Leasing & You

 Now, however, new interpretations of federal housing and civil rights laws have given owners and tenants a way to challenge leasing restrictions that effectively sidesteps governing documents.

A case before the Indiana Supreme Court could have broad ramifications for associations.

A homeowners association in Kokomo, Indiana, is appealing a lower court decision, which concluded the association’s ban on leasing residences to non-family members violates the federal Fair Housing Act.

If the state appeals court ruling is allowed to stand, “it’s going to have a huge impact nationwide. It’s effectively a statement that you can really never create a no-rent scenario that doesn’t violate the Fair Housing Act,” said Jeremy A. Peele, the association’s attorney in the case.

The appeals court noted that fair housing regulations are intended to promote “open, integrated residential housing patterns and to prevent the increase of segregation.” Since a higher percentage of African-Americans in Kokomo rent compared to whites, the court said the impact of the rental restrictions violated federal law.

Although the association argued that leasing restrictions had a positive effect on property values, a point which wasn’t disputed, the court concluded there were less discriminatory ways to achieve that goal – namely by enforcing the covenants that required homeowners to maintain their homes and lots.

In an Illinois case, George v. Colony Lake Property Owners Association, two owners who had rented their homes to minorities in an otherwise white community alleged that amendments to the association’s governing documents preventing rentals violated the federal Fair Housing and Civil Rights Acts. The federal district court last year refused the association’s request to dismiss the case. A trial date hasn’t been set.

The success of such cases could change the way community associations approach leasing restrictions in the future.

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