New Settlement Sets Lease-Breaking Precedent Under the Servicemembers Civil Relief Act

In a landmark settlement, a property management company and its landlord have agreed to pay a significant sum following allegations of violating the Servicemembers Civil Relief Act (SCRA).

The U.S. Attorney’s Office, Eastern District of Virginia, recently announced the settlement involving a claim between a servicemember homeowner and their landlord and property management company, McGowan Realty LLC, operating as RedSail Property Management. The complaint alleged that the defendants violated the SCRA by imposing early lease termination charges and additional rent on a servicemember.

An overview of the Servicemembers Civil Relief Act (SCRA)

The SCRA is a federal law enacted to provide legal protections and relief to active-duty servicemembers of the United States Armed Forces. Originally known as the Soldiers’ and Sailors’ Civil Relief Act (SSCRA) when it was first passed in 1940, it has undergone amendments and updates over the years.

The SCRA aims to ease the financial and legal burdens placed on servicemembers during active duty by postponing or suspending certain civil obligations. For example, the law allows servicemembers to request a postponement of civil court proceedings, such as lawsuits, foreclosures, or bankruptcy proceedings if their military service materially affects their ability to participate. It also protects servicemembers’ property, such as vehicles, against repossession for nonpayment while they are on active duty.

This lawsuit involved a different provision of the SCRA, which allows servicemembers who receive permanent change of station orders or are deployed for at least 90 days to terminate their residential leases without penalty. Landlords are prohibited from imposing early termination fees or requiring payment of rent beyond the termination date specified in the SCRA.

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The allegations of SCRA violations in this lawsuit

Here, the defendants refused to honor a servicemember’s lease termination after he received a permanent order to a new duty station 33.5 miles from his residence in Virginia Beach. The defendants argued they were covered by the Virginia Residential Landlord and Tenant Act. Unlike the SCRA, the Virginia law allows servicemembers to qualify for early lease termination only if they must relocate 35 or more miles from their current residence. Therefore, the defendants forced the sailor to pay $3,408.55 in early termination fees plus additional rent.

The Department of Justice argued that the SCRA offers “relief to servicemembers who would otherwise be forced to pay rent for housing they cannot occupy because they have been ordered to move to another location.” The federal law, they argued, trumped state law in this case because the SCRA has no distance limitation. Moreover, while the SCRA allows a landlord and tenant to waive the applicability of the rules, there was no such waiver in this case. A waiver must be executed in writing separate from the lease.

After spending 14 months and $50,000 in attorneys’ fees litigating the case, the defendants opted to settle. The consent decree requires the defendants to pay the servicemember $10,225.65, which includes the unlawful termination fees and additional rent plus two times the unlawful fees and additional rent assessed. The decree also orders the defendants to pay a $3,000 civil penalty to the U.S. Treasury. Moreover, the company must provide SCRA training for its employees and avoid imposing the 35-mile restriction on leases involving qualifying service members and their dependents.

What this lawsuit means for landlords

The resolution of this case sets a precedent for the protection of SCRA rights nationwide. All landlords should be aware of how the SCRA affects their relationship with tenants. In litigation failure to provide a servicemembers affidavit can derail proceedings, wasting the time, effort, and resources of the landlord. Even out of court, failure to abide by SCRA rules can be an expensive mistake.

Source: JD Supra by Ryan Kennedy

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