Legislation UPDATE: Landlord/Tenant Law-Landlord's Out of Pocket Expenses

Every year around this time North Carolina elected representatives get together and pass session laws.  Some are amendments to existing laws, while others are revocations of laws, or implementations of new laws.  The session law about which I am speaking today is SL 2018-50 (SB 224) and it pertains to the legal ability of a landlord to charge certain fees pertaining to the curing of a contract default by a tenant.  In layman's terms, SL 2018-50 lays out what fees a landlord can legally seek against a tenant, especially those tenant's that have cured their breach of the lease (ex. paid all back rent and fees prior to a judge entering a judgment against them). 

WHAT GAVE RISE TO SL 2018-50 IN THE FIRST PLACE?

One of the things I have done over the years is review lease agreements.  I have noticed over the last 24 months a provision in lease agreements that has become more commonplace.  That  provision states that the landlord will be entitled to recoup from the tenant out of pocket costs associated with having to file a summary ejectment action (filing fee, service fee, attorney's fees).  Under certain leases, the aforementioned fees would be due even if the case is dismissed by the landlord because the tenant cured his/her breach.  Those fees were typically allowed by Magistrate Judges until Wake County Superior Court Judge Graham Shirley ruled in Hargrove v. Grubb Management, Inc. that there was no legal authority in North Carolina for the landlord to charge those fees.

Now, North Carolina General Statute 42-46 does allow landlords to charge a tenant certain late fees and eviction fees.  However, section h(3) specifically states that "[i]t is contrary to public policy for a landlord to put in a lease or claim any fee for filing a complaint for summary ejectment and/or money owed other than the ones expressly authorized by subsections (e) through (g) of this section, and a reasonable attorney's fee as allowed by law."  Based on section h(3) and the legislature's session law, it appears as though Judge Shirley was correct in his ruling.  

WHAT DOES SL 2018-50 MEAN FOR LANDLORDS AND TENANTS GOING FORWARD?

SL 2018-50 adds sections (i) and (j) to the existing NCGS 42-46 referred to above.  Those sections allow landlords to recover actual out of pocket costs associated with the filing of an action for summary ejectment, service of process fees, and reasonable attorney's fees up to a certain percentage.  Landlords do not have to settle for just "a complaint-filing fee not to exceed fifteen dollars ($15.00) or five percent (5%) of the monthly rent, whichever is greater".  They can now recover the full $96 cost of filing in small claims along with the $30 service by sheriff fee and the aforementioned attorney's fees.  

Landlords must specifically state in a lease the fees and penalties for which they will seek upon a breach by a tenant.  So if you are a tenant, make sure you read the lease agreement thoroughly and know what remedies your landlord will have if you breach the lease agreement.

*REMEMBER, NOTHING IN THIS BLOG POST IS INTENDED TO BE LEGAL ADVICE AND DOES NOT ESTABLISH AN ATTORNEY-CLIENT RELATIONSHIP