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Karaa v Yim (security deposit, 93A requires actual injury)

This case came out yesterday:

The tenant (Yim) broke the Lease because they went to China and their visa to come back to the US was denied. The landlord sued the tenant to get all the rent owed until the end of the lease or at least until he re-rented the house. The tenant naturally countersued.

FRUSTRATION OF DOCTRINE. The tenant said that under the “Frustration of Purpose Doctrine” they don’t owe anything because their purpose of renting was to send their children to school in the town that they rented in but since they were denied Visa, their purpose was frustrated and there was nothing they can do. In other words, it’s not their fault that they broke the lease. The judge did not buy that argument and said that they knew or should have known that there was a possibility that their Visa could be rejected when they entered in the Agreement.

MITIGATION OF DAMAGES. The Landlord has an obligation to mitigate its damages. In other words when a tenant leaves, the Landlord must advertise and try to rent the apartment. A question was raised whether the Tenant or the Landlord bears the burden of proving that the Landlord mitigated damages. The Appellate court said that this issue is undecided in MA law but in this case it does not matter who needs to prove it because the judge was already persuaded that damaged were properly mitigated.

SECURITY DEPOSIT VIOLATIONS. The landlord failed to deposit the Security Deposit in an escrow account and failed to pay interest on the Last Month. The fact that the Tenant failed to provide a Social Security Number was not an excuse to open an escrow account. At this point just as a side not I must say that it is absolutely clear that the Legislature must re-write MGL 186, 15B to clarify the Security Deposit law because it is a mess and even judges are confused by it. (just read pages 12 and 13 of the Decision of you are still unpersuaded).

The Appellate Court said that even though the Landlord failed to deposit it in escrow, he did return it before he filed a lawsuit against the Tenant and before the Tenant filed counterclaims,  added a voluntary 12% interest to it as well and so he does not owe triple damages to the Tenant. Triple damages would apply if the Landlord fails to return the Deposit after the Tenant files counterclaims or within 30 days of the termination of the Tenancy. However, in this case, even though it was after 30 days after the termination of the Lease, the Tenant allowed the Landlord over email to keep the Deposit because they broke the Lease. In this case, the Appellate court in their infinite wisdom said the Landlord is off the hook.

LAST MONTH INTEREST. The Landlord did not pay interest on the Last Month. That entitles the Tenant to three times the interest. The appellate court it seems made an error here when it said at 5% because the law says 5% or less if the actual interest paid by the bank is less than 5%. In any case they said that there is no proof offered by the Tenant lawyer that they had any expenses or fees incurred in connection with recovering the interest on the Last Month and so they are getting nothing.

93A. A very important ending of this case is the statement that actual injury is required in order for 93A to exist. Violation of a consumer legal right (like having an unfair and deceptive Lease language) is not enough to trigger 93A unless there was a separate identifiable harm arising from the violation. (digest that, judges Dina Fein and Robert Fields from Western Housing Court!). The Appellate Court also stated that Leardi v Brown was overturned. There is no doubt now what the law in MA is on this.

In the end the court awarded the Landlord the unpaid months until the end of the lease plus their attorney fees plus what they had to pay to the Realtor to look for another tenant plus Utilities as part of the Lease minus the trebled interest on Last Month.

Karaa v Yim (Security Deposit, Last Month Interest and NO 93A without actual injury)