Tenants hit Jared Kushner's real-estate company with a class action lawsuit

Tenants of the Baltimore-area apartment complexes owned by Jared Kushner’s real-estate company have brought a class-action lawsuit against the firm’s property management arm over its aggressive pursuit of tenants for allegedly unpaid rent.

The lawsuit, filed Wednesday in Circuit Court for Baltimore City, alleges that the management company and related corporate entities have been improperly inflating payments owed by tenants by charging them late fees that are often unfounded and court fees that are not actually approved by any court. This, the lawsuit charges, sets in motion a vicious cycle in which tenants’ rent payments are partly assessed toward the fees instead of the actual rent owed, thus deeming the tenant once again “late” on his or her rent payment, leading to yet more late fees and court fees. Making matters worse, the 5 percent late fees are frequently assessed on principal that includes allegedly unpaid fees, not just the rent itself. Tenants are pressured to pay the snowballing bills with immediate threat of eviction, the suit alleges.

“The routine practice of charging tenants illegal fees combined with filing eviction proceedings against tenants who have paid their rent on time is predatory and destructive to hard-working Marylanders and their families. This is yet another example of corporations profiting from deceptive policies,” said Chelsea Ortega of Santoni, Vocci & Ortega, a Baltimore-area firm that has also brought class-action suits for similar “fee-churning” practices against two other large property management companies in the area. In this case, the firm is working with Brown Goldstein & Levy, a Baltimore firm specializing in civil rights cases, and the Public Justice Center, a civil legal aid office based in Baltimore that has also brought cases against area landlords over similar practices.

A spokesman for the Kushner Companies declined to comment on the particulars of the lawsuit. “We will respond to the complaint at the appropriate time in the legal proceedings,” he said.

The family-controlled Kushner Companies purchased apartment complexes with about 5,500 units in the Baltimore area as part of a $371 million deal in 2012, and added three more complexes a year later for $37.9 million. After several subsequent deals, the company now manages a total of 15 complexes in the Baltimore area, with a total of close to 9,000 units. Jared Kushner, who was instrumental in the purchases, stepped down as the company’s CEO when his father-in-law, Donald Trump, won the presidency. Kushner has become one of Trump’s senior advisers in the White House.

The suit follows a May 23 article jointly published by ProPublica and The New York Times Magazine that detailed the Kushner Companies’ highly litigious dealings with the people who rent its apartments. The company, which shares ownership in some of the complexes with other partners but runs them all through its Westminster Management subsidiary, has brought hundreds of cases against current and former tenants in local courts.

Many of the cases involved former tenants who had moved out of the complexes several years prior to the Kushner Companies’ purchase of them. And some involved tenants who possessed clear evidence that they did not owe the money the company claimed, yet were pursued anyway for several years, with late fees and court fees piling on top of the original claims. The article also described shoddy conditions that many tenants contend with at the complexes, including mice, leaky roofs and mold.

In response to questions for the May 23 article, the Kushner Companies’ chief financial officer said that its approach when it came to pursuing tenants was in line with industry practices and that it had a fiduciary duty to its ownership partners to collect all money owed by current and former tenants.

A subsequent report by The Baltimore Sun last month found that in some cases, Kushner Companies went to even greater lengths: Since 2013, corporate entities affiliated with the company sought the civil arrest of 105 former tenants at the company’s 17 Maryland complexes (it also owns two in the Washington suburbs) for failing to appear in court to face allegations of unpaid rent. Twenty former tenants were in fact briefly detained, the Sun reported.

In response to the stories, Maryland’s two U.S. senators and four of its House members, all Democrats, last month sent a letter to Kushner Companies asking for some of the firm’s records. The lawmakers noted that the complexes rely heavily on tenants with Housing Choice (Section 8) rental vouchers, and thus must comply with a host of Department of Housing and Urban Development regulations. The lawmakers demanded, among other things, all notifications from HUD, public housing authorities, inspection companies or local jurisdictions identifying defects in the complexes in the past three years; all complaints from residents about maintenance and repair issues over the past three years; and information regarding the role played by Jared Kushner.

One of the two named tenants in the class-action suit filed Wednesday is Tenae Smith. Smith and her partner have lived at Dutch Village, a Kushner-owned complex on the northern edge of Baltimore, since 2009. Last September, water started leaking from the bathroom ceiling whenever it rained. She told the rental office repeatedly in the months following, but no one came to fix it. Finally, during a hard rain in December, she slipped on the wet bathroom floor, and had had enough. She filed a rent escrow claim in court on Dec. 19, seeking to withhold her rent until the problem was fixed. But the city inspector didn’t come to verify the problem until Jan. 11. Dutch Village finally started work on the problem on Jan. 24, just before her Jan. 30 rent escrow hearing. The judge dismissed the case, but Smith kept fighting, insisting on a reduction in rent for the months when the problem went ignored. Then, during a hard spring rain, the patched ceiling leaked again, suggesting the problem was with the roof.

Smith, who has two young children, has been in court countless times this year, arguing for her rent escrow claim and against Dutch Village’s suits demanding payment of her $795-per-month rent. Her family has also been dealing with bedbugs, a leaky sink and mold in the utility closet.

The class-action suit alleges that Dutch Village at various points charged Smith with fees for “writ filing” and “legal-summons” ranging up to $80 even though no court had awarded such fees. If Smith did not pay all of the fees along with her rent, Dutch Village sometimes rejected her rent payment, leading to yet more fees. For instance, when she paid her $795 rent for this past July, it rejected the payment and said she in fact owed $944.70 because of accumulated fees, a sum that would grow with additional late fees, agent fees and baseless court fees if it was not paid in full.

“I would pay my rent, and if I was late, I would pay a 5% late fee, but the fees kept adding up,” Smith said in a statement paired with the lawsuit. “I work full-time and made regular payments, but they kept taking me to court for eviction and piling on the fees.”

The other named plaintiff is Howard Smith (no relation), a retiree who has lived in the Kushner-owned Carroll Park Apartments in Middle River, east of Baltimore, for 10 years. He has been hit with a string of late fees and court fees and eviction notices even though he has arranged to have his rent automatically debited from his bank account every month. He has also suffered repeating flooding in his ground-floor unit, including in 2015 after a mentally unstable tenant above him left the tub running, causing Smith’s ceiling to collapse. That tenant subsequently shot two employeesin the rental office.

The class-action suit alleges that on several occasions in the past two years, after Smith paid his rent in full, Carroll Park misallocated a portion of that payment to non-rent charges, deemed his rent to be late, then charged him a “legal-summons fee,” even though no court had awarded such a fee at the time, as well as a “legal-agent fee,” and then filed an eviction notice to spur payment of the full bill. Smith complied, fearful of eviction.

“Adding small but improper fees to the rent of tenants living paycheck to paycheck, then misallocating rent payments to those fees in order to generate more fees, is a scheme that preys on working-class tenants,” said Andrew D. Freeman of Brown, Goldstein & Levy. “Westminster Management’s misuse of Maryland courts’ eviction proceedings to force tenants to pay these improper fees makes this scheme all the more deplorable. It must be stopped.”

One former tenant pursued by Kushner Companies has already received legal relief. Kamiia Warren, a home health care worker, moved her family out of the Cove Village complex in Essex, just east of Baltimore, in 2010 after her elderly neighbor started behaving erratically toward them. Warren got the necessary written approval from the on-site manager to leave in advance of her lease’s expiration. But three years later, after Kushner Companies bought the complex and took over management of it, she received notice that a Kushner subsidiary, JK2 Westminster, was suing her for $3,014.08 for having broken her lease.

Warren was initially unable to locate the document showing she had permission to leave, and a Baltimore County judge awarded JK2 Westminster a judgment of nearly $5,000 against her, including court and late fees. The Baltimore-area law firm that handles all of the cases against the Kushner Companies’ local tenants then got a court order to garnish Warren’s wages and bank account — she changed jobs soon afterward, but her bank account was cleaned out.

Around the same time, she got her hands on a copy of the document showing she had received permission to move and presented it in court, but the Kushner attorneys kept up their pursuit, eventually securing a court lien against her for the remaining $4,615 she allegedly owed. That lien has marred her credit record, making it hard for her to secure loans, including the one she would need to launch the small assisted living center she dreams of opening.

But after the ProPublica/New York Times article appeared, featuring her treatment by Kushner Companies, lawyers at the Baltimore office of Ballard Spahr, a nationwide law firm, stepped forward offering to take on Warren’s case pro bono. They contacted the Kushner Companies’ local lawyer, Jeffrey Tapper, and earlier this month, the company agreed to a stipulation releasing Warren from the $4,615 lien — more than seven years after she moved out of Cove Village.