The Fair Housing Act: Does it Apply to You?

The Fair Housing Act:

Does it Apply to you?

If you are buying, selling, renting, or investing in real estate, you need to know about the Fair Housing Act.  Initially passed in 1968, and amended many times since, the Fair Housing Act prohibits discrimination in real estate transactions.

What is the Fair Housing Act (FHA)?

According to HUD.gov: "Title VIII of the Civil Rights Act of 1968 (Fair Housing Act), as amended, prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, based on race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and disability."

In a nutshell, this means you cannot discriminate against potential buyers or lessees when you are trying to rent or sell a unit.  You cannot refuse to rent to someone because they have children or might be a "bad fit" for the neighborhood.

Who is NOT Protected Under The Fair Housing Act?

The Fair Housing Act does not apply to age discrimination.  It does not apply to housing managed by certain non-profit disorganization or by private clubs that limit occupancy to members.  Certain owner-occupied buildings with no more than four units, are exempt, as is single-family housing sold or rented without the use of a broker.  When in doubt as to whether FHA applies, consult with a Real Estate Attorney.

How Does This Impact Me as a Landlord?

This effects both the tenant screening and advertising process.  For example, you cannot run an ad for a property stating "no children," unless the property is located in an "over-55" type community.  You cannot advertise "Nice Latino neighborhood; perfect for Spanish speaking individuals."  Doing so may result in a discrimination claim under the Fair Housing Act.  You may not ask questions during the tenant screening process that fall into any of those areas.

For example, you have a single family house you are trying to sell or rent.  Your first appointment consists of a couple and a young baby.  You cannot ask that couple whether they are married, or even if both individuals are parents of that baby.  You may only ask if all three residents will be living in the unit.  Is a person in a wheelchair shows up to look at the unit, you may not ask if that person is capable of living in a unit with stairs in the front.  You may only ask if the individual would need to make any modifications to the property in order to live there.

What Kind of Screening May I Do?

In most states, tenant screening is limited to a credit and background check, performed by an agency licensed to perform those checks.  You are not allowed to  perform a background check by running your own Google Search.  In addition, only certain types of things may be considered.  You may check to see that the person has the financial resources to pay the rent in a leasing situation.  When selling property, the banks are allowed to do a much more thorough financial check.  Most sellers use the mortgage documents as evidence of financial capability.  Most of the major credit bureaus offer background checks as a part of the credit check.

When it comes to rejecting someone based on a background check, you need to consult with a Real Estate Attorney to determine if a criminal history is relevant under the Fair Housing Act.  Most misdemeanors cannot be held against an individual in housing applications.  Things like drug trafficking, sex offenses, and certain felonies may be considered.  If a background check exposes anything of concern, it is best to consult with an attorney before rejecting an applicant.

So in a nutshell, you may perform a credit and background check.  However, you may NOT interview potential applicants, and lease or sell depending on those answers.  You may not ask any questions pertaining to the applicants' lifestyle.

What if Someone Thinks I've Discriminated?

If an applicant feels like s/he has been discriminated against, they may file a complaint for free with HUD.  The individual has one year to file with HUD.  The individual may also elect to file a civil case using a private attorney.  Or the individual may choose to file BOTH a civil case and a HUD complaint.  If this occurs, it may lead to a mediation conference or to an actual court case.  If it is found that you have discriminated,  you can be ordered:

• To compensate you for actual damages, including humiliation, pain and suffering.
• To provide injunctive or other equitable relief, for example, to make the housing available to the applicant.
• To pay the Federal Government a civil penalty to vindicate the public interest. The maximum penalties are $16,000 for a first violation and $70,000 for a third violation within seven years.
• To pay reasonable attorney's fees and costs.

Does the Americans with Disabilities Act (ADA) Apply to Renting or Selling Housing?

Usually, the ADA does not apply, but there are exceptions to this rule.  If the property is advertised for short-term rentals, then the ADA does apply.  If the property receives any type of Federal money, the ADA applies.  (For example, if you lease an investment property under Section 8 assistance, the ADA may apply.)  However, in most cases, when selling or renting real estate, it is the Fair Housing Act, rather than the ADA that applies.  

Where Can I Find Out More about the Fair Housing Act?

HUD is responsible for overseeing the Fair Housing Act.  Your local HUD office, or HUD.gov can provide more information about the Fair Housing Act.  This includes fact sheets for buyers, sellers, landlords, and tenants.  In addition, a good Real Estate Attorney can answer all of your Fair Housing Act questions.

Summary

This article briefly examined the Fair Housing Act and how it applies to buying, selling, and leasing property.  The Fair Housing Act applies to ALL real estate transactions in the United States.  Its limitations must be kept in mind when selling or leasing property.

If you at all follow this blog, you know that we feel strongly that ALL Real Estate Investors have a good attorney on call.  We suggest you have your attorney review ALL documents associated with any real estate transaction.  However, having your lawyer review ads and property applications is even more essential.  Violating the Fair Housing Act carries stiff penalties, and it is very easy to violate.  An attorney can help you word your documents so that you perform adequate screening, while not inadvertently violating the Fair Housing Act.  

Here at the Law Offices of Heath D Harte, we find many of our clients need this type of assistance. We are skilled at developing ads and screening documents that neither violate the Fair Housing Act nor the Americans with Disabilities Act.  We find real estate investors regularly include verbiage that may violate the FHA.  Attorney's fees are much cheaper than the fine you will receive if you violate The Act.

If you are in the Connecticut or New York area, we are here to help you with all of your Real Estate Law needs.  This includes developing effective ad copy and efficient screening procedures, all within any laws that may apply.  This is a very expensive area in which to make mistakes.