how the fair housing and false claims acts can stop construction, buying, and selling rd properties
TRANSCRIPT
How the Fair Housing and False How the Fair Housing and False
Claims Acts Can StopClaims Acts Can Stop
Construction, Buying, and Construction, Buying, and
Selling RD PropertiesSelling RD Properties
Federal Laws Regarding
Accessibility
Section 504 of the 1973 Rehabilitation Act
The Fair Housing Amendments Act
Fair Housing Act
• All multifamily housing with buildings
with 4 or more units designed and
constructed for first occupancy after
March 13, 1991
• All units in buildings with elevators
• Ground floor units in buildings without
elevators
Section 504
• All multi-family properties receiving Federal
Financial Assistance that was newly constructed
or substantially altered after June 10, 1982 for RD
funding and July 11, 1988 for HUD funding
• 5% of total number of units must be accessible to
persons with mobility disabilities and additional
2% to persons with sensory disabilities
Enforcement Failures
• Federal government has recognized
that there is widespread non-
compliance with these laws
• Statute of limitations and other
procedural hurdles limit the ability of
persons with disabilities to bring
claims
Creative Enforcement and Remedies
• HUD/DOJ Joint Statement on Design and Construction Requirements of Fair Housing
Act (April 30, 2013)
• HUD Mortgagee Letter 2012-25
(November 21, 2012)
• False Claims Act
April 30, 2013April 30, 2013HUD / DOJ Joint HUD / DOJ Joint
StatementStatement
HUD/DOJ Position on Statute of Limitations
• HUD/DOJ Position on when SOL begins to run
• SOL begins to run when “aggrieved person” is denied housing as a result of the failure to design and construct property per FHAA
• “a failure to design and construct a multifamily property in accordance with the FHA may cause an injury to a person at any time until the violation is corrected. A person may be injured before, during or after a sale, rental or occupancy of a dwelling.”
HUD/DOJ Position on Statute of Limitations
• Take away• Any property built after 3/13/91
(implementation date of the FHAA) that is NOT in complete compliance with the design and construction requirements is at fault until the violation has been corrected
• Can face a complaint today for a development constructed in the 1990s
Joint HUD & DOJPress Release
• “Continuing Violation” “pattern or practice”• New statement further says
• If a builder, architect or developer does not comply with the design and construction requirements at multiple properties over time, violations at all properties constitutes a “continuing violation” or “pattern or practice” of illegal discrimination
• In past occasionally applied to builders, now can apply to architect or developer as well
HUD MortgageeHUD MortgageeLetter 2012-25Letter 2012-25
Mortgagee Letter 2012-25dated November 21, 2012
• Describes their policies / requirements for Project Capital Needs Assessments (PCNA) as part of their revitalization funding
• Letter covers:
• Requirements for CNAs & PCNAs
• Estimating Reserves for Replacements
• Remedies for Accessibility Deficiencies
Accessibility
• HUD has realized that in past CNAs, accessibility was not taken seriously
• This resulted in CNAs that didn’t include all necessary costs, and
• Properties that did not comply with all Federal accessibility laws and standards.
Accessibility• In order to correct this problem, HUD has set up a new
policy REQUIRING a thorough review of accessibility shortcomings as a part of the CNA
• All accessibility shortcomings will be considered a “critical repair”
• All critical repairs should be completed prior to implementing the CNA/PCNAs, providing funding, transfers, servicing actions, etc.
• Notify HUD if not completed by closing if not completed by closing, completed within one year
Accessibility
• To track accessibility repairs, a Corrective Action Plan (CAP) or Transition Plan will be developed
• Must include all Accessibility Issues
• Must Include estimated cost for those repairs
• Requires HUD National Office approval if all repairs will not be completed within one year after loan closing (with justification)
False False Claims Claims
ActAct
False Claims Act
• Lincoln Law
• RD/HUD Certifications
• Westchester case
• Trickle Down
Westchester Case and Current Initiatives
• Westchester case was private litigation under the False Claims Act– HUD eventually challenged Westchester County’s
certification and terminated funding briefly
– Remedy included large numbers of affordable housing units in segregated white neighborhoods
• HUD published proposed regulations
• HUD has a new office focusing on sustainable communities led by Deputy Secretary Ron Simms, based on his Seattle experience– Tie integrated housing to jobs, transportation, schools,
health care opportunities
Not So Veiled Threat
“Significantly, not only did [the Fair Housing Group]
find systemic violations of the FHA, but they further
found that Defendants' affirmations and assurances
to the federal government and the State regarding
compliance with the FHA and the Americans with
Disabilities Act (ADA) in order to receive public
financial assistance were false and invalid.”
Not So Veiled Threat
“For many years, Defendants have received substantial
governmental financial assistance for the development of
their properties, including Low Income Housing Tax Credits.
As a condition of participation in these federal and state
supported financing programs Defendants signed many
Land Use Restriction Agreements certifying that their
properties will conform to the requirements of the FHA and
ADA. Based on the investigation and testing by [the Fair
Housing Group], it appears that many of Defendants'
certifications to the government were false or erroneous.”
Impact on Transactions
• EVERYONE has to ensure compliance
– New Construction• What law applies?• What standard applies?• Do my people know what they are doing?
– Post-Construction Transaction• Does the property comply with the FHA, Section 504,
and ADA accessibility requirements?
– Both buyer and seller need an inspection to determine compliance
• Impossible to fully mitigate risk without full retrofit• Difficult to value property because of inability fully
mitigate risk
UFASUFASReplaced ByReplaced By
ABAASABAAS
UFAS is being combined with ADAAG to produce
a new Accessibility Standard titled
“ABAAS”
Accessibility Standard Change
• Existing 1940-D written in the 1970’s
– Last major revision in 1990’s (to include Fair Housing
Amendments Act)
• New regulation written, internal review complete, between
OPM and publication in Federal Register
• Changes accessibility standard for programs from UFAS
(Uniform Federal Accessibility Standard) to ABAAS
(Architectural Barriers Act Accessibility Standard)
RD Instruction 1940-D
ABAAS Requirements
• Why now? / What’s the Logic?
– Disability Advocacy Groups raised issue of insufficient accessible units in the market place (especially in Rural America)
• New properties built since 1991 (Fair Housing units) helping, but that law not being strictly enforced
• New Federally funded property construction (providing 5% fully accessible units) down considerably, so fewer new fully accessible units coming on line
– Older existing properties (pre-1982 for USDA, pre-1988 for HUD) did not have accessible units.
• Although accessible units not required at time of construction, these properties now going through “substantial rehab”.
• With “new dollars” going in, an ideal time to include the 5% requirement
ABAAS Requirements
• Why now? / What’s the Logic? (con’t.) – Discussion then focused on definition of “substantial alteration”
(which invokes the 5% requirement)
– Cabinet replacement was determined an ideal trigger• if property replacing kitchen and / or bathroom cabinetry, they typically were
doing considerable rehab to the unit
• this an ideal time to make the kitchen / bathroom accessible
– New ABAAS criteria:• 1. a rehab that requires vacating a building will require 5% fully accessible units
in that building
• 2. if an individual unit “altered’, per unit, 5% fully accessible units required
– “altered” equal: altering the kitchen or bath (change plan configuration or replacement of cabinetry) and alter at least one other room (for example, replace flooring), then you have “altered” that unit
– for 2nd floor units in building without an elevator, substitute a ground floor unit)
“Triggers”
• Sale / transfer of property to new owners
• Adoption of ABAAS by the funding Agency
(USDA close, HUD following but lagging
behind) will impact present owners
• Properties following a CNA or a PNA and
replacing cabinetry and flooring, or in
ordinary “replacements” in a single year
“The Devil You Know…”
• At present, UFAS the accessibility standard at both
USDA and HUD
– no requirement for 5% fully accessible units for older
properties (pre-82 USDA, pre-88 HUD)
– no new “substantial rehab” definition
• With sale of property, adoption by Agency, or
“substantial rehab”, ABAAS becomes new (stricter)
standard
• Having an existing Section 504 Transition Plan in place
(under UFAS) should commit Agency to that 3 year
plan
(402) 636-8268
Mark English Scott P. Moore
(888) 504-7483, ext. 113