Legislature(2005 - 2006)BELTZ 211
03/09/2006 01:30 PM LABOR & COMMERCE
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SB 307-LANDLORD REMEDIES; LATE FEE CHAIR CON BUNDE announced SB 307 to be up for consideration. JANE ALBERTS, staff to Senator Bunde, said that SB 307 addresses a problem from the 2002 Superior Court ruling on how landlords collect late fees. The court ruled two separate notices were required. This has caused problems. SB 307 returns the notification process back to what it was prior to the 2002 Superior Court Ruling. It allows landlords to include the late fee on the same seven-day Notice to Quit for nonpayment of rent. She explained that the 2002 ruling required a seven-day Notice to Quit for nonpayment of rent and a 10-day Notice to Quit for nonpayment of the late fee. This meant that two separate notices had to be sent to the tenant. Having two different notices with different due dates and different amounts has caused problems and many have ended up being settled in court. BOB MAIER, Alaska Manufactured Housing Association, supported this legislation. He explained that they are asking for the notice and late fee to be included on the Notice to Quit to cut down on misunderstandings. Rent is usually due on the first of the month and generally there is a 5 to 10 day grace period before a late fee is assessed. After that time a Notice to Quit is hung. He supported having the dollar amount of the rent and the dollar amount of the late fee to be included on the seven- day Notice to Quit to make communication clearer between landlord and tenant. The Building Owners and Managers Association supports SB 307. It has over 12,000 members worldwide with 108 members in Alaska. CHAIR BUNDE asked if this would make it easier to evict renters. MR. MAIER replied no; it is just a simplification for the landlords, the tenants and the courts. CHAIR BUNDE asked if an eviction notice is served and protested, does it have to be settled in court. MR. MAIER replied that any Forced Entry and Detainer (FED) is filed with the District Court where judges have a wide purview to make decisions. 1:50:33 PM GEORGE CAMP, Manager, Diamond State Properties, said Diamond Properties is a 522 mobile home park in Anchorage. He sends out an average of 20 Notices to Quit per month on the rent issue alone. He supported SB 307 because it would cut down on administrative costs by only requiring one notice. It would also clarify the law for everyone concerned. 1:51:22 PM ED SNIFFEN, Assistant Attorney General, Division of Consumer Protection, said the department doesn't take a position on this bill but he wanted to point out some of the consequences SB 307 would have. Before the Nakamoto case in 2002, there was an accepted practice that was illegal and has always been illegal. The Nakamoto case recognized it as illegal under the current law. Mr. Sniffen explained: It was illegal because we have two statutes, one that requires a 10-day Notice to Quit for failure to pay late fees and other surcharges and another statue that requires a seven-day notice for failure to pay rent. Rent is treated completely differently from late fees and surcharges and for a reason. Under the statute, if you fail to pay rent, there are specific review requirements the court has to go through to decide if you didn't pay because you didn't get your notice - maybe there were offsets, maybe you had to perform repairs, maybe you had to pay utilities - a variety of reasons. And the court has directed, by statute, to look at those issues when deciding whether or not to allow an eviction for failure to pay rent. If you fail to pay a late fee, however, there is another notice required. And the failure to pay a late fee has to rise to the level of being a material breach of the contract before you can evict a tenant and that's the current state of the law. So, by combining these two concepts into one notice, you are essentially allowing landlords to evict tenants for failing to pay late fees. When under the current system, you can only do that for failing to pay rent and then you could proceed to evict for failure to pay late fees, but only if you show that the late fee failure was a material violation of the lease agreement. MR. SNIFFEN said some subtle consequences would have impacts on tenants. One of the ways landlords could currently get around this is by just issuing a 10-day Notice to Quit. Then the late fees can be included with the late rent. It would be a 10-day notice, not a seven-day notice. 1:54:39 PM CLAYTON WALKER, Alaska Law Offices, Anchorage, said he has represented a lot of landlords. He explained that the statute doesn't say anything about the 10-day notice being for late fees; it's simply for any other material violation of a lease. Also, the tenant is only allowed one opportunity in a six-month period to remedy a 10-day violation. So, if he misses making a second late payment, he has no right to remedy that circumstance. He elaborated: So, having a landlord use a 10-day notice rather than a seven-day notice is harmful for consumers. The seven-day notice, in contrast, that tenant could be late every month, get the seven-day notice; pay within the seven days and they've remedied. They have a right to stay in the premises. Allowing late fees to be included with the rent on that kind of a notice would allow them to remedy that indefinitely, no matter how many times they were late. In contrast, a 10-day notice, they would be out the second time they failed to within six months. MR. WALKER informed them that the Nakamoto Superior Court case has not been consistently applied by the courts. Some of the courts feel that the decision was wrongly decided and there is a split within district court on how to handle the issue. Passing this statute would create uniformity among the district courts in how they handle the issue, which would simplify things for both the tenants and the landlords, both of whom have problems understanding the amount that needs to be paid. 1:57:01 PM CHAIR BUNDE asked if this bill would encourage people to be chronically late. He asked if under the old system, a person was late twice, he could be evicted. MR. WALKER replied that was his understanding. CHAIR BUNDE asked if under existing law with the 10-day notice for a late fee, could a person get the chance to cure that once every six months. So being late twice would be cause for eviction. MR. WALKER replied that was correct as long as the court thought the late fee non-payment was a material breach of the lease. If the late fee was $50 and the rent was $1,000, he might decide to let them stay and the landlord would have to wait until the late fees accumulate to a much larger number that a judge would find as material. 1:58:52 PM WAYNE STEVENS, President and CEO, Alaska State Chamber of Commerce, supported SB 307 because it clarifies and simplifies the process and is in the spirit of regulatory reform, which was passed last year. 1:59:33 PM CHAIR BUNDE announced the bill would be held for further work with Mr. Sniffen.