with state and local occupancy standards, which may be more generous than HUD’s general two-person/per bedroom rule. In this case, for example, the complaint alleged that the applicable county law allowed for more than eight people to occupy the four-bedroom unit based on its square footage and number of bedrooms.

• Fair Housing Act: 42 USC §3601 et seq.