Blacklisting Settlement

[Landlord's Boy]

So you will consider it equally reasonable if your tenants refuse to hand over a security deposit until you give them your SSN?

My business TIN is part of the public record and accessible as such. Regardless of that, every tenant must fill out a W-9 if I am to pay them anything; that's the law.

[HardKnocks]

No, I want your personal SSN, the one I can use to steal your identity, run up debts in your name and/or access more personal information about you than I'm entitled to. You don't mind, do you? I can't see why you would, if you want the same from me.

What kind of official IRS form did you fill out and give to your tenants when you received their deposits?

[TenantNet]

I'd have to do some research on it, but if I remember, if tenants fail to provide the SS number and/or the W-9 form, the bank is required to do what's called backup withholding. I think that means a calculated amount is sent to the IRS in lieu of the amount calculated from the W-9 form.

However, that does not mean that the remainder can be withheld from the tenant, either interest or principal when the tenant leaves.

Another reason for tenants to recover the deposit by withholding the last month's rent. In addition to all-to-frequent invented damages, LL's may be inventing reasons to not return the deposits if tenants prefer to engage in privacy protection.

As we've said many times, one view is that recovering deposits by not paying the last month's rent is not legal. What that means it may violate the lease agreement; it's not illegal as if it's some sort of crime. What it does is put the shoe on the other foot, putting the LL in the position of seeking damages if any real damages have occurred. In either case, the LL must prove the damages and the value of the damages. However in the real world many tenants lose out if -- for whatever reason -- they do not take steps to recover the deposit after giving up possession.

[Landlord's Boy]

How much of my money do my tenants hold for me in an interest-bearing account? Hey, if it was up to me, I'd have the bank deal with the tenants on this one directly. But the law says I have to be the middleman.

[Landlord's Boy]

Real Estate transactions are not subject to backup withholding, and I think security deposit interest falls under that.

Security deposits are NOT meant to be used to pay the last month's rent. A security deposit is security against damage to the apartment, plain and simple.

[Landlord's Boy]

BTW, a common mistake is that departing tenants fail to give me a forwarding address. When the SD finally does come through, where am I supposed to send the check?

[Cranky Tenant]

Originally posted by Landlord's Boy:

My business TIN is part of the public record and accessible as such. Regardless of that, every tenant must fill out a W-9 if I am to pay them anything; that's the law.

The point you seem to be missing is that you're not "paying" the tenant anything in terms of non-employee compensation, royalties, etc. Security deposits are to be treated as the tenant's money. held "in trust", in an interest bearing account. Banks may require this information for tax purposes ( interest paid) but landlords really only function, in this instance, as an intermediary. It sinply isn't your money to write off.

<small>[ June 01, 2006, 04:25 PM: Message edited by: Cranky Tenant ]</small>

[Cranky Tenant]

Originally posted by TenantNet:
]I'd have to do some research on it, but if I remember, if tenants fail to provide the SS number and/or the W-9 form, the bank is required to do what's called backup withholding. I think that means a calculated amount is sent to the IRS in lieu of the amount calculated from the W-9 form.

So if my LL was actually playing by the rules, I'd receive a yearly report indicating 30% of the 1-2% interest on my deposit had been sent to IRS as back-up withholding? And that I'd get to include it on my 1040 as tax paid? Sounds like a fair price to pay to maintain a little privacy.

[HardKnocks]

LL Boy, if more LLs actually gave back deposits instead of making up bogus reasons to keep it, tenants wouldn't resort to using it as the last month's rent.

Greed is human nature, I suppose, but LLs seem to think the deposit is a little bonus they're owed for all the hard work they do cashing our rent checks every month. They see it as their reward for being a LL instead of what is intended to be... security against damage. So we see not paying the last month as *our* security against being stolen from.

Don't blame us... blame your fellow LLs.

[Landlord's Boy]

Not on this one, I won't. The damages irresponsible tenants do can far exceed the security deposit. And the LL, when pressed, has to document it by presenting the bills, whereas an ex-tenant can just run the other way. So the LL should get the benefit of the doubt.

[Concourse]

Landlord's Boy is, as usual, dissembling on the subject of social security numbers.

The SS number can and should be provided directly to the BANK, not the landlord. The landlord has no right to such information and is not disadvantaged by not having such info.

I have no idea if the bank is required to perform backup withholding. Given the small sums involved, that is not in the least troubling.

If a landlord wants to withhold the deposit for such a patently invalid reason, that is his privilege and in fact I would encourage him to do so, as such bad faith is looked down upon by the courts.

Such landlord inanity is a good reason to withhold last month's rent, as I believe TN just pointed out.

[TenantNet]

We received the following from James B. Fishman, attorney for the plaintiff in the class action Blacklisting matter:

The judge did not approve or deny approval of the proposed settlement of the tenant blacklisting class action. Instead, he gave the parties 30 days to go back to the bargaining table and see if we can revise certain provisions that provide stronger programmatic changes in the defendant's business practices. The plaintiffs will re-negotiate the in accordance with the judge's instructions. If a better settlement agreement is reached it will be presented to the judge for approval. If not, we will continue to litigate the case at trial.

[Concourse]

TN, can you put that in perspective? I am confused. Is the court saying that the settlement does not adequately protect tenants?

[TenantNet]

Well I can't speak for the tenant lawyer, or the court obviously. I wasn't there and it's being filtered from the perspective of the tenant atty (James Fishman). Apparently the court wasn't satisfied and told the parties to go back to the bargaining table, with instructions to provide better protections against case reports that might be misleading, i.e., if the case was dismissed, settled, found in the tenants favor and so on. That's my speculation. How far the defendant is willing to go, that's anyone's guess.

In situations like this both parties have to devise strategies. If there's no agreement and it goes to trial, what are the chances of party A or B winning. That's what the parties need to consider.

I'm sure Fishman wanted a better outcome than first presented as a settlement, but he had to weigh his client's interests if a trial was not in favor of tenants, i.e., what he could gain and what would be certain by settling.

[Concourse]

Sounds like a friggin good judge, whoever it is.