Justice Department Obtains Its Largest Ever Settlement Against A Property Management Company for Alleged Violations of the Servicemembers Civil Relief Act

Ballard Spahr LLP

Ballard Spahr LLP

The Justice Department announced in a March 15 press release that it has reached an agreement with property management company PRG Real Estate Management (PRG) and several related entities to settle claims that PRG violated the Servicemembers Civil Relief Act (SCRA) by obtaining evictions and money judgments against service-member tenants by filing affidavits that did not accurately reflect the tenants’ military status. PRG also allegedly charged servicemembers improper lease termination fees. The affected servicemembers were tenants at six properties located in Virginia

The $1.59 million settlement is the largest settlement the Justice Department has reached against a landlord or property management company for SCRA violations. Under the terms of the settlement, PRG will pay 127 servicemembers a total of $1,490,000 to compensate them for default judgments that were erroneously entered against them. PRG will also pay $34,920.39 to compensate servicemembers who were charged improper early lease termination fees and a $62,029 civil penalty to the United States. PRG also agreed to repair the credit of affected servicemembers, provide SCRA training to its employees, and develop new SCRA policies and procedures, including an express requirement that PRG conduct thorough checks of the DMDC website for evidence of SCRA eligibility before attempting to obtain a default judgment.

The Justice Department launched its investigation of PRG after learning of reports that PRG had filed erroneous affidavits stating tenants were not in military service in order to obtain default judgments against them. If a tenant is on active duty military service, the SCRA includes special requirements that must be met in order to obtain a default judgment against the servicemember. The moving party must file an affidavit of military service with the court, the court must appoint an attorney to represent the servicemember, and there is a 90-day stay of proceedings that may apply before the Court could properly enter a default judgment. PRG also allegedly violated the SCRA by charging servicemembers termination fees in order to terminate residential leases. The SCRA allows military tenants to terminate a residential lease early without incurring fees if the servicemember receives deployment or permanent change of station orders or enters military service during the term of the lease.

This settlement follows several other recent investigations and settlements that have been reached related to servicemembers under the Justice Department’s Servicemembers and Veterans Initiative.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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