Practice Pointers: Is It Worth Pursuing a Claim for Money Against a Tenant?

Here is a question I am often asked from my landlord clients:  Can I recover the rent that I am owed from a tenant?

The answer:  it depends.  In deciding whether to pursue a claim for damages, a landlord needs to ask themselves two questions:  (1) is the tenant working and/or have any assets and (2) can the tenant be located.

The picture above is a spoof of the old adage: you can’t get blood from a stone.  In other words, if the tenant does not have documented income and has no assets, the landlord has no way to collect their judgment.  Even if the landlord wins a claim for monetary damages, it needs a source of income or asserts to obtain the money owed.

The second major consideration is whether the landlord is able to locate the tenant, after he or she has left the rental unit.  In order to bring any type of lawsuit, a party needs to be properly served.

Locating where a person is living is difficult if they do not own real property.  It is impossible to garnish the wages if the party has a job, but again, the the landlord needs to know where the tenant is working.

With this in mind, landlords should gave careful consideration to whether it is worth pursuing a claim for monetary damages against a tenant.  In many cases, the costs of pursuing this—in both the landlord’s time and legal expenses—will far exceed anything that can be recovered from the tenant.  Often, landlords are best off “cutting their losses” by getting the tenant as quickly as possible, even if that means forgoing any claims for money.

Practice Pointers: Business Organization Issues in Landlord/Tenant Law

Landlord/tenant issues are often affected by the particular type of business organization involved in these matters.  

A landlord is either a sole proprietor or a business organization, most often a limited liability company (“LLC”) or corporation.  A sole proprietor does business in his or her name.  This is common for many residential landlords, who often are renting a unit in their home.  As a sole proprietor, the landlord personally enters into leases with the tenants and reports any rental income on their individual taxes.

One of the main drawbacks about being a sole proprietor is that the landlord is personally liable for anything that occurs as part of the landlord/tenant business.  For example, if a tenant were injured and the landlord was at fault, the landlord would be personally liable for these damages.  For this reason, landlords should consider putting their landlord/tenant business into an LLC or corporation.  Not only does this protect the landlord, it also may offer several tax advantages as well.  Landlords should consult both a business attorney and tax adviser to determine if this is the right fit for them.

Tenants need to know what type of landlord they have when dealing with a landlord/tenant matter.  This is particularly important when determining who to bring to court for a landlord/tenant case.  If the landlord is an LLC or corporation, the tenant needs to serve the businesses’s registered agent (which can be found on the Secretary of State’s website).  A registered agent is a business or individual designated to receive notice of a lawsuit, and the tenant should include the registered agent in any demand letter or legal papers sent to the landlord.

The type of business organization for a landlord is also important for court proceedings.  With the exception of small claims court, an LLC or corporation must be represented by an attorney in court.  For this reason, landlords organized as LLCs or corporations need to obtain legal counsel before bringing an eviction or other lawsuit against tenants.  Tenants, in turn, should make certain that their landlord is represented by a licensed attorney in court. 

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FAQ: Do I Need to Hire a Lawyer for a Landlord/Tenant Case?

Question: Do I need to hire a lawyer for a landlord/tenant case?

Answer:  As with all legal questions: it depends.  In Massachusetts, a business entity (ex. corporation, limited liability company) must be represented by an attorney in court (except for small claims court).  If your business organization (as opposed to you personally) is involved in a landlord/tenant matter, you need a lawyer.

If you are not a business organization, you do have the option of representing yourself in court.  While some people can represent themselves effectively in these matters, many find these issues too complex to handle without a legal background.  More importantly, many landlord/tenant matters become contentious, with both sides unable to work together for a resolution to the case.  If you find yourself in such a situation, give serious thought to hiring a lawyer for your case.

Lawful Entry of a Rented Premises

When a landlord rents an apartment, the landlord remains the owner of the property but grants possession of the premises to the tenant(s).  In other words, even though a landlord is still the owner of the property, they no longer have unlimited access to the premises.  Massachusetts law only allows a landlord to enter a rented apartment for a number of limited reasons, such as to inspect the premises, make repairs, or show the apartment to a potential new renter.

A landlord is required, however, to give the tenant(s) reasonable notice before entry.  While there is no set rule on what “reasonable notice” is, I recommend that landlords provide at least one day’s notice prior to entry.  Most importantly, landlords should provide this notice in writing, even if the landlord speaks with the tenant in person.  A quick email is one easy way to do this.

If a landlord refuses to provide a tenant with notice prior to entry, a tenant can seek damages against the landlord, including an injunction or restraining order preventing the landlord from entering the apartment.  Such steps, however, are often unnecessary; sometimes a cordial conversation between the landlord and tenant is all that is needed to resolve these problems.

FAQ: If I Am Foreclosed, Will I Owe the Bank Any Money For My Mortgage Loan?

Question:   If I am foreclosed, will I owe the bank any money from my mortgage loan?


Answer:  After a foreclosure, the bank is entitled to collect any deficiency judgment owed following the foreclosure sale.  The deficiency judgment is the difference between the amount you owe on the loan and the amount of money the home is sold for at the foreclosure sale.  For example, if you owe $400,000 on the mortgage loan and the home sells for $300,000, the deficiency judgment would be $100,000.  This is the amount that the lender could attempt to collect against you personally in a lawsuit.

A homeowner’s personal liability on the mortgage loan can be eliminated through a bankruptcy.  If you filed for bankruptcy and received a discharge on your mortgage loan, the lender cannot collect this debt against you (it can, however, still foreclose the home).

The deadline for a bank to file a deficiency judgment case on a mortgage loan is two years after the foreclosure sale (“Statute of Limitations”).  If the bank does not file in these two years, they lose their right to collect this debt.

Banks rarely attempt to collect deficiency judgments; most of the time, the homeowner will not have any assets that make such a lawsuit worthwhile.  Nonetheless, a homeowner should always ask the bank to waive the deficiency judgment against them in any settlement for a foreclosure matter.

There are several tax consequences relating to deficiency judgments.  Homeowners should always consult a tax expert before making any decisions related to these matters.

 

Stays of Execution

Massachusetts eviction law allows a tenant to ask the court to delay their move-out from the property.  This is commonly referred to as a “stay of execution.”  An execution is the formal court document that permits a landlord to obtain possession of the premises through the sheriff or constable.  Eviction law allows a tenant to request that the court delay issuing this document and, consequently, postpone the eviction.

As written, the law really only applies to “no-fault evictions”, where the tenant is being forced to leave without cause (as opposed to an eviction based on non-payment of rent or violation of the lease).  However, under the right circumstances, the court may be inclined to stay an execution for tenants in other circumstances, if they can show good cause.  The law allows the court to stay the execution for up to six months (twelve months for a party over sixty years of age).

A stay of execution can be difficult to obtain and is left entirely to the discretion of the judge.  The judge will likely want to see good reasons for granting a stay, and proof that the tenant is making a real effort to find new housing.  Tenants have a better chance of getting a stay of execution if they are willing to pay rent for the time they wish to remain in the premises.

Landlords need to remember that tenants have this option of seeking a stay of execution in an eviction case, and should require the tenant to waive this right as part of any settlement agreement in one of these cases.

Self Help: No !!!

I’m willing to bet that among the frequently asked questions on landlord/tenant law, the following is at the top of the list:  “If my tenant is not paying his or her rent, can I change the locks of the apartment?  Can I turn off the utilities?”  The answer, in one word: No!

These actions of trying to evict a tenant without going to court, often called “self-help,” are against the law.  Not only will this result in civil liabilities, which could include huge monetary damages, a landlord can end up in jail for doing any form of “self help.”  Simply put, a formal eviction is the sole means of dealing with a tenant that a landlord wants to get rid of.  This doesn’t mean that a landlord cannot try to settle a case with a tenant outside of court, but any interference with a tenant’s living situation is a huge problem.

No doubt, landlord/tenant cases can be frustrating, but landlords are much better off speaking with an experienced attorney instead of trying to take matters into their own hands.  The risks just aren’t worth it.

Practice Pointers: Use Mediation to Resolve Landlord/Tenant Disputes

Mediation is an excellent option for anyone involved in a landlord/tenant dispute.  This form of alternative dispute resolution can help parties in these cases save enormous time and money.

Mediation is an opportunity for the parties in a case to meet with a trained facilitator for the purpose of working out a resolution to the problem.  More and more, trial courts have staff mediators available to assist the parties, with some courts (such as Northern Housing Court) requiring parties to meet with a mediator before seeing the judge.  In a mediation, parties are encouraged to freely discuss their case and attempt to come up with a mutually agreeable resolution.

Mediation is a great option in landlord/tenant matters because trial courts are overflowing with cases, especially on summary process day.  It is not unusual for a judge to have a caseload of up to fifty landlord/tenant cases in a single session (Boston Housing Court reportedly has 150 new cases filed each week!).  Through mediation, many of these disputes can be resolved without the need for a lengthy hearing or trial.

Best of all, mediation is confidential and risk free; parties can still go before the judge if they cannot workout the problem.  With this in mind, mediation should be the first step in trying to resolve a landlord/tenant dispute.

Summary Process 101

Evictions in Massachusetts are known as “summary process.”  The goal of summary process is found in Rule 1 of the Uniform Rules of Summary Process: “the just, speedy, and inexpensive determination of every summary process action.”  In other words, summary process cases are intended to move at a much faster pace than a typical civil action.  While it can often take years for a civil lawsuit to go to trial, summary process cases are intended to be tried only weeks after the filing date.

To begin a summary process case, the landlord must serve the tenant(s) with a notice to quit, which explains the reason why the tenant is being evicted (more on this later).  This notice of quit must provide a date by which the tenancy is terminated.  After this date, if the tenant has not left the premises, the landlord can begin the case.

The start of a summary process case is opposite that of a typical civil lawsuit.  In a typical lawsuit, the plaintiff first files the lawsuit and then serves it on the defendants.  In summary process, the plaintiff/landlord begins the case by serving the defendant/tenant with a summary process summons, which must be obtained from the court.  On this summons, the plaintiff/landlord selects the date that he will file the lawsuit; called the entry date.  After the summons is served on the defendant/tenant, the landlord can file the lawsuit, which must be done at least seven days (but no more than thirty) from the date the summons was served (click here for a useful timeline of a summary process case).  From there, the case begins.

Confused?  You aren’t the only one; summary process can be a complicated.  Given the stress and heartache these cases can cause, I recommend seeking legal assistance if you are involved in one of these cases.  Contact me for a consultation.

Evictions on the Rise in Massachusetts

The New York Times reports that evictions are on the rise across the United States, including Massachusetts, where eviction filings increased 11% between 2010 to 2013.  The rise in these cases poses challenges not only to the parties in these cases, but also to the courts, who have to deal with increased caseloads, filings, and hearings.

The article cites several studies showing that the use of an attorney can make a real difference in these cases, a point I can attest to based on personal experience.  In Massachusetts, the eviction process is not always “user friendly” and I encourage anyone involved in one of these cases to seek legal representation.