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The LandLord Advocate Dec 2012

Lead Article:

When landlord and tenant logic don’t match.

Our landlord clients are logical folks, however they sometimes struggle when dealing with tenants who are perceived as not mirroring that logic – especially when issues arise regarding their residential or commercial tenancy. In this article, we will explore the perceptions of both the landlord and tenant, along with key questions that landlords may face – specifically when their attorney invokes the default process in a court case.

First, let’s build the scenario. The conflict under discussion manifests once the landlord has been forced to take legal action against the tenant for noncompliance with the lease, rules and regulations, or governing statutes, such as nonpayment of rent. Faced with this situation, tenants often react to the legal action incompletely or by doing nothing at all, forcing the landlord and its lawyer to use the default motion process to gain an eviction judgment against the tenant.

OK, let’s next look at the side of the landlord. As we say on our website and in all our seminars, our goal is the same as yours – full units with compliant tenants paying the rent. A landlord’s main business function is to provide a home (on the residential side) or business space (on the commercial side) in a manner that encourages the tenants to not only initially rent from them, but also to repeatedly renew their lease – allowing the landlord’s business to succeed and earn a solid profit. To help facilitate this goal, landlords build policies and procedures to address problems with tenants who fail to comply. Using rent collection as an example, a compliant community means that the landlord has the cash flow necessary to maintain the property and its operation in a successful manner, while making the necessary profit. When tenants do not pay the rent, the landlord’s business is threatened.

Alternatively, in the world of tenants (particularly those that fall into legal trouble with the landlord), things may not go smoothly, and sometimes uncertainty and unexpected events arise that create problems. When legal action by the landlord arises, the tenant may not perceive that time is available for a logical (i.e. full and complete) response to the situation, or the tenant may say and do things (or not do things) that are counterproductive from the landlord’s perspective – even though they may make perfect sense to the tenant. Their inappropriate, incomplete, or non-existing response necessitates the filing of the default motion.

The default motion process comes into play when the tenant has received and not responded to a complaint seeking to enforce the landlord’s notice to quit. At that point, in a nonpayment case, the tenant either has paid the “rent” (in part or in full), or has not (and the landlord with a strong landlord attorney has accepted any payment as use & occupancy). When faced with this situation, landlords often choose to negotiate with the tenant to resolve the situation.
The basis for this decision may be fueled by a desire to maintain a long history of compliant tenancy, occupancy standards in financing agreements, or other personal or business reasons.

In their effort to negotiate, landlords typically want the tenant to engage with the lawyer by responding to the complaint in court, if for no other reason than the tenant has forced the matter to this point, all at the time and expense of the landlord. Accordingly, the landlord’s lawyer files – and serves on the tenant – a motion for default for the tenant’s failure to respond to the complaint, and asks the court to order a default judgment (i.e. a victory) for the landlord. If the tenant does not respond, there will be no court hearing, default judgment will enter against the tenant, and the landlord will be empowered to evict the tenant under the law in approximately one (1) week.

However, the tenant, not having fully understood the legal process that got them to this point, may still wish to work with the landlord to retain their tenancy. This is the classic conflict between what the landlord logically expects, and what the tenant actually does (or, more accurately, has not done).

The landlord now faces the question whether to evict or attempt to retain the tenant, and – if the latter – how. What should the landlord do? There is no perfect answer here, because there is no way for the attorney to “force” a court date – the Court will only schedule a court date on the case if the tenant actually responds to the complaint or the default motion. And since the tenant in this situation did neither, there is no court date to continue negotiations.

Luckily, there are a number of options available to the landlord:

  • On the one hand, the landlord can stop the case if satisfied with the situation (see our Quick Tip in last month’s newsletter for more on the subject).
  • On the other hand, they can simply move to the eviction process and either carry it out, or use that process to force the tenant to respond more meaningfully.
  • Finally, landlords can choose a path in-between, which forces both the property management staff and landlord attorney to work together to achieve an acceptable resolution.

Alternatively, in an effort to avoid this scenario entirely, we recommend that landlords consider in advance how this situation can occur, understand that “logic” will not necessarily apply, and prepare their response by contacting their landlord attorney to review the applicable law, options, and make the best operational decision.

The trick is preparation. Landlords can often find the best answer for this and other inevitable business problems, by exploring the situation with their landlord attorney, preferably before it ever happens.

Quick Tip:

Problem tenants and the holidays.

I wanted to take a moment to clear up a misconception that we hear repeatedly this time of year. The myth: Courts refuse to evict a tenant over the holiday season or during the winter months. This myth is simply untrue. Courts regularly issue judgments in favor of landlords that result in tenant dispossession throughout the year, whether the egg nog is flowing or the summer breeze is blowing. Just because the end of the year is near does not mean you are stuck with a nonpaying or nuisance tenant until the snow starts to melt.

A recent interaction I overheard confirms that tenants especially feel that they are buffered this time of year. I was in court recently and overheard a tenant talking to the landlord in the hallway while they were waiting for mediation. The landlord was talking about getting the rent paid on time and getting the arrearage paid in a timely manner. He offered the tenant three weeks, until December 24, 2012, to make a payment that was now several months overdue. The tenant’s retort is what prompted this writing: “You want me to pay on Christmas Eve. I am a Christian and we celebrate with presents and all that stuff. I can’t believe you want me to pay on Christmas Eve.”
I kept my composure and remained uninvolved, as I was not there to represent the landlord and the case had nothing to do with me. However, I decided it had everything to do with all of our clients.

Don’t let the myth of winter evictions cloud your judgment about effectively handling tenants when they refuse to meet their lease obligations. You may feel compelled by your moral fiber to offer understanding and compassion for a tenant who claims to have fallen on hard luck. However, let me offer an optional moral position that not only protects you, but will eventually prove best for the tenant in the long run. Require the tenant to take their responsibilities seriously, regardless of the time of year or celebrations of the season. Your actions will hopefully strengthen their understanding of what is required to be self-reliant and live within their means – regardless of the time of year.

Had I been able to voice my opinion, my message to that tenant that day would certainly have been “Paying on Christmas Eve is a whole lot better than packing on Christmas Day.”

Quick Tip:

Understanding the risks associated with occupancy standards.

Last week, we learned in the press that Landings Real Estate Group (based in Newport, RI), agreed to pay $40,000 to settle a federal discrimination case brought by a family claiming that Landings illegally refused to rent them an apartment based on family size in violation of federal and state law. Landings has properties here in CT, which include the 156-unit Long Meadow Landings apartment complex in Groton (“Long Meadow”), where these events apparently occurred.

According to one press report, the Connecticut Fair Housing Center initiated the complaint to the U.S. Department of Housing and Urban Development (“HUD”) on behalf of a woman with four children who claimed that Landings denied her a 2-bedroom apartment at Long Meadow based on her familial status. Specifically, Landings allegedly had a two-person-per-bedroom limit at Long Meadow, which caused it to deny the woman’s application to rent the 2-bedroom apartment. The complaint alleged that this limit is more restrictive than state and local law.

There are at least four (4) things to learn from this article:

  • First, a caveat: We must always be concerned about press reports involving legal cases, because they sometimes tell an incomplete, or wrong, story.
  • Second, the press reports show that the U.S. Attorney’s Office for Connecticut and the U.S. Department of Justice were involved in prosecuting this case, which are the equivalent of the 2-ton guerrilla in federal court. There may be nothing worse than having the federal government against you, because it basically has unlimited resources and well-motivated and smart people handling their legal cases.
  • Third, the issue of occupancy standards is not simple and involves taking the time and expense to evaluate federal, state, and local law, and develop compliant policies and procedures to address that law and the landlord’s interests.
  • Fourth, it always makes sense to involve your landlord attorney the minute you face a discrimination claim, so that you can establish your position (and defenses) early in the process.

Contact your landlord attorney if you have any questions or concerns about the current occupancy standards at your residential complexes, or if you are facing a discrimination claim based on them (or any other federal or state law).

Quick Tip:

New acquisition? Be sure you know what you’re getting yourself into.

Whether you’re buying a new property, or simply taking over the management of one, part of your preparation should consist of a thorough analysis of what you are truly getting yourself into. Now, there are certain limitations that you will face with such an analysis. The first and most obvious is grasping a perfectly accurate picture of the current residents in the community and what could very well be their disruptive and distasteful habits.

While we are not recommending that you assume the former owner or manager is being dishonest in their presentation, you must be diligent in verifying that the information you have been offered is being presented in its most favorable light. If for no other reason, the inherent value of the property is largely dependent upon a tenant base that pays in full, on time, and requires little management at all. So, acquiring this information from the former owner or manager makes a lot of sense.

Another limitation, over which you have a bit more control, is the analysis of past documentary information about the residents. You have absolute control over the review of all tenant files and you should take the time to examine them. If you are unable or unwilling to review them all, at a very minimum, take a look at the rent payment histories for every tenant and flag those files belonging to the problem payers. Payment issues often reflect other underlying problems, and so knowing more about those tenants will make you better prepared once you take over the community.

Lastly, be sure you have an accurate account of the various leases distributed among the tenants, review them all closely, and ensure that you clearly recognize what your rights and obligations are under each of those leases. Combined with your review of the tenant files for potential challenges, the knowledge gained by this lease analysis will put you in the best possible position to address any future troublesome situation aggressively and efficiently.

Quick Tip:

Increase in “shared households” raises risk of unauthorized occupancy.

Last month, the U.S. Census Bureau issued a report titled “Poverty and Shared Households by State: 2011,” which evaluates data gathered by the American Community Survey (“ACS”) from 2007-2011. Shared households are nothing new, but they can become problematic for landlords, particularly when it leads to unauthorized occupants.

At residential properties, unauthorized occupants create numerous problems for landlords, including the lack of an authorized, open connection between the landlord and the new occupants. Without that connection, the unauthorized occupants may not be concerned about complying with the lease or rules and regulations – remember, they never signed them. Indeed, it also undermines (consciously or unconsciously) the tenant’s commitment to lease compliance, because unauthorized occupancy is a lease violation, if the landlord has a well-crafted lease.

Moreover, unauthorized occupants can be a burden on the property physically, such as wear and tear on the unit and things like parking, particularly if the number of occupants exceeds the landlord’s occupancy standards (see our Quick Tip in this newsletter for a cautionary tale about occupancy standards). At subsidized properties, unauthorized occupancy can lead to fraud claims if the authorized tenant does not report the income of the unauthorized occupants, which often occurs because tenants generally do not voluntarily report their lease violations to the landlord.

Anecdotally, our clients have reported over the last decade that most of their systemic problems arise from (or are created or exacerbated by) unauthorized occupants. With that in mind, here are the highlights from the report:

  • In 2011, almost 20{b3839be935df112798d4ec5997aa1a27aa9a9725854b075bcbd0000f0c7f06fc} of all households included an “additional adult,” defined as someone who was not the householder or the householder’s spouse (or cohabiting partner).
  • From 2007 to 2011, the number and percentage of all adults who were “additional adults” increased for the nation and in 40 states.
  • There is some evidence that these statistics reflected an economic dimension, meaning that the additional adult moved-in for economic reasons (i.e. loss of, or no, income to support himself/herself).

Generally, our nation and state is still facing economic challenges, such as slow (or little) job growth and stubborn unemployment. Accordingly, it is likely that this trend of increasing shared households will continue, and therefore so will the potential for increased problems with unauthorized occupancy. However, this does not mean that landlords are powerless to address unauthorized occupancy. If you have a well-crafted lease, this is a lease violation and fully enforceable in state court, regardless of whether the occupants exceed any applicable occupancy standards.

Contact your landlord attorney if you have any concerns about unauthorized occupants, or how to draft a lease provision to proactively deal with the subject.

DISCLAIMER:

The reading of this newsletter does not form an attorney-client relationship. The contents of this newsletter are for informational purposes only and do not constitute legal advice. Nothing in this newsletter is intended to imply or predict the outcome of any legal matter that you may be considering or be involved in. The Landlord Law Firm makes no warranties of any kind regarding the information contained in this newsletter.