Vicarious liability for housing discrimination clarified

If you live in a housing community (i.e. a common interest development, such as a condominium association or a housing cooperative) and another resident of that community commits a discriminatory or harrassing act against you, whom can you blame? The other resident only, or also the community association?

Possibly both, it seems. Final Rule FR-5248-F-02 was issued by the U.S. Department of Housing and Urban Development on 14 October 2016. It provides, among other things, that “A person is directly liable for … [f]ailing to take prompt action to correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the discriminatory conduct and had the power to correct it.”

Community associations  have some regulatory powers over their member/residents, and also some duties to exercise those powers. Those powers and duties are spelled out in applicable statutes and in the communities’ own governing documents. For example, an association’s governing documents may prohibit a resident from disturbing, by noise or otherwise, residents in other units and may grant the association’s board of directors the power to enforce that prohibition. If a racist resident were to harrass or disturb a neighbor because of that neighbor’s race, and if the association failed to “take prompt action to correct and end” that behavior, the association could be vicariously liable for that violation of federal fair-housing law.

Below I offer some thoughts about how to manage this risk. But first here is the HUD discussion of the arguments made about how this new rule applies to community associations:

Issue: A commenter expressed concern that proposed § 100.7(a)(1)(iii) creates liability on the part of a community association (homeowner association, condominium or cooperative) for the illegal acts of residents over whom they have no control. The commenter urged HUD to remove or revise the proposed rule’s extension of direct liability to community associations for the discriminatory actions of non-agents. The commenter stated that community associations generally lack legal authority to mandate that residents take actions described in the preamble of the proposed rule because the associations cannot evict homeowners or otherwise impose conditions not specifically authorized by the association’s covenants, conditions, and restrictions (CC&Rs) or state law. The commenter suggested that if the language in § 100.7(a)(1)(iii) remains, it should be modified to clearly state which terms and conditions in association bylaws and regulations constitute a duty on the part of an association or its agents to investigate and punish residents for illegal discriminatory housing practices.

HUD Response: As noted above, HUD has slightly revised § 100.7(a)(1)(iii) to clarify that a housing provider is liable under the Fair Housing Act for third-party conduct if the provider knew or should have known of the discriminatory conduct, has the power to correct it, and failed to do so. HUD also notes that the rule does not add any new forms of liability under the Act or create obligations that do not otherwise exist. The rule does not impose vicarious liability (see § 100.7(b)) on a community association for the actions of persons who are not its agents. Section 100.7(a)(1)(ii) describes a community association’s liability for its own negligent supervision of its agents, and § 100.7(a)(1)(iii) describes a community association’s liability for its own negligence for failing to take prompt action to correct and end a discriminatory housing practice by a third-party. With respect to § 100.7(a)(1)(iii), the rule requires that when a community association has the power to act to correct a discriminatory housing practice by a third party of which it knows or should have known, the community association must do so.

As the commenter recognizes, a community association generally has the power to respond to third-party harassment by imposing conditions authorized by the association’s CC&Rs or by other legal authority. (31) Community associations regularly require residents to comply with CC&Rs and community rules through such mechanisms as notices of violations, threats of fines, and fines. HUD understands that community associations may not always have the ability to deny a unit owner access to his or her dwelling; the rule merely requires the community association to take whatever actions it legally can take to end the harassing conduct.

What does this rule suggest for risk management by community associations? Here are some thoughts:

  • The association’s governing documents should perhaps state not only that the association prohibits itself from engaging in illegal discrimination or harrassment, but also that it prohibits such conduct on the part of its members.
  • To the extent that the association has the power to accept or reject new members and residents (as cooperatives typically do), the governing documents should perhaps require the decisionmaker to make reasonable inquiries about any history of discriminatory or harrassing conduct by a candidate, and to reasonably avoid approving the admission of any candidate who could be expected to engage in such conduct.
  • The association should perhaps ensure that it has a procedure for the safe reporting of discriminatory or harrassing behavior by members and residents against one another and for the “prompt” intervention of the association to verify and deal with it.
  • Trying to avoid vicarious liability by giving up enforcement powers seems impractical in most cases. Members and residents depend on associations to keep the premises livable, if necessary by enforcing rules against disruptive residents.
  • This potential liability seems tricky enough that it may warrant a consultation with a qualified attorney about rules that an association proposes to adopt in order to deal with it. (I’m not one, in case that isn’t obvious.)

Thanks to Matt Ober, Esq., for calling community associations’ attention to this new rule.

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