7 Pitfalls to Avoid When Responding to Fair Housing Complaints
On average, 25,000 to 30,000 fair housing complaints are filed against landlords in the U.S. each year. Fueling this massive wave of litigation isn’t just the national determination to crack down on discrimination but the glut of potential plaintiffs, including not just the individual victims but also their allies, including the U.S. Department of Housing and Urban Development (HUD), state and local fair housing agencies, and nongovernment fair housing organizations (FHOs). You may think that as long as you obey all the laws, you have nothing to worry about. Unfortunately, that’s not always true. Even if you do everything by the book, you still face the risk of getting hit with a discrimination lawsuit.
Thus, while preventing complaints is the primary objective of compliance, you also have to be prepared to respond if and when somebody files a complaint against you. And the key to effective response is knowing what to do when a HUD investigator comes calling. Recognize that the ultimate outcome will be determined not simply by the merits of the case—that is, whether you actually committed the alleged discrimination—but also how you handle the complaint and investigation process.
With that in mind, we’ve dedicated this lesson to how to respond to a fair housing complaint. First, we’ll explain how the HUD fair housing complaint process works and what to expect at each stage. Then, we’ll lay out seven common pitfalls landlords fall into when responding to complaints. We’ll wrap up with the Coach’s Quiz enabling you to apply the lesson to real-life situations.
THE FAIR HOUSING COMPLAINT & INVESTIGATION PROCESS
The first thing you need to survive the fair housing complaint and investigation process is an understanding of how it works. So, that’s where we’ll start the lesson.
How the Process Begins
The federal Fair Housing Act (FHA) bans housing discrimination based on race, color, religion, sex, national origin, familial status, or disability. State and local fair housing laws also ban discrimination on the basis of other characteristics, such as marital status, sexual orientation, age, ancestry, domestic abuse, and source of income. The complaint and investigation process generally begins when a complaint of housing discrimination is filed.
While alleged victims can go directly to federal or state court, the vast majority of cases follow an administrative process that begins with the submission of a fair housing complaint to HUD or a state or local government fair housing agency. There are four basic scenarios:
- A rental applicant or tenant files a written complaint with HUD or the state/local agency—in some cases, with the agency’s assistance;
- The government files its own complaint based on alleged violations it’s unearthed via its own operations, such as discriminatory treatment of testers sent by the agency or ads the agency discovers in written or online publications;
- A rental applicant or tenant goes to a local fair housing organization (FHO) for help in filing a fair housing complaint, which may also be accompanied by a separate complaint from the FHO; and/or
- The FHO files its own complaint based on treatment of its testers or other discriminatory practices the FHO uncovers.
Each state and local government agency follows its own procedures. So, let’s focus on the federal HUD complaint and investigation process.
The statute of limitations for a fair housing complaint is one year from the last date of alleged discrimination.
Example: A tenant claims she was sexually harassed by her landlord, resulting in her eviction on April 15, 2022. If that was the tenant’s last interaction with the landlord, she’d have until April 15, 2023, to file a complaint under the FHA. The complaint must list basic information about the case, including:
- The parties’ names and addresses;
- The location of the allegedly discriminatory action;
- A short description of what happened; and
- The date of the alleged violation.
Complaints may be filed in person, by telephone, through the mail, and online through the agency’s website, or using HUD’s mobile app. There are four phases in the complaint and investigation process.
Phase 1. Intake. The HUD Office of Fair Housing and Equal Opportunity (FHEO) initiates its complaint investigation process soon after receiving the complaint. First, it makes a threshold determination about whether: (1) the individual can even make a formal complaint under one of the laws HUD enforces; and (2) the complaint meets minimum standards. If not, HUD dismisses the complaint without further action.
But if the complaint is accepted, HUD files a formal complaint, signed by the individual, and notifies the landlord and other “respondents”—that is, parties accused of discrimination, including community owners, managers, and employees—that the complaint has been filed. The notice, which HUD sends by first-class mail with return receipt requested within 10 days after the complaint is accepted, includes a copy of the complaint, a description of the alleged discriminatory housing practice, and an explanation of the parties’ procedural rights and obligations. The notice may also request documents or other materials, as we’ll discuss later.
Phase 2. Investigation. After a formal complaint is filed, HUD investigates the allegations to determine whether there’s reasonable cause to believe that a discriminatory housing practice has occurred. Among other things, the investigator (from HUD or a state/local partner agency) may interview the parties and witnesses, obtain and review relevant documents, and conduct on-site investigations. HUD is supposed to complete its investigation within 100 days, but the process often takes longer, especially in cases involving complex claims and evidence or multiple witnesses. (Note that, in some cases, HUD refers a fair housing complaint to a state or local government agency for investigation under the HUD Fair Housing Assistance Program.)
Phase 3. Conciliation. The law requires HUD (or its partner agency) to try to get the parties to work out a mutually agreeable settlement via a process known as “conciliation” during the investigation process. While settlements are voluntary, they often require landlords to do things like make monetary payments to the aggrieved party, pay civil penalties to the government, and/or take active measures to remedy discriminatory policies and practices, such as revising rental policies or providing fair housing training to staff. If the parties do reach a settlement, HUD closes the complaint and monitors compliance with the settlement agreement.
Phase 4. HUD legal action. If the case doesn’t settle through conciliation, the investigator completes the investigation and issues a final investigative report on whether there’s reasonable cause to believe that a discriminatory housing practice occurred.
If HUD finds no reasonable cause, it dismisses the complaint. But that’s not necessarily the end of the matter because the complainant can still bring a private lawsuit on the matter.
If HUD finds reasonable cause, it issues a determination of “reasonable cause” and charges the landlord or other “respondent” with violating the FHA. The government still has to prove the case in a legal proceeding—unless the landlord decides to settle, which at this point, will probably be at a much higher price than the landlord would’ve had to pay in the conciliation phase. But the reasonable cause finding is evidence of liability that can and will be used against the landlord in the proceeding.
What Happens After HUD Files a Discrimination Charge
Once a charge is issued, the landlord and other respondents become defendants in either a federal court case or before a HUD administrative law judge (ALJ).
Option 1: Federal Court Case
Each side has 20 days to elect to go to federal court. If so, the Justice Department (DOJ) will prosecute the case against the landlord on behalf of the complainants, who can also ask to have their own private attorneys represent them in court. The way it works: After being served with notice of the lawsuit, you’ll have 30 days to file an answer or risk having what’s called a “default judgment” entered against you.
Before trial begins, you and the DOJ will engage in a process called “discovery” to gather evidence and determine what evidence the other side has so as to avoid being surprised at trial. Discovery is often a time-consuming and burdensome process requiring the production of documents, interviews called depositions, and answering “interrogatories” or written questions from the other party. Discoveries can also become minitrials of their own, with the sides presenting written motions to the judge on what kinds of evidence to include, exclude, shield from disclosure, or require the other side to produce.
If a settlement isn’t reached, discovery will end and the case will proceed to trial, which will be by jury if either side requests it—something the DOJ is likely to do given the tendency of juries to side against landlords. If the DOJ meets its burden of proving that you committed discrimination, you could be ordered to pay damages, civil penalties, attorney’s fees, and/or court costs. The court can also grant injunctive relief—that is, order you to do something or stop doing something to remedy the discrimination.
Option 2: Administrative Law Judge Proceeding
If neither side opts for court, the case will go to a hearing before a HUD ALJ where HUD, rather than the DOJ acts as the prosecutor. The way it works: The ALJ will issue an initial decision on whether a violation of fair housing law occurred. If the answer is no, the ALJ will dismiss the case; if the answer is yes, the ALJ can make you pay a civil penalty to the government, actual damages to the complainant, and attorney’s fees. The losing party has a right to appeal the ALJ’s decision to the HUD Secretary. Once the Secretary affirms, modifies, or revises the decision, either side may appeal it in federal court.
Which Is Better: Court Trial or ALJ Hearing?
It depends on the circumstances. Court trials are usually longer and more expensive. And if the trial is by jury, landlords run the risk of being cast as the “bad guy.” In addition to being quicker and less expensive, ALJ proceedings don’t involve risk of liability for punitive damages.
7 THINGS NOT TO DO
WHEN RESPONDING TO FAIR HOUSING COMPLAINTS
Now that we’ve described the HUD fair housing complaint and investigation response, let’s look at what you need to do in case you get caught up in it. The stakes are high. Thus, even if an allegation is false, you can still get into trouble by botching the process; conversely, if the case against you is strong, handling the complaint and investigation process effectively can help you minimize the damage. Here are seven pitfalls to avoid when responding to a HUD (or state/local) fair housing complaint.
Pitfall 1. Overreacting
Finding out that you’ve been sued for fair housing discrimination can be extremely upsetting. But don’t lose your cool or act impulsively. Resist the urge to shred documents, forge or alter evidence, make up false excuses, order employees to stonewall the investigation, or take retaliatory action against those involved in the case.
Instead, take a deep breath and put things into perspective. Remember that discrimination cases happen all the time to tens of thousands of landlords and housing providers around the country. Also recognize that a complaint isn’t a conviction. All it means at this point is that HUD has determined that the allegation is worthy of investigation and that one of three things is going to happen—at least one of which represents a positive outcome:
- HUD will find no reasonable cause and toss the complaint;
- HUD will find reasonable cause and you’ll get a chance to defend yourself in court or an ALJ proceeding; or
- You’ll reach a conciliation agreement with the complainant.
Pitfall 2. Underreacting
The flip side of overreacting is failing to take notice of a HUD complaint seriously. While you’re still a long way from conviction, you’ve got a lot of work to do and not much time to do it. HUD will expect you to respond within 10 days. So, carefully read the notice and attached complaint so you understand exactly what you’re being accused of. Pay careful attention to the instructions.
Also, don’t be surprised if the investigator sends you long lists of documents to provide, questions to answer, or other “discovery requests.” HUD investigators are not only legally entitled to make these requests, but also authorized to issue subpoenas and compel people to attend interviews if you don’t comply. At the same time, you also have certain rights and aren’t necessarily required to provide everything HUD requests. And that brings us to Pitfall #3.
Pitfall 3. Answering the Notice Without Speaking to an Attorney
You know the old saying about how lawyers who represent themselves have a fool for a client? It’s doubly true in the context of a fair housing investigation. Also true is the saying that what you say can and will be held against you. That’s why you shouldn’t respond or even talk to a HUD investigator unless and until you speak to your firm’s legal counsel or outside attorney with expertise in fair housing law and the HUD or state/local investigation process. Yes, attorneys cost money. But more often than not, legal fees are substantially less than the costs landlords incur when trying to navigate the HUD complaint process alone and without counsel.
So, the consensus view is that you should contact an attorney immediately when you receive notice of complaint. Ask the attorney to prepare your response, oversee your internal investigation, and communicate with the HUD investigator on your behalf.
Caveat: To be fair, there are some attorneys who believe that it’s okay for landlords to handle the intake and investigation phases of the process themselves if they understand the law and know what they’re doing. Even then, though, they say that you should still keep your attorney in the loop throughout the process in case you need legal assistance in the later phases.
Coach’s Tip: One of the first things to do when receiving notice of a fair housing complaint is to check your insurance policies. Most general liability policies don’t cover fair housing complaints or lawsuits, but some do. It’s also crucial to strictly follow the policy’s notice of claim requirements to keep the insurer responsible for covering the claim. It’s generally wise to notify insurers and begin exploring the availability of insurance coverage well before HUD completes its investigation.
Pitfall 4. Botching the Initial Response
While it might work for some operations, learning on the fly is the wrong approach to responding to fair housing complaints and investigations. What’s needed is a careful response strategy that starts immediately after notice is received. One of the first things attorneys can do is buy you more time by filing what’s called an entry of appearance and request for an extension to respond to the notice of complaint.
Best practice: Designate a staff member to lead and coordinate the in-house investigation and response effort, preferably an internal fair housing officer. If your community doesn’t have such an officer, select a manager or experienced employee who understands fair housing laws and procedures and your training, leasing, recordkeeping, and other operations. The coordinator’s responsibilities should include acting as the point-of-contact with your attorney, or the HUD investigator if you don’t have counsel, as well as collecting the necessary documents and information about anyone who witnessed or may have witnessed the events.
Regardless of whether you’re dealing with the normal 10-day or an extended response deadline, the starting point is to find out as much as you possibly can about what happened. Start with the allegations in the complaint. Questions to ask:
- Who’s making the accusation?
- Whom are they accusing?
- Exactly what wrongdoing do they allege happened?
- When, how, where, and how often did the alleged wrongdoing occur?
Pull all the records and try to construct a timeline or chronology. Start with any documents of interactions with the person who filed the complaint.
Example: If the complaint alleges steering or other misconduct while displaying apartments, collect records such as guest cards and files detailing which apartments were available and which ones were shown.
Example: If an applicant you rejected claims discrimination during the application process, gather a copy of the application, the information provided by the applicant, the results of applicant screening. and the reasons that the application was denied.
Example: If the complaint comes from a current tenant, pull documents related to the allegedly discriminatory events, which may include maintenance records, disability-related accommodation or modification requests, complaints by or about the tenant, or records detailing the reasons leading up to and including the eviction proceedings.
After you collect the relevant documents, identify any potential witnesses who may have had dealings with the person who filed the complaint. That may include current or former management and staff, as well as current or former residents.
The initial investigation will enable you to respond effectively to the complaint and make an informed judgment about how strong the case against you is. Then, once you figure out what you’re dealing with, you can decide on your next move and legal strategy—that is, whether to defend or settle.
Pitfall 5. Ordering Staff Not to Cooperate with HUD
So far, we’ve been talking about initial response to notice of the complaint within the 10-day or extended deadline. Let’s now move to the next phase of the process: HUD’s investigation of the complaint. As we noted above, the investigation is supposed to last no more than 100 days but often drags on longer.
HUD typically begins the investigation by requesting documents and other information it needs to determine whether there’s reasonable cause to believe that your community violated fair housing law. That may include rent rolls and comparables to show that people were treated the same under similar circumstances.
Example: A Black tenant that you refused to renew because he was noisy files a race discrimination complaint claiming that you renewed the leases of white tenants who committed similar noise infractions. HUD may request not only a copy of your community noise policy but also rent rolls broken down by race, as well as years’ worth of internal records documenting noise complaints and how you responded to them. Investigators are also likely to seek to interview just about everyone involved.
At times, it may feel like HUD is overreaching its authority and deliberately trying to interfere with your business. While this has been known to happen, it’s extremely rare. The mission of HUD investigators is to get to the bottom of what happened, and they have broad powers to gather the evidence they need to accomplish that mission. Resisting HUD authority exposes you to risk of liability for obstruction. It may also result in less favorable outcomes. After all, while investigators are legally required to be fair to both sides, they’re also human beings. So, if investigators feel like you’re trying to make their life miserable, they’re apt to return the favor in kind, even if it’s subtle and unintentional and the investigators subjectively believe they’re being impartial.
Your best strategy is to cooperate with and avoid stonewalling HUD investigators. Of course, you can and should give HUD information that supports your position, such as pictures of ads and brochures displaying children at your community if you’re accused of discriminating against families with children. Nor do you have to forgo your legal rights, such as the right to have your attorney present during certain interviews or not disclose privileged documents. However, you must understand what your rights are and how to properly assert them.
Pitfall 6. Categorically Refusing to Settle
As a practical matter, the conclusion of the investigation report is the make-or-break for most HUD fair housing complaints. Thus, while a finding of no reasonable cause technically doesn’t preclude the complainant from filing a civil lawsuit, very few cases reach court after they’re dismissed by HUD. Conversely, while it doesn’t amount to a final judgment on liability, a HUD finding of reasonable cause totally changes the dynamic by elevating the landlord’s risk and incentive to settle the case.
Conciliation gives both sides the option to settle the matter before HUD completes the investigation and issues a reasonable cause finding. But the very thought of settlement is tough for some landlords to take, especially when they’re confident that the discrimination complaint has no merit and that the motivation for filing it is to harass and extort a settlement award the complainant doesn’t deserve. The thinking: Why should I pay a dime to settle when I can just wait for HUD to finish the investigation and issue the inevitable no reasonable cause finding?
The answer to that question, of course, is that you can never be sure what a HUD investigator will find. And if HUD does find reasonable cause, the landlord not only misses out on vindication but also faces actual discrimination charges. At that point, the options become fewer and less favorable: Settle at a higher price or go to trial and risk even greater penalties.
So, refusing to even consider conciliation and settlement is tantamount to ignoring the realities of how the legal system works and closing off what may be the least risky and least expensive way to respond, settle, and end the complaint. This may be true even when the claim is a “nuisance” lawsuit designed to game the system and earn the complainant a chunk of settlement money. While infuriating in principle, the business strategy makes sense given that the relatively minimal amount of money it takes to settle many claims is far less than the legal costs the landlord would have to incur in defending against the complaint. In some cases, fair housing lawyers say, the complainant doesn’t even want money but something simpler and cheaper to provide, like an agreement to let a tenant out of a lease or refrain from filing a collection claim against her after she moves out.
Strategy: While lawyers differ on whether you can get away without having a lawyer during the intake and investigation phases, all sides agree on the essential need to consult an attorney before entering into a fair housing settlement agreement. Such agreements, referred to as Conciliation Agreements or Voluntary Compliance Agreements, are laden with fine print subtleties that can trip up even the most experienced landlords.
For example, while avoiding the need to admit liability or wrongdoing is typically a powerful incentive for settling claims, landlords may not realize that many consent decrees allow HUD to retain jurisdiction over the matter and impose higher penalties for any subsequent violations. In essence, the settlement is viewed as an admission of liability with the subsequent violation treated as a second offense.
Pitfall 7. Retaliating Against People Who File Fair Housing Complaints
You can also get into big trouble by seeking revenge or retribution against those who sue you. The FHA makes it unlawful to “coerce, intimidate, threaten, or interfere with” anyone for exercising his rights under fair housing law—and anyone who has helped or encouraged someone to do so. Take special care to avoid even the appearance of retaliation against tenants, applicants, or any other persons who have filed a fair housing complaint against you or your community. Also be very careful about how you treat employees or other residents if you find out that they helped someone to file a fair housing complaint against you. The FHA’s retaliation provisions prohibit coercion, intimidation, or interference with anyone who aided or encouraged any other person in the exercise of her fair housing rights.
Get legal advice before evicting, not renewing, or taking any other adverse action against a tenant who’s filed a complaint. This is true even if you believe the action is justified for legitimate reasons, such as failure to pay rent, because the fact that it occurs after the complaint is filed may make it look like you acted out of a retaliatory motive. Keep in mind that retaliation is treated as a separate offense, which means that you could be found liable for retaliation, even if the initial discrimination claim is ultimately found to be groundless. Moreover, the fact that retaliation is one motive is enough to prove liability, even if there were also other, nonretaliatory motives for the action.
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|May 2022 Coach's Quiz