Daily Development for
Wednesday, March 17, 1999

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

Note that there are two reports on different aspects of this case in this DD.

FAIR HOUSING; REMEDIES; DAMAGES: The award of compensatory damages is mandatory, not discretionary, under the Fair Housing Amendments Act.

New Jersey Coalition of Rooming and Boarding House Owners v. Mayor and Council of the City of Asbury Park, 152 F.3d 217 (3rd Cir. 1998). This case is discussed also under the heading "Fair Housing; Standing; "Grandfathered" Uses."

Plaintiffs sought damages against municipalities for their ordinances implementing the New Jersey Rooming and Boarding House Municipal Licensing Law, which applies "spacing requirements" to rooming and boarding houses. Plaintiffs alleged that such regulations violated the Fair Housing Act because they impacted adversely upon parties who were deinstitutionalized mentally and physically handicapped individuals dependent upon such facilities. The plaintiffs included some such residents and parties who provided the facilities for them the operators of rooming and boarding houses.

The plaintiffs sought an injunction setting aside the regulations and statute and damages in the form of emotional distress damages because of the threats of dislocation and uncertainty in the ability to maintain value of their existing properties and develop new properties.

The trial court viewed the damages section of the Fair Housing Act, which provides that a court "may" award damages, as discretionary, and refused to consider a damages award.

On appeal to the Third Circuit: Held: Reversed. The Act requires the awarding of damages when shown. There is no discretion in the court.

The Act does not, however, require the awarding of punitive damages here. Even supposing that punitive damages could be awarded against public agencies, the record indicates that there was no discriminatory intent in the regulations at issue, but rather a legitimate concern about the well being of residents of such facilities when they were too close together. The court cites authority indicating that such justifications will not withstand scrutiny under the Fair Housing Act, but concludes that they evertheless do not rise to the level of discriminatory intent justifying punitive damages awards.

Comment: In light of the vigor with which federal regulators have pressed various Fair Housing Act claims, it is possible that even the rather attenuated damage claims here may be recognized.

FAIR HOUSING; STANDING; "GRANDFATHERED" USERS: Owners of existing rooming and boarding houses have standing to challenge regulatory restrictions on such activities generally even if their properties are not directly affected because they have been "grandfathered" under the regulation.

New Jersey Coalition of Rooming and Boarding House Owners v. Mayor and Council of the City of Asbury Park, 152 F.3d 217 (3rd Cir. 1998). This case is discussed also under the heading "Fair Housing; Remedies; Damages."

The Rooming and Boarding House Municipal Licensing Law contains a provision stating that no license shall be issued for any rooming and boarding house when any part of the boundary line of any other rooming and boarding house is within a certain distance.

An association representing owners of rooming and boarding houses, together with a number of individual residents, sued to have the law and certain municipal ordinances related to it declared unconstitutional under the United States and New Jersey Constitutions, and invalid under both the New Jersey Law Against Discrimination and the Fair Housing Amendments Act of 1988 (FHAA). The District Court held that the plaintiffs lacked standing as to certain claims because of the grandfathering provisions in the law and also declined to award compensatory damages under the FHAA holding that an award of damages was discretionary. The Third Circuit reversed the District Court on both grounds.

The District Court's determination that the owners lacked standing was based upon the licensing law's clause that exempted all existing rooming and boarding homes from that provision. It reasoned that there was no way the existing owners or residents could be harmed by this provision. The Third Circuit determined that the District Court made insufficient findings of fact and remanded the case because of evidence in the record that the rooming and boarding housing stock in the municipality declined in value and other detrimental effects had occurred as a result of the licensing law. It also determined that while the language of the FHAA appears to allow for a discretionary award of compensatory damages, the award of compensatory damages actually is mandatory under the FHAA.

Comment 1: Although it is no surprise that a federal court might apply very broad standards for standing to contest an allegedly unconstitutional statute, it should be noted that here there is likely no shortage of developers of new rooming and boarding houses that would have an interest in mounting a challenge. Thus, there is no reason to "stretch" the rules here.

The rationale that a generaly regulatory pattern that does not apply to a landowner's property might lead to a reduction in the value of that property could support a virtually unlimited standing notion, since any given regulation is likely to have some impact on other property in the area subject to the regulation.

Comment 2: We note the case, however, not because of the standing issue, but because it might be relevant for real estate lawyers arguing for or against various kinds of municipal regulations. When the issue of whether it is appropriate to "grandfather" existing activities comes up, one concern might be whether in doing so the municipality obtains a benefit in elminating potential lawsuits. The answer under this case would be no.

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