Q&A: Board directors who act as property managers can pose a liability threat to associations

Question: Our homeowner association president has a second job as a property manager for several investors who rent out their condos in our common interest development. I’ve heard through the grapevine that she harasses tenants she doesn’t like, including one woman who couldn’t take it anymore and left.

A neighbor told me that when the owner asked the president what happened, she told him that the tenant was Jewish and very difficult to work with. I’m worried that the association may be liable for the president’s actions if there is a lawsuit. Is there any liability here?

Answer: The federal Fair Housing Act prohibits “hostile environment harassment” conducted on the basis of a protected class, such as religion. Any tenant who believes that he or she is being harassed, or has been harassed, may bring a claim against the manager or landlord for a violation.

Even prospective tenants can be a source of liability. If the manager is making rental decisions based on race or religion, or if the landlord has encouraged her to do so, anyone she decides not to rent to can file a claim with one of the appropriate government agency cited below, or sue in civil court for damage.

The law doesn’t require that prospective tenants show that landlords or managers hung up signs saying certain religious or ethnic groups are not welcome. The harassment can be subtle, such as making the rental-application process intentionally invasive so as to ferret out a prospective tenant’s race or religion.

As for an existing tenant, simply stating to a third party that someone’s religion or ethnic background caused them to be difficult to work does not necessarily reach the threshold of hostile environment harassment, even though such a belief is loathsome. It is defined as unwelcome conduct spurred by a legally protected characteristic — such as religion — that is so severe that it interferes with or prevents the victim the use and enjoyment of a home.

This conduct could manifest itself in many ways, including making derogatory statements or jokes about a person’s religion or ethnicity directly to them, and treating the tenant differently merely because the person falls within a “protected class,” which is defined by age, sex, race, national origin or disability.

Claims of hostile environment harassment can be submitted to the U.S. Department of Housing and Urban Development or a state attorney general’s office for prosecution. Along with such a complaint, an aggrieved prospective or existing tenant may file a civil lawsuit for general and special damages. These damages could include any costs associated with moving out of a rental unit, any additional rent at the new home and other out-of-pocket costs. In some civil cases, punitive damages are imposed against a defendant as a punishment and to deter future harassment.

When your president acts as a property manager for owners in your association, then she is representing that landlord-owner’s interests and those landlords may be liable for her actions and harm she causes to others. She also may pose a liability threat to the association itself.

There is a fine line between a president representing the association and simultaneously acting as property manager for real estate located within a community. Those who believe that they have been harmed by her might choose to sue the association, and the association might get stuck paying for legal fees and any damages assessed.

Association insurance policies typically include “reservation of rights” contingency clauses that allow insurers to not defend actions that are against public policy, such as discrimination. And if it is found that she was acting in her official capacity as president, the association and its board of directors may be jointly and severally liable for any damage she causes. This source of potential liability is more than enough reason for titleholders to initiate a petition to remove this president from her position on the board.

Every member of the board should be an example to the community and represent all owners and members equally. Even if there have been no formal complaints or lawsuits filed to date, this manager’s attitude is a disaster waiting to happen. The titleholders must seriously reconsider whether someone like this is acting in their best interest and the best interests of the association.

Zachary Levine, a partner at Wolk & Levine, a business and intellectual property law firm, co-wrote this column. Vanitzian is an arbitrator and mediator. Send questions to Donie Vanitzian, JD, P.O. Box 10490, Marina del Rey, CA 90295 or noexit@mindspring.com.