Take the Time to Re-Examine Rules for Potentially Discriminatory Impact

The state of Maryland recently passed a new law after an HOA’s demand for the removal of basketball hoops raised questions of racial discrimination. The episode provides a strong reminder to associations, boards, and managers that seemingly innocuous rules, new or existing, could lead to unwanted publicity and litigation stemming from allegations of discrimination.

The Situation in Maryland

The Maryland law generally prohibits condo associations and HOAs from imposing “unreasonable limitations” on the location and use of portable basketball hoops on an owner’s property. A state legislator initiated the law after a dispute arose regarding an HOA’s declaration provision that prohibits recreational equipment.

The Washington Post reported that the hoops in question were used by an African American boy and his Korean American friend. Their families were ordered to remove the hoops, even though soccer goals and lacrosse nets allegedly were permitted in the community. According to the Post, basketball hoops “have often been at the center of disagreements,” including in Coral Springs, Fla., St. Louis, Mo., and other cities.

But hoops aren’t the only danger zone. “Down here in South Florida, I do see this issue in other contexts,” says Alessandra Stivelman, a partner/shareholder in Eisinger Law in Florida who focuses on real estate and association law.

“Basketball wouldn’t necessarily be something that would have racial impact here, but soccer or baseball restrictions could become more of a racial issue with regard to Latino residents.”

Beyond Basketball

Arguments over recreational equipment in associations are nothing new, but the racial component is less common. “I’ve heard of allegations of familial discrimination related to these types of restrictions, but not racial,” says Kevin Hirzel, managing member of Hirzel Law, PLC, a Michigan-based firm that works with numerous community associations.

The risk of racially discriminatory rules isn’t limited to those addressing recreational equipment.

“We see a lot of it with lease restrictions and approval rights for sales,” Stivelman says. “Associations tend to have very detailed criteria for what they require. For example, they come up with arbitrary financial requirements like credit scores or require criminal background checks.

“Most associations don’t know that they can’t deny someone just because they have a criminal background. Just the fact that someone killed someone, served their time, and is out doesn’t mean you can exclude them.”

As explained in 2016 guidance from the U.S. Department of Housing and Urban Development, basing housing decisions on criminal records can lead to racial discrimination under the Fair Housing Act.

“If you completely ban criminals,” Hirzel says, “that in theory could lead to a disparate impact claim because minorities are more likely to have gone to prison.”

So-called disparate impact discrimination — which occurs when facially neutral restrictions have a disparate impact on a certain class of people — can come up with financial requirements, too.

“With credit and financial criteria, there’s no particular guidance,” Stivelman says. “A lot of associations and management companies will just move forward under the notion that, if you have a low credit score, you can’t live here.

“It’s very hard for them to understand why that isn’t okay because, when they’re dealing with a bunch of foreclosures, they don’t want to allow people they think can’t pay their assessments. But they have other remedies for dealing with delinquencies — they can’t just deny approval.”

How to Dodge the Landmines

Stivelman has some advice on how your clients can reduce their risk of rules-related accusations of disparate impact discrimination. For starters, it’s time to review all of the rules, regulations, and restrictions, some of which may date back decades.

“You have to change with the times,” she says. “The board generally has the authority with notice to revise rules, and they need to review them to see if they’re still reasonable in this day and age.”

For example, with basketball hoop restrictions, “they should put themselves in the owner’s shoes,” Stivelman says. “Everyone’s home more now because of the pandemic, and everyone is going through a tough time no matter who you are.”

Stivelman also is a strong advocate for educating board members: “Education is really number-one. They’re volunteer lay people, and the law is constantly changing. The board needs to be cognizant of the risks and careful.” They must understand the potential implications of discriminatory rules and selective enforcement.

Finally, Stivelman encourages boards to be more open about rules and enforcement. “If there isn’t transparent communication with owners, rumors get started about why things are being done.”