HUD Racial Discrimination - shake down

14 Replies

This is more a venting session in the event anyone else has to deal with this.  

My property manager (who is of race 1) was accused of racial profiling against a tenant of race 2.  The claim was that the discrimination was against both race 2 and race 3.  The tenant complainant had lived in our apartments for two years and was trying to break his lease early.  I am the owner and of race 3.

When I first got the notice from HUD I was shocked! I have learned a lot about this process. The case was then handed down to a local city Fair Housing Office. The open and "Investigation," which starts off with --> If you want this problem to just go away, how much will you pay the complainant?

They have a price in mind as the complainant gets to request an amount. I was again disgusted with the idea that this process seemed like a shake down. I declined to offer anything and knowing my innocence as the property owner (who is who the claim goes against and not the property manager) I requested an investigation. Six months later and many discussions, emails, meeting, copying, "investigating" I found out that the majority of such complaints end in "reconciliation." Reconciliation involves the owner paying the complainant. Our application process and procedures are clearly written out and all of our renting evidence is clearly showing no racial discrimination what so ever. After another couple of months the local office calls and wants to discuss the recommended finds to HUD. "Based on census data you should have __% percentages of each race in your apartments and you don't so it looks like racial discrimination." How they know what the tenants races are, they admit they are only guessing.

They say this is their finding and they will pass this on to HUD if I don't reconcile for $450. I tell them this isn't fair and there is no way I or the property manager was racially discriminating against a tenant. Their response, "This is our finding, but you can reconcile and we just close the file." Of course I paid the $450.

Just wondering - if you had a property manager (with a license), would this have gone differently...

They are licensed, bonded and a well known property management company.  That is how I found out most cases just reconcile as they advised me to do at the beginning when they wanted $900.

sounds like a shake down. i would have let them take it back to HUD and let HUD take you to court and prove that you have less than he recommended % of minorities in your apartments. keep this in mind when dealing with a court situation. people in court, be it attorneys, judges, prosecutors or anyone are only people. they do not want to work any harder than you do. if you fight all the way to the end, that means they have to work. if you settle, they do nothing but collect. make them work. if they had an air tight case, they wouldn't have lowered the asking amount in the first place. make them work

What would HUD do if you didn't pay? Would it actually go to trial?

Where was your PM during all of this? Even though the claim was against you as the owner, wasn't it their actions in question? Was there not anything in the management contract where they indemnify you against all claims?

WOW ! My assumption is that nothing probably would have come of it if you refused but......... If it was sent to the HUD investigative dept it at the least would cause you months if not years of uneasiness and worst thousands of dollars in legal fees defending yourself

I would have held my nose and wrote the check as well.  You did the right thing

In many sectors of our country these are the types of organizations to fear.  They cause trouble where trouble doesn't exist to promote their cause with little or no oversight or accountability

If there was no basis for the complaint, I would have stood my ground. If they wanted to carry on their game, I'd have taken them to the mat. But then, I have some influential friends in high places. Are they implying we as landlords need to practice affirmative action? 

What would have happened if the PM had let the tenant break the lease early? Perhaps the tenant would have left quietly without raising the complaint. Another reason why I don't deal with long term leases and much prefer month-to-month rental agreements. There must be something that ticked off the tenant. Seems like a counter move to something that occurred, most likely having nothing to do with race.

I'm shocked that HUD/Fair Housing would handle a complaint in this way. Sounds like the wild west. Thanks for sharing your experience. I'll be more on alert now.

Originally posted by @Greg H. :

WOW ! My assumption is that nothing probably would have come of it if you refused but......... If it was sent to the HUD investigative dept it at the least would cause you months if not years of uneasiness and worst thousands of dollars in legal fees defending yourself.

I would have held my nose and wrote the check as well.  You did the right thing.

In many sectors of our country these are the types of organizations to fear.  They cause trouble where trouble doesn't exist to promote their cause with little or no oversight or accountability.

This is some good insight, especially knowing that you are in the same market as @Joe Edgar. The last sentence is extremely poignant.

I wouldn't have paid. You shouldnt have either...assuming u are 100 percent confident in u and your property mgr being innocent

Wow.  Sorry you had to go through that.  I wonder though, if by paying the money you may inadvertently become a more likely target again in the future?  Either because 1) they now know you'll ultimately pay, or 2) they may see the fact that you paid as an admission of guilt and therefore any future claims may seem more credible since you were "guilty" of discrimination on this prior occasion? 

As a landlord myself, I know that these sort of things often come down to a business decision - kind of like paying a non-paying tenant money ("cash for keys") to leave your property and avoid a costly eviction.  But paying anything in the scenario you described would be a tough pill to swallow for me personally. 

I just got my letter that confirms the issue is closed, which I feel disgusted with myself for not fighting, but relieved its over (@Kyle it is a good point - if I am now a target.  The letter says "both parties mutually resolved the issue and the investigation is closed").  I tried to find anyone who did fight such a claim and all I found were others who went through and did the same thing I did.   

You did the right thing.  You don't want to put yourself at risk defending your property manager.  You cannot actually know what the PM did or did not do, so stay out of it if you can.

@Joe Edgar , I think you did the right thing.  Unless you have a lot of time and money to waste protecting a principle, just pay the $450 and write it off as the cost of doing business.

You say you're worried that you might now appear to be a target. I would look at it the other way. Imagine you fought this all the way to court. Imagine, as unlikely as you might think it to be, you lost the case for whatever reason. At that point, with a FHA judgment against you, you'd be in HUD crosshairs for anything. And any future case brought against you, you would automatically be assumed to be guilty.

I'd much rather pay the $450 and save myself the hassle of going through a trial where a loss might severely affect my REI business.

Unfortunately, large, bureaucratic government entities are part of our continued existence. This type of unmeritorious harassment from HUD based on speculation of discrimination from an "aggrieved" tenant, especially if they are one of the protected classes, is like oxygen to HUD. This reminds me of the situation in the pharma and biotech world. OIG and FDA are ultra-sensitive to the *perception* of wrongdoing with companies, and many big fines have been paid to avoid full blown court actions (which could have dire financial consequences). One group of pharma/biotech consultants reported that for every $1 the government spent investigating pharma companies, the return was close to $7. This is not to say some companies haven't done things which have shined a spotlight on the industry as a whole, but the pendulum swing has been profound.

Very lucrative indeed....