Thursday May 30, 2013,
BY RYAN J. FOLEY
IOWA CITY, Iowa (AP) — An appeals court approved a class-action lawsuit Thursday that is challenging lease provisions that critics say are illegal and unfairly shift costs from landlords to University of Iowa students who live in off-campus apartments.
A judge erred last year in dismissing the case and refusing to certify the class-action lawsuit brought by tenants of Iowa City landlord Tracy Barkalow, the Iowa Court of Appeals ruled. A trial should determine whether the clauses are illegal under Iowa's landlord-tenant law and if Barkalow knowingly and willfully included them, a three-judge panel concluded.
The Iowa City Tenants' Project, which is bringing the case on behalf of students, said the litigation could eventually involve as many as 10,000 current and former tenants in the college town, where most of the university's 31,000 students live off campus.
The group is challenging numerous provisions in the leases. Those include allowing landlords to deduct carpet-cleaning fees from security deposits regardless of an apartment's condition, and to charge tenants for vandalism to common areas and the costs of routine repairs, among others.
The decision will also revive a similar class-action lawsuit brought against the Clark family, which has long been the dominant player in the Iowa City rental market, said Tenants' Project attorney Christopher Warnock. He said the Clarks have at least 1,000 tenants through companies such as Apartments Downtown, and use a nearly identical lease as Barkalow, a mid-sized landlord with roughly 80 tenants.
Earlier this month, Magistrate Judge Lynn Rose invalidated a provision in Barkalow's lease that allowed him to charge $150 to any tenant who had an open window when the building's heat was on. Rose said the law only allows landlords to charge tenants for "actual damages" and the $150 fee was excessive and illegal. Rose ordered Barkalow to pay $2,200 in damages for trying to use the provision to improperly deduct a tenant's security deposit and for acting "in bad faith" in refusing to return the deposit in a timely manner.
The twin decisions are a "one-two punch for landlords," Warnock said.
Barkalow, the Clarks and their attorneys didn't immediately return phone messages Thursday. Barkalow is an owner of Big Ten Property Management and TSB Holdings LLC.
Warnock said his group is seeking to reform the landlord-tenant relationship in Iowa City, where students have long complained that landlords unfairly take part or all of their security deposits when they move out and charge excessive costs and fees.
He said he has pursued the litigation for 2 ½ years, without cost, after one of his friends who rented from the Clarks was not given his security deposit back. Warnock said he reviewed the lease provisions and was stunned at how "all sorts of fees, penalties and excessive charges" appeared to be illegal under Iowa law.
"The landlords in Iowa City are basically running wild," he said. "What we're trying to do is to change the culture. That's what this is all about."
He said the class-action could entitle affected tenants to damages equal to three months' rent plus reasonable attorneys' fees. But he said he simply wanted the landlords to agree to change their leases and suggested he would use their potential "multimillion-dollar liability" to prod them in that direction.
District Judge Paul Miller had dismissed the class-action lawsuits last year against Barkalow and the Clarks. He said class members could not challenge lease provisions, even if they were illegal, unless they had proof that landlords actually enforced them. Miller said certifying a class was not appropriate because members suffered varying damages and that their individual claims should be litigated in small claims court.
But the appeals court disagreed, ruling that landlords cannot knowingly include illegal provisions in their leases and that proof of enforcement is not required to show a violation. Allowing Barkalow's tenants to form a class is appropriate since they all signed the same lease, and will be a more practical way of deciding their claims than through individual cases in small claims court, Chief Judge Larry Eisenhauer wrote.
"The individual tenants' claims are likely insufficient in the amounts or interests involved, in view of the complexities of the liability issue and the expenses of litigation, to afford significant relief to the members of the tenant class without certification of the class," he wrote.
For further information go to the Iowa Tenants' Project Contact Page