Question: My wife and I purchased a 10-unit residential building as an investment. This is our first time owning a rental property, and we quickly realized it's a lot of work. We hired a property manager to deal with all of the details, and for a while everything seemed to be fine. Last week, however, we received a notification from the Department of Housing and Urban Development that one of our tenants had filed a complaint against us, claiming that our property manager had sexually harassed her. We know nothing about this — can we be liable for what the property manager did here? We hired him so that we wouldn't have these kinds of headaches!
Answer: Both federal and state fair housing laws impose absolute vicarious liability on property owners when management violates the law. In other words, if your property manager violates a tenant's rights under the fair housing laws, you may be held legally and financially responsible for what the manager did, even if you had no part in the illegal behavior and had no knowledge of it at the time it happened.
This liability applies to the actions not only of the manager but also of any employee of yours that might have contact with tenants, such as a maintenance worker. Liability for discrimination under the fair housing laws from administrative complaints or lawsuits can cost you thousands of dollars in damages and attorney fees. You can also be subjected to years of monitoring by a local fair housing or government agency.
For these reasons, it is important for you to make sure that your employees are knowledgeable about the law, take those laws seriously and make every effort to comply with those laws. You may turn over responsibility for the day-to-day management of your apartment building to a property manager, but not responsibility for complying with the fair housing laws.
You can help protect yourself from liability under the fair housing laws from the actions of your employees in a number of ways.
First, have a lawyer or other person knowledgeable about the laws review the form lease agreements, advertisements for vacancies, notices, house rules and written policies that the manager uses to make sure they comply with the law.
Second, make sure your property manager attends fair housing training at least once a year with a reputable organization, such as your local fair housing agency or apartment owner association. The laws change, which means your employees must continue their education on an ongoing basis to stay current.
Third, make sure you take seriously any information that comes to your attention suggesting that there is a problem. Tenants sometimes reach out to the property owner when they are having problems with management. There may be nothing to the tenant's complaint, but it is in your interest to check into it to see whether a legitimate fair housing issue is lurking somewhere.