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Why We Need Mandatory Rent Escrow Now

The aim of escrowing is to cut through the nuisance cases where the tenant never had the rent and is using code violations as a way to avoid paying. Non-paying tenants can live rent-free for many, many months, even years, using the “free rent trick.” That’s when nonpaying tenants call in the housing inspector after they receive an eviction notice, get code violations cited in their apartment that they never complained about before, and then claim they are “withholding” their rent under state law (M.G.L. Ch. 239, sec. 8A), making them unevictable.

We want a new mandatory escrow law because an escrow simply shows good faith by the tenant.  After all repairs are complete, the withheld rent is paid out to the owner and tenant as they may agree or as the court may direct. We don’t support H. 3683 and H.3684 because they add extra burden on the system by requiring prior hearings to determine the amount of the rent to be deposited in escrow. The amount of monthly rent is already known.

Here is a typical scenario under the current law: The tenant breaks the Lease, let’s say they bring a pit bull when the lease prohibits dogs. You serve the tenant with a notice to quit and the tenant being vindictive calls the Health Board. The Health Board comes and finds minor issues and the Landlord fixes those issues promptly even though some of them might have been caused by the tenant while living there. When the Landlord asks for the rent, the tenant has either left the apartment already without paying you or tells you that he doesn’t have the rent because he had to pay his electrical bill or something else.

These situations do not happen often but they do happen often enough that they are causing substantial pain to our community. We don’t understand why it is so unreasonable to ask the tenant to simply put the rent money aside until all is fixed and we get the certificate of compliance so that at the end we can get our rent from whatever the court determines is owed to us. How is that unfair to the tenant?

All we are saying is: “If you are going to call the Health Board, you better show that you have your rent. If you don’t have your rent to begin with, you don’t get to call the Health Board and if you do, it wouldn’t count until you show that you are doing it for the right reasons by paying the rent to the court in escrow first” Why is that so unfair to the tenant? The answer is: It isn’t unfair. It is simply being obstructed mostly by lawyers who see their fees dropping after all of these nuisance cases are removed from the court system.

  1. Tenants’ Argument #1: Who is going to determine what amount to be put in escrow? Maybe the Landlord got the rent wrong? All of this is absurd. The tenant knows how much their monthly rent is. Just put it aside in escrow with the courts.
  2. Tenants’ Argument #2: Evictions get resolved in about 10 days. Well, that may be true but to get to the judge in order to get resolved in 10 days takes about 2 months so the truth is an average eviction takes about 2 – 2.5 months to resolve where we lose about 1 – 1.5 months in rent on average.
  3. 3.      Tenants’ Argument #3: It will deprive us Tenants from our due process. That is also untrue. There is already precedent in this area. If you have a dispute about your taxes, first you pay the taxes and then file for the dispute. If you have a dispute over condo fees, first you pay them into escrow and then dispute. The simple premise is that municipalities, condo associations and landlords need that money to maintain and repair.
  4. 4.      Tenants’ Argument #4:  No one is stopping the Landlords from asking the Judge to order escrow. This option exists under current law. Once we get to the judge (2 months after we served the eviction notice) it is already too late to ask for escrow. The rent money has been spend, the Health Report is considered against us even though they were called only after we served the tenant with the original notice to quit and in many circumstances the tenants by the time it gets to a judge are already gone, the apartment vacated with damage and our rent money stolen. We want this law passed because we should have these protections by default, we shouldn’t be forced to ask for them. Another reason is that although the courts today still have the power to order a pre-trial deposit, the amendments which have been made to Chapter 239, 8A [by the state legislature in 1975] now require the court to consider all counter-claims raised by the tenant first. This makes the pre-trial hearing an exact duplicate of the trial on the merits, which effectively discourages judges from making the escrow order.

Here would be how we envision the new escrow law in practice: Here is what a Judge might say if it gets to a Judge: “Dear Tenant, you want me to prevent the landlord from evicting you and punish him because of what the Health Board discovered? I can’t do that because I can see here that you didn’t pay your rent in court escrow which can only mean that you called the health board because you ran out of money. If your escrow account was up-to-date, then I could have looked at the Health report and maybe credit you for any damages in the apartment that are attributable to the Landlord but you can’t use the Health Report now as a defense in this circumstance so I have no choice but to authorize the eviction.” Why is that scenario so unreasonable and how is it unfair to the tenant in any way? We are tired of our heard-earned money being consistently stolen by tenants using loopholes in the current law.

 

In conclusion, a rent escrowing law will stop many vicious and unnecessary fights between landlords and tenants and reduce the load for our housing courts. We are not asking for anything unfair. We are not trying to screw anyone. We are not saying that tenants and their lawyers are trying to screw intentionally anyone either. We are simply trying to prevent tenants from being vindictive (the same way we are prevented from being vindictive) and from using the current system to steal our money. This solution would protect owners against loss of legally owed rent, yet would retain the tenant’s right of a strong incentive to force owners to make demanded repairs through withholding of rent as long as they can put in escrow.

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