Latham & Watkins Litigation Department

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1 Number 600 June 4, 2007 Client Alert Latham & Watkins Litigation Department Accessibility Litigation Under the Fair Housing Act This Client Alert provides an overview of the Act, identifies the most important legal issues and suggests some strategies for minimizing the risks of litigation. Recently, advocacy groups have brought a series of suits against multifamily housing developers alleging violations of the design and construction requirements of the federal Fair Housing Act (FHA). 1 In a leading case, for example, one of the nation s largest multi-family REITs was sued in It reached a settlement with the Equal Rights Center, a Washington, D.C. based advocacy group, which required very extensive retrofitting of apartment interiors as well as extensive modifications of sidewalks and other common areas. Based on public statements, the cost of the settlement could substantially exceed $40 million. Similar suits have been filed against other major developers. The aggressive efforts of the advocacy groups, the breadth of the FHA s requirements and the potential high cost of liability suggest that owners, developers, and others involved in design and construction of multi-family housing developments should carefully review the requirements of the FHA and develop strategies for complying with it and for responding to and preferably preventing litigation. This Client Alert provides an overview of the Act, identifies the most important legal issues and suggests some strategies for minimizing the risks of litigation. Overview of the Accessibility Provision of the FHA The 1988 Amendments Congress enacted the original FHA in It barred discrimination in the sale and rental of housing based on race, color or religion. 2 The Fair Housing Amendments Act of 1988 (1988 Amendments) substantially expanded the scope of the FHA by barring discrimination against families with children and enhancing the enforcement mechanisms and remedies available under the law. In addition, Congress barred discrimination based on disability by adding the word handicap to the bases of discrimination outlawed by the Act. The 1988 Amendments included a design and construction provision, which was intended to ensure that developers design and construct apartments and other multi-family housing developments to be accessible to persons with disabilities. The Act required that, with certain exceptions, all covered units in a development, as well as the common areas, be accessible. In contrast, the Americans with Disabilities Act, which applies to public accommodations, such as hotels and motels, requires only that a certain portion of units be accessible. Latham & Watkins operates as a limited liability partnership worldwide with an affiliate in the United Kingdom and Italy, where the practice is conducted through an affiliated multinational partnership. Under New York s Code of Professional Responsibility, portions of this communication contain attorney advertising. Prior results do not guarantee a similar outcome. Results depend upon a variety of factors unique to each representation. Please direct all inquiries regarding our conduct under New York s Disciplinary Rules to Latham & Watkins LLP, 885 Third Avenue, New York, NY , Phone: Copyright 2007 Latham & Watkins. All Rights Reserved.

2 The breadth of the 1988 Amendments makes clear that Congress was deeply concerned with discrimination against persons with disabilities and that it sought to ensure that all new properties were built in compliance with the Act s requirements. However, it is unlikely that Members of Congress foresaw the consequences of cases brought many years after the Act went into effect alleging that developments were not in compliance with these requirements. The result of the broad scope of the Act is that developers can face allegations that they are required to perform extremely costly retrofits and modifications of properties even though they are rarely used by disabled persons. The Act s Requirements The FHA applies to multifamily dwellings constructed for first occupancy after March 13, Congress mandated that all new multifamily housing be designed and constructed so that: the public use and common use portions of such dwellings are readily accessible to and usable by handicapped persons; all of the doors designed to allow passage into and within all premises within such dwellings are sufficiently wide to allow passage by handicapped persons in wheelchairs; and all premises within such dwellings contain the following features of adaptive design: an accessible route into and through the dwelling; light switches, electrical outlets, thermostats and other environmental controls in accessible locations; reinforcements in bathroom walls to allow later installation of grab bars; and usable kitchens and bathrooms such that an individual in a wheelchair can maneuver about the space. 4 Failure to include these features in dwellings subject to this provision amounts to discrimination on the basis of handicap in violation of the statute. 5 FHA Safe Harbors The FHA provides that compliance with the appropriate requirements of the American National Standards Institute for buildings and facilities providing accessibility and usability for physically handicapped people (commonly known as ANSI A117.1 ) satisfies the last four requirements outlined above. 6 In addition, the Department of Housing and Urban Development (HUD) issued the Fair Housing Accessibility Guidelines in 1991 to provide detailed technical assistance about how designers and builders could comply with each of the FHA s design and construction requirements. HUD provided further guidance in 1996 (updated in 1998) with the publication of the entitled Fair Housing Act Design Manual. While none of these guidelines are mandatory, they are intended to provide a safe harbor, which, if followed, will guarantee compliance with the FHA s accessibility requirements. Enforcement/Limitations Periods The FHA provides for three different methods of enforcement. First, a person aggrieved by a discriminatory housing practice may file a complaint with HUD, which may lead to an administrative hearing 7 or, if either party elects, may be transferred to federal court and prosecuted by the Justice Department on behalf of the complainant. 8 Complaints under this provision must be filed within one year after the alleged discriminatory housing practice has occurred or has been terminated. Second, an aggrieved person may bring a direct civil action in federal or state

3 court without a prior administrative complaint. 9 A private claim alleging housing discrimination under this provision must commence no[] later than 2 years after the occurrence or the termination of an alleged discriminatory housing practice. 10 Third, the FHA authorizes the Attorney General to bring a federal suit when there has been a pattern or practice of resistance to the rights guaranteed by the FHA or when the denial of these rights raises an issue of general public importance. 11 Suits by the Justice Department under this provision are not subject to any explicit statute of limitation. Major Litigation Issues Most cases brought under the FHA have been settled and no FHA design and construction cases have ever reached the US Supreme Court. As a result, the courts have not definitively answered some of the most important questions about the meaning of the Act s provisions. This section examines four key issues that have a significant impact on potential liability. 1. When Does the Statute of Limitations Begin to Run? A private claim alleging discrimination under the FHA must be filed within two years after the occurrence or the termination of the alleged discriminatory housing practice. While this requirement may seem straightforward, the courts are divided on when the limitations periods begin to run, particularly when some properties are completed outside the limitations period and other properties are built within the limitations period. Plaintiffs have argued that the continuing violations doctrine permits claims of discrimination even based on those properties completed outside of the limitations period. This doctrine, applied to the FHA in Havens Realty Corp. v. Coleman, 12 can have the effect of preserving claims of discrimination based on incidents occurring outside of the limitations period if those incidents were part of a larger discriminatory practice that continued into the limitations period. In Havens, the plaintiffs alleged that a real estate firm and its agent were engaged in racial steering in violation of the FHA. The plaintiffs cited five specific instances in which black and white testers were directed to homes in different areas. Although only one of these instances occurred within the limitations period, the Supreme Court found that the plaintiffs claims were timely. The Court held that where a plaintiff, pursuant to the Fair Housing Act, challenges not just one incident of conduct violative of the Act, but an unlawful practice that continues into the limitations period, the complaint is timely when it is filed within 180 days of the last occurrence of that practice. 13 Arguably, a series of racial steering incidents involving the same individuals is more akin to a single practice than multi-family housing developments constructed in different cities months or years apart. Nevertheless, plaintiffs have argued that the continuing violations doctrine recognized in Havens applies to all of a developer s properties as long as any of them was built within the statute of limitations period. However, some courts have reasoned that the discriminatory practice that triggers the statute of limitations is the completion of the design and construction of each property Organizational Standing Under the FHA Organizational plaintiffs can have standing in two ways. First, if they represent their members, they derive their standing from the standing of their members and can assert claims that their members could assert. Second,

4 an organization can have standing based on in its own injuries from the defendant s challenged conduct. This second type of organizational standing has been a major source of contention in FHA cases. In Havens, a fair housing organization alleged that, as a result of the defendant s racial steering practices, it had been frustrated in its mission to assist equal access to housing and that it had devoted significant resources to identify and counteract the defendant s discriminatory practices. The Court held that there can be no question that the organization has suffered injury in fact. Such concrete and demonstrable injury to the organization s activities with the consequent drain on the organization s resources constitutes far more than simply a setback to the organization s abstract social interests. 15 Although it is clear that an organization had standing to raise some claim, the scope and type of claims it can raise remain unclear. 3. Who are Proper Defendants? Unlike other federal civil rights statutes, the FHA generally does not specify who may be held liable for engaging in the outlawed discriminatory practices. With regard to the accessibility requirements, the FHA makes the failure to design and construct covered dwellings with the required features discrimination under the Act. However, the FHA does not define the scope of who may be held liable under this provision. Likewise, the regulations do not address this issue. A minority of courts have found that the a proper defendant must be involved in both the construction and design of an alleged noncompliant property. 16 Courts interpreting nearly identical language in the ADA 17 have accepted this argument. 18 However, most courts have held that a party responsible for either the design or the construction may be held liable under the FHA. 19 A harder question is what level of involvement in either of those activities is needed to confer liability. According to one influential district court opinion: The Court is further satisfied that the design and construct language should be read broadly. When a group of entities enters into the design and construction of a covered dwelling, all participants in the process as a whole are bound to follow the FHAA. To hold otherwise would defeat the purpose of the FHAA... and allow wrongful participants in the design and construction process to remain unaccountable. In essence, any entity who contributes to a violation of the FHAA would be liable. By this, the Court does not suggest that all participants are jointly and severally liable for the wrongful actions of others regardless of their participation in the wrongdoing, but rather, that those who are wrongful participants are subject to liability for violating the FHAA. HUD, the Department of Justice and other courts have agreed with this approach. As this quotation and other cases in this area suggest, if an architect designs accessible entrance ways to a building and the builder deviates from those plans, the architect would not be liable because he was not a wrongful participant. 21 Other situations are harder to evaluate. For example, is a party with inspection rights liable for accessibility violations? The case law is not clear as to whether that level of involvement would make the party a wrongful participant in the design and construction process. 4. Compliance with FHA Safe Harbors Recent court decisions have also discussed the burden on defendants to demonstrate that a property is accessible even though it does not comply with the FHA safe harbors. The design and construction requirements of the FHA itself are quite broad. For instance, developers must ensure that common areas are accessible, all doors are sufficiently wide for wheelchairs,

5 light switches are accessible, and that kitchens and bathrooms are usable, but the FHA does not contain specific standards that developers must follow. When followed, the FHA safe harbors, such as ANSI A117.1 and HUD s FHA Guidelines, guarantee compliance with these requirements. However, in passing the FHA, Congress did not delegate to HUD authority to promulgate specific regulations for design and construction compliance. Moreover, HUD has specifically provided that these guidelines are not mandatory: The Guidelines are not mandatory. Additionally, the Guidelines do not prescribe specific requirements which must be met, and which, if not met, would constitute unlawful discrimination under the Fair Housing Amendments Act. Builders and developers may choose to depart from the Guidelines, and seek alternate ways to demonstrate that they have met the requirements of the Fair Housing Act. 56 Fed.Reg (1991). Likewise, courts have made clear that the safe harbors are not mandatory. 22 However, defendants have frequently failed to present sufficient evidence that an alternative approach satisfies the requirements of the Act. In the absence of such evidence, the courts have tended to reject the defendant s assertion that the subject property is accessible and simply accept the safe harbors as the only established standard presented to them. For instance, in a recent decision upholding a lower court decision for the plaintiff, the Sixth Circuit stated that the defendant had ample opportunity to demonstrate compliance with the Fair Housing Act by means other than those set forth by the applicable HUD guideline and simply failed to do so. When facing an allegation that certain features do not comply with the FHA safe harbors, developers should pay close attention to the burden placed upon them to prove accessibility. Recommended Strategies In this section, we suggest a number of strategies for minimizing the risk of and if necessary, responding to design and construction claims. 1. Get it right the first time. The most obvious way to avoid liability under the Act s design and construction provision, of course, is to ensure that properties meet the Act s requirements when the units are first made available for rental. The text of the Act itself is too general to serve as guidance. Architects and building companies should refer to the Department of Housing and Urban Development Accessibility Guidelines 24 and Design Manual. 25 There are a number of highly-qualified architectural firms and design consultants who are experts in these requirements. 2. Document and support any decision to deviate from the safe harbors. Meeting the safe harbors is not the only way to comply with the accessibility requirements of the Act. However, if you decide to use a design that deviates from the safe harbors, it is important to review the evidence and justification for such a deviation. If you cannot find adequate justification, it may make more sense to rely on the safe harbors. It is also important to establish at the time of construction why a development may meet the site impracticality standard that exempts a developer from meeting the accessibility requirements. Some courts have said that they will not consider site impracticality arguments unless there was such an analysis at the time of construction. 3. Periodically review the properties to see where the problems are. Even if properties comply with the safe harbors when they were built, it can reduce litigation risks to survey property compliance periodically even though the Act itself does not require ongoing compliance efforts. Modifications over time repairs, replacements of doors and landings, renovation of common area facilities, and even shifting of

6 outdoor sidewalk surfaces may have led to a lack of compliance. If left unaddressed, these could create litigation risks even if no tenant ever complains. 4. Provide training for management. Property management must be trained in the basic requirements of the Act and it is helpful to have an in-house expert or outside consultant periodically remind property management of their obligations under the Act. For example, the Act requires owners to allow reasonable modifications at the tenant s expense if requested by a tenant with a disability. Ensuring that management of individual properties respond promptly to these requests can avoid litigation risks and promote goodwill among tenants. 5. Consult with disabled tenants. The people who understand the problems of inaccessibility best are persons with disabilities. It is helpful to establish a process for consulting with disabled tenants periodically to learn about potential problems. 6. Obtain contractual protection if possible. If a design and construction claim is brought, all those who have had a significant role in designing and constructing a property have a potential risk. Contractual provisions, such as indemnification and warranty provisions, will often determine who pays the ultimate bill for any liability. Developers are obviously benefit if they can shift these risks to the architects and building contractors. 7. Provide particular attention to newer properties. It is more difficult for plaintiffs to overcome the two year statute of limitations if they cannot point to inaccessible properties built within the statute of limitations period. Thus, it is particularly important to ensure that these properties comply with the Act s requirements. 8. Consider all potential defenses. If litigation does occur, there are a number of potential defenses. It usually make sense to explore these fully and assess the probability of prevailing with one or more of them before entering into settlement discussions. 9. Be creative in settlement discussions. Housing advocacy organizations usually want property owners to modify both common areas and the interiors of all units, even though there may be only a few tenants with disabilities. Such a remedy may seem to be overreaching since the practical effect is to force all the tenants to vacate the properties to make modifications that the tenants themselves do not want. Sometimes it is possible to negotiate relief that targets disabled tenants rather than a very expensive requirement to retrofit all properties.

7 Endnotes 1 As amended by the Fair Housing Amendments Act of 1988, 42 U.S.C Id. 3604(a). The FHA was amended in 1974 to prohibit discrimination based on sex U.S.C. 3604(f)(3)(C)(2000) U.S.C. 3604(f)(3)(C) 5 Dwellings covered by this provision are generally buildings with at least one elevator that have four or more units and ground floor units in other buildings consisting of four or more units. 42 U.S.C (f)(7) U.S.C. 3604(f)(4) gives HUD the power to issue subpoenas and order discovery in aid of its investigations and hearings. 42 U.S.C. 3611(a). 8 See 42 U.S.C and U.S.C U.S.C. 3613(a)(1)(A) U.S.C. 3614(a) U.S. 363 (1982). 13 Id. at See United States v. Taigen & Sons, Inc., 303 F. Supp. 2d 1129, 1144 (D. Idaho 2003) (holding that the statute of limitations began to run on the date that the last certificate of occupancy was issued for the subject property); Moseke v. Miller & Smith, Inc., 202 F. Supp. 2d 492, 503, (E.D. Va. 2002) ( a plaintiff would have two years from the time a building is constructed to bring a claim under the design and construct statutory provision. ). 15 Id. at See Whitaker v. West Vill. Ltd. P ship, No. Civ. A. 3:03-CV-0411-P, 2004 WL , at *1 (N.D. Tex. Sept. 10, 2004) (dismissing a 3604(f)(3)(C) claim against a builder who was not also accused of designing the subject property) 17 See 42 U.S.C (a). 18 See Paralyzed Veterans of Am. V. Ellerbe Beckett Architects, 945 F. Supp. 1, 2 (D.D.C. 1996) (finding, under 303 of the ADA, that the phrase design and construct is distinctly conjunctive. It refers only to parties responsible for both functions, such as general contractors or facilities owners who hire the necessary design and construction experts for each project. ). 19 See, e.g., Baltimore Neighborhoods, Inc. v. Rommel Builders, Inc., 3 F. Supp. 2d 661, 662, (D. Md. 1998). 20 Id. at See United States v. Quality Built Constr., Inc., 309 F. Supp. 2d 756, 762 n.2, 765 (D.N.C. 2003). 22 See, e.g., United States v. Pac. Northwest Elec. Co., 2003 WL , *12 (D. Idaho 2003). 23 Vill. of Olde St. Andrews, 2006 U.S. App. LEXIS 31217, at * See disabilities/fhefhag.cfm. 25 See destech/fairhousing.html.

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