Compliance for DYI Landlords

There are a number of laws and regulations that must be considered when managing residential real estate. In this article, we will highlight a few so that you as a residential landlord, can further investigate and discuss with your legal counsel to determine what actions you must take to operate your residential rental property in compliance with the laws which govern residential rentals.

North Carolina Real Estate License Law

North Carolina General Statute Chapter 93A along with the North Carolina Real Estate Commission Rules governs the conduct, actions, and business practices of any person or business entity who for a fee lists or offers to list, sells or offers to sell, buys or offers to buy, auctions or offers to auction (specifically not including a mere crier of sales), or negotiates the purchase or sale or exchange of real estate, or who leases or offers to lease, or who sells or offers to sell leases of whatever character, or rents or offers to rent any real estate or the improvement thereon, for others. 

As you can see, this includes the business of Property Management.  Because North Carolina is a Broker-only state, property managers, unless specifically exempt from N.C.G.S. §93A, must be licensed real estate brokers who must comply with Real Estate License Law and Commission Rules in order to practice the business of 3rd party property management in the state of North Carolina.

Federal and State Fair Housing Laws

As a result of the African American Community’s ongoing fight for freedom and equality, following key events such as the Civil War which span from 1861 to 1865, Abraham Lincoln’s emancipation proclamation of 1863 purposed to punish rebel confederate states by freeing their slaves, and the ratification of the Thirteenth Amendment on December 18, 1865 which abolished slavery in the Union; Congress passed the Civil Rights Bill of 1866 after the House overrode President Andrew Johnson’s veto on the bill.  The bill mandated that “all persons born in the United States,” except for Native Americans, were “hereby declared to be citizens of the United States.”  The bill granted all citizens the “full and equal benefit of all laws and proceedings for the security of persons and property.”  The Civil Rights Act of 1866 is important because it prohibited any type of discrimination based on race.

The U.S. Supreme Court’s 1896 decision in Plessy v. Ferguson established the separate but equal doctrine of legalized racial segregation.  This led to the fight for desegregation because of the major inequalities perpetuated by the separate but equal doctrine.  Amidst massive resistance to desegregation, after the murder of civil rights activist Medgar Evers on June 12, 1963, who was shot in his back in his driveway just hours after President John F. Kennedy’s speech on national television in support of civil rights, Congress began to develop a comprehensive civil rights bill at the request of President Kennedy.  Following Kennedy’s assassination on November 22nd of that same year, President Lyndon B. Johnson continued to push for the bill.  In 1964, Congress passed Public Law 88.352 (78 Stat. 241) which is known as The Civil Rights Act of 1964.  Title VI of the Civil Rights Act of 1964 prohibits discrimination on the basis of race, color, religion, or national origin, yet only in federally subsidized or public housing.

As a result of housing discrimination in the North, in the summer of 1966, the Chicago Freedom Movement, an alliance between Chicago civil rights activists and Martin Luther King’s Southern Christian Leadership Conference, targeted Chicago’s discriminatory housing market and staged marches in all-white city neighborhoods and suburbs purposed to end racially motivated housing discrimination.  This movement caused Dr. King’s name to be closely associated with fair housing initiatives.  After the assassination of Reverend Dr. Martin Luther King, Jr on April 4, 1968, President Lyndon B. Johnson utilized the tragedy of Dr. King’s death to urge Congress to pass federal Fair Housing legislation which Congress failed to pass many times before.  President Johnson wished to have the act passed prior to Dr. King’s funeral in Atlanta as he viewed the Act as a fitting memorial to Dr. King’s life work.

On April 11, 1968, President Lyndon B. Johnson signed the Civil Rights Act of 1968, which was meant to expand upon the protections rendered in the Civil Rights Act of 1964.  Title VIII of the Civil Rights Act of 1968 is known as the federal Fair Housing Act of 1968, which prohibits discrimination concerning the sale, rental, and financing of housing based on race, color, religion, and national origin.  In 1974, the Housing and Community Development Act added sex to the list of protected classes. In 1988, the Fair Housing Amendments Act included handicapping conditions and familial status.  Thus, today the Federal Fair Housing act has seven protected classes.  We remember these protected classes with the acronym FRESH CORN:

Familial Status – any type of family unit with at least one child under 18, including pregnant women.

Race – a group of people that an individual was born into or has affiliated with all of their lives.

EQUAL

Sex – male or female gender.

Handicap – defined by HUD as any physical or mental impairment that substantially limits any life activity.

Color – the actual color of the skin’s pigmentation including the degree of darkness.

OPPORTUNITY

Religion

National Origin – the country in which an individual was born or from which they derive their direct ancestry.

As a result of the U.S. Supreme Court’s 6-to-3 ruling announced on June 15, 2020, the court redefined its interpretation of “sex” under Title VII of the Civil Rights Act of 1964 to include both sexual orientation and gender identity.  This means that the definition of “sex” in the federal Fair Housing Act has been expanded to include the members of the LGBTQIA+ community.  Thus, sexual orientation and gender identity are protected classes under the federal Fair Housing Act.

In addition to the federal Fair Housing Act, each state has its own Fair Housing Act which may add additional protected classes.  The North Carolina Fair Housing Act is expressed in N.C.G.S. Chapter 41A.  The State Fair Housing Act does not expand the list of protected classes; however, it outlines how the state handles matters concerning fair housing.

Reasonable Accommodation

A reasonable accommodation is a change, exception, or adjustment to a rule, policy, practice, or service.  The Fair Housing Act makes it unlawful to refuse to make reasonable accommodations to rules, policies, practices, or services when such accommodations may be necessary to afford persons with disabilities an equal opportunity to use and enjoy a dwelling, and public and common use areas.

A common example of this is a property owner who has required KRG Property Management to list their home for rent as not accepting pets.  As a reasonable accommodation, such an owner will likely be required to allow a service or companion animal.  KRG utilizes HUD guidance when approaching this type of situation.

See also Section 504 of the Rehabilitation Act and Title III of the Americans with Disability Act.

Reasonable Modification

A reasonable modification is a necessary modification of the existing premises at the expense of the person with a disability to afford such a person full enjoyment of the occupied dwelling unit.  The Fair Housing Act makes it unlawful to prohibit such reasonable modifications.  We utilize HUD guidance when approaching this type of situation.

Also See Section 504 of the Rehabilitation Act and the Americans with Disability Act.

Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act of 1970 (Public Law No. 91-508) protects information collected by consumer reporting agencies, which includes tenant screening services.  Information in a consumer report cannot be provided to anyone who does not have a purpose specified in the Act.  Companies that provide information to consumer reporting agencies have specific legal obligations.  Users of the consumer reporting information must notify the consumer when an adverse action is taken on the basis of such reports.  As users of consumer reporting information, we must provide written notice and receive authorization from the subject of the credit report, and certify to the credit reporting agency that it won’t be used for discriminatory purposes.

Fair and Accurate Credit Transaction Act (FACTA)

FACTA gives consumers the right to restrict how businesses use their non-public personal information.

Section 504 of the Rehabilitation Act of 1973

Section 504 of the Rehabilitation Act of 1973 requires federally assisted housing to be readily accessible to and usable by individuals with disabilities.  It impacts the availability of services, accessibility, delivery, employment, and administrative responsibilities of organizations receiving federal financial assistance.  Private entities must comply with these laws if they receive public assistance.

Title III of the Americans with Disability Act of 1990 (ADA)

Title III of the ADA requires as of 1990 that public spaces and common areas used by the public be accessible to persons with disabilities.  This act essentially took the protections of Section 504 to cover virtually all facilities open to the public, whether such facilities are public or privately owned.  For landlords, this includes many of the common areas of an apartment community.

People with disabilities who visit a facility covered under these laws must have access to all services and amenities such as:

• Parking

• Curbs

• Ramps

• Stairs

• Elevators

• Public Drinking Fountains

• Restrooms

• Public Telephones

The Housing for Older Persons Act of 1995 (HOPA)

When the Fair Housing Act was amended to add familial status, it forced retirement communities to accept families with children.  This was an unintended consequence.  HOPA amended the Fair Housing Act to provide that certain properties for older persons can exclude children from residency without being liable for discrimination on the basis of familial status.  The housing can be exempt if:

• The housing is planned and managed for people over 55 years of age.

• The policies and procedures that demonstrate its intent to qualify for the exemption are followed and distributed.

Over the Air Reception Device Rule (OTARD)

As directed by Congress in Section 207 of the Telecommunications Act of 1966, the Federal Communications Commission adopted the Over-the-Air Reception Devices rule.  In short, the OTARD rule prohibits homeowners’ associations, condominium associations, and landlords from placing unreasonable restrictions on residents which impede the installation, maintenance, or use of satellite dishes, TV antennas, or wireless cable antennas.

A restriction is considered unreasonable by the rule if it:

• Unreasonably delays or prevents installation, maintenance or use;

• Unreasonably increases the cost of installation, maintenance, or use; or

• Precludes the reception of an acceptable quality signal.

The January 22, 1999, OTARD amendment made the rule applicable to rental property where the renter has an exclusive use area, such as a balcony or patio.

State Landlord and Tenant Law

North Carolina General Statute Chapter 42 is known as the North Carolina Landlord Tenant Law.  This law governs the landlord-tenant relationship.  Inclusive in the act is Article 2A, Ejectment of Residential Tenants; Article 3, Summary Ejectment; Article 4A, Retaliatory Evictions; Article 5, Residential Rental Agreements; and Article 6, Tenant Security Deposit Act among others.

Conclusion

When managing a rental property, several factors need to be taken into account. If you choose to handle it yourself, it's important to consult with an attorney to ensure compliance with relevant laws and regulations. KRG Property Management is available to manage your property for you, ensuring adherence to all applicable laws and regulations.

Find out more at www.krgresidential.com/landlords

The purpose of this article is to highlight certain laws that impact residential rentals and is not intended to replace or supplement legal advice. Consult an attorney before acting on any information in this article.