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HUD Settles Resident Screening Discrimination Claim Against Florida Condominium Association

A few days ago, the Department of Housing and Urban Development (“HUD”) issued a press release that it had settled a discrimination claim involving allegations that a condominium association rejected a qualified buyer based on the buyer’s national origin and sex.  HUD is the federal agency that investigates and enforces claims of discrimination under the Federal Fair Housing Act.

It is relatively rare for condominium associations to have the authority to screen owners and residents of the condominium units.  Normally, the sale of a condominium unit is a matter between the seller and the buyer — the condominium association is not involved.  However, it is theoretically possible for the condominium documents to include a provision that grants the Board the authority to approve the sale of a condominium unit.  Even then, however, there may be a claim that such a provision is an illegal restraint on sale of the property.

Even if an association has an enforceable right to screen prospective purchasers of a condominium unit, the Association may want to consider whether the association has an interest in restricting who owns a unit and whether the risk is worth the benefit to the Association.  Screening prospective purchasers of a condominium unit might give rise to claims that the Association is discriminating based on a protected class, just like this Florida condominium association.  Moreover, screening may make units in the condominium project ineligible for certain types of mortgages which could affect property values.

Under the terms of the HUD settlement agreement, the Florida condominium association will:

  • Pay the complainants $25,000;
  • Make dwellings available to persons without regard to race, color, religion, sex, handicap, familial status or national origin;
  • Train board officers on all matters relating to their responsibilities under the Fair Housing Act;
  • Submit to HUD a copy of all requests of occupancy and a copy of all board decisions to approve or reject each request for a period of 1 year; and
  • Discontinue all applicant screening interviews.

Before you implement an owner or tenant screening process, you should seek the advice of the association’s attorney.

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