Currently in Massachusetts, the most serious threat to every rental property owner is the all-too-common abuse of our state’s rent withholding law, what we call the “free rent trick.” Whenever this horrible trick happens, owners are deeply distressed both emotionally and financially. In some cases, owners are pushed into bankruptcy or foreclosure.

Here’s how the free rent trick works

Using a loophole in the law, any tenant who stops paying rent can call in a housing inspector, get code violations cited, and assert a claim that they are “withholding rent” for the violations rather than simply not paying the rent.

From this point forward, as long as an apartment has unrepaired violations, a nonpaying tenant cannot be evicted. So, naturally, in order to delay eviction and live rent-free, the tenant does everything possible to ensure that code violations continue to exist. The tenant often refuses to let the landlord or repairman in to make repairs. The tenant finds new code violations after the old ones have finally been repaired. All too often the tenant damages the apartment to create new code violations. The tenant keeps doing these tricks for as long as he or she can get away with it.

Meanwhile, the owner’s burden is suddenly huge.  He or she must simultaneously push forward with eviction and attempt to make difficult, extra-costly repairs, all while receiving no rent. The tenant’s actions delay eviction, and when a judge finally orders the eviction, the tenant moves on, having lived rent-free for months and months on end. While most or all of the “withheld” rent is legally owed to the landlord, he or she never gets it. For some owners, especially small owners, the high cost of the free rent trick pushes them over a financial edge – into foreclosure or bankruptcy.

But the free rent trick does more than just harm private owners. It has a public effect. While the owner battles one tenant, his or her other tenants are deprived of services. As one tenant absorbs all an owner’s resources, the owner’s property deteriorates for lack of repair and improvement. As one property is neglected and devalued, surrounding properties lose value, and local municipalities lose tax revenues. Since the free rent trick happens more often in lower-income areas, whole neighborhoods are affected. At the extreme, during periods of recession, housing is abandoned and low-income neighborhoods become crime-ridden, producing little tax revenue but demanding extensive city services.

How a rent escrow law would work

The fair and equitable solution to this abuse of rent withholding is a rent escrow law. Currently, rent escrowing is totally at the discretion of judges, it involves a long hearing, and it’s almost never ordered. A mandatory rent escrow law would require any tenant who is claiming rent withholding to pay the withheld rent to a local court month by month until code violations are repaired. After repairs are done, either the landlord and tenant agree on how the escrowed rent should be divided, or a judge orders a fair settlement. In most cases, the owner will get back most of the withheld escrowed rent.

But the most important impact of a mandatory rent escrow law is that those nonpaying tenants who do not escrow can be promptly evicted for nonpayment of rent. Although nonpayment evictions will still take about three months, and owners will lose about three months of rent, much-longer-delayed evictions and the free rent trick will be stopped.

How to learn more

            Click on the “Evictions” button at the left to read more about the free rent trick and mandatory rent escrow.

What you can do

           Over the years, the State Legislature has considered passing a mandatory rent escrow law, but has fallen short of a majority by just a few votes. The Small Property Owners Association is now committed to putting more pressure on legislators to pass a rent escrow law. That pressure boils down to one thing: legislators receiving strong messages from many of their constituents asking them to vote for a fair and effective rent escrow law.

So the single, most important thing you can do is to write, call or email your own state senator and representative and tell them you want them to support a strong, mandatory rent escrow law for Massachusetts. Refer to Senate Bill No. 815, which is drafted by SPOA. Use the links below to find out your state legislators and for tips on how to write them.