Fatal flaws in Just Cause Eviction proposal

565010_fireplaceBased on oral testimony and written comments by Stuart Schrier, Boston landlord attorney of 35 years, who has done 5,000 evictions. Additional comments by Skip Schloming

 The Just Cause Eviction proposal being debated in Boston consists of two essential parts, both of which are fatally flawed: (1) a requirement that landlords send all eviction and rent increase notices to the city so that the city may send tenants information on their rights, and (2) a requirement that all evictions must be based on at least one of nine stated “just causes” proven in court before eviction can be ordered.

These two requirements have legal consequences making them illegal and  flatly not acceptable.

Privacy rights are violated

If landlords are required to send the city copies of eviction, non-renewal, rent increase, and 14-day non-payment notices, as the Just Cause Eviction proposal would require, both landlords and the city would be violating the Federal Fair Debt Collection Practices Act (FDCPA). A debtor, which includes a tenant who has not paid rent, has a right to privacy, and a landlord, a lawyer, or a debt collector cannot share that information with anyone until papers are filed in court. Moreover, keeping all such records confidential in a city office does not work. A staff person could easily tell a neighbor about the private information in a notice.

Such notices would also violate a state law (M.G.L., Ch 93, Sec 49), which says that a debt collector cannot communicate any information about a debt to anyone who is not liable for the debt. Therefore, the Just Cause Eviction proposal, if enacted, would expose both landlords and the city to penalties for violating these laws – and this notification requirement thus fails to to be legal.

Can’t get rid of very bad tenants

The other serious flaw in this Just Cause Eviction proposal is requiring every eviction notice to state one of nine “just causes” itemized in the proposal. What the proposal does is end what are known in Massachusetts as “no-fault evictions.”

In a no-fault eviction, the owner simply gives the tenant 30 days’ notice to move out – with no reason stated. This eviction option becomes a critical tool at times for the landlord and his or her tenants. For really bad tenants, it becomes difficult or impossible to get witnesses to testify against him at trial. When a landlord has a drug dealer, gang banger, pimp, or thug as a tenant, this one tenant terrorizes all the other occupants in the building and the landlord gets constant calls and complaints. In these cases, no one will testify in court against the bad tenant out of fear for their personal safety.

This situation calls for the no-fault eviction: 30 days’ notice and the tenant is out. If the Boston City Council passes this proposal and outlaws no-fault evictions, then landlords will be powerless to get rid of really bad tenants and will end up losing their good tenants. This outcome is totally unacceptable. And thus, a critical provision of the Just Cause Eviction proposal falls by the wayside.

Evictions and rights are not the issue

The proposal is riddled with other serious problems. One problem is the complicated mechanism that requires landlords to send copies of their notices to the city within 48 hours after delivering them to their tenants, followed by the city sending the affected tenants information about their rights. If the real issue is notifying tenants of their rights, there are a lot of easy ways to do it, like requiring a disclosure-of-rights notice to be part of every lease or rental agreement, just like the lead paint notification requirement. Or a simple online link to a tenants’ rights brochure could be posted in the hallway along with the already-required posting of the landlord’s contact information. Supposedly, the eviction notices are also for “data collection” purposes. But all information about evictions is readily available online.

No, something else is afoot. When the city sends tenants information on their rights, the proposal explicitly requires the city to include “a list of tenants’ rights organizations with their contact information.” In this extraordinary requirement, the city is essentially recruiting members and clients for highly partisan, private organizations, just when the tenants would be most interested. These groups will, among other things, urge tenants and help them to organize rent strikes, a powerful way to get landlords to knuckle under and beg for tenants to pay their old rent and forget about rent increases. Rent strikes, however, are a violation of rental agreements and grounds for eviction – making such contact information an unworthy goal of city policy.

Moreover, in blatant bias, the proposal does not require the city to do the same thing for affected landlords, putting them in touch with available landlord groups. Landlords have rights, too, don’t they?

The real goal is rent control

The official purposes of Just Cause Eviction – to stop “arbitrary, unreasonable, discriminatory, or retaliatory evictions” and to “make sure that tenants are aware of their rights” – are bogus. Evictions are very costly and difficult. Owners do not do evictions for no good reason. In addition, 80% or more of evictions are for nonpayment and hardly fall into the category of “arbitrary, etc.” evictions.

No, Just Cause Eviction is not about so many evictions being done for bad reasons. The not-so-hidden, real agenda of Just Cause Eviction is to regulate rents without looking like rent control. It is disguised as a rent “stabilization” act, whatever that means. In New York City, it means rent control.

The proposal contains a definition of “reasonable rent” and a reference to “fair market rent,” which clearly suggest a rent control goal. If it’s not already rent control, it’s the camel’s nose in the tent. Three times in the past, these same advocates have come up with proposals to bring rent control back to Boston. Three times their proposals were voted down by the City Council. Now they hope to sneak it through in disguise. Rent control is the tenant advocates’ obvious goal, now or later.

The basic reality is that you have to live where you can afford to live. The expenses of housing have to be paid for by the people who live in the housing.

If the city wants rent control, however, let the city pay for it by subsidizing the rents.

Penalizes small property owners

The Just Cause Eviction proposal is supposed to apply only to owners of seven or more Boston units. Owners of six or fewer units are exempt, but only if their property is held in an individual’s name. Property owners, however, often put their properties in limited-liability companies (LLCs) or S corporations, protecting their other properties if a serious accident happens in one of them. But since these properties are not held in an individual’s name, they would become subject to the Just Cause proposal.

This law will force small property owners to make a difficult choice: forego the protections of limited liability or be subject to Just Cause Eviction. Think of an elderly owner who has put their property in a Trust for Medicaid purposes. They may have only a two-family, owner-occupied home but, because it is in a trust, it is not exempt from this law. Why punish our elderly or other small owners?

Clear-outs and periodic rehabs

Some have expressed concerns about clear-outs of entire buildings, prior to gut rehabs and condo conversion. Of the nine “just causes” allowed for eviction, evicting to do a gut rehab or condo conversion is NOT one of them. Such clear-outs, however, are necessary from time to time since property must be upgraded.  Many older homes, some as old as 100 years, have one outlet and one overhead light per room. Upgrading these homes to four outlets in every room, hard-wired smoke detectors, and sprinkler systems involves a huge investment and must be completed in a vacant house to be cost-efficient.  If we want modernized housing and great life-safety systems, older houses need to be vacated, one at a time, and upgraded to today’s standards.  We do not want to read about people dying in fires.

Boarded-up housing degrades neighborhoods

Thinking back over the history of rent control, in the 1960’s, 1970’s and 1980’s, there was serious disinvestment in Boston.  The city was dotted with boarded-up buildings and vacant lots. That was all turned around after rent control was terminated in 1994. This Just Cause Eviction will turn back the clock to those sad days, as many homeowners have large mortgages, and delays in collecting rent will result in losing their homes to foreclosure.  Rent control leads to vacant, boarded-up buildings. One boarded-up building ruins the whole block.

The backlash: Getting around the law

Big landlords have lawyers that will quickly find ways around this proposal if it is enacted. Smaller landlords will have much more trouble. One of the ways that tenants can avoid rent increases under the Just Cause Eviction proposal is not to agree to them. The proposal requires tenants to pay only the rent the landlord is “entitled” to. A contract is not enforceable unless both parties agree to it voluntarily. A rent increase requires a new lease or rental agreement, and if the tenant does not agree to it, then the landlord is only entitled to the original rent the tenant agreed to. Just Cause Eviction thus results in a rent freeze, a permanent one. No provision in the proposal allows for legal rent increases.

One obvious strategy around this agreement required for a rent increase is for landlords to build very large rent increases into the original lease the tenant agrees to. For example, the lease can say “this year the rent will be $2,000, the year following $3,000, and the year after that $4,000.” In the second year, the tenants will be very happy to pay $2,200 instead of $3,000. And they will have agreed to it in the original rental agreement.

The Just Cause Eviction proposal does not allow eviction to do major rehabs or condo conversions. But once a unit is vacant, no such restriction applies (yet). So the easy thing to do, when a unit becomes vacant, is to jack up their rents as high as possible in a tight rental market to get “absolute top dollar” – and do all their renovations then. The result will be apartments scattered throughout the city with very high rents, catering to high-income tenants – the opposite of the alleged goal of the proposal’s advocates.

Rent control, whether it is direct control of rents or indirect control through Just Cause Eviction, effectively produces two highly divergent rental markets:  the starving properties being firmly held at below-market rents, and the excessively high rents that occur in the non-controlled housing.

Shifting property taxes onto others

On the day that Just Cause Eviction were to become law, all the affected properties would lose at least 25% of their value. Thereafter, as the gap between controlled rents and non-controlled rents becomes larger year after year, property assessments on the controlled properties will decline steadily further. Without any deliberate act of the city, the divergence in property assessments will mean that property taxes on controlled properties will fall and on non-controlled properties will rise – significantly – in order for the city to collect its usual tax levy.

Housing supply and rent levels

The most effective way to bring rents down is to increase the supply of housing. Currently, in response to a great deal of new rental housing coming on the market, rents in Boston have actually declined recently. A similar decline in rents in New York City has also followed in the steps of new construction.

Increasing the supply will bring rents under control naturally through the forces of supply and demand. But rent control and its ugly step-sister Just Cause Eviction always and very quickly stops all new rental housing construction. Owners and developers fear that the law will be changed in the future to apply to them. A city has either rent control as its housing policy or a policy of openness to new rental housing construction – but you can’t have both policies at the same time. With expected population growth in Boston, tens of thousands of new units will be needed. It will be impossible with rent control or any version of it in Just Cause Eviction.

The problems outlined here are not outcomes to be wished for. Nothing in Just Cause Eviction is to be wished for.

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