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Unfair and Deceptive Acts and Practices: 8.2.2 Apartment Finders

Fraudulent apartment finders promise, for a fee, to find housing for low-income people to rent or rent-to-own. In areas where housing is scarce or substandard, or where segregated housing patterns lock people out of large portions of the housing market, apartment finders have considerable appeal. False and exaggerated claims by apartment finders are appropriate subjects for UDAP claims.70

Unfair and Deceptive Acts and Practices: 8.2.3 Security Deposits and Calculation of Rents

UDAP regulations in Massachusetts and Wisconsin require landlords to disclose all terms and all tenants’ rights pertaining to security deposits and to itemize any claims against the deposit.77 Landlords may not withhold excessive amounts from the security deposit without justification.78 Many states have provisions in their UDAP statute or regulations that prohibit misrepresentations about the need for repairs.

Unfair and Deceptive Acts and Practices: 8.2.4 Rental Agreements

Rental agreements must be readable83 and may not contain illegal or unenforceable terms.84 Rents may be increased during the lease term only if agreed upon and disclosed in advance.85 Obtaining the tenants’ signatures on a lease by taking advantage of their inability to speak or read English may be a UDAP violation.86 False or misleading statements made during the negotiation of a lease renewal may give rise

Unfair and Deceptive Acts and Practices: 8.2.5.1 Substandard Housing

A landlord who rents out an apartment impliedly represents that it is in compliance with applicable health and safety codes; if it is not, the landlord has committed a UDAP violation.90 Other UDAP violations include renting out residential premises in which there is lead paint that exceeds statutory limits91 and collection of the full amount of rent while the unit is in violation of the housing code or where the unit has material defects rendering it unsafe or unfit.

Unfair and Deceptive Acts and Practices: 8.2.5.2 Authority to Rent Out a Unit; Failure to Obtain Occupancy Certificates

It is a UDAP violation to misrepresent one’s authority under the rules of a cooperative apartment building to rent a unit to a prospective subtenant.100 It is also a per se UDAP violation to rent property and accept rent payments when the landlord has failed to obtain a certificate of occupancy required by state law101 or the rental is otherwise illegal.102 Since the licensing requirement is meant to protect the pub

Unfair and Deceptive Acts and Practices: 8.2.5.3 Misrepresentations Related to Crime Prevention

A landlord who represents that an apartment building has various features to protect against crime may be liable under the UDAP statute for an assault upon a tenant, if the criminal act was reasonably foreseeable and a direct and proximate result of the deception.105 A landlord’s misrepresentation of the tenant’s right to have additional locks put on their door is actionable pursuant to a UDAP statute, when the tenant was assaulted by a person who obtained a key to their apartment through the landlord’s negligence.

Unfair and Deceptive Acts and Practices: 8.2.6 Utilities

A landlord must provide agreed-upon utility services and may not cause the services’ termination.107 Violation of the state’s utility service laws and regulations may be a UDAP violation.108 It is a UDAP violation to have a tenant pay for heat and hot water without a written agreement, contrary to a state health regulation.109

Unfair and Deceptive Acts and Practices: 8.2.7 The Tenant’s Early Termination

Damages for a tenant’s breach of the lease are limited to those specified by state law. A “termination fee” in a lease, under which the tenant who terminated the lease early was charged one and one-half months’ rent even if the landlord re-rented the unit immediately, was an unenforceable penalty.111 But the evidence was insufficient to establish a violation of the UDAP statute’s unconscionability standard because the tenant did not introduce evidence of the actual costs to the landlord of early termination.

Unfair and Deceptive Acts and Practices: 8.2.8.1 Deceptive Notices to Quit

A federal court has found potentially deceptive a landlord’s filing of a complaint for possession without proper notice to the tenant that the landlord was terminating their lease and the basis for the eviction.113 A landlord’s form notice to quit was deceptive where it included an image of a uniformed police officer and wording that implied that the landlord would resort to self-help eviction, and where it failed to disclose the tenant’s right to judicial process to contest the eviction.114

Unfair and Deceptive Acts and Practices: 8.2.8.3 Excessive or Unjustified Fees

Misrepresenting that a security deposit was withheld because repairs were necessary violates a UDAP prohibition against misrepresentation of the necessity of repairs.127 It is unfair and deceptive to sue tenants for damage to property and cleaning costs before they have vacated, or to falsely claim in a suit that attorney fees are due and owing.128 It is also unfair for a landlord to charge excessive late payment penalties or institute unnecessary summary ejectment proceedings.

Unfair and Deceptive Acts and Practices: 8.2.8.4 Landlord Seizure of Evicted Tenant’s Possessions

A moving and storage company engaged in UDAP violations where it negligently held a tenant’s property after a sheriff contracted with it to move the contents of the tenant’s apartment.131 Among its deceptive practices were selling the collateral before the time specified in a notice to the tenant and allowing items to be broken and stolen.132 Similarly a landlord commits a UDAP violation by selling a tenant’s property without a valid lien.133

Unfair and Deceptive Acts and Practices: 8.3.2 UDAP Violations Concerning Title, Financing, and the Homeowner’s Legal Rights

A broker commits a UDAP violation by misrepresenting the interest rate of a mortgage,176 or failing to disclose that low-cost financing is subject to conditions and restrictions that will make it difficult for the home buyer to qualify.177 It is be deceptive for a seller to state that it will arrange a title search and title insurance and fail to do so, leading to damage to the purchaser because the title is not clear.178 It is a UDAP violation for

Unfair and Deceptive Acts and Practices: 8.3.3 Special Issues Concerning Home Inspectors

Home inspectors have been found liable for UDAP damages for faulty reports.185 A particularly interesting case exposed a home inspection company’s conflict of interest, which led it to soft-pedal defects in order to avoid derailing the sale of the home and antagonizing the realtors on whom it relied for referrals.186 Home inspectors have sometimes been involved in fraudulent property flipping schemes.187

Unfair and Deceptive Acts and Practices: 8.3.4 Special Issues Concerning Real Estate Agents and Brokers

Brokers must disclose any financial interest they have in a real estate sale.189 It is deceptive for a broker who is representing the seller to purchase the property without fully disclosing all material facts to the seller, including other purchase offers.190 A real estate agent who is also a local public official and who misuses their public authority to effectuate a sale to the consumer’s detriment commits an unfair practice.191

Unfair and Deceptive Acts and Practices: 8.3.5.2 UDAP Precedent

A Maryland decision holds both a loan officer and an appraiser liable to the home buyers in a property flipping scheme.211 The loan officer met with the speculator at the beginning of the scheme, advised the speculator about how to secure FHA loans for the home buyers, and gave them paperwork to use to falsify the source of down payments and closing costs. The loan officer then worked with the speculator to generate inflated sales prices.

Unfair and Deceptive Acts and Practices: 8.3.5.3 Other Causes of Action

Civil conspiracy claims are especially worth investigating in property flipping cases as ways of reaching people who enabled the scheme to succeed but did not deal directly with the buyer.223 Discrimination claims may also be appropriate if the speculator targets a protected class.224 Claims under the federal Credit Repair Organizations Act,225 a state credit repair law,226 or a federal or state RICO

Unfair and Deceptive Acts and Practices: 8.3.6.2 Investigating Appraisal Fraud

Since the consumer usually has limited contact with the appraiser, the appraiser’s involvement in the fraud may not be obvious. A thorough investigation is therefore necessary. Investigating the facts surrounding the appraisal may also reveal how others—those who arranged for or used the appraisal—are tied into the fraud.

Unfair and Deceptive Acts and Practices: 8.3.7.1 Misrepresentations Concerning the Home or Work to Be Performed

It is deceptive to misrepresent that homes are built in accordance with good construction practices, that they meet HUD minimum standards, that they are free of structural defects, that there are no drainage or water problems, that parks and public transportation will soon be built nearby, or that the homes are ready for immediate occupancy.256 Charging extra money for rooms included in the advertised description and selling “bedrooms” that do not have sufficient insulation and waterproofing to serve as bedrooms are also deceptive practices.