LAST YEAR TAXPAYERS screamed when Marv Wolfenson and Harvey Ratner dumped their overbuilt, under-financed Target Center onto the public's back. In a quieter transaction this June, Wolfenson and Ratner quietly sold the other cornerstone of their real estate empire--their vast Twin Cities apartment holdings--to a company called Richfield Housing Associates. Now, it is those properties' largely low-income tenants who are screaming about what one housing advocate calls "excessive and illegal" late-fee charges imposed despite two unfavorable court rulings.
Unlike standard industry fines of $25 for tenants who are a few days late on their payments, Richfield Housing and its management group, Dominium Management Services, have imposed fines of $100 for renters who are more than six days late--even though the apartments rent for just $400 or so a month in the first place.
Michael Czarnik, a lay advocate with Home Line tenant advocates of suburban Hennepin County, says excessive fees are increasingly common in the profit-depressed rental industry. Seniors, who make up a high percentage of tenants in Richfield Housing's properties, often don't get Social Security checks until the third day of the month, Home Line advocates say, which is when the first of two $50 fines kicks in. (Another $50 is added after the sixth late day.) "A lot of people won't complain," says Czarnik, "especially seniors, because they think that they signed a binding contract. But tenants have to know that if the terms of a contract are illegal, they are not bound by them."
Czarnik had two late fee payments reversed in October in Hennepin County District Court, but says that the company has held firm and kept the offending codicil on its standard lease. "The farthest Richfield Housing Associates has gone is to tell us that if people argue about it, they'll refund the money," Czarnik says. "But they still want to get it from people who can't or won't complain."
Prompted by the response to the court rulings, Home Line says it has formally complained to the Minnesota Attorney General's consumer division. Investigator Deb Strafaccia said that her office would not confirm the status of any investigation, as per department policy.
However, when RHA limited partner Armand Brachman was contacted by City Pages, he announced an abrupt halving of his company's late fees, to $25 after the third day and $25 after the sixth. "That's the policy as of now," says Brachman. "Our new leases will reflect that. We're in the business of collecting rent and providing safe, affordable housing, not collecting late fees."
Still, Brachman would not agree to remove the higher charges from current leases: "Those people signed a contract, and furthermore, it's not illegal," insists Brachman, whose partnership owns 18 properties and 5600 units in the Twin Cities. "The laws say late fees cannot be 'excessive,' but when a person does not pay rent, getting an unlawful detainer costs me a lot of money."
Czarnik--who terms Brachman's concession "much better...though probably still illegal, considering it is still double industry standard"--adds that the unlawful detainer argument is misleading. "If a landlord gets an unlawful detainer to reclaim his premises, the court will make the tenant pay the $132 in court costs. Any late fee expenses are separate from that. If a landlord can't document his costs, tenants don't have to pay." (David Brauer)
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