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Boom! Security deposits get the full Alderaan

April 29, 2016:- Security deposits are supposed to help cover the cost of damage to the landlord’s property. Yesterday, security deposits themselves sustained damage on an Alderaan scale.

In its decision in Meikle v. Nurse (see my earlier post) the Supreme Judicial Court held that a landlord’s violation of the security deposit statute provides the tenant not only with a counterclaim but provides a defense to possession. In plain English, a defense to possession means the tenant gets to stay.

For many years, Massachusetts landlords wise to the ways of the law have known that any mistake handling the security deposit (e.g. failing to give the tenant a piece of paper stating the name of the bank holding the deposit  and the account number) could result in them paying the tenant multiple damages plus the tenant’s attorney’s fees. But yesterday’s decision means that a mistake gives the tenant the right not just to money but to remain in the landlord’s property. Not forever, of course: The tenant “does not enjoy that right in perpetuity,” the SJC states reassuringly. To avoid a tenancy in perpetuity the landlord need only bring “a second summary process action for possession after he or she has remedied the violation of the security deposit statute.”

So what does bringing a summary process action for possession ordinarily involve? Serving a new notice to quit; waiting either two weeks or a full rental period depending on the nature of the notice; completing the new summons and complaint and making sure it aligns perfectly with the notice to quit (on pain of dismissal if it does not); serving a new summons and complaint (with the attendant sheriff’s fees) at the right time, not too early and not too late (on pain of dismissal for premature or tardy filing); filing the summons and complaint (again, not too early and not too late on pain of dismissal); paying the court’s filing fee; appearing in court; being presented with the tenant’s list of interrogatories, which automatically postpones the trial for 10 days; prevailing at trial (if the stars are aligned); seeking a writ of execution; watching the judge grant the tenant a stay of execution; and then, when the first stay has expired, watching the judge grant another stay of execution, and so on. Not quite perpetuity, perhaps, but close. The line between ad nauseam and ad infinitum starts to get a bit blurry after a year or so.

Will this new decision discourage landlords from taking security deposits? One would think so, those who fall into the rational-economic-actor category at any rate. Without security deposits, how will these rational economic actors insure themselves against the risk of tenants damaging their property (bearing in mind that an increase in the risk involved in renting increases the cost of renting)? Applying some basic economics, perhaps landlords will respond to an increase in the cost by raising the [fill in the blank].

Justin Sargent 6
Peter Vickery, Esq.
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Lopsided landlord law (plus quiz)

Lopsided laws are annoying. But here in Massachusetts we have the right to require that our legislators observe the principles of justice and moderation in formulating our laws. It says so in the Massachusetts Declaration of Rights (article 18, to be precise). So immoderate, unjust laws do more than annoy; they flout some fundamental constitutional principles.

Which prompts me to ask, Why do we put up with the dramatically different burdens that the law places on landlords who hold security deposits vis-à-vis tenants who withhold rent?

If you are a Massachusetts landlord you are free to ask for a security deposit to insure against the tenants damaging your property. But if you do, you had better comply with every jot and tittle of the security-deposit law, M.G.L. c. 186, §15B. The amount of the security deposit must not exceed one month’s rent (not by so much as a dollar), you have to place the deposit it in a separate, interest-bearing account in a Massachusetts bank — not a New Hampshire bank or a Connecticut bank — and give the tenant (1) a detailed receipt within 30 days, and (2) annual statements showing the interest that the deposit has earned. The law goes into great detail about what you must and must not do with the security deposit at the end of the tenancy. Innocent mistakes can prove as costly as deliberate violations. Landlords who are curious about the kind of oversights that could trigger multiple damages and attorney’s fees should watch this short slide-show video by tenants’ lawyer Arthur Hardy-Doubleday, Esq.  If pushed for time start watching at the 3:45-minute mark.

In contrast, if you are a Massachusetts tenant and you wish to withhold rent from the landlord (i.e. go on rent strike) the list of legal formalities you have to comply with is considerably shorter. Here is a short video on the subject.

Rent withholding has a reasonable purpose. Tenants are allowed to withhold rent if the conditions in the dwelling are unsanitary, which encourages landlords to make repairs promptly upon request. Fair enough. Mind you, just try that rationale in the realm of workplace relations.

Employer: “Your performance is inadequate.”

Employee: “Are you going to fire me?”

Employer: “No, and you can’t quit either. You have to keep working for us. But we’re going to stop paying you.”

Any employers desiring an insightful predictive analysis of the likely outcome of such an interaction should click here.

If tenants withhold rent, do they have to set the money aside?  After all, if — many months, or even years, after the rent strike started — the Housing Court judge decides that the landlord is entitled to some or all of the bank-rent, it could be difficult for the tenants to come up with money. It takes above-average self discipline to save the money rather than spend it on all the other pressing day-to-day demands, especially in a culture that actively discourages thrift (have you looked at interest rates lately?).

But no, the law does not require that tenants place the withheld rent in escrow, so nor do tenants have to provide the landlord with documentary evidence stating the name of the bank and the number of the account.

To recap, landlords holding security deposits have to comply with a long list of legal requirements whereas tenants withholding rent have to comply with none. Landlords who fail to give tenants a detailed statement within 30 days face the prospect of paying treble damages and the tenants’ legal fees. Tenants who withhold rent even if a judge concludes that the withholding was not justified do not have to pay a penalty of any kind.

If you think of tenants as wards of the state and your image of landlords conforms to popular Dickensian stereotypes, or this, or this, this imbalance in the law may not bother you much. If so, I urge to watch a real landlord, Garth Meikle, argue a real case in front of the Supreme Judicial Court. To see and hear Mr. Meikle click here, and start at minute 18:38.  Mr. Meikle simply wanted his apartment back so that one of his children could move in, but the tenant alleged that Mr. Meikle had made a mistake with the security deposit.  By the way, the tenant received pro bono representation from a Harvard Law School clinic; the landlord had to represent himself.

On the other hand, if you think that the provision of affordable homes is a social good that we should encourage or at least not discourage, and that it might be time to restore some balance to landlord-tenant law, there is hope. Recently I went to the State House to listen to testimony about a proposal to amend the rent-withholding law  by requiring tenants to deposit the withheld rent into escrow. Will it pass? I shall keep you posted.

Now for the quiz that I promised in the headline.

If I had to choose one word to describe the current security-deposit law it would be persnickety, an adjective (possibly related to the Scottish pernickety or pernicky) that boasts the highest jurisprudential imprimatur available on this side of the Atlantic, namely a 2011 decision of the Supreme Court of the United States.

Question: Which justice penned the opinion?

Email your answer to peter@petervickery.com with the word persnickety in the subject line. There will be a prize for the first correct answer.* But, please, no pre-quiz use of Google, LexisNexis, etc. We use the honor system around here.

* A warm glow.**

** Subject to availability, satisfaction not guaranteed, and no warranties as to fitness for general or particular purpose. Some glow-feelers may experience side effects so before winning this quiz talk to your primary care physician, pharmacist, and faith-community leader.

Justin Sargent 6
Peter Vickery, Esq.
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Appeals Court vacates triple-rent award

February 23, 2016:-  A case that started in the Western Division Housing Court in 2009, Clark v. Leisure Woods Estates, Inc., has provided some clarity as to how much money a tenant can get from a landlord under M.G.L. c. 186, S. 14. Judge Robert G. Fields found that the landlord violated the quiet-enjoyment provision in two different ways and awarded triple damages for each violation, i.e. two separate triple-damage awards. The Appeals Court vacated one of the two triple-damages awards as duplicative, holding that

only one triple rent award is available in a single proceeding under S. 14, no matter how many ways the landlord interferes with the tenant’s quiet enjoyment.

In a footnote, the Court noted that the statute “prohibits five separate categories of landlord misconduct” of which the Leisure Woods case involved just one (interference with quiet enjoyment).  The decision “does not address a situation in which the landlord violated two or more categories.” So if landlords violate the right of quiet enjoyment and violate S. 14 in other ways as well (e.g. cross-metering, failing to provide adequate heat) they still face the threat of having to pay multiple damages for those other violations in addition to the quiet-enjoyment violation. But at least they are only liable for one triple-damage award per category.

In a nutshell, the decision limits the exposure of landlords somewhat, and reduces the leverage of tenants’ counsel concomitantly. Tenants who show 57 varieties of violation of their right to quiet enjoyment should not expect 57 separate awards of triple damages.

Justin Sargent 6
Peter Vickery, Esq.