V. John Ella and Malcolm P. Terry
Your client, who owns a couple of rental properties on the side, calls you in a tizzy: She has just received a complaint from the U.S. Department of Housing and Urban Development (HUD) alleging that she has engaged in discriminatory housing practices under the federal Fair Housing Act, 42 U.S.C. Section 3601-3619 (FHA). Not only that, but she was named personally, along with her property manager, even though she was careful to run all of her rental agreements through her management company LLC. Moreover, the property “owner” was a partnership and HUD wants the names of all the individual general partners as well, to add them to the complaint. What to do?
Background
The Fair Housing Act prohibits discrimination based on race, color, national origin, religion, sex, disability or familial status in most housing-related transactions. HUD has the authority to investigate complaints of discrimination involving, among other things, home sales, rentals, advertising, mortgage lending and insurance, property insurance, and environmental justice. Although the Fair Housing Act does not include sexual orientation and/or gender identity as protected classes, in 2014 HUD published a rule stating that lesbian, gay, bisexual and transgender (LGBT) individuals have access to HUD programs, and commissioned a study on housing discrimination against same-sex couples in the rental market.
In fiscal 2013, HUD, along with its partner Fair Housing Assistance Program (FHAP) agencies, received 8,368 complaints of housing discrimination, of which only 72 were filed in Minnesota. This number is actually down slightly from previous years. In Minnesota, charges of housing discrimination are often filed with the Minnesota Department of Human Rights (MDHR) under the Minnesota Human Rights Act. These numbers do not include MDHR charges. The majority, 53 percent of HUD complaints nationally, were based on disability. The next two largest categories were race, 28 percent, and familial status 14 percent. The four most common issues in FY 2013, in order, were (1) discriminatory terms, conditions, privileges, services and facilities in the rental or sale of property; (2) failure to make a reasonable accommodation; (3) refusal to rent; and (4) coercion or intimidation, threats, interference and retaliation.
Procedure
HUD operates in ways that are similar to, but qualitatively different from, the Equal Employment Opportunity Commission (EEOC). Although HUD has an office in Minneapolis, complaints are investigated through its Midwest Region Office in Chicago, Illinois. Anyone can file a complaint on their own behalf. HUD than has 10 days to serve the complaint by U.S. mail. HUD complaints often name individual property managers, landlords or other individuals personally, as well as any corporate entity involved in the housing relationship. The respondents then have 10 days to submit an answer. However, HUD, unlike the MDHR, is flexible in working with attorneys to allow more time to gather information and response if a request for such is timely made. HUD will typically request documents and will usually conduct telephone interviews. In the majority of cases the HUD investigator will attempt to conciliate the matter to settlement. In this regard, HUD is different from the EEOC. EEOC investigators dismiss a significant majority of discrimination charges. In FY 2103, HUD only issued no-reasonable-cause findings in 35 percent of all cases. A full quarter of all cases, however, were dismissed “administratively” because the complainants backed out or did not respond or cooperate. A total of 37 percent of all cases were conciliated or settled, and only 2 percent resulted in a “charge of discrimination,” equivalent to a finding of probable cause by the EEOC. Only 1 percent of all cases were referred to the Department of Justice for prosecution. So HUD finds no reasonable cause less often than the EEOC, but also finds cause less often, because it conciliates settles almost 40 percent of complaints.
If a case is not settled or dismissed, and a charge is issued, the case proceeds to an administrative law judge, unless either side requests that it be heard in U.S. District Court. Most defendants opt for District Court. In 2013, 22 cases were sent to District Court, nine were settled by consent order, and zero resulted in an administrative law judge decision.
Tips for effective advocacy
The authors have dealt with recent complaints involving companion animals including parrots, rats, cats and dogs; requests for accessible parking spots and wheelchair ramps; non-renewal of a tenant in a protected class based on multiple complaints of a barking dog; accusations that a potential buyer of East Indian heritage was not provided a tour of a model apartment; and a claim that a prospective tenant was told that a building did not allow children. HUD acts aggressively and will investigate virtually every type of complaint. Often, complainants in Minnesota are represented by an attorney from legal aid, which recently received a large monetary grant from HUD to combat housing discrimination.
Prevention:For larger property owners and multi-unit facilities, it is a good idea to provide annual training to avoid problems or misunderstandings and head off any conciliation requirement that training take place.
Tender:Clients should tender complaints to all applicable insurance providers. Coverage may be available.
Individual respondents: It is often not worthwhile trying to get individual respondents dismissed. Case law provides significant latitude for HUD in this context, and there is no efficient mechanism to weed out respondents early in the process. Use of an LLC as the property “owner” instead of a partnership may avoid all general partners from being added to a complaint.
Be prepared to discuss settlement: As noted, HUD does not typically dismiss a complaint before making an attempt to conciliate. You can never be certain what direction the investigator is leaning, so “nuisance” type settlements are, for better or worse, par for the course in many of these cases. Ultimately, of course, if the facts are clear, your client can take its chances and insist on a finding.
Non-monetary relief: When conciliating, HUD investigators often request non-monetary relief, in addition to a monetary payment, typically including training, policies and postings on housing discrimination. Prepare your client for this aspect of settlement.
Consent decrees: HUD is a party to all settlements. Read the small print. HUD may insist on a consent decree which allows it to retain jurisdiction over the matter. These proposed agreements may also mean that a second violation will result in a higher monetary penalty. “Settling” the first claim may be viewed as an admission, and not a release of claims without admitting liability, depending on the language of the agreement, causing any subsequent claim to be seen as a second violation.
Above all, clients should understand that navigating HUD complaints takes patience. It is unproductive to be emotional about being accused of discrimination when sometimes it is simply part of doing business in the housing and rental property business.
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V. John Ella is an attorney at the Minneapolis office of Jackson Lewis P.C. He regularly represents defendants in responding to charges of housing and employment discrimination. Malcolm Terry is an attorney at Bernick Lifson where he practices in the areas of employment and housing law.
