As reported by Builders Online, the U.S. Department of Housing and Urban Development (HUD) published guidance recently regarding criminal background checks for housing providers, focusing on 'disparate impact' discrimination. According to a post by the California-based real estate law firm of Kimball, Tirey & St. John, LLP, "Disparate impact occurs when a landlord has a policy or practice that is neutral (i.e., non-discriminatory) on its face and applies equally to all applicants and/or residents, but its application has a discriminatory effect on one or more of the protected classes. In order to successfully defend a claim of discrimination, the landlord must be able to show that this policy or practice is necessary in order to achieve a non-discriminatory business objective, and that there is no less discriminatory alternative that would achieve that business objective."
It's worth highlighting that a “guidance” from a federal agency is not law, and HUD’s language appears focused on landlords and rentals. But, if the guidance is a warning of how the feds may want to handle housing discrimination in the future, co-op and condo boards might want to pay attention.
Accept or Reject
"In a rental situation, you fill out an application, check some boxes, they run a check, then they rent to you or they do not," says Ira Brad Matetsky, Esq., a partner with the Manhattan-based law firm of Ganfer & Shore, LLP. "A co-op board, assuming that the applicant meets the basic screening, is going to want to interview a candidate, and then is going to make an 'accept' or 'reject' decision, typically without offering reason for the latter. In fact, lawyers routinely counsel boards not to provide that information. Boards have broad discretion to accept or reject for what the court refers to as good reasons, bad reasons, or no reason at all."
Now, while that may make it sound as if co-ops have carte blanche to reject anyone on a whim, there are protected categories, including race, religion, family status, sexual orientation and disability, by which a board cannot make a dismissal. According to T. Austin Brown, founder and principal attorney at The Austin Brown Law Firm in New York City, a decision made based on a discriminatory reason:
is unlikely to be unanimous, and will leave someone on the board unhappy with the decision to deny someone for that reason, which may prove to be ground zero for opening an association to legal risk.