Does Federal Fair Debt Collection Practices Act affect non-payment eviction proceedings?

For quite some time, the federal Fair Debt Collections Practices Act (FDCPA) has caused confusion in the courts of New York (as well as in federal courts) as it relates to summary proceedings brought on by landlords against residential tenants for nonpayment of rent.

The FDCPA requires that in order for a "debt collector" to seek payment of a debt (rent), he must serve a 30-day notice upon the debtor (tenant) to verify the debt. Failing to do so may result in an award against the debt collector for money damages, as well as attorneys' fees.

The U.S. Supreme Court held in 1995 that the term "debt collector" applies to lawyers who regularly, through litigation, try to collect consumer debts. Thus, attorneys who regularly engage in consumer debt collection activities through litigation and who attempt to collect back rent on behalf of a landlord client must serve the federally-required 30-day notice upon the tenant. These requirements do not apply when the landlord himself directly attempts to collect the rent, and in doing so uses his own name and not the name of a third person.

As a result of these FDCPA requirements many attorneys are advising their landlord clients to serve all required notices upon defaulting tenants by using only the landlords' own names.

Nevertheless, various judges in the courts of New York still are in conflict as to how FDCPA effects non-payment proceedings, particularly since New York State law also requires formal notices to be served upon defaulting tenants, such as the three-day notice of demand for rent as required by Real Property Actions and Proceedings Law (RPAPL), [section]711(2).

Some months ago, the New York City Civil Court held in the case of Soho Tribeca Space Corp. V. Mills (NYLJ, May 13, 1998 P.28 Col.6) that the three-day demand notice for rent served upon a tenant in arrears, as is required by New York State law, if made by the attorney for the landlord, constituted a violation of FDCPA. In that case, the Civil Court judge dismissed the summary proceedings.

However, in the case of Barstow Road Owners, Inc., Landlord, V. Billing Tenant, (687 NYS 2d 845 Dis. Ct 1998), Judge Christopher G. Quinn of the District Court, Nassau County, First District held that FDCPA does not apply to eviction proceedings for non-payment of rent, and he made a detailed analysis of the effect of FDCPA upon non-payment proceedings.

Barstow Road Owners, Inc., a cooperative, commenced eviction proceedings against the tenant under a proprietary lease for non-payment of maintenance over a long period of time.

The tenant argued that since the three-day notice of demand for rent required by New York law (RPAPL [section]711(2)) and the 10-day notice required by the proprietary lease were both signed the cooperative's attorney and not by the cooperative itself, the provisions of FDCPA were violated because the "debt collector" attorney failed to serve the federally required 30-day notice upon the tenant. The tenant claimed that due to this violation of FDCPA, the eviction proceedings were invalid.

The tenant also counterclaimed against the landlord for the sum of $10,000 as damages for this violation of federal law.

Judge Quinn, in holding that FDCPA does not apply to summary proceedings for the recovery of possession of residential apartments, made a thorough analysis of the impact of FDCPA upon non-payment landlord/tenant matters. His analysis took a step-by-step evaluation of the federal statute and compared it with the New York RPAPL.

Judge Quinn first addressed the question of public policy and the purpose of FDCPA, as opposed to the purpose of a summary proceedings. He stated that the federal statute was enacted to eliminate abusive debt collection practices and to protect consumers by prohibiting a debt collector from using unfair or unconscionable means to collect a consumer debt, and if he does, the law imposes civil liability, including attorneys fees, upon the debt collector. Judge Quinn stated, however, that in the case before him the tenant made no allegation of harassment or unconscionable practices, the very items outlined by Congress which are the targets of the federal legislation.

Judge Quinn stated that New York State has long provided a mechanism in the RPAPL for efficient solutions of landlord/tenant non-payment disputes in residential property. Summary proceedings for nonpayment may be commenced three days after demand for rent is served upon tenant, and such cases may theoretically be resolved in as little as 20 days. Therefore, an immediate conflict arises because federal law requires a debt collector to give the tenant thirty days' notice before litigation can start. Since the primary purpose of summary proceedings is the speedy and expeditious disposition of the issue as to the right of the landlord to immediate possession of his property, it is unlikely that Congress foresaw that FDCPA would be used as a device to dismiss legal summary proceedings commenced by a landlord to reclaim possession of his real property.

While it is true that summary proceedings may also seek judgment for back rent, the main purpose is to reclaim possession of an apartment.

The second issue to be resolved is whether a three-day demand for rent as required by RPAPL is in fact a communication to collect a debt. It has been argued that a three-day notice is not a collection device, but is simply a litigation paper required by New York State law.

Judge Quinn held that the three-day demand is not a collection letter within the meaning of FDCPA. but rather a legal requirement under RPAPL. The judge observed that there are federal District Court cases which differ on the issue of whether a three-day notice signed by an attorney is a communication for purpose of collecting a debt within the meaning of FDCPA; and there is also a difference of opinion in the federal courts as to whether a "debt" must involve an obligation which is past due. Rent, he observed, is usually paid in advance and therefore would not be a "debt" of past due money. He also relied upon a federal Eleventh Circuit Court opinion which ruled that condominium fees do not constitute a debt under the FDCPA because they arise by contract, are assessed on a regular basis, and like rent, do not reflect deferred payments on prior debt.

The third issue which Judge Quinn addressed was the remedy actually available to the tenant even if the landlord violated the provisions of FDCPA. The federal Act provides that a debt collector who violates the provisions of FDCPA is liable for actual damage sustained by the debtor and the debtor's attorney fees. The tenant in this case, however, also sought a dismissal of the eviction proceedings. Judge Quinn stated that since FDCPA provides on its face only for money damages against debt collectors, and since that statute does not provide that one who has been "wronged" can use FDCPA to defeat eviction proceedings, the only remedy that the tenant would have, if indeed FDCPA was violated, would be to sue in federal court for monetary damages as outlined by the federal statute.

Even if the tenant was successful in proving a violation of FDCPA, the violation would only relate to payment of back rent. It would have no bearing on the landlord's effort to evict the tenant and secure possession of the apartment.

Judge Quinn held that the provisions of FDCPA do not apply to a non-payment summary proceeding commenced in New York, and awarded immediate possession of the apartment to the cooperative unless the tenant paid his overdue maintenance forthwith.

(Edward L. Schiff is a real estate partner in the Manhattan law firm of Hartman & Craven, LLP.)