Landlords rarely take action against ex-tenants as collection process takes time
Q: I am a property owner in Vacaville. Not long. I just own a duplex and a single family home that I lived in and rent out. I had a tenant in one of the duplexes who didn’t pay rent for about six months and I had him evicted. Turns out they ransacked the place to the tune of $6,000. So I got a judgment against them in small claims court. Now I have judgment in hand and have been trying to get it back, more out of anger than anything else. I called tenants day and night and sent them letters asking them to pay me. Today I received a letter from a lawyer asking that I stop trying to collect the judgment and listing a host of laws he says I violate. He’s threatening to get an injunction against me. If a court says he owes me money, why can’t I get it back?
A: It’s hard for me to tell you exactly what’s going on without at least seeing the letter from your ex-tenant’s lawyer, because there could be other issues involved.
For example, if the tenant says he was never properly served with the small claims suit, he can appeal the judgment.
But for the sake of discussion, let’s assume the judgment isn’t being challenged and they just believe you can’t legally proceed with the collection. Or at least you can’t continue collecting like you did.
The first legal issue that came to mind was that the tenant might have filed for bankruptcy. This is actually quite common for tenants in their position. Remember that you were probably not their only creditor.
When a person declares bankruptcy, from the moment the bankruptcy lawyer presses the “send” button and files the electronic documents for his client, there is an automatic “suspension” which becomes effective.
The term “stay” is simply a legal buzzword meaning that a federal court has ordered that all collection activity of any kind against the debtor must come to an abrupt halt. At once. This is true even if the creditor (you) is not even aware of the bankruptcy. The suspension prohibits phone calls, letters, ongoing lawsuits, evictions, seizures and even tax collection actions.
All creditors, or even potential creditors, now have to go through bankruptcy court in hopes of getting money.
By the way, a creditor who violates the automatic stay can be met with very bad things, including very high fines. So don’t go there.
The letter should mention bankruptcy and stay if that is what they are talking about.
My second thought is that your collection activities may violate California and/or Federal Fair Debt Collection Practices provisions.
The California version is called the Rosenthal Fair Debt Collection Practices Act and is found in the California Civil Code. The federal version, also known as the FDCPA, is found in United States codes. These two laws govern exactly how a creditor can, and more importantly cannot, collect a debt.
These laws apply to any type of consumer debt. Your judgment was based on a type of consumer debt since you rented the unit to the tenant, which is a type of consumer action. The rules are very complicated. But here is a summary:
A debt collector cannot engage in certain specified acts, or “any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt.” This part of the law is found in the United States Code at 15 USC §1692d, if you care.
But you get the idea. The purpose of these laws is to prevent a consumer from being harassed by a bill collector. And again, bad things can happen to creditors who break these rules.
My suggestion is to do one of three things, in no particular order:
- Contract with a collection company to pursue the debt. You’ll pay something like 35% of what they earn in commissions, but they know what they’re doing.
Hire a lawyer who specializes in collections. My hunch is that you will find that the amount they owe will not justify the costs of hiring a lawyer.
Buy a good book on collection practices in California and study it. Collecting legally isn’t rocket science, but it will require a significant investment on your part.
There’s a good reason most landlords don’t bother to file lawsuits against ex-tenants. The collection process can be expensive and, at best, the owner can end up with only pennies per dollar.
Tim Jones is a real estate attorney in Fairfield. If you have any real estate questions you would like answered in this column, you can email [email protected].