• Rent Escrow Statute: a Sword or a Shield
  • April 17, 2017 | Author: Edward J. Levin
  • Law Firm: Gordon Feinblatt LLC - Baltimore Office
  • In Cane v. EZ Rentals, 450 Md. 597 (2016), the Court of Appeals held that Maryland’s rent escrow statute may be used to enable a tenant to raise the existence of defects or conditions in a rental unit as an affirmative defense in a summary ejectment proceeding brought by the landlord. In so doing, the Court of Appeals reversed a decision of the Circuit Court for Calvert County, which held that the tenant needed to bring its claim under the rent escrow statute in a separate proceeding.

    Wendy Cane rented the ground floor of a single family house in Lusby, Maryland from Daniel Brown and his partner. The house had been divided into two residential units. EZ Rentals leased and rented the units for Mr. Brown. Ms. Cane started to rent her unit in May 2013, and by January 2015 she fell behind in her rental payments. That month EZ Rentals filed a summary ejectment action against her in state district court. The district court entered a judgment in favor of EZ Rentals for $1,150 and granted to EZ Rentals judgment for possession of the property, without the right of redemption. Ms. Cane appealed to the Circuit Court for Calvert County.

    At the trial before the circuit court, Ms. Cane attempted to testify about significant defects in the property including a major water leak for which the water company had threatened to turn off the water and had sent her a $600 bill. She claimed a right of asked “offset” for these defects. The circuit court declined to hear testimony on this because, in the words of the court, those issues were “a completely separate landlord/tenant issue.” After finding that a payment of rent had not been made, the circuit court entered a judgment in favor of EZ Rentals for $1,150, ordered the appeal bond that Ms. Cane had posted to take the case to the circuit court released to EZ Rentals, and foreclosed Ms. Cane’s right of redemption.

    The Court of Appeals granted Ms. Cane’s petition for certiorari

    Mootness Claim Dismissed

    In July 2015, before the Court of Appeals heard the case, Mr. Brown died in a drowning accident. Although the monetary judgment against Ms. Cane was listed as an asset of Mr. Brown’s estate, EZ Rentals did not appear in the case after the Court granted certiorari, and no person sought substitution as a party in lieu of EZ Rentals. The Maryland Multi-Housing Association, Inc., with the permission of the Court, filed an amicus brief supporting the position of the landlord and defended the circuit court’s judgment at oral argument. Also, the house in which Ms. Cane lived was sold at foreclosure in November 2015. This would have likely terminated Ms. Cane’s tenancy, even if she had not been ejected.

    In light of these facts, the Maryland Multi-Housing Association, Inc. argued that the case was moot. The Court of Appeals denied this claim because a favorable decision to Ms. Cane would help her credit score, and an unfavorable decision could be used against her in a future summary ejectment case. Therefore, the Court held that the appeal would not be “without effect” and so was not moot.

    Tenant Has Right to Claim an Offset against Rent Owed

    The Court read the summary ejectment statute, Real Property Article (“RP”) §8-401(d), as authorizing the trial court to enter a money judgment for the amount of unpaid rent determined to be owing and to issue an order for the tenant to yield possession of premises to the landlord. Therefore, the Court held that a summary ejectment action is a “proceeding brought by the landlord to recover rent or the possession of the leased premises.” Accordingly, the Court held that under the plain meaning of the language of the rent escrow statute (RP §8-211), the affirmative defense created by that statute is applicable in a summary ejectment action.

    Because the circuit court had declined to consider evidence concerning defects in the property or to hear Ms. Cane’s arguments for an “offset,” the Court of Appeals remanded the case to the circuit court to be retried.