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Why Apartment Owners in Dallas are Crying ‘Foul’ on Changes in the Code of Ordinances

June 20, 2016 by Art Young

Navigating the labyrinth of the code of ordinances of a large, politically diverse municipality can be challenging. Just ask the owners of apartment complexes in Dallas, Texas. The managers and owners of multi-family real estate in the ninth largest city in the United States face even greater challenges in the form of recent recommendations from the City Council’s Housing Committee.

The Housing Committee conducted hearings among constituents regarding the standards of apartments in the Dallas and later made recommendations to the city’s professional staff on a wide range of issues. In spite of the staff’s opposition, these recommendations were sent to the entire Council for debate.

Some of these recommendations, which were opposed by The Apartment Association of Greater Dallas the trade association for apartment owners in the city, would lead to dramatic increases in the cost of maintenance of apartment complexes.  Ironically, these expenses would most likely be passed on to apartment renters, hurting many of the people they were designed to help.

The Dallas Code of Ordinances

Kimberly

Kimberly Sims is a member in the Dallas-based law firm Palter Stokley Sims PLLC, and she represents landlords and managers in landlord/tenant disputes. Recently, she offered insights on the city’s proposed Code of Ordinances for Minimum Housing Standards and the implications in dealing with this code.

“These are the standards by which multi-family complex owners must comply in the managing and maintenance of their properties,” she said.

What does Sims think about the recent recommendations presented by the Housing committee of the council?

“In the broad scheme of things, everyone wants people who live in apartment complexes to be treated well,” she said. “We also want them to have remedies when the standards are not met and we want all owners to follow these standards.  But I’m not convinced that we need to specifically dictate all of the standards – down to the minutia –  in order to ensure that.”

“There will always be outliers in any industry – on the one side the great apartment owners who treat their tenants in the same way they treat their family members — and then – on the other — those owners who won’t follow any standards even if told by ordinance to do so. The latter causes these specific requirements to be put in place even though they are the ones who need to be regulated but likely also the ones who won’t follow them.

“As with all things in law, there is a pendulum,” she noted. “And the pendulum appears to be swinging towards forcing landlords to adhere to stricter policies. Because of the costs associated with these policies and the impractical nature of some of them, these recommendations should be modified.”

Some Recommendations are Misguided

“Several of the proposed provisions stand out as burdensome and impractical,” Sims said. “For example, the requirement that HVAC units in every apartment cool to a minimum of 80 degrees.  This may seem to be reasonable. However, these apartments are in Texas and we all know that it’s hard to get AC down to 80 when it’s 108 outside.

“Most air-conditioning systems – even in single-family dwellings – cannot cool more than 20 degrees from the outside temperature.  So why do we expect landlords to be able to make that happen?” she asked.

“If this is included in the ordinance, and the cooling requirement is not met, what happens? If an apartment owner has 180 units and the inspector (inspections are provided for in the ordinance) finds the cooling requirement is not being met on a hot summer day, does the owner have to immediately replace all 180 units? This is not practical.

“The standards in these proposals will also lead to excessive costs,” she said.  “This means that owners are either not going to comply because they can’t comply for the entire complex at one time, or they risk fines being assessed against them.

“The real concern, on both sides of these issues is ‘what happens as a result of these restrictive ordinances,” she asked. “Are the increases in costs for meeting these standards passed on to the tenant? The likely result is yes. There is a strong probability that these recommendations, if passed, will result in higher rents for the very people they were passed to help.”

Input of Apartment Owners

There is some availability for apartment owners to provide input as to the proposed ordinances. Sims explains.

“There was a request for the city for input from management companies and owners of apartment complexes and that has been supplied by these groups,” she said. “Hopefully, that will result in modifications to these ordinances that are more reasonable.

“There is also an effort on the part of management companies and owners to clarify the process of inspections. For example, how often will these inspections occur? Will the city inspect owners who have had more violations in the past more frequently?

“An apartment owner is less likely to be inspected if his complex has less tenant complaints,” she noted. “As a practical matter, it is important for the landlord to be one of those who is complying, to the best of its ability. For example, if you can’t replace every air-conditioner and every water heater in your complex, you can set a schedule for replacing the faulty ones.

“Most importantly, as a practical matter, owners must try to stay off the city’s radar,” she said. “An apartment complex that is cited will be re-inspected, perhaps multiple times.”

If you have legal questions about landlord/tenant matters, contact Kimberly Sims. The phone number is 214.888.3110.

Filed Under: News/Press Tagged With: City of Dallas apartment ordinances, Code enforcement for apartments in Dallas, Housing Committee of Dallas City Council, Kimberly Sims, Palter Stokley Sims PLLC, Recommendations of Housing Committee City of Dallas, The Apartment Association of Greater Dallas

Apartment Owners: Are You Unknowingly Discriminating in Your Application Process?

June 1, 2016 by Art Young

Apartment Stock

The vacancy rates for apartments have dropped to their lowest point in more than a decade and this increased consumer demand has allowed many property owners and managers to be more selective in the tenants they choose. When these factors are combined with access to more sophisticated electronic criminal background checks, prospective tenants with any kind of criminal record – whether it is a serious felony or minor traffic ticket – run the risk of having their application turned down.

According to an April 5, 2016 article in the Wall Street Journal, the owners and managers of these apartments are adamant that they are within their rights to refuse to rent to individuals who might endanger other tenants. In spite of this, these commercial property owners are receiving increased scrutiny from the Department of Housing and Urban Development (HUD), the federal agency charged with ensuring that the access to housing remains fair and this situation motivated HUD officials to issue guidelines in April. However, even with these guidelines, the situation is far from clear.

Kimberly Sims, a partner in the Dallas-based law firm Palter Stokley Sims PLLC,  represents landlords and managers in landlord/tenant disputes and recently offered some insights for apartment owners and managers who want to avoid violations of the Fair Housing Act.

Disparate Impact

Real estate executives who are adept at juggling a wide range of business demands, including finance, operations, marketing and others, are sometimes flummoxed by legal terms.  This issue has a beauty. It is “disparate impact.” Kimberly Sims explains.

“The issue with disparate impact turns on the fact that no one knows exactly what it is and no one knows when they’re doing it.. Unlike when someone alleges discrimination on the basis of race, gender, national origin or religion – which most understand to be violations of the law – this term means that an apartment owner is discriminating against a prospective tenant without knowing it.”

“In the case of an owner saying that ‘anyone with a criminal history’ will be excluded from renting my property, he is excluding all people with this history. The result of this is that the owner may be unintentionally excluding a certain group of people which have  more criminal history based on their socioeconomic status.

“Without knowing they are discriminating, the owners who use these criteria are, in effect, discriminating based on the impact of applying the criteria. The challenge of this legal issue lies in the fact that no one would know they were discriminating without the  data about the propensity of any group toward criminal history,. . . that is until someone sues them.”

What are the Rights of the Landlord?

“Most landlords require an application from a prospective tenant which grants them the right to screen the tenant,” Sims said.  “Current residents want landlords and apartment managers to screen tenants because they want a process to weed-out tenants who do have might have violent histories.

“While the landlord clearly has that right to screen applicants, the question becomes ‘how far does this right extend?’ For example, are we excluding someone with a minor traffic ticket? Frankly, I don’t know any  landlord who has ever excluded someone because they have a traffic ticket on their record but this is the example that many have used.

“However, if a landlord’s policy is to exclude anybody with ANY crime, while they certainly have the right to do this, we get into the legal landmine field of ‘what is the effect of this policy’ on discrimination against protected groups.  A prospective tenant might legitimately ask what the legitimate business concern is served by this broad policy.

“In creating their screening policy, I would ask the landlord what their business objective is.  Is it philosophical? Is it to protect other tenants? What exactly is the business objective?”

Issues Associated with Excluding EVERY Tenant with a Criminal History

Kimberly was asked if there are any legal issues involved in excluding all prospective tenants with any type of criminal history.  She explained.

“Let’s say a prospective tenant had a conviction for violating drug laws related to marijuana in the 1970’s. This is minor violation that occurred more than 40 years ago. Can this person be excluded by the apartment management?

“Potentially, yes,” she said. “But then what happens?”

“I have seen situations where the excluded person filed suit claiming that others who had had this similar violation were not excluded. Since everyone must be treated equally, the landlord must make sure that they catch everyone who might have had this minor violation on their record. This is, of course, a challenge.

“It also comes back to the question of ‘what is the legitimate business reason for excluding this individual? What does something that happened 40 years ago really matter now? Are we really protecting the other tenants?”

The Ramifications of NOT Excluding Prospective Tenants with Criminal Backgrounds

This issue must surely have landlords scratching their heads. In an effort to loosen their screening policy, what liabilities are presented?

“The violence and theft issues should be the primary concerns of landlords who are screening tenants,” Kimberly said. “If a landlord can determine that a prospective tenant has a history of violent criminal activity, they are certainly within their rights to keep this individual away from their other tenants.

“Of course, that is the other extreme from the minor violation which happened 40 years ago. Landlords don’t want this type of tenant exposed to other families and they face potential liability if they know this background and fail to exclude the applicant.

“As a practical matter, we need to find a middle-ground,” Kimberly said. “Landlords need a specific policy that does not exclude tenants who have minor infractions in their background and distinguishes those minor and remote issues from more serious, violent crime.

“Another strategy is to establish a policy that checks for criminal history for a specific amount of time. A good range is to go back seven to ten years. If there is nothing on the prospective tenant’s background for the past ten years, the landlord can legitimately surmise that whatever happened in the distant past, excluding violent crimes, is not affecting this person now.

“Noticing the frequency of violations that the prospective tenant has is also a good factor to check,” she said. “If they are having many minor legal issues, on a regular basis, they might be someone who could be undependable and potentially disruptive to the other tenants.

“Establishing a policy, which include these criteria, is the most important take-away of this discussion. When a policy is written and followed in every case, the landlord is more likely to avoid claims, including discrimination, but also further their legitimate business goals

In the course of managing your real estate business, you might have legal questions come up. If so, contact Kimberly Sims at Palter Stokley Sims.

Filed Under: News/Press Tagged With: Background checks for apartment rental, Discrimination in apartment tenant screening, Disparate impact, Kimberly Sims, Multi-family residential real estate, Palter Stokley Sims law firm, Real Estate law issues, U.S. Department of Housing and Urban Development

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