The apartment complex is complete, the construction crews have gone home, and a certificate of occupancy has been issued. A decade passes, and then another. The apartments are sold and the developer, contractor and architect move on to other projects. Any complaints about construction of the apartments in compliance with FHA accessibility requirements seem lost in the mists of time. And then comes the lawsuit. A disabled renter has discovered that the individual units are not FHA compliant and sues the entire original development team demanding that they renovate the entire complex. Surely such a claim is barred by the FHA’s two year statute of limitations. Unfortunately, in most of the U.S. it is not.
Federal courts considering this situation have applied three different theories about when limitations runs for design/build claims under the Fair Housing Act. The Ninth Circuit, in Garcia v. Brockway, adopted a bright line test. The two year limitations period runs from the date of the certificate of occupancy. Developers and contractors in the seven western states that make up the Ninth Circuit can breathe a sigh of relief. The Sixth Circuit, in Fair Housing Council v. Village of Olde St. Andrews, adopted a more liberal position that generally starts the limitations period running when the last unit in a project is sold or rented for the first time. As long as a single unit remains unsold or unrented, however, a suit can be brought requiring remediation of the entire project. In any case, the law in the four states in the Sixth Circuit seems clear.
In the remaining 39 states things are far from certain, and may be very bad. Several district courts in various circuits treat the existence of non-compliant apartments as a continuing violation of the law, so that the two year statute of limitations begins to run only when a disabled person actually encounters the discriminatory condition or when it is repaired. The trend is against these cases, with most recent district court decisions adopting the Sixth Circuit’s approach; however, individual district court cases can only influence, not control decisions in other district courts. More important, perhaps, is the Fifth Circuit’s decision in Frame v. City of Arlington. This was an ADA Title II case, but the Fifth Circuit’s holding that a cause of action does not accrue until the plaintiff encounters discrimination could certainly be applied to Fair Housing Act cases. The Fifth Circuit was notably unsympathetic to the problem of endless liability, writing that the defendant could avoid the problem by “building the sidewalks right the first time, or by fixing its original unlawful construction.”
The rule in the Sixth Circuit also leaves open the possibility of a limitations period that never ends. In Village of Olde St. Andrews the court found that where the plaintiff alleged a policy or practice of discrimination in a multi-phase development limitations would not run until the first sale or rental of the last unit in all the phases. When economic conditions slow development a lawsuit will remain possible for many years after the early phases are complete and fully leased or sold. The court also found that a claim of a “policy or practice” of discrimination might extend beyond a single development to all the developments of a single owner, and that if so then limitations would not start to run until two years after the last sale or rental of the last development. This leaves open the prospect of liability that never ends because all but the dullest of plaintiffs’ lawyers will be able to at least plead a case alleging a policy or practice of discrimination that extends over the entire history of developments by a single owner.
There are practical ways to deal with endless liability, including the use of separate entities for different developments and indemnities from purchasers back to the original developer, but these are far from certain to provide a defense. The only real solution will be through a change in the statute itself (which I’ll discuss in my next blog) or a decision from the Supreme Court that adopts the Ninth Circuit’s rule that limitations runs from the issuance of a certificate of occupancy. Neither is in the offing, so for now outside of the Ninth Circuit uncertainty about the running of limitations is the only rule.