Why Florida Landlords Should Think Twice Before Rejecting Tenants With Criminal Records
Recently, the owner of a multi-family property in Queens, NY agreed to pay over one million dollars to settle a lawsuit brought on behalf of tenant applicants denied because of their criminal records. The defendant landlord and property manager had a policy of automatically denying rental applicants with criminal convictions. Regardless of the underlying circumstances. All landlords should pay close attention to this case and take seriously the need to screen tenants legally to avoid costly problems. Here is why Florida landlords should think twice before rejecting tenants with criminal records
A nonprofit advocacy group for formerly incarcerated people filed this suit in federal court under the Fair Housing Act, (“the Act”). This law was enacted in 1968. To prohibit housing discrimination against protected classes of people. The Act makes it illegal to discriminate in housing on the basis of race, color, gender, religion, familial status, and national origin. Later amendments to the Act added disability as a protected class. The Act doesn’t explicitly grant any protection to people with criminal convictions.
Fair Housing Act
The Act was passed to reverse a very long and well-documented history of housing discrimination in the U.S. By both the government and private actors. These patterns of discrimination pervaded all aspects of real estate. This included home sales and rentals as well as mortgage lending. There were many systematic discriminatory practices the Act made illegal, including “redlining.” Which entrenched a system of segregated housing throughout the country that continues to this day.
When Congress passed the Act, however, they failed to directly address the issue of what kind of intent to discriminate is necessary to violate the law. For decades following its passage, it was not clear whether one needed to specifically intend to discriminate against protected classes to violate the Act or it was enough to commit acts that had a discriminatory effect, regardless of intent and however innocent the motives behind the action.
Supreme Court Ruling
In 2015, the U.S. Supreme Court answered the intent question in the case of TX Dept. of Housing and Community Affairs vs. The Inclusive Communities Project. In this case, the Inclusive Communities Project (ICP), a nonprofit dedicated to promoting racial and economic integration in the Dallas area, argued that the state agency in charge of distributing federal low-income tax credits acted to perpetuate housing segregation in violation of the Act.
There was no claim that the Texas agency intended to promote segregation. ICP’s argument was that they distributed tax credits in a way that led to a concentration of low-income housing in minority neighborhoods. In a 5-4 decision split along ideological lines, Justice Kennedy was the swing vote who wrote an opinion siding with ICP (while upholding two lower court decisions). The Court decided that the state’s policies had a “disparate impact” against minorities, which was enough to violate the Act, regardless of its lack of intent to discriminate.
Department of Housing and Urban Development (HUD)
In 2016, and the Department of Housing and Urban Development (HUD), the agency tasked with enforcing the Act, issued a policy decision stating that landlords cannot deny housing based on a prospective tenant’s criminal history. The reasoning for this policy is that, because people convicted of crimes are disproportionately minorities, discriminating on the basis of criminal record has a disparate impact on minorities.
Shortly after this HUD pronouncement came out, I wrote an article about it, found here. https://www.celebrationlaw.com/understanding-huds-attack-investors-respond/
In that article, I argued that HUD’s policy, despite good intentions, was misguided and flawed. My reasoning is, that although minorities are disproportionately represented among the population with criminal convictions, minority status is not the common denominator for crime. While citing some states with high incarceration rates and extremely low minority populations, such as New Hampshire, I argued that poverty, not race, is most responsible for criminal behavior. New Hampshire, with a minority population of 1.5% African American and 3.5% Hispanic, has crowded prisons, but they’re full of poor white folks.
As political winds have shifted, today the Supreme Court and HUD are more conservative and less receptive to discrimination claims. The question of whether convicted criminals are entitled to the Act’s protection may work its way through the federal courts and result in a different conclusion than the Supreme Court opinion discussed above about low-income tax credits. In the meantime, landlords need a game plan to conduct business without risking legal liability to applicants with criminal records and avoid outcomes like the one the NY landlord recently suffered.
As a starting point, landlords cannot have a blanket policy of denying all applicants with criminal records, regardless of circumstances, including the nature of the crime and length of time since it occurred. Aside from the legal and economic risk discussed here, residential landlords should acknowledge they’re in the human being business. Nobody is perfect and people make mistakes, including getting into legal trouble. A criminal record alone shouldn’t render a tenant unacceptable for legal, as well as, business reasons.
An absolute no-tolerance policy against applicants with rap sheets is not only legally reckless, in light of the cases discussed in this article, it’s bad business. Criminal history should be considered in reasonable context, along with all other factors, most important of which is financial stability and the ability to pay the rent.
A tenant with good credit, steady employment, sufficient income and no eviction history shouldn’t be denied because of a misdemeanor ten years ago. One simple policy to follow is not to deny an otherwise well-qualified tenant solely because of a minor and distant criminal conviction while accepting a less-qualified candidate without a record. It was significant in the NY case that settled that the landlord had a blanket policy denying all applicants with any criminal history.
Landlords should also be aware that undercover operations have been a hallmark of HUD enforcement activities for years. If you’re wondering how an applicant with a criminal conviction would know you accepted a less-qualified applicant with a clean record, a sting operation may be the answer.
The New York newspaper, Newsday, recently published a series of reports based on several years of investigations involving minority operatives posing as prospective home buyers on Long Island. During that investigation, real estate agents repeatedly committed fair housing violations evident in their inconsistent treatment of minorities and white prospects. Though this example doesn’t involve government action, sting operations with hidden cameras still happen. The Newsday story also shows how housing discrimination continues and is not a relic from ancient history.
What Landlords Need To Know
I don’t mean to suggest any of the issues discussed in this article are simple or that easy answers are readily available to landlords. This matter lacks clear black and white answers. It’s mostly gray and confusing, with “damned if you do, damned if you don’t” situations all around. For example, if you own a multifamily into which you bring a financially stable violent criminal for fear of a legal action for denying them, and they hurt another tenant, you can expect to receive an attorney’s demand letter.
All landlords should be aware of the Act’s requirements and have a sound compliance policy in place. This includes a strategic plan for handling applications from prospective tenants with criminal histories along with avoiding discrimination against all classes protected under the Act.
As an attorney at the firm of Widerman Malek, I represent real estate investors of all shapes and sizes and serve their legal needs. It’s better to prevent a problem than to solve it, especially with respect to lawsuits. If you’re an investor who wants to protect what you’ve worked so hard to build and maximize your chances for success in business and life, call me to discuss how I can help you. https://www.celebrationlaw.com/our-attorneys/charles-p-castellon/