Summer Update (Source of Income, Swimming Pools, and CARES Act Notices)

Howdy, gang. It’s been a while, but I’m back with a few updates on issues that are important in the landlord-tenant space. We’re going to look at three topics today:

1. The state of the law on Source of Income
2. New swimming pool legislation
3. Notice requirements for CARES Act properties

The state of the law on Source of Income

As most of you know, the city of Louisville passed a local ordinance in 2021 that required housing providers to accept Section 8 vouchers for tenants who otherwise meet the provider’s Tenant Selection Policy. Early in 2024, Lexington’s city government did the same.

However, the state legislature passed a bill in April, then overrode the Governor’s veto, and prohibited local governments from requiring housing providers to accept any federal assistance. Seemingly, that bill nullified the ordinances in Lexington and Louisville.

But there is one small part of those ordinances that the state law did not nullify – it did not nullify the part of the local ordinances that prohibited housing providers from “advertising” that they don’t accept housing vouchers. Fair Housing law defines “advertising” extremely broadly – it covers basically any communication to a tenant or prospective tenant. That creates an absurd situation in which the law allows you to refuse to accept housing vouchers but prohibits you from communicating that you don’t accept housing vouchers. Yes, welcome to Clown World.

The bad news is that the situation is complicated even further. If you’ve read my articles on Fair Housing issues, you’re aware of a housing discrimination theory called Disparate Impact. Disparate Impact occurs when a housing provider adopts a policy that, even though it may be neutral on its face, has a disproportionate adverse effect on a protected class.

HUD is apparently pushing local fair housing advocates to file housing discrimination claims against housing providers who refuse to accept housing voucher on the basis that such a policy has a disproportionate adverse effect based on race, since most voucher holders in Louisville and Lexington are black.

If such a claim is filed, the housing provider would have to show that their policy is (1) necessary to achieve a legitimate business interest and (2) written in the least discriminator manner possible to achieve that interest.

 That leaves housing providers with two options. If you can provide evidence that accepting housing vouchers substantially hurts your business as a housing provider, then you may be able to defeat a Disparate Impact claim. This is an aggressive position and may invite housing discrimination claims to test your position. If you’re comfortable with that, go for it.

The more cautious path is to adopt a policy that you will rent to the first qualified applicant who is ready, willing, and able to sign a lease and begin paying rent. This opens your process to voucher holders but does not require you to wait until the voucher approval and inspection process are completed if you get another qualified applicant who is ready to sign a lease and begin paying rent before the voucher holder is able to do so.

New Swimming Pool Legislation

The state legislature also passed a new law that that requires lifeguards at residential communities with swimming pools if they have the following:

• They allow those 17 or younger to enter the pool area without a responsible adult 18 or older present; or
• The pool has induced waves or slides; or
• The pool has an entry from a height above the pool deck from a diving board, platform, climbing wall, or other similar feature.

If your pool meets any of these criteria, one lifeguard is required for every 100 swimmers. The Cabinet for Health and Family Services, which creates pool regulations for the state, will be amending its regulations over the fall and winter. So, for now, they intend to do more education than citing, but you likely want to make arrangements for compliance with this law if it applies to your pool.

CARES Act and Notice Requirements

As you know, the question of whether the CARES Act 30-day notice requirement still applies has been batted around in several counties in Kentucky since late last fall. In mid-May, the Fayette Circuit Court settled the issue for housing providers in Lexington. Judge Van Meter issued a thoughtful and well-reasoned opinion that, since the notice requirement had no expiration date and was not tied to the national state of emergency unlike other portions of the CARES Act, the 30-day notice is still in effect.

So, for housing providers in Lexington, you must give a 30-day notice to pay or vacate if your property is covered by the CARES Act.

The CARES Act covers any property that (1) has a federally backed mortgage, such as with Fannie Mae, Freddie Mac, or the FHA or (2) receives federal assistance, subsidies, or tax credits of any kind, including Section 8 vouchers. In the case of vouchers, it only applies to the individual unit that receives the voucher, not the entire community.

There are several databases you can search to see if your property has a federally backed mortgage. Click the links below to search. The owner databases are likely more accurate, but require an SSN to search.

• HUD's FHA database
• Freddie Mac’s owner database
• Freddie Mac's tenant database
• Fannie Mae’s owner database 
• Fannie Mae's tenant database

In Lexington, there are multiple tenant attorneys at each session of eviction court. If they get one of your tenants as a client, they will look up your property in these databases. If the database shows a match, they will make a motion to dismiss your case if you did not give a 30-day notice to pay or vacate.

However, we have recently found that database to be wrong on occasion. Here’s my recommendation if you don’t believe your property is covered by the CARES Act: look up your property in each database. If it shows a match in either database, reach out to your lender and obtain an affidavit from the lender that your loan is held and serviced by that bank and is not serviced or insured by Fannie Mae, Freddie Mac, the FHA, or any other federal government affiliate.

If you know your property is covered by the CARES Act, give 30-day notices. Otherwise, your eviction case will likely be dismissed in court.

For the housing providers in Louisville, the Jefferson Circuit Court has ruled that the 30-day notice requirement has expired. That case is on appeal with the KY Court Appeals. I expect they will overturn that ruling, but we’ll see what happens.

That’s it for today. I’m going to spend most of July sitting in a gym watching my daughter play basketball or at a field watching my son play baseball, or at the beach. Still, if you need help on something, shoot me an email at smarshall@tripleslaw.com. If you need a lease package, I have you covered. I’ll be glad to let you look at it before you purchase.

Have a great rest of your summer!