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HUD Guidance brings higher level of scrutiny to Condo and HOA screening policies which reject new purchasers and tenants with criminal records - May 1st, 2017

May 1 st, 2017

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Cuevas, Garcia & Torres, P.A.

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Jose A. Torres, Esq. - Shareholder
e-mail: jtorres@cuevaslaw.com

Tel: (305) 461-9500
Fax: (305) 448-7300

Introduction

Mr. Jose A. Torres, Esq., is a Shareholder/Attorney at Cuevas, Garcia & Torres, P.A., and Vice-President of Vantage Property Title Company, Inc. Cuevas, Garcia & Torres, P.A., provides legal services in the areas of Community Association Law, Corporate Law, Real Estate Law, and Business Immigration, including, without limitation, title insurance services through Vantage Property Title Company, Inc. If you have any questions regarding this article or any other questions, you may contact Mr. Torres at (305) 461-9500 or via e-mail at jtorres@cuevaslaw.com. If you are interested in reading previous newsletters, please visit www.cuevaslaw.com, select the icon for Newsletters, and then choose the area of law you are interested in.

HUD Guidance brings higher level of scrutiny to Condo and HOA screening policies which reject new purchasers and tenants with criminal records

It's quite common for condominiums and HOAs to employ a screening process whereby new purchasers or tenants have to complete an application and be approved or denied by the Board. Some condominiums and HOAs employ a screening process even when their governing documents do not expressly grant them the authority to screen new purchasers or tenants, let alone have the Board approve or deny them. Either way, a relatively new guidance issued by the U.S. Department of Housing and Urban Development (HUD) should serve to caution condominiums and HOAs who screen new purchasers and tenants and use criminal history as a consideration in whether to approve or deny said applicant.

HUD is the federal agency tasked with enforcing the Fair Housing Act, which prohibits both intentional discrimination and housing practices that have an unjustified discriminatory effect because of race, national origin, or other protected characteristics. The Fair Housing Act governs most types of housing, including condominiums and HOAs, so it's important for condominiums and HOAs to ensure that their policies, practices, and procedures do not fall outside the scope of what is permitted by the Fair Housing Act.

In April 2016, HUD's Office of General Counsel published a guidance entitled Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions (the "Guidance"), which discusses how the Fair Housing Act applies to a housing provider's use of an individual's criminal history. Specifically, HUD's Guidance advises that due to prevalent racial and ethnic inequalities in the U.S. criminal justice system, denying housing on the basis of an individual's criminal history is much more likely to disproportionately burden African Americans and Hispanics.

While the Fair Housing Act does not prevent condominiums and HOAs from appropriately considering criminal history information when making a decision on whether to approve a new purchaser or tenant, arbitrary and/or overbroad criminal history-related bans are likely to lack a legally sufficient justification. Therefore, a discriminatory effect resulting from a condominium or HOA screening policy that rejects any new purchaser or tenant with a prior arrest or any kind of criminal conviction would likely not be justified, and such a practice would violate the Fair Housing Act, even if the condominium or HOA did not intend for the discriminatory effect to occur.

For example, a condominium or HOA which rejects a new purchaser or tenant on the basis of a prior arrest which did not result in a conviction, without more, likely has violated the Fair Housing Act. Similarly, a condominium or HOA which rejects any new purchaser or tenant with a previous conviction record - irrespective of when the conviction occurred, what the underlying conduct entailed, or what the convicted person has done since then - has also likely violated the Fair Housing Act.

Screening policies that result in the rejection of new purchasers or tenants based on criminal history must be tailored to serve the condominium's or HOA's substantial, legitimate, nondiscriminatory interest and take into consideration such factors as the type of crime committed and the length of the time that has transpired since the conviction. For instance, screening policies which result in the rejection of only those new purchasers or tenants who have been convicted of second or first-degree felonies within the last ten (10) years involving violence to persons and/or property, or involving the sale, distribution, or manufacturing of illegal narcotics and/or controlled substances, have a greater likelihood of falling in line with the Fair Housing Act than screening policies which result in the rejection of all new purchasers or tenants who have been convicted of any crime, whether a felony or misdemeanor, and which do not take into account the nature of the crime committed or the length of time that has passed since the conviction.

Even where a policy or practice is specifically tailored to serve the condominium's or HOA's substantial, legitimate, nondiscriminatory interest, however, condominiums and HOAs still bear the burden of proving that any discriminatory effect caused by such policy or practice is justified. Such determinations are made on a case-by-case basis.

For the above reasons, it's recommended that condominiums and HOAs who use criminal history as a consideration in screening new purchasers and tenants communicate with their respective legal counsel to determine whether their screening policy is compliant with the Fair Housing Act in light of HUD's Guidance. It's also recommended that condominiums and HOAs confirm that they have proper insurance coverage for discrimination claims. While Florida law prohibits an insurer from paying a damage award for discriminatory conduct, many policies will cover the defense of such claims and frequently participate in their settlement.

This article is solely a partial explanation of all the issues related to the topic of this newsletter, and is not to be considered legal advice. Associations should seek legal advice for all issues related to their governing documents and enforceability. This Newsletter is for informational purposes only and should not be relied upon as a legal opinion.

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