Do You Think a Vendor Can Legally Assume Your Fair Housing Obligations and Cover You if You Are Sued?

Imagine you are a property manager or owner of residential rental properties listening to a pet management vendor making a sales pitch to review your company’s assistance animal requests under the Fair Housing Act and HUD regulations. The pitch goes like this:

You don’t need to worry about assistance animals anymore because we will do it for you. We will ourselves APPROVE or DENY requests rather than you having to do it. Don’t worry about it; including new or inexperienced employees making mistakes or inappropriate statements. Indeed, you never have to worry about HUD because we will assume all liability for you.

As a professional property manager or owner, would you really buy this sales nonsense?

In the complex world of property management, ensuring compliance with the Fair Housing Act (“FHA”) is a liability that cannot be delegated. The FHA, enacted in 1968 and amended over the years, prohibits discrimination in housing based on race, color, religion, sex, national origin, disability, and familial status. Property managers, as fiduciary stewards of residential properties, bear a direct legal obligation to uphold these protections. However, some vendors may attempt to lure property managers into a false sense of security by promising to accept all liability for FHA violations. This is a hollow and false promise that professional property managers should not fall for, as the law does not permit anyone to offload their fair housing duties, and indemnification agreements in this context are unenforceable.

Fair Housing Act Compliance: A Duty That Can’t Be Outsourced

The FHA applies to property owners, managers, and their agents, holding them accountable for ensuring that housing practices do not discriminate against protected classes, such as disabled persons. Courts have consistently ruled that this liability is non-delegable, meaning property managers cannot blindly pass it off to a third party. Even if a vendor’s actions lead to a violation, the property manager remains liable for failing to oversee and prevent such conduct.

This principle stems from the FHA’s purpose: to protect tenants and applicants from discrimination at every level of the housing process.¹ A property manager could directly or vicariously face penalties under the FHA if the actions caused by itself or its agents result in discrimination, even if there was no intent on behalf of the property manager to discriminate or knowledge that the discrimination is occurring.²

Allowing property managers to escape liability by pointing fingers at vendors would undermine the law’s purpose and effectiveness. As a result, federal courts have made it clear that delegating tasks does not equate to delegating accountability.  For example, the Supreme Court affirmed that property owners and their agents can be held vicariously liable under the FHA for discriminatory acts committed by employees or contractors while acting within the scope of their authority or employment.³

The Illusion of Indemnification Agreements

Setting aside the legal fact that property managers cannot delegate their obligations under the FHA, some vendors may try and sweeten their sales pitch by offering indemnification clauses in contracts. They promise to cover any costs or penalties arising from FHA violations as in, for example, an action brought by an individual in a HUD complaint. On the surface, this might seem like a safety net for property managers. In reality, these agreements are unenforceable when it comes to shielding property managers—and property owners—from liability under the FHA.⁴ The FHA imposes strict liability in many cases, meaning that intent isn’t always required for a violation to occur, and the government or affected tenants can pursue claims directly against the property manager—and property owner--regardless of any side agreements. Indemnification clauses for FHA violations are unenforceable.

Moreover, even if a vendor agrees to indemnify a property manager for something other than a FHA violation, such as a claim for breach of contract or contribution, enforcing that promise in court is a separate and costly battle.

If a vendor lacks the financial resources to cover penalties, legal fees, or damages (which can easily reach tens or hundreds of thousands of dollars in FHA cases), the property owner and/or manager can be left holding the bag. Bankruptcy or insolvency on the vendor’s part could also render the indemnification worthless, and courts are unlikely to let property managers off the hook simply because they trusted a third party’s promise.

These principles apply equally to the owners of residential rental properties. A property manager hardly fulfills its professional, fiduciary duties to its owner if it obtains services--with an indemnity--from a vendor that the property manager has been naively led to believe is viable protection against Fair Housing liability. Imagine the reaction of a property owner who learns that its “professional” property manager was misled to believe that the property manager  and property owner were protected by a contract provision that was unenforceable. The resulting interaction would seem to be really uncomfortable, as would the experience of having possible adverse litigation with the property owner, as it seeks a remedy for negligent property management services.

Practical Risks of Relying on Vendors

Beyond legal unenforceability, there are practical reasons property managers should be skeptical of vendors claiming to assume all FHA liability. Vendors’ interests often diverge from those of property managers. Their priority may be cost-cutting or efficiency, not compliance, which could lead to shortcuts that expose property managers to risk.

Consider a common scenario: a third-party leasing agent subtly discourages families with children from renting certain units, citing “safety concerns” about upper-floor apartments. This could violate the FHA’s familial status protections. Even if the agent signed an agreement accepting liability, the property manager would still face legal scrutiny, potential fines, and reputational damage—all of which could have been avoided with proper oversight.

How Property Managers Can Protect Themselves

Rather than relying on vendors’ assurances, property owners and managers should take proactive steps to ensure FHA compliance across all operations:

• Keep Your Power to Decide: You are ultimately liable for the consequences of a wrongful denial that violates FHA, so while it is smart to accept recommendations from a trustworthy and experienced vendor, do not authorize a vendor to make that decision for you, especially when the vendor may not have to live with the consequences.
• Training and Oversight: Regularly train staff in fair housing laws, emphasizing that compliance is a shared priority. Monitor their actions to catch potential violations early. A vendor may not always be privy to all communications between your employees and tenants, and likely is unable to notice physically observable disabilities.
• Clear Policies: Establish written policies that align with FHA requirements and require vendors to adhere to them as a condition of doing business.
• Contract Review: Work with legal counsel to draft vendor contracts that reinforce compliance expectations, but don’t assume these agreements will absolve you of all liability.
• Documentation: Keep detailed records of all interactions with tenants and vendors to demonstrate a good-faith effort to comply with the law if a dispute arises.
• Direct Accountability: Treat vendors as partners, not scapegoats. Ultimately, the property owner’s and manager’s name is on the line, and the buck stops with them.

Conclusion

Vendors promising to accept all liability for Fair Housing Act violations are selling a mirage and taking advantage of property managers that do not know they cannot legally delegate their FHA obligation in the base case. The law’s non-delegable nature and the practical limits of indemnification mean that property owners and managers cannot escape their duty to ensure compliance. Instead of being swayed by such sales pitch promises, property owners and managers should focus on building a robust compliance framework that includes training, oversight, and clear accountability. A proper vendor relationship has the vendor assisting and advising a housing provider in its obligations in complying with the law. A vendor should not be suggesting that the housing provider and property manager can simply hand off all of their legal obligations. It raises the obvious issue that if the vendor is leading a property manager down a path with legally unenforceable promises, then why would the property manager authorize and trust that same vendor to make consequential decisions regarding the legality of denying or approving accommodation requests on its behalf? In the high-stakes world of fair housing, trusting a vendor’s misleading word is a gamble that no professional property manager should, or can afford to, take.

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¹42 U.S.C.S. §  3601 (The declared policy of the FHA is “to provide, within constitutional limitations, for fair housing throughout the United States”); see also Texas Dep't of Hous. & Cmty. Affairs v. Inclusive Cmtys. Project, Inc., 576 U.S. 519, 539, 135 S. Ct. 2507, 192 L. Ed. 2d 514 (2015) (The Supreme Court explained that Congress enacted the FHA “to eradicate discriminatory practices within a sector of our Nation’s economy.”)

²See 24 C.F.R. § 100.7

³Meyer v. Holley, 537 U.S. 280, 285, 123 S. Ct. 824, 154 L. Ed. 2d 753 (2003) (The Supreme Court explained that the FHA incorporates "traditional vicarious liability rules [which] ordinarily make principals or employers vicariously liable for acts of their agents or employees in the scope of their authority or employment.”).

⁴Equal Rights Center v. Niles Bolton Associates, 602 F.3d 597, 602 (4th Cir. 2010) (“Allowing an owner to completely insulate itself from liability for an ADA or FHA violation through contract diminishes its incentive to ensure compliance with discrimination laws. . .”).