Kushner apartments charge improper fees, tenants allege in lawsuit

Baltimore-area tenants of the apartment company owned by Jared Kushner, son-in-law and adviser to President Donald J. Trump, filed a lawsuit Wednesday alleging the firm has been charging improper fees and threatening eviction to force payment.

The two tenants who filed the lawsuit in Baltimore Circuit Court Wednesday morning are Tenae Smith, who lives in the Dutch Village apartments in Northeast Baltimore, and Howard Smith, who lives in the Carroll Park apartments in Middle River.

The tenants are asking the court to certify the lawsuit as a class action on behalf of all tenants living in the 17 apartment complexes in Maryland owned by the Kushner Cos. and managed by its affiliate, Westminster Management.

Westminster Management manages nearly 8,800 units in Maryland. Most are in Baltimore County. Others are located in Baltimore and Prince George’s County.

A Kushner Cos. spokesman said the company “will respond to the complaint at the appropriate time in the legal proceedings.”

The allegations are similar to those that the Baltimore-based Public Justice Center asserted in class action claims against two other large rental property managers. The companies in those actions denied any wrongdoing but agreed to settlements that resulted in nearly $2 million of debt forgiveness for tenants.

In the lawsuit Wednesday, the tenants allege Westminster Management improperly allocated rent payments to allegedly overdue fees for other services, prompting more late fees and threats of eviction, and perpetuating a cycle of debt.

The Public Justice Center said Westminster charges tenants “excessive, illegal fees, regularly misapply tenants’ subsequent payments in part to the illegal fees, and then deem the next rent payments ‘late’ to justify additional excessive fees.”

If tenants “do not pay the improper fees,” the plaintiffs allege, the company files “summary eviction proceedings to collect these fees, even when the tenant’s rent is current. … If a tenant has not paid his or her monthly rent in full by the end of the fifth day of a month, [the company] charge not only a ‘late fee,’ which purports to be 5 percent of the monthly rental payment, but also other fees.”

The plaintiffs allege that Westminster charges court-related fees that are improper because judges have not awarded those costs.

The tenants allege that the charging of such fees violates Maryland law, which states that landlords may not collect penalties in excess of 5 percent of the rent due.

“Contrary to Maryland law, Westminster claims that these fees are ‘rent’ and thus collectible under threat of eviction,” the Public Justice Center said in a statement.

The Maryland Court of Appeals ruled in February 2016 that a property manager should not have claimed unpaid utility bills amounted to overdue rent for the purpose of filing eviction proceedings against a tenant.

“As a part of their routine business practices in Maryland,” they say, Westminster Management has “systematically and regularly charged plaintiffs and other class members fees in excess of 5 percent of the amount of rent due for a rental period for which a rent payment was delinquent, and charged late fees even when tenants paid their rent on time.”

The tenants are seeking damages in excess of $75,000 and attorneys fees.

Smith, a lawyer for Senior Legal Services in Baltimore, lives in Dutch Village with her 11-year-old son, her 3-year-old daughter and their father.

“Ten to 30 dollars might not seem like a whole lot right away, but when you’re already working paycheck to paycheck it can be the difference between putting gas in your tank or feeding your family,” she said. “I hope that, one, they actually stop doing this to all the other tenants and hopefully I’ll be able to recuperate some of the fees I have paid in the past.”

The tenants are also represented by the law firms of Brown, Goldstein & Levy and Santoni, Vocci & Ortega.

Attorney Andrew D. Freeman said the fee practice “preys on working-class tenants.”

“Westminster actually puts some of these improper practices directly in its leases where it claims the right to deem these fees as rent and then charge late fees on top of those fees,” he said. “That’s directly contrary to Maryland law.”

The Public Justice Center filed similar class actions against Dunne Wright Services and Sage Management in the past two years. The lawsuits, filed on behalf of more than 3,200 tenants, alleged that the companies charged improper fees and allocated rent payments to other charges.

Dunne Wright Services, based in Baltimore denied the allegations but agreed to allocate nearly $663,000 to reduce the debts of past and current tenants, to credit their rents and reimburse some costs. The firm also agreed to pay $61,500 in tenants’ legal fees.

Dunne Wright also agreed to define “rent” to include “only the fixed sum due from the tenant each month (not including repair charges or utilities, which will be classified as non-rent charges).”

The president of Sage Management said the claims against it were “without merit,” but the company paid tenants in Baltimore nearly $1 million in compensation and debt forgiveness.

Tenants alleged that the company routinely charged late-paying tenants not only the permitted 5 percent penalty but also illegal fees, charges and penalties. They also alleged that the landlord hid “agent fees” by combining them with legitimate court costs.

A Sage representative said at the time the company charged fees to tenants to cover expenses it incurred as a result of tenant delinquencies. The company agreed to forgo such fees in the future.

The Public Justice Center labeled such actions by landlords “fee-churning schemes” that “keep renting families constantly guessing at what they owe in any given month, constantly falling farther ‘behind’ on the landlord’s ledger and constantly facing eviction.”

Landlords in Baltimore file more than 155,000 lawsuits annually alleging non-payment of rent, resulting in nearly 7,000 evictions annually.

Tenant advocates have accused Kushner’s affiliates in Maryland of being overly aggressive in collection tactics when pursuing allegedly unpaid debts through state courts.

The Baltimore Sun reported in August that Kushner’s affiliates in Maryland have filed at least 1,250 legal actions in the state since 2013 against tenants accused of owing money. Judges have awarded a total of $5.4 million in judgments against tenants who owed an average of $4,400, The Sun’s analysis showed. That includes the alleged original debts, plus lawyers' fees, court costs and interest.

In most of those cases, judges have approved the garnishment of tenants’ wages and property, actions that have helped the Kushner-controlled companies collect $1 million so far, the data showed.

The Sun analyzed data from a searchable database of district court cases compiled by the Maryland Volunteer Lawyers Service.

The Sun also found that the company has been the most aggressive in Maryland in getting judges to order the arrest of people who allegedly owe it money for failing to appear in court.

Since 2013, the first full year in which the Kushner Cos. operated in Maryland, corporate entities affiliated with the firm's 17 apartment complexes in the state have sought the civil arrest of 105 former tenants for failing to appear in court to face allegations of unpaid debt, The Sun found.

That’s more than any other landlord in the state over that time, an analysis of Maryland District Court data shows. Court records show that 20 former Kushner tenants have been detained.

Jennifer McLean, chief financial officer of the Kushner Cos., has said that the firm “follows guidelines consistent with industry standards” and state law when it files legal action.

Westminster Management “only takes legal action against a tenant when absolutely necessary," McLean said in a statement in August.

Units owned by the Kushner Cos. generate at least $90 million in revenue annually, according to offering circulars from mortgage giant Freddie Mac obtained by The Sun, and at least $30 million in profit, according to financing documents provided to investors who hold the mortgages.

Three of the portfolio's apartment complexes — Dutch Village in Northeast Baltimore, Carriage Hill in Randallstown and Highland Village in Lansdowne — have received $6.1 million in federal rental subsidies since Jan. 1, 2015, according to records obtained through a Freedom of Information Act request. That’s money from the U.S. Department of Housing and Urban Development that helps the poor pay rent.

The Housing Choice vouchers from HUD have helped 268 tenants pay rent at the Kushner properties, finance records show.

Congressional Democrats from Maryland asked Westminster Management last month for thousands of pages of documents to review.

In a letter to the company, Sens. Ben Cardin and Chris Van Hollen and Reps. Elijah E. Cummings, C.A. Dutch Ruppersberger, John Sarbanes and Anthony Brown told Kushner’s firm that it must abide by U.S. Department of Housing and Urban Development regulations because its tenants receive federal rental subsidies through the Housing Choice voucher program.

ddonovan@baltsun.com

twitter.com/dougdonovan

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