Relating to Real Estate
Interest Limited to 6% on Unpaid Rent
The Court of Appeals held in Ben-Davies v. Blibaum & Associates, P.A., ___ Md. ___ (2018), Misc. No. 4, Sept. term 2017 (Md. Ct. App. Jan. 19, 2018), that the interest note on a judgment arising from a residential landlord-tenant case is six percent per annum even if only a part of the judgment is for the failure to pay rent and even if other parts of the judgment are for costs, expenses, and damages incurred by the landlord.
The consequences of this decision may be substantially more than the difference between the six percent interest rate and the typical post-judgment interest rate of ten percent. Here, the losing party in this action may be liable for damages under the federal Fair Debt Collection Practices Act, the Maryland Consumer Debt Collection Act, and the Maryland Consumer Protection Act (collectively, the "Consumer Statutes").
Amber Ben-Davies and Bryione Moore (collectively, the “Tenants”) had similar stories. They rented apartments but failed to pay some of the rent owed before they left. Their landlords incurred other costs, expenses, and damages when they left, including the cost of unpaid utilities, cleaning or replacement of carpeting, installing a new lock, and advertising and reletting the premises. Their landlords obtained judgments in Maryland District Courts against the Tenants. The judgments were for lump sums; they did not segregate the basic rent from the other components.
In each case, years later Blibaum & Associates, P.A., a licensed debt collector, demanded payment from the Tenants of the judgments together with interest at ten percent per annum. The Tenants had paid very little, if anything, on their judgments. These were not cases where the judgment debtors argued that they paid everything they thought was owed and they should be released from their judgments. Under any way of calculating the debts, the Tenants owed the full amounts of their original judgments and more.
The Tenants sued, separately, in the United States District Court for the District of Maryland alleging violations of the Consumer Statutes for claiming excess interest on their judgments. They claimed that they suffered actual and intangible harm as a result. The U.S. District Court judges who heard the cases dismissed them, but the Fourth Circuit Court of Appeals held that the Tenants had established injuries and therefore vacated and remanded the cases.
Upon remand to the U.S. District Court, the Tenants’ cases were consolidated, and the court issued a Certification Order to the Maryland Court of Appeals regarding the legal rate of interest.
Section 11-107(a) of the Courts and Judicial Proceedings Article (“C&JP”) provides that a post-judgment interest rate of ten percent applies to all judgments, except as otherwise provided. C&JP §11-107(b) states that the post-judgment interest rate is six percent for “a money judgment for rent of residential premises.” The landlord argued that in C&JP §11-107(b) “rent” is a noun and relates to the money owed, usually on a periodic payment, for the right of a tenant to occupy space. But this argument was unsuccessful. The Court of Appeals held that if any part of a judgment was for non-payment of rent, the entire judgment is limited to six percent. The Court read the word “rent” in the quoted language as a verb. It considered any judgment arising under a landlord’s rental of residential property to be squarely within the statute.
The Court of Appeals also held that awards of court costs and attorneys’ fees are not part of a judgment and therefore they do not accrue post-judgment interest.
For questions, please contact Ed Levin (410) 576-1900.