HOA Must Follow Fair Housing

Indiana Court of Appeals, 2006 Villas West II of Willowridge v. McGlothin

September 1, 2007

An Indiana court has ruled that efforts by a homeowner’s association to enforce an antileasing covenant violated the Fair Housing Act. In the cases, a couple bought a home in the development. Their purchase agreement contained a standard clause prohibiting them from leasing their home “for the protection of owners with regard to financially responsible residents.”

Two years after buying the home, the owners were placed in a nursing home, and the house was leased. Three years later, the homeowner’s association became aware that the home was leased and filed an injunction against the homeowners. The owners sued and both the trial court and later the appeals court ruled in favor of the owners.

The appellate court stated that the HOA’s attempt to enforce the antileasing covenant supported discriminatory housing practices in the area since many more racial minorities in the town leased their residences. In addition, almost no racial minorities were home owners at the development.

Looking at the number of minorities in the community as a percentage of the total population compared to the percentage of minorities at the development, the court decided the prohibition on leasing had a greater impact on minorities than on whites.

The court also dismissed the association’s argument that the antileasing provision protected property values. It noted that leasing didn’t have a negative effect on values and that many other HOA requirements on landscaping, trash removal, etc., provided sufficient protections to property values. However, the court noted that not all antileasing covenants would violate the Fair Housing Act.