Condominium associations in Michigan frequently adopt bylaws and restrictive covenants intended to promote the safety and well-being of their communities. Some condominium and homeowners associations consider restricting occupancy or ownership by individuals with prior criminal convictions. However, federal and state fair housing laws can limit how and whether such restrictions may be imposed. In Lyman v Montclair at Partridge Creek, LLC, No. 23-CV-10131, 2023 WL 6096678 (E.D. Mich. Sept. 18, 2023), the United States District Court for the Eastern District of Michigan addressed whether a housing provider’s blanket ban on applicants with felony convictions could violate the Fair Housing Act (FHA) and Michigan’s Elliott-Larson Civil Rights Act (ELCRA). As discussed below, the decision provides important guidance for condominium associations considering criminal history restrictions.
Facts
The dispute arose when an African American applicant sought to lease a unit at a residential community and was denied based on a prior felony conviction. The complaint alleged that the housing provider maintained a categorical policy barring applicants with felony convictions, without considering the nature of the offense, the time elapsed, or evidence of rehabilitation.
The plaintiffs brought suit under the FHA and ELCRA, asserting both disparate-impact and disparate-treatment claims. They alleged that a blanket felony ban disproportionately affects African Americans due to documented racial disparities in arrest and incarceration rates. The defendants moved to dismiss the complaint, arguing that the plaintiffs failed to state a viable claim.
Blanket Criminal History Bans May Violate the Fair Housing Act
In analyzing the motion to dismiss, the Eastern District Court of Michigan focused on whether the plaintiffs adequately alleged that the no-felony policy violated fair housing laws. The court held that the complaint sufficiently stated a claim under the FHA for disparate impact.
The Court recognized that even facially neutral policies, such as a rule excluding all persons with felony convictions, may violate the FHA if they disproportionately affect a protected class and are not sufficiently justified. At the pleading stage, statistical allegations showing racial disparities in felony conviction rates were enough to allow the plaintiffs’ claim to proceed.
The Court also allowed the disparate treatment claim to proceed, concluding that the plaintiffs had alleged sufficient facts to support an inference of intentional discrimination. Importantly, the court emphasized that rigid enforcement of a blanket criminal history policy, without individualized consideration, may raise fair housing concerns. Based on the above, the Court denied the defendants’ Motion to Dismiss.
Key Takeaways for Condominium Associations:
The Court’s decision in Lyman v Montclair at Partridge Creek, LLC highlights several important considerations for condominium and homeowner associations:
- Fair Housing Laws Apply to Condominium and Homeowners Associations. Condominium and homeowners associations that regulate leasing, occupancy, and ownership should ensure their bylaws and restrictive covenants comply with the Fair Housing Act when they exercise control over occupancy, leasing approvals, or residency requirements. For condominium and homeowners associations, restrictive covenants and bylaws that restrict occupancy and ownership based on criminal history may be scrutinized under the Fair Housing Act.
- Occupancy Restrictions Based on Major Criminal Offenses May be Enforceable. For condominium and homeowners associations, courts will generally enforce restrictive covenants as written, as private contracts, and have held that occupancy restrictions banning residency for individuals found guilty of major criminal offenses may be enforceable for safety reasons within a community. For example, restrictive covenants banning sex offenders within associations have been found to be enforceable. See Court Rules that Restrictive Covenant Banning Sex Offenders is Enforceable – The Michigan Community Association Law Blog.
- Blanket Criminal History Bans Are Legally Risky. A categorical restriction barring occupancy or ownership by anyone with a criminal record may expose your condominium or homeowners association to disparate impact claims under both the FHA and ELCRA. The Department of Housing and Urban Development (“HUD”) has provided guidance for condominium associations, stating that an association would need to prove that a criminal record policy is necessary to serve a substantial, legitimate, nondiscriminatory interest and must be able to show that the use of criminal background checks is tailored to accurately distinguish between criminal conduct that indicates a demonstrable risk to resident safety and/or property and criminal conduct that does not. Although these HUD guidelines were recently revoked, courts have in the past found them instructive and may continue to do so when examining criminal history bans in your communities.
- Individualized Assessments Are Critical. Policies that consider the nature of the offense, the time elapsed since the offense, and evidence of rehabilitation are more defensible than automatic exclusions and categorical restrictions. Failure to carefully tailor criminal history restrictions may expose condominium associations to liability. Having an experienced community association attorney ensure your documents contain restrictions that are narrowly tailored and directly related to substantial, legitimate safety concerns will help ensure your community’s compliance with civil rights laws.
Need Guidance on Condominium Occupancy Restrictions?
If your condominium association is considering occupancy restrictions based on criminal history, or if you are facing a fair housing challenge, experienced legal counsel at Hirzel Law, PLC can help evaluate risk and ensure compliance with federal and Michigan law. Our attorneys can also provide proactive review of governing documents and screening policies that can help protect associations, board members, and co-owners from costly litigation and unintended liability.
