Apartment Law (top)
The laws governing management of apartment communities are as diverse and complex as the people living in them. On any given day, managers may confront problems that are relatively easy to solve, just by following general rules. Change the facts — even slightly — and suddenly another set of rules may apply. The resolution becomes more complicated. The rules are not always black and white. Often there are subtle shades of gray, and sometimes an exception to the rule comes into play.
Apartment law is a descriptive phrase for a large number of federal and state laws and regulations which affect property management. The list includes:
A number of years ago, we began using “apartment law” to describe our firm’s law practice. Over time, as laws have changed or expanded, the field of apartment law and our practice has grown beyond simple landlord-tenant issues to encompass many other areas of law. The core of our firm’s work is dedicated to helping apartment management negotiate a path through the myriad laws, ordinances, and regulations that comprise the body of apartment law.
By: Robert P. Hein, Esq.
All rights reserved. Copyright 2009
Fair Housing Complaints, Investigations, and Enforcement Process (top)
How the Complaint Process Works. The fair housing complaint, investigation, and enforcement process is complex because there are so many public and private components. There are two basic kinds of housing discrimination claims. Both often are loosely referred to as “complaints” but are very different. One is called an administrative agency complaint. The other is a civil action. Both are civil in nature, as opposed to criminal. However, state or federal authorities could file criminal actions or complaints for prosecuting certain kinds of serious housing discrimination.
The administrative agency complaint involves the investigation of an alleged discrimination claim by a federal or state enforcement agency, such as the U.S. Department of Housing and Urban Development (HUD) or the Georgia Commission on Equal Opportunity (GCEO). The administrative agency complaint is the most common kind of fair housing claim confronted by apartment management. It is basically the preliminary or first stage of most fair housing complaints and focuses mainly on investigation. However, the other very important kind of housing discrimination claim or complaint is a traditional lawsuit or civil action which is filed and proceeds through the court system. The procedures involved in defending or responding to these two kinds of discrimination claims are very different.
The Agency Investigation. Processing the administrative agency complaint focuses more on investigation and results in an agency finding or determination and report. The enforcement agency’s report sets out conclusions with regard to whether the agency has reason to suspect discrimination may have occurred. The investigative agency finding is not conclusive and may not be the final step in determining whether discrimination occurred. Further prosecution of the claim in either a civil trial court or administrative court would be necessary to establish discrimination and potential liability for a fair housing violation.
The investigation could take place at either the federal or state level. An administrative agency complaint and investigation is the most frequent kind of fair housing claim facing apartment communities. Often the investigation ends the process and is considered the final resolution of most fair housing claims. The parties are not required to advance to the second stage (trial), and the process often ends with conclusion of the investigation. As noted above, the results of an investigative agency report do not establish liability or damages against management. Nor does the conclusion of the investigation preclude the complaining resident from filing a lawsuit.
Housing discrimination claims are rarely, if ever, pursued at the city or county level, as most city governments do not have the resources and procedures in place to handle such claims. In Georgia, only the City of Atlanta appears to have a fair housing ordinance that prohibits housing discrimination. In Florida a number of cities have their own fair housing ordinances and enforcement agencies.
The Trial. If an investigation advances to the next level it could turn into a civil lawsuit or administrative hearing that results in a trial. Traditional civil lawsuits must follow the federal or state rules of civil procedure and rules of court that govern formal legal actions. Defense of such lawsuits requires legal counsel experienced with litigation. Administrative proceedings must follow the federal or state rules for administrative actions and do not provide for jury trials. A civil lawsuit or administrative trial will result in a binding judicial decision. So, what is often considered the “second stage” after an investigation could take place at either the federal or state level. It can be in either a regular or administrative court. It also is possible that the unhappy applicant or resident may never proceed with the claim beyond the preliminary agency investigation.
A federal civil lawsuit alleging housing discrimination could be filed in one of the three U.S. District Courts in Georgia (Northern District in Atlanta; Middle District in Macon; or Southern District in Savannah). The lawsuit also could be filed under Georgia’s state Fair Housing Act in a Superior Court in one of Georgia’s 159 counties. While the fair housing laws under Title VIII of the Civil Rights Act are very similar to employment discrimination laws of Title VII, the fair housing claim does not have to start with HUD or the GCEO before a lawsuit can be filed in court.
Note: Employment discrimination claims must first be filed with the U.S. Equal Employment Opportunity Commission (EEOC) within 180 days of the alleged act of employment discrimination and be processed by the EEOC before an employment discrimination civil lawsuit can be filed in a federal or state trial court.
Governmental Agencies That Enforce and Process Fair Housing Complaints. The U.S. Department of Housing and Urban Development, Office of Fair Housing and Equal Opportunity (HUD FHEO) is the federal agency responsible for processing and investigating most housing discrimination complaints at the federal level. Many states also have adopted their own versions of the federal FHA and have been certified by HUD’s FHEO as “substantially equivalent.” These state (GCEO in Georgia), and sometimes local agencies (in states other than Georgia), are then eligible to receive federal funds (called FHAP grants). Currently, over three fifths of the states have been certified as having enforcement agencies eligible for federal grants that can investigate and process housing discrimination complaints under a process that is substantially similar to federal law. In Georgia, the state agency with enforcement powers to investigate fair housing complaints is called the Georgia Commission on Equal Opportunity (GCEO), Fair Housing Division.
Georgia is among 38 states that have been certified as having their own fair housing laws which are substantially equivalent to federal law. Of those 38 states with similar housing discrimination laws, 32 have state agencies certified by HUD that can process and investigate fair housing claims. Also, there are more than 50 cities or counties around the country with their own local city or county fair housing enforcement agency to process and investigate housing discrimination claims. Housing discrimination claims could originate either with HUD, the state, or one of these local agencies; however, HUD often will defer or send cases to the state agency for investigation. Cases which were filed or originated at the local or state level will stay with the local or state agency for handling and processing. Management companies which do business in states other than Georgia are subject to the laws of the state in which they conduct business. Fair housing complaints filed in states other than Georgia follow a similar procedure.
Some housing discrimination claims may involve more extensive issues and are not deferred or sent to the state for handling. These cases are investigated and handled by either HUD or the U.S. Department of Justice. The Department of Justice may prosecute another kind of claim which is sometimes referred to as a “pattern and practice” violation. These kinds of cases usually allege that the owner or manager of an apartment community has engaged in persistent or widespread violations of the fair housing laws. Such cases usually generate a more extensive interest in federal prosecution and may be used to pursue an important national housing policy or expose examples of serious and widespread discriminatory housing practices.
Another area that has drawn much attention pertains to the design and construction of accessible housing for persons with disabilities. Such claims are complex and technical, involving potential liability spanning many years.
Retaliation Claims Are Separate Violations. The FHA prohibits any kind of “retaliation” against the applicant, resident, management employees, or other persons who might be involved in filing or investigating the complaint. If a resident, visitor, or applicant has threatened or filed a fair housing complaint, care should be taken to avoid any adverse action which could be seen as retaliatory. A housing discrimination retaliation claim is a separate offense that may be prosecuted even if the investigation or lawsuit establishes there was no discrimination.
Final Investigative Report. Filing a fair housing complaint with HUD or the GCEO only starts an investigation process. The end result of the investigation is a determination of whether HUD or the GCEO finds sufficient evidence to believe housing discrimination may have occurred. At the conclusion of the investigation, HUD or the GCEO will issue a “final investigative report” summarizing the facts and recommending whether to issue a “charge” or to dismiss the case. If there is no reason to believe that discrimination occurred, the complaint will be dismissed. If there is some evidence that discriminatory housing practices occurred, a “charge of discrimination” will be issued.
A charge is sometimes called a “cause finding.” Even if a charge is issued at the end of the investigation of an administrative complaint, either an administrative hearing or civil trial is still required in order to become a binding determination as to whether discrimination actually occurred. A dismissal or issuance of a charge does not end the process, as the “complainant” or “aggrieved party” still has the right to file a lawsuit or request an administrative hearing before an administrative judge for a final judicial determination.
Issuance of a Charge or Dismissal. If there is reason to believe that a discriminatory housing practice occurred (sometimes referred to as a “cause finding”), a “charge” is issued (called a “Charge of Discrimination”). HUD or the state agency will state the facts upon which the decision is based. If no reasonable cause is found for a violation, the complaint will be dismissed (called a “Determination of No Reasonable Cause”). The dismissal does not completely end the matter since the complaining party still could file a civil action or lawsuit in the state or federal court system or pursue an administrative hearing under federal or state law.
Issuance of a charge is not a conclusive and binding judicial finding of discrimination. The owner or manager is not “guilty” of a discriminatory housing practice simply because a charge was issued; however, the charge could be admissible in evidence at a later jury trial or administrative hearing. There still must be a judicial hearing or trial to determine whether discrimination occurred and any civil liability for damages or other relief. Management will have an opportunity to present its side of the case to a judge, jury, panel, or hearing officer to determine whether discrimination did in fact occur.
By: Robert P. Hein, Esq.
All rights reserved. Copyright 2009
Overview of Georgia Landlord and Tenant Laws (top)
Origin of Georgia Landlord and Tenant Laws. Taken together, the Georgia landlord tenant laws are the basic legal principles comprising the lease relationship, security deposits, and dispossessory or eviction laws. Some of these laws are created by the legislature’s enactment of statutes. However, a good bit of the law pertaining to landlord and tenant comes from interpretations of these statutes by the courts. Finally, management and the resident can create binding legal obligations by signing a rental contract or lease defining what each party has agreed to do.
Provided the lease does not violate an expressly prohibited public policy management and the resident can reach any agreement they want regarding rental of an apartment.
Prohibited Lease Provisions. Georgia specifically prohibits certain provisions from being included in an apartment lease or occupancy agreement. A residential lease cannot:
Some states have adopted comprehensive landlord and tenant laws governing residential leases. Usually such statutes are based on modified versions of a modern model law called the Uniform Landlord Tenant Act. For example, South Carolina has such an act. Georgia, however, has not taken that approach. Generally, Georgia’s “landlord tenant laws” most applicable to modern apartment management are found in three related sets of laws of the real property code regarding: the landlord and tenant legal relationship; security deposits; and dispossessory proceedings.
Georgia still operates under landlord and tenant laws which — with a few significant changes — were in force in England in the 1700s. Much of Georgia’s landlord tenant law has developed through court interpretations of the old English statutes and case law. For example, the Georgia statute (OCGA §44-7-1) that defines the legal relation of landlord and tenant states:
(a) “The relationship of landlord and tenant is created when the owner of real estate grants to another person, who accepts such grant, the right simply to possess and enjoy the use of such real estate, either for a fixed time or at the will of the grantor. In such a case, no estate is passed out of the landlord and the tenant has only a usufruct which may not be conveyed except by the landlord’s consent and which is not subject to levy and sale. “
(b) All renting and leasing of real estate for a period of time less than five years shall be held to convey only the right to possess and enjoy such real estate, to pass no estate out of the landlord, and to give only the usufruct unless the contrary is agreed upon by the parties to the contract and so expressly stated in the contract.”
By: Robert P. Hein, Esq.
All rights reserved. Copyright 2009
Eviction Procedures in Georgia
Dispossessory Proceeding Defined (top)
An eviction in Georgia is called a “dispossessory proceeding” or “dispossessory warrant.” It is referred to in the landlord and tenant code law as a proceeding against tenant holding over. (OCGA § 44-7-50). Other states use different names but have similar procedures which must be followed to retake possession from a resident who has breached the lease. Regardless of which name it is known by, a dispossessory proceeding is the only legal way to obtain possession of an apartment which remains occupied by the resident, his family, occupants, or other individuals. The dispossessory warrant is a civil action, not a criminal warrant. This article discusses the steps for obtaining possession when the resident has failed to pay rent or is in default of an important provision of the lease or community rules.
Two Kinds of Evictions. There are two basic legal grounds for filing an eviction: non-payment of rent or holding over beyond the term. A warrant for non-payment of rent is used when management has not received timely payment of rent. An eviction filed for holding over beyond the term is chosen when management has decided to terminate or non-renew the lease because of a serious lease violation. The Georgia dispossessory statute draws a distinction between these two kinds of proceedings. The dispossessory warrant form used by the courts in Georgia requires that management choose which of the two kinds of evictions is being used for the eviction. The same form is used for filing either the non-payment or holding over beyond the term dispossessory proceeding, and management or its filing agency simply checks a box to specify which kind is being filed.
Note: Difference Between Non-payment Cases and Lease Termination/Non-renewal Cases: Non-payment of rent is itself a lease violation that also could be used as a reason for terminating or non-renewing a lease; so, non-payment can be used as the basis for a dispossessory proceeding filed for holding over beyond the term. However, management usually is willing to accept occasional late payment of rent, even when a dispossessory proceeding is filed, so long as the resident has not fallen into an unreasonable pattern of repeated late payments and dispossessory filings. It is not necessary to terminate the lease before filing an eviction for non-payment of rent. Usually management terminates the lease and files for holding over case if it is requiring the resident to move but files a non-payment case when it is willing to accept payment and allow the resident to stay.
The apartment industry generally refers to the two kinds of evictions as either non-payment or lease termination (and non-renewal) cases, keeping in mind that when late payment has become a serious problem it could result in a lease termination. A lease termination or non-renewal also is sometimes called or referred to as a “holding over” case. If non-payment of rent is used as the basis for terminating or non-renewing a lease, then management will need to file for holding over beyond the term, and not for non-payment. Regardless of which kind of dispossessory proceeding is filed the end result of obtaining a writ of possession will allow management to obtain possession of the apartment if they have decided to require the resident to move.
Procedural Differences Between Non-payment and Lease Termination Cases. The eviction form which starts the legal process requires management to specify one of these two grounds as the basis for filing the eviction lawsuit. (Either non-payment or holding over beyond the term). Regardless of which basis is used, management first must make a demand for possession of the apartment before filing the warrant. However there is also an important procedural difference in the way management handles these two kinds of warrants.
Unlike an eviction filed for non-payment of rent, management first must send a separate letter to terminate or end the lease before filing an eviction based on holding over beyond the term. This difference — sending a lease termination letter in a “holding over” case vs. sending a combined late notice and demand for possession in a “non-payment” case — determines which procedure to follow and can be confusing. If management has made a decision requiring the resident to move, then the lease should be terminated or non-renewed, and the warrant should be filed for holding over beyond the term, even if the lease violation only involves non-payment of rent.
Note: Do not, however, try to combine a lease termination notice with a demand for possession notice. The Georgia courts will not consider that to be a proper demand for possession in a case filed for holding over beyond the term.
General Steps in the Dispossessory Process. Sometimes the word “eviction” is used in a general sense to mean the filing of a dispossessory warrant and refers to the overall legal process as the case moves through the court system. At other times “eviction” is used to describe the actual physical removal or “set-out” of the resident and his possessions from the apartment. In property management usage, “eviction” refers to the overall process of filing a dispossessory proceeding. The term “set-out” means the end result of the eviction process during which a resident or their personal possessions are physically removed from the apartment.
The overall sequence of the dispossessory process involves four basic steps:
Most courts have their own dispossessory forms which need to be filled out and accompanied by fees at the time of filing with the clerk of court. Apartment communities may use either an attorney or filing service to prepare, file, and track the warrants through the court system. Dispossessory proceedings are filed in either a Magistrate or State Court, depending on the court system of the county in which the property is located. In some counties the local court may have been specially created by the state legislature and have another name; however, rarely is a dispossessory proceeding ever filed in Superior Court.
The dispossessory statute was intended to be used for removing the resident from the apartment and not as a remedy to collect past due rent. Even so, management frequently files warrants for non-payment of rent as a collection method because it provides the option to evict if the resident does not pay the balance of the account by a specified date. If the resident has the full amount due, management can accept the payment and discontinue the eviction. Management cannot, however, both accept the past due rent and go forward with the eviction without risking liability and a lawsuit for an unlawful eviction. If management accepts full payment of rent, the case either should be dismissed or any judgment should be noted with the court as paid in full.
Unless the apartment has been abandoned, filing a dispossessory proceeding is the only lawful way to obtain possession. Even if the apartment is occupied by someone other than the original resident or his family, management must go through the dispossessory process rather than trying to arrest or lock-out an unauthorized occupant for criminal trespass. If there is a question as to whether the resident or his family has fully vacated or abandoned the apartment, it is almost always best to go completely through the eviction proceeding.
More About Lease Termination Notices. Lease termination and non-renewals occur when an apartment community has decided to terminate the lease and ask the resident to move from the property. Management needs to be sure that it can prove that the letter was properly delivered. After giving a notice to cure or electing not to issue a warning, management should pick an appropriate date for the lease termination to take effect. In Georgia, there is no set amount of time that a landlord must give before the lease is terminated.
If no notice to cure is required by the lease or if such notice was given and the time to correct the problem has passed without obtaining the resident’s compliance, the next step in the process is to send a termination letter which specifies a particular date on which the lease will end. The length of time set before the termination takes effect depends on the severity of the breach and the timing deemed appropriate or necessary under the circumstances.
When terminating the lease because a resident has an unauthorized pet, for example, and management accepted the current month’s rent before learning about the pet, management may want to set the date for the end of the month. If there is a more serious situation, such as domestic violence, illegal activities, no power or utilities to the home, or something which threatens the health, safety, or welfare of management or other residents, then management should make an immediate termination so it can file the eviction as soon as possible.
Filing and Service of the Dispossessory Warrant. After giving all the required preliminary notices, management may file the dispossessory warrant with the clerk of court by requesting its attorney or filing service to initiate the filing. Alternatively, management may file its own dispossessory case.
After filing, the warrant is sent from the clerk’s office to the sheriff, marshal, or process server for service on the resident. The dispossessory warrant usually is delivered by “tack and mail” service. Tack and mail service requires that the deputy or process server first try to personally hand the warrant to the resident. If the deputy or process server is unable to personally hand a copy to the resident, then a copy is taped to the door of the apartment and a copy of the warrant is sent by U.S. first class mail to the resident on the same day.
“Tack and mail” service is sufficient to obtain jurisdiction for the purpose of obtaining a writ of possession; however, it is not sufficient to obtain a money judgment against the resident for rent due unless the resident actually files an answer to the eviction. Most courts allow someone other than the resident or their attorney to file an answer, but the court will not issue a money judgment unless the resident either personally was served or files a signed answer with the court.
In order to obtain a judgment against a resident for the past due rent, either the deputy or process server personally must serve the resident, or the resident must file an answer to the dispossessory warrant. So, if the resident does not file an answer or abandons the apartment, management can obtain a writ of possession, but not a judgment. Regardless of whether the resident is personally served or files an answer, management will still be able to obtain possession of the apartment if service was made by tack and mail.
Time for Answering a Dispossessory Warrant. The resident must file an answer to the dispossessory proceeding within seven days after service by the deputy or process server. However, when the seventh day falls on a Saturday, Sunday or legal holiday, the last day to answer is extended through the next regular business day of the court. Once a resident or other person answers the warrant, the case typically is assigned a trial date within seven to 10 days.
If the resident, his attorney, or an occupant does not file an answer within seven days of service the case is in default (see below), and management is entitled to apply for a writ of possession from the court without the necessity of having a hearing or trial. A “writ of possession” is the order issued by the court commanding the sheriff or marshal to evict the resident and any other occupants and place the management company in lawful possession of the apartment.
After the seven day period which the resident has to file an answer to the dispossessory proceeding, management needs to determine whether the rent has been paid or whether the resident has abandoned the apartment. If the resident has not filed an answer and has not paid or vacated the apartment, management then may apply for a writ of possession. The writ application is filed with the clerk of court. Some courts, such as Dekalb County, require that management state on the writ application form that no money has been received from the resident since the warrant was filed.
The writ application requires payment of an additional charge (usually $20 or more) to the clerk. This is an additional fee to the dispossessory warrant. The marshal or sheriff also may charge another fee ($10 – $20) to perform the eviction. Management also will have to pay a labor crew the cost to perform the physical eviction or set out of the residents and their possessions.
Trial of Dispossessory Actions When an Answer Has Been Filed. If a resident timely answers the dispossessory warrant, the case will be scheduled for a non-jury trial within seven to 10 days. About half of the answers and responses to dispossessory warrants do not state a legal defense and are subject to a “motion for judgment on the pleadings.” This means that the answer does not raise a recognizable legal defense and the court does not need to consider further evidence before granting a writ of possession to management. Residents who state that they do not have the money to pay their rent but ask the court to give them additional time to pay do not raise a valid defense. Nevertheless, the resident still will receive a hearing or trial since they filed an answer to the warrant. The other half of answers filed with the court often raise a defense recognized by law, but it will be the resident’s responsibility to prove.
At the trial, the court will hear evidence and determine whether the resident failed to pay rent. If the case is based on a lease termination that resulted in “holding over,” then the court will hear evidence to determine if sufficient grounds exist to terminate the lease. The court also will determine how much rent is due and hear any defenses the resident may have raised in their answer. Sometimes residents file what is known as a “counterclaim” in which they state the landlord owes them money for damages to the resident’s possessions for failure to make repairs or for other money claimed to be owed. Management should expect to go to court as a witness either to prove the grounds for a lease termination or to defend a counterclaim.
Acceptance of Money from the Residents. Management should not accept money from the resident after filing the dispossessory warrant without first consulting legal counsel on whether acceptance of money will affect management’s right to evict the resident. Acceptance of rent after filing the warrant but before the court issues a writ of possession could be inconsistent with the landlord’s desire to evict and result in the case being dismissed by the court. Acceptance of rent after issuance of a writ of possession falls into a gray area which could lead to filing a wrongful eviction claim. It is best not to accept any payment if management intends to go forward with the eviction. If management wants the resident to move or if the resident attempts to make a partial payment of the rent owed, then the payment should be returned along with a letter advising why the payment is being returned and explaining management’s intentions or position.
Writ of Possession. The end result or most important part of any dispossessory proceeding is the order of court called a writ of possession. This is the court order which requires the sheriff or marshal to remove the resident and give possession of the apartment back to management. The writ of possession is necessary in order to conclude the case and perform a set-out. A writ of possession can be issued at many different stages of the dispossessory proceeding, as noted above.
The Set-Out or Actual Eviction. Once a writ of possession is issued by the court, the clerk sends the writ to the sheriff or marshal for eviction. The sheriff or marshal will contact management or the filing agency to schedule the time and date of the eviction or set-out. The eviction labor crew or service (the persons who physically perform the move-out under the supervision of the marshal or sheriff) will coordinate the eviction. There are relatively few actual evictions when compared to the number of dispossessory warrants filed. Most residents either pay the money owed or vacate the apartment before the sheriff or marshal arrives with the eviction crew to remove them from the property. Management is not required to store the resident’s possessions, and the eviction crew can place the personal property at any location on the property allowed by the sheriff or marshal. The resident’s property is considered to be legally abandoned as soon as it is placed on the ground after its removal from the apartment; however, it is advisable to leave any remaining items for at least 24 hours before disposing of them.
By: Robert P. Hein, Esq.
All rights reserved. Copyright 2009
Fair Credit Reporting Act (top)
The Fair Credit Reporting Act (FCRA) is a comprehensive and complex federal law that regulates how credit files and other personal information about someone are collected and used. The FCRA provides rules for processing rental applications and performing criminal background checks. It also provides rules for use of consumer reports (credit reports) in processing employment applications and collecting bad debts. The U.S. Federal Trade Commission (FTC) is the federal agency which regulates and enforces violations of the consumer reporting laws; however, individuals also have the right to file their own legal actions for violations of the FCRA.
As with most laws, the FCRA has its own set of definitions which are important in understanding what is regulated and what is not. What the public generally calls a “credit report” in everyday language is referred to as a “consumer report” in the FCRA. A “consumer” is an individual person as relates to his or her personal credit information, as opposed to financial information about a business or corporation. A “consumer report” is any written, oral, or other communication of information by a consumer reporting agency related to an individual’s (or consumer’s) personal creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or collected for any of the permissible purposes allowed under the FCRA.
Note: Personal information, such as the name, address, phone number, and employer of an individual sometimes is referred to as “identifying” information about an individual. A report that is limited to identifying information is not a “consumer report” as defined under the FCRA. A consumer report contains extensive information only about an individual’s creditworthiness and credit standing.
Credit information, credit scores, and consumer reports can be obtained only for a limited number of reasons. Any other use of consumer reports is strictly prohibited by federal law. Apartment management companies and owners may use or obtain a consumer report or credit score only if a rental applicant or resident has signed a written authorization which provides for accessing the applicant’s or resident’s credit file in order to approve a rental application.
Permissible purposes under the FCRA for obtaining a consumer report or credit information include:
Note: The FTC does not consider a landlord and tenant relationship (leasing an apartment) or processing an apartment rental application to be a “credit” transaction or “commercial business” transaction as defined by federal law. For that reason, management must have a signed written authorization to obtain any credit information about the applicant or resident. Apartment management must abide by all laws and regulations of the FCRA and FTC when using information provided by a consumer reporting agency from an individual’s credit file.
Credit bureaus and resident screening agencies which provide credit reports, process rental applications, or provide credit scoring are defined by the FCRA as “consumer reporting agencies” (CRAs). A “consumer reporting agency” is any person or company which regularly assembles or evaluates consumer credit or other information on consumers for the purpose of furnishing consumer reports to third parties. The three largest nationwide consumer reporting agencies are Equifax, Experian, and TransUnion. Smaller resident screening agencies and other businesses which regularly help management process rental applications, provide credit scores, check criminal records, or collect rental history data are also CRAs which are subject to the FCRA.
The Federal Trade Commission has issued a guide called Using Consumer Reports: What Landlords Need to Know which can be used by apartment management in the rental application process. The guidance can be found at www.ftc.gov/bcp/conline/buls/buspubs/landlord.shtm.
The FTC publication Using Consumer Reports makes it clear that management may use consumer reports to evaluate rental applications as long as management follows and complies with the FCRA. The FCRA requires apartment management to provide rental applicants with an “adverse action notice” if the rental application is denied or if a higher security deposit or co-signor or guarantor is required. An adverse action notice is a written statement of the applicant’s rights to see and dispute the information that resulted in denying the application or requiring a higher security deposit or co-signor.
The FTC clearly believes that the FCRA rules apply to the rental application process, even though rental of housing as a landlord tenant relationship is not the same as extending “credit.” In order to process the rental application, management must have the applicant’s or resident’s written permission to obtain or evaluate consumer information from a credit bureau or credit file. Written permission to obtain credit information or a credit score may be provided on the signed rental application, lease, or another document. The document can be a signed original, fax copy, or electronic signature as submitted online via the internet.
By: Robert P. Hein, Esq.
All rights reserved. Copyright 2009
Trade Names and Trademarks (top)
Trade Name Registration. A trade name is the name under which a company does business. The name of the apartment community is its trade name. It identifies the owner or operator of a business, but not necessarily the products or services sold by that business. Apartment communities fall into a combined offering of both a product and related management services.
The name of the apartment community is a trade name that belongs to the owner of the apartment community, not the management company that runs the day to day operations for the owner. However, a fee management company could also have its own trademark or service mark that identifies it as a residential property management company. (See below.)
The trade name must be officially registered by filing a trade name registration in the Superior Court in the county where the company does the majority of its business. The name must be registered within 30 days of starting business operations. Registration is not only a Georgia law requirement, but it also can protect a business from others who might infringe on the use of its name. Any corporation that does business in a name other than its true name must register the trade name in the county in which it does business.
Trademarks. Trademarks are similar to, but technically different from, a trade name. Trademarks are registered either with the Georgia Secretary of State in Atlanta, GA, or the U.S Patents and Trademarks Office in Washington, D.C, depending on the level of protection desired. A trademark uniquely identifies a particular product or the source of a product or its manufacturer, but not necessarily the owner of the business selling it. For example, the name “Coca-Cola”™ is possibly one of the best known trademarks in the world and is owned by the Coca-Cola Company, Inc., headquartered in Atlanta, GA. Even the color and style of script in which the words “Coca-Cola”™ are written on the cans or bottles form part of the overall look and recognition of the trademark and are protected under a trademark registration.
Service Marks. Service marks, which are similar to trademarks, are another way to identify a company that provides services, as opposed to products. A service mark identifies the services offered by a company in its sale or advertising to distinguish them from services of another. When a business is using its name to identify its products or services, the name is functioning as a trademark and could be protected under federal, as well as state, trademark law. At that point, an owner company has the legal right to use its name only to the extent that it does not infringe upon other existing marks.
Service mark infringement depends on whether the mark owner’s property rights extend into a given area where an alleged encroachment has occurred. Determining whether a trademark or service mark “infringes” on another company’s use of a similar name often involves an analysis of the likelihood that the public is confused or misled by the name being used.
A residential property management company may also have its own trade name, trademark, or service mark under which it does business. For example, “Post Apartment Homes”™, “AMLI”™, and “Archstone”™ are recognized trade names and trademarks under which those companies do business. The trade name “Post Apartment Homes”™ is owned by Post Apartment Homes, L.P. The trademark, service mark, or recognized logo of Post Apartment Homes is:
In Post’s case, the trademark or service mark has a very specific look, type font, and stylized picture of a tulip centered over the “o” and “s” in the word “Post.” Because those companies use their service marks or trademarks as part of the naming of their communities, the name also becomes part of the trade name under which the apartment communities do business in a particular city. However, the names also form part of the overall national recognition.
How the mark was created, where it is located, and the nature of the infringement impact whether there is misuse. These considerations depend on the specific circumstances of any given case, but the overall protection of a trademark or service mark is to stop the unauthorized sponsorship or endorsement of a mark, as it appears to consumers. The concept of ownership of names and marks becomes important when a similarity arises in the marketplace between the names or marks of one company versus that of a competitor.
By: Robert P. Hein, Esq.
All rights reserved. Copyright 2009
Federal Lead Disclosure Requirements for Leasing Pre-1978 Housing (top)
Owners of apartment communities and single family residential properties built before 1978 are required to provide all prospective residents with a pamphlet on lead hazards before they sign a lease. The apartment owner or its managing agent also must complete a disclosure form with a lead warning statement, which must be signed and attached to the lease. These forms must be kept on file for three years and produced if requested in an audit by the U.S. Environmental Protection Agency (EPA).
The EPA has established strict rules governing the disclosure of lead-based paint and lead hazards. Failure to give the required notice or maintain proper records as required under EPA and U.S. Department of Housing and Urban Development (HUD) regulations can result in civil penalties of up to $31,500 per violation (subject to adjustment for inflation) as well as the potential for criminal prosecution with $25,000 per violation and imprisonment. The lead paint and hazard disclosure rules have been in effect since September 6, 1996.
The apartment owner must inform prospective residents about any known lead-based paint (LBP) or lead hazards anywhere on the property. In addition, if an owner sells a building, the same information must be provided to prospective buyers and be attached to the signed contract. The buyer has 10 days after disclosure is made to conduct a lead paint inspection of the property before being obligated to complete the purchase.
The EPA pamphlet titled Protect Your Family from Lead in Your Home, Form EPA747-K-99-001, dated June 2003, must be provided to the applicant prior to signing the lease. The form can be obtained directly from the EPA or downloaded over the internet in an Adobe PDF format. The pamphlet may be reproduced but must be duplicated in exactly the same size, font, and pictures as the original. The National Lead Information Center can provide additional information at (800) 424-LEAD (424-5323). To obtain multiple copies of the brochure, contact the U.S. Government Printing Office at (202) 512-1800. The disclosure must be in the same language as the lease contract. If a Spanish or other language version of the lease is used, then the LBP disclosure must be made in that language.
The LBP disclosure must contain the following important language that is referred to as the “Lead Warning Statement:”
“Housing built before 1978 may contain lead-based paint. Lead from paint, paint chips, and dust can pose health hazards if not managed properly. Lead exposure is especially harmful to young children and pregnant women. Before renting pre-1978 housing, lessors must disclose the presence of lead-based paint and/or lead-based paint hazards in the dwelling. Lessees must also receive a federally approved pamphlet on lead poisoning prevention.”
The Georgia Apartment Association (GAA) and National Apartment Association (NAA) have each created an addendum which contains both the Lead-Based Paint and LBP Hazard Disclosure Form and EPA pamphlet on the Blue Moon Software. The GAA form (Form #9560) contains a detailed step by step instruction sheet.
If a property owner elects or is required to remove materials containing lead from the community, the owner must use a certified lead abatement contractor. The Georgia Department of Natural Resources (DNR) has issued state certification rules for Lead Abatement Contractors. Contact the DNR at (404) 657-6514 to obtain a copy of the regulations and a list of certified contractors.
These Georgia certification regulations will apply only to lead contractors and should not impact apartment owners under normal operations.
Owners of property and property management companies doing routine cleaning and repainting on property where there is insignificant damage, wear or corrosion of existing lead-containing paint or coating substances are exempt from certification requirements. However, there is another, separate lead disclosure requirement when repairs to any surface will disturb more than six square feet of materials that contain or may contain lead in occupied apartment buildings.
The EPA has estimated that three-quarters of the nation’s housing built before 1978 (possibly as many as 64 million dwellings) contained or could contain some lead-based paint. When properly maintained and managed, lead-based paint poses little risk to residents. However, studies conducted prior to implementation of the LBP regulations estimated that as many as 1.7 million children have blood lead levels above safe limits. Elevated levels of lead in children are believed to be due mostly to exposure to lead-based paint hazards.
Lead poisoning causes permanent damage to the brain and many other organs and also causes reduced intelligence and behavioral problems. Children are especially vulnerable to the effects of lead. Lead can cause abnormal fetal development in pregnant women. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence, behavioral problems, and impaired memory.
To protect families from exposure to lead in paint and the contaminated dust and soil lead based paint generates, Congress passed the Residential Lead-Based Paint Hazards Reduction Act of 1992. The law is also known as Title X of the Toxic Substances Control Act. Georgia has implemented Lead-Based Paint Abatement, Certification and Accreditation Rules which can be found in Chapter 391-3-24. Section 1018 of the Title X law directed EPA and HUD to require disclosure of known information on lead-based paint and lead-based paint hazards before the sale or lease of most housing built before 1978. The 1996 EPA and HUD LBP regulations were the result of that legislation.
Before ratification of a contract for sale of an apartment community or before entering into a lease with a resident, the apartment owner or its managing agent must:
The EPA LBP rule does not require testing, removal or abatement of lead-based paint. A violation does not invalidate leasing and sales contracts, although it carries very stiff civil penalties and could lead to terminating a lease. Most private housing, public housing, federally-owned housing and housing receiving federal assistance are covered by the rule.
The apartment owner’s pre-leasing disclosure must contain a list of any records or reports available referencing known lead-based paint and/or lead-based paint hazards. Such records sometimes come from inspections performed by lenders who request what is known as a Phase I Environmental Site Assessment Report. A Phase I report usually is made in connection with the purchase or financing of an apartment community in order to identify potential or existing environmental liabilities. While the required EPA LBP disclosure may summarize what is contained in the environmental reports, the documents themselves must be kept at the management office on the property and provided to any resident, purchaser, or inspector from the EPA who wishes to examine the records and reports. If no such records or reports are available, then that should be noted on the disclosure form.
By: Robert P. Hein, Esq.
All rights reserved. Copyright 2009
Negligent Security Liability Claims (top)
Premises liability claims based on a crime committed against a resident are called “negligent security” suits. It is a kind of negligence claim in which the injured resident, occupant, or guest alleges that the apartment owner or management failed to keep the property safe by taking reasonable steps to discover and prevent crimes which are likely to be committed on the property.
Steps toward preventing or reducing the possibility of a negligent security claim start long before the crime ever takes place. Reducing crime and the opportunities for crime significantly reduces risk of these liability claims. Another important part of this process involves understanding the legal standard for imposing liability and what duties owners and managers have to keep the premises safe from crime. Court decisions defining an owner’s or manager’s responsibility for criminal attacks are decided on a case-by-case basis, depending heavily on the particular facts of each situation. There is no clear list of things that management can do which will provide a safe harbor or prevent lawsuits. There are general steps that can be taken to help reduce the likelihood of crime from occurring on the property and reduce the likelihood of a negligent security lawsuit.
Although the apartment community is not an insurer for every injury that occurs on the property, the property owner and management owe residents, their families and guests, a duty to keep the premises safe from dangerous conditions, defects, or unreasonable risks about which they, but not the resident, have knowledge. The courts have been less clear about what those duties are, when they will arise, and what steps an owner or manager is required to take to prevent crimes in the community.
In order to hold the apartment community liable, the resident must first show that the apartment owner or manager was under a duty to provide security. A duty to provide security arises when the apartment community is placed on notice of other similar crimes committed on or around the property. Next, the resident must show that whatever management did or failed to do to prevent the crime was negligent or unreasonable. Finally, the resident must establish that he or she was damaged or suffered some type of personal injury or property loss.
The court rulings are a source of confusion to owners, managers, attorneys, and judges alike. Appellate and trial courts struggle with determining when owners and managers of apartment properties can be held liable for crimes committed on or near their properties by third parties. One test consistently used to determine an owner’s liability turns on, among other things, whether the apartment owner or manager either could or should have “foreseen” that a crime might be committed. The problem lies in determining which crimes are “foreseeable.”
Courts often calculate whether the property owner or manager should have foreseen or been able to predict the kind of crime in terms of how many and what kinds of crimes have occurred on the property in the past. There are two legal schools of thought as to what kinds of prior crimes will create liability on the part of the apartment owner. Some states like Georgia require the resident to show that there were “substantially similar crimes” committed on the property in the past. If the apartment owner or manager were aware of prior substantially similar crimes, then the apartment community should have foreseen the likelihood of future similar crimes. This foreseeability in turn creates a duty to keep the premises safe from similar crimes.
Other states like California consider the “totality of the circumstances” and do not require that the prior crime be “similar” to find that the landlord was on notice of potential danger and failed to protect residents and guests from a criminal attack. “Totality of the circumstances” means that the court will consider many different factors in deciding whether the landlord should be held liable for a third party’s criminal act. In most instances, the owner or manager actually must have had notice of the previous crime or crimes in question.
The Georgia “substantially similar” test is more favorable to the owner for defending cases, while the California “totality of circumstances” approach means that even property crimes such as vandalism and theft could be used to establish an owner’s liability for much more serious and violent crimes, such as rape or murder. In Georgia, as in many other states, owners and management usually have no duty to prevent criminal attacks by third parties (someone other than an employee of management or a family member of the tenant) until management or the owner has prior notice of a substantially similar crime or attack in the apartment community.
Once sufficient crimes exist that establish a duty to provide security, it is not always clear what duty the apartment community has. Below is a list of duties or things the apartment community might need to address to avoid a negligence claim. Failure to do any of the following could result in a negligence claim:
By: Robert P. Hein, Esq.
All rights reserved. Copyright 2009
There are many kinds of insurance policies that cover different kinds of risk in the apartment industry. Among those important to the apartment ownership and property management are policies providing coverage for:
Another important kind of insurance coverage is a renter’s policy. This is insurance purchased by the resident that pays for claims caused by the resident’s negligence. A renter’s policy also can cover the resident’s personal property that is damaged, lost, or stolen.
Liability Insurance. The two most important things that a liability insurance type policy does is pay for claims (indemnify) and pay attorney’s fees for defense of the lawsuit. Most policies have a deductible or self insured retention (SIR) which limits the amount of coverage provided by the insurance company (carrier) and claims paid. The insured (the apartment owner or management company) are responsible for paying the amount of any claim up to the limit of the deductible before the insurance company is obligated to begin paying its coverage limits.
Liability insurance pays for what are sometimes called third-party claims, meaning the claim or lawsuit is brought by someone other than the apartment owner or management, such as resident or visitor to the property. Liability insurance policies do not usually cover intentional acts committed by a company’s employee such as a theft or criminal attack or assault by an employee of the apartment community on a resident. The nature of the act that resulted in the injury or damage or how it is stated in a lawsuit will determine whether the claim is one that may be covered by the insurance policy.
An important part of any liability policy is coverage for attorney’s fees incurred in defending a lawsuit. Many claims can be very expensive to defend, and the stakes are often very high. Negligent security claims for sexual assaults or death of a resident on the property can result in jury verdicts reaching as high as $10 million or more. The cost to defend such suits through a jury trial can easily exceed $250,000 and span many years of litigation in the court system. Most liability policies pay for the attorney. Even when the apartment owner or management must hire its own legal counsel to defend a claim that is within the deductible of the policy, management may have to obtain permission of the insurance company to hire outside legal counsel.
Attorneys who are hired by the insurance company to represent the apartment owner or manager are often referred to as “insurance defense counsel.” While the owner or management is the client of the insurance defense counsel, the attorney hired by the insurer also is required to provide status reports to the insurer. Many times the owner or management may retain its own outside general counsel to help manage and assist in defense of claims. Using their own outside general counsel can be very helpful in making sure defense counsel understands critical issues of apartment and property management that may affect the outcome of the claim or lawsuit.
Property Damage or Casualty Insurance. This kind of policy provides coverage to the buildings and other property owned by the apartment community and often is referred to as a fire and casualty policy. These policies provide insurance for the physical damage done to a building or other equipment at the apartment community due to fire, wind, hail, explosions, and other kinds of catastrophic events. There usually are exclusions from coverage, including damage from floods, earthquakes, and other kinds of disasters. Special insurance coverage can be purchased for those kinds of coverage. Fire and casualty policies provide insurance for damage caused to the physical structures in the apartment community, as well as business interruption (loss of business).
Under most fire and casualty policies the insurance carrier has a right of subrogation. This means that the insurance carrier may be entitled to sue another person or company that was responsible for causing the property damage to the apartment building. Subrogation allows the apartment owner’s property insurance carrier to recover the money it paid out on the loss by going against the liability insurance carrier of the person who was responsible. For example, a resident who causes a fire that damages the apartment building could be sued by the apartment owner’s insurer in a subrogation claim to recover what it cost to rebuild the apartment or building. This is a significant reason why many apartments now require residents to carry a renter’s insurance policy.
Because the apartment owner’s fire and casualty policy usually has a high deductible, the owner may have its own claim against the resident or other responsible party for damages caused by a fire. Management can request the insurance carrier have its attorney include the owner’s claim along with a subrogation claim. If the insurer recovers from the resident, person, or vendor who caused the damage, then the owner may receive a portion back on their loss or damages that fell under the deductible portion of the policy.
Exclusions from coverage can present unexpected surprises. One such exclusion is sometimes referred to as an “ordinance or law” exclusion. Coverage can be purchased to cover the loss of the undamaged value of a building, the cost to demolish a damaged building and remove the debris, and the increased cost of reconstruction necessary to comply with the local law. Another exclusion is for damage caused by water. Typically there is no coverage for flooding by rivers, lakes, streams, or ocean. Also not covered are mud slides, sewer back-ups and burst water pipes. Federal flood insurance is available to cover some of these risks. Policies also do not cover ordinary wear and tear such as ordinary mechanical breakdowns.
Commercial General Liability. A commercial general liability (CGL) policy is issued to the owner of an apartment community to provide coverage for negligence claims. This kind of liability insurance will indemnify or pay claims by the owner, its management company, or the due to inadvertent or negligent acts or failure to act for personal injuries and property damage caused to residents, visitors, and others. The CGL policy covers a wide variety of premises liability claims related to ownership and operation of an apartment community and many other claims that are filed in lawsuits. It also may offer protection for mistakes made that resulted in eviction of a resident such as a wrongful eviction.
Often the deductible or SIR of the CGL policy may be quite high, and the apartment owner or management company will need to hire and pay for its own legal counsel to defend a lawsuit or claim filed by a resident. Some management companies have their own risk manager or in-house legal counsel to help with insurance issues and lawsuits. Or, the company may rely on outside general counsel for handling such matters. Regardless, it often is best to report significant incidents or potential claims to the insurance company so that the insurer can decide whether to investigate the claim. Even if it initially appears that the claim is less than the deductible or that it may not be covered under the policy, it is best to report the incident in case it later turns out there is coverage to pay part or all the claim.
The CGL policy requires the apartment owner to notify the insurer of any lawsuit or demand for payment of money (claim) made. Giving notice of an incident that might be covered under a potential future claim is not the same as giving notice of an actual claim or lawsuit. The insurer may assign a claims representative to handle or investigate the claim.
By: Robert P. Hein, Esq.
All rights reserved. Copyright 2009
Real Estate Licensing for Property Management and Locator Services (top)
Companies that provide property management services to the apartment industry are regulated by the Georgia Real Estate Commission (GREC). The definition of property management services includes apartment referral and locator services. So, any company that provides either property management or resident referral services must comply with the laws and regulations pertaining to real estate brokers and salespersons.
It is illegal to perform property management services in Georgia without obtaining a broker’s license or otherwise being exempt as described below. The management company may obtain a corporate license if it designates a licensed broker to insure compliance with the licensing laws.
Definition of Property Management Services. Property management services include providing any of the following services for a fee:
Who Is Required to Be Licensed? Although real estate brokers, associate brokers, and salespersons are required to be licensed by the GREC, the employees who work in the corporate office or on-site are not required to be licensed in Georgia. An apartment property management company or referral service that receives fees for performing property management services is required to have a licensed real estate broker (unless exempted as described below) if they perform any of the following acts:
Broker’s Duties in a Property Management Company. A real estate broker has a number of duties it must carry out in connection with providing property management services:
A broker may delegate his or her management duties described above to other employees but remains responsible for any of the employees’ actions or failure to act. While not clearly spelled out in the laws or regulations, a broker is not required to review every lease as long as he or she has approved the form of the leases and the leasing policies and procedures that are to be followed by the on-site management staff.
Broker’s Job Position Varies Based on Kind of Business Structure. The following rules govern what position the licensed broker must hold in a property management company, depending on what kind of company it operates (either providing property management or referral services):
Exceptions to Broker Licensing Requirement. As mentioned above, the law specifically exempts apartment management employees from the requirement of having a real estate license. However, anyone who is a licensed real estate broker still must comply with all licensing laws and regulations, even when managing his own rental property. There are certain conditions to the exceptions or exemptions such as proper supervision of the overall leasing process by a licensed broker and a written property management agreement that states the unlicensed employees of the property management company will be employed under the supervision of a licensed broker.
The exemptions from the requirement of having a broker’s license are:
The above exceptions, which excuse certain persons from compliance with the GREC licensing laws and regulations, do not apply to any person who holds a real estate license. This means that a licensed broker who manages his or her own properties must still comply with all licensing laws and regulations and is not exempt from compliance.
Security Deposits. A licensed real estate broker that receives security deposits while providing property management services is required to place such deposits in a trust account and cannot utilize the provisions of the Georgia Security Deposit Law which provide for an alternative of posting a bond with the Clerk of Superior Court. Brokers are required to have trust or escrow accounts to handle trust funds such as security deposits.
Disclosure of Broker’s Corporate Name and License Number in Leases. A licensed real estate broker is required to disclose the corporate name of the broker’s company and its GREC license number in any apartment lease.
By: Robert P. Hein, Esq.
All rights reserved. Copyright 2009
Differences Between the GAA and NAA GA Leases (top)
Two different sets of lease forms are available for use by members of the Georgia Apartment Association (GAA). The GAA lease is called an Apartment Rental Contract, or Form 9401. The National Apartment Association (NAA) also has developed a lease called the Apartment Lease Contract, or Form A-06 (NAA GA). Both leases and their respective addenda are available for purchase by members of the GAA in the Atlanta office. Samples of all forms may be viewed at the Blue Moon website: www.bluemoon.com by selecting “Georgia” as the state and clicking on the “Preview Forms” active window. You will need Adobe Reader to view the sample forms in a PDF format.
The leases have similar provisions; however, there are some key differences in the way they work. Both are provided through Blue Moon Software, either as a software package or online through the internet. A more in depth explanation of the GAA lease provisions is in Section 9:3, Understanding the GAA Apartment Rental Contract. A similar detailed explanation of the NAA GA lease provisions are found in Section 9:4, Understanding the NAA Apartment Lease Contract. The GAA lease has the GAA logo in the upper left margin of the first page and the words: “Form Valid for Georgia Apartment Association Members Only” in the upper right margin. The NAA GA lease has the NAA logo in the upper right margin of the first page.
Below are quick references to some important differences.
By: Robert P. Hein, Esq.
All rights reserved. Copyright 2009