Author: David Kline – Page 2

The Wheels of Justice Speeding Up! Bank of America v. Miami

A recent Fair Housing Act case might give community associations another tool to use in addressing bad actors who commit unlawful discrimination within the community.

The City of Miami sued Bank of America and Wells Fargo for predatory mortgage lending practices that caused a reduction in the City’s tax revenue. The City alleged the banks violated the Fair Housing Act by lending money to minority home buyers on less favorable terms (higher interest subprime loans) than similarly qualified non-minority applicants and homeowners with higher interest subprime loans were more likely to default on their mortgages. The banks were allegedly unwilling to renegotiate the terms of their predatory loans and foreclosed on many properties in minority neighborhoods. This reduced the value of the foreclosed homes and other homes in the neighborhoods, which caused a reduction in the City’s tax revenue. The complaint also alleged the City had to spend more money on services in these neighborhoods to reduce blight and address the dangerous conditions found in communities with high vacancy rates.

In response, the banks argued that the City was not a “proper party” to this lawsuit, because it was not the direct victim of the banks’ alleged discriminatory conduct. Essentially, the banks asserted that the City did not have standing to sue because the City was not within the Fair Housing Act’s “zone of influence.” The banks also argued that the alleged damages suffered by the City were too far removed from the banks’ alleged discriminatory conduct for its wrongdoing to be considered the proximate cause of the City’s lost tax revenue.

In a 5-3 decision, the United States Supreme Court ruled that the City was an “aggrieved party” under the Fair Housing Act and that it has standing to sue, because Congress intended to confer standing broadly under the Fair Housing Act. The Court remanded the case to the lower court to determine whether there was a direct relation between the injury asserted and alleged discriminatory conduct. [1]

What does this mean and how far could such an expansive reading of standing extend to an association?

For example, if a community association learns of discriminatory conduct within its community, would the association be able to bring a Fair Housing Act complaint against the perpetrator?

Suppose a homeowner harasses his neighbor because of the neighbor’s race, and the association’s board and management divert resources to investigate and remedy violations of its governing documents. Could the association sue the harassing homeowner under the Fair Housing Act?

What if a board member sexually harasses a resident during a board meeting? Certainly, the association could be exposed to liability for that director’s conduct. But, could the association distance itself from that director’s conduct by suing him for violating the Fair Housing Act?

Suppose the board of directors grants a request for a reasonable accommodation under the Fair Housing Act to provide a tenant with a disability exclusive use of a desirable parking space. If an angry homeowner thereafter harasses that tenant, because of the accommodation, could the association sue the homeowner for violating the Fair Housing Act?

The answers to these questions are not yet known. However, in 2016, the Department of Housing and Urban Development (HUD) changed its regulations governing enforcement of the Fair Housing Act to clarify that housing providers, including associations, may (and perhaps in the view of HUD, should) be liable for failing to take appropriate action in response to alleged discrimination or harassment within their communities, and where such bad behavior is not necessarily a violation of the CC&R’s.

This indicates that the Fair Housing Act may be used as a sword (not a shield) by associations confronted with unlawful discrimination. In other words, the way seems clear for associations to commit resources and use the Fair Housing Act to combat discrimination, at least where the bad actors are members or residents of the association.

[1] In contrast, consider Dodaro v. Std. Pac. Corp., 212 U.S. Dist. LEXIS 47099 wherein plaintiff homeowners filed suit against developers who targeted poor borrowers, and facilitated subprime loans with accleration clauses, the failure of which loans allegedly led to the devaluation of all other homes in the community. The developers sought and were granted dismissal of all claims.

Unintentional Housing Discrimination

Supreme Court Says Unintentional Housing Discrimination is Against the Law: What Could This Mean for Your Community Association?

By David A. Kline, Esq.

On Thursday, June 25, 2015 the United States Supreme Court announced its decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc.

The Federal Government provides tax credits to housing developers for the construction of low income housing. Those tax credits are distributed to developers by the states. The Texas Department of Housing and Community Affairs (“Texas”) adopted a system of scoring proposed housing developments that gave additional points to developments in low income neighborhoods.

Inclusive Communities Project (“ICP”) sued Texas alleging that Texas violated the Fair Housing Act (“FHA”). The FHA, as amended, prohibits discrimination in housing because of race, color, religion, national origin, sex, disability, or familial status. ICP used statistical evidence to show that Texas’s scoring system resulted in a disproportionately high percentage of tax credits to developments in minority communities. Texas argued that its scoring system was not adopted “because of race” and does not violate the FHA.

ICP’s argument relies on a “disparate impact” theory of liability. Under that theory, a plaintiff need not show that a housing provider intended to discriminate. Rather, the plaintiff need only show that the housing provider’s facially neutral policy has a disproportionate adverse impact on members of a protected class. The burden would then shift to the housing provider to show that its policy is necessary to achieve its substantial, legitimate, nondiscriminatory interest that cannot be achieved by less discriminatory means.

Although the FHA does not explicitly state that plaintiffs may use this disparate impact, unintentional discrimination, theory to prove their case, numerous courts have allowed these claims. Nevertheless, confusion about this issue has led to inconsistent enforcement of the FHA from one presidential administration to the next.

Today’s decision by the Supreme Court clarifies that a housing provider may be held liable for violations of the FHA even if it did not intend to discriminate, so long as its policy has a disproportionate adverse impact on members of a protected class. This may embolden plaintiffs to file claims that might not otherwise have been filed.

How might this decision affect community associations?

Suppose an association adopts a pet restriction that is more restrictive for tenants than for owners. If that association is located in a community with a low level of minority homeownership, a claim could be made that the pet restriction has a discriminatory effect based on race.

Suppose an association adopts a rule that prohibits the use of skateboards in the common area. If a resident with children can show that children are more likely than adults to use skateboards, she might argue that the rule has a discriminatory effect based on familial status (i.e., the presence of children in the household).

Today’s decision could lead to more claims of unintentional discrimination. Associations should carefully review their governing documents with legal counsel to consider whether any restrictions might disproportionately affect members of a protected class, whether the association has a legitimate interest in enforcing such restrictions, and whether there are alternative nondiscriminatory means of achieving the association’s objectives.

Drought Legislation: Say Goodbye to Your Green Lawns; New Law Blocks Fines During Drought Emergencies

By: David A. Kline, Esq.

What Does the New Law Say?

On July 21, 2014, the Governor signed AB 2100 into law. The new law, which became effective immediately, amended Civil Code section 4735. Because the Governor has already declared a state of emergency due to drought,[1] the new law now prohibits associations from fining owners for failing to water their plants and lawns. We may also see more drought-related legislation in the near future, so stay tuned for updates.

Does This Mean That We Can No Longer Enforce Landscaping Restrictions?

Even though Civil Code section 4735 already blocked restrictions that prohibited low water-using plants as a group, the amendment of this statute does not prevent associations from adopting and/or enforcing other landscape restrictions. Thus, associations may still impose restrictions regarding landscape design, the placement of trees, bushes and turf, topography, hardscape, and general aesthetics. In addition, associations may still enforce the owners’ obligation to maintain their lots in a neat and attractive condition. And, owners who choose to alter their landscaping are still required to obtain architectural consent.

While an association may no longer fine an owner for failing to water his lawn, we believe that an association may still fine an owner for failing to mow his lawn, remove weeds, trim bushes and trees, remove or replace dead and dying vegetation, prevent erosion of slopes, or for otherwise allowing his lot to become a nuisance and an eyesore.

Although the law addresses only fines and monetary assessments, associations should probably seek legal advice before attempting to impose other forms of discipline upon a member for failing to irrigate landscaping.

What Can My Association Do To Protect Itself?

Because associations can no longer rely on their members to irrigate their landscaping sufficiently, associations should probably consider adopting or amending their landscape rules or guidelines to allow for plants that use less water. In addition, associations should consider encouraging landscape designs that incorporate less turf, well-planned irrigation zones, the proper use of irrigation timers, the use of forest mulch to reduce evaporation and runoff, the use of heartier vegetation and drought tolerant plants, the use of shade from taller plants to reduce evaporation, and the smart use of topography to reduce runoff.

When considering applications for changes to the landscaping or when considering adopting or amending any landscape guidelines or rules, associations may wish to consult professional landscape architects or designers to minimize the negative impact of the drought upon the aesthetic appeal of the community. Associations should seek legal advice before adopting an immediate rule change without a thirty-day comment period, in light of the state of emergency.

In addition, associations may wish to educate their members regarding the increasing cost of water and local programs that may be available to buy back turf or provide rebates to offset the cost of converting to water efficient landscaping.

Bottom Line?

While the new law eliminates one method of enforcing landscape restrictions, associations should not be afraid to enforce an owner’s obligation to maintain his lot in a neat and attractive condition. Associations should consider amending their landscaping rules and guidelines to protect the value of the properties in their communities in anticipation of limited irrigation.

[1] http://gov.ca.gov/news.php?id=18368