How to Amend HUD Lease to Get Residents to Pay Your Attorney's Fees

Going to court with a resident can be an expensive proposition—even if you win. You may win $1,000 in back rent, but that's not a meaningful victory if you have to pay your attorney a few thousand dollars to win it for you. And without a lease clause requiring residents who violate their leases to pay your attorney's fees, you won't be able to convince many courts to order residents to do so.

The HUD lease doesn't have an attorney's fees clause. So, to get the right to collect attorney's fees from residents who violate their HUD leases, you'll have to add an attorney's fees clause to your HUD lease. We'll give you a Model Lease Clause: Use Lease Clause to Get Attorney's Fees from Residents, that you can adapt for your own use that will make it difficult for a resident to avoid paying your attorney's fees if you win. We'll also tell you how to get HUD approval to add the clause to your lease and implement the clause once you get HUD's approval.

How to Get HUD Approval

To ensure that a court will uphold an award of attorney's fees in breach-of-lease cases, ask HUD to let you insert an attorney's fees clause into the HUD lease. The HUD Handbook requires you to get the written approval of your local HUD office or contract administrator for new lease clauses and describes what types of clauses may and may not be amended [HUD Handbook 4350.3, par. 6-5(C)(2)]. HUD will not permit modifications to the following nine provisions of the model lease:

• Changes in Tenant Rent;

• Regularly Scheduled Recertifications;

• Reporting Changes Between Regularly Scheduled Recertifications;

• Removal of Subsidy;

• Tenant Obligation to Repay;

• Discrimination Prohibited;

• Changes in Rental Agreement;

• Termination of Tenancy; and

• Penalties for Submitting False Information.

Also, HUD states that you can't include a clause in which a tenant is charged with the cost of legal actions regardless of outcome. For example, a lease provision that the tenant agrees to pay all attorney and other legal costs if the owner brings legal action against the tenant, even if the tenant prevails in the action, is not allowed. However, prohibition of this type of lease provision doesn't mean the tenant, as a party to a lawsuit, may not be obligated to pay attorney's fees or other costs if the tenant loses the suit [Handbook 4350.3, par. 6-5(C)(6)(h)].

To request approval to amend the lease, submit a letter requesting approval under HUD Handbook 4350.3, par. 6-12. Describe the new clause and say why it's important that you add it to your lease. Include a draft of the proposed clause. Before you send a request to add a clause to HUD, show the letter—and the proposed clause—to your attorney.

Although it's not a HUD requirement, you should determine whether any applicable state or local laws apply to your proposed lease modifications. An attorney will help ensure that your lease is in compliance with, and enforceable under, state and local laws. Don't send the letter or amend your lease until you get your attorney's okay.

How to Make Lease Clause Airtight

Your lease clause, like our Model Lease Clause, should say that the resident must pay your attorney's fees. But it should also make two things clear:

1. Clause applies to any enforcement of the resident's lease obligations. Some attorney's fees clauses begin with words like “If the lease is terminated…” That language limits you to collecting attorney's fees only if you terminate the lease. But you might take legal action that won't end the lease, so don't restrict yourself, suggest Florida attorney John McMillan.

Also, a resident may comply with her obligations before you have to take her to court, adds McMillan. But by then you've already spent money on your attorney. So don't limit yourself to collecting attorney's fees and costs involved with litigation only. Make sure you can collect all attorney's fees and costs involved in enforcing the lease.

Remember that the lease clause can't permit you to recover attorney's fees for the cases that you lose. HUD doesn't allow a lease clause that says residents will pay your attorney's fees regardless of who wins.

2. Clause applies to all reasonable attorney's fees and costs. It's important, also, to use the word “reasonable,” says McMillan. That's because residential lease disputes tend to be for small amounts of money, especially at assisted sites, and the legal bills can far exceed the amount of money at stake. Courts don't want you to run up huge bills chasing small debts at the debtor's expense, and they won't let you rely on an open-ended lease clause to do so. So to make sure that your clause will be enforceable, limit yourself to reasonable attorney's fees.

Some states, such as New York, have laws that give residents the right to attorney's fees if the lease has an attorney's fees clause giving the owner that right. Check with your attorney to see if your state has such a law. If so, by adding an attorney's fees clause to your HUD lease, you'll be giving residents the right to collect attorney's fees from you if you sue them in court and lose.

Implementing HUD-Approved Lease Amendments

Once you get HUD approval for the lease clause, you can start using a HUD-approved lease amendment right away when a new household moves into a unit at your site. But you can't just change the leases of current households to reflect the amendment.

You must follow special HUD rules for putting the lease amendment into effect. These rules specify how and when you should notify households of the amendment, what options you must give households about the amendment, and when the amendment can go into effect. We've given you a Model Letter: Notify Household Members of Lease Amendment, to help you comply with these implementation rules.

Household notification. You can start using a new lease amendment for your current households only as each household's lease ends. But you must first notify the household members of the amendment by giving them a copy of the amended lease or a lease addendum containing the amendment, along with a letter explaining that they can either accept the lease amendment or move out of their unit [Handbook 4350.3, par. 6-12(B)(5)]. Regardless of their choice, they must respond in 30 days [Handbook 4350.3, par. 6-12(B)(5)].

When to deliver. You must deliver the letter and other lease amendment documents to each household at least 60 days before the household's lease ends [Handbook 4350.3, par. 6-12(B)(4) and par. 6-12(D)(1)-(2)].

How to deliver. You must deliver the lease amendment documents in two ways: by first-class mail and by personal delivery. The 60-day notice you must give your household members begins only after you've both mailed and personally delivered the documents. The 60 days start on the date you mailed the documents or the date you personally delivered them [Handbook 4350.3, par. 6-12(D)(4)]. You should try to complete both deliveries on the same day so there's no confusion.

Mail the lease amendment documents first class to the household members at their unit address. Your envelope must have your site's return address and the proper amount of stamps [Handbook 4350.3, par. 6-12D(3)(a)].

Personally deliver the lease amendment documents to an adult person answering the door at the unit. If an adult doesn't answer the door, either place the notice under the door or through the door (probably through a mail slot) or affix it to the door [Handbook 4350.3, par. 6-12(D)(3)(b)].

File proof of delivery. You should get and keep some proof that you properly delivered the lease amendment documents, in case a household later claims that you didn't give it proper notice of a lease amendment. For example, you could spell out the delivery method in the letter. In your notification letter, say how you're delivering it and the other lease documents attached to it. That way, the copy of the letter you keep in your household file will itself be proof of delivery. Or you can keep the certified mail receipt. Send the lease amendment documents by certified mail, return receipt requested, and keep a copy of the return receipt in the household's file.

Insider Source

John McMillan, Esq.: John E. McMillan, P.A., 5309 E. Busch Blvd., Temple Terrace, FL 33617; www.johnemcmillan.com.