commercial lease

Here Come the Lawyers! US Supreme Court Declares Criminals Have a Right to Live in Your Community Association and a Right to Sue You for Trying to Stop Them

Posted on by Gerstin

By Seth Amkraut, Esq.neighborhood_watch_05b

Click here for .pdf version of this article

Potential Personal Liability for Board Members.

Many community associations in Florida screen prospective buyers and tenants. This screening process typically includes a comprehensive background check into each applicant’s credit, rental, employment and criminal history.  Recently, an interpretation by the United States Department of Housing and Urban Development (“HUD”) of a recent United States Supreme Court Case, Texas Department of Housing and Community Affairs, et al v. Inclusive Communities Project, Inc., et al., severely curtailed community associations’ ability to deny sales or rentals to convicted criminals.  Enforcing blanket bans on convicted criminals purchasing or renting in your community can now subject both the community association and its Board members, individually, to liability.

With particularly awful circular reasoning, HUD issued an April 4, 2016, guidance memorandum declaring a higher percentage of adult minorities have criminal records when compared to the overall adult population.  Therefore, prohibiting a person with a criminal conviction to buy or rent in your community has a “disparate impact” on certain racial minorities tantamount to racial discrimination. Considering racial discrimination in housing violates federal law, HUD rounds the final corner and declares by extension the blanket use of criminal records to deny housing violates Federal law. This is a critical pronouncement effectively outlawing all blanket prohibitions on individuals with a criminal history and calls into question less restrictive policies. Even a narrowly tailored policy excluding only certain types of criminals must accurately distinguish between criminal conduct representing a genuine risk to other residents or property.

Making matters worse, HUD’s guidance on this issue shifts the long-standing burden requiring a Plaintiff to prove their case. Instead, community associations will be presumed to have discriminated against a proposed tenant or purchaser if a person within a protected class (e.g. a racial minority) is denied housing simply due to the person’s prior criminal record.   To rebut this presumption, community associations will have to prove the association’s denial of housing to persons with a “criminal history” actually assists in protecting resident safety and/or property. The only exception is for criminal convictions relating to manufacturing or distributing controlled substances. In essence, HUD has determined violent felons, such as murderers or rapists, are less dangerous than people manufacturing or distributing illegal drugs.

Individual board member liability.

As experienced Board members will tell you, often times upset owners (and their accommodating lawyers) name board members individually in lawsuits.  More often than not, these lawsuits are defended (and dismissed) by an association’s insurance counsel. However, most community insurance association policies will not offer coverage for housing discrimination or similar claims.  Without such coverage, both the association and the individual board members will have to pay out- of-pocket for representation and any resulting damages.  Although the individual board members may seek reimbursement from the Association (indemnification), claims for housing discrimination are known as intentional torts or intentional statutory violations. Typically, community associations are not required to indemnify individual board members against claims for damages related to intentional conduct. As you can surmise, the result of not a board member not being indemnified by his/her community association can be financially ruinous.

What can an association do? 

There is no one size fits all formula for creating Fair Housing Act compliant criminal background policies. In this new legal landscape, every community association that considers criminal history when evaluating prospective buyers and tenants must be prepared to defend the inevitable claims filed by rejected applicants.

Gerstin & Associates can assist your community association with drafting a criminal background policy allowing for the rejection of the most dangerous applicants while minimizing the risk of liability for discriminatory practices. Contact our office today for a free consultation.

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New Florida Supreme Court Ruling Should Alert Businesses to Review Their Contracts, Now

Posted on by Gerstin

Although businesses should review their standard “form” contracts annually with their attorney, many do not.  Most often changes to year’s old contracts occur after a deal has gone bad or an expensive lawsuit has been lost. Hidden “time bombs” await businesses in the form of “the law has changed since we first used this contract” or ” this provision has not been enforced by a court in years”.  However, every so often news of a court case, ruling or new statute froths to the top and successful businesses take the necessary steps to adapt their businesses and their contracts accordingly. The recent Florida Supreme Court decision in  Tiara Condominium Assoc. v. Marsh & McClennan Companies, Inc. (SC10-1022) should be one of those instances.

In the Tiara Condominium case, the Florida Supreme Court severely limited the “Economic Loss Rule”. This means business that may not have been able to sue for breach of contract, because the actual contract said they could not (clauses limiting certain damages or liability, etc.) have a second chance.  Lawsuits seeking damages for tort claims like negligence can now be filed even though a claim for breach of contract, on the same set of facts, is not available.

To businesses that update their contracts regularly, the court’s decision restricting the confusing and often sloppily applied Economic Loss Rule will be welcome. These businesses will have their attorneys review their contracts for the best way to adapt to the court’s ruling.  Most likely contract provisions regarding liability and damage limitations, indemnity, insurance and dispute resolution will be modified. Unfortunately, for many businesses the effect of the court’s decision will only be known at a later, much more expensive, date.

 

Commercial Landlord’s Blanket Refusal to Allow Sublease Fails

Posted on by Gerstin

Recently, in the case of  Siewert V. Casey, 37 Fla. Weekly D527 (Fla. 4th DCA 2012), Florida’s Fourth District Court of Appeal illustrated the pitfalls and “time bombs” awaiting commercial landlords using “boilerplate” or outdated leases. In Siewert, the landlord’s commercial lease required the tenant to obtain the landlord’s written consent to an assignment or sublease.  The lease did not contain any specific standards (financial ability, credit score, etc.) governing the landlord’s approval process. Nevertheless, the landlord’s blanket refusal to allow a sublease was considered by the Court a breach of the lease:

 When a lease contains a boilerplate clause requiring the landlord’s consent for any
proposed sublease—without specific standards governing the landlord’s approval—
the landlord may not then arbitrarily withhold approval of a sublease.

This decision stems in part from Florida’s “implied covenant of good faith”.  The implied covenant of good faith is a common law doctrine requiring contracting parties to fulfill their contractual obligations in good faith.

To avoid suffering a similar fate, commercial landlords should seek assistance from an attorney in maintaining up to date master templates and leases. A lease should always be as short and concise as possible, while at the same time meeting the latest standards of Florida law and the landlord’s specific needs.  The full text of the Court’s decision can be found here: Siewert V. Casey, 37 Fla. Weekly D527 (Fla. 4th DCA 2012).