A federal district court judge in Oakland, California, has given the go-ahead for tenants of one of the largest landlords in America to pursue a class-action lawsuit alleging unlawful and excessive fees to renters who are late on payments.
Notices to current and former tenants of Equity Residential’s properties went out last week after U.S. District Court Judge Jeffrey S. White certified the class action, which argues that the company’s practice of charging a fee of either $50 or 5 percent of the total delinquent rent when tenants are only one day late violates California anti-profiteering statutes.
The company, founded and headed by billionaire Sam Zell, is the third largest private owner of apartments in the United States, with 78,000 units across six states, according to the National Multifamily Housing Council. Company filings show California is its largest market, with more than 36,000 units in 150 properties in Southern California and the San Francisco Bay Area.
The tenants also argue that the company’s practice of “stacking late fees” by charging an additional penalty when rent is current but an old late fee is outstanding is illegal under California law.
In court papers, company attorneys had argued that the fees were legal and that the class action should not be certified because “individual issues predominate.” A spokesman for Equity Residential did not return multiple calls seeking comment for this story.
Among the plaintiffs is child care worker Javanni Munguia-Brown, who was raising three children in one of the company’s East Palo Alto apartments. She said she paid her rent and all fees one day early in March 2014. However, the company assessed an automatic $50 late fee because she had a balance of $200 in previous late fees and $122 in city administrative fees and water and sewer charges.
“They’re making a profit off people who can least afford it, folks who are struggling to pay rent working in Silicon Valley in food and landscaping,” said Jason Tarricone, directing attorney for the housing program at Community Legal Services in East Palo Alto, which brought the case together with two California law firms that specialize in class-action lawsuits.
“It’s worse than payday lending,” he said. “We don’t think of these late fees as usurious interest but that’s what it is. And people will pay it because they don’t want to lose their housing.”
Not all of Equity Residential properties are in poor neighborhoods. This reporter lived in one company’s Palo Alto apartment complexes, the Southwood Apartments, while completing a journalism fellowship at Stanford University. The company also owns oceanside apartments in Santa Monica, a luxury tower on Park Avenue South in Manhattan and a complex on Massachusetts Avenue, a few blocks from the Capitol in Washington, D.C.
Equity Residential is the latest large, corporate landlord to come under scrutiny over what critics say are exorbitant fees.
In June, Reveal from The Center for Investigative Reporting exposed conditions at Colony Starwood Homes, a 35,000-house rental empire founded by Tom Barrack, one of President Donald Trump’s oldest and closest friends. Among the tenants featured in the story was Evelyn Knights, a Los Angeles resident who received a three-day eviction notice over a $49.33 late fee. The company’s stock filing showed it made $14 million in fees in 2016 and took in another $12 million tenant clawbacks, including seized security deposits.
Barrack quit the company the day after Reveal’s report and the firm rebranded itself as Starwood Waypoint. In November, ABC News confronted company chief operating officer Charles Young about the fees.
“It’s part of the business,” Young said.