Court selection when seeking recovery of COVID-related rent debt
Although we have several reservations about SB 91, the prospect of recouping up to 80% of rent debt by tapping into federal stimulus dollars should be a welcome development to cash-strapped landlords. Our strong preference is to take advantage of the statewide rental assistance program, but we do know that for many landlords and renters, funds will not be available.
There is a large pool of well-to-do tenants who will not qualify because their income falls outside of eligibility guidelines. Unfortunately, we anticipate other tenants to be uncooperative with the landlord and refuse to provide the requisite income and household information needed in the application, a subject we took on in this article.
We need to begin thinking about collecting debt, but in what court?
Beginning August 1, 2021, landlords can seek recovery of COVID-related rent owed that has been converted into consumer debt, and the term “small claims” is inevitably used in everything read or heard. In reality, landlords can go to Superior Court, or what you might call “regular” court.
One of the chief disadvantages in small claims court is that unless the defendant appeals the decision, the landlord/plaintiff cannot be represented by an attorney. Having legal counsel is huge.
It will be more costly at the outset to retain an attorney, but in Superior Court, attorneys’ fees may be recoverable. It will depend on your lease agreement and other factors, of course.
This tidbit - the tenant could be on the hook for thousands of dollars in landlord legal fees - carried more weight before the passage of SB 91. The new law, however, has put a limit on recoverable attorneys’ fees, so being liable for the plaintiff’s legal bills would seem to be less intimidating to the non-paying tenant.
Small claims court, moreover, has been characterized as a kangaroo court, many times presided over by volunteer judges with no law degree. Landlords will find that Superior Court operates under a more rigorous set of rules and a higher degree of due process.
We've all heard the phrase that you will "get your day in court."
Not necessarily true in small claims court, but we can say with more certainty that you will get your day in Superior Court. Small claims courts can handle most run-of-the-mill cases, but when the situation gets a bit more entangled, we recommend Superior Court.
How motivated is the tenant to preserve his or her credit?
We have to put a finger on this in the selection of courts. Many tenants with upward mobility and desire to get loans in the future will want to settle with the landlord to avoid a major blemish on their credit.
On the flip side, however, we expect there will be tenants with poor credit who don’t necessarily fear a judgment. If the defendant is not conscientious of their credit or already has multiple judgments, what’s another one?
Just some of the factors we have to consider.
While small claims have dominated the discussion about recouping rent debt, small claims court is not the only option. In some circumstances, it may make sense to avoid what we would expect to be a congested small claims court system and escalate the matter to Superior Court.
Long before the pandemic, we said that our goal is not to elongate a dispute but to resolve it as quickly and inexpensively as possible, taking into account time, risk, and attorneys’ fees. We’ve always believed in working ourselves out of a job.
Having said that, we can certainly assist in litigation in the event the rental relationship collapses and the circumstances warrant.