On behalf of Michael Brooks of Law Offices of Michael A. Brooks posted in commercial real estate on Thursday, December 28, 2017.

Equity Residential is the name of the company that controls numerous rental properties throughout California. Nationally, it’s the third-largest rental company in the United States.

Now, the company faces a class-action lawsuit in federal court from both former tenants and current ones. Considering that the company owns around 36,000 apartments, the number of litigants involved is bound to be sizable.

At issue is Equity’s policy of charging “stacked” fees to tenants who missed their rent-due dates.

Equity charges tenants who are late on their rent either 5 percent of the late rent or a $50 late fee. These fees are not defined in the leases renters sign. In addition, even if the rent is paid, unpaid late fees are assessed additional late fees. Tenants are allegedly charged these fees automatically and not notified.

In other words, if a tenant forgets to pay his or her rent by its due date, the tenant could incur a 5 percent penalty. If the tenant unwittingly drops the rent off the next day, the landlord cashes the check and then charges an additional $50 penalty for the missing late fee. If the tenant isn’t aware of the late fee and penalty or can’t afford to pay it on top of the following month’s rent, another penalty is assessed.

This sort of action is, at least according to the plaintiffs and some legal experts, a violation of anti-profiteering regulations in the state of California — although attorneys for Equity insist that late fees are the industry norm and legit.

While it remains to be seen how this case will play out, the class-action status will help plaintiffs pool their legal expertise and firepower — which may not bode well for Equity. A single tenant, or even a handful of tenants, might be overpowered in court by the rental giant. An entire class of tenants, including those who no longer live on the properties, could prevail.

This is one of the reasons its wise to have good legal advice regarding your contracts with tenants in any commercial real estate transactions. Clear leases often lead to less litigation.

Source: The Real Deal, “Equity Residential faces class-action suit in California for “unlawful” late fees,” accessed Dec. 28, 2017

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