Highgate Housing Limited Partnership v. Macaulay-Fisher

Citation: Not availableDocket: 40

Court: Vermont Superior Court; August 11, 2015; Vermont; State Appellate Court

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In Highgate Housing Limited Partnership v. Macaulay-Fisher, the Vermont Superior Court addressed a dispute involving eviction and unpaid rent. The plaintiff, Highgate Housing Limited Partnership, sought eviction against defendants Joshua Macaulay-Fisher and Karissa Macaulay, who asserted that proper notice was not provided as mandated by federal regulations included in their lease agreement. 

The defendants rented an apartment in a complex that received Section 8 housing subsidies, which are administered according to HUD regulations. These regulations require tenants to provide information for income verification and adjustments to rent based on income changes. Specifically, if a tenant's income decreases, their rent share may be reduced retroactively; however, any increase in rent due to income changes necessitates a 30-day advance written notice. 

Relevant lease terms stipulate that changes in rent may occur due to changes in income or household composition, contingent upon adherence to HUD procedures. The landlord must provide written notice of any rent increase, detailing the new amount, effective date, and reasons for the change, while also allowing tenants the opportunity to discuss the adjustment. The case emphasizes the importance of compliance with HUD regulations in the landlord-tenant relationship within the context of subsidized housing.

Regular recertifications are conducted annually, where the landlord requests the tenant to provide household income and composition details, along with any other HUD-required information for determining rent and assistance payments. The tenant must submit accurate information by the specified deadline. The landlord will verify this information to adjust the tenant's rent and assistance payments accordingly.

If the tenant experiences a cumulative income increase of $200 or more per month, they must notify the landlord immediately. The tenant can report any decreases in income or changes affecting rent calculation, and the landlord will verify and implement a rent reduction if the decrease is expected to last. If income is anticipated to partially or fully return within two months, the landlord may postpone the certification process, but any rent reduction will be retroactive, preventing eviction for nonpayment during this period. The tenant has 30 days to pay any rent due after being notified.

Failure to report changes may result in the landlord increasing the rent to the HUD-approved market rate, following HUD guidelines. Assistance may be terminated if the tenant fails to provide required information within ten days of the landlord's notice of intent to terminate assistance.

Additionally, if the tenant submits false information or fails to report income changes, resulting in being charged less rent than required, they must reimburse the landlord for the difference. However, the tenant is not required to repay for undercharges solely due to the landlord's procedural errors. Relevant HUD provisions mandate tenants to provide necessary information for interim recertification to ensure rent aligns with their ability to pay.

Owners must conduct an interim recertification when a tenant reports a decrease in income, with specific obligations outlined. Upon tenant request, owners are required to process the recertification within a reasonable timeframe, typically not exceeding four weeks. If a tenant's income is expected to be restored within two months, owners may delay the process until the new income is confirmed. Once verified, owners must recertify the tenant, retroactively adjust rent from the first day of the month following the income change, and provide written notification of any rent due. If the tenant does not pay the notified amount within 30 days, eviction for nonpayment may be pursued.

When a tenant requests an interim recertification or reports changes, owners must obtain third-party verification of the reported changes and maintain documentation. Changes in rent and assistance payments must be documented with signatures from all adult family members on the HUD-50059 form.

If tenants fail to comply with reporting requirements, owners must implement any rent increases retroactively to the first of the month following the change. In a specific case, tenants initially paid $610 monthly but reported a job loss in December 2013. They experienced a delay in income due to background checks with their new employer and did not pay rent for January or February. They were later charged a nominal rent of $22 per month for that period, as they were deemed to have no income at that time. The plaintiff does not claim more than this nominal amount for the specified months.

As of March 1, 2014, Joshua was employed by ARIS but had not disclosed his earnings to the Plaintiff, who did not verify this income with ARIS. The Plaintiff had not informed the Defendants of any rent adjustments due to Joshua's employment. Joshua was responsible for providing paystubs as per an agreement he signed on December 18, 2013, which detailed his obligation to submit the first four consecutive paystubs after receiving his fourth paycheck. He started receiving biweekly paychecks in March, with paystubs due by early May. On April 9, 2014, Joshua authorized ARIS to confirm his employment, and on April 11, 2014, the Plaintiff verified that he began working on January 16, 2014, but it remains unclear if the Plaintiff inquired about Joshua's earnings.

The Plaintiff reasonably delayed interim recertification until May for two reasons: 1) Joshua's income was expected to be partially restored soon, allowing for a delay in recertification, and 2) ARIS would not provide the required four paystubs until late April. On April 29, 2014, tenants paid $300, but there is no evidence that the Plaintiff took steps to verify Joshua's income or requested paystubs in May. A letter sent by the Plaintiff on May 1, 2014, mentioned the need to report interim income changes but did not specifically request paystubs. It inaccurately stated the current gross household income and the date of the last recertification, which had not occurred. Moreover, despite having been informed of Joshua's employment and having signed releases for income verification, the Plaintiff did not act on this information. On May 11, 2014, it was confirmed that Joshua had terminated his previous employment at Capital Candy on December 15, 2013.

Verification of Joshua's employment termination occurred five months after notice was given, with no evidence of attempts to verify his income or notify Defendants of the need for paystubs during that period. Testimony regarding reminders to submit paystubs was vague and lacked specificity. Defendants had signed releases allowing Plaintiff to verify income, and on June 8, 2014, a call to ARIS confirmed Joshua's full-time employment and income. Despite this, Plaintiff did not process the Interim Recertification or notify Defendants of their new rent obligations, even though they had sufficient information to determine that the Defendants no longer qualified for a subsidy as of March 1, 2015. The Plaintiff failed to provide a 30-day notice of the increased market rent that could have taken effect starting August 1, 2014. Although a Notice of Annual Recertification was sent on July 1, 2014, compliance with HUD regulations and lease terms for timely processing was lacking. A Notice of Termination of Lease for nonpayment was sent on July 18, 2014, but the basis for the calculated amount was unclear, and eviction was not pursued. A meeting on July 29, 2014, resulted in another authorization for third-party verification, leading to a faxed payroll report confirming that Joshua's total wages exceeded the threshold for a rent review, yet Plaintiff did not issue a notice of rent increase.

Plaintiff's manager did not complete the Interim Certification process because Joshua failed to provide necessary paystubs, despite Plaintiff having obtained detailed income information directly from ARIS. From January onwards, verification could not be completed due to tenants' inability to provide paystubs. Plaintiff argues that while paystubs are typically a preferred method of verification, they are not the sole acceptable source, as ARIS provided sufficient income data to calculate annualized income. Although the printout of income did not specify hours worked, HUD regulations do not mandate this detail for verification. Plaintiff justified delaying the Interim Recertification process based on Joshua's failure to submit paystubs and did not initiate the Annual Recertification. As of August 8, 2014, Plaintiff verified Joshua's full-time employment but had not notified tenants of any rent recalculations. The Interim Recertification remained incomplete, and no notices of rent due were sent to the Defendants. On August 21, 2014, the Defendants paid $200. Subsequently, Plaintiff issued multiple Interim Recertification letters retroactively adjusting rental amounts without providing explanations for the retroactive charges or the lack of a 30-day notice. Joshua delayed signing the HUD 50059 form confirming income information until November 24, 2014, when he acknowledged the termination of subsidy due to ineligibility and transitioning to market rent, with an effective date of February 28, 2014, though it was unclear which of the prior letters it related to and the specific rent amount involved was not identified.

The “Anticipated Voucher Date” is set for December 1, 2014, with no waiver of the right to a 30-day notice for rent increases. The plaintiff's manager testified that Joshua's signing of the 50059 form completed the Interim Certification process, which was delayed due to tenants not providing paystubs. The Annual Certification was not processed because the Interim Certification led to disqualification for a subsidy. Tenants received their first and only rent notices in October 2014 after notifying the plaintiff on December 18, 2013, about a job change, wherein they authorized income verification. The plaintiff claims the rental obligation is based on the amounts outlined in those letters, suggesting different rates for various months. On December 11, 2014, the plaintiff issued a Notice of Termination of lease for nonpayment of $9,530, stating that the lease would end on December 31, 2014, if the amount was not paid. The tenants had not paid rent since August 2014. On January 2, 2015, Joshua reported a job change that reduced his income and requested a new Interim Certification. This lawsuit was initiated on January 11, 2015, based on the termination notice. On March 24, 2015, an Interim Recertification letter set the rent retroactively to $764 per month, though there was no evidence presented regarding the income used for this determination. A hearing on March 24, 2015, resulted in a Rent Escrow Order for monthly payments of $764, which were paid as required. The plaintiff seeks eviction for nonpayment and a judgment of $14,600 for the rent owed, minus escrow funds and a security deposit credit. The defendants argue no rent is due, asserting compliance with reporting income changes and not receiving the required 30-day notice for any increased rent. Procedural issues arose when both parties submitted documents post-hearing that were not considered by the court, as they were submitted too late. The defendants' Motion to Reconsider a prior denial regarding a counterclaim was also denied. It is established that the plaintiff seeks to collect rent amounts without providing the necessary advance notice of the due amounts or a notice of subsidy loss.

Plaintiff asserts entitlement to retroactive rent increases based on Section 7-13, Paragraph D of the HUD Handbook, claiming Joshua's income rose in March 2014, which he failed to report. Consequently, Plaintiff seeks to impose market rent effective March 1, 2014. On November 24, 2014, Joshua acknowledged on the HUD-50059 form that his income exceeded subsidy limits, affirming his obligation to pay market rent as indicated in prior communications.

Defendants counter that Joshua provided adequate employment information and authorized necessary verifications, arguing that Plaintiff failed to fulfill its verification responsibilities under Lease 4(f) and HUD Handbook 7-12 Paragraph A(2). They also claim that without a 30-day notice of rent increase post-March 1, 2014, Plaintiff cannot demand rent above the established $22 monthly rate effective January 1, 2014.

The evidence delineates three distinct rental periods: January and February 2014 at $22, December 2014 at $924 (with proper notice given), and January 2015 onward at $764, which was a retroactive reduction from $924. The primary contention revolves around the nine months from March to November 2014, where it is undisputed that the household income exceeded the subsidy threshold, yet Defendants only paid $500 during this time. Joshua provided timely verification releases but failed to submit paystubs from ARIS. 

Crucially, no 30-day notice for rent increase or 10-day notice of subsidy loss was issued to Defendants. The dispute hinges on whether the lease terms permit Plaintiff to claim unpaid rent beyond $22 per month for this period. If Defendants are correct, they have overpaid and eviction is unwarranted. Conversely, if Plaintiff's rent claim is valid, Defendants have underpaid, justifying Plaintiff's claim for possession and judgment. 

Under Lease provision 4, landlords must give at least 30 days' notice for any rent increase, unless exceptions apply. Plaintiff bears the burden of proving that an exception is applicable, particularly since this lease is a standard form presented without tenant negotiation. Paragraph 11 is irrelevant, while Paragraph 15 pertains to annual recertifications requiring tenants to submit accurate information by specified dates. Plaintiff's July 1, 2014 recertification requested a meeting for Defendants to provide employment verification materials.

On July 30, 2014, the Plaintiff received payroll information from ARIS covering January 16, 2014, to July 30, 2014. The court found that the Defendants did not fail to meet the requirements that would allow for an exception to the 30-day notice requirement for a rent increase retroactive to March 1, 2014, as specified in Paragraph 15. In Paragraph 17(a)(1), a subsidy can be terminated if the Tenant fails to provide necessary information within 10 days of the Landlord’s notice. However, the Plaintiff did not issue a notice of intent to terminate the Defendants' subsidy, and the October letters, which could be seen as final determinations in the Interim Certification process, did not clearly indicate an intent to terminate or provide a required 10-day period for response. Therefore, the court ruled that the exception in Paragraph 17 did not exempt the Plaintiff from the 30-day notice requirement.

The Plaintiff's assertion of the right to retroactively claim rental amounts without the required notice was based on Paragraph 18 of the Lease, which necessitates reimbursement for undercharges resulting from false information provided by the Tenant. The Defendants did not provide any false information, having disclosed a change of employment in December 2013 and authorized verification of their income. The Plaintiff argued that the Defendants’ failure to submit paystubs constituted a failure to provide information under Paragraph 4(f). However, the court highlighted two issues: First, any rent changes must comply with HUD procedures, which include the 30-day notice requirement, and second, reliance on the Defendants for paystub provision was unreasonable given that the necessary information was already available to the Plaintiff from mid-January onwards.

Plaintiff's reliance on noncompliance with the Intake Form certification to delay the Interim Recertification was deemed unreasonable, particularly past July, as there was insufficient evidence that Plaintiff reminded Defendants of this necessity. Plaintiff contends that Defendants should not have been able to earn income throughout 2014 at a level that warranted full market rent without subsidy while only paying $500. The Plaintiff is involved in a government subsidy program with specific procedural requirements, including the use of a lease that protects both parties. The Findings indicate that the Plaintiff had multiple opportunities to act to protect their interests, such as issuing timely notices for rent changes or utilizing lease provisions to delay certification. Defendants provided timely notice of employment changes and executed releases for income verification but did not receive any notice of rent adjustments until October 2014, despite a clear expectation of changes due to their job transitions. The lease required a 30-day notice of any rent increase, which was not provided.

Defendants claimed the Consumer Protection Act as a defense, but the court found no basis for relief, clarifying that while the Act applies to landlord-tenant relationships, not every rental dispute constitutes consumer fraud. The court referenced previous rulings indicating that breach of contract does not inherently imply fraud, and noted that the contract between the parties was complex with neither side adhering strictly to its terms. Based on calculations for unpaid rent from January 2014 to March 2015, the total amount due was determined to be $2,904 after accounting for rent paid. Plaintiff also requested $1,920 in attorneys’ fees, which the court found reasonable. The court ordered the preparation of a judgment for possession and the unpaid rent, allowing for execution with ten days' notice.