21 Days Left: Are You Ready for the Fair Chance for Housing Act?

As discussed in depth in a recent article in the New York Law Journal Landlord Tenant Column, authored by Members Gary Rosenberg and Cori Rosen, effective January 1, 2025, under the Fair Chance for Housing Act (as defined in the aforementioned article), it will be an “unlawful discriminatory practice” for all New York City owners, lessors, managing agents, and others having the right to sell, rent or lease a housing accommodation (“Covered Entities”) to rely upon an individual’s criminal history, other than an individual’s “Reviewable Criminal History,” when making decisions with respect to renting, leasing, and/or the sale of a housing accommodation. Likewise, discrimination might involve advertisements and/or lease, sale, and other printed documents that express, directly, or indirectly, a limitation on the availability of housing based upon criminal history other than Reviewable Criminal History.

The mere act of conducting a criminal background check that fails to strictly conform with the rigid requirements of the City Human Rights Law (or the “Fair Chance Housing Process”) is also discrimination under the new law. This Fair Chance Housing Process dictates, among other things:

• that a criminal background check may only be run after an applicant is otherwise approved for the housing in question and has been provided with a purchase, rental or lease agreement committing the same to them;
• the advance notice and disclosures required to be provided by Covered Entities before running a background check (inclusive of a document yet to be published by the City Commission on Human Rights intended to outline these restrictions on criminal background checks, the “Fair Chance Notice”);
• the Reviewable Criminal History that may be considered (generally, felony convictions within the last 5 years, or misdemeanors within the last 3 years that are related to the safety of persons or property), along with categories of criminal history that are explicitly excluded from the definition of Reviewable Criminal History (i.e. offenses by a youthful offender or juvenile delinquent, convictions or pending arrests that were pardoned or sealed, and/or crimes in other jurisdictions that would not be prosecuted in New York, by way of example, those related to reproductive rights); and
• how a Covered Entity might take adverse action against applicants, based upon the results returned, if at all.

What does this mean? Covered Entities may be sued and/or investigated for housing discrimination, not only for rejecting applicants with criminal histories, but for merely failing to follow these procedures, potentially even in instances where the application was approved and there were no adverse consequence. The law goes further to hold that Covered Entities are imputed with liability for any missteps by third-party screening companies retained to conduct background checks. If a Covered Entity fails to take reasonable steps to ensure that a screening company it retains conducts background checks in conformity with the Fair Chance for Housing Act, and it receives information excluded from the definition of Reviewable Criminal History, it is presumed to have relied upon such information.

Inevitably, Covered Entities should anticipate that many rejections will result in a civil action because all rejected applicants will know that criminal history was the catalyst for rejection. While a Covered Entity can rebut this discrimination claim, doing so is expensive, and there is no ability to recoup a Covered Entity’s legal fees and expenses under the City Human Rights Law. Beyond the fees for defense, there could be financial liability for compensatory damages, punitive damages, and/or civil penalties, as well as affirmative directives and injunctive relief, including, without limitation, an order staying the lease or sale of a housing accommodation, a mandate to create fair housing policies, a set aside of units for exclusive lease by members of the aggrieved protected class, and/or an order requiring trainings, publication of notices, and/or reporting on future compliance.

The worst exposure, however, is that adverse discrimination findings (or a published settlement) risk opening the floodgates for opportunistic lawsuits by attorneys and testing agencies hoping to establish a pattern or practice of discrimination to profit from the right of a complainant to recover attorneys’ fees under applicable Housing Discrimination Laws.

The best way to avoid liability is through education. Clients should create policies and train employees on compliance with these and other requirements of the applicable Human Rights Laws. Apart from the obvious avoidance of litigation, proactive measures are considered by administrative agencies investigating and, are persuasive in obtaining dismissals housing discrimination complaints.

Cori Rosen, a Member of the firm’s Litigation Department, and the Leader of the firm’s Human Rights Practice, regularly conducts seminars and trainings on compliance with the applicable Human Rights Laws and drafts educational materials and policies for proactive implementation of compliant practices. If you have any questions or would like to know more about The Fair Chance for Housing Act and other Human Rights issues impacting real estate professionals in New York, please feel to contact your trusted R&E attorney or Cori Rosen, who authored the above industry update, to discuss the same.