The Hidden Costs of a Housing Discrimination Case

Our recent theme on the blog has been familial status discrimination. My first article on the topic delved into age-related rules that are commonly used by landlords and gave some guidelines on which rules to eliminate and which need to be revised to comply with Fair Housing law. My most recent article was about a property manager who tried to keep residents with children separated from those without children. Her intent was to keep the children in a safer part of the property and to keep noise levels down for residents without children. The fact patterns in both articles were drawn loosely from recent housing discrimination cases based on familial status filed by HUD.

Before we leave the topic of familial status, I thought it worthwhile to take a look at why landlords need to care about this issue. In 2015, a number of housing discrimination cases based on familial status were resolved via settlement. I’ve summarized the results of five such cases below. Pay attention to two things: (1) the amount of money paid by the landlord, and (2) the administrative burdens placed on the landlord. Since landlords are running a business, the amount of financial liability is always a significant factor, so we need to be aware of our risk. But, what most landlords don’t realize is that discrimination cases create numerous additional administrative obligations for the landlord.     

Case Number One – United States v. Brisben Chimney Hills Limited Partnership (March 27, 2015)

In this case, a Kansas owner, management company, and individual managers were accused of implementing age-related rules that discriminated against families with children, much like those in my blog post titled Beware of . . . Children, linked here. Specifically, they were accused of the following:

• adopting rules requiring adult supervision of children under age 16 at all times,

• prohibiting or restricting the activities of children in the common areas,

• prohibiting the unsupervised use of the swimming pool by those under 16,

• limiting the number of children under 16 that one adult could supervise at the pool, and

• prohibiting bicycles and other sports equipment on the property. 

In order to settle the case and avoid additional litigation costs, the landlord agreed to pay $60,000.00 to one particular tenant, to pay a civil penalty of $10,000.00 to the federal government, and to pay $100,000.00 into an interest-bearing account to be distributed to other individuals who were harmed by the landlord’s practices. The landlord then had to publish a notice to the public in at least three editions of three major newspapers notifying former residents that they might be entitled to monetary compensation if they had been harmed by the landlord’s age-related restrictions and providing information on how to obtain the compensation. You can read the settlement order in its entirety here. 

Case Number Two – United States v. J & R Associates (May 4, 2015)

This case involved a Massachusetts landlord accused of steering families with children to certain areas of the property, much like the case discussed in my most recent blog post, linked here. In order to settle the case, the landlord agreed to pay $135,000.00 to the individuals harmed by the discriminatory practices, publish a notice to the public in at least three editions of three major newspapers notifying former residents that they might be entitled to monetary compensation if they were harmed by the company’s discriminatory practices and providing information on how to obtain the compensation, and to pay a civil penalty of $7,500.00 to the federal government. You can read the entire settlement order here. 

Case Number Three – United States v. Twin Oaks Mobile Home Park, Inc., et al. (December 17, 2015)

This case involved a Wisconsin mobile home park owner and manager accused of steering families with children to certain areas of the property considered to be “low activity”. The park settled its case with HUD by agreeing to pay $86,000.00 to the individuals harmed by the discriminatory practices, to publish a notice to the public in at least three editions of three major newspapers notifying former residents that they might be entitled to monetary compensation if they were harmed by the company’s discriminatory practices and providing information on how to obtain the compensation, to provide rent and deposit credits to particular tenants in the amount of $5,100.00, and to pay a civil penalty of $10,000.00 to the federal government. I've linked the entire settlement order here. 

Case Number Four – United States v. Williams (August 31, 2015)

This case involved three individuals who owned and managed an Illinois mobile home park accused of refusing to rent to families with children. The park settled its case with HUD by agreeing to pay $45,000.00 to the individuals harmed by the discriminatory practices, to publish a notice to the public in at least three editions of three major newspapers notifying former residents that they might be entitled to monetary compensation if they were harmed by the company’s discriminatory practices and providing information on how to obtain the compensation, and to pay a civil penalty of $30,000.00 to the federal government. You can download the entire settlement order here. 

Case Number Five – United States v. Wallschlaeger, et al. (July 28, 2015)

This case involved three different owners and managers of another Illinois mobile home park accused of both refusing to rent to families with children on the same terms as others, and of steering such families to certain areas of the property. These parties settled their case with HUD by agreeing to pay $217,500.00 to the individuals harmed by the discriminatory practices and to pay a civil penalty of $34,000.00 to the federal government. The entire settlement order is linked here. 

If you’re keeping score, that’s $740,100.00 paid out by landlords in five familial status housing discrimination cases in 2015. This list is not exhaustive, and does not include the amounts that these landlords paid their own attorneys to handle the case throughout the process, nor does it include the administrative costs imposed by the settlement orders. Now, the $740,100.00 is plenty reason to make sure your policies are not discriminatory against families with children, but I also want to point out the significant administrative burden that is imposed by these settlements. This cost aspect is rarely considered by landlords when conducting risk assessments on housing discrimination issues.

The Standard Obligations

Almost every HUD settlement order has certain administrative burdens that are placed on the landlord as a condition of settlement. Here’s an example of what is typically required:

• An injunction requiring that the landlord refrain from any discriminatory conduct in the future. This is not a major deal, as the law already prohibits such conduct. However, the injunction creates additional future penalties if subsequent violations occur, which heightens the future financial risk to the landlord.

• Within 15 days of the settlement order, the landlord must adopt, implement, and maintain a policy of non-discrimination and distribute the policy to all employees and residents. The policy will advise residents of toll-free phone numbers to call if they believe they have been the victim of discriminatory conduct.

•  A requirement that the landlord include the following in a prominent place and in legible form in the rental office and on all advertisements and informational/promotional documents:

“We are an equal opportunity housing provider. We do not discriminate on the basis of race, color, national origin, religion, sex, familial status, or disability.” 

• Within 15 days of the settlement order, the landlord must provide a copy of the settlement order and non-discrimination policy to all employees and obtain a signed statement from each employee that he or she has received and read the documents, has had the opportunity to have questions answered about them, and agrees to abide by the order and the policy.

• Within 30 days of the employment of any new individual involved in showing, renting, or managing units, the landlord must provide a copy of the settlement order and non-discrimination policy to the individual and obtain a signed statement from each that he or she has received and read the documents, has had the opportunity to have questions answered about them, and agrees to abide by the order and the policy.

• Within 90 days, the landlord and all staff members must undergo in-person training on the Fair Housing Act, with emphasis on familial status discrimination, and provide documentation of such training to HUD. The training must be conducted by an independent, qualified third-party, approved in advance by HUD, and shall last at least two hours. Each new employee must receive such training within 60 days of employment.

• Within 30 days after the occurrence, the landlord must also notify HUD of the following:

any written or oral complaint of housing discrimination against it

any change to the landlord’s rules or practice regarding the non-discrimination policy

               proof of compliance with its obligations under the settlement order

a list of the names and addresses of all tenants to whom the non-discrimination policy was provided

• Within 90 days after the order and every six months thereafter, the landlord shall submit a report containing the following:

proof of compliance with Fair Housing training

notification and documentation of the adoption and implementation of any non-discriminatory rules changes mandated in the order (more on that below)

photos of management office(s) showing fair housing signs and posting of enforcement procedures for each of the landlord’s properties

list of all tenants, including the number of occupants under age 18

copies of any documents related to any specific non-discriminatory rules or procedures mandated by the order (see below)

copies of any advertisements for each of the landlord’s properties

The Specific Additional Obligations

These are just the boilerplate obligations that are a part of every familial status settlement. In addition to these standard obligations, landlords are also subjected to additional obligations that are particular to the facts of their case. For example, in almost every case in which the landlord is accused of steering families with children to a certain part of the property or refusing to rent to them altogether, the landlord is required to develop a proposed nondiscriminatory policy for showing units to prospective tenants. The new policy must be submitted to HUD for review and approval, and must include use of the following documents:

• Guest Cards that provide details of all prospective tenants and their interactions with management

• Phone Logs that detail phone interactions with all prospective tenants

• An Availability List of all available units and those that will likely become available within the next 30 days; this list must be shared with each person who inquires about the availability of units, whether in person or by phone

• Rental Applications that are completed by all interested renters

• A Waiting List that identifies the uniform and non-discriminatory manner in which applicants will be selected for units as they become available.

Landlords accused of imposing improper age-restrictions are typically required to both rescind the improper rules and also develop enforcement procedures for alleged rule violations, including the adoption of a Rule Violation Log that shows the date and nature of any violation, as well as any action taken by management in response to the violation. All residents must then be given notice of the new enforcement procedures, and a copy of the procedures must typically be posted in the rental office for no less than 90 days. 

As you can see, discrimination cases based on familial status not only cost landlords hundreds of thousands of dollars, but also require many hours of additional administrative activities, with additional penalties from the court for failure to comply with the administrative obligations. While money is the primary goal of a business, time is still our most precious resource. Housing discrimination cases always result in a loss of time that could otherwise be spent on more valuable endeavors. These cases always bring about a loss of money, loss of time, and loss of peace of mind. Pay attention to the guidelines in my familial status articles, and you’ll almost certainly have more of each.