The U.S. Department of Housing and Urban Development (HUD) has issued a final rule that creates liability for housing providers for occurrences of "quid pro quo harassment" or "hostile environment harassment." The new rule, "Quid Pro Quo and Hostile Environment Harassment and Liability for Discriminatory Housing Practices Under the Fair Housing Act," takes effect on October 14, 2016.

The rule prohibits both quid pro quo and hostile environment harassment because of a resident’s protected class which, under the Fair Housing Act (FHA) includes race, color, religion, sex, familial status, national origin, or disability. It imputes direct liability on housing providers more broadly for discriminatory practices.

Quid pro quo ("this for that") harassment is defined as occurring when a housing provider conditions a resident’s housing availability, terms, or privileges on compliance with an unwelcome request or demand. The unwelcome request or demand can still constitute harassment even if the resident acquiesces to it.

Hostile environment harassment is defined as unwelcome conduct because of an individual's membership in a protected class, which is sufficiently severe or pervasive that it interferes with the availability, terms, or privileges of residency in the dwelling. The rule enacts a "totality of the circumstances" test for assessing whether a hostile environment of harassment exists, which examines factors such as the nature of the conduct, its context, severity, scope, frequency, and location, and the relationship of the people involved. Harassment can take the form of written, verbal, or other conduct. Physical contact or psychological harm, although relevant, is not required for a viable claim.

The final rule largely mirrors the proposed rule on which we previously reported. One notable modification to the final rule creates the standard for judging whether harassing behavior is "sufficiently severe or pervasive," which is to be judged from the perspective of a reasonable person in the aggrieved person's position.

The most concerning section of the rule for housing providers relates to direct liability exposure for any type of discriminatory housing practice. The rule creates three categories of direct liability for housing providers—liability for the housing provider's own conduct; liability for failing to take prompt corrective action relating to the conduct of its employees or agents; and liability for failing to take prompt corrective action for the conduct of a third party (such as another resident).

Perhaps the most significant impact of the new rule is the imposition of direct liability for the conduct of third parties—housing providers could be liable for behavior among tenants. This liability hinges on whether the housing provider "knew or should have known of the discriminatory conduct and had the power to correct it." Determining if a housing provider has the "power to correct" the third party's actions depends on the somewhat ambiguous task of assessing the extent of its control over that offending party and what legal responsibility it has for the conduct.

The concern for housing providers under this new rule is facing liability for one tenant harassing another tenant—regardless of whether the harassment relates to the terms or conditions of residency. An implication of the rule is the interjection of housing providers into common disputes between two tenants. The rule neither defines what steps a housing provider must take nor how far it must go in mediating tenant-on-tenant harassment disputes. Housing providers should pay attention to developments in this area as courts provide further guidance on how to navigate compliance in this new regulatory framework.

Ballard Spahr's Housing Group regularly represents and advises clients, including rental property owners, on a range of issues related to the Fair Housing Act, and defends a variety claims brought under its provisions.

Copyright © 2016 by Ballard Spahr LLP.
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