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MANDATORY RENT ESCROWING: THE ONLY REAL SOLUTION By G. Emil Ward, Esquire Copyright 2004, 2016.

In 1972, in Lindsey v. Normet, 405 U.S. 56 (1972), the United States Supreme Court held that it was not an unconstitutional deprivation of the tenants’ right to trial in an eviction action for the State of Oregon to require the tenant to escrow rent in court if the tenant wanted more than the five days allowed by statute to prepare a defense to the eviction action. The Court stated in footnote 13, that it might well be an unconstitutional deprivation of the landlord’s right not to have his or her property taken without just compensation, if an escrow requirement were NOT imposed upon the tenants.

In line with this legal precedent, many states have adopted some form of mandatory rent escrowing statutes to combat the pernicious tactic where tenants set up a defense, sham or real, to an eviction with no intention of ever paying withheld rent during the months it typically takes to evict a tenant who contests the summary process action. Some in Massachusetts have dubbed this the “free rent trick.” It is simple, and devastatingly effective.

Here is how it works:

A tenant decides, based on problems with the apartment, or based on no legal reason at all, that he or she no longer wishes to pay rent. She then complains to the landlord, in writing or orally, of defects, real or imagined. Or, the tenant complains to the Board of Health, who immediately issues a citation and a list of defects which could be substantial or which could be minor. At this point the tenant sets up the right not to pay any rent to any person until all defects have been remedied; or until a court orders further payment.

While the tenant is legally obligated to resume rent payments from the moment repairs have been made, typically tenants unlawfully do not resume payments at that time. Then, the landlord’s only recourse is to bring a costly, time-consuming eviction, known as a Summary Process action. From the service of the 14-day Notice to Quit to the original trial date, by law, this must take at least seven weeks, if the tenant(s) file discovery.

The well-versed tenants always do. That means two more months of rent gone just getting to court. In a busy court, with State Sanitary Code violations raised as a defense, the landlord will probably not get a non-jury trial on the Thursday dictated by the rules. It will happen perhaps in another two to three weeks, when the court has an open date which allows enough time to try the case. Therefore, another month of rent is gone: three months in addition to what was previously unpaid. The action is not at all speedy. Additionally, a sympathetic landlord may have delayed for two to four weeks in sending the Notice to Quit to allow the tenant a chance to “catch up with his/her rent.” Therefore, the total rent unpaid at this point is four months, and this is before trial. There are many other delays a malicious or knowledgeable tenant could interject to put off the trial date. For example, a malicious tenant might avoid the owner’s calls and thus delay granting access to make repairs. Or, a malicious or simply knowledgeable tenant might make an appointment and then fail to answer the door after having unlawfully changed the locks. These actions extend the period of disrepair during which usually no rent can be collected through court

It should be noted that more judges are granting ad hoc orders requiring tenants to escrow unpaid rent as the process drags on.

Housing Courts will not generally entertain evictions where Code violations are still unremedied. Savvy tenants know this and act accordingly to delay the day of trial: more lost rent. Frequently, tenants contest the landlord’s discovery responses and further delay trial by Motions to Compel. This takes weeks to resolve in a busy court, perhaps months: more lost rent. A recent study by Massachusetts Landlords found that Housing Court evictions take three times longer than District Court evictions.

Then, win, lose or draw a trial, the tenant typically just leaves without paying rent despite a court order to pay it.

MANDATORY RENT ESCROW

Unlike approximately 28 other states, while an eviction grinds on, Massachusetts does not require a tenant to escrow the withheld rent subject to either: a) the landlord completing all repairs; or b) a court ruling determining how much money, if any, must be paid back to the landlord after repairs have been made to retain possession.

Further, while much lip service is PAID to the supposedly “Summary Process” for regaining possession, the speed with which these evictions proceed when contested can, in actual fact, take from three months to a year, or longer in some cases, without the landlord receiving one penny in rent during this time. Before concentrating on only landlord representation, the undersigned represented a tenant who did not pay rent for three years, although eventually there was a small rent escrow established and the tenant eventually vacated the premises without paying the manager a dime.

Normally, the actions of parties in litigation are somewhat constrained by the fact that the parties must choose carefully which litigation acts they wish to pursue, because they must pay their lawyers as they go in order to pursue their chosen tactics. For example, if a defendant in a collections case wants to pursue legal tactics which, although ethically proper, have the effect of delaying the litigation, but which may have a slight chance of changing the ultimate result, that defendant would have to think twice about paying his or her lawyer to do those litigation acts. It is that obligation to pay one’s lawyer as one moves through legal proceedings, which acts as a brake on intentionally time-wasting, low efficiency legal tactics, because the defendant “must pay to play.” Indeed, even very effective steps may be foregone where the party has little cash.

In Massachusetts, where almost every claim or defense by a tenant in an eviction action carries with it fee-shifting rights which work to force the losing landlord to pay the tenants’ attorney should there be even a nominal win in the tenants’ favor, normal litigation inhibitions do not exist. Therefore, the tenants are encouraged to perpetrate almost any baseless litigation acts which may come to hand. This is especially so where the tenant receives free legal services. For example, the tenant (and landlord) have an absolute right to send discovery questions to each other seeking sworn answers and documents to use in his or her case. The mere filing of discovery automatically continues the trial for two weeks. Legal services offers standard check-the-box discovery that a tenant can complete without a lawyer and file to obtain an automatic two-week extension of the trial. The questions need not even be relevant to work. The mere filing of discovery triggers the automatic two-week delay. Further delays of months are routinely obtained by the tenant requesting a jury trial.

Further, where the tenant has the prospect of having his landlord pay his lawyer, if the tenant wins, there is another reason not to save or escrow the withheld rent. The Massachusetts tenant has nothing to lose by refusing to pay rent using this method. Frequently, after trial, the tenant will owe the landlord more money than the landlord owes the tenant for breaches of the tenancy. Where there is no state-wide mandatory rent escrow requirement in Massachusetts, even if the net judgment runs in favor of the landlord, and even if possession is therefore granted to the landlord, in the overwhelming majority of cases, the landlord will never see a dime of the unpaid rent. Rather than pay money they have not been required to save or escrow, the tenant simply leaves, if the landlord is lucky.

If the landlord is unlucky, to add insult to injury, because Massachusetts requires the landlord to take the execution (order to vacate) and remove the tenant from the premises by a constable and bonded mover, not only will the landlord lose whatever rent has gone unpaid for the past six to twelve months, the landlord must then swallow the bitter pill of either paying the tenant more money to move voluntarily or of paying the constable, mover and warehouse to remove the tenants’ possessions and store them. Typical move out and storage bills easily exceed $1,500.

IT TAKES DE MINIMIS EFFORT TO LEGALLY SET UP THE “FREE RENT TRICK”

A missing cover on a wall outlet, a dripping faucet, missing batteries from a smoke detector, a missing window screen, even in the dead of winter, a stained ceiling tile, one broken floor tile, are sufficient to force the landlord into costly litigation to have the tenant’s damage claims decided by a court after months of expensive litigation where the tenant may well lose.

But, once having lost, while Massachusetts statutes require the tenant to pay to the landlord the balance found due to the landlord after the case has been decided, if the tenant does not want to remain, where no escrow was required, there is no legal incentive or requirement for the tenant to ever pay the money.

In 40 years of evictions, the undersigned may have witnessed the tenant paying the rent found due once, or perhaps twice and in those cases the tenant wanted to remain in the premises. In this fashion, millions of dollars are lost by landlords, because Massachusetts law encourages this appalling result.

Massachusetts law operates to pay the tenant to thumb his/her nose at the landlord and the courts. Let’s use an example to illustrate the point.

Assume a monthly rent of $1,500 for a two-bedroom apartment in Boston. The tenants stop paying rent on, say, January 2, 2014. The tenants then let the oil run out and thus clog the furnace burner nozzle and destroy the filter. Even upon filling up the tank, the heat is off until the landlord pays to fix the tenant-caused malfunction of the oil burner. The landlord is forced to repair these to get her rent. Cost: $100.

On or about February 1, 2014, the tenants have the Board of Health (BOH) write-up violations of no heat and many others not previously complained about. In this author’s opinion, there are few buildings in Boston which have no violations for any length of time. Therefore, there is almost always fodder for a citation.

Note in this example, the tenants have not preserved their defense to possession, because they were behind in their rent before they complained to the landlord through B.O.H. In short, even after trial, no matter what the monetary give and take, in this example the tenants have no legal way to keep possession. But, let’s continue. The tenants bar access to the landlord and her repairmen. The tenants promise, yet deny access for weeks before the workmen can finally fix the heat, cracked window, broken screen, etc. Repairs cost $650.00.

It is now March 15. Three months’ rent is gone.

Finally, on March 22, B.O.H. has closed the violations.

It is this author’s experience that such a fast violation sign off does not generally occur. The B.O.H. generally takes much longer. But, the tenants still do not pay the landlord.

On or about March 24, 2014, the landlord served a 14-day Notice to Quit for non-payment. It is seven more weeks (with the tenants’ filing discovery) before the first trial date, May 13, 2014 is established. (This presupposes no discovery battles or additional delays).

Let’s look at the respective ledgers: Landlord Before Trial -$7,500 Unpaid rent (5 months: Jan-May) -650 Repairs -125 Filing Fee -70 Constable (Notice to Quit, Summons & Complaint) -750 Retainer only for attorney -100 Replace nozzle and fuel filter. Total loss: -$9,195 Costs to date. Tenant Before Trial + $7,500 saved in unpaid rent, but not necessarily withheld, rent – 0 Attorney’s fees (fee-shifting laws) 150 – Fuel Oil. Total gain to date: + $7,350 Net unspent by tenant.

The tenant remains in possession of a rent-free, defect-free apartment. But, back to the trial court. Trial is delayed because of many Code claims and lots of witnesses. On the day of trial, May 13, 2014, the parties are told the case will not be heard for two more weeks, a non-Thursday, or May 25, 2014.

After a contested two-day trial ending May 26, 2014, the landlord wins (lack of heat and broken window were tenant’s fault), the tenants lose possession and are ordered to pay $7,000 ($7,500 – $500 reduction in value of the apartment for door, window and other minor defects) to the landlord within 7 days in order to lawfully remain in the apartment. M.G.L.L.239 §8A

The landlord’s attorney’s fees cost $2,250 (very conservative for a contested trial). The decision did not come down until June 16, 2014. The execution (court order allowing landlord to take back possession) issues on June 30, 2014. At this point: four more months’ lost rent. As of June 30, 2014:

1. The tenants continue living in a defect-free, rent-free apartment. They do not appeal;

2. The landlord hires a constable, a mover and a locksmith to physically evict the tenants using her execution. Costs are approximately $150 + $1500 + $50, respectively. Total out of pocket: $1,700;

3. The landlord’s mortgage of $2,500 per month is one month behind due to lack of rent; and her savings are exhausted for the same reason;

4. The landlord has been ordered to pay the tenants’ attorney $1,000 for winning the Breach of Warranty/Chapter 93A claim;

By July 6, 2014, the tenants are finally removed and the locks are changed. The tenants, of course, paid nothing. The apartment is vacant, in need of $750 of repairs due to damage caused by the tenant on the way out of the apartment. It will not be occupied until August 1, 2014. Another month of lost rent.

Landlord’s total loss for a largely tenant-caused problem:

$10,500 seven months lost rent;

$2,250 landlord’s attorney’s fees;

$1,000 tenants’ attorney’s fees;

$1,700 constable, mover and locksmith fees;

$125 filing fees;

$70 constable’s service fees;

$650 repairs (Note, landlord keeps value of repairs);

$100 furnace repairs;

$750 repair for tenant-caused damage $17,145.

The tenants’ Net Gain:

$10,000 approximately, in unpaid rent;

Likely landlord loss: $17,895. This is a conservative number in Boston due to many variables. Trials almost never go forward in two weeks from the intended trial date. Tenants’ lawyers often make discovery motions, trials take longer than expected, and for many other time-consuming reasons.

The lack of mandatory rent escrowing effectively pays the tenant to cheat the landlord out of huge sums of money. Small wonder there is too little affordable housing in Massachusetts. Without mandatory rent escrowing, the landlord will never see a dime of the lost money. Clearly, if the tenant no longer has the judgment amount saved, the tenant cannot pay it. No landlord should be made to run risks of this magnitude just to be in the landlording business. Landlords supposedly supply something which the government on its own has been unable to provide in sufficient quantities: affordable housing. Yet, landlords are treated as though they were all slumlords all of the time.

INSIDIOUS EFFECT ON THE LEGAL SYSTEM

The above-described loop-holes in the law have a very negative effect on the housing stock, landlords in particular and on the legal system in general. Deprived of their rent money, with no assurances that at the end of a protracted eviction they will receive a just award after deducting for any breaches in the landlord/tenant relationship by the landlord, landlords not only are deprived of the means with which to make speedy and proper repairs to an apartment where they should, but they are also deprived of the incentive to do so because they all know that even at the end of protracted litigation, they are not likely to receive one dime of unpaid rent, win, lose or draw. Most understand that they are in fact likely going to pay a “cash for keys” sum to the tenant, because there is no other inexpensive, reliable way to get them out. Or, the landlord will have to pay another few thousand dollars to a constable, mover and locksmith to finally move out the tenant.

This is grossly unfair to the landlord. Ultimately this has a destructive effect on both the housing stock and landlords’ desires to provide a stock of housing to low and moderate income tenants. One must remember that while bearing these losses the landlord must somehow continue to pay her mortgage, property taxes, insurance, water, etc.

If one takes a step back to look at the overall process of “dispute resolution” and eviction, it is clear that Massachusetts is in the forefront of those who are the least enlightened about some of the real reasons why adequate housing remains in such short supply.

On the one hand, Massachusetts mouths the platitudes that it wants to produce adequate, safe, housing for low and moderate income persons. Yet, on the other hand, it does nothing to dismantle a system which in the end discourages landlord investment in rental property, removes the fiscal ability to properly maintain rental premises, and pays tenants to steal large sums of money from landlords.

This situation is untenable and must end. However, only the Massachusetts legislature can provide a consistent, state-wide remedy for this cancerous blight upon our housing stock and judicial system by passing mandatory rent escrowing.

In more recent cases, some judges have been responsive to the glaring inadequacies of the Massachusetts landlord-tenant laws, and, on an ad hoc basis, have ordered some tenants to escrow their rent as they go forward contesting the landlord’s claim to possession and rent.

However, far too many escrow motions are denied or are inadequate to protect a landlord’s right to her rent.

While some far-sighted judges have imposed a rent escrow, because there are only trial court decisions espousing this position and no broad based acceptance of the principles of Lindsey v. Normet, there is a lack of state-wide consistency and predictability.

BENEFITS OF MANDATORY RENT ESCROWING

Some years ago the undersigned was involved in a case after a far-sighted judge ordered the tenants to escrow their rent as litigation ground on. In that Housing Court case the summons and complaint was served on February 7, 2003, and final judgment was entered on October 31, 2003. At the end of the case, there was approximately $14,000 in escrow. The tenants received their reduction in rent due to the landlord’s breaches. There was enough money collected over the approximately eight to nine months the litigation dragged out, so that the tenants’ attorney was paid for their win. The landlord’s attorney was paid, and the landlord actually received some money after setting off her debt to the tenants. That is a rare outcome in Massachusetts for a landlord.

The landlord was able to raise the money to make the required repairs, because the landlord knew that at the end of the litigation, money would be released back to the landlord to cover the loans taken to make the needed repairs. The net results of escrowing in this case were that all of the goals supposedly sought by the legislature were fulfilled:

1) the tenants had their day in court and were compensated for harm done to them;

2) proper repairs were made and signed off where there were deficiencies found on the part of the landlord;

3) the tenants’ attorney was paid his fees;

4) the landlord’s attorney was paid his fees; and

5) the landlord received the excess after all her debts to the tenant were discharged.

Without the court-ordered escrow account, as in thousands of similar cases across Massachusetts, it would have been much more difficult for the landlord to finance the repairs. The litigation may therefore have dragged on even longer. The tenants’ attorney may never have taken the case if there had not been the real prospect of payment for services rendered, or he may never have been paid for his efforts, thus discouraging him from taking more cases on a fee-shifting basis.

The landlord’s attorney may not have been paid fully, thus discouraging him from taking this or future landlord cases where the landlord is not well heeled. Finally, the landlord would not have received a penny of the money to which she was justly entitled after the above set off. The housing stock would have suffered, and the legal system would have suffered another loss in confidence. The last effect is probably the most destructive effect. For the legal system depends for its viability on the belief of all litigants that the system is fair and that it will work for them. However, where one group consistently perceives it as unfair, this leads to many systemic ills too numerous to mention here. Thus, without a court escrow, no one but the tenants who took the landlord’s money would have been satisfied with the results.

Massachusetts needs a mandatory rent escrow law, because it would avoid unfairness, polarization, loss of housing, and large financial losses described above. If mandatory rent escrowing were required from the moment the tenant begins to withhold rent, this abuse would end.

Tenants should be required to pay their rent as they litigate. This is asking no more of the tenant than to live up to his or her rental agreement until a judge finds a breach by the landlord. If this were the law, incentives for spurious litigation, for basing defenses on false or de minimis violations, and for clogging the courts with such cases that readily lend themselves to abuses, would be reversed. It would likely force to resolution many cases before they ever arrived on the courthouse steps. If tenants knew beforehand that it is unlikely that they will keep all of their unpaid rent at the end of the litigation by simply leaving rather than paying any judgment against them, the number of these junk cases would be dramatically reduced. Under mandatory rent escrowing, the landlord and tenant would be encouraged to work out their differences prior to trial, not discouraged from doing so even after trial. Under such a system, the landlord would be encouraged to make prompt repairs, not discouraged from doing so because of either a lack of funds, a lack of the ability to obtain funds and/or fear and animosity towards the tenant from whom he or she knows they will never collect one red cent even if he or she wins.

HARM TO THE LANDLORD WHEN RENT IS WITHHELD

When a tenant withholds rent, whether rightly or wrongly, the landlord suffers five immediate harms:

1) the landlord’s cash flow is reduced by, let’s assume, one third for a three family property (for example $1,500 per month);

2) however, there is no equal reduction in the landlord’s mortgage, tax, maintenance, utility, or other monthly expenses;

3) the landlord must usually pay a lawyer to pursue the eviction, in addition to suffering the reduced cash flow;

4) the landlord must pay the funds or must somehow borrow the funds (with no assurances that the funds will be returned to him or her) with which to make prompt and effective repairs; and

5) the landlord must expend the time and effort gathering evidence, contacting vendors and/or going to court in order to staunch the bleeding that the rent withholding, whether justified or not, engenders.

Looking at the tenant’s side for a moment where the tenant withholds, the effects on the tenant without a requirement to escrow rent arrears are these:

1) the tenant suddenly has a windfall of an extra $1,500 per month to do with as he or she wishes;

2) the tenant has a “free lawyer” provided by the fee-shifting statutes;

3) the tenant typically does not save or escrow the unpaid rent money;

4) after a few months the tenant readily concludes that s/he is not going to pay the $3,000 or $4,500 (two or three months’ rent) because he or she has spent it, no matter how it turns out in court; and

5) the tenant typically denies or delays the landlord’s access in order to put off paying rent for an apartment with all defects corrected.

Mandatory rent escrowing in approximately 28 other states sometimes takes the following general form:

If the tenant asserts any defense other than payment, or if the tenant wishes to delay a speedy hearing, meaning delay trial for more than seven days, the tenant must escrow his or her rent in court as it accrues during the progress of the litigation. If the tenant fails to do that, the tenant’s case is subject to dismissal, and judgment for possession would enter for the landlord. The tenant, in some instances can submit receipts for tenant-made repairs and the difference in cash in lieu of monthly rent. Or, the tenant in some states may have a right to ask the court in an expedited manner to make a preliminary decision as to the present value of the apartment with defects and order future rent paid into court in that amount during the pendency of the case.

As it is now, without mandatory escrowing, the Massachusetts tenant gets a free ride simply by alleging defects, real or imagined, with no requirement to be a responsible part of the landlord/tenant equation.

“A recent study found that: 99.5% of all judgments were decided in favor of the landlord.”

The overwhelming majority of these judgements are uncollectable.

Worcester Property Owners Association, inc., March 15, 2016.

Significantly, the study also found that:

“Cases filed in Housing Court were three times as likely as cases in District Court to last longer than 90 days”

REAL MANDATORY RENT ESCROWING

The form of mandatory rent escrowing the author suggests is as follows.

If the tenant seeks to set up any defense at trial other than payment, the tenant would be required to deposit all withheld rent into the court escrow until further order of the court at the contract rate for the tenancy. The deposits would continue to be made throughout the pendency of the eviction action. For any failure to deposit rent the tenant’s claims would be dismissed on motion by the landlord. The landlord could apply to the court for a release of money from escrow in an amount sufficient to pay for repairs required by the board of health. Or, the landlord could apply for a release of funds sufficient to remedy a situation where the landlord is about to lose the property through foreclosure or to avoid an imminent shut off of utilities.

The tenant could apply to the court at an expedited hearing for a reduction in the monthly escrow deposits upon proof of serious code violations. Otherwise, the 8A statute would apply as it has in the past. It could be tweaked to better suit the new rent escrow requirements.

NO CONSISTENCY EQUALS NO LAW

While some courts have sporadically granted a rent escrow motion, because these orders are ad hoc and lack a consistent, state-wide, predictable basis for their grant, there is really no rent escrowing in Massachusetts. It is simply false to state that there is any statute or appellate case which implements effective, consistent, predictable, mandatory state-wide rent escrowing. That loop-hole in the law can best be addressed by the Massachusetts Legislature. Only through a consistent set of rules can genuine mandatory rent escrowing be made a reality for all landlords and tenants within the state.

The enormity of the long-term harm done to landlords, tenants, the judicial system and the housing stock in general by the lack of mandatory rent escrowing cannot be adequately remedied on a case-by-case basis. Such litigation is too costly and has little potential for a long-term cure to the ill that is a cancer on the present system.

Lindsey v. Normet declared that it was probably an unconstitutional taking of property to deny the landlord the benefit of rent escrowing during the pendency of litigation beyond the five-day trial period set by the State of Oregon’s statute.

THE LEGISLATURE MUST ACT.

Massachusetts must accept the implications of this case and shake off its lethargy. For years, Massachusetts legislators have listened to false statement after false statement that rent escrowing does exist in Massachusetts, that the system is not broken so don’t fix it, or that landlords will somehow take advantage of tenants through this system. None of this is true.

It is time for the legislators to take off their blinders, to accept the reality described above, and to act on behalf of landlords, tenants and the sake of credibility to the judicial system to create a more equitable, effective set of laws which do not likely violate the Constitutional rights of landlords in the State of Massachusetts.

Were they to do so, we would all benefit greatly.

By G. Emil Ward, Esquire Copyright 2004, 2016 All Rights Reserved

TIPS FOR SCREENING TENANTS

By G. Emil Ward, Esquire Copyright 2004, 2016

Finding tenants in this market is easy. But, finding a good tenant is not. Let’s look at some of the more common problems and things to watch out for if you are a landlord in Massachusetts.

CREDIT CHECKS

When a tenant applies to you or your broker to become a tenant of yours, you must check his/her credit history before accepting the person. It is amazing the large number of landlords who either do not run the credit history or who do not carefully review the report once obtained. It is perfectly legal to require a tenant to grant access to his/her credit history for purposes of evaluating whether or not the applicant will be able to pay the entire year’s rent. Business-wise, it is essential to review it carefully. Although not perfect, one can substantially increase the odds of getting a good tenant if properly used.

For example, an applicant who has several charge-offs on the report (statements by the creditor that it simply gave up trying to collect the debt from this person) is obviously a bad bet if you are looking for a person who will consistently pay you on the first of the month as agreed without a headache. If the person did not pay his Master Card bill or student loan, it is highly likely he won’t pay you either. The same holds true of prospects with a number of a 30-day or even a 60-day late payment on their credit history. Some landlords will not take a tenant who has any “lates” on the report. I recently evicted a tenant for a landlord where the tenant had these things on his credit report. But, the landlord said he trusted the broker to review that for him, and the broker failed to do a good job. So, the client had to incur the cost of an eviction and the aggravation of constantly dunning the tenant pervious to that for timely payments and for money orders to replace bad checks. Once you take the time to review the credit report carefully, if you see these or similar red flags, throw that prospect back. Also a low FICO is not good. Keep looking for a tenant who will pay you on time and who will respect you and your property. After all, your mortgage is due on time isn’t it? Then, you should be entitled to receive your rent on time so you can pay your mortgage on time, right?

VERIFICATION OF EMPLOYMENT

You must verify employment and income. Ask for several pay stubs as proof. Also verify through one of the employment verification services or receive verification from a supervisor. A written verification is preferable.

GUARANTORS

A guarantor for any lease or tenancy is a good thing. You, as the landlord, should not restrict this safety mechanism only to those under 18 or only to college students. Any prospective tenant who may have a blemish on his/her credit report or who has just started a job, or who might be a recent college grad with no credit history good or bad, is a likely candidate for a guarantor. If you are inclined to take the applicant because of other positive things in the application, but you have some minor reservations as above described, get a guarantor to co-sign the tenancy agreement before you take the prospect on.

But, be careful about taking out-of-state guarantors. Many are not worth the paper they are written on for one very good reason. If the tenant whose performance they have guaranteed defaults, in order for you to collect your money from the guarantor, you will eventually have to go to the state where the guarantor lives or has assets to enforce a judgment. You will also have to hire a lawyer in that distant state to reduce your judgment to cash. So, be careful to get at least one in-state guarantor on any tenancy agreement or you may find the guarantee is not any easier to collect than the rent was.

By G. Emil Ward, Esquire Copyright 2004, 2016 All Rights Reserved