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Advertising and the fair housing laws.

Advertising and the Fair Housing Laws Property managers face stricter requirements when they advertise residential property than when they select tenants. First, the court recognizes claims for damages from people who have had no direct dealings with managers or owners. In other words, many more people may sue because of discriminatory advertising than other violations of the Fair Housing Act of 1968 (42 U.S.C. 3601) or the Civil Rights Act of 1866 (U.S.C. Tit. 42 1981-1982). Secondly, the standard of proof required of plaintiffs to win the case is less.

The purpose of this article is to explain the requirements imposed on advertising practices by the Fair Housing Act. In addition, it reviews several recent court decisions that have important implications for property managers. Lastly, the article makes some practical suggestions to avoid suits or to help when suits occur.

General requirements

for selecting tenants

Unless their professional organization has agreed to an affirmative action plan or policy, property managers have no ethical obligation to seek minority tenants for housing units. When accusing them of discrimination because of race, color, religion, sex, or national origin, claimants must prove an intentional act or policy. To show that an apartment project has no minority tenants is not sufficient proof. Statistics are accepted by courts as evidence, but more proof is needed for claimants to win damages. (1)

Oddly, an intentional act--as defined by the courts--does not have to be deliberate. The assumption that a woman might be uninterested in a rental unit because it is in an isolated or unsecured location is an example of "steering." In showing residential units, property managers must make no assumptions about prospective tenants' preferences or needs.

Many states have expanded the list of "protected classes." This term refers to types of people specifically protected by fair housing laws. Age and handicap status are the most common additions. Generally, these laws make exceptions for limiting rental of all or part of the property to single and childless couples or elderly people. In March 1989, the Congress expanded discrimination to include age and handicap. However, the exact provisions and congressional intent have not been clarified.

The federal law allows the owners of a single-family residence to discriminate if they sell or rent the property without the services of a broker. However, property managers generally do not enjoy this exclusion. If they sell or rent personal residence or single-family rental properties, they may not discriminate. They are considered to be "in the business of renting dwellings" if they have acted as an agent in the sale or rental of two or more transactions in the past year. The Act forbids discrimination by such people.

Management of a residential property owend by a religious organization falsl under a special exemption to the Act. So long as the religion does not discriminate in its membership, the organization may exclude all people not belonging to the religion. This exemption applies whether or not management is provided by licensed people.

State and local governments may not require rental property owners to set aside a certain number of units for minority people or for protected classes in general (2) unless the state or local government can show that a set-aside program compensates for past rampant and intentional discrimination by rental property owners in the county or city. To prove this contention, government officials would need evidence of a conspiracy to exclude, coordinated by major owners and managers of apartments. Congress may require set-aside programs, but is unlikely to do so without funding allocations.

More stringen rules

The 1866 Civil Rights Act differs significantly from the Fair Housing Act of 1968 in several ways.

* The 19866 Act protects against only racial discrimination

* It pertains only to the rights to contract for, hold tile to, and to inherit property.

* It contains no exemptions.

Although both the 1866 Act and the 1968 act forbid discrimination in renting or selling housing, only the 1968 Act forbids discriminatory advertising.

The effects of the Fair Housing Act, and subsequent case law on its interpretation, are broader when requirements for nondiscriminatory advertising are discussed. Section 3604(c) makes it unlawful to:

make, print, or publish, or cause to be made, printed, or published any notice, statement, or advertisement, with the respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race, color, religion, sex, or national origin, or an intention to make any such preference, limitation, or discrimination.

Because defendants commonly challenged the right of "testers" and others to bring a suit for damages or to seek an injunction forcing a change in advertising practices, federal courts have wrestled with the issue of discrimination in advertising cases.

Since 1982, when the supreme Court decided Havens Realty Corporation v. Coleman, testers have had the undisputed right to bring suit for discrimination. Moreover, they do not have to be government investigators. In Havens, a private organization, Housing Opportunity Made Equal (HOME), provided the evidence upon which the state's attorney general (Coleman) based the suit.

The Supreme Court ruled that HOME or individual testers have standing to provide evidence or bring suit in discrimination cases. Lawyers for Havens Realty had contended that testers were not really harmed because they would not rent or buy even if given the chance. They are merely probing the landlord's or seller's discriminatory practices.

Because acts of discrimination are contrary to the purpose of HOME or a similar organization, the Court did not accept the argument. Therefore, if employees of HOME review an advertising brochure or pamphlet displaying a discriminatory preference for tenants, the organizations may bring suit for expenses of investigation and to force change in advertising practices.

Members of the protected classes who believe that advertising discriminates against them may also sue the advertisiers for damages. The injury stems from the pain of reading advertising copy indicating that the advertiser did not wish to rent or sell to them as members of a protected class.

A typical case

Many of the legal issues affecting discriminatory advertising are illustrated by a recent federal district court case. In HOME and Renee Saunders v. G.S.C. and Johanthan Perel, a minority person joined with a "watchdog" organization in bringing suit against a large property management firm (General Services Corporation) and its president.

At issue was an advertising brochure promoting the 13 large apartment complexes managed by the firm in the Richmond, Virginia area. The brochure was distributed widely at banks, real estate brokerage firms, and other public places where prospective tenants can obtain a copy.

HOME maintained that the absence of minority people as models in the brochure indicated a racial preference for tenants. This advertising was contrary to HOME's purpose of promoting open housing. Ms. Saunders had been "offended by the virtual absence of blacks in the brochure." Because of her strong negative reaction, she did not wish to live in any of the advertised properties. Both parties sought damages and an injunction requiring proportional representation of blacks (about 35 to 40 percent in the urban area) among the models. Ms. Saunders also sought punitive damages.

The judge found the brochure to be racially discriminatory. He awarded HOME $10,000 to cover the time and expenses of the organization in the case, and the injury to the cause of fair housing. Ms. Saunders received $2,500 in compensatory damages.

The judge found no reason for the injunction because the brochure had been changed before the hearing to include blacks. Moreover, he did not rule that such advertising had to be proportionally representative of protected classes, including blacks. The new brochure also included the Equal Housing Opportunity logo required by an earlier conciliation agreement between the management company and the community group.

Evidence presented by the plaintiffs indicated that management was aware of the effect of the choice of models. Memoranda among officials of the company contained discussions of where blacks should appear if the brochure was revised. Evidence was not sufficient, however, to prove the defendants acted "wantonly or willfully or were motivated by ill will, malice, or a desire to injure the plaintiffs." Therefore, the court did not award punitive damages.

Following the precedent established by Harrison v. Otto G. Heinzeroth Mortgage Co. in 1977, the judge held the president of the management company jointly liable with the corporation. The finding was that the president "had a non-delegable duty to ensure that the company through its employees, did not discriminate."

Important lessons

Someone said of experience. "Considering what it costs, experience should be the best teacher." To avoid needless litigation and subsequent negative publicity--not to mention the wrath of property owners--property managers should learn from these experiences and take the following steps to avoid claims of discriminatory advertising:

* Be aware of the demographic composition of the population in the area where you are advertising. Be certain that your ad or brochure does not exclude or offend protected classes.

* Include senior citizens, couples with children, and handicapped people among the models that your use in brochures, even if your apartment is not suitable for their needs.

* Educate your subordinates in the dangers of discriminatory practices and advertising themes. You are equally responsible when they discriminate.

* Submit proposed advertising copy to watch dog organizations, such as HOME, in your area. Solicit their suggestions, but remember that the brochure does not have to be proportional, only non-exclusionary.

* Stay aware of changes or amendments to fair housing laws and court cases.

* Take complaints about your advertising literature seriously. If you can accommodate complaints without extensive or unreasonable changes in already printed brochures, do so. You never know when judges or juries will extend interpretation of fair housing legislation.


(1.) The "intent rule" was formulated in Metropolitan Housing Development Corp. v. Village of Arlington Heights, 558 F.2nd 1283 (7th Cir. 1977), cert denied, 434 U.S. 1025 (1978).

(2.) See City of Richmond vs. J.A. Croson Co. (Supreme Ct., untitled, 1989).

Jerry T. Ferguson, Ph.d., is a professor of real estate studies at Virginia Commonwealth University, Richmond. He is the author of seven books and numerous articles on real estate subjects.
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Author:Ferguson, Jerry T.
Publication:Journal of Property Management
Date:Nov 1, 1989
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