HUD Significantly Expanded Possible Harassment Liabilities for HOA Boards

#HOAHarassment

Perhaps the most notable federal protection for homeowners against HOA harassment and discrimination exists in the Fair Housing Act (FHA) of 1968 that prohibits the discrimination of individuals based upon their race, color, religion, sex, handicap, familial status, or national origin. We have previously gone into depth regarding how the FHA applies to HOA boards if you need a quick refresher.

As part of the Fair Housing Act, Congress granted the Department of Housing and Urban Development (HUD) the authority to adopt rules to meet the statute’s objectives. In October of 2016, the department completed the formal rulemaking process and published the final rules that are now law. According to HUD, the reason the department now needed to promulgate the new rules was because “no standards had been formalized for assessing claims of harassment under the Fair Housing Act.” HUD goes on to say that courts are having a difficulty applying a consistent standard from Title VII of the Civil Rights Act, so the rulemaking is warranted.

Now let’s get to the important stuff: one of the new rules codified by HUD can potentially significantly affect the number of harassment claims an HOA will face.

What Does the New Harassment Rule Say?

As you can see, when it comes to the proper administration of an HOA, a clear understanding of the Fair Housing Act is mandatory. The board members should not stop there—a complete understanding of the new HUD rules is also highly recommended. Today we will focus on what might be the most significant new rule: liability for discriminatory housing practices, found at 24 C.F.R. §100.7(a)(1)(iii).

The law states that an HOA board member will be held 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,” (emphasis added). It is likely HOA boards will come to resent that very pregnant sentence in the years ahead. Let’s unpack the rule to elucidate how liability will attach to possible violators.

First, the discrimination in question must be done to one the protected classes listed above. If there is a discriminatory act, like an HOA maintenance worker refusing to serve a single mother as an example, then a court will examine to see if the board:

  1. Knew or should have known about the alleged harassment,

  2. Took prompt action to correct the injustice,

  3. Has the power to correct the alleged behavior.

Now we must call your attention once again to the underlined phrase above, “by a third-party.” As we will now examine, that is quite the loaded term.

What Does “Third-party” Mean in Application?

A better question would be: what doesn’t the term “third-party” mean? Before, most harassment claims faced by HOA boards regarded the protections for people with disabilities such as reasonable accommodation and reasonable modification requests. Although HUD claims that the new rule does expand liability for HOA boards, this just doesn’t square with reality. Fact is, with the rule formalized, it is much easier for homeowners to use the FHA to resolve harassment claims as there is now much greater clarity into what type of claim is permissible.

As we tease out a couple of examples, you will see that an HOA board could be held liable for nearly any type of harassment that occurs on the properties. Under the previously more common discrimination claims like reasonable accommodation requests, the potentially liable act is committed by the folks with the power to make such decisions, the HOA board of directors. When the federal government attaches liability to the board for all “third-party” associates, the universe of possible violators expands immensely.

It is difficult enough for some HOA boards to control the behavior of select rogue directors, just imagine what is in store now that all an HOA’s employees could be subject to a harassment claim. And it is not just for the more obvious forms of discrimination that we are familiar like race and religion—we must seriously consider familial status as well. Familial status discrimination would describe the example we used above with the maintenance employee and the pregnant homeowner. The protections are even more extensive; nearly any comment to a woman about her living status could also be considered impressible harassment under the new rules.

So who else is included in the third-party designation? Besides employees of the property management firm, any contractor performing a task on behalf of the HOA board is responsible for abiding by these new rules. Even more surprising, fellow homeowners fall under the “third-party” designation meaning that HOA directors can be liable for harassment between members of the community.

How to Use the New Law as Protection from Harassment

So let’s use that last example of homeowner on homeowner harassment to see how to best use the law to your advantage. We can shorten the three requirements for liability to attach to knowledge, power, and timely action. The first element is the most important—the board isn’t liable for behavior that it doesn't know or shouldn’t be expected to know. If you are unfortunately victimized by such harassment, the first step is to write a formal letter to the board, (go ahead and cite 24 C.F.R. §100.7(a)(1)(iii)), informing the directors of their legal responsibility.

The issue of power in such a scenario is mute as it is difficult to claim that an HOA board has the power to enforce paint color requirements against members, but no disciplinary means to remedy a harassment claim. Most importantly for the board, is that they act as soon as feasible to address the claim. It is possible to debate the effectiveness certain courses of action, but for a board to not address a claim of harassment by a fellow member—or anyone else associated with the HOA—is a surefire way to lose a claim of harassment under the new HOA rule. If there is one important takeaway, it is that prompt action upon receipt of a harassment claim by an HOA board is necessary to comply with the FHA.