Resident Must Move to One-Bedroom or Pay Market Rate

Facts: A site manager sought to relocate a Section 8 resident from her two-bedroom unit to a smaller unit because the manager deemed the resident ineligible for the subsidized two-bedroom unit. The resident had occupied the two-bedroom unit since 2005, when she initially shared it with her daughter. But after her daughter moved out, she maintained the two-bedroom unit despite the regulation, because she asked and was granted permission from the manager to do so. She based her request on a doctor’s note that stated only, “This patient requires a home exercise regimen and space to put such equipment.”

In April 2012, the manager reviewed the arrangement and determined that the resident was required to move to a one-bedroom unit or pay the HUD-approved market rate for her two-bedroom unit.

Complying with HUD regulations, the manager conducted an annual inspection of the unit. She found no exercise equipment in the second bedroom, prompting her to question the resident’s alleged medical need for a two-bedroom unit. The manager sent a letter to the resident requesting to reevaluate her need for a reasonable accommodation. Over the next few months, the resident asserted the need for the second bedroom on medical grounds. She also submitted notes allegedly from doctors and her physical therapist. But her submissions didn’t persuade the manager.

Although the dispute remained unresolved, in June 2012, the manager renewed the resident’s lease for her two-bedroom unit anyway. But very soon after, the manager decided the issue, and in June 2012, the manager notified the resident by letter that her unit was “underutilized,” that there was a one-bedroom unit available, and that if she stayed in her current unit, she’d have to pay market rent. The resident attempted to pay only $230 as August rent for the two-bedroom unit, but the manager demanded the full market rate. To avoid eviction, the resident paid her August, September, and October rent at the market rate, but she paid no rent at all from November 2012 through February 2013. The manager began eviction proceedings in district court in January 2013.

Looking only to the lease, the district court ruled for the resident. It determined that the lease didn’t permit the owner to raise the rent in August 2012 when she declined to move to a one-bedroom unit, because circumstances hadn’t changed in the two months since the parties executed the June 2012 lease. The owner appealed.

Ruling: The Minnesota Court of Appeals reversed the lower court’s ruling.

Reasoning: The appeals court ruled that the district court had misinterpreted the lease. The lease incorporates provisions of HUD Handbook 4350.3, which address the circumstances in which a single tenant may occupy a two-bedroom unit. The handbook provides that a single tenant “must not be permitted to occupy a unit with two or more bedrooms,” but it excepts “[a] person with a disability who needs the larger unit as a reasonable accommodation.”

Without question, when the owner agreed to execute the June 2012 lease it had already challenged and was investigating the resident’s assertion that she was eligible for a two-bedroom unit as a reasonable accommodation for a disability. The owner ultimately determined that she was eligible only for a one-bedroom unit and ineligible for the two-bedroom unit at the time she entered the lease.

• Seward Towers Corp. v. Ogbe, October 2013