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Aug 10

[ARCHIVED] Civil Penalties and the Department of Housing and Urban Development

The original item was published from August 10, 2017 5:08 pm to August 10, 2017 5:10 pm

Effective June 29, 2017, the Department of Housing and Urban Development (HUD) finalized a rule adjusting its civil monetary penalty (CMP) regulations, which cap the penalties that can be assessed against companies or people (whether developers, landlords, applicants, participants, or HUD employees) involved in HUD-funded programs. Activities that can result in monetary penalties include violations of the Fair Housing Act, of the False Claim Act, and of other rules defined in the Code of Federal Regulations.

HUD originally proposed the CMP adjustments on June 15, 2016, in response to the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015, which required all Federal agencies to implement changes to their CMP regulations using a new methodology that corrects inaccuracies in the method of computing inflation adjustments.

Here are a few highlights of the new Final Rule:

Violations of the Fair Housing Act
The Federal Fair Housing Act prohibits housing discrimination against individuals or families who belong to a protected class. Currently, the federally protected classes include race, color, religion, sex, familial status (the presence of children in the household), national origin, and disability.

The revised civil penalties for discriminatory housing practices are:

For a first offense, the maximum civil penalty is $20,111.

For a second offense within a five-year period, the maximum penalty is $50,276.

For a third offense within a seven-year period, the maximum penalty is $100,554.

These amounts apply to violations that occur on or after August 16, 2016. Note that in successful Fair Housing suits, the CMP amounts are assessed on top of any damages and attorney’s fees that might be awarded to a claimant who has experienced housing discrimination.

Violations of the False Claims Act
The Federal False Claims Act is a law that imposes liability on people or entities who defraud governmental programs. This law includes a qui tam or whistleblower provision that allows private individuals who file meritorious claims to receive a portion (typically 15-20%) of damages. Some of the more infamous settlements under this law have involved health care and military spending, but there have been significant cases in the housing industry as well.

The revised civil penalty for making false claims against HUD programs is $10,957.

24 CFR 28.10 is the section of the Code of Federal Regulations that defines civil penalties for violations against HUD. Particularly noteworthy is subsection 4, which states “each claim for property, services, or money is subject to a civil penalty” and that this is true “whether the property, services, or money actually is delivered or paid.”

In the Housing Choice Voucher program, one of the most common false claims made by housing providers is the attempt to collect “side payments,” which is the practice of charging voucher tenants more rent than what is defined in the Housing Assistance Payments (HAP) contract. Under 24 CFR 28.10 (4), simply attempting to collect such side payments may be considered a false claim, and for each month that a side payment is attempted or collected, a separate penalty could be assessed.

Other Violations
Other housing regulations that are subject to the new CMP regulations include:

Under 24 CFR 30.65, the maximum penalty for failure to disclose lead-based paint hazards is $17,047 for each violation;

Under 24 CFR 30.80, the maximum penalty for certain violations committed by Section 8 project owners is $37,396 per violation; and

Under 24 CFR 30.25, the maximum penalty for violations by applicants for assistance from HUD programs is $19,246 per violation.