Alabama State House Representative Wren (75th District, Montgomery and Elmore Counties) has introduced an amendment to the Alabama Residential Landlord Tenant Act. Under current law, a residential lease cannot contain a clause making the tenant liable for legal fees in the event of a dispute or a lawsuit. If there is a lawsuit, the judge can award legal fees in some situations, it’s just illegal for the lease to say that. The reasoning behind this was that, previously, some unethical landlords used such a clause to browbeat tenants into giving up valuable rights whenever there was a dispute between a landlord and a tenant. The landlord would say, “Let’s just go to court on this issue. You’ll have to pay MY legal fees and YOUR legal fees if you want a judge to decide our dispute.” Most consumers would just give up.
Now, Representative Wren wants to change the law to add the following paragraph:
(c) A rental agreement may include a provision in which the tenant agrees to pay the landlord’s reasonable attorney’s fees when the landlord prevails in an action against the tenant and is a corporation or other entity required under Alabama state law to be represented by an attorney in a legal proceeding. “
You’ll notice a couple of questions raised by this:
I’ll contact Representative Wren’s office, and see if I can find out the answers to some of these questions.
All Landlords should have the right to collect legal fees. The eviction process is very lengthy and clostly to everyone. I just don’t understand this type of wording.
Denise, please write something plain and simple and send to this person who wants to make the process even more confusing and unfair..
Comment by Delora Pate — March 7, 2011 @ 8:49 am
I sent an email to Representative Wren’s office asking for a clarification regarding his thoughts. The problem with drafting something “plain and simple” is that it is always “plain and simple” from the writer’s point of view. But, because the writer has certain background experiences and ways of thinking about things, it just never occurs to them that their language might be interpreted in a different way by clever lawyers. I’ll always remember an IQ test I took in grammar school. Some of the questions were analogies. You know, “Hair is to Head as Toes are to (1)Foot (2) House (3) Steak.” I got one of the questions wrong because it order to answer it correctly, you had to know that newly mown grass had a smell. I didn’t know that. We lived in US Army apartments my whole life. We didn’t have grass, we had dirt and gravel, even in the play areas. So, answering the question correctly was not possible, because it was outside my experiences. I think this happens a lot of times to lawmakers who pass laws they think are going to fix problems.
Comment by deniselevans — March 7, 2011 @ 10:01 am
I really don’t have an issue with the proposed wording given that it appears to apply to LLCs as well. With that being said, the real question is why some individuals don’t keep or move these properties under an LLC from a liability standpoint.
Comment by Justin South — March 7, 2011 @ 9:42 am
Many investors think they cannot afford the legal fees involved in simple evictions, routine “default judgment” quiet title actions and collection actions, etc. Others think that bankruptcy options are more flexible if they hold title in their own names rather than a single-asset or even multi-asset entity. Many investors grew out of a single family home, or inherited one, and converted it to rental property. The single ownership state of affairs just continued, without thinking about it. Others started out with an individual ownership plan from ignorance, and have been told that a later transfer to a corporation or LLC is a taxable event that will result in income taxes due on phantom income. I’m not saying whether any of these is true or not, I’m just repeating what many people believe. Perhaps you could write a short article addressing these concerns. If you post it on your website, or your blog, I will provide a link to it from my blog.
Comment by deniselevans — March 7, 2011 @ 9:56 am
Denise,
Thank you for this information. I agree with the first comment here and with the direction you’re going. All landlords, especially an individual (such as myself) who has less room for absorbing expenses, should be able to be reimbursed.
Comment by mary robin jurkiewicz — March 7, 2011 @ 9:59 am
Thanks for letting me know about this – keep me posted!
I’m fairly certain that the reason it was drafted so as to just allow attorneys’ fees for corporate entities required by statute to have attorneys is BECAUSE of the statute requiring them to have attorneys. Individual landlords always have the option of being pro se. However, just because individual landlords have that option does not mean that they should be limited in their ability to be represented, or treated differently should they elect to have their case handled by an attorney.
Comment by Sarah Taggart — March 7, 2011 @ 10:34 am
Hi Sarah, I agree that the statute probably didn’t think about the fact that individual investors often CHOOSE to hire attorneys even though not legally REQUIRED to do so. This is why it’s such a good thing to have public comment on pending laws. Voting is not the ONLY way to have input into government.
Comment by deniselevans — March 7, 2011 @ 10:44 am
I wonder if I could raise my $150/flat rate if landlords passed on legal fees to tenants.
Comment by Sarah Taggart — March 7, 2011 @ 11:04 am
Great rate!
Comment by deniselevans — March 7, 2011 @ 11:13 am
an answer to point 5.
because alabama favors business, especially big businesses, as opposed to us who happen to be individuals
corporations and mortgage companies get favorable construction of alabama statutes
enforcement by government agencies is stricter against individuals – eg. huntsville community development cites individuals for code violations but not as much for finance companies
etc.
Comment by howard ross — March 7, 2011 @ 11:42 am
Denise – good article. I think we all should be entitled to legal fees when we win in court.
However,I have experienced first hand why the wording is as such. I have a C Corp and went to court one time for an eviction involving a property owned by that corportation. As I learned in court, I could not represent the corporation even though I was the sole owner of the corporation. I was “required” to use an attorney to do the eviction. As an individual, I am able to represent myself.
Comment by Tommy Schors — March 8, 2011 @ 8:14 am
Hi Tommy, I think your comment illustrates the intention behind the statute. In Alabama, a corporation or LLC can be represented by its shareholders or members ONLY in small claims court. In any other court, they must have an attorney. If we said you can collect legal fees from a tenant only if you actually have an attorney are owe legal fees, then that’s the law already. If we said corporations and llcs must be represented by an attorney in District Court or Circuit Court, that’s the law already.
What the proposed amendment says is this, basically, “Even though the Landlord/Tenant statute says a lease cannot contain a clause making the tenant liable for legal fees, we are going to let a lease say that after all, but ONLY if the landlord is a corporation or a LLC.”
Unfortunately, most of legal interpretation boils down to the lost art of diagramming sentences. Did you have to do that in grammer school, or have they quit teaching that? It’s hard for me to keep up with educational trends. Often, in order to figure out what a statute REALLY says, instead of what it MEANT to say, you have to take it apart and figure out what is the subject, what is the predicate, and what clause modifies what. It’s not hard, but it is tedious. It’s not how our brains think normally. When you go through this exercise with the proposed statute, I think it says something different from what it meant to say. I’m still waiting to hear back from Representative Wren, but will be sure to post his comments after I talk to him.
Comment by deniselevans — March 8, 2011 @ 3:03 pm
I believe the language as Wren has it drafted it redundant and cumbersome – instead, he could just eliminate the attorneys’ fees provision from the “prohibited lease terms” section of the Act and the problem would resolve itself. That way, if your lease allowed for attorneys’ fees and you did in fact have an attorney for your eviction, you’d be able to pass on the costs.
Comment by Sarah Taggart — March 8, 2011 @ 3:11 pm
Sarah, I agree completely with you. Thanks for sharing with all of us.
Comment by deniselevans — March 8, 2011 @ 3:20 pm
Did you get an answer yet from Rep. Wren?
Comment by Sarah Taggart — March 11, 2011 @ 10:29 am