Legislature(2005 - 2006)BELTZ 211
03/28/2006 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| Personnel Board | |
| SB307 | |
| SB300 | |
| SB309 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 241 | TELECONFERENCED | |
| *+ | SB 309 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 307 | TELECONFERENCED | |
| += | SB 300 | TELECONFERENCED | |
SB 307-LANDLORD REMEDIES; LATE FEE
CHAIR CON BUNDE announced SB 307 to be up for consideration. He
recapped that going to a seven-day notice would allow people to
be a month late on their rent. Going to a 10-day notice would
allow them to be evicted if they were late more than twice in a
year.
ED SNIFFEN, Division of Consumer Protection, Department of Law
(DOL), explained under the current bill, if a tenant is late on
his rent, the landlord can issue a seven-day Notice to Quit and
if the tenant cures the problem, he is not evicted. But if the
tenant repeats that offense within so many months, the landlord
can give a shorter notice period before evicting the tenant.
CHAIR BUNDE said the goal of the bill was to consolidate the
late fee notice and the notice for nonpayment of rent to seven
days before an eviction process would start. His question was,
though, why not go to 10 days because he has been led to believe
that a tenant can violate a late fee twice in a six-month period
before he is liable for the eviction process.
CHAIR BUNDE asked Mr. Sniffen to relate general concerns.
MR. SNIFFEN said the Department of Law did not take a position
on this bill, but he explained that it would allow landlords to
evict tenants for not paying late fees just as if they had
failed to pay rent. Currently, a different notice is required
for failure to pay late fees and other charges and the standard
of review applied by the court in determining whether to evict
someone for failing to pay those fees is different.
The court must decide whether or not the failure to
pay those fees constitutes a material breach of the
rental agreement. Whereas, if you have tentative fail
to pay rent - rent is sort of separated out from all
the other fees and charges and when a court is faced
with a situation where a tenant has failed to pay rent
and is deciding whether an eviction would be
appropriate, the landlord simply needs to submit
evidence that rent wasn't paid and there were no
defenses and then eviction can follow. There are
different standards of review, so to speak, that a
court engages in when reviewing a failure to pay rent
versus a failure to pay a late fee.
And what this legislation would do is it would combine
those into a streamlined procedure as the proponents
have advocated that would allow the landlords to issue
one notice that would include not only the late rent,
but whatever late fees could be associated with that
rent and then a court would decide if that combined
fee wasn't paid, whether or not eviction would be
appropriate. The court would not need to engage in the
analysis to determine whether that constitutes a
material breach of the rental agreement - because the
late fees would be essentially rolled into the rental
amount.
CHAIR BUNDE asked if nonpayment of late fees was a material
breach of the contract.
MR. SNIFFEN replied yes.
1:40:53 PM
SENATOR SEEKINS commented that he liked streamlining the
process, but he had a problem with nonpayment of late fees
constituting a material breach.
SENATOR JOHNNY ELLIS asked if landlords wanted to include other
fees were in one notice.
MR. SNIFFEN replied that AS 34.03.220(a)(2) doesn't actually use
the term "late fee" when it discussed the 10-day notice that is
required to evict somebody for failure to pay it. It says
essentially anything else owed to the landlord that is not rent
falls under the 10-day notice period and before an eviction can
occur for non-payment of any of those other charges, the court
needs to determine that constitutes a material breach of the
rental agreement.
1:44:13 PM
SENATOR SEEKINS referenced page 2 of Mr. Sniffen's letter where
it said the court is not required to consider whether the late
fee is reasonable and he asked if any statute puts a cap on what
a late fee can be.
MR. SNIFFEN replied that he didn't know of such a statute, but
perhaps some common law or consumer protection principles could
be applied to some completely outrageous and unreasonable late
fees. Essentially the late fee needs to be reasonably related to
the costs of having to pursue late rent.
SENATOR SEEKINS asked if that would be a different type of an
action from an eviction and the court would be required to
consider whether or not that late fee was reasonable.
MR. SNIFFEN replied that was correct. He said that current
practice among the judiciary is uneven.
CHAIR BUNDE asked if a tenant were late in paying his $1,000
rent that was due on the first of the month, did it accrue a
late fee beginning at the first of the month and he then has
seven days in which to pay his rent and three more days in which
to pay the late fee - or did the late fee begin 10 days after
the seven-day period.
1:47:32 PM
BOB MAIER, Executive Director, Alaska Manufactured Housing
Association, replied that generally rent is due on the first of
the month and then there is usually a 10-day grace period. After
the end of that grace period, the late fee would be assessed. As
it stands now, the landlord has to hang a seven-day notice for
the rent and a separate 10-day notice for the late fee. This
requires two separate court actions. He said that the question
had come up about putting both on a 10-day notice, but rules are
different for a seven-day notice than for a 10-day notice. A 10-
day notice has a six-month re-occursion provision. In other
words, if the tenant does not pay a late fee two or three times,
he could be evicted if one 10-day notice was used for both rent
and late fees. On a seven-day notice, this re-occurrence
provision does not fall into play. The tenant can re-offend each
and every month. As long as the tenant cures within the seven
days, he is fine. With SB 307, the question has come up that
including the late fee on the eviction notice would allow a
judge to evict for both rent and late fee, but he claimed that
SB 307 simply allows the communication process to improve
between the landlord and the tenant.
MR. MAIER said that many businesses already follow this process.
Further, he said:
If the tenant came up after that period and said,
'Hey, I've got the $500, but I don't have the $50 late
fee, no landlord is going to go through the whole
process of having to turn their apartment, go to court
- it's $435 now for a FED that the court awards - it
costs the landlord - take the time to get the tenant
out - go in and have to clean the apartment up and
then re-rent it. Now, that's where the rubber meets
the road. The landlord will not go through the process
just to collect the late fee. He'll wait for it.
The question has come up now the judge can legally
evict for the late fee if you go to a seven-day notice
- that it would be included as rent. Well, the same
thing happens, I think, as Ed Sniffen referred to, the
District Court is sort of the wild, wild, west of the
judicial system. The judges have a wide array of
decisions that they can make and they don't
necessarily always stick to the letter of the law.
I've been to two or three hundreds of these FEDs and I
have never seen a judge ever evict for a late fee.
1:51:58 PM
CHAIR BUNDE asked if the landlord has to go to court to get a
legal document to "hang a notice to quit."
MR. MAIER explained that after a 10-day grace period, landlords
can hang a seven-day notice to quit. The clerk of the court has
a standard form to use. Under current law, a landlord hangs a
10-day notice at the same time as the late fee. He is dealing
with two different pieces of paper - with two different amounts
of money with two different dates due - at the same time. He
said the Nakamoto decision was made in 2002 and he wants the law
to go back to what it was before that decision.
GORIUNE DUDUKGIAN, Staff Attorney, Alaska Legal Services, said
he worked on the Nakamoto decision and agreed with Mr. Sniffen
that SB 307 makes nonpayment of late fees a material breach by
definition. That means that no matter how big or small the late
fee is, if a tenant has paid all the rents due, but not the late
fee, the landlord can have him evicted after 48 hours. He
disagree with Mr. Maier that the current law requires two
separate court actions. That's simply not the case. There is
nothing to keep landlords from combining the two notices into a
single action and proceeding under both of them in an eviction
case. He explained that SB 307 gives landlords the right to take
a tenant to court and have them evicted if he hasn't paid his
late fees.
1:56:58 PM
MR. DUDUKGIAN also said that in streamlining the process for
landlords, they might create some unintended consequences for
both landlords and the court system. Now it's easy for a
landlord to comply with the law. If he ends up in court and the
judge determines the late rent has not been paid, the judge's
hands are tied and the person has to be evicted. If the notice
starts to include late fees, then tenant advocates like himself
will have only one defense - to challenge the reasonableness of
the late fee. This would convert a five or ten minute hearing
into a half hour hearing so the court could determine what is
reasonable.
He firmly stood behind the Nakamoto decision. The principle
behind it is that eviction is a very harsh remedy. It makes
people homeless and families with children have to move. The
Nakamoto decision said because eviction is so harsh, it should
be limited to the most major breaches - like nonpayment of rent
or bothering other tenants. It shouldn't be used for things like
late fees or parking fees or fines. This law doesn't make it any
easier to evict a tenant. He said that studies show that tenants
lose in court about 90 percent of the time even if they have a
lawyer. The whole reason behind the Landlord Tenant Act was to
make more of a level playing field between landlords and tenants
and the Legislature doesn't have to make it any easier for
landlords to evict their tenants with a statistic like that.
1:59:52 PM
CHAIR BUNDE asked if this bill passes, all the potential tenant
loses is three days.
MR. DUDUKGIAN replied that more than just three days is at
stake. The seven-day notice is automatic and with a 10-day
notice you have to prove that the breach was a material one that
should lead to eviction. Now a tenant can argue whether a late
fee is material.
2:02:23 PM
SENATOR SEEKINS said it seems that low income folks are really
the most likely to be late on a rental payment and a landlord
who has no limit on reasonableness of a late fee can count on
exponentially increasing his rental income by charging an
exorbitant late fee with the threat of eviction. He said he
would like to hold on to the bill and examine its consequences
further.
2:04:20 PM
CHAIR BUNDE announced that he would hold SB 307 until Thursday.
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