By John F. Baumgardner
Unresolved disputes amongst neighbors can lead to lengthy and costly litigation. This is especially true when dealing with claims of harassment or discrimination. In a typical residential setting, the costs of these disputes, and any resulting litigation, would be borne solely by the individual homeowners. However, in a common interest development, these disputes can evolve into claims against the Homeowners Association, individual board members, and property management companies. Homeowners Associations and Community Managers may be more likely to find themselves wrapped up in these neighbor disputes because homeowners may allege they have failed to satisfy their obligations under federal regulations and other statutes protecting homeowners from discrimination based on race, color, religion, sex, familial status, national origin or disability.
Harassment And Discrimination Between Owners Can Lead To Liability For Homeowners Associations And Community Managers
The U.S. Department of Housing and Urban Development (“HUD”) has issued a rule interpreting the Fair Housing Act, 42 U.S.C. §§ 3601-3619, (“FHA”) to make a landlord, community management company, or Homeowners Association directly liable for housing discrimination. (See, 24 C.F.R. 100.7) In addition to liability based on a board member or Community Manager’s own discriminatory conduct, a Homeowners Association may be “directly liable for . . . [f]ailing to take prompt action to correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the discriminatory conduct and had the power to correct it.” (24 C.F.R. § 100.7 (iii).)
These regulated discriminatory housing practices also go beyond a sale and/or acquisition of real estate. Under HUD rules, claims may also be brought for quid pro quo harassment and hostile environment harassment which effects the “use or enjoyment of a dwelling . . . or the provision or enjoyment of services or facilities in connection therewith.” (24 C.F.R. 100.600 (a) (1), (2).) Plainly stated, pervasive harassment and/or discrimination that results in a homeowner’s inability to use and enjoy their homes, common area, and other association facilities can result in FHA violations.
Potential liability is also limited to “the extent of the person’s control or any other legal responsibility the person may have with respect to the conduct of such third-party.” (24 C.F.R. § 100.7 (iii).) Courts have held that “[l]iability attaches because a party has ‘an arsenal of incentives and sanctions … that can be applied to affect conduct’ but fails to use them.” (Wetzel v. Glen St. Andrew Living Cmty., LLC (7th Cir. 2018) 901 F.3d 856, 865.)
What Is A Homeowners Association’s Arsenal Against FHA Claims?
Although the enforcement actions permitted by the Davis-Stirling Act and a Homeowners Association’s own governing documents are more limited than a residential landlord, there are substantial options available to reduce neighbor harassment and discrimination. These include investigations, IDR/ADR procedures, fines for violating the CC&Rs or association rules, and court action. Each of these options must be considered to protect the use and enjoyment of the common areas for all owners.
The initial step in evaluating a claim of harassment or discrimination is to perform in an investigation, which should likely be undertaken by either the Community Manager or an attorney. An investigation allows the Homeowners Association to gather the facts and statements to evaluate the extent of the harassment or discrimination. It also provides an opportunity to educate the owners about the Homeowners Association’s rules against harassment and discrimination. Investigators can also inform the alleged harassers about the possible penalties for failing to abide by the terms of the CC&Rs and association rules. An investigation will also allow the Homeowners Association to determine what additional intervention is necessary.
Internal Dispute Resolution (IDR) / Alternative Dispute Resolution (ADR)
Although actionable claims require “more than a quarrel among neighbors or an isolated act of discrimination” (Bloch v. Frischholz (7th Cir. 2009) 587 F.3d 771, 776), Homeowners Associations should consider proposing either the IDR or ADR process to resolve the neighbor dispute before it escalates further. All board members and Community Managers should be educated regarding the IDR and ADR process required by the Davis-Stirling Act or the Homeowners Association’s governing documents. These dispute resolution procedures can assist in de-escalating neighbor disputes by allowing the owners to communicate their concerns while attempting to remove the emotions involved in the situation.
Although not required under the IDR procedures, a Homeowners Association can request the assistance of the Community Manager or attorney during these meetings. (See, Civil Code § 5915.) While the Homeowners Association would be required to pay for this assistance, effectively resolving a dispute before litigation is invaluable to the members of a Homeowners Association. It is also important to note that there are low cost mediation services providers available through the websites of the Department of Consumer Affairs and the United States Department of Housing and Urban Development.
Additionally, in some instances, a Homeowners Association and its members are required to participate in an alternative dispute resolution process before filing a civil suit. (See, Civil Code § 5930 (b): pre-filing requirement to participate in alternative dispute resolution process “applies only to an enforcement action that is solely for declaratory, injunctive, or writ relief, or for that relief in conjunction with a claim for monetary damages” under $25,000.) While IDR and ADR will not resolve every dispute, they provide a fair process that provides Homeowners Associations, Community Managers, and owners an opportunity to reach consensus, be heard, and reduce potential litigation.
Fines Or Superior Court Action
HUD has noted that Homeowners Associations “generally ha[ve] the power to respond to third-party harassment by imposing conditions authorized by the association’s CC&Rs or by other legal authority.” (81 FR 63054.) The ability to impose monetary fines and/or bring an action in Superior Court may be a Homeowners Association’s final quiver in its arsenal against harassment and discrimination. Proactively updating a Homeowners Association’s nuisance, anti-harassment, and anti-discrimination policies and rules in accordance with the Davis-Stirling Act and the governing documents is essential to being able to issue fines. If a Superior Court action is necessary, the Homeowners Association must bring a claim for injunctive relief against the nuisance behavior otherwise it will be limited solely to a monetary judgment and cannot receive an order imposing restrictions against the offending owner.
Homeowners Associations and Community Managers need to be aware of their potential liability for failing to protect owners from pervasive harassment and discrimination. By proactively using their available arsenal and documenting each step in the process, Homeowners Associations and Community Managers can hope to reduce the potential for escalating disputes and litigation. Lastly, if there is ever a concern for an owner’s life or safety, Homeowners Associations and Community Managers must immediately report the matter to the police.
John F. Baumgardner is an attorney with Chapman & Intrieri, LLP in their Roseville, California office. His practice focuses on representing Homeowners Associations in construction defect disputes, judicial collections, general counsel matters, general civil litigation, and revision of governing documents.