Neighbor Disputes within Homeowners Associations: When Should the HOA Intervene?

Disputes between neighbors in a homeowners association inevitably arise.  HOA board members often face difficult decisions in deciding whether to intervene in neighbor disputes that do not directly involve the HOA.

If a violation of the restrictive covenants does not impact all owners, many HOA boards find it difficult to justify spending time and money pursuing a violation of the HOA rules.  In other cases, a homeowners association will take minimal action and send a demand letter, or impose a fine, and fail to follow through if covenant violations continue.  However, HOA board members should be aware that selective enforcement of HOA rules or a failure to properly enforce HOA rules may potentially expose them to liability if it results in the creation of a hostile environment under the Fair Housing Act.

A recent federal court opinion demonstrates the importance of pursuing HOA covenant violations and the potential liability exposure that homeowners associations may face if they fail to property enforce the governing documents.  In Fair Hous Ctr of Cent Indiana, Inc v New, Docket No. 1:20-CV-01176-TWP-DLP, 2021 WL 195380 (S.D. Ind., January 20, 2021), a federal court ruled that an issue of fact existed as to whether a homeowners association and its management company violated the fair housing act by collecting HOA dues from an owner that violated the HOA bylaws, but then failed to pursue litigation against the same owner when she engaged in a pattern of harassment and racial discrimination.

Facts

Plaintiff, Donata Banks, and her family are African American and rented a home located within the Twin Creeks subdivision.  The subdivision was governed by the Twin Creeks Homeowners Association, Inc. (the “HOA”).  Defendant, Vicki New, was a Caucasian member of the HOA and lived across the street from the Banks family.  The complaint alleged that New engaged a pattern of racial discrimination that involved harassing, taunting, and threatening African American and Latino residents, guests, and contractors, including the Banks family, which created a racially hostile environment in violation of the Fair Housing Act.

The complaint alleged that by the summer of 2016, only a few months after New moved into the subdivision, the HOA became aware that New frequently harassed, threatened, and intimidated the Banks family and other Twin Creeks residents, by calling them racial slurs, making racially insensitive comments, and making physical threats. In June 2016, the HOA’s attorney sent a letter to New demanding that New stop telling HOA members that she was on the HOA board and requested that she stop harassing other HOA members.

The complaint alleged that New did not stop harassing the Banks family, and other residents, and that the HOA sent New another letter in the fall of 2016 that detailed various additional acts of racial discrimination that New continued to engage in.  The letter demanded that New cease her abusive behavior and threatened litigation if New did not comply with the HOA’s rules and restrictive covenants.  The HOA did not pursue litigation after New continued to use racial slurs and make race-based threats of violence.

In August of 2018, New was arrested and charged with criminal trespass, battery, and criminal mischief after a physical altercation with some of her Latino Neighbors, although the charges were later dismissed.  In September of 2018, the HOA sent another cease-and-desist letter informing New that she had violated various HOA covenants and that there would be “zero tolerance” for any further discriminatory acts.  The complaint alleges that the discriminatory acts did not cease and only ended after New sold her home and moved out of the subdivision in December 2018.

The complaint alleges that the HOA and management company often told the Banks family and other residents that there was nothing they could do to stop discriminatory conduct.  The complaint alleges that one HOA representative told the HOA members that he was tired of receiving complaints about incidents with New and he was going to start charging for receiving complaints about New.  The restrictive covenants contained standard provisions that prohibited HOA members from engaging in illegal activity, offensive activity or creating a nuisance.  The complaint alleged that the HOA did not enforce these restrictions even though it enforced other covenants when it filed a complaint against New in 2017 to collect unpaid HOA dues.  The above facts were reported the Fair Housing Center, who later filed a lawsuit in federal court along with Banks.

Analysis

In response to the complaint, the HOA and management company filed a motion to dismiss.  While the court dismissed portions of the complaint, the court held that the plaintiffs had adequately pled a violation of the Fair Housing Act based on a hostile environment theory.  Specifically, the court held as follows:

A person is directly liable for … [f]ailing to take prompt action to correct and end a discriminatory housing practice by a third-party, where the person knew or should have known of the discriminatory conduct and had the power to correct it. 24 C.F.R. § 100.7 (a)(iii). While it is unclear the level of success the Plaintiffs may have later in this litigation, the allegations are sufficient to allow the fair housing claims to proceed beyond this stage of the litigation.

The Court also held that the plaintiffs had alleged a valid claim under 42 U.S.C. 1982, which requires a plaintiff to demonstrate that a defendant interfered with their right “to inherit, purchase, lease, sell, hold, and convey real and personal property” based on racial discrimination.  Specifically, the Court held as follows:

There are sufficient factual allegations to draw an inference that the Association Defendants had discriminatory intent in interfering with Banks’ right to hold real property when they initiated legal action against New for failing to pay HOA dues but not pursuing legal action when New engaged in egregious, racially-discriminatory conduct that affected property rights—all when the Association Defendants had the authority and power to intervene.

Conclusion

At the time this article was written, the federal court case remains pending.  As noted by the court, the plaintiffs still have the burden of establishing a factual basis for their claims and the court only relied on the allegations in the complaint in ruling that the entire case should not be dismissed.  Even without a final resolution, this opinion provides the following important lessons for homeowners associations:

1. HOA’s should not engage in selective enforcement and should uniformly enforce HOA rules and restrictive covenants.
2. Disputes between neighbors can lead to fair housing claims against homeowners associations and management companies if they fail to take action to prevent discrimination based on race, color, national origin, religion, sex, familial status, or disability.
3. Homeowners associations must be prepared to take appropriate action to remedy violations of restrictive covenants or fair housing laws. Cease and desist letters are a good start, but if they are ignored, an HOA must be prepared to file a lawsuit to obtain an injunction to prevent continued violations of the HOA bylaws.