Michigan Protection & Advocacy Service v. Babin: Sixth Circuit Applies Fair Housing Act to Case of Discrimination Against a Group Home for Mentally Disabled Adults

In Michigan Protection & Advocacy Service v. Babin, the Sixth Circuit addressed alleged fair housing discrimination in the purchase of a house intended to be used as a group home for mentally disabled adults.

In May 1988, a couple listed a home with Century 21. Hammonds, a Century 21 agent, contacted Macomb Oakland Regional Center (MORC), a state agency, regarding leasing the property as a group home for mentally disabled adults if she purchased it. MORC approved the proposed lease and, in February 1989, Hammonds bought the house for $95,000. The lease was to commence in May 1989, but due to administrative delays, the date was moved to July 1989.

In April 1989, MORC notified area residents of the proposal and Hammonds met with several of them to allay their fears about the group home. The neighbors began a campaign to prevent use of the property as a group home. Hammonds expressed concern about the neighbors' reactions to Kersten, the owner of Century 21, who told her she would have to deal with it herself. Soon after, Hammonds sold the home to a group made up of neighbors for $104,000. At the closing, no one from Century 21 was present, and Hammonds did not pay a commission to the agency. However, the closing documents bore the Century 21 logo and the forms were pre-printed with Kersten's signature as broker. The plaintiff sued Hammonds, Kersten, Century 21, and the neighbors for alleged violations of section 3604(f)(1), which makes it illegal to discriminate in the sale or rental of property, or to otherwise make it unavailable or deny a dwelling to a person because of a disability.

Exemption from section 3604 is allowed for sales or rentals of single family homes by the owner if: (1) the owner has no more than three such homes at any time; (2) in the case where the owner did not occupy the home at the time of sale, or was not the last occupant of the home, the owner did not make a similar sale in the last two years; (3) the owner did not have a beneficial interest in any part of the proceeds from the sale or rental of more than three such dwellings; (4) the dwelling was sold (a) without the use "in any manner" of the services or facilities of a real estate broker, agent, or sales person, and (b) the owner did not publish, post or mail any advertisement or notice that included discriminatory language. The Sixth Circuit reviewed these criteria for the exemption as respected Hammonds and held that elements (1), (2), and (4)(b) were satisfied. The court read element (3) to require a "fee simple" interest rather than a "commission" interest, and found it was satisfied. Element (4)(a) also was satisfied, as Hammonds' use of Century 21 "forms" was not sufficient to meet the "services and facilities" language. Also, in concluding that Hammonds' actions did not amount to use of an "agent," the court found the Act preempted a state law which deemed sales, other than those of a principal residence, by an agent, as sales made through a broker.

Regarding Century 21 and Kersten, the Sixth Circuit found no vicarious liability, as the broker and the company had no involvement with the sale, other than use of its company forms. The court also noted Kersten's statement that Hammonds would have to deal with it herself.

Regarding the neighbors, the Sixth Circuit read the Fair Housing Amendments Act narrowly and concluded that the neighbors actions constituted economic competition and not interference. Thus, they were not liable.

Michigan Protection & Advocacy Service v. Babin, 18 F.3d 337 (6th Cir. 1994).

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