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For Landlords Discrimination Comes with a Price

June 13, 2012 Email Blast To Select Clients -- Subscribe to Our Mailing List

By Jay B. Itkowitz

It is imperative that landlords of commercial and residential properties alike comply with the various laws governing discrimination in the management, leasing and sale of real property. To most people the word “discrimination” implies an animus towards a person because of his or her membership in a protected class such as a racial or ethnic minority, gender, or sexual orientation. However, anti-discrimination law contemplates a broader set of conduct which also includes activity that is arguably founded upon business judgment which nonetheless impacts a protected class, for e.g. whether the design of a structure accommodates persons with disabilities. Whatever the basis for the alleged discrimination, a landlord’s cost of litigating the lawsuit with the added potential for high jury awards for the victim’s emotional distress (that, most likely, are not covered by insurance), counsel in favor of a thorough analysis of landlord’s compliance with the law.

Whether the aggrieved individual pursues relief through an administrative proceeding[1] or by filing a complaint in state or federal court, the party defending the action could be held liable for damages arising from the victim’s mental anguish or emotional distress and punitive damages. See New York State Div. of Human Rights v. Caprarella, 82 A.D.3d 773, 774-75 (2d Dep’t 2011) (upholding $10,000 award in punitive damages and $7,500 in damages for mental anguish where agency found that landlord could not proffer credible nondiscriminatory reason for turning down a non-white couple); Parris v. Pappas, --- F.Supp.2d ---, 2012 WL 573033 at *6-9 (D. Conn. 2012) (awarding $100,000 in compensatory damages and $150,000 in punitive damages where mobile-home park owner failed to reasonably accommodate plaintiff’s live-in aide and failed to service septic system as required by the lease agreement).

The obligation to provide “reasonable accommodation” to disabled persons is typically the most difficult standard to comply with given the fact-sensitive nature of the issue. Leaving aside the vexing question of what qualifies as a “reasonable accommodation” given a person’s disability, who qualifies as a “disabled person” is a threshold issue that deserves careful attention. Take, for example, the case of Shirley Carper of California who, in 2005, reached a $1 million settlement with the landlord of an apartment development after a five-year legal battle. [2] The case centered on Ms. Carper’s need for a parking space closer to her unit after she developed a degenerative knee disorder that worsened over time, in part, due to the flight of stairs she had to ascend to reach her apartment from her original parking space. Id. The landlord maintained the position that Ms. Carper was merely demanding accommodation of a “convenience” rather than a disability. Id. After trial, the jury awarded $250,000 in compensatory damages and, during deliberations for punitive damages, the case ultimately settled for $1 million. Id.

Similarly, in the context of commercial leases, both landlords and commercial tenants of “public accommodations” are subject to liability for discrimination against disabled individuals for failure to comply with the ADA’s public access requirements. 42 U.S.C. § 12182(a).[3] The ADA precludes recovery of compensatory and punitive damages,[4] although special damages for emotional distress may be recoverable upon sufficient pleading and proof under Federal Rule of Civil Procedure 9(g),[5] and the court may award reasonable attorney fees under 42 U.S.C. § 12205.[6] Thus, Congress intended that the ADA offers plaintiffs a prospective remedy in the form of injunctive relief, 42 U.S.C. § 2000a-3(a), i.e. that may require landlord and/or tenant to remove “architectural barriers” to the extent such alterations are “readily achievable”. 42 U.S.C. § 12182(b)(2)(A)(iv).[7] Alteration of “architectural barriers” can, no doubt, be costly and the question is who bears this cost? [8] The ADA simply imposes liability on “any person who owns, leases (or leases to), or operates a place of public accommodation.” 42 U.S.C. § 12182(a). Under the enacting regulations, tenants and landlords may allocate the cost by agreement. 28 C.F.R. § 36.201(b). Nevertheless, merely because a lease agreement may hold tenant solely responsible for complying with all the laws and regulations, a landlord cannot escape liability under the ADA.[9] In other words, a third-party can still hale the landlord into court and obtain injunctive relief requiring the landlord to effectuate structural changes that bring a public accommodation within compliance of the ADA’s access requirements. The landlord can then seek indemnification from the tenant to the extent this is permitted under the lease agreement.[10]

From the above discussion, it is easy to see how landlords of commercial and residential properties can get tripped up and be subject to costly litigation if they are not in compliance with all the relevant anti-discrimination laws. Therefore, nowhere else may the old adage be more apt than in this case, that an ounce of prevention is worth a pound of cure, and knowledgeable counsel should be consulted to ensure compliance and minimize exposure.    

[1] In New York City, complainants who believe that they are the victims of discrimination can seek relief: (1) by commencing an administrative proceeding with the New York City Commission on Human Rights, the New York State Division of Human Rights, or the United States Department of Housing and Urban Development (“HUD”), or (2) by filing an action in state court or federal court under state and federal civil rights and fair housing laws. Note that HUD is obligated by law to refer housing discrimination complaints to certified state or local agencies that may have jurisdiction over the matter before taking any further action. 42 U.S.C. § 3610. Also note that, unlike claims of employment discrimination under Title VII of the Civil Rights Act of 1964 (“Title VII”) and Title I of the American with Disabilities Act of 1990 (“ADA”) which require plaintiffs to exhaust administrative remedies by filing a complaint with the Equal Employment Opportunity Commission (“EEOC”) and obtaining a right to sue letter, discrimination claims brought under Title III of the ADA in connection with public accommodations, or claims brought pursuant to the Fair Housing Act (“FHA”), New York Executive Law § 296, or the New York City Human Rights Law do not require an exhaustion of administrative remedies and the plaintiff can seek redress directly in court. See Huntington Branch, N.A.A.C.P. v. Town of Huntington, 689 F.2d 391, 394 n. 3 (2d Cir.1982) (holding that a party challenging a municipality's zoning decision under the FHA does not need to exhaust administrative remedies, even where, as here, the “reasonable accommodation” test is invoked); Joseph's House and Shelter, Inc. v. City of Troy Planning Bd., No. 05–CV–513, 2009 WL 2413936, at *1 (N.D.N.Y. March 31, 2009) (“It is well-established that plaintiffs are entitled to bring an FHA and ADA claim based on a discriminatory land use decision, even if a state-court Article 78 proceeding is available.”); Hernandez v. New York City Dep't of Corp. Counsel, No. 94 Civ. 9042, 1997 WL 27047, at *10 (S.D.N.Y. Jan.23, 1997) (“Unlike Title VII, the NYSHRL and NYCHRL do not require exhaustion of administrative remedies.”)
[2] California Dept. Of Fair Emp't & Housing v.2001 California St. Apart., No. 03–423255 (Cal.Sup.Ct.2005), Vol. E1, Issue 1 National Fair Housing Advocate (Dec.2005).
[3] Liability is imposed upon “any person who owns, leases (or leases to), or operates a place of public accommodation” that discriminates against an individual on the basis of disability. Id. Discrimination includes the failure to remove “architectural barriers” in existing facilities where such removal is “readily achievable.” 42 U.S.C. § 12182(b)(2)(A)(iv).
[4] Powell v. National Bd. Of Medical Examiners, 364 F.3d 79, 86 (2d Cir. 2004).
[5] Id.See Botosan v. Fitzhugh, 13 F.Supp.2d 1047, 1053 (S.D. Cal. 1998) (recognizing that, in an appropriate case, emotional distress can constitute special damages under Fed. R. Civ. P. 9(g)).
[6] Santiago v. Coco Nail HB, Inc., No. CV 10-3373, 2012 WL 1117961, *2 (E.D.N.Y. 2012) (awarding reasonable counsel fees in ADA public accommodation case).
[7] Roberts v. Royal Atlantic Corp., 542 F.3d 363, 373 (2d Cir. 2008) (characterizing “readily achievable” as a plausible proposal for barrier removal, the costs of which, facially, do not clearly exceed its benefits).
[8] Brooks Shopping Centers, LLC v. DCHWWC Restaurant, Inc., 32 Misc.3d 55, *56-7 (N.Y. Sup. Ct. App. Term. July 8, 2011) (reversing trial court and holding that cost of bringing premises into ADA compliance which exceeded $500,000 was not sufficient to demonstrate that removal of barriers was unduly burdensome and new trial was ordered to determine tenant’s ability to render the premises ADA-compliant to the “maximum extent feasible”).
[9] Botosan v. Paul McNally Realty, 216 F.3d 827, 834 (9th Cir. 2005) (“[A] lease allocating liability between a landlord and a tenant does not affect either parties' liability with respect to third parties.”)
[10] Yates v. Delano Retail Partners, LLC, No. C 10-3073 CW, 2012 WL 1094444, *2-3 (N.D. Cal. 2012) (recognizing parties’ ability to rely on lease agreements to seek indemnification but holding that indemnifying party not an indispensable party for an action brought under the ADA). 
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