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The "Red Flags" Rule: What You Need to Know

MHCO Note: At the time of this printing, the Federal Trade Commission still has the effective date for enforcement of the Red Flags Rule as December 31, 2010. Exemptions for specific industries have been granted as late as the first week of December 2010. MHCO and MHI are conducting research on this topic and will be providing additional information as it becomes available. The Federal Trade Commission link is http://www.ftc.gov/bcp/edu/microsites/redflagsrule/index.shtml and contains a lot of information that should be of interest to community owners and manufactured home community retailers. If you are subject to the new rule there is a template developed by the FTC for businesses at low risk for identity theft at this site. While we are still looking into this and monitoring developments in the Congress, it is likely that if a community owner is not billing for utilities, is not providing loans for residents purchasing homes, and is not acting as a retailer selling homes, they are not probably covered by the Red Flags Rule.

The "Red Flags" Rule: What You Need to Know

As of June 1, 2010 the Federal Trade Commission has begun enforcement of the 'Red Flags' rule which mandates creditors and financial institutions to implement identity theft prevention programs. It's important to spend some time discussing the rule, including what it is and what it means for you

The "Red Flags" Rule - In Plain English

The full title is this: "Identity Theft Red Flags and Address Discrepancies under the Fair and Accurate Credit Transactions Act of 2003" (FACT). It amends the Fair Credit Reporting Act (FCRA). The rule was written specifically for companies making loans, such as banks and commercial lending institutions, but a portion of it extends to rental property owners and managers since both rely on consumer reports (e.g. credit) that (1) ask for sensitive information, such as social security numbers, and (2) could turn up address discrepancies. The philosophy behind this rule is simple: sensitive information must be kept secure to prevent identity theft, and a discrepancy in address could indicate fraud.

The rule requires that "reasonable" policies be in place to prevent identity theft and to verify a person's identity when an address discrepancy is reported. In the case of address discrepancy, if the property manager can't work out the discrepancy, the rule says he/she is not to rent to this individual.

What the Red Flags Rule Means for Rental Owners & Property Managers

While the rule has caused some confusion, compliance is straightforward. More than likely, you're probably already in compliance since the only thing that rental owners or property managers have to show is that they have a "reasonable" process in place for preventing identity theft and for checking IDs, verifying IDs, and following up/asking about any discrepancies.

For example, how do you destroy electronic and paper records that contain sensitive information? Or how about this: if someone gives one address on his or her rental application, but the license lists another address, what's your policy for handling this situation? As long as you have reasonable policies in place, you're in compliance.

Do I need to create a special report if I suspect fraud?

The other commonly asked question about the Red Flags rule (beyond "how do I comply") is this: do we need to report suspected fraud? The answer - for better or worse - is no. If you believe someone is trying to perpetrate a fraud, there's no requirement beyond not renting to this individual.

Still Unsure About the Red Flags Rule? Contact Your Screening Partner

Laws, rules, and amendments result in legitimate questions and concerns, so we understand people's trepidation regarding the Red Flags rule. While it's true that you're likely already in compliance, it can't hurt to contact your screening partner and ask to review with them your policies and systems.

For full details, visit the FTC website at http://www.ftc.gov/redflagsrule

The information in this article should not be construed as legal advice. Always consult an attorney for questions regarding legal matters and compliance.

ScreeningWorks is a service of RentGrow, Inc. the resident screening experts (www.ScreeningWorks.com).

For more information please contact info@screeningworks.com or 888-401-7999.

Look for more information on this issue in future issues of MHCO's "Community Update". 

Phil Querin Q&A: Recovery of Cost and Fees When Tenant Tenders Rent After FED Filed

Phil Querin

Question:  I have an issue regarding late payment of rent where I own both the home and the space.  The rent is constantly late. After I file for eviction the tenant either pays before the court hearing or at the hearing.  I am then stuck with the filing fees and service fees.  What are my options?

 

Answer:   Let’s start from when you filed you eviction in court. The First Appearance is the time noted in the Summons for both parties to appear in person (or via Zoom). If you and tenant both appear, the judge will likely encourage the parties to reach an agreement and report it back to the courtroom. This normally includes either the tenant remaining in the premises by payment of some, or all of the rent due, or working out a date to vacate.

 

The best approach is to reach a “stipulation” with the tenant at the First Appearance to pay all unpaid rents by a certain date or according to a certain schedule – including your costs and fees. If the judge signs the stipulated order, and the tenant complies, the case will ultimately be dismissed at the end of the stipulated period. If the tenant does not comply with the stipulation, you may file a Declaration of Non-Compliance along with a Notice of Restitution and seek a Judgment of Restitution removing the tenant from the property. It is a fast-track process.

 

However, the law requires the Court to dismiss the FED if the tenant tenders rental assistance or payment (or causes rental assistance or payment to be tendered by a 3rd party) that covers the nonpayment amount owed under your 10-day termination notice.[1] In other words, after the tenant has tendered the rent before the first appearance, you have to accept it - if you wait to go to court after the tender, the same result will occur.

 

In those cases in which you did not recover the costs and fees by stipulation during the First Appearance you can file a 30-day notice of termination for payment of the funds. Unfortunately, if it isn’t paid after the 30-day period, you will have to file another eviction in court, and the process starts all over again.

 

Alternatively, you could forget going back to court, and simply file in Small Claims Court (or Justice Court in some jurisdictions) for the fees and costs you did not recover after filing the FED in court.

No lawyers are allowed – it’s just you and the tenant. The judge’s decision is not appealable. The

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problem with that approach is if the judge doesn’t give you the full amount of costs and fees, you’re stuck. You can’t appeal. This should not occur, but it’s impossible to predict; not being subject to appeal, the FED judge can exercise a lot of discretion.

 

Since the resident does not own the home, he/she is the same as any other tenant. This means that you do nothave the ability to use ORS 90.630(10) for a three strikes notice which is reserved only for MHP landlords.

 

[1] Note that the definition of ‘nonpayment’ now includes late charges, utility or service charges, or any other charge or fee as described in the rental agreement or ORS 90.140.

Phil Querin Q&A: Selling Park-owned Carports to Residents

Phil Querin

Answer: There is no specific law regarding this issue. However, you clearly understand the ramifications i.e. if a service or amenity is withdrawn, the inference usually is that the landlord has received some financial benefit. In this case, the "benefit" is that the landlord is no longer responsible for maintenance, and the resident is. My position generally is that this type of arrangement should net out to zero in cost/benefit to both sides. That is, here, if the cost of maintenance is shifted from the landlord to the resident, then there must be some offsetting benefit to the resident. If you believe you can allocate the estimated cost that has been shifted to the resident, e.g. $5.00 per month [I am using the figure as an example - I have no idea what the actual figure might be. - PCQ] then there would be a commensurate $5.00/month reduction in rent. The more difficult issue is whether you may "require" this. I doubt it. The residents never signed on to ownership of a park amenity when they commenced their lease or rental. In fact, a cynic would say that you're only doing this because of the condition or age of the carports. I'm not, but I'm suspecting this as a response from some if you attempted to "require" that all residents assume ownership of them. There is also the issue of the condition of the carports. Are you going to warrant to each resident that they are in good condition? Or, is this going to be an AS-IS sale? If the latter you most certainly cannot require they agree to take over ownership of carports when you decline to stand behind their quality. If the idea is that once bought, a resident could "upgrade" them, you need to think the idea all the way through. For example, any such construction must first be approved by Management. Are you going to require that all work must be performed by bonded contractors who have liability insurance and are licensed with the Construction Contractors Board? You will need to post a Notice of Nonresponsibility for construction liens. [I have seen liens imposed on park owned property for a resident's construction project that was (foolishly) approved by Management.] Are you going to permit residents to do the construction work themselves? If so, you must make clear that the work must be performed in accordance with all applicable laws and ordinances, especially the applicable building codes. Who is going to then monitor construction to make sure what was approved is what was built? Is the manager qualified to do this, and does he/she have time? Are you going to require the residents undertaking construction [either themselves or through a contractor] first sign an agreement to assume all liability and release the park and Management from damages? If a third party does the work, besides licensing, you have to make sure they have workers comp insurance (i.e. SAIF). You cannot assume all contractors have this insurance. The smaller the contractor, e.g. solos, the greater the chance they may have neglected to obtain workers comp. If there were an accident resulting in personal injuries, e.g. falling off the roof of the new garage, without SAIF, the injured worker could look to you. Lastly, what are you going to do upon sale of the home? I assume the resident will be selling title to the garage. Since the garage is affixed to the land, would assume a regular "deed" be given, as opposed to a bill of sale [as is common for personal property, such as a manufactured home]. So how is this going to work? Certainly, you don't want residents delivering deeds to the garage, since they actually don't own the underlying land. Yet once affixed to the land, the garage becomes a part of the land. You will certainly have to cover this issue if/when you undertake this program. It's possible that you would just give a revocable "license" or "permit" to the resident, allowing the use and construction, but not pure ownership. And be careful of a resident claiming that you owe them for the value of the improvement, since upon resale of the home, you might increase the space rent because of the "enclosed garage." In light of all the issues, it seems that if you decide to plow ahead with this idea, it seems to me that it should be voluntary, with adequate disclosures and releases per above, so that the resident can never say they had no choice in the matter. There is little question in my mind, that if you made this program mandatory, a court of law would not enforce it, no matter how ironclad.

Rules For Applying Important Exceptions To Comply With Fair Housing Law

Manufactured Housing Communities of Oregon

 

A fair housing myth: You have to treat everyone the same to comply with fair housing law. It’s a common belief, but it’s not as simple as that. The law requires that you give everyone an equal opportunity to live at your community—not that you treat everyone the same.

It’s often true that treating everyone the same helps to counter any perception of discriminatory motives, but there are many important exceptions that you must understand and apply properly to comply with fair housing law. Because of these exceptions, having a one-size-fits-all policy can sometimes hurt you rather than help you to avoid fair housing trouble.

Chief among the exceptions are disability-related requests for reasonable accommodations, which by definition involve exceptions to your general policies, procedures, or rules when necessary to enable an individual with a disability an equal opportunity to live in and enjoy housing at your community. Disputes over reasonable accommodation requests, often involving assistance animals or parking accommodations, are the number one reason why communities find themselves on the hot seat to defend themselves from accusations of housing discrimination.

Having a one-size-fits-all approach also can lead to fair housing trouble when it has a discriminatory effect on people protected under fair housing law. One example involves occupancy policies: If they’re too restrictive, they can have a discriminatory effect on families with children. Though it’s generally accepted that two persons per bedroom is a reasonable occupancy policy, that’s only a rule of thumb—and subject to a number of exceptions.

Finally, the law itself offers some exceptions, but it’s important to know whether—and how—they apply to avoid fair housing trouble. For instance, the law generally forbids communities from excluding families with children from living there, but there’s an exception for senior housing communities. To claim the exception, however, communities must meet strict technical requirements—unless you do, you’ll invite a fair housing complaint if you deny housing to families with children.

In this article we will review fair housing requirements and give you seven rules—along with the most common exceptions—to help your community avoid fair housing trouble.

WHAT DOES THE LAW SAY?

The federal Fair Housing Act (FHA) bans housing discrimination based on race, color, religion, sex, familial status, national origin, and disability.

The vast majority of fair housing cases are for intentional discrimination—that is, purposely denying housing to people—or treating them differently—because of their race, color, religion, sex, national origin, familial status, or disability. In these cases, the focus is on intent—why the community acted the way it did. If, for example, an applicant accuses you of intentional discrimination for refusing to rent to him based on his race, the community may defend itself by proving that it rejected his application for a legitimate, nondiscriminatory reason: The applicant didn’t satisfy its standard screening criteria, which were consistently required of all applicants.

But the law goes further to outlaw what’s known as “disparate impact” discrimination—that is, housing practices that appear to be neutral, but have an unjustified discriminatory effect on members of protected classes, even if there’s no intent to discriminate. In contrast to claims for intentional discrimination, fair housing claims based on disparate impact aren’t so much concerned with your intent, but on the effects, of your policies or practices. For example, courts have ruled that overly restrictive occupancy policies violate fair housing law because of their discriminatory effect on larger households, which are more likely to be families with children.

RULE #1: Consistency Is the General Rule

EXCEPTION: Understand When the Law Requires You to Make Exceptions

As a general rule, it’s a good idea to establish reasonable, nondiscriminatory rules policies—and to apply them consistently—to counter any perception that your community treats people differently based on race, color, religion, sex, familial status, national origin, and disability. Applying the same policies and rules to everyone helps avoid accusations of conduct made unlawful under the FHA, such as:

  • Excluding members of protected classes from living in your community;
  • Falsely denying that housing is available to members of protected classes;
  • Discouraging members of protected classes from living there;
  • Restricting where members of protected classes may live in your community;
  • Setting different terms, conditions, or privileges or facilities for members of protected classes;
  • Delaying or denying requests for maintenance services for members of protected classes;
  • Enforcing community rules more harshly or leniently for members of protected classes;
  • Making eviction decisions because of a protected characteristic;
  • Making statements expressing a preference for or against members of protected classes; or
  • Threatening, coercing, intimidating, or interfering with anyone exercising a fair housing right.

Nevertheless, you should learn to recognize when fair housing law requires you to make exceptions to your general policies. The most important are requests for reasonable accommodations or modifications for individuals with disabilities. Under the FHA, it’s unlawful to refuse to make reasonable accommodations in the rules, policies, practices, or services if necessary for an individual with a disability to fully use and enjoy the housing. It’s also unlawful to refuse to allow reasonable modifications to the unit or common use areas, at the applicant or resident’s expense, if necessary for an individual with a disability to fully use the housing.

RULE #2: You Make the Rules When It Comes to Pets

EXCEPTION: You Can’t Apply Pet Rules to Assistance Animals

Your community, like many others, may have rules about pets. You may forbid all pets, or you may allow only certain types, breeds, and sizes of animals at your community. Fair housing law doesn’t prevent you from regulating whether and when residents may keep pets at your community—as long as you understand that you must make an exception to your pet rules as a reasonable accommodation for an individual with a disability who needs an assistance animal to fully use and enjoy the premises.

That’s because assistance animals are not pets under fair housing law. They’re animals that work, provide assistance, or perform tasks for the benefit of a person with a disability, or provide emotional support that alleviates one or more identified symptoms or effects of a person’s disability, according to HUD. Though most requests for assistance animals are for dogs, HUD says that assistance animals may include a wide variety of species—not just dogs—that provide various forms of assistance—including emotional support—with or without specialized training.

Though many communities have policies banning so-called dangerous breeds, most notably pit bulls, HUD says that breed, size, or weight limitations may not be applied to assistance animals. That doesn’t mean that you must allow a resident to keep a dangerous animal—even if it’s an assistance animal. Though you can’t apply a blanket rule against certain dog breeds, you can exclude a specific animal that poses a direct threat to the safety of others.

Example: In October 2017, the Vermont Supreme Court upheld an eviction of a resident who had a dog in violation of the community’s no-pet policy. The resident claimed that she had disabilities and that the dog, which had been living with her for some time, was an emotional support animal.

Though the resident was disabled and had a disability-related need for an emotional support animal, the court ruled that she wasn’t entitled to a reasonable accommodation to keep this dog, Duchess, because it posed a direct threat to the safety of others. The evidence showed that Duchess often exhibited aggressive tendencies and that other residents were afraid of her. The resident, who was unable to restrain the dog, had tried and failed to reduce the potential for aggression that the other residents had reasonably feared. While sympathetic to the resident’s attachment to Duchess, the court said that the landlord was not required to do everything humanly possible to accommodate her disability [Gill Terrace Retirement Apartments Inc. v. Johnson, October 2017].

Though your rules may require pet owners to pay extra pet fees or deposits, you must make an exception to the rules for assistance animals. According to federal guidelines, communities may not require individuals with disabilities to pay extra fees or security deposits as a condition of allowing them to keep assistance animals as a reasonable accommodation. If the assistance animal causes damage, you can charge the resident for the cost of repair—but only if you have a general policy requiring all residents to pay for damages they cause to the premises.

RULE #3: You Can Regulate Parking at Your Community

EXCEPTION: You Must Consider Disability-Related Requests for Special Parking Arrangements

For the most part, it’s up to you to determine whether—and how—to regulate parking at your community. Whatever your policy, however, you should be prepared for reasonable accommodation requests by individuals with disabilities who say they need an exception to your parking policies so they may use and enjoy their home.

A prime example is a request for an exception to parking rules for an individual with a mobility impairment. In general, you should grant reasonable requests from applicants or residents with mobility problems for parking accommodations, such as a designated parking space near a building entrance or a resident’s unit, an accessible parking space, or a space designed for van parking. When there’s a clear relationship between the resident’s disability and the need for the requested parking accommodation, the law requires the community to grant the request unless it’s unreasonable—that is, it would impose an undue financial and administrative burden on the community or fundamentally alter the nature of the community’s operations.

Nevertheless, HUD says that the FHA does not require a community to make an exception to parking rules unless there is an identifiable relationship between the requested accommodation and the individual’s disability. The requested parking accommodation must be more than a mere convenience—it must be necessary to allow the resident to live in and fully enjoy the community.

Example: In September 2017, a court ruled against a resident who accused her community of refusing her requests for reasonable accommodations, including her request to reserve the three parking spaces in front of her condo to prevent her neighbors from parking there. The resident claimed that she had a mental disability and that she needed all three parking spaces because she felt unsafe and harassed when strangers parked in front of her home. Allegedly, she rejected the community’s offer to reserve one designated parking space for her, because the installation of a sign to mark the space would block her view and cause psychological distress. She sued, accusing the community of disability discrimination.

Siding with the community, the court ruled that the resident failed to show that her request for three reserved parking spaces were either necessary or reasonable to accommodate her mental disability. She presented a doctor’s note, but it didn’t explain the nature of her disability or why reserving the three parking spaces in front of her unit was necessary to afford her equal opportunity to use and enjoy her dwelling.

The resident also failed to show that reserving these three parking spaces was a reasonable accommodation. The three parking spaces at issue were among the 150 non-reserved parking spaces at the condo complex and all the condo owners had rights to the spaces. Reserving three of them for the resident couldn’t be done without amending the condo documents and reducing the rights of all other owners. The requested accommodation was unreasonable because her unproven need for the spaces was entirely outweighed by the burden that others would suffer if the accommodation were granted [Burrows v. Cubba, September 2017].

RULE #4: You Can Require Applicants to Satisfy Financial Criteria

EXCEPTION: You Must Consider Disability-Related Requests to Modify Financial Requirements

You’re entitled to, and should, determine financial criteria that you apply consistently to all applicants. If you ask some applicants to meet stricter financial requirements than others have to meet, then an applicant may believe he’s being treated differently because of his race or other protected characteristic and claim discrimination under fair housing law.

Nevertheless, you could face a request for an exception to your financial requirements as a reasonable accommodation for an individual with a disability. For example, an applicant with a disability may not qualify financially for a unit in your community, but offer to have someone who will co-sign and promise to pay the rent for him. Depending on the circumstances, refusing to consider such requests for exceptions to your community’s financial requirements could be viewed as denying requests for reasonable accommodations required by fair housing law.

Example: In July 2017, a New York co-op community agreed to pay $125,000 in damages and penalties to resolve a fair housing lawsuit for its alleged refusal to grant a reasonable accommodation to an applicant with a disability.

In its complaint, the Justice Department alleged that the community and its property managers repeatedly denied the application of a 34-year-old man to purchase a one-bedroom unit because of his disabilities, which included serious heart problems, learning disorders, and depression. Allegedly, the man and his family asked that ownership of his unit be placed under a legal trust to help him manage the requirements of cooperative housing, but that the community refused the requests without explanation. As a result, the complaint alleged, the man was forced to continue living in a boarding house with abysmal conditions, grew increasingly depressed, and suffered another heart attack.

“Every member of our society is entitled to equal access to housing and the independence and dignity that it provides,” Acting U.S. Attorney Joon H. Kim said in a statement. “With this resolution, we again emphasize that condos, cooperatives, landlords, and property managers must provide reasonable accommodations to people with disabilities” [U.S. v. 505 Central Avenue Corp., July 2017].

In some cases, disabled applicants have asked for an exemption from financial requirements as a reasonable accommodation, arguing that their disabilities caused them to suffer financial hardships, such as the inability to work. That argument has been rejected by a number of courts, but these can be difficult cases to resolve, so it’s a good idea to get legal advice when confronted by such requests.

RULE #5: You Establish Policies on When and How Rent Is Paid

EXCEPTION: You Must Consider Disability-Related Requests to Modify Rental Payment Policies

You have the right to require residents to pay their rent in a timely manner, but you should consider disability-related requests for exceptions to your policies on how rent is paid. For example, federal guidelines state that a community with a policy requiring payment of rent in person at the leasing office must make an exception for a resident who has a mental disability that makes her afraid to leave her home. According to the guidelines, the community must grant her request to have a friend mail the rental payments as a reasonable accommodation.

Depending on the circumstances, you may also have to consider a disability-related request to change the rental due date. This may come from a resident who relies on disability benefits to pay rent, but who doesn’t receive the check until after the rent is due. If the resident can show that he needs the accommodation because of a disability, then you’ll need documentation to prove that his request is unreasonable because of its impact on your business operations.

Example: In April 2017, a court refused to dismiss a lawsuit accusing a Pennsylvania community and its management company of disability discrimination for allegedly denying a resident’s reasonable accommodation request for the change in his monthly rental due date until after he received his monthly SSDI benefit check. After conducting an investigation, fair housing advocates sued, alleging that the company wouldn’t permit any exceptions to its policies on the rental due date.

The court ruled that the advocates could pursue claims that the company unlawfully denied the resident’s reasonable accommodation request for an exception to the policy requiring rent payments on the first of the month. The company argued that it wasn’t required to grant accommodations related to a disabled person’s financial circumstances, but the advocates argued that SSDI recipients relied on their checks as their primary or only source of income because their disabilities rendered them unable to work. The court said it may be reasonable that the company be required to adjust its rent due date for disabled persons to be afforded equal housing opportunities.

Nevertheless, further proceedings were needed on the community’s claim that the accommodation request was unreasonable. The company argued that the request to change its policy on the rental due date posed an unreasonable financial and administrative burden on the company’s business operations. The company pointed out that it manages more than 35,000 rental units in approximately 140 communities in 10 states. According to the company, its current system of rent collection and handling court proceedings is cost-effective and that the requested accommodation would “fundamentally alter the way” it does business and require a “major and expensive reprograming of software and business procedures [Fair Housing Rights Center in Southeastern Pennsylvania v. Morgan Properties Management Company, LLC, April 2017].

RULE #6: You Can Enforce Reasonable Occupancy Standards

EXCEPTION: General Two Person/Bedroom Standard May Not Be Reasonable in Some Circumstances

As a general rule, fair housing law doesn’t prevent communities from maintaining reasonable occupancy policies, but it’s unlawful to set overly restrictive occupancy standards that have the effect of excluding families with children.

Across the country, communities have come to rely on the industry standard—“two persons per bedroom”—as a reasonable occupancy standard. It comes from HUD in what’s known as the “Keating memo,” which states that the agency considers two persons per bedroom to be a reasonable standard. But, as the memo points out, that’s not a hard-and-fast rule, and HUD will consider other factors, including bedroom size and other “special considerations,” which may make the two person/bedroom standard unreasonable under the circumstances.

In recent years, fair housing advocates have challenged the use of the two person/bedroom standard where state or local occupancy laws may allow more people to live there based on square footage and other factors. It’s too soon to tell how it will all shake out, but for now, communities could face a greater risk of being challenged if they stick with a rigid one-size-fits-all occupancy standard without considering other factors listed in HUD’s Keating memo.

Example: In October 2017, the owner of a Washington community was ordered to pay more than $127,000 in damages for violating federal, state, and local fair housing laws based on familial status by enforcing an occupancy policy allowing only one occupant in studio units.

The case began when an advocacy group conducted fair housing testing at the 96-unit apartment complex where two-thirds of the units were studios, all over 400 square feet. According to the group, its testing confirmed that the community rented the studio units only to single occupants. The group sued, arguing that the community’s occupancy restriction had an adverse discriminatory effect on families with children.

The court agreed, rejecting the community’s claim of legitimate, nondiscriminatory reasons to justify the rule. Among other things, the community argued that the units were too small to accommodate more than one person, but the court pointed out that the city code allowed two people to occupy a studio unit as small as 150 square feet [Fair Housing Center of Washington v. Breier-Scheetz Properties, LLC, October 2017].

RULE #7: You Can’t Refuse to Rent to Families with Children

EXCEPTION: You Can Exclude Children ONLY if You Qualify for Senior Housing Exemption

The FHA prohibits housing discrimination based on familial status—which means the presence of a child under 18 in the household. The law protects families with children, along with anyone else who has legal custody or written permission to have a minor child living with them. It also applies to pregnant women and anyone in the process of obtaining legal custody, such as through adoption or divorce proceedings, of a child or children under 18.

On the whole, familial status is on the same footing as race and any of the other protected classes under fair housing law. Just as it’s unlawful to turn people away because of their race, you can’t turn people away because they have one or more children living with them. It doesn’t matter whether you—or your current residents—would prefer to be living among adults; it’s unlawful to deny housing to people—or to treat them differently—because there’s a child under the age of 18 in the household.

There’s only one exception that would allow you to exclude children from your community—but it applies only to senior housing communities that meet strict legal requirements to qualify as “housing for older persons.” The FHA recognizes three types of housing that may qualify under the familial status exemption as housing for older persons. The most common—55 or older—is also the most complicated: Among other things, 55+ communities must adopt policies and procedures to ensure that at least 80 percent of its units are occupied by at least one person 55 and older.

Senior communities that comply with these and other technical requirements are exempt from the general rules that protect families with children. There’s no middle ground—you either meet those requirements or you don’t. And if you don’t, you’ll likely trigger a fair housing complaint by adopting an “adults-only” policy to prevent families with children from living there.

Example: In September 2017, the owners and manager of three apartment buildings in Washington agreed to pay $95,000 to resolve allegations that they refused to rent to families with children. In its complaint, the Justice Department alleged that a manager told a woman seeking an apartment for herself, her husband, and their one-year-old child that the apartment buildings were “adult only.” Allegedly, the communities advertised their apartments as being in “adult buildings.”

“No family should be denied a place to live simply because they have a child,” added Anna Maria Farias, HUD Assistant Secretary for Fair Housing and Equal Opportunity. “HUD will continue to work with the Justice Department to ensure that property owners comply with their obligations under the nation’s fair housing laws.”

 

Phil Querin Article: Waiver Under Oregon's Landlord-Tenant Act

Phil Querin

  • The landlord accepts:
    • A last month's rent deposit collected at the beginning of the tenancy, regardless of whether the deposit covers a period beyond a termination date;
    • Rent distributed pursuant to a court order releasing money paid into court; or
    • Rent paid for a rent obligation not yet due and paid more than one rental period in advance.
  • For a continuous or ongoing violation, the landlord's written warning notice remains effective for 12 months and may be renewed with a new warning notice before the end of the 12 months.
  • For a violation concerning the tenant's failure to pay money owed to the landlord, the landlord's written warning notice under subsection ORS 90.412(4)(c) remains effective for 12 months from the date of the tenant's failure to pay the money owed.
  • A landlord that must refund rent shall make the refund to the tenant or other payer by personal delivery or first class mail. The refund may be in the form of the tenant's or other payer's check or in any other form of check or money.

Acts not constituting waiver of termination of tenancy. If a notice of termination has been given by the landlord or the tenant, the following acts do not waive the landlord's right to terminate on the notice and do not reinstate the tenancy:

  • Except in the case of issuance of a nonpayment of rent notice under ORS 90.394, the acceptance of rent if:
    • The rent is prorated to the termination date specified in the notice; or
    • The landlord refunds at least the unused balance of the rent prorated for the period beyond the termination date within 10 days after receiving the rent payment.
  • Except in the case of termination for cause under ORS 90.392 (termination for cause), 90.398 (termination for drug/alcohol violations), 90.405 (unpermitted pets), 90.630 (termination of MHP tenancy by landlord) or 90.632 (termination for physical condition of home in MHP), the acceptance of rent for a rental period that extends beyond the termination date set forth in the notice, if the landlord refunds at least the unused balance of the rent for the period beyond the termination date within 10 days after the end of the remedy or correction period described in the applicable notice.
  • If the termination is for cause under ORS 90.392 (termination for cause), 90.398 (termination for drug/alcohol violations), 90.405 (unpermitted pets), 90.630 (termination of MHP tenancy by landlord) or 90.632 (termination for physical condition of home in MHP) and eviction proceedings have commenced to recover possession of the premises based on the termination:
    • The acceptance of rent for a period beyond the expiration of the notice of termination during which the tenant remains in possession if:
      • The landlord notifies the tenant in writing in (or after the service of) the notice of termination for cause that the acceptance of rent while an action for possession is pending will not waive the right to terminate under the notice; and
      • The rent does not cover a period that extends beyond the date the rent payment is accepted.
    • Service of a nonpayment of rent termination notice under ORS 90.394.
  • The following acts do not waive the right of the landlord to terminate on a notice of termination given by the landlord or the tenant and do not reinstate a tenancy:
    • Acceptance of a last month's rent deposit collected at the beginning of the tenancy, whether or not the deposit covers a period beyond a termination date.
    • Acceptance of rent distributed under a court order releasing money that was paid into the court as provided under ORS 90.370 (1) (Rent tender provisions when tenant files a counterclaim)
    • Acceptance of rent paid for a rent obligation not yet due and paid more than one rental period in advance.
  • When a landlord must refund rent, it shall be made to the tenant or other payer by personal delivery or first class mail and may be in the form of the tenant's or other payer's check or in any other form of check or money.

Effect of acceptance of partial rent. A tenant's duty regarding rent payments is to tender to the landlord an offer of the full amount of rent owed within the time allowed by law and by the terms of the rental agreement. A landlord may refuse to accept a rent tender that is for less than the full amount of rent owed or that is untimely.

  • A landlord may accept a partial payment of rent.
    • The acceptance of a partial payment does not constitute a waiver of the landlord's right to terminate the tenancy under ORS 90.394 (Termination of Rental Agreement for Failure to pay Rent) of the balance of the rent owed if the following rules below for partial payments are followed.
  • A landlord and tenant may by written agreement provide that monthly rent shall be paid in regular installments of less than a month pursuant to a schedule specified in the agreement. Such agreed-upon installment rent payments are not "partial payment of rent"
  • Acceptance of a partial payment of rent waives the right of the landlord to terminate the tenant's rental agreement for nonpayment of rent unless:
    • The landlord accepted the partial payment of rent before the landlord gave a nonpayment of rent termination notice based on the tenant's agreement to pay the balance by a time certain and the tenant does not pay the balance of the rent as agreed;
    • The landlord's notice of termination is served no earlier than it would have been permitted under ORS 90.394 (Termination of Rental Agreement for Failure to pay Rent) had no rent been accepted; and
    • The notice permits the tenant to avoid termination of the tenancy for nonpayment of rent by paying the balance within 72 hours (or 144 hours) or by any date to which the parties agreed, whichever is later; or
    • The landlord accepted a partial payment of rent after giving a nonpayment of rent termination notice and entered into a written agreement with the tenant that the acceptance does not constitute waiver. This agreement may provide that the landlord may terminate the rental agreement and thereafter file for eviction without serving a new non-payment of rent notice if the tenant fails to pay the balance of the rent by a time certain.
  • Application of a tenant's security deposit or prepaid rent to an obligation owed to a landlord in foreclosure under ORS 90.367 does not constitute a partial payment of rent.
  • Notwithstanding any acceptance of a partial payment of rent pursuant to the above rules, the tenant continues to owe the landlord the unpaid balance of the rent.

Portland City Council to Consider Limits on Security Deposits and Screening Criteria/Background Checks

 

By Gordon R. Friedman - The Oregonian/OregonLive

Published 8-20-18

The Portland City Council will soon consider an ordinance to cap what landlords can charge for security deposits and limit how they may use renters' credit and criminal conviction history to deny them tenancy.

"Screening criteria and security deposit reform" will be the subject of an upcoming council agenda item, Commissioner Chloe Eudaly wrote in an August 14 post to her Facebook page. The ordinance is scheduled for a hearing September 20, said Eudaly spokeswoman Margaux Weeke.

It is exactly the kind of move that Oregon landlords feared when they banded together to try to raise $2 million to fight those and other restrictions they say will undermine their businesses.

Policymakers in other cities have also explored regulating security deposits, citing mounting pressures on renters who struggle to save up cash for move-in fees. New York City's comptroller in July introduced a deposit-limiting measure. The Seattle City Council adopted a similar ordinance in December 2016, and landlords filed a lawsuit to challenge it.

In Portland, landlords may currently charge what they like as a security deposit, and there are few regulations over how deposits must be returned after a tenant vacates. That would change under Eudaly's ordinance. In the Facebook post, Eudaly described one an effect of the ordinance as "limit security deposit requirements."

 

The ordinance would also change how landlords may use information about potential tenants. Property owners typically perform criminal records and credit history checks on rental applicants. Some renter advocates have described the background checks as offering landlords a pretense for discriminating against those with criminal pasts or poor credit.

 

Eudaly said in her Facebook post that changing how landlords may use information about rental applicants to deny them tenancy is in part intended to "reduce barriers to housing" and "prevent discrimination."

According to a draft of the ordinance provided by Eudaly's office, she has considered establishing a system that requires landlords to approve tenants on a first-come, first-served basis, though a minimum credit score would still be allowed.

To deny applicants, landlords would be required to rank applicants on their credit history, criminal convictions and housing record and give them a chance to provide favorable information.  

The draft ordinance includes a list of crimes that are not to be judged by landlords as meaning a tenant convicted of them would likely harm the property or cause the premises to be unsafe, if the applicant was sentenced at least three years prior or released from prison one year prior. The list includes felony assault and battery, felony burglary or breaking-and-entering, stalking and misdemeanor domestic violence, dealing or manufacturing illegal drugs, and non-forcible sex offenses, among others.

Mark Busch Q&A: Stay and Pay" Court Agreements"

Mark L. Busch

Answer: You are right that it can't continue - this is your business and you need to treat it as a business. However, there is a chance that you can give this tenant an opportunity to redeem himself, yet still protect your interests as well.

The first step is to give the tenant a 72-hour rent nonpayment notice. Use MHCO Form 82, fill it in following the directions on the form, and serve it on the tenant. If the tenant pays the rent by the 72-hour notice deadline, then life goes on and the tenancy continues. If not, you should file an eviction case at your county courthouse.

The court clerk will have several "check the box" forms that you can use to file an eviction - but be sure to bring along several copies of the 72-hour notice that you will need to attach to the eviction complaint. After you file the paperwork and pay the filing fee, you can then have the sheriff serve the eviction summons and complaint. The court clerk will be able to show you to the sheriff's office to have them serve the paperwork.

The court clerk will set a "1st court appearance hearing" when you file the eviction complaint. Both sides need to show up at this hearing. If the tenant doesn'tappear, then you win automatically and get a judgment entitling you to an eviction by the sheriff. The court clerk can give you the paperwork to finish that process.

If the tenant does show up, you will get a chance to negotiate a "stay and pay" agreement that the court will sign off on as an enforceable court order. (Most courts will have a form that you can use for this agreement.) Under Oregon law, the payment agreement can and should include: (1) All past-due rent; (2) late fees; (3) unpaid utilities; (4) court costs; (5) attorney fees (if any); and, (6) any other unpaid charges. The payment agreement can extend for up to six months, with payments made at monthly intervals or any other schedule that both sides agree on. The agreement can also include the next three regular monthly rent payments, sort of a "probationary period" to make sure the tenant gets back on track.

If the tenant complies with the payment terms, the tenancy continues and the court will automatically dismiss the eviction case after the payment agreement expires. If the tenant misses any payment, then you will file a "declaration of noncompliance" with the court and finish the eviction process.

These "stay and pay" agreements are very useful to my landlord clients and I use them regularly. They give you an opportunity to keep good tenants that may have temporarily fallen on hard times, but also keep open your eviction options.

As the landlord, you will also need to appear in court unless you have an attorney or other agent (such as a property manager) appear in court at the "1st appearance hearing." This hearing is usually set 8 days after the FED is filed. The purpose of the hearing is to see whether the parties can work out a payment plan, move-out agreement, or other arrangement. If not, the case will be set for trial.

If you are unable to settle the case at the first appearance hearing, by law the trial must be scheduled within 15 days from the 1st appearance hearing. Sometimes, the parties or the court will delay the trial beyond this time frame, but most cases move quickly. This leaves little time for preparation, meaning it is important to have your witnesses, exhibits, and trial arguments ready to go.

You do not necessarily need an attorney for court appearances, but you will increase your chance of success if you do. The eviction statutes are very technical, and most people aren't familiar with courtroom procedures. You will especially be at a disadvantage if the RV tenant has an attorney. If your case gets to the point of a trial, it is usually worth it to hire an attorney.

Sweet Dreams: don't Let Overtime Exemption Issues Become Nightmares

J. Kent Pearson

Background

The FLSA generally requires employers to pay a minimum wage (currently $7.50 an hour) for all hours worked, as well as overtime pay at time and one-half the employee's regular rate of pay for all hours worked in excess of 40 in a workweek. Oregon law imposes similar, but not identical, requirements. Effective July 1, 2016, depending on where your employees work, the Oregon minimum wage currently ranges from $9.50 to $9.75 per hour. The minimum will increase annually and will eventually reach a maximum range of $12.50 to $14.75 an hour, with subsequent increases based on increases to the Consumer Price Index.

In addition to establishing a minimum wage, Oregon law and the FLSA also require covered employers to pay overtime wages at time and one-half the employee's regular rate of pay for all hours worked over 40 in a workweek. Like the minimum wage requirements, the overtime rules apply unless the employee is "exempt"; non-exempt employees are subject to the overtime rules and must be paid accordingly for hours worked beyond 40 in a workweek.

 

Who's Exempt?

 

Both Oregon law and the FLSA provide certain exemptions from the overtime requirements. Most common are the so-called "white collar" exemptions: the executive, administrative, and professional exemptions. The white collar exemptions are not identical under Oregon law and the FLSA, but they are similar. To be exempt under one of the white collar exemptions, an employee must satisfy a duties test, a salary threshold test, and a salary basis test.

The "salary basis" test requires that exempt employees be paid a fixed amount per pay period, and the amount is not subject to variance due to the quality or quantity of work produced. While both Oregon and federal law provide a limited number of specific exceptions, employers generally may not make deductions from an exempt employee's salary without putting the overtime exemption at risk. Ordinarily, except for permissible deductions, or additions such as bonuses or commissions, one would expect to see an identical amount of gross wages on an exempt employee's pay check from pay period to pay period.

The "salary threshold" test imposes a minimum salary requirement. Under Oregon law, the minimum salary is simply 40 times the minimum wage. Since 2004, the FLSA minimum salary has been $455 per week ($23,660 annually). However, that number is about to increase-substantially. Effective December 1, 2016, the minimum salary for an exempt "white collar" employee will be $913 a week ($47,476 annually). Regardless of their duties, "white collar" employees generally will be non-exempt if they earn less than $913 per week.

In determining whether an employee satisfies the minimum salary after December 1, 2016, the FLSA will allow employers to count non-discretionary bonuses and "catch up" payments once a quarter. However, the salary threshold must be paid "exclusive of board, lodging, or other facilities." Consequently, the cost or market value of housing provided to a manager may not count toward the $913 weekly minimum salary.

If an employee satisfies the "salary basis" and "salary threshold" tests, then the employee will be exempt from FLSA and Oregon overtime if the employee also meets the duties test for the particular "white collar" exemption at issue, whether it is the executive, administrative, or professional exemption. While an examination of the duties test is beyond the scope of the article, employers should remain mindful of a couple of points with respect to overtime exemptions. First, overtime exemptions are narrowly construed in favor of employees. Along the same lines, an employer always has the burden of proof when it comes to proving that a particular employee meets the salary and duties tests sufficient to qualify as exempt. Finally, while a good job description is useful, the employee's actual day-to-day duties will determine whether an overtime exemption applies.

 

Final Thoughts

 

Because of the litigation risks, employers confronted with close exemption situations simply may elect to treat the employee as non-exempt and pay overtime for hours worked over 40 in a workweek. It may also make sense in close cases to require the employees to record their hours to avoid inflated claims in litigation. In any event, employers should always thoroughly evaluate the employees they treat as exempt; be in a position to prove that an overtime exemption applies; and do not forget about the increased salary threshold requirements effective December 1, 2016. Do these things and the quality of your sleep is sure to improve.

 

 

*J. Kent Pearson, Jr. is an attorney at Bullard Law in Portland, Oregon. His practice focuses on employment law and advice. He works with business owners and managers to help them understand the issues and risks before problems arise. Kent has broad experience in counseling employers on wage and hour matters, employment agreements, employer personnel policies, plant closing and other labor and employment issues. Kent is licensed to practice law in Oregon.

 

 

 

 

The information presented is not intended as legal advice and should not to be acted on as such.

 

 

Maintaining an Age-Restricted Community: A Refresher on the Housing for Older Persons Act

MHCO

History


The Civil Rights Act of 1968 enacted The Fair Housing Act ("FHA") to prohibit housing discrimination based on race, color, religion, sex or national origin. The FHA was amended in 1988 to expand its coverage to prohibit discrimination based upon disability or family status, meaning the presence of a child under the age of 18 and pregnant women. Because the creation of families as a protected class clashed with the operation of retirement or adult communities, the 1988 amendments included exemptions for housing developments that qualified as housing for persons over the age of 55. Because there was an inherent conflict between protected family status and the exemption for older persons, Congress responded with The Housing for Older Persons Act of 1995 ("HOPA")* which fine tuned the exemptions and is now the definitive authority for owners of such housing. (You should also be aware that municipalities can have ordinances prohibiting discrimination for categories broader than the Civil Rights Act. Examples of common ordinances gaining popularity are discrimination in housing on the basis of HIV/AIDS status or sexual orientation. Such ordinances are not addressed in this article.)


Occupancy Requirement to Qualify for Exemption


HOPA maintained the requirement that at least 80% of exempt housing must have one occupant who is 55 years of age or older. It also still required that the exempt housing publish and follow policies and procedures that demonstrate an intent to be housing for persons 55 and older. Significant in terms of capital costs, HOPA eliminated the requirement that 55 and older housing had to maintain "significant facilities and services" designed for the elderly. (Communities that are occupied solely by persons who are 62 or older are also exempt from the prohibition against family discrimination under Section 100.303.)


The "Wiggle Room" Factor


At first blush, the 80% requirement appears to give a property owner some "wiggle room" to comply with the exemption. HOPA specifically allows a 55 and older community to be "exempt" from the preference for families if, after September 13, 1988, 80% of the units are occupied by at least one person age 55 years or older. Units occupied by employees of the housing facility or community who are under age 55 do not count against the 80% as long as the employee's perform substantial duties related to the management or maintenance of the community. Likewise, units occupied by persons who are disabled and require a reasonable accommodation, also do not count against the 80%.


However, the 80% requirement can also be a property owners' pitfall if it is achieved improperly. The 80% requirement does not mean that the property owner can manipulate the remaining 20% of units occupied by persons under the age of 55. The 80% occupancy requirement is coupled with an additional requirement that the facility or community adheres to policies and procedures that demonstrate the intent to be a 55 or older facility. A manager cannot merely choose to rent to "good" non-seniors or families just because the facility is over 80% senior.


One provision of HOPA which, on the surface, appears troublesome is Section 100.305(h) which provides that each housing facility may determine the age restriction for units that are not occupied by at least one person 55 years of age or older. On its face, this provision appears to allow a community to set any age requirement it wishes for the twenty percent (20%) of spaces which are not required to be occupied by a person 55 years of age or older, including requiring the occupants of the remaining twenty percent (20%) of spaces to be adults. However, this would appear to be contrary to the general intent of the FHA to prohibit discrimination on the basis of "family status." A more likely interpretation is that the housing provider need not apply any age restrictions on occupancy of the remaining twenty percent (20%) of rental units. This interpretation seems likely, not only in view of the general intent of the FHA, but in view of Section 100.306(d) which provides that a housing facility or community may allow occupancy by families with children as long as it meets the intent requirements of Sections 100.305 and 100.306 (a).


An argument could well be made that a community must allow up to twenty percent (20%) of the spaces to be occupied by persons who do not otherwise satisfy the community's minimum age requirements. The problem is that a park which "uses up" its twenty percent (20%) allotment may find itself below the 80% requirement if a space which was previously occupied by a person 55 years of age or older ceases to be so occupied. This could occur as a result of an older tenant dying or moving out of the community.


It has been our experience that HUD has, from time to time, interpreted the "twenty percent" allowance as a "fudge factor" in order to avoid hardship where, for example, an older tenant dies, leaving a widow who does not satisfy the community's minimum age requirements. This interpretation was bolstered by the requirement that the housing be intended for persons 55 years of age or older and that the properties have rules that limit residency to persons meeting the age requirements. Deliberately allowing persons under age 55 to move into the community seems contrary to this intention.


**Tip: In many states (including California) the law requires that mobilehome park owners uniformly enforce all published rules. To allow some households to avoid the requirement could run afoul of the such laws leaving the door open for a disgruntled tenant to sue on a claim that the management is not uniformly enforcing it own rules.


Published Procedures and Policies of Intent


In addition to requiring that at least 80% of the occupied units be occupied by at least one person who is 55 years of age or older, HOPA requires that the housing be "intended and operated" for persons 55 years of age or older, and that the housing facility "publish and adhere to policies and procedures that demonstrate its intent" to qualify for the 55 or older exemption. Section 100.306(a) sets forth a non-exclusive list of relevant factors in determining whether the park "demonstrates" this "intent":


(1) The manner in which the housing facility is described to prospective residents;(2) Any advertising designed to attract prospective residents;(3) Lease provisions;(4) Written rules and regulations;(5) The maintenance and consistent application of relevant procedures;(6) Actual practices; and(7) Public posting in common areas of statements describing the facility as housing for persons 55 years of age or older.


These requirements bolster the "common sense" approach to a community demonstrating its intent to be housing for older persons. Specifically, without limitation, the park's residency documents need to clearly state the age restrictions on residency, and the age restrictions need to be consistently enforced.


Unscrupulous attempts by property owners to manipulate the intent to remain senior housing have resulted in adverse judgments. In a 2003 federal case in California, Housing Rights Center et al. v. Galaxy Apartments, et al., the apartment complex and management company was sued for allegedly telling an expectant mother that it would not accept families with children because it was a "seniors only" complex. The Housing Rights Center sent "testers" to the building and learned that childless adult testers of all ages were accepted and only testers with children or who were expecting children were told that the complex was seniors only. Obviously, the apartment owner was not complying with the "intent" of the over 55 exemption and was ordered to pay the plaintiffs $51,000 and enter into a two year fair housing training program.


Some states require that housing intended and operated for occupancy by persons 55 years of age or older register with state agencies. You should consult your legal counsel for the applicable registration and renewal process in your state.


Age Verification


HOPA provides specific guidelines for "age verification". To protect your property, these procedures should be followed to the point that, at any given time in the past, you should be able to demonstrate, the percentage of units that were occupied by at least one person age 55 or older.


Section 100.307(d) provides that the following documents are considered "reliable" documentation of the age of the occupants:


(1) Driver's license;(2) Birth certificate;(3) Passport;(4) Immigration card;(5) Military identification;(6) Any other state, local, national, or international official documents containing a birth date of comparable reliability or;(7) A certification in a lease, application, affidavit, or other document signed by an adult member of the household asserting that at least one person in the unit is 55 years of age or older.


This last provision is useful in those cases where tenants who are believed to be over 55 years of age fail or refuse to provide proof of age to the park by allowing any other adult member of the household to sign a statement to the effect that the person in question is, in fact, at least 55 years of age.


**Tip: Make it a policy to obtain a written application for tenancy from every household and keep those applications for the length of the tenancy.


Section 100.307(g) further provides that: "If the occupants of a particular dwelling unit refuse to comply with the age verification procedures, the housing facility or community may, if it has sufficient evidence, consider the unit to be occupied by at least one person 55 years of age or older." This section goes on to provide that such evidence may include government records or documents, such as a census; prior forms or applications; or a statement from an individual who has personal knowledge of the age of the occupants. In the latter case, the individual's statement must set forth the basis for such knowledge. Compliance with this provision most probably would be met by a park employee statement as to their opinion of the age of a tenant, based upon the tenant's appearance and, if applicable, the apparent age of the tenant's adult children.


A typical pitfall for owners of such properties is the HOPA requirement that the age verification information must be updated at least every two years, pursuant to Section 100.307(c).


**Tip: In addition to keeping the tenant's application, the management should consider developing a form which it distributes to all spaces at least once every two years, asking residents to confirm the names and ages of all persons who are currently residing in the home. This is probably good policy in any case, since a record of what adults are actually occupying a home is useful in other situations (e.g., naming all adult occupants in an unlawful detainer complaint).


Conclusion


While there is no guaranteed insulation from lawsuits, a property owner or landlord is well advised to have their policies and procedures in writing and reviewed by competent legal counsel. All levels of a property owners' management should be instructed to adhere strictly to those written policies and procedures. With competent advice, you should be able to avoid needless and expensive litigation which only detracts from your eventual retirement.


*/The Housing for Older Persons Act of 1995 is codified in 24 CFR 100.300 et seq. The Code of Federal Regulations can be viewed on line. One such site is the National Archives and Records Administration found at www.gpoaccess.gov/cfr


Robert S. Coldren is a founding partner of the law firm of Hart, King & Coldren. For over 20 years he has represented various entities as they relate to the manufactured housing industry.

Phil Querin Q&A: Applicant Has Criminal Background Concerned About Accepting as Temporary Occupant

Phil Querin

UPDATE: Thanks to John VanLandingham for reminding me that pursuant to the recently enacted Senate Bill 970, ORS 90.303 was amended to provide that when evaluating an applicant for tenancy, the landlord may not consider: (a) A criminal conviction for possession of marijuana; nor (b) Possession of a medical marijuana card, or status as a medical marijuana patient. This new law becomes effective on January 1, 2020. ~ PCQ

Answer.  This applicant seems to believe he makes the rules. Please remind him otherwise. Regardless of the guest policy, you know he has a “lengthy criminal record” so you need to exercise extreme care in permitting him into the park under any circumstances.  

 

I do have some questions:

  • It is unclear to me whether all his criminal history is over 10 years old, or just some of it. If all of it is over 10 years ago, the cuts in his favor.
  • You did not describe the nature or severity of the crimes. Are they misdemeanors or felonies? Repeat offenses? 
  • Crimes against persons or property? The former warrant more careful attention.
  • Lastly, and perhaps most critical to any analysis is whether this person is a member of a protected class. Ex-cons are not, per se’ a protected class. If he is not, there is little he can do from a fair housing standpoint. However, this is not to say you can drop your guard. The main rule-of-thumb to always follow is to be consistent. 

 

On April 4, 2016, the U.S Department of Housing and Urban Development (“HUD”) issued its “Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions” (hereinafter, the “Memo”). The full text of the 10-page Memo can be found here. Not surprisingly, it follows the June 25, 2015 ruling by the U. S. Supreme Court, in the Texas Dept. of Housing vs. Inclusive Communitiescase, which upheld the much-debated concept of “disparate impact” under the Fair Housing Act, as amended (the Act”).   

 

At footnote 43 of the Memo, the following appears: 

 

***see Megan C. Kurlychek et al., Scarlet Letters and Recidivism: Does an Old Criminal Record Predict Future Offending?, 5 Criminology and Pub. Pol’y 483 (2006) (reporting that after six or seven yearswithout reoffending, the risk of new offenses by persons with a prior criminal history begins to approximate the risk of new offenses among persons with no criminal record). (Emphasis added.) 

 

Does this mean that six or seven years is the maximum look-back that landlords can make when screening someone’s criminal background? I submit that for non-violent crimes, this is not an unreasonable review period. But in cases of crimes to the person, and most significantly, rape and child molestation, I agree a ten-year period is not unreasonable. 

However, the Memo is not to be read to say that anyconviction over seven years may not be taken into consideration when screen potential tenants or temporary occupants. Its purpose is to “…issue guidance, mostly by way of examples and prior case law, in how the use of criminal history during the tenant-screening process, may, and may not, trigger a disparate impact result.”  

 

 Here are some tenant screening tips I’ve suggested in past articles:  

 

  1. Beware of testers, calling over the phone and asking if you will rent to persons with a criminal background.Be careful about answering these blind calls with a “yes” or “no”. Make sure callers understand that no rental decisions are made in advance of reviewing all relevant background information, including a criminal background report. Encourage the caller to either come to the office and pick up the necessary paperwork, or if they prefer, send it to them at their provided address.  

 

  1. Ultimately, landlords should plan on making adjustments in their rules and application process.   

 

  1. Do not have a rule or policy that treats an arrest, with no conviction, the same as a conviction.If you currently have such a rule, it should not be enforced. 

 

  1. Do not have a blanket guideline providing, for example, that conviction for any crime is an automatic denial. 

 

  1. Be sure that all rules or policies concerning criminal records are uniformly enforced – no exceptions.  However, note No. 7 below. You should avoid a policy saying that all persons with a felony are automatically disqualified. There is a world of difference between an ex-felon who served time for embezzlement ten years ago and has been a contributing member of society ever since vs. an ex-felon who served time for aggravated battery, and has been in and out of jail for similar violent crimes over the past five years. 

 

  1. If possible, evaluate all other rental history, such as prior tenancies, employment, credit, income and affordability, before even going to the results of a criminal background check. If the prospective tenant does not pass one or more of these other criteria, then the rejection can be based on that, rather than a criminal background report, thus avoiding the disparate impact issue entirely. 

 

  1. In evaluating an applicant’s criminal history, do not use a “one size fits all” approach. There are several gradations of severity. Additional issues need to be addressed before deciding to reject a prospective tenant based upon criminal history. For example: 

 

·     How long ago was the conviction? (A single conviction over 6-7 years old, in most cases should probably not be used as the basis for a denial (excluding registered sex offenders, or those convicted of violent crimes). 

·     What has the person been doing since their release? 

  • Has the person been convicted once, or on multiple occasions? 
  • What was the nature and severity of the crime?  

 

  1. Note that according to the Memo, a refusal to rent to an applicant who has a conviction for one or more drug crimes involving the manufacture or distribution (notmere possession) of a federally defined controlled substance ispermissible and not subject to a disparate impact claim.In other words, a landlord or manager may legally base the refusal to rent based upon a conviction for manufacture or distribution is nota violation of the Act, based upon disparate impact. Per the Memo: “Section 807(b)(4) of the Fair Housing Act provides that the Act does not prohibit ‘conduct against a person because such person has been convicted … of the illegal manufacture or distribution of a controlled substance as defined in section 102 of the Controlled Substances Act (21 U.S.C. 802).’” 

  

  1. ORS 90.303 (Evaluation of Applicant) addresses some of the same issues as in the Memo, but not all of them. And where there is similarity, Oregon law does not go as far as the Memoon the issue of criminal records and disparate impact. Oregon’s statute provides: 

 

(1) When evaluating an applicant, a landlord may not consider an action to recover possession pursuant to ORS 105.105 to 105.168(Oregon’s eviction statutes – PCQ)if the action: 

       (a) Was dismissed or resulted in a general judgment for the applicant before the applicant submits the application. This paragraph does not apply if the action has not resulted in a dismissal or general judgment at the time the applicant submits the application. 

      (b) Resulted in a general judgment against the applicant that was entered five or more years before the applicant submits the application. 

 

(2) When evaluating the applicant, a landlord may not consider a previous arrest of the applicant if the arrest did not result in a conviction. This subsection does not apply if the arrest has resulted in charges for criminal behavior as described in subsection (3) of this section that have not been dismissed at the time the applicant submits the application. 

 

(3) When evaluating the applicant, the landlord may consider criminal conviction and charging history if the conviction or pending charge is for conduct that is: 

     (a) A drug-related crime; 

     (b) A person crime; 

     (c) A sex offense; 

     (d) A crime involving financial fraud, including identity theft and forgery; or 

     (e) Any other crime if the conduct for which the applicant was convicted or charged is of a nature that would adversely affect: 

     (A) Property of the landlord or a tenant; or 

     (B) The health, safety or right to peaceful enjoyment of the premises of residents, the landlord or the landlord’s agent.  

 

  1. Landlords should notassume that compliance with ORS 90.303 means that a denial of tenancy automatically avoids a disparate impact claim.  Landlords and managers should be extra-cautious in this minefield, since where federal law is more restrictive (i.e. burdensome on landlords), it will likely pre-empt state law.  Thus, compliance with state law, but non-compliance with federal law, can still result in a disparate impact claim under the Fair Housing Act, as amended. 

 

Here are some considerations to keep in mind: 

 

  1. The Memo and ORS 90.303 bothprohibit screening applicants for arrests, regardless of the conduct that led to the arrest; 
  1. ORS 90.303 says that an arrest which has not been dismissed but is still pending (i.e. a conviction is still possible) may be considered in tenant screening. The HUD Memo does not address this issue – so we don’t know what the feds would say. Accordingly, it may be prudent to take a more balanced approach in these situations. For example, rather than having a blanket policy that a tenant will automatically be rejected if their charge is still pending, landlords and managers should evaluate the matter based upon (i) When the matter will be resolved, e.g. a week, a month, or a year? (ii) What was the charge? (iii) If convicted, would the applicant automatically be denied? As noted above, the whole issue of criminal background information is an element of the application process that need not be fully vetted, if, regardless of the crime, its severity or recency, the person would fail the application process on other grounds.If so, there is no need to rely upon a landlord’s criminal background policy at all. However, a word of caution here: Be prudent when selecting a basis for denial. Using a weak reason can be viewed as pretextual if the applicant is a member of a protected class. In other words, beware of using a credit basis for denial if it is “iffy” and exclude the criminal background basis. In these cases, landlords and managers should consult legal counsel; it may be best to use both bases.  
  1. ORS 90.303 says that a landlord may consider a conviction for certain conduct, generally relating to threats of violence, drugs, sex, or property damage, which would indicate risks to fellow tenants or the landlord. However, the HUD Memo is broader and more subtle (i.e. it demands an evaluation beyond a one-size-fits-all rejection policy). In short, do not rely solely on ORS 90.303, to the exclusion of the more balanced approach demanded by the Memo. 
  1. Unlike the HUD Memo, ORS 90.303 does not address how long ago the conviction occurred or require an evaluation of what the applicant had been doing since the conviction. (e. g. evidence of rehabilitation). In the past, earlier Landlord-Tenant Coalitions could not reach agreement on whether to use a five- or seven-year standard in the statute3, nor whether multiple convictions should be dealt with differently than single ones. Accordingly, our statute is silent on this issue.  

 

Conclusion.  Landlords could be forgiven for feeling they are caught on the horns of a dilemma. If they follow Oregon statutes, it may not be enough. And while it may be sufficient to follow federal law, today that requires a “disparate impact” analysis, which, at best, is a shifting and nuanced set of “guidelines” based upon anecdotal information.  

 

Perhaps most unsettling is the fact that today, a landlord’s good faith effort to comply with the tenant application process is not enough. Instead, unintentional discrimination, now known under the more benign title, “disparate impact”, has become a basis for Fair Housing claims. Yet unlike statutes, which can provide distinct guidance, disparate impact is more of a conceptthan a law, since it ignores one’s intent, and looks instead to the perceived long-term consequences of certain actions based upon empirical statistics, academic writings, analysis, surveys, demographics and footnotes. Is this something landlords can or should be expected to fully appreciate and understand when evaluating a person for tenancy?  

 

So, to your two questions:

  1. Can you still deny the temporary occupant based on a criminal record from 10 years ago, I would say yes, if the crimes were violent/sexual in nature, were repeated, and during the intervening years, the applicant had not exhibited any stability or rehabilitation. (Note, if the applicant is a member of a protected class, you probably should consult with your lawyer first.)
  2. Can he “couch surf”? If your decision is to decline him as a temporary occupant, using the above screening criteria, you certainly don’t want him in the community under any other category. Just say No and let any residents who would aid him in this work-around know that.

 

Remember this: In the final analysis the decision is easy. Which would you rather defend against: (a) an angry ex-con, or (b) the parents of a child harmed by the ex-con you allowed into the community because he tried to make you bend to his rules?

UPDATE: Thanks to John VanLandingham for reminding me that pursuant to the recently enacted Senate Bill 970, ORS 90.303 was amended to provide that when evaluating an applicant for tenancy, the landlord may not consider: (a) A criminal conviction for possession of marijuana; nor (b) Possession of a medical marijuana card, or status as a medical marijuana patient. This new law becomes effective on January 1, 2020. ~ PCQ