Recent Developments at HUD and in the Courts
HUD Proposed Rule on Safe Harbors
The list of “safe harbors” is growing as HUD recognizes updated versions of the ANSI standards and other standards that reflect improvements in accessibility design, according to Boston-based fair housing attorney Henry Korman. He explains that older versions remain on the list to account for the possibility that a state or locality has adopted, without modification, one of the safe harbor standards as the local building code.
A community built in accordance with a standard in effect at the time of construction is considered to be in compliance with the FHA's design and construction requirements as long as the buildings are constructed in accordance with the plans approved during the permitting process, and building code officials did not modify, waive, or misinterpret a safe-harbor compliance standard.
In July 2007, HUD proposed a rule to amend its regulations to update references to the ANSI standard and codify the current HUD-recognized safe harbors under the FHA. HUD's current regulations reference the 1986 edition of ANSI A117.1 (the most recent edition in effect at that time). Since then, it was updated in 1988, 1992, 1998, and 2003. The proposed rule would update the references to adopt the 2003 edition of the ANSI standard and clarify that compliance with the 1988, 1992, and 1998 editions meet the FHA's design and construction requirements.
In the Courts
Owners, developers, and others responsible for complying with the FHA's design and construction requirements continue to face private civil claims filed by fair housing groups and others. Among other issues, some recent cases have focused on technical legal defenses—most notably, the statute of limitations—which can be the pivotal issue in determining liability.
The FHA provides three enforcement mechanisms for the FHA's design and construction requirements: administrative actions by HUD, federal lawsuits filed by the Justice Department, and private civil claims filed by anyone “aggrieved” by FHA violations. Each offers certain forms of relief and has its own procedural requirements, including the limitations period after which a claim may not be filed.
Private civil claims under the FHA must be filed “not later than 2 years after the occurrence or the termination of an alleged discriminatory housing practice” [42 USC §3613(a)(1)(A)]. In design and construction cases, the issue boils down to when the two-year statute of limitations starts to run—when the design and construction phase ends, when someone encounters the defect, or some other time.
Last fall, the federal appeals court for the Ninth Circuit ruled that the statute of limitations begins to run at the conclusion of the design and construction phase [Garcia v. Brockway, September 2007]. The appeal involved two separate lawsuits involving multifamily communities in Idaho and Nevada, both of which allegedly failed to meet the FHA's design and construction requirements and were constructed more than two years before the suit was filed.
The court reasoned that the alleged discriminatory practice was a failure to design and construct the communities in accordance with FHA standards. That meant that the statute of limitations was triggered at the conclusion of the design and construction phase, which occurred on the date the last certificate of occupancy was issued. In both cases, the court ruled, the statute of limitations barred the lawsuits because the triggering event occurred long before the lawsuits were filed.
The Ninth Circuit rejected several theories—some of which have been accepted by other courts—that would have extended the statute of limitations:
The court rejected the argument that an FHA design and construction defect should be a continuing violation. Under that theory, an FHA design and construction defect is a continuing one that does not terminate until the building defects are cured. The continuing violation theory is reflected in HUD's Fair Housing Act Design Manual: “With respect to the design and construction requirements, complaints could be filed any time that the building continues to be in noncompliance, because the discriminatory housing practice—failure to design and construct the building in compliance—does not terminate.”
Rejecting that theory, the Ninth Circuit said the plaintiffs and HUD confused a continuing violation with the continuing effects of a past violation. Although the ill effects of a failure to properly design and construct may continue to be felt decades after construction is complete, failing to design and construct was a single instance of unlawful conduct, which in these cases occurred long before the lawsuits were filed.
The court also rejected these theories, under which the statute of limitations didn't begin to run until an aggrieved party was actually damaged by the defective design feature. Based on the encounter theory, that date would not occur until the tester in the Nevada case encountered the alleged defect, which occurred within two years of filing suit. Under the discovery theory, that date would be when the disabled resident in the Idaho case discovered the alleged defect, which occurred within the two-year period.
The court rejected both theories for similar reasons, ruling that the FHA's statute of limitations for private civil actions begins to run when the discriminatory act occurs—at the end of the construction phase—not when it's encountered or discovered.
In contrast, the federal appeals court for the Sixth Circuit came to the opposite conclusion in a December 2006 ruling [Fair Housing Council v. Village of Olde St. Andrew, December 2006]. That lawsuit was filed by a fair housing organization after its testers discovered alleged FHA design and construction defects in three multifamily housing developments. The lawsuit was filed more than two years after construction of the first development, but within two years of construction of the other two developments.
The builder raised the statute of limitations as a defense. However, the lower court ruled that the noncompliant structures amounted to a continuing violation, such that the statute of limitations didn't begin to run until the violation terminated—in other words, when the alleged defects were corrected.
In an unpublished decision, the appeals court agreed that the statute of limitations did not bar the lawsuit, but it rejected the continuing violation theory. Instead, the court focused on identifying the triggering event for claims brought under the FHA's discriminatory housing provisions. The court ruled that the triggering event in design cases was the sale or rental of the last nonconforming unit in a development.
The Sixth Circuit rejected the builder's argument that the triggering event was the completion of the design and construction phase. Noting that the “overwhelming majority of the federal courts have rejected [that] position,” the court reasoned that the wording of the FHA focused on housing discrimination in the sale or rental of housing units, not the mere design and construction of a noncompliant housing unit.
According to the court, a contrary holding would make little practical sense because many units go unsold after completion of construction. If the statute of limitations began running at the end of construction, potential buyers or renters may not even look at property until after the statute of limitations had expired.
The court said the triggering date for the statute of limitations in design and construction cases depended on the circumstances of the case. When an individual with a disability wanted to rent a particular unit and discovered it was inaccessible because of a design defect, the limitations period for that person's claim would begin to run from the date he tried to rent the unit and discovered the nonconforming conditions.
In this case, however, where the owner or developer was accused of engaging in a policy or practice throughout the entire development of constructing housing units that failed to comply with the FHA, the court ruled that the statute of limitations did not begin to run until the sale of the last unit in that development. And, where the owner of several developments was accused of engaging in continuous policy or practice with regard to noncompliant design and construction of each, the statute of limitations would not begin to run until the last unit of all the implicated developments is sold.
The parties in the Sixth Circuit case have asked the U.S. Supreme Court to review the decision.
Henry Korman, Esq.: Attorney at Law; Newton, MA