Keep it fair

Fair-housing rules seem clear, but some situations
can be complicated. What do you do if a property owner
asks you not to rent to same-sex couples or rowdy
college students?

by Tom Morgan   The REALTOR® organization today stands firmly and proudly in favor of equal housing treatment of all Americans. No one in the United States today is doing more to promote equal housing opportunities than REALTORS®, not only because it makes economic sense for the consumer, for the REALTORS®, and for society, but also because it’s simply the right thing to do.

While promoting fair housing is a priority for all REALTORS®, complying with the legal, ethical, and technical aspects of fair-housing rules can be complicated. The changing nature of households, the differing views of what constitutes a family, and the varying expectations of housing consumers can make your efforts to comply with all fair-housing laws and ethical standards a challenge.

Because consumers often expect REALTORS® to be knowledgeable in all aspects of fair housing, your role often becomes that of educator as much as agent or broker. In addition, you may find yourself balancing the interests of various parties while guiding clients into compliance with the rules.

What does fair housing mean?
In brief, federal law, state law, some local laws, and the REALTOR® Code of Ethics all govern fair-housing practices by REALTORS®. Originally enacted in 1968 and amended in 1989, the federal Fair Housing Act says that, with a few exceptions, you may not discriminate in the showing, selling, or leasing of properties based on a person’s color, national origin, race, religion, sex, handicap, or familial status. Violation can result in significant penalties such as fines and may give rise to a private right of action by an individual against the violator.

The Texas Occupations Code gives the Texas Real Estate Commission the right to suspend, revoke, or otherwise discipline a real estate licensee if the licensee “discriminates against an owner, potential buyer, landlord, or potential tenant on the basis of race, color, religion, sex, national origin, or ancestry including directing a prospective buyer or tenant interested in equivalent properties to a different area based on the race, color, religion, sex, national origin, or ancestry of the potential owner or tenant.” Article 10 of the REALTOR® Code of Ethics states that REALTORS® should “provide equal service to all clients and customers.”

Some local jurisdictions have adopted ordinances that go beyond the requirements of state and federal law. For example, Austin has adopted an ordinance prohibiting discrimination based on creed, status as a student, marital status, sexual orientation, or age.

How can I stay out of trouble?
The most likely scenario that could result in problems for you is the result of good intentions gone awry. The typical REALTOR® wants to extend outstanding service to all clients and will bend over backwards to accommodate their wishes. Problems often arise when the client expresses an interest in marketing a property in a certain manner that can result in a violation of fair-housing rules, even if no violation were intended.

Examples of challenging situations
Rowdy student tenants
A property owner in a residential neighborhood has received numerous complaints from neighbors about the rowdy parties that his student tenants have held. What if the property owner, rightfully concerned about potential liability for nuisance complaints against the tenants, asks you, her REALTOR® property manager, to stop renting to students at all the owner’s properties?

If the properties were located in Austin, the property owner could not reject a prospective tenant simply because the tenant was a student. Not all jurisdictions have such restrictions, so it might be possible to have such a restriction if not prohibited by local ordinance.

What if the property owner then suggested only renting to female tenants under the theory that female tenants would be less likely to hold rowdy parties? Because both federal and state laws prohibit discrimination based on sex, the landlord could not reject a prospective tenant simply because the tenant is male. Note, however, that there is a roommate exception. The roommate exception exempts an owner (or tenant who is subleasing) who lives in a one- to four-family dwelling from the prohibitions against preferences based on sex when renting out the other rooms or units in the dwelling. For example, a female tenant could lawfully seek out only female roommates.

Rather than risk a fair-housing violation, you may be better off working with the property owner to ensure strict compliance with existing city ordinances by the student tenants. Tenants clearly do not have a legal right to have rowdy parties, especially if there are violations of city ordinances regarding noise or if alcohol is served to minors. You could work with the neighbors to monitor the tenants’ behavior. If a neighbor filed a complaint with the police and a citation were issued, this could be grounds for eviction of the tenants under most standard lease terms.

Same-sex domestic partners
Acting as a property manager, you receive an application from two prospective tenants who are both male and have a minor child living with them. The property owner does not want to lease to the applicants. The potential violation here rests not on the fact that both applicants are male but the fact that the household includes a minor child. Fair-housing laws clearly prohibit discrimination based on familial status. The owner may not refuse to lease the property because of the child.

As noted previously, Austin prohibits discrimination based on sexual orientation, defined as “an individual’s sexual preference or practice including homosexuality, heterosexuality, and/or bisexuality.” Clearly, in Austin a landlord may not reject a tenant solely because of the prospective tenant’s sexual orientation. However, most other local jurisdictions in Texas have not adopted a comparable ordinance.

A landlord who instructs a REALTOR® property manager not to rent to homosexuals puts the REALTOR® in a difficult position, because the REALTOR® Code of Ethics states that REALTOR® should “provide equal service to all clients and customers.” If a landlord insists on such a prohibition, you should ask that the landlord put the instruction in writing so that you could have a defense in case the prospective tenant filed a professional standards complaint against you. Further, the determination and enforcement of such an instruction to not rent to homosexuals may prove difficult and burdensome. You will have to evaluate whether it is prudent business to operate under such a prohibition.

Families with numerous children in small dwellings
A property owner owns a two-bedroom house. A mother and father with three children over the age of six months old apply to rent the house. Unless the local jurisdiction has adopted a tenant protection ordinance that prohibits such discrimination, the landlord could legally refuse to rent the property to the prospective tenants based on having too many occupants for the number of bedrooms. Indeed, if the local jurisdiction had adopted an occupancy standard limiting the maximum number of persons to two per bedroom, the landlord could not rent to the family.

Fair-housing laws clearly prohibit discrimination against families with children under age 18 but do not preempt local ordinances governing the maximum number of persons who may occupy a unit. In addition, absent any local occupancy ordinance, U.S. Housing and Urban Development regulations allow property owners to establish reasonable rules governing the number of persons who may occupy a unit. These rules must be reasonable and not used to unreasonably exclude families with children.

The Texas Commission on Human Rights has promulgated policy that allows certain occupancy standards by landlords. The following policy is presumed reasonable by TCHR: A family may occupy an owner’s dwelling if the family does not exceed two persons per bedroom plus a child who is less than six months old and who sleeps in the same bedroom with the child’s parent, guardian, legal custodian, or person applying for that status.

Birth of new child that exceeds occupancy limits
A property owner has a two-bedroom house that is rented to a mother and father and two children over the age of six months. The local jurisdiction has an occupancy standard that is limited to two occupants per bedroom. The tenants have a one-year lease. During the lease, the mother gives birth to a third child. The property owner is concerned about violating local occupancy limits and asks you as the property manager not to renew the tenant’s lease.

If the owner of the property has made timely written disclosure of the owner’s newborn policy and maximum-persons-per-bedroom policy for families, you may legally require the tenants to move out at the end of the lease term. In fact, if you let the tenants simply renew the lease, there may be an issue of violation of the local jurisdiction’s occupancy standards.

The Texas Commission on Human Rights has promulgated the following policy regarding newborns that it presumes reasonable: If an owner makes timely written disclosure of the owner’s newborn policy and maximum-persons-per-bedroom policy for families, the owner may adopt a newborn policy as follows: Residents who have a newborn less than six months old at the time of rental application or lease renewal and residents whose newborn has reached six months of age during the lease term may be required, at that time, to either move into another available dwelling of the owner which has more bedrooms or move out. Rent for the larger dwelling may be the rental rate at the time the lease or rental agreement is entered into for the larger dwelling. Timely written disclosure means that the disclosure is made in a written lease, lease addendum, rule, letter, or memorandum provided to at least one of the residents, and the disclosure is made prior to the time the residents and the owner sign a written lease or enter into an oral rental agreement. The disclosure must contain the owner’s policy for newborns and policy for maximum-persons-per-bedroom for families. Most standard leases do not contain such disclosures. Therefore, in most cases, the landlord in the example above could not ask the tenant to move until the end of the lease term.

Use of models in advertising
A client who is a builder of high-end housing asks you as her REALTOR® to list properties for sale. The client wants an aggressive advertising campaign that is directed at the upper-income market—individuals who can afford the type of housing in which the builder specializes.

Fair housing rules also govern real estate advertising. The Fair Housing Act makes it unlawful to make, print, publish, or cause to be made, printed, or published any notice, statement, or advertisement with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race, color, religion, sex, handicap, familial status, or national origin. Therefore, REALTORS® should consider fair-housing issues when designing newspaper ads, magazine ads, or fliers promoting properties.

While it may be obvious that advertising should avoid using any words that might be construed to exclude certain groups of people, REALTORS® need also be aware of the use of models in photographs advertising properties. If you are designing display advertisements for a particular development, for example, the advertisement should use pictures of a diverse group of people. Photographs of only one race of people could be construed that the development is only available to people of that race.

In addition to the photographs themselves, be sure to consider the placement of such advertisements. If advertisements are only placed in limited circulation publications that are directed to certain groups of people, it could be interpreted that the development is not open to other groups of people.

In this example, while you can certainly create an advertising campaign that places advertisements in publications and media outlets targeted to upper-income individuals, you should also encourage the builder to place advertisements in general circulation publications to avoid any appearance of only marketing to certain groups of people.

Tom Morgan is associate counsel for the Texas Association of REALTORS®.

Photo © PictureQuest.

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