#communityassociationstoo: Community Associations’ Liability for Sexual Harassment Under HUD’s Hostile Environment Rules

In the summer of 2013, Kayla West began looking for a house to rent in Georgia. She came across a rental home owned by DJ Mortgage, LLC, and contacted Gene Andrews, DJ Mortgage, LLC’s property and leasing manager. Ms. West entered into a lease agreement for the rental property, and between August 2013 and October 2013, Ms. West alleged that Mr. Andrews repeatedly sexually assaulted and harassed her. She subsequently sued DJ Mortgage, LLC, Mr. Andrews’s employer, in part for violations of the Fair Housing Act (“FHA”). Under the FHA, Ms. West alleged two sex discrimination claims, one of which included a hostile housing environment sexual harassment claim. DJ Mortgage, LLC defended against the hostile environment harassment claim by arguing that Mr. Andrews’s conduct was outside the scope of his employment and that the company had taken prompt corrective action when it learned of the conduct. However, the United States Court of the Northern District of Georgia in West v DJ Mortgage, LLC, 271 F Supp 3d 1336 (2017), denied DJ Mortgage, LLC’s motion for summary judgment, holding that a reasonable jury could find DJ Mortgage, LLC liable for Mr. Andrews’s conduct because Mr. Andrews had “‘used his power as property manger as a vehicle through which to perpetrate his unlawful conduct,” and DJ Mortgage, LLC had not acted promptly or appropriately to correct the situation. Id. at 1356, 1358-59.

On October 14, 2016, the Department of Housing and Urban Development (“HUD”)’s new rule regarding housing and hostile environment harassment claims became effective. In sum, the rule prohibits any unwelcome conduct that interferes with a resident’s use or enjoyment of his or her housing and holds the perpetrator, their employer, and anyone who had the power to correct the behavior liable for the conduct. This liability exposure should be especially concerning to community associations who face multiple ways of being held liable for a hostile environment harassment claim due to the conduct of others in the community, including board members, property managers, hired vendors providing services in the community, and even other co-owners.

What is a hostile environment, and who can be held responsible for creating one?

The HUD rule defines hostile environment harassment as the following:

unwelcome conduct that is sufficiently severe or pervasive as to interfere with: The availability, sale, rental, or use or enjoyment of a dwelling; the terms, conditions, or privileges of the sale or rental, or the provision or enjoyment of services or facilities in connection therewith; or the availability, terms, or conditions of a residential real estate-related transaction. Hostile environment harassment does not require a change in the economic benefits, terms, or conditions of the dwelling or housing-related services or facilities, or of the residential real-estate transaction. 24 CFR § 100.600(a)(2) (emphasis added).

HUD also standardized how to determine if the unwelcome conduct rises to the level of hostile environment harassment. 24 CFR § 100.600(a)(2)(i) states that “[w]hether hostile environment harassment exists depends upon the totality of the circumstances”, listing the following considerations:

(A) Factors to be considered to determine whether hostile environment harassment exists include, but are not limited to, the nature of the conduct, the context in which the incident(s) occurred, the severity, scope, frequency, duration, and location of the conduct, and the relationships of the persons involved.


(B) Neither psychological nor physical harm must be demonstrated to prove that a hostile environment exists. Evidence of psychological or physical harm may, however, be relevant in determining whether a hostile environment existed and, if so, the amount of damages to which an aggrieved person may be entitled.


(C) Whether unwelcome conduct is sufficiently severe or pervasive as to create a hostile environment is evaluated from the perspective of a reasonable person in the aggrieved person’s position. … (emphasis added).

The harassment “can be written, verbal, or other conduct, and does not require physical contact” and “[a] single incident of harassment … may constitute a discriminatory housing practice, where the incident is sufficiently severe to create a hostile environment….” 24 CFR § 100.600(b)-(c) (emphasis added).

The HUD rule does not limit who must commit the unwelcome conduct in order to give rise to a hostile environment claim so the unwelcome conduct could be perpetrated by anybody: a board member, another co-owner, property manager, vendor, and even another co-owner’s guest.  While a community association may assume it cannot be held responsible for the conduct of others, especially those of guests, HUD’s rule and West v DJ Mortgage, LLC make it clear that a community association can be held both directly and vicariously liable for the conduct committed by another.

Under 24 CFR § 100.7(a)(1), a person is directly liable for the following:


(i) The person’s own conduct that results in a discriminatory housing practice.


(ii) Failing to take prompt action to correct and end a discriminatory housing practice by that person’s employee or agent, where the person knew or should have known of the discriminatory conduct.


(iii) Failing to take prompt action to correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the discriminatory conduct and had the power to correct it. The power to take prompt action to correct and end a discriminatory housing practice by a third-party depends upon the extent of the person’s control or any other legal responsibility the person may have with respect to the conduct of such third-party.


(2) For purposes of determining liability under paragraphs (a)(1)(ii) and (iii) of this section, prompt action to correct and end the discriminatory housing practice may not include any action that penalizes or harms the aggrieved person such as eviction of the aggrieved person. (emphasis added).

Accordingly, a community association could be held directly liable for failing to promptly act when it knew or should have known that one of its employees or agents, such as a property manager, created a hostile environment or for failing to promptly act when a third-party, such as a guest, created a hostile environment and the community association had the power to correct the situation.  24 CFR § 100.7(b) also permits a community association to be held vicariously liable for the conduct of its employees or agents in creating a hostile environment, “regardless of whether [it] knew or should have known of the conduct that resulted in a discriminatory housing practice….” (emphasis added).

Conclusion

While community associations may initially feel overwhelmed by the potential exposure they face under the HUD rule, community associations cannot hide their heads in the sand and hope a hostile environment claim does not arise in their community. Instead, community associations should consider taking proactive measures to prevent a hostile environment claim from arising in the first place and to be prepared to take swift corrective action when a claim does arise. These proactive measures can help decrease the association’s potential exposure to a hostile environment claim and create a more welcoming environment for all co-owners.

Community associations should consider working with legal counsel who specialize in community association law to draft anti-discrimination rules and policies for their communities that specifically address sexual harassment, provide co-owners with a mechanism to report unwelcome conduct, and provide boards with guidance on the steps to take when the association becomes aware of a potential hostile environment harassment claim, all of which would be best accomplished through the adoption of rules and regulations. Community associations should also consider providing regular sexual harassment training for their board members (both directors and officers), property managers, and other regular vendors. In West v DJ Mortgage, LLC, the United States Court of the Northern District of Georgia specifically noted that the company “maintained no sexual harassment policies or training for its staff. Nor did Defendant have a standard sexual harassment complaint or investigation process that would have facilitated Ms. West’s raising her concerns with DJ Mortgage….” West, 271 F Supp 3d at 1358. In the event a hostile environment claim does come to the association’s attention, the association should promptly seek legal advice on the steps necessary to appropriately address the claim, including utilizing any remedies provided under the community association’s governing documents and policies without retaliating against the victim.

Kayleigh B. Long is an attorney with Hirzel Law, PLC and focuses her practice in the areas of appellate law, community association law and civil litigation. Ms. Long obtained her Juris Doctor degree from Indiana University Robert H. McKinney School of Law, where she graduated in the top 5 of her class and served as the Senior Executive Editor on the Indiana Law Review. Her law review note was selected for publication, and she has an upcoming publication in the Denver Law Review. She can be reached at (248) 478-1800 or at klong@hirzellaw.com.