a.) Owners and Operators Must Comply with the Indiana Consumer Deceptive Sales Practices Act in Placing Advertising
The Indiana Consumer Deceptive Sales Practices Act (the Act) expressly includes the leasing of apartments. Under the Act, advertising, whether in written or oral form, which makes untrue representations regarding an apartment community could be considered deceptive and subject owners and operators to legal ramifications. Although the Act does not explicitly address consumer actions against an owner or operator, it does allow the attorney general to sue under the Act on behalf of the state for injunctive relief and fines. The attorney general may seek up to $1,500 per violation. If the court issues an injunction and the owner or operator violates the injunction, s/he is subject to a $15,000 civil penalty. (Ind. Code § 24-5-0.5.)
Representations in advertising or promotional materials may be deceptive acts, both by the party who places or authorizes the use of the advertisement and by any other person who confirms the representation, either orally or in writing. Thus, the fact that someone other than the owner or operator drafted and placed the advertisement does not shield the owner or operator from liability if the owner or operator confirms or authorizes its use.
The Act is particularly concerned with:
- Advertisements that: (a) falsely suggest a particular apartment community has the sponsorship or approval of any person or agency; (b) indicate the apartment community or individual units have certain characteristics, accessories, uses, or benefits that are not available; (c) state that a unit is of a particular style, model, grade or quality when it is not, or; (d) imply that particular accessories or appliances are generally available when they are only available in certain units.
- Advertisements implying or stating that a particular unit or benefit will be available in a greater quantity than the owner or operator actually intends or may reasonably expect to be available. Thus, where special offers or promotions are limited as to the number or duration of the offer, owners and operators must be careful to indicate them in their advertisements.
- Advertisements concerning special pricing, rebates, or discounts are also subject to the Act. Owners and operators should be careful to indicate whether limitations upon special offers, such as reduced rent, “free rent,” or reduced security deposits, exist in their advertisements. The Act prohibits advertising that certain amenities are available when units containing those amenities are not available. For example, an apartment community may not advertise units with fireplaces if only units without fireplaces are available. The Act also prohibits advertising rebates or discounts in return for the names of prospective residents if earning the rebate or discount is contingent upon an event after the prospective resident agrees to lease.
- Advertisements regarding the right or opportunity to use certain facilities that are not a part of the apartment community. When the use of facilities – such as tennis or racquetball courts – requires payment of certain fees or membership, even if at reduced rates, advertisements should not imply or represent that such use shall be available without charge by virtue of leasing a unit in that community.
b.) The Fair Housing Act Precludes Discrimination in Advertising Based on Certain Classifications
The Fair Housing Act (FHA) places very important limits on the content of rental housing advertising. Exceeding or violating these limits may be construed as violating the FHA and may subject all persons involved in publishing the advertisements to liability or severe civil penalties.
To avoid violating the FHA, advertisements should not contain any statements regarding an intent to discriminate. The FHA protects against discrimination based on race, color, religion, sex, handicap, familial status, and national origin. The FHA has also been determined by recent court cases and executive orders to protects those who identify as LGBTQ. An advertisement should not imply or state a preference for, or bias against, any group within these classifications.
Models (e.g., photographs and drawings) or other characters used in advertisements should reasonably reflect a cross-section of all possible residents. People may view the continuous use of models of couples (without children), persons of the same race, non-disabled persons, or members of only one sex as exhibiting a preference only for the represented groups and, conversely, a bias against other groups. Such evidence may support a finding that the owner or operator violated the FHA.
In the context of advertising, enforcement agencies consider certain words and phrases – like those once used to indicate the desirability of a community – to be suggestive of an intent to discriminate. These include “restricted,” “exclusive,” “private,” “integrated,” “traditional,” and “board approval required.” Similarly, authorities may consider references to nearby landmarks or facilities – “just blocks from St. Mary’s Catholic Church” or “minutes to the University of Notre Dame” -suggestive of unlawful religious preferences and/or bias.
Apartment communities should not be overly selective about the content or location of business advertisements, as this can also constitute a violation of the FHA. For example, a business should not only distribute advertisements or purchase billboards in specific communities it intends to target. Likewise, businesses should not publish some advertisements that contain the Equal Housing Opportunity slogan or logo intended for certain areas, while excluding the same slogan or logo on advertisements intended for other areas.
In addition to avoiding the behaviors described above, there are certain practices businesses can employ to avoid the perception of discrimination. These include: (1) using the Equal Housing Opportunity logo, statement, or slogan on all advertising materials; (2) when using human models, using those who reasonably represent the diversity in the area; (3) including applicable local fair housing or human rights ordinances on materials where the Equal Housing Opportunity brand is displayed, and; (4) notifying employees, clients, and publishers’ of application non-discrimination policies.
Further information on advertising and marking requirements for multifamily communities can be found here.
c.) Federal Trade Commission has Guidelines to Help Businesses Stay within the Letter of the Law
The Federal Trade Commission (FTC) has promulgated regulations and enforcement mechanisms to eliminate deceptive advertising. The FTC has created guidelines to help businesses avoid charges of false advertising. In these guidelines, the FTC recommends that in making “free” or similar offers, all of the terms and conditions upon which one can receive and retain the “free” item should be clearly established at the outset of the offer so there is no reasonable probability that the terms of the offer might be misunderstood. (16 C.F.R.§ 251.1.)
Historically, the FTC has focused on situations where the offer of “free” merchandise or services is blatantly false. For example, the Book of the Month Club violated the FTC’s rules when it advertised a free book to new members in large print, but in much smaller print, indicated the request for the free book formed a contract by which the new member agreed to purchase at least four books each year. In that instance, the failure to purchase the four books in the subsequent year required the new member to pay for the “free” book. In a similar case, a company offered “free” encyclopedias but required recipients to purchase annual updates. The cost of the updates, as it happened, equaled the purchase price of the encyclopedias and updates as they were normally sold. Therefore, there was nothing free about the encyclopedias.
The FTC offers its guidelines or rules in an effort to allow businesses to conform to federal law; variance from them may lead to corrective actions by the FTC. In other words, if owners and operators follow the guidelines, they should be able to avoid FTC intervention. However, if an owner or operator does not follow the guidelines, the FTC may assume the owner or operator is in violation. The FTC may then propose ways to correct the alleged violations. If the corrective actions fail, the FTC may seek a legal remedy. For more information, visit- the FTC’s Advertising FAQ webpage here: https://www.ftc.gov/tips-advice/business-center/guidance/advertising-faqs-guide-small.
d.) Steering Clear of Deceptive Trade Practices in Specials and Concessions
Owners and operators sometimes promote and attempt to attract applicants to their communities by offering special rates or terms or by offering concessions. To avoid any deceptive trade practice challenges, owners and operators must carefully structure specials and spell out any contingencies or limits on the offer.
Owners and operators also must protect themselves from residents who seek to take advantage of the concession or special rate but then breach other lease obligations. A resident might, for example, accept one month’s free rent, then move out rather than fulfilling the lease obligation to pay rent for the remainder of the term. In such an event, it might appear to the court when the owner or operator seeks to enforce the lease that the resident owes only 12- month’s rent (assuming a one-year lease). Of course, the owner or operator intended that the free rent be for the first of 13 months and intended to collect only 12 months of rent; otherwise, s/he would not have given a month of free occupancy. The owner or operator should be able to recover rent for the “free” month as well as the 12 payable months, but s/he must state in advertisements and the lease that any such special is contingent on satisfaction of all the resident’s lease obligations.
Keywords: Deceptive Practices, Fraud, Fraudulent advertising