Case-by-case rent escrow decisions are not fair

Same facts, but one judge says no escrow, another judge says yes escrow. What’s fair about that?Small Property Owner Association

This article is based on material submitted by practicing attorneys.

Approximately 36 states have a mandatory rent escrow law. Massachusetts does not, which is a primary reason why Massachusetts is one of the most landlord-unfriendly states in the union.

Unlike Massachusetts, a Florida tenant being evicted, for example, is barred from asserting any defense against eviction except that he or she has paid all the rent. For any other defense against eviction, the tenant must escrow all rent in court while the eviction plods along.

The eviction rules in Massachusetts require the courts “to secure the just, speedy, and inexpensive determination of every summary process [eviction] action.” But rarely do contested eviction cases resolve speedily because the free rent trick is built right into the eviction statute. The lack of a mandatory rent escrow requirement is the root cause of a gargantuan problem.

No Massachusetts law requires the tenant to escrow rent while the eviction grinds to its inevitable conclusion. Tenants are left free to intentionally create violations of the state sanitary code, thus blocking and delaying evictions. Not all tenants intentionally damage their apartments to gain free rent, but some do.

Even if they don’t intentionally create code violations, tenants are encouraged by the eviction law to delay resolution of evictions as long as possible in any other way. One popular way is to request a jury trial, every tenant’s right. Housing Court is well-known to have severely backlogged jury schedules. Boston’s backlog is huge. Many Housing Court cases state as much. When a tenant files a jury request, then the case gets placed in a long line waiting for a jury trial and easily buys the tenant an extra four to six months of free rent, rightly owed but never paid.

Regardless of intentional damage or other delay, tenants often simply move out at the end of a protracted eviction, depriving the landlord of rent which could have gone into maintenance and improvements of the property and also depriving state government of income tax revenue from the rent if it had been paid.

The legislative response to this problem has been non-existent. The judicial response has been slow in coming, particularly in the Housing Courts.Massachusetts

The hallmark of a good law is that it provides predictability for all: landlords, tenants, judges, banks, etc. Yet the absence of a mandatory rent escrow statute gives judges the discretion to rule on a case-by-case basis, granting or denying individual landlord requests to require escrowing. Where one judge might grant such a motion to require escrowing, another judge – on the same facts – might not. This outcome flies in the face of what a good law is supposed to be and do. It is unfair to all parties, it is a waste of judicial resources, and it prevents much needed predictability in the area of landlord-tenant law, which both sides crave and need. The law has remained unchanged because no individual landlord will appeal an adverse ruling to a higher court. The cost of such an appeal would surely exceed the non-escrowed rent.

Legal Service lawyers constantly assert that no statutory requirement of rent escrowing is needed because we already have judge-made law that provides for rent escrowing now. This argument has only a small basis in fact. To its credit in recent years, the Boston Housing Court has responded to the inequitable outcome of present law by granting rent escrow requests more frequently and providing some landlords with a modicum of protection from receiving no rent at all at the end of a protracted eviction.

Case-by-case rulings, however, vary considerably in the absence of a state standard. Anecdotally speaking, only about 50% of these motions are granted. Most of these motions are granted on the condition that if the tenant fails to pay the rent into escrow as ordered, the court “may” strike the tenant’s jury request that is stalling the trial date. Note the lack of predictability even when such motions are granted.

A search of rent escrow decisions taken from the Housing Courts further verifies that rent escrow requests can be “granted” in ways that fall far short of true escrow. The court, for example, may be very slow to order it. One escrow motion was granted only after the tenant was fully two years behind in her rent and very unlikely to win enough at trial to exceed her debt to the landlord. In another case, the court’s remedy was a contempt citation for not following a court order, but the jury request by the tenant, which greatly delayed the trial, was not struck down.

Filing a contempt – that is, the landlord asks the judge to order the tenant to pay a penalty or even go to jail – is another expensive, time-consuming proceeding that will not necessarily help the landlord get the rent into escrow. Of the court cases reviewed for this article, only one order struck down the tenant’s request for a jury trial automatically, without further landlord action, if the tenant did not comply with the escrow order.

It is noteworthy that in District Courts, judges have ordered that the rent continue to be paid directly to the landlord. In one case, the beleaguered landlord was thus relieved of having to exhaust her savings to save her mortgage while the long eviction ground to its ultimate conclusion months after it started.

Housing Court orders, in contrast, never require direct payment to the landlord, no matter the lack of code violations and no matter how long it will take to reach a jury trial. In Housing Court, the expeditious resolution of eviction disputes is not the guiding principle. Thus, landlords get different treatment in different courts on essentially the same facts.

One must ask: If the Housing Courts consider it fair that tenants should be allowed to withhold rent so as to guarantee that they have the landlord’s funds available to pay their anticipated damages from having to live with any alleged code violations, why is it not equally fair to order in all cases that the tenant continue to pay rent into escrow at least until the judge finds that the landlord has violated the tenant’s rights?

The argument that we do not need a mandatory statewide escrow requirement because we already have a judge-made remedy is mostly groundless. The consequences of present-day, case-by-case, judge-based decision-making on escrow requests are insidious, seemingly harmless but in fact quite grave. We do not have true rent escrow in Massachusetts, and it is high time we did.