December–2015

Tenants File More and More Small Claims Court Lawsuits
The Importance of Unambiguous Notices

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Volume 17 • Issue 1 January 2016 Landlord News 3600 South Yosemite Street Suite 828, Denver, Colorado 80237 thsnews@thslawfirm.com www.thslawfirm.com Denver Phone 303.766.8004 FAX Completed Eviction Forms To: 303.766.1181 or 303.766.1819 Colorado Springs Phone 719.550.8004 FAX Completed Eviction Forms To: 719.227.1181 ARRESTS DON’T DISQUALIFY APPLICANTS UNDER HUD’S NEW POLICY On November 2, 2015, HUD announced its policy that Public Housing Authorities (PHAs) and federallyassisted properties should exclude the use of arrest records in housing decisions. The stated purpose of the policy announcement was to “inform PHAs and owners of other federally-assisted housing that arrest records may not be the basis for denying admission, terminating assistance or evicting tenants, to remind PHAs and owners that HUD does not require their adoption of “One Strike” policies, and to remind them of their obligation to safeguard the due process rights of applicants and tenants.” HUD’s policy only applies to subsidized housing. However, because HUD’s announcement will likely generate substantial discussion in the rental industry, we review HUD’s policy and discuss criminal background checks in this newsletter. The number of persons arrested every year is staggering. In 2014, law enforcement made an estimated 11,205,833 arrests, 498,666 were for violent crimes, and 1,553,980 were for property crimes. However, as set forth in the HUD memo, “HUD has reviewed relevant case law and determined that the fact that an individual was arrested is not evidence that he or she has engaged in criminal activity. Accordingly, the fact that there has been an arrest for a crime is not a basis for the requisite determination that the relevant individual engaged in criminal activity warranting denial of admission, termination of assistance, or eviction.” HUD goes on to state that in the 75 largest counties in the country, approximately one-third of felony arrests did not result in conviction, with about one-quarter of all cases ending in dismissal. HUD also points out that “arrest records are often inaccurate or incomplete (e.g., by continued on page 2 A NEW YEAR, A NEW LOOK NEW ENHANCED FEATURES By now most of our clients are aware that we have debuted our new and improved mobile friendly web site. You probably have also noticed that we have reordered some of our primary categories on the main page search bar. This was done to provide a more logical and user-friendly site map for our clients. For those clients who may only deal with us on Eviction matters this new site provides you with an opportunity to explore and become acquainted with information in the ‘Practice Areas’ of the site and learn all about the many other legal services that we regularly provide for residential, commercial and HOA clients. As you may know our website has always featured an expansive Resource Library covering a multiplicity of topics of importance to property owners, management companies and on-site management. Now this resource is even more user friendly with an expanded search function. Type in your key word and just like Google the THS site will bring up all relevant resource material on that topic. We have also added this feature to our Landlord News section so that if you are looking for an article that you remember or just looking to see if we have written on a topic any time in the past all you have to do is a key word search and ‘voila’ you will find what you are looking for. The year 2016 promises to be a very active one on the political front so we have made it easier for our clients to have the information they need to contact their elected officials at the state and federal levels. Clients can type in their address in the ‘Legislative Alerts’ dropdown continued on page 2 ARRESTS DON’T DISQUALIFY APPLICANTS UNDER HUD’S NEW POLICY continued from page 1 failing to indicate whether the individual was prosecuted, convicted, or acquitted), such that reliance on arrests not resulting in conviction as the basis for denying applicants or terminating the assistance or tenancy of a household or household member may result in unwarranted denials of admission to or eviction from federally subsidized housing.” Further, according to a 2006 Attorney General Report on background checks commercial criminal record databases and services, especially name-based searches, have been found to be rife with errors and may report irrelevant arrest records or outdated convictions that have been expunged from an individual’s history. Based these facts, a PHA or owner of a federally-assisted property may not conclude that an applicant engaged in criminal activity, warranting a denial of admission, based on a record of arrest alone. If an applicant has an arrest record, a landlord may inquire further whether sufficient evidence exists that an applicant engaged in disqualifying criminal activity. According to HUD, subsidized landlords must utilize other evidence such as police reports, witness statements, and other relevant documentation to determine the applicant engaged in criminal activity warranting a denial. In short, under HUD policy, a landlord must conduct its own investigation and conclude that the applicant committed the crime for which they were arrested. Obviously, HUD has no idea of the burden this would place on the rental industry if this were to apply to all rentals, and the lack of existing resources to implement this edict. HUD’s stated goal is for landlords to “consider all of the circumstances relevant to the particular admission decision, including but not limited to the seriousness of the offending action.” To meet this goal, PHAs and owners should “institute protocols that assure that its procedures and standards are consistently applied and that decisions are made based on accurate information.” The HUD Memo goes on to suggest application policies and best practices continued on page 3 A NEW YEAR, A NEW LOOK NEW ENHANCED FEATURES continued from page 1 under the ‘Resource Information’ tab and the names and contact information for their State or Federal Representative and Senators will be provided to you in order for you to be able to respond to industry alerts and legislative matters of concern to multifamily housing owners and managers. We have streamlined our ‘Events’ section to make it easier and more user friendly to register for activities that are part of the Firm’s Value Added Services like our Free Client Luncheons and our Free Educational Workshops. Our expanding website will continue to add more resources and information in the coming months to provide the best support and service for our clients’. Check the site out at www.thslawfirm.com and register TODAY! JJJJJJJJJJJ Landlord News January 2016 Page 2 IMPORTANT THS JANUARY DATES January 14th Basic Fair Housing THS Lower Conference Center 3600 S. Yosemite Street Denver, CO 8:30 a.m. – NOON January 15th North Client Lunch Dave & Busters Westminster 11:30 a.m. – 1:00 p.m. January 18th ALL COURTS CLOSED MLK DAY HOLIDAY January 21st Advanced Fair Housing THS Lower Conference Center 3600 S. Yosemite Street Denver, CO 8:30 a.m. – NOON Don’t Forget To Register For The First Client Lunch of 2016 Jan 15th ARRESTS DON’T DISQUALIFY APPLICANTS UNDER HUD’S NEW POLICY continued from page 2 to meet these goals. “Some PHAs allow public housing and Housing Choice Voucher applicants to address and present mitigating circumstances regarding criminal backgrounds prior to admission decisions.” Limiting the lookback period for arrests and criminal convictions based on type of crime. HUD also suggests that landlords should consider the nature or seriousness of the crime, i.e. was it violent or the type of crime that threatens the health, safety, or right to peaceful enjoyment of the premises by other residents. We are concerned that HUD’s policy will ensure the failure of the very goals HUD is attempting to promote. Fair housing is about consistency. HUD’s goal is to be consistent. However, we are concerned about how any landlord can be consistent when being mandated by HUD to make case by case determinations based on “all of the relevant circumstances”. Who determines what circumstances are relevant? Relevant evidence is any evidence that makes a fact more likely or less likely. Often relevancy is obvious. Many times, it is not. Judges who are trained to determine relevancy often have difficulty determining what evidence is relevant. Different judges could rule differently on the same piece of evidence. We don’t see how untrained lay persons are going to consistently make determinations regarding relevant circumstances. Similarly, what constitutes mitigating circumstances? Obviously, different landlords aren’t always going to agree on what is a serious or violent crime, or what crimes threaten others safety or their right to peaceful enjoyment. If HUD asked existing tenants, they likely would feel that any new tenant with an arrest record threatens their safety or peaceful enjoyment of the premises. Over the years, existing tenants nearly riot when they discover another tenant has been charged (arrested) for a sex related offense. Ironically, as justification for the new policy, HUD refers to a 2000 court decision. Specifically, HUD cites a federal circuit court of appeals case for the proposition that inconsistent application of admission criteria based on partial or inaccurate information may result in liability under federal civil rights laws. In this case, the court held that allegations by a protected class member (an African American applicant) was given less opportunity to contest an erroneous criminal record than two similarly situated white applicants was enough to establish Landlord News Jamuary 2016 Page 3 a prima facie case of discrimination under the Fair Housing Act. In other words, landlords can be liable for not having consistent application policies or not consistently carrying them out. Thus, first HUD justifies the new policy by recognizing current law that landlords are liable for treating applicants differently. Then HUD adopts a policy that forces landlords to make countless individual judgment calls about relevant circumstances, mitigating circumstances, and the seriousness of crimes, which in all likelihood will result in applicants being treated differently. The good news is that HUD’s new policy only applies (for now) to PHAs and federally-assisted properties. The bad news is that HUD’s policy, along with the Supreme Court’s recent disparate impact decision (See July 2015 Edition of Landlord News), is likely to result in increased legal challenges to application related policies, especially criminal background check related policies. HUD’s policy doesn’t mean that conventional communities need to change their policies. However, with more legal challenges likely on the horizon, it would be good time for all landlords to review their criminal background check policies. If you are a conventional community, your review should include answering some key questions. Do you automatically exclude applicants with arrest records? Do you make exceptions depending on surrounding circumstances, mitigating circumstances, or nature of crimes? If you do look at the surrounding circumstances, do you have well thought out written policy that attempts to set forth objective criteria for evaluating every case? Do you limit the lookback period for arrests or convictions? If not, why not? Do you have a policy that addresses potential errors in criminal background checks? Is it well defined? Is it consistently followed? If you want to adopt or are forced to adopt HUD’s policies (you are a PHA or federally assisted property), do you have the resources to carry them out? We would say probably not. Based on our experience, the multifamily industry is ill- equipped to deal with the extensive burdens that would be imposed on the multifamily industry if HUD’s new policy were to apply to all apartment communities. Most managers and owners simply don’t have the necessary continued on page 4 ARRESTS DON’T DISQUALIFY APPLICANTS UNDER HUD’S NEW POLICY continued from page 3 resources to be conducting individual investigations into tenants’ backgrounds. Ask yourself, how many applicants were denied at your property in the past year based on criminal background checks? Do you have the time to meet with each one individually, hear their side of the story, gather necessary documentation including police reports, and then make a determination? Unfortunately, if HUD’s policy applies to you, you will have to find the resources. You should also consider the risks of various criminal background check policies. Excluding arrests is the least risky from a fair housing liability perspective. However, it may be more risky from a NOI perspective, i.e. your community may become less desirable if most or many tenants have arrest records. Remember, tenants have access to the internet too, including many sources of publicly available arrest records. Exclusion of arrests may also result in potential liability (something HUD probably didn’t consider). Specifically, if you rent to someone with an arrest record, and then they commit a crime on the property or against another tenant (assault or kill another tenant), you may be sued. Your legal liability for such acts is tenuous in most circumstances, but clients have been sued based on allegations that they introduced (allowed) a known dangerous person into the community. Even though you will likely prevail in this type of lawsuit, you still have to deal with the lawsuit and incur the corresponding legal costs. Excluding prospective tenants with serious felony arrests, violent or sexually related crimes, is less risky from a fair housing liability perspective than HUD’s policy. Such a policy is based on objective criteria. The applicant either has been arrested for a serious felony or they have not. This policy also avoids the fair housing liability quagmire of having untrained onsite teams making individual judgment calls regarding the surrounding circumstances of applicant arrests, or attempting to establish whether the applicant committed the crime for which they were arrested. The policy is also a bulwark against liability claims based on persons with violent felony arrest records committing crimes on your property or against other tenants. While excluding felony arrests decreases fair housing liability, based on disparate treatment (every applicant is treated exactly the same based on legitimate non-discrim inatory business reasons), it does leave the door open for fair housing claims based on disparate impact. Remember, under fair housing disparate impact theory, you can still be liable for fair housing discrimination even if your policy is facially neutral (everyone is treated the same), but the policy has a disproportionately negative impact on protected class members. The argument would go like this. Protected class members are more likely to have arrest records. Thus, your policy of excluding applicants with arrest records disproportionately impacts them. Overall, from a fair housing liability prospective, the less risky policy is to have objective criteria applied to everyone, and except for errors, individual circumstances are not considered. Under this policy, the possibility of a disparate impact claim exists. However, when your policy has onsite teams making individual judgment calls (evaluating individual circumstances), you are almost guaranteed to be facing multiple disparate treatment fair housing claims. Finally, as further insulation against liability, both your criteria and your lease should clearly address criminal background checks. Specifically, owner may, but has no obligation to conduct criminal background checks on actual or potential residents or occupants. If owner does conduct criminal background checks, owner cannot and does not guarantee the accuracy of such checks, or that any resident or occupant does not have a criminal record. Information regarding registered sex offenders is available from local law enforcement agencies upon request. If you interested in reading the full memo, HUD’s memo can be downloaded from the sparkling new THS website: https://www. thslawfirm.com-Resource Information, Legislative/Industry Alerts Landlord News January 2016 Page 4 If at first you don’t succeed, then skydiving isn’t for you How many of you believe in telekinesis? Raise my hand Monday is an awful way to spend 1/7th of your life To steal ideas from one person is plagiarism; to steal from many is research Success always occurs in private and failure in full view 99 percent of lawyers give the rest a bad name Nothing is foolproof to a talented fool I intend to live forever – so far so good Borrow money from a pessimist – they don’t expect it back Experience is something you don’t get until just after you need it Depression is merely anger without enthusiasm If at first you don’t succeed, destroy all evidence that you tried Landlord News January 2016 Page 5 A SMILE AND A CHUCKLE TO START 2016 FOR THOSE WHO TAKE LIFE TOO SERIOUSLY