Recently, class-action lawyers have filed various putative class-action complaints against landlords and real estate management companies under the Massachusetts Security Deposit Statute, Mass. Gen. Laws, ch. 186, § 15B (“MSDS”). The MSDS has been interpreted to apply to residential leases and not commercial leases. The lawsuits seek to redress the defendants’ imposition of alleged unlawful fees charged to tenants at or prior to the commencement of the lease term in violation of Section 15B(1)(b). The putative class-action complaints typically include related counts alleging breach of the Massachusetts Consumer Protection Act, Mass. Gen. Laws, ch. 93A, (“Chapter 93A”), thereby potentially exposing the defendants to double or treble damages, reasonable attorneys’ fees, and costs.
Background
Section 15B(1)(b) provides, in relevant part, as follows:
At or prior to the commencement of any tenancy, no lessor may require a tenant or prospective tenant to pay any amount in excess of the following:
- rent for the first full month of occupancy; and,
- rent for the last full month of occupancy calculated at the same rate as the first month; and,
- a security deposit equal to the first month’s rent provided that such security deposit is deposited as required by subsection (3) and that the tenant is given the statement of condition as required by subsection (2); and,
- the purchase and installation cost for a key and lock.
See MASS. GEN. LAWS, ch. 186, § 15B(1)(b). In addition, the Massachusetts Attorney General has adopted consumer protection regulations that adopt the provisions of Section 15B(1)(b) verbatim. See 940 C.M.R. § 3.17(4)(a). A violation of this regulation itself constitutes a breach of Chapter 93A. See MASS. GEN. LAWS, ch. 93A, § 2.
Recently, in Hermida et al. v. Archstone, et al. No. 10-12083-WGY (D. Mass.), Judge William Young of the United States District Court for the District of Massachusetts granted summary judgment on liability to a plaintiff’s class against lessor defendants under Chapter 93A stemming from a violation of Section 15B(1)(b). In Hermida, plaintiffs/tenants alleged that their lessors violated the MSDS by charging an “amenity use fee” that was not expressly enumerated in Section 15B(1)(b). Before granting summary judgment, Judge Young certified a class of all current and former tenants who paid the “amenity use fee” and who make a demand to receive the return of that fee after receiving the class notice. The matter is currently scheduled for trial later this summer on the issue of damages. Buoyed by their victory in Hermida, the plaintiffs’ lawyers have targeted other landlords/management companies for similar alleged fee violations.
Although there is no known, reported decision by the Massachusetts Supreme Judicial Court defining the scope of Section 15B(1)(b), Judge Young’s analysis in Hermida is consistent with decisions from Massachusetts lower trial courts and the Massachusetts Appeals Court. See Dolben Co., Inc. v. Friedmann, 2008 WL 81549 (Mass. App. Div. 2008) (imposition of $35 application fee violated Section 15B(1)(b) and, pursuant to 940 C.M.R. 3.17(4)(a), violated Chapter 93A); Carter v. Seto, 2005 WL 1383337 (Mass. App. Div.), affirmed 66 Mass. App. Ct. 1114, review denied, 447 Mass. 1108 (2005) (landlord’s collection of $150 designated as “deposit” for electric garage door opener and electric eye in addition to $2,000 security deposit at inception of tenancy was an unfair and deceptive trade practice); see also, Dent v. Abbey, 2005 WL 1875543 (Mass. App. Ct. 2005) (referencing, in dicta, that trial court had concluded that landlord collected application fee in violation of Section 15B(1)(b)); cf. Sandy Bay Estates v. Urbano, 2004 WL 316147 (Mass. App. Ct. 2004) (no violation as fee for purchase and installation of lock was enumerated under Section 15B(1)(b)). As a result, alleged violators may face an uphill battle when defending against claims alleging breaches of Section 15B(1)(b) and Chapter 93A.
What Should Landlords and Real Estate Management Companies Do in Response to Hermida and This Latest Trend in Class-Action Litigation?
Landlords and real estate management companies should review all fees imposed on tenants at the outset of their tenancies to make sure that those fees comply with Section 15B(1)(b). Any questions about the propriety of fees should be brought to the attention of your Greenberg Traurig attorney to discuss strategies to minimize potential liability. In addition, landlords and real estate management companies should review all other policies relating to rent and security deposits to ensure that their practices comply with all other MSDS provisions. Although there are ways to limit exposure to double and treble damages under Chapter 93A in response to alleged Section 15B(1)(b) violations, other MSDS provisions (unlike Section 15B(1)(b)) mandate treble damages. The MSDS seeks to equalize the bargaining position between landlords and tenants and its requirements are not onerous. When there is a violation, however, the MSDS (coupled with Chapter 93A) assuredly weigh the bargaining position heavily in favor of tenants.
