Owners, Brokers, and Section 8 Vouchers: a Cautionary Tale

You probably know that federal, state, and city laws prohibit discrimination by landlords against tenants and prospective tenants based upon age, national origin, disability, marital status, religion, etc. And you hopefully know that New York City’s anti-discrimination laws include protection against tenants based upon their lawful source of income including vouchers and subsidy payments. Are you taking sufficient steps to avoid a prospective tenant’s legal attack? 

In our current politico-legal landscape—characterized by an uptick in source of income discrimination litigation fueled in part by Mayor Adam’s promise to beef up enforcement on housing discrimination—now is a good time to review your policies and practices to ensure that you are protected from prospective tenants’ discrimination claims based upon source of income.

Step 1: Know the Law

The New York City Human Rights Law (“NYCHRL”) prohibits discrimination against any person or group of persons by virtue of their lawful source of income, including Section 8 vouchers. The provisions apply to any person who has the right to sell, rent or lease or approve the sale, rental or lease of at least one housing accommodation within New York City that contains six or more housing units. It is unlawful to represent to voucher recipients that the housing accommodation is not available to rent when in fact it is available to such person. It is also unlawful to make any statement which expresses, directly, or indirectly, any limitation, specification, or discrimination as to any lawful source of income. Similar prohibitions apply to real estate brokers and their agents. See N.Y.C. Admin. Code § 8-107(5). The provisions of the NYCHRL are construed liberally for the accomplishment of the “uniquely broad and remedial purposes thereof, regardless of whether federal or New York State civil and human rights laws…have been so construed.” N.Y.C. Admin. Code § 8-130. 

Based on the foregoing, a landlord’s refusal to accept a Section 8 voucher (or similar voucher/subsidy payment) constitutes a prima facie violation of the NYCHRL. The same representation made by a broker on behalf of a landlord likewise constitutes a violation. Of course, things aren’t always so clear cut. 

Step 2: Those Real Estate Brokers Are Not My Agents – Are They? 

You distribute broker blasts of your available listings to dozens of real estate brokers. You’re not exclusive with any broker. You don’t pay them a commission. You certainly never told these brokers that you, as owner or owner’s representative, do not accept vouchers. Is that enough? Are you protected from liability based upon a prospective tenant’s claim of discrimination if the broker allegedly refuses to show an apartment based upon a prospective tenant’s source of income? Maybe. But even if you might be protected, you likely could be more protected. Here’s why and here’s how.     

First, the “why.” An action for housing discrimination is, in effect, a tort action, and ordinary tort-related vicarious liability rules apply. This means that liability generally flows from the agent (your employees or agents or brokers) to the principal (you). Owners and their managing agents may be surprised – appalled – to learn that courts have rejected owners’ arguments, in sum and substance, that owners had no idea that a non-exclusive broker who had permission to list their unit via a broker blast purportedly told a prospective tenant that the owner would not accept a voucher. The owners certainly never instructed any broker to make that representation. How can owners be at fault under such circumstances? 

Under traditional agency principles, strict liability, or liability without fault, makes it difficult to cut off owners’ responsibility for the brokers’ conduct. In fact, a principal may be held liable for its agent’s actions within the scope of agency even if the acts disobeyed the principal’s general or express instructions to the agent. As one judge put it, the owners’ “argument about agency, that it cannot be vicariously liable because it did not make or authorize …has no basis in law.” That sounds ominous but there are steps owners can take to hopefully avoid this outcome.

Which brings us to the “how.” Although owners of real estate may be held vicariously liable for discriminatory acts by their agents and employees, that fact that you own real estate does not automatically mean that some broker who listed your apartment acted as your agent when carrying out alleged acts of discrimination. 

As you’ve probably gleaned, one off-ramp from the strict liability pathway lies in demonstrating that a broker receiving your broker blast is not your “agent.” Agency is a “highly factual” inquiry. An agency relationship between the owner of real estate and a broker has been found where (i) the owner provided the broker with a listing of available apartments and criteria for leasing; (ii) the broker screened prospective tenants using the owner’s criteria; and (iii) the owner could deny listings to the broker if it referred unacceptable applicants. 

Based on this test, courts will look to the nature of instructions and discretion, if any, given to the broker showing apartments for an owner. As such, you are potentially responsible for anyone who plays a role in processing applications for your rentals. Therefore, anyone screening prospective tenants for your rental units must be formally trained on their duties and obligations under the NYCHRL. As you do not have actual control over the conduct of the brokers receiving your broker blast, it is best to not give them criteria by which to screen prospective tenants.

You can do more to put distance between you and your listing brokers. Consider issuing written anti-discrimination policies to any brokers receiving your broker blasts or listings. You can incorporate an acknowledgement into the blast, e.g., any use of this listing acknowledges receipt of owners’ anti-discrimination policies and agreement to comply with them. 

Step 3: Minimize Potential Damages

The NYCHRL allows for the recovery of compensatory and punitive damages. Punitive damages are available where the defendant engaged in a discriminatory practice with malice or reckless indifference to the protected rights of an aggrieved individual. If the worst happens and you are facing liability based upon a broker’s discriminatory conduct, you’ll want to minimize potential damages by showing, to the extent possible, that you took reasonable steps to ensure that you, and your employees and agents, were trained to comply with the NYCHRL and took that responsibility seriously. 

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Section 8 cases are proliferating and both tenants and testers are out in force. So please heed Mayor Adam’s warning:

“We’re also cracking down on landlords who discriminate based on source of income. If you tell a potential tenant that you don’t accept Section 8 vouchers or other rental assistance, guess what? That tenant might be an actor hired by the city, and we are going to take enforcement action against you.” 

Based on the number of cases coming through our doors, Mayor Adams was not issuing an idle threat.