The decision in Miami Valley Fair Hous. Ctr., Inc. v. Preferred Living Real Est. Investments, LLC, 2018 WL 4690790 (S.D. Ohio Sept. 28, 2018) has the potential to create a significant change in how FHA design/build cases are litigated. It also provides litigants with a treatise on the most important evidentiary issues faced by both plaintiffs and defendants. The critical take-away for apartment owners and developers is that proof of deviations from the various FHA safe harbors is not conclusive evidence of an FHA violation. That means defendants who own or build apartments that are accessible but have technical deviations from FHA design/build safe harbors will be given the chance to talk about what matters to the disabled, that is, accessibility. More
Guidance from HUD and DOJ is nice to have, but ultimately the courts are responsible for deciding what the Fair Housing Act means. In Fair Hous. Rights Ctr. in Se. Pennsylvania v. Post Goldtex GP, LLC, 2016 WL 2865733 (3d Cir. May 17, 2016) the Third Circuit confirmed HUD and DOJ’s position that FHA accessibility standards do not apply to pre-1991 buildings, even if they have been for the first time converted to residential use. This will help urban project developers who want to preserve historic structures but find it impossible to make new residences meet all of the FHA accessibility guidelines. More
By Richard Hunt in Accessibility Litigation Trends, FHA, FHA Statistics, Landlord-tenant, Multi-Family Tags: Fair Housing, Fair Housing Training, FHA, FHA Litigation, HUD, HUD guidance, HUD policies, HUD regulations
Today’s press release concerning HUD’s Fair Housing Initiative Program (“FHIP”) says all you need to know about HUD’s approach to eliminating housing discrimination. Out of more than $37 million dollars made available to improve fair housing in this program, HUD is spending about 20% on programs intended to educate the public and business about their rights and obligations, while 80% goes to funding private organizations that are in the business of either suing folks or filing HUD complaints. HUD is clearly much less interested in helping people obey the law than in punishing people who fail to obey it. The press release ends, of course, with information on how to file a complaint with HUD. There’s no mention of where to go for education on following the law. More
We’ve blogged more than once about the ongoing question of whether a current owner of a property built after the FHA guidelines became effective can be liable under the design/build provisions of the Fair Housing Act. (Click, here, and here). A March 31, 2016 decision from the United States District Court for the District of Maryland (Equal Rights Center v. Equity Residential, Case No. 1:06-cv-01060-CCB, Document 283) adds some important clarity to this issue, but not without raising other issues.
In Equal Rights Center the first issue the Court considered was whether various entities that were successors to the original owner and builder could be liable under the design/build provisions of the FHA. The Court looked at two theories; veil piercing and successor liability, to decide based on undisputed facts that some could and some couldn’t. Where there was liability the Court found that the predecessor was:
- merely an agency or instrumentality of the current owner, giving rise to veil piercing, and/or
- part of a continuous enterprise giving rise to successor liability
In every case the Court applied federal common law. As it applied the law, the effects on traditional development structures is dramatic:
First, the Court found that when the ownership of a property owning entity changed the entity had successor liability, apparently to itself. This analytical step is puzzling since the property owning entity did not change and would, under traditional standards, continue to be liable regardless of any changes in ownership.
Next, if the original property owner was a typical subsidiary or subsidiary of a subsidiary of the ultimate corporate owner the Court concluded that veil piercing was always appropriate. The Court explained this holding as follows:
It would be fundamentally unfair to limit liability to these entities which serve as nothing more than vehicles for holding Equity’s property assets. Further, it would frustrate the purpose of the FHA’s broad remedial scheme* to allow Equity to escape liability simply because it established separate subsidiaries to hold each of its properties.
The Court did not require any element of fraud or misuse of the corporate structure, both of which are the typical hallmarks of veil piercing. Instead it applied “no fault” veil piercing in which the subsidiary structure is simply disregarded for public policy reasons.
Moreover, the Court refused to consider the implications of the timing of control; that is, the Court looked at control of the property owning subsidiary not at the time of construction, but rather at the time Equity obtained complete control by buying out its development partner. Under these holdings the ultimate corporate owner of any traditional development subsidiary or partnership will always be liable for its subsidiary’s FHA violations. This denies developers any protection from the FHA through the use of typical development structures that suffice with respect to every other kind of liability.
The second important holding from the Court is that violations of the statute will be measured by a purely objective standard; that is, the FHA Design Manual or one of the other safe harbors in the statute. This is appropriate, the Court held, because:
requiring a plaintiff to make an ill-defined subjective showing of inaccessibility—that is, allowing a defendant to escape liability simply by showing that some disabled persons can access a property—cuts against the “broad remedial intent of Congress embodied in the [FHA]”
In keeping with this holding the Court rejected evidence from two experts that the property was in fact accessible, choosing a regulatory theory over actual facts. This holding means that the standards intended by Congress to be a safe harbor standard have been converted into a national building code for multi-family housing, which Congress certainly did not intend. In short, the FHA is not an anti-discrimination law; it is a building code that applies regardless of whether any disabled person is ever affected.**
Equal Rights Center v. Equity Residential was first filed in 2006, and it seems reasonable to conclude that the defendant is not simply going to give up after 10 years of litigation in the District Court. It therefore remains to be seen whether the 4th Circuit will agree with any of the District Court’s departures from traditional legal principles. One thing, however, is certain. There will be more litigation, and plaintiffs will not be deterred from suing the ultimate parent entities by the ownership structures created to insulate the ultimate owners from liability of all kinds.
*”broad remedial scheme” is, in general, a phrase used by courts just before they throw out the actual words of the statute in favor of enforcing the law the court believes Congress should have written.
**As recently as March 23, 2016 another Court found that disputes about actual accessibility despite deviations from the safe harbors created a fact issue:
By Richard Hunt in Accessibility Litigation Trends, Animals, Apartments, Condominiums, FHA, HOA, Landlord-tenant, Multi-Family, Policies and Procedures FHA ADA Tags: assistance animals, Emotional Support Animals, ESA Letters, Fake ESA Letters, Pet Deposits, reasonable accommodation, service animals
Apartment owners and managers are familiar with the internet industry providing junk disability letters for pet owners. You only have to go to the web to find a dozen or more places that will sell a letter from some kind of alleged therapist certifying that you are disabled and your pet cat, koala or kangaroo is a necessary emotional support animal. Many owners and managers feel helpless when confronted by these letters. After all, organizations like the National Apartment Association warn owners and managers:
- “do not ask for details about the resident’s disability” and
- “documentation is sufficient if it establishes that an individual has a disability and that the animal in question will provide some type of disability-related assistance or emotional support.”
These organizations agree that you can verify the authenticity of the letter and signature on a third party letter, but say that you “may not ask for additional information about the disability.”*
We think this advice is wrong. You can fight back against bogus requests for Emotional Support Animals. We will be presenting a free webinar with all the details at noon Central Standard Time on April 15, 2016 and at noon Central Standard Time on April 20, 2016.
In the meantime, here are the basics of why the conventional wisdom is wrong.
First, HUD specifically recognizes that apartment owners and managers are entitled to “reliable documentation” when the disability and need are not apparent. A typical letter from an internet vendor is not reliable on its face because the diagnostic tools used by these vendors do not appear to conform to acceptable medical practice. Nothing in the Fair Housing Act requires that apartment owners and managers grant reasonable accommodations based on letters that have no scientific or medical support.
Second, part of making sure a letter is reliable is confirming not only that it is authentic, but that the author is qualified to make the diagnosis of disability. A string of letters after someone’s name does not mean they are qualified to determine if someone is mentally ill. We don’t let podiatrists diagnose heart disease, and there is no reason to think a marriage and family counselor is qualified to diagnose acute anxiety disorder. Given the already dubious nature of these internet businesses demanding credentials is only reasonable.
Third, you are entitled to ask about the nature of a non-obvious disability because you cannot evaluate a request for reasonable accommodation unless you know what the disability is and how it relates to the particular accommodation requested. As one court says, a request for reasonable accommodation cannot be analyzed except by “by examining the facts and circumstances surrounding [the tenant’s] particular impairment.” (emphasis added). A letter that merely says the tenant has a “mental impairment” is not sufficient because for some mental impairments there is no reason to think an ESA is needed for their use and enjoyment of the apartment they rent.
Finally, you are entitled to know whether the tenant or resident meets the statutory definition of disability. Courts have recognized that not all mental impairments are disabling, and there is no single statutory or medical definition of “handicap” or “disability.” The fact that a letter says the tenant is “disabled” or “handicapped” is not enough to evaluate a reasonable accommodation request because you can’t tell what definition the doctor or therapist used. It it is reasonable to ask that the doctor or therapist certify that the patient meets the statutory definition of handicap under the Fair Housing Act.
Exploitation of the disabilities laws shows a lack of character, but being morally handicapped is not protected by the Fair Housing Act. We don’t believe Congress or HUD intended to create an industry based on shoddy medical practices, and while there are important limits on what you can do, we think in most cases apartment owners and managers can fight junk ESA letters.** Sign up for our webinar on April 15 and April 20 to find out how.
* These quotes are taken from the NAA Emotional Support Animal Toolkit, but I should make it clear that these represent the conventional wisdom found in materials from many Fair Housing Act trainers and lawyers who practice in the field. They represent a cautious approach that makes sense for good faith requests for accommodation, but not for obviously purchased letters.
** Naturally, every individual situation is different, and you should always consult an attorney or well designed policy and procedure before responding to or refusing a reasonable accommodation request, no matter how dubious it appears. Always remember that suspicion justifies asking questions; it does not justify an outright refusal to accommodate.
Special thanks to Professor Jeffrey N. Younggren of the University of Missouri, who advised me on medical issues in this blog, and to Cassie Bonness, co-author with Professor Younggren of a soon to be published paper on the standards of practice for psychologists and therapists asked to provide ESA letters.