Vol. 6 No. 42 - February 2, 2018 - Click here to access our library. 

Industry Update

Second Class Petty Officer Jonathan Stacy had always thought of himself as capable of handling whatever the U.S. Navy threw at him. Then he met his match: American Homes 4 Rent, the Agoura Hills, California-based real estate investment trust that leases single family homes it snapped up in the wake of the 2008 real estate crash.

First came the broken air conditioning in Stacy’s Jacksonville Florida home in the summer of 2014; he paid $300 to fix it when maintenance requests were ignored and mishandled. In October, it was the furnace, with the company again ignoring repair requests.

Before the year was up, Stacy received orders to deploy to the Middle East, which under federal law allowed him to break his lease. His efforts to get out of the home ended in full voicemail boxes and eventually a refusal to let him cancel the rental agreement.

When an American Homes 4 Rent employee in Las Vegas finally intervened weeks later with the Jacksonville office, Jacksonville told Stacy he had missed the 30-day window opened by the deployment order. Stacy rebutted that he’d been contacting the company for weeks. He hired a cleaning service, gave the landlord the receipts, paid through January and deployed. He figured he was done with American Homes 4 Rent. The company disagreed.

A few months later a bill arrived for $6,500 in move-out charges. It included the January rent he had paid, $800 for paint, and compensation for heavy pet damage for a pet he never had. The company said it was keeping his security deposit and that he owed thousands of dollars more.

“I was trying to deal with this in the Middle East in a combat zone,” said Stacy, who was 22 at the time. “I was on an app in a tent typing emails to anyone who might be able to help me. I had to work on this in the middle of the night because I was 13 hours ahead.”

Industry-wide practices. Stacy’s move-out experience after renting from one of the new companies in the business of leasing single-family homes isn’t unique.

Across the sunbelt and in metropolitan areas such as Seattle, Los Angeles, Denver, Indianapolis, Nashville and Charlotte, where the institutional SFR companies have concentrated their operations, former tenants say they have been charged excessive move-out costs, had their security deposits withheld, and had their credit and rent histories ruined.

Tenants of the three publicly traded single family rental home landlords have lodged complaints that mirror one another, suggesting an industry-wide pattern of shifting landlords’ rental property repair, maintenance and turnover costs to tenants when they leave a home (in addition to American Homes 4 Rent, the other companies are Tricon American Homes, a subsidiary of Tricon Capital Group; and Invitation Homes, consolidated by a recent merger with Waypoint Homes, which previously absorbed Colony Starwood Homes).

Stacy’s aggressive stance with the company, encouraged by his older comrades in the Navy, eventually paid off. A Jacksonville district attorney finally intervened with American Homes 4 Rent. The company cut its demands to a few minor move-out issues that Stacy acknowledged were his responsibility such as repairing spots where three finishing nails marred an interior wall. The pet damage charge disappeared as did the $800 for paint, along with a number of other line items. The company refunded almost all of his security deposit.

Others are not so fortunate, however, as we discuss below. The story of the struggle between institutional SFR tenants and their landlords emerged from 25 interviews of former and current tenants, documents filed in Florida’s small claims courts, complaints submitted to the Attorneys General in Florida, North Carolina and Texas, and tenant messages on the Better Business Bureau and social media platforms.

Potential brand damage, legal risks and increased complaints to regulatory agencies. SFR companies are likely at risk of brand and reputational damage, as there are a multitude of negative social media messages warning prospective tenants away and instructing current tenants to expect abusive practices.

Tenants have been advising each other on state specific protections and suggesting defensive actions including how to submit complaints with consumer agencies, how to film date-stamped video evidence, and how to file small claims lawsuits. Additionally, some state real estate commissions regulate the property management industry, requiring property managers and leasing agents to hold a real estate license against which tenants’ complaints may be filed.

Brand damage has the potential to impact the SFR companies’ appeal to prospective tenants, especially in markets where the SFR companies have not heavily saturated the single-family market or where the local rental market is not overheated. Litigation risks from individual and class action lawsuits from these business practices are also likely to grow as tenants and media expose the business practices the landlords are employing to shift turnover costs onto tenants.

Tenants who settle claims are often forced to sign nondisclosure agreements, but as more tenants gather photo and video evidence, and more court dockets yield exhibits with company emails and documents, the industry’s practices are coming to light.

Company statements. Invitation Homes’ “move-out process is designed so that residents and Invitation Homes associates work together to help ensure the home is left in good condition and that residents’ security deposits are returned,” the company said in an emailed statement to our request for comment. 

The company further wrote that it works to ensure that residents pay only for those items that are their responsibility, and that trained, skilled professional inspectors, armed with knowledge, judgement and applicable guidelines, are able to discern damage from wear and tear: “Life expectancy of paint or carpet is factored into a residents’ refund” the company said. “If residents have concerns or disagreements about potential charges, they are encouraged to dispute those with an Invitation Homes manager.”

The company’s full statement can be found here. Neither American Homes 4 Rent nor Tricon Capital Group responded to our requests for comment.

A Close Look at Former Tenant Complaints

Tenants, backed up by photo and video evidence presented in court, say landlords withheld security deposits and applied excessive repair charges even though they followed all move-out instructions and left the properties in good condition. Renters maintain they have been charged to rectify damage that occurred before they moved in and for repairs that were the landlord’s responsibility. Some claim that the landlord billed for post move-out improvements that they verified were never made.

Photos used to justify charges did not accurately depict condition of homes on date of departure. Tenants cite demands to pay for allegedly missing fixtures and appliances they insist were left in home. Other tenants say they were charged for services and repairs that weren’t performed or for serious structural issues such as problems with an aging roof or hurricane damage to the homes and landscaping—none of which was their responsibility.

Ashley Salyers, a former tenant whose family lived for a year in an American Homes 4 Rent house in Buford, Georgia, says she’s still upset about the $600 debt that was sent to a Tampa debt collector. Saylers, a nurse, lost almost $2,000 when her security deposit wasn’t refunded. In all, she was billed over $3,000 in move-out charges.

Salyers was present for the pre-move-out inspection and complied with the list of requirements, but she was still charged for most of the items she had checked off that list; changing all the lightbulbs and hiring vendors to deep clean the carpets and pressure wash the exterior of the home. Her itemized move-out statement shows that she was also charged for the cost to remove a bird nest on the roof. Repairs to fix damage that existed prior to her moving in such as a broken backyard fence was billed to her, Salyers said.

The post-move-out photos American Homes 4 Rent provided to Salyers as justification for the charges were the same photos taken during the pre-move-out inspection instead of providing new photos after Salyers completed the move-out tasks. “I knew the photos they used to assess charges were not taken after I had cleaned the home, had the carpets steam cleaned and moved out because my personal property was clearly identifiable in the background of the pictures. They didn’t take into account that I did everything that they asked me to do.” she said. 

Tenants say they complied with move-out requirements, yet were charged again for same services. Art Sobota, an Air Force veteran, rented a house from Invitation Homes in Orlando, Florida for two years. When he and his wife Kim saw the rent increase, additional monthly fees and added requirements in a proposed new lease, they decided to leave the home and requested a move-out inspection.

Sobota says they completed every task on the company’s move-out punch list including pressure washing the sidewalk, driveway, front porch, garage and back porch, replacing mini-blinds and light bulbs, tightening, securing or replacing toilet seats, and completing landscaping maintenance. The couple said that also had the carpets professionally cleaned and provided a receipt.

Still, Invitation Homes took half of their security deposit, charging them for what the Sobota’s say were completed tasks including pressure washing and carpet cleaning, and more for painting. In response to Kim’s complaints, the company said by email that photos it took showed the carpets weren’t clean enough, the pressure washing was inadequate and that when valances were removed “we have to re-paint the entire wall because touching up will not match.” Kim’s assertion that the that the valance was there before the couple occupied the home fell on deaf ears, she said.

Tenants complain they left home in clean condition, but expectations are homes be in rent-ready condition. Justin Perlman, who rented a home in Texas for two years, wrote to the Attorney General of Texas to complain about Waypoint Homes billing him $3,845 in move-out charges on top of keeping his security deposit of $1,880.

According to Perlman’s complaint: “Damages included: carpet replacement, full house painting, trash removal, light bulb/air filter replacement, ‘floor management fee’ and appliance cleaning. I had the carpets steam cleaned before moving out. Original paint, spackle, and tile were all left in the garage. There were no lights out in the house, and there were extra air filters located in the laundry room…Waypoint/Colony Starwood is guilty of fleecing their residents and engaging in unethical/immoral business practices. They are now trying to pursue this through collections, which I will not pay.” (Perlman did not respond to a request for comment for this article).

Another tenant who followed all move-out instructions but was billed for cleaning fees is Blonnie Crispin, a young Army wife and mother, whose family lived for a year beginning in September 2015 in a Waypoint Homes rental in Raleigh. Crispin wrote in her complaint to the North Carolina Attorney General, “I was charged $595 Cleaning and Damage Fee after my family moved out of the residence. I attempted to contact the property manager several times via phone and once by certified mail and never received a response.”

Crispin drove to the local office to get clarification of the charges and was informed that “these charges were for light bulbs, air filters, cleaning fees and to bring the home into ‘move-in ready’ condition. I left brand new light bulbs and air filters in the residence upon move-out. The house was thoroughly cleaned and the move-out inspector himself told me that he didn’t see any reason why we wouldn’t get our full security deposit back.” Crispin detailed multiple attempts to reverse the withheld funds, and closed the letter, “We are a military family and have rented numerous placed and have never been charged any fees previously.”

Crispin told The Capitol Forum she eventually received her refund. “The move-out inspector told me that the house was in wonderful condition but he said that he wasn’t the one who made the determination about our security deposit. He said, ‘I just take the pictures and submit the report to corporate. Corporate makes the decision.’ It was the same with the property manager who said she couldn’t reverse the charges. She had to submit a request to corporate.”

A corporate decision-maker who has the power to impose move-out charges despite not conducting a move-out inspection, not communicating with tenants and not comparing photos from before and after residents’ occupancy may contribute to tenant experiences upon move-out of institutional SFR properties. When Kim Sobota, the Air Force veteran’s wife, tried to dispute move-out charges with her local Senior Director of Operations, she was informed by email that the charges were validated by corporate employees other than the local inspector and property manager, who wrote, “After reviewing, I do think the charges are correct. I reviewed these with the Vice President of our Region & our Resident Service Director, as well.

Inflated move-out charges. Mary V. reviewed Tricon American Homes on Yelp, writing: “The issues come from move-out. We were charged for several items that were addressed in the pre-inspection (for example, a closet door that was never there in the first place). It seemed as though they charged us without even reviewing the detailed pre-inspection (with pictures). Thankfully, Heather did a great job responding to my disputes and removed the charges. I'm just confused as to why those charges were added in the first place, but at least they fixed the mistakes.”

An anonymous former Phoenix Tricon American Homes tenant wrote a similar review on revdex.com explaining inflated move-out charges deducted from his security deposit, “I would like to report the unscrupulous business practices of Tricon American Homes-Phoenix, Arizona office. This office has business practices that need to be evaluated immediately. The partial security refund I received is highly inaccurate.” Confronted, the company replied, “This matter was rectified on 5/12/15 with a settlement agreement from Tricon American Homes in the amount of $1,522.00.”

Another anonymous former Tricon tenant posted on the same website, “I had the entire house professionally cleaned and carpets cleaned. At the walk thru I was advised the house was turn key and they put it up for rent within the hour. Over 30 days later I finally received my refund check for my $2175.00 deposit minus $440.00. There was no invoice with explanations, no walk thru check sheet just the check. I have video of the walk thru and my walk thru check list now I want my money back. I spent over $500.00 cleaning the house, pool and yard.”

Again, a Tricon representative replied that the tenants’ money would be refunded, “I would like to respond to the complaint made by the resident regarding her deposit refund. I have emailed her and agreed to send her an additional $380.00 for the cleaning that was charged to her security deposit.”

Derryck Boyer, a former tenant of American Homes 4 Rent from Columbus, Ohio, returned to his former rental home under the guise of a prospective tenant when he suspected he was being overcharged for services that weren’t completed. He had been shocked when he was refunded less than a third of his $2,300 security deposit.

“We never expected 100% of the deposit back, but surely not only $700,” Boyer said. Boyer went to scout out the post-move-out condition of the home. “American Homes 4 Rent has self-viewing for prospective tenants. We just applied to have an electronic key sent to us to gain entry with consent.” 

Boyers’ suspicions were confirmed: “We won in mediation against American Homes 4 Rent. They lied and said that we damaged the home beyond normal wear and tear and they needed to repaint the entire home. We went into the house and took picture of nail holes and smudges on the walls proving the entire home was not repainted. All they had to say was, ‘Well, it was supposed to have been.’ They are crooks trying to keep your money. Tell tenants to please document everything, every phone call and take pictures. They will need it to get your deposit back.” Boyer added: “In Ohio, we had to mediate before suing. We recouped 75% of our security deposit which we thought was a fair outcome.”

Salyers, the nurse from Georgia, also went back to her former rental home to survey the repairs that were charged on her move-out statement. After receiving the bill, Salyers arranged to view the home as a prospective renter. She was able to determine that several items she was charged for had not been fixed or replaced. Sayers then faxed the company a 20-page rebuttal to the bill, including cleaning receipts, pictures and her original move-in statement showing pre-existing damage prior to her tenancy. After a lengthy dispute process, the company reduced the amount she owed to roughly $600 over the security deposit and forwarded her account to a collection agency.

Tenant lawsuits. State landlord tenant laws govern security deposits including whether the funds must be sequestered from landlords’ other accounts, when the deposit must be returned to the tenant, under what circumstances deductions can be taken, if interest accrues to the benefit of the tenant and what penalties landlords are subject to for improperly refusing to refund the deposit.

Unable to find satisfaction at their SFR company, tenants have sought redress by filing lawsuits in small claims court to recoup their security deposits and shed the move-out debt, posting complaints on the BBB and social media sites, writing to state regulators and turning to local and national media to expose these practices.

In February 2016, David and Jenna Davis sued an Invitation Homes subsidiary, IH2 Property Florida, L.P., in small claims court in Palm Beach County Florida, for $1,527. The Davis’ statement of claim filed with the court stated, “Our security deposit in this amount was withheld by our landlord was withheld after residing in one of their properties. We replied to the landlord disputing their false claims for damages which was ignored” (The Davis’ did not respond to a request for comment).

April Cabral also turned to the courts. In July 2016, Cabral flew from Virginia to Florida to arrange to rent a home from Waypoint Homes for herself and her three children. The rental experience did not go smoothly. According to public records, she sued Waypoint Homes twice during her tenancy, first in November 2016 for habitability issues, a lawsuit she settled, and again in August 2017 claiming that the company improperly withheld $850 from her security deposit.

Cabral filed company emails with the court revealing a move-out policy that restricts tenants’ ability to attend a pre-move out inspection and prohibits tenants’ presence at the final walk-through. Tenants on social media sites discuss these practices and post warning messages with explicit instructions to take date-stamped videos of every nook and cranny of the property to defend against inflated move-out charges supported by company photos that do not accurately represent the property’s condition at the time the tenant vacated the premises.

In July 2017, a Waypoint Homes representative emailed Cabral a message that informed her that a pre-move-out inspection would take place three days later. “Please note: pre-move out inspections are done as a courtesy and attendance is optional. Unfortunately, we are unable to reschedule,” the email said.

In an earlier email exchange, Cabral was informed that there would be no other opportunity for an inspection, “Courtesy Pre-Move out inspections are performed approximately two weeks prior to the move out date to point out issues (if any) you can correct before your final move out date. This is the only inspection performed before you move out. There is no final resident inspection.”

“I was able to attend the pre-move-out inspection. The inspector pointed out broken blinds and that’s it. Later, when I received my security deposit refund, $850 was missing and there was no documentation included explaining the deduction. Finally, I got a letter in the mail detailing the charges which I disputed but got nowhere” Cabral said.

Cabral pointed out that she was charged for pre-existing damage evidenced in the company’s own photos “taken when I moved in,” she said. “They charged me for problems that were there before I moved in and I used their move-in own pictures as proof in the lawsuit! I agreed that $135 were justified and disputed the rest, which is what I settled the case for, plus court costs.” Cabral said.

Without providing a final resident inspection, many tenants are blindsided by the industry’s tactics. Marie Coyle submitted a complaint to the Florida Attorney General in December 2015 about Colony American Homes. Coyle who had rented a Tampa area home with her husband and daughter, wrote in her complaint: “Upon move out 11 months later I personally spent 3 days cleaning the entire house. Colony American made no attempt to do a final walk through with us. As a result, they have assessed that we owe them $535.28 in damages which is an outright lie. This was put into collection and now is on the credit reports of my daughter, my husband and myself, all based on their word. This is NOT FAIR.”

Coyle, told us she has not been able to resolve the debt collection account, “They’re all a bunch of crooks and never have any intention of giving anyone their security deposit back. And it’s their word against yours. It’s a horrible practice for people who are struggling.”

Other tenants prepare to fight back. Serena and Latisha Rich are former Section 8 tenants of Colony Starwood and Waypoint Homes, which by a succession of mergers is now Invitation Homes.

The Richs relied on their own photos to dispute those used by Waypoint to show and bill for extensive move-out damages. According to a Phoenix news story, the couple was, “facing more than $5,500 in questionable charges from their landlord and decided to take the case to court themselves.”

The Richs took date-stamped photos to prove that they left the home in good condition, they told azfamily.com. But, according to an earlier story on the site, Waypoint sent the Richs photos revealing serious property damage such as broken doors, furniture and fixtures, and other issues inside the home that would be charged to the Richs. Serena Rich said she had twice requested a move-out inspection but was rebuffed, according to the news report (Latisha Rich did not respond to a request for comment).

“The judge determined Colony Starwood refused the family their right to a move-out inspection, and in doing so, forfeited their right to dispute the condition of the home. The court also found the couple provided enough evidence to establish they left the home in good condition,” the azfamily.com story reported. The judge ruled in favor of the Richs to receive a return of their $1,139 security deposit.