Settling—or reaching an agreement out of court—on most legal issues is usually smart, whether it’s a divorce, automobile accident, or landlord/tenant dispute. Too often, anger builds, and both sides refuse to budge.
Bringing in an objective third party to mediate an alternative dispute resolution can calm tempers and lead to compromise. When a settlement is reached, it usually saves both sides money, avoids even more aggravation, and eliminates a trip to small claims, eviction, or housing court—or a judge or jury trial.
“The most common reason for landlord/tenant disputes has to do with eviction, often because of nonpayment of rent, though it can be because of another violation in the lease agreement such as sub-tenants staying when the lease specifically says no unauthorized guests,” says Christopher E. Delaplane. His Sherman Oaks, California real estate firm focuses on all real estate-related matters, including litigation, transactions, landlord-tenant matters, neighbor disputes, and risk management for brokers/agents.
Tenants often sue landlords, too, for issues like damages to furniture caused by a faulty sprinkler system. And sometimes either side may start with a strike against them: Some states tend to be friendlier toward landlords, while others may favor tenants, adds Ariel Ozick, co-founder of PMGuardian.com, which screens tenants in multifamily buildings.
5 Reasons for Property Managers to Settle Out of Court
Before heading to eviction or housing court, consider the following five reasons not to.
Hiring a lawyer can be costly, and going to trial will make the dollars disappear quickly. How much you spend often depends on whether the lawyer works by the hour or for a flat fee. And in some states, legal processes like evictions take longer than in others.
“Besides the legal costs, you also may lose a month or two of rent, or more, when you go to court, even if the tenant isn’t supposed to stop paying until all is resolved,” Delaplane says. “The court may say, ‘Come back at a later date,’ and you could be out the money even longer.”
Even for the calmest people, the legal process can raise stress levels through the roof, particularly if the matter goes to a judge and jury. And that also can mean loss of privacy when the proceedings become part of the court record. Future landlords or tenants may be able to check the record, unless it is sealed. An out-of-court settlement prevents that from happening.
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It can take time for a tenant to find an attorney or for the landlord or property manager to talk with their lawyer. Add in depositions, interrogatories, a court date, and maybe an appeal of the decision, and the costs continue to climb as the clock ticks away. In contrast, when a settlement is reached, the matter is a done deal.
Settle and both sides know exactly what they’re getting—and not getting, while a court decision with a judge or jury involves uncertainty. In addition, litigation procedures offer less flexibility about what can and can’t be said in court, says Delaplane. And many times members of a jury like to go with the underdog, which is usually the tenant, Ozick says.
No tenant wants a negative mark on their credit report or history. If they’re told to move out and don’t comply with the judgment, that could happen, says Delaplane. A settlement removes that possibility.
Final Advice for Property Managers
A detailed lease helps both sides remove potential problems related to noise, cleanliness, pets, guests, subletting, eviction procedures, and the day of the month when rent is due. Landlords, property managers, and tenants should familiarize themselves with local laws because different cities and states have different rules to abide by for processes like eviction.
It’s also a great idea for each party to check each other out in advance. Landlords and property managers should screen tenants by looking at their credit history, previous rental situations, criminal record (if any), and personal recommendations. They also should look into a tenant’s ability to pay by asking for copies of current pay stubs or other guaranteed income. And the tenant should investigate the landlord’s track record of caring for the property, repairing damage, and returning security deposits on time when the lease is up.
A healthy landlord/tenant relationship should be mutually beneficial and provide peace of mind, not drama, for both parties. A detailed lease and a bit of homework by each side can reduce the potential for conflict—and a trip to the courthouse.
Have any of your own recommendations about settling out of court with tenants? Let us know by leaving a comment with your story.Read more on Legal Considerations