Bacon's Rebellion

Democracy Thrives in Sunlight

Use the Tenant’s Money to Cure the Tenant’s Rent Shortfall

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by

James A. Bacon
in , ,

by Martin Wegbreit

Recently, Virginia drew national attention for reportedly high eviction rates, especially in central Virginia and Hampton Roads. This has inspired many efforts to address the issue. These include a Campaign to Reduce Evictions, an evictions workgroup at the Virginia Housing Commission, and a possible Eviction Diversion Program in Richmond and elsewhere. These initiatives may result in changes that decrease the number of evictions and benefit both tenants and landlords.

One partial solution requires no change at all: Use the tenant’s money to cure the tenant’s rent shortfall. The Sunday April 8, 2018, New York Times article about evictions reported that the median amount owed in a non-payment of rent eviction in Richmond was $686. By contrast, a Virginia landlord may hold a security deposit of up to two months’ rent. With an average monthly rent in Richmond of $1,269, a typical landlord may hold around $2,000 of the tenant’s money.

And the security deposit is the tenant’s money. It is not the landlord’s money. The landlord is a fiduciary, or a trustee, holding the tenant’s money and using it only for a permissible purpose.

In most cases, the tenant’s security deposit is not an issue until the tenant has moved and been gone for 45 days. During that time, the landlord either must refund the security deposit or provide a written accounting for how the funds were used, or some combination of the two.

A Virginia landlord also may use the security deposit during the tenancy for any permissible purpose. This includes payment of rent owed. The law, part of Code of Virginia §55-248.15:1, is clear: “The landlord shall notify the tenant in writing of any deductions provided by this subsection to be made from the tenant’s security deposit during the course of the tenancy. Such notification shall be made within 30 days of the date of the determination of the deduction and shall itemize the reasons.”

In 38 years of legal aid practice in Virginia, I never have seen or heard of a landlord deducting a rent shortfall from the security deposit, and seeking a repayment plan to replenish the funds, rather than undergo the time and expense of filing a non-payment of rent eviction. Unquestionably, tenants who intentionally or habitually fail to pay their rent deserve an eviction lawsuit, a judgment of possession, and eviction by the sheriff. But true hardship cases ought to be treated more humanely. Use the tenant’s money to cure the tenant’s rent shortfall.

A tenant’s non-payment of rent should not be subject to a “one size fits all” solution of an eviction lawsuit. Landlords have in their own hands a partial solution to lower eviction rates. Treat tenants like customers, not like a commodity to be disposed of whenever a problem arises.

Martin Wegbreit is director of litigation for the Virginia Legal Aid Society.

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7 responses to “Use the Tenant’s Money to Cure the Tenant’s Rent Shortfall”

  1. LarrytheG Avatar
    LarrytheG

    Security deposits, in general, apply to most all tenants – rich or poor – for the same basic reason..to motivate the tenant to treat the apartment as if it were their own and in some cases, I have heard that to rent – there is not only a security deposit but one month rent up front to start.

    When they no longer have skin in that game AND they are still looking at eviction anyhow… it would seem to be not such a good solution.

    There are always going to be evictions just like car repossessions and other punitive responses to not paying one’s owed bills and in the case of an apartment – the owner being able to keep it in good repair and maintain heat and air conditioning , plumbing, etc – depends on his/her rental income so implementing regulations to essentially reduce their cash flow seems to be counterproductive for all the other rent-paying tenants who do depend on the landlord to provide maintenance and operation services as part of THEIR rent.

    Surely there must be a better solution other than encouraging the landlord to let the property deteriorate and result in poorer living conditions even for those who do pay their rent.

    Unfortunately in our society – everyone has to “contribute” to those who are not financially whole… we do it all kinds of ways from entitlements to welfare to special rates for those who are at or below the poverty level but I’m not in favor of regulations that encourage even less financial responsibility as a way to “fix” another problem.

    Unfortunately in our society – even those who are financially better off – will game the system….abuse the system ..if we do not have rules to hold them accountable… Forgiving those rules for the poor or those on the lower financial rungs – in my view – can encourage more irresponsible behaviors.

    Remember – I’m one of the those “leftist” liberals who blogs here!

  2. djrippert Avatar
    djrippert

    This seems like a reasonable plan. Evictions can’t be good for the landlord since there must be a period of vacancy between the eviction and the next renter moving in. Vacant properties generate no cash flow. The only objection I can see is that a landlord might be left holding more of the bag if the eviction happens. Scenario: A renter doesn’t pay his rent on time and the landlord draws down the security deposit from $2,000 to $1,000 to “loan the renter his own money”. The renter defaults anyway and gets evicted. Now the landlord has half the security deposit with which to recover lost rent and/or make repairs. While the deposit is the renter’s property it is also the landlord’s insurance policy against damages and non-payment (I assume). A reasonable landlord might not want to decrease her insurance coverage to make up for a renter’s inability or unwillingness to pay.

    I wonder if there is a possibility of maintaining a “landlord’s and renter’s database” across the state. It would track complaints by renters against landlords as well as evictions by landlords of individual renters. A renter that has regularly been evicted probably shouldn’t be extended a loan of the deposit money. A landlord with lost of complaints for failure to maintain the property, for example, probably shouldn’t be at the top of a renter’s list of choices. Does something like this exist?

    1. LarrytheG Avatar
      LarrytheG

      I like DJ’s database idea. We talk a lot about “transparency” and collecting data will help us be better informed – so we can make good decisions.

      Making evictions harder will put more burden on the Landlord and in turn on those who expect him/her to maintain the facility.

      Somewhere along the line, the folks who end up in financial trouble – need more help than putting it on the landlord will fix.

  3. Reed Fawell 3rd Avatar
    Reed Fawell 3rd

    I agree completely with both Larry ‘s and Don’s comments above.

    Some supplemental thoughts:

    As regards security deposits, the devil is most always in the details. As pointed out above, the security deposit secures the landlord against the tenant’s wastage of the landlords property. Lose that security money to lend that money to the tenant to “cure” that tenants monetary default, such action will often only acerbate the problem. It will cut further into the landlords cash flow (needed to maintain the property for benefit of the entire project and all tenants), and in addition, it will encourage and empower further wastage by often irresponsible tenants.

    In addition, eviction is often an essential action necessary to preserve a rental property from chronic, and sometimes fatal, wastage that creates “hell holes” beyond the point of return. In this regard, I earlier I mentioned the receivership of a 1100 unit highly distressed property in the late 1970, one whose distress was ruining the lives of most all tenants (particularly kids, and mothers), and that was also dragging down and infecting surrounding urban neighborhoods, bringing them down too. In that case, starting with receivership, many tactics were used to halt wastage, and to restore that property to affordable, safe, and livable condition. To this very day, nearly 40 years later, that project provides safe affordable livable housing to people who could otherwise not afford to live in that community. This was thanks in substantial part to the targeted use of eviction to remove those folks, including a thriving criminal element, that otherwise would have thwarted recovery of a large urban area that today thrives.

    This is not to say that landlords do not abuse security deposits. Some do. This, too, should be dealt with forcefully and intelligently. But it is unwise to throw the baby out with the bathwater. Or to dilute valuable tools needed to maintain and/or restorw the health and workability of affordable housing stock for the benefit of all responsible tenants and landlords.

  4. LarrytheG Avatar
    LarrytheG

    not to go on about this – but also talk here about how getting a child to a good academic education – is only part of what is needed to get and hold a job, be steady, reliable and trustworthy, pay your debts, develop good credit, etc.

    That’s a chronic issue with many in the lower economic tiers – and the failure to learn and practice those behaviors just cascades into a lot of downstream problems … which are wrongly characterized as “bad luck” or not being able to “catch a break”, etc.

    I’m not in favor of punishing people for their faults but on the other hand – all of us do OWN the consequences of our own poor decisions – and the difference sometimes is some folks learn and get better at being responsible for their choices while others continue to make excuses and refuse to own their own mistakes.

    That ought not be a “liberal” or “conservative” quality but the thing that happens when children grow up to be adults.

  5. Acbar Avatar
    Acbar

    When I first read this I thought it sounded like a great idea. But I’ve also rented out an apartment in a house in the Fan, while I lived in the other flat; and I had to evict the couple renting the apartment. First, it usually takes two months beyond the last payment to get a tenant out, especially if you’re not experienced with the process. Second, the security deposit covers not only the last rent but also damage — and there’s a higher incidence of damage from tenants being evicted.

    But you’re not talking about a tenant sharing a building with the landlord — but a more arms length relationship with tenants in an apartment building or “project.” In THAT instance the landlord is probably a business, represented by a clerk behind a payment desk. Businesses do not like discretionary actions like waivers; they want a checklist: rent paid (yes/no), full deposit on file (yes/no), moving out inspection passed (yes/no). So in addition to the factors already mentioned, you need to make what you are asking into a checklist for an unskilled clerk to administer. Longer term relationship? Check. First missed payment in X years? Check. Explanation of extraordinary cause? Check.

    I just don’t see much likelihood of this except in unusual circumstances. In that event, I hope people remember this option exists.

    1. Reed Fawell 3rd Avatar
      Reed Fawell 3rd

      You raise important points:

      Yes, security deposits also secure non-payment by tenant of their rent at the end of the lease term (for whatever reason) and also covers cost of all tenant damage to apartment during term or that is revealed at end of term when tenant vacates.

      So, as happened to your rental of your single rental unit, these two types of default – the tenant’s failure to pay one or more months of rent at end of term, and their earlier or concurrent damage to apartment on vacating it – these sorts of defaults often occur in tandem, thus they go hand in hand. Such defaults harm not only landlord but also the project generally and other tenants within the project who act responsibility, and who deserve safe, livable and affordable housing, by landlord with sufficient funds to do so.

      On related issue, we need to think far more holistically about these project problems and what we need to do to begin to fix them. For example:

      1. It takes intact families to thrive in the affordable housing projects, or at the least makes thriving far easier. How do we promote that?
      2. It takes a supportive and healthy village to support these families and broken families in these projects. How do we promote that?
      3. How do we transform this affordable projects into supportive village that teach and protect and encourage?

      Earlier I raised a few suggestions – bring after school work, and lifestyle and cultural training, and job and parenting skills deep and constantly into these projects. Bring and enforce safety and discipline within these projects.

      Chronic habits of dysfunction, anti-social behavior and despair must be broken and reconstituted in healthy productive habits, this must be done at the source, where these people live, if we are to give them, particularly the children, that equal opportunity to thrive that they need and deserve.

      And never repeat proven mistakes like housing these sorts of tenants in high rises, as was recently done in Fairfax County. Highrises compound problems.

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