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Military Law

A Section of the Virginia State Bar.

Military Law Newsletter - Spring 2015

Military Law News

Landlord Concession Fees: A Targeted Attempt to Circumvent the Protections of Servicemembers by Undermining the Servicemembers Civil Relief Act

By Mr. Dwain Alexander, II*

Since 2003 landlords have sought methods to circumvent the application of the Servicemembers Civil Relief Act’s (SCRA) provisions to their business.  In this ongoing battle, various tactics have been developed to remove the burden placed on this industry by laws that protect the military.  Two primary methods of avoidance are the pre-dispute SCRA waiver and the concession fee agreement.  Pre-dispute waivers require a waiver before there is an understanding or knowledge of an issue or the law.  Concession fee agreements create a penalty where the law has foreclosed the option.  This article discusses the history of the SCRA and the Virginia Residential Landlord Tenant Act (VRLTA), the development of civil protections for military personnel, and why pre-dispute waivers and concession fee agreements should fail.

Federal and state laws have long recognized the need to protect those who protect us.  Since the Civil War, congress has acknowledged the adverse impact military service can have on the civilian elements of a servicemember’s life.  Congressional power to pass legislation providing civil protections for the military was reviewed and sustained after the Civil War.1  After debate and challenge on its constitutionality, the proposed Act of 1918 was passed by the 65th Congress.2  In 1940, Congress essentially reenacted the expired 1918 statute as the Soldiers and Sailors Civil Relief Act (SSCRA).  It was substantially amended in 1942, to take into account the new economic and legal landscape that had developed between the World Wars.3  The 1942 version of the SSCRA remained essentially unchanged, except for minor amendments, until late 2003, when it was amended and recodified as the Servicemembers Civil Relief Act, 50 App. U.S.C.A. §§ 501 et seq.4

Among the many changes presented by the 2003 amendments was the substantial modification of Section 534, “Termination of leases by leasees,” renumbering it to 535 and retitling it “Termination of residential or motor vehicle leases.”  The pre-2003 lease termination provision provided for the termination of a lease only if the lease was executed prior to military service and only upon the entry into military service.5  The 2003 changes included provisions for lease termination (pre-service obligation) upon entry to the military and during military service upon the receipt of permanent change of station orders, deployment with a military unit, or as an individual in support of a military operation, for a period of not less than 90 days.6  The term “orders” was defined to include official military orders or any notification, certification, or verification from the servicemember's commanding officer.7  Subsequent changes under the Veterans Benefits Act of 2010 included a prohibition against early termination fees.8  

Prior to the 2003 change in the SSCRA Virginia law was more beneficial than federal law in its protection for servicemembers seeking to terminate a lease.  Virginia allowed post service lease termination upon receipt of (i) permanent change of station orders to depart thirty-five miles or more (radius) from the location of the dwelling unit; (ii) temporary duty [TDY] orders in excess of three months' duration to depart thirty-five miles or more (radius) from the location of the dwelling unit; (iii) discharge orders or release from active duty or (iv) orders to report to government-supplied quarters resulting in the forfeiture of basic allowance for quarters.9  Virginia had a limit on the time period for notice of the termination date requiring that notice be provided no more than sixty (60) days prior to the date necessary for departure to comply with orders.10  Additionally, Virginia law provided landlords liquidated damages in consideration for allowing early termination prior to the end of a 12 month lease term.11  A landlord would receive one month's rent if the tenant had completed less than six months of the tenancy, or one-half of one month's rent if the tenant had completed at least six, but less than twelve months of the tenancy.12

The amendments to the SSCRA in 2003 were followed by changes to the VRLTA in 2005.13  The change in Virginia law was very similar to the SCRA, but not a mirror image.  Virginia’s law does not provide termination for dependents on the lease when the servicemember terminates and includes a 60 day cap in the notice requirements.14  Virginia, kept provisions requiring Temporary Duty (TDY) orders and mileage requirements (> 35 miles) for some terminations.15  The state requirement of TDY orders differs from the federal use of the term deployment.  The words are terms of art and have different meanings.  TDY orders are specific directives provided to some members of the military for temporary duty.16  Deployment is the rotation of forces into and out of an operational area.17  Military personnel can and do deploy for 90 days or more without receiving TDY orders.  The risk for those transiting without TDY orders is no less great, nor the need for their travel any less important than those assuming duty under TDY orders. 

The restrictions imposed by the divergence of VRLTA Section 55-248.21:1 from federal law interferes with and is contrary to the laws congress made to protect servicemembers.18  Those sections are preempted by the Supremacy Clause of the United States Constitution.19  Those sections of VRLTA that restrict or reduce the rights provided to servicemembers by federal law must fail.20  The differences between federal and state law regarding the termination of leases by military personnel provide the impetus for the landlord’s use of pre-dispute SCRA waivers and concession fee agreements to avoid federal protections for servicemembers. 

The requirement of pre-dispute SCRA waivers and the use of concession fee agreements grew rapidly following the 2003 modification of the SCRA and the 2005 modification of the VRLTA.  SCRA waivers and concession fee agreements are attempts by the residential leasing industry to maintain the pre-2003 status quo.  The SCRA waiver was addressed in a previous article.21  However, in short, the waiver as employed by many Virginia landlords is unlawful.  Some of the SCRA waiver forms do not meet federal requirements.22  Where the SCRA waiver form complies with federal law, the use of pre-dispute waivers runs afoul of Virginia common law.  Virginia courts have consistently held that a valid waiver must be made voluntarily and with knowledge.23  By requiring that the waiver by made prior to the understanding of the need for a waiver or law that is being waived, the pre-dispute waiver removes the knowing element and invalidates the waiver.  The use of SCRA waivers that do not comply with federal law or state law is a violation of the Virginia Consumer Protection Act.24  To address the common law challenge to pre-dispute SCRA waivers, legislation was proposed in 2014 that, in its original form, would have amended the VRLTA allowing a waiver of the SCRA.25  Had this provision passed, it could have statutorily nullified the history of cases that developed the voluntary and knowing requirements for the waiver.26  The original bill would have opened the door to the use of SCRA waivers and potentially nullified the application of federal protections for servicemembers in Virginia. 

Both the SCRA and the VRLTA express strong public policy to protect a select segment of the general population.  The SCRA is a statement of Congressional intent and public policy to provide protections for the military in civil legal matters, allowing servicemembers to focus on the National defense.27  When Virginia’s legislature enacted the VRLTA it chose to revise and replace years of diverse common law rulings that could be harsh and confusing to tenants.  This is especially true where the parties had unequal bargaining power.28  It redefined the obligations and rights of landlords and tenants encouraging them to maintain and improve the quality of housing.29  To protect tenants from the potential of unequal bargaining power the Act cannot be waived.30  Within the VRLTA, the legislature carved out special rights and protections for military personnel.31  These special rights provided for servicemembers may indicate support for the unique demands on and needs of military personnel, an appreciation for the role each servicemember plays in national security, and/or an acknowledgement of the important role the military plays in the Commonwealth’s economy.32  The rights and protections for military personnel found in the VRLTA were made exempt from the exclusions to the Act and apply to all leases.33  Under federal and Virginia law, a contract or agreement that violates public policy is void and cannot stand.34 

Concession fees, like the pre-dispute waiver, are an attempt by the residential leasing industry to maintain the pre-2003 status quo.  Concession fees are presented to the public as an inducement to rent property from a landlord.  The offer may take the form of a monthly reduction in rent, a free months rent, or other monetary benefit to the prospective tenant to induce him or her to execute a lease from the landlord.  The concession agreement typically requires the tenant to complete and comply with the terms of the lease as a condition to retain the benefit of the concession.  The inducement aspects of the concession fee agreement and the contractual penalties for breach of the lease apply equally to the civilian and military population of Virginia.  In any breach of the lease by a tenant, the landlord can pursue legal remedies for ascertainable damages.  The concession fee is a pre-determined sum not related to the actual damages for breach of the lease where the amount of damages is easily determined.35  The concession fee when used as a penalty for breach is clearly a liquidated damage and penalty not allowed by Virginia law.36  Notwithstanding clear law on liquidated damages and penalties in contracts, The clear advantage of the concession fee agreement is presented when it is used to create damages where the law does not otherwise provide one.  When a servicemember legally terminates a lease under state or federal law the landlord cannot pursue damages for early termination or breach and cannot obtain liquidated damages.37  When applied to lawful termination by servicemembers the concession fee agreement attempts to create a penalty that the law has prohibited.  A landlord cannot extract from servicemembers fees that the state and federal government have expressly barred from collection.38

Both the SCRA and VRLTA provide for the termination of a lease upon compliance with the terms of the statute.  Termination of a lease under the SCRA is not early termination, but a constitutionally supported, statutory modification of the terms of the lease ending the tenancy upon compliance with the requirements of the law.39  The concession fee or early termination fee is expressly prohibited by the SCRA.  Similarly, the VRLTA Section 55-248.21:1, “Early Termination of Rental Agreement by Military Personnel” provides for the lawful termination of the lease upon compliance with its statutory requirements.  The Section prohibits liquidated damages for termination of the lease.40  In this regard, the federal and state statutes are one; they both provide a legal end to a residential lease.  There is no breach or noncompliance with the terms of the lease, as federal and state law have spoken to legally and constitutionally modify the lease contract regarding the terms for termination.  As such the lease ends with no penalty or fees.  The servicemember is still responsible for any damages to the property.
The use of the term “Early” in VA Code Ann 55-248.21:1 does not alter the current purpose of the statute and subject servicemembers to penalties similar to those for breach.  The title of VA Code Ann 55-248.21:1, “Early termination of rental agreement by military personnel”, was applicable to the pre-2005 Act when the statute contained liquidated damages provisions for “early termination.”41  The use of the term “Early” to justify and validate the application of concession fees that create a penalty for servicemembers who lawfully terminate a lease is incompatible with the Act’s purpose.  A court seeking to ascertain the legislature’s intention in enacting and modifying Section 55-248-21:1 in 2005 must consider the object of the statute and the purpose to be accomplished.42  The clear intention of the statute is to provide relief to servicemembers whose military obligations impede their ability to comply with a lease by terminating the lease and eliminating any penalty for fulfilling their duties in service to the nation.  Any other interpretation would render the statute superfluous.  The assertion that the term “Early” as included in the title of 55-248.21:1 should control the purpose of the statute is inconsistent with statutory construction.43  A lease that is terminated lawfully under state or federal statute severs all penalties that would flow from non-compliance except actual damages to the property that are not excluded or prohibited under the law. 

The federal and state legislatures have determined that it is sound public policy to provide protections for those who protect us.  The balance of rights determined by our elected officials results from an understanding of the needs of the nation and the demands and risks placed on our servicemembers.  The defense of our nation and way of life is a burden that all must share, but it is not shared equally.  No amount of money lost on a contract can replace the life of a son, daughter, husband, wife, mother, or father to those who love them.  Every servicemember swears to defend the Constitution of the United States and obey the lawful orders of those appointed over them.  That oath means that when called they will answer and face whatever peril the future may hold.  Today they may occupy a quiet position in the United States, relatively safe from harm with normal hours, food, and housing, surrounded by family.  Their duty to the country means that they have agreed to leave all safety, security, and loved ones to defend our ability to live the American dream.  During the 1917, House Committee on the Judiciary, Soldiers' and Sailors' Civil Relief Bill debate, Major (Professor) John Wigmore stated:

You drop everything you have; drop all your relations and all your business affairs, and all the property you have, and we will take you, and maybe your life. We say to him, Leave your family; leave your affairs, and sacrifice a great deal actually and sacrifice everything potentially.44

The enemies have changed, but the call to arms is the same.  The need to provide for, strengthen, and expedite the national defense by protecting servicemembers so that they can devote their entire energy to the defense of the Nation is ever present.  The temporary suspension of judicial and administrative proceedings and transactions that may adversely affect the civil rights of servicemembers is the means selected by congress to provide these protections.45   The SCRA is the method congress created to provide these protections to our military.

*Mr. Dwain Alexander, II is a retired Navy Captain and Attorney who currently works for the Region Legal Service Office, Mid Atlantic, Legal Assistance Department.  He is a frequent speaker at conferences and continuing legal education courses on the Servicemembers Civil Relief Act, automobile transactions, auto fraud, family law and servicemembers’ rights.  He testified on consumer issues facing the military before the Senate Commerce Committee and Access to Justice for Servicemembers before the Senate Judiciary Committee.  He is a contributing author for the National Consumer Law Center’s publication on Collection Actions and the American Bar Associations publication, Legal Guide for Military Families.  Mr. Alexander is the consumer law advisor for the Navy Mid-Atlantic Region, Armed Forces Disciplinary Control Board.  He is a member of the American Bar Associations, Standing Committee on Legal Assistance for Military Personnel (LAMP).  He currently serves as the Chair of the National Association of Consumer Advocates, Military Consumer Justice Project and is a member of the Virginia State Bar, Military Law Section.  Mr. Alexander is the winner of two Distinguished Service Awards from the American Bar Association LAMP Committee, the Department of the Navy Superior Service Award, and the National Image, Inc. Meritorious Service Award.

This article is provided by Mr. Alexander in his private capacity and does not represent the opinion or position of the Department of Defense or the United States Navy.

1 Steward v. Kahn, 78 U.S. (11 Wall.) 493, 507 (1870); "The power to pass [relief legislation] is necessarily implied from the powers to make war and suppress insurrection."

2 H.R. Rep. No. 181, 65th Cong., 1st Sess. (1917).  Possible objections considered were:  Art. I, § 10, "No State shall pass any law impairing the obligation of contracts," and the protections guaranteed by the Fifth Amendment.

3 37 A.L.R. Fed. 2d 1

4 Pub. L. No. 108-109, 117 Stat. 2835 (2003) (codified at 50 U.S.C. app. §§ 501-596).

5 50 U.S.C. Appx 534 (2002)

6 50 U.S.C. Appx 537(a)(1)

7 50 U.S.C. Appx 577(i)(1)

8 Veterans Benefits Act 2010 Oct. 13, 2010, P.L. 111-275, Title III, §§ 301, 303(b)(5), 124 Stat. 2875, 2878.)

9 VA Code 55-248.21:1 (2004)

10 VA Code 55-248.21:1 (B) (2004)

11 VA Code 55-248.21:1 (C) (2004)

12 Id

13 VA Code 55-248.21:1 (2005) amendment by c. 742, effective March 26, 2005

14 VA Code Ann 55-248.21:1(B)

15 VA Code Ann 55-248.21:1(A)

16 Joint Publication 1-02, DOD Dictionary of Military and Associated Terms 08 November 2010, as amended through 15 March 2015; JP 1-02

17 Joint Publication 1-02, DOD Dictionary of Military and Associated Terms 08 November 2010, as amended through 15 March 2015; JP 3-35

19 Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1 (1824)

20 Hines v. Davidowitz, 312 U.S. 52 (1941).

21 Unenforceability of Certain Pre-dispute Waivers of Rights under the SCRA, Virginia State Bar, Military Law Section, June 2014

22 50 U.S.C. Appx 517

23 Henrich v. Whitaker, 280 Va. 507(2010), Weidman v. Babcock, 241 Va. 40 (1991), Wilson v. Carpenter, 91 Va. 183 (1895)

24 VA Code Ann 59.1-200(13)

25 HB1451; 2105 Session; 12/30/14 Landlord Tenant Laws (Provide that the landlord and tenant may enter into a written waiver of certain rights of a service member in accordance with 517 of the Servicemembers Civil Relief Act.)

26 See,Williams v. Matthews, 248 Va. 277 (1994); 1994 Va. LEXIS 132, Wackwitz v. Roy, 244 Va. 60 (1992).

27 50 U.S.C. Appx 502, Dameron v. Brodhead, 345 U.S. 322 (1953); U.S. Const., Art. 1, § 8, cl. 11 and cl. 12

28 The VRLTA is adapted from the Uniform Residential Landlord Tenant Act drafted by NCCUSL

29 VA Code Ann 55-248.3

30 VA Code Ann 55-248.3:1,and 55-248.9; These sections are similar in intent to URLTA Section 1.106 which prohibits pre-dispute waivers

31 VA Code Ann 55-248.21:1

32 Total military spending Virginia $46.8 BB, 2012, Office of the Deputy Assistant Secretary of Defense, Demographic Report

33 VA Code Ann 55-248-5(A). VA Code Ann 55-248.21:1(D)

34 See, Midstate Horticultural Co. v. Pennsylvania R. Co., 320 U.S. 356; Hiett v. Lake Barcroft Community Ass'n, 244 Va. 191 (1992); 1992 Va. LEXIS 69

35 See, Boots, Inc. v. Singh, 274 Va. 513(1987) McLane v. Vereen, 278 Va. 65  (2009)

36 Taylor v. Sanders, 233 Va. 73 (1987), O'Brian v. Langley Sch., 256 Va. 547, (1998), FNB Southeast v. Dean, 83 Va. Cir. 503 (2009)

37 50 U.S.C. Appx 535 (e)(1), VA Code Ann 55-248.21:1(B)

38 See, Toll v. Moreno, 458 U.S. 1 (1982), United States v. Onslow County Bd. of Education, 728 F.2d 628 (U.S. App 4th Cir1984)

39 Dameron v. Brodhead, 345 U.S. 322 (1953), See, Clark v. Mechanics' American Nat. Bank, 282 F.2d 589 (8th Cir. 1922); Konkel v. State, 168 Wis. 335 (1919).

40 VA Code Ann 55-248.21:1(B)

41 VA Code Ann 55-248.21:1 (2004)

42 See,Funkhouser v. Spahr, 102 Va. 306 (1904), 1904 Va. LEXIS 71

43 See, Nat'l Fed'n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566 (2012); 2012 U.S. LEXIS 4876; Commonwealth v. Baltimore Steam Packet Co., 193 Va. 55 (1951), 1951 Va. LEXIS 240,  Dunston v. Norfolk ,177 Va. 689 (1941), 1941 Va. LEXIS 253

44 Major (Professor) John Wigmore House Comm. on the Judiciary Soldiers' and Sailors' Civil Relief Bill, H.R. Rep. No. 181, 65th Cong., 1st Sess. 9 (1917).

45 50 U.S.C. Appx 502