Dive Brief:

• The Maryland Supreme Court last week ruled in favor of five former tenants of properties owned and operated by Westminster Management, a real estate company owned by New York City-based Kushner Cos. The tenants are seeking a class action lawsuit against the company for illegal late fees, among other issues.
• Maryland state law caps late fees at 5% of monthly rent, inclusive of any costs incurred in order to collect that rent, according to the lawsuit. However, the suit alleges that Westminster Management charged writ fees, agent fees and summons fees on top of the 5% late fee.
• Other issues named in the suit include the definition of payments counted as rent and the allocation of rent payments to non-rent obligations. The court ruled in favor of the tenant plaintiffs in all three situations.

Dive Insight:

The Kushner case was initially filed in 2017 in Baltimore County Circuit Court, but the court denied certification for a class action suit in April 2019, according to the Baltimore Sun. The Maryland Supreme Court overturned this decision in March 2023, according to court records.

The plaintiffs lived at Carroll Park Apartments and Whispering Woods Apartments, both in Middle River, Maryland, and Dutch Village Apartments in Baltimore. All three properties have since been sold to other owners, according to the Sun, and the Middle River properties have been renamed.

While Westminster Management defined rent in its leases as “all payments from tenant to landlord required under the terms of this lease,” including any and all fees charged, the Maryland Supreme Court, in its ruling, held that rent is “fixed, periodic payments a tenant is obligated to pay for use or occupancy of the leased premises” as written in Maryland law.

The court also held that a clause in Westminster leases, in which the company said it could allocate rent payments to non-rent obligations, violates Maryland law. Reallocating rent payments in this way, the court said, would allow the company to evict tenants for nonpayment, even if the rent was already paid, if it had been allocated to another purpose.

Kushner Cos. is owned in part by Jared Kushner, former senior advisor to and son-in-law of former president Donald Trump. Kushner stepped down as CEO of the company in 2017 to join the Trump administration, but remains a partial owner, according to the Sun. Kushner Cos. did not respond to a request for comment.

Fee troubles

In 2022, Kushner Cos., through Westminster Management, settled a separate lawsuit brought by the Maryland attorney general alleging unfair and deceptive trade practices, including substandard living conditions and illegal fees, at 17 separate Baltimore-area properties, including the three involved in the 2017 suit. The company paid a $3.25 million fine, including restitution, for which more than 30,000 current and former residents are eligible, according to ProPublica.

The lawsuits are among a number of court actions brought against multifamily companies for fee practices, including a recent suit against Greystar. 

In addition, the Federal Trade Commission has drafted a proposed rule that would ban the charging of junk fees, defined as fees not initially disclosed in a transaction, across all businesses, including apartment leases. In a joint statement on the announcement, the National Apartment Association and a coalition of other real estate organizations stated that the rule’s broad application did not fit the multifamily industry’s needs or accommodate state-level regulations.