Katrina Wallace had saved up two months’ rent to tide her over as she went through brain surgery to correct a dangerous condition. But as her recovery became more involved, she no longer had enough to pay for her apartment.
She scraped together enough to cover one-third of the rent, and she had a commitment from Durham County’s social services department to cover the rest while she waited for her disability payments to start.
The landlord at the Southpoint Glen Apartments rejected that arrangement and launched eviction proceedings. That triggered an additional $201 in court fees Wallace would have to pay to keep her and her young daughter from being kicked out of the complex along Fayetteville Road in South Durham.
“I felt like a statistic,” Wallace said. “I felt like in their eyes it’s just like ‘OK, you’re a poor girl, but I want my money, I want it now.’ I felt like that’s not really human.”
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Wallace’s mom came up with the $201 and she was able to stay in her apartment. But even though Wallace never went to court, the court fees weren’t returned. Today, Wallace, 25, is among a group of tenants challenging several rental companies in lawsuits over fees that are commonly charged by landlords.
In late March, a state Superior Court judge in Wake County sided with one of those tenants — a decision that shocked landlords across North Carolina. Superior Court Judge A. Graham Shirley said $191 in court-related fees charged to a tenant in a Raleigh apartment complex weren’t allowed under state rental statutes.
That decision now has lobbyists for apartment owners asking state lawmakers to “clarify” the state rental laws so landlords can legally charge the fees. The legislative session begins Wednesday.
“We have already had meetings with various legislators and allies so that we can act quickly once session begins to try to resolve this issue,” Colleen Kochanek, legislative counsel for the Apartment Association of North Carolina, wrote to members.
NC cities hit hard
No one tracks the total amount of disputed fees paid by tenants, but North Carolina communities and much of the southeastern United States are home to some of the nation’s highest eviction rates, a recent study by a Princeton professor found. State court records show North Carolina had nearly 164,000 eviction proceedings in the 2016-2017 fiscal year.
In the Raleigh case, Jordon Hargrove, 26, had paid the fees to stay in his Raleigh apartment near Crabtree Mall, only to discover months later his record reflected an eviction, which became a barrier as he sought to move elsewhere.
Jordon Hargrove didn’t know he had been evicted until he tried to move to another apartment. He sued the complex he lived in, near Crabtree Mall, when they wouldn’t help him expunge an eviction that never should have happened, and won. Julia Walljwall@newsobserver.com
“It’s sad that this is what it comes to,” said Hargrove, who works in sales for a computer manufacturer. “It’s sad that this has become a money-making scheme on top of the profit that they are already making from rent.”
Charlotte, Durham and Raleigh ranked in the top 100 cities for eviction rates, according to Princeton professor Matthew Desmond’s study. All three are fast-growing cities with low unemployment and rising rents, which gives landlords more leverage when tenants fall behind.
In many eviction cases, tenants settle with the landlord and remain in their apartments. That’s where the dispute arises in North Carolina: Is it legal to charge the kinds of eviction-related fees that Wallace and Hargrove paid?
Fees are ‘legitimate’
Neither Wallace nor Hargrove had their doors padlocked by a sheriff’s deputy, or had any contact with an eviction lawyer. Both said they were told they didn’t have to go court. They said they paid rent on time as they lived paycheck to paycheck, before unforeseen circumstances left them scrambling for money.
In Hargrove’s case, he too struggled with medical bills after a bout with bronchitis, and said he had sought to make arrangements to pay two-thirds of his $875 monthly rent upfront and the rest plus a late fee when his next paycheck came. He said the apartment management was unwilling to cut him a break. His mother also stepped into cover the rent he couldn’t pay, the late fee, the court fees and next month’s rent, which the landlord demanded in advance.
Grubb Properties, the owner of the Sterling Glenwood Apartments near Crabtree, referred all questions to the apartment association. Greystar Real Estate Partners, the owners of Southpoint Glen Apartments, could not be reached. Hargrove and Wallace’s lawsuits seek class action status to represent other tenants in a similar situation.
Dustin Engelken, government affairs director for the Triangle Apartment Association, said he couldn’t speak to individual eviction cases, but in general the fees being charged reflect incurred expenses that landlords believe are legal under state rental laws.
“The fees we’re talking about are very legitimate fees,” he said. “Attorneys’ fees, court fees — essentially fees you can provide a receipt for and say, ‘This is an actual cost that we’ve taken on.'”
He added: “If we’re barred from collecting these fees, you are saying that the landlord is not only going to lose out on rent when a tenant fails to meet their obligations, but that (landlords) are also going to have to pay these administrative and court costs on top of that. And obviously we don’t feel like that’s a fair deal for the apartment owner and operator.”
Landlords ‘making money’ over evictions?
Engelken and Wallace and Hargrove’s attorneys — Ed Maginnis and Karl Gwaltney of Raleigh — point to changes to the state’s rental law in 2009 to argue their case.
Housing advocates say the law was in response to a court decision that raised questions about what kinds of eviction-related fees could be charged, and sought to limit them so landlords couldn’t tack on others.
For example, the law limits landlords to a “complaint-filing” fee of no more than five percent of a tenant’s monthly rent if the tenant paid up and an eviction was averted. Shirley found that Grubb Properties went beyond this in charging the $191 in additional court fees that are only applicable when a tenant is evicted.
Maginnis said the additional fees “incentivize” landlords to start eviction proceedings instead of working with tenants.
“They can even come out making money filing evictions,” he said.
Shirley’s decision created a bigger problem for landlords. He found Hargrove was also eligible to seek damages under the state’s unfair and deceptive practices act. The law allows for those harmed by such practices to collect an amount equal to three times the actual damages.
“It wasn’t fair,” said Hargrove, who works in sales for a computer manufacturer. “And I was really appreciative that when we went to court (the judge) said ‘These fees are being charged without a basis.”
The eviction was removed from his record, Hargrove said, but not before he lost out on an apartment with a significantly lower rent.
Wallace said she sought a receipt from her landlord that would explain the $201 fee. The landlord gave her an invoice from a law firm that bills itself as “The Eviction Team,” that is heavily redacted, but lists the landlord as being charged $201 for Wallace’s eviction. That invoice helped persuade Wallace, a technician for a biotechnology company, she should get legal help.
Advocates for renters say legal fees are often tacked on when they they fall behind. Carol Hardison, CEO of Crisis Assistance Ministry in Charlotte, said the agency commonly sees the fees tacked on to the amount they’re paying to help tenants stay in their apartments. Crisis Assistance serves about 150 people every weekday who need help to cover rent or utilities payments. They spent $2.6 million in 2017 for emergency rent assistance to tenants facing eviction.
“When we’re sitting down with a customer and looking at everything they owe, it’s in there,” Hardison said of the attorney fees. “It always breaks my heart, because that’s money that could be put to rent.”
Eviction fees vary widely from state to state. Ohio doesn’t allow landlords to collect attorney fees in simple rent nonpayment evictions, while New York and New Jersey do – but they also allow tenants to collect fees from the landlord if they win in court.
Engelken said if landlords are not able to collect the court-related costs they incur in launching eviction proceedings, or are forced to pay damages from the lawsuits, the end result will be increased rents for all tenants.
“That landlord has to find a way to keep the property running and keep the money flowing,” he said.
Landlords could also seek monetary judgments against tenants if they aren’t able to collect court costs and attorney fees automatically, property owners say. Such judgments, which would be awarded by judges or magistrates, could follow tenants around for years and negatively impact their credit.
Bill Rowe, general counsel for the N.C. Justice Center, which advocates for those with low and moderate incomes, said there may be a need to revisit the state’s rental law, but not with the quick fix advocated by landlords. He said the cases should first play out in the courts.
“Our concern is trying to fix this in this short session doesn’t have some more unintended consequences that we haven’t thought through,” he said.
Kane: 919-829-4861; @dankanenando