Class Action Claims Greystar Real Estate Partners’ ‘Unchecked’ Late Fee, Penalty Practices Violate California Law

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A proposed class action challenges what it calls a “late fee scheme” allegedly perpetrated by Greystar Real Estate Partners, LLC whereby the apartment and student housing operator charges tenants “numerous unrelenting fees and penalties” that overstep California law.

According to the 17-page case, Greystar, the largest owner and operator of apartments in the U.S. and second-largest owner and operator of student housing, takes advantage of the “power imbalance” that exists between it and tenants by assessing illegal late fees, utility fees, utility “administration” fees, and other unlawful charges and penalties in order to “squeeze all it can” from renters.

“Defendant knows it has virtually unchecked power to collect whatever fee it wants, when it wants, no matter how illegal it may be,” the lawsuit says. “This is because the system that Defendant deployed is protected by the threat of eviction.”

The complaint alleges Greystar regularly charges, for instance, a $100 late rent penalty when a resident’s rent is paid “even a minute late” and regardless of whether the defendant was harmed in any way by the late payment. When the next month’s rent payment is received, Greystar applies it first to the late fee and any other previously recorded penalties instead of the base rent for that month, after which it considers the rent not fully paid and charges yet another late fee, the suit claims.

As a result of improperly treating unpaid fees as “rent,” Greystar stacks $100 late penalties on balances that may only be $100 or less, such as when a tenant forgets to include a $3.95 “utility administration” fee, the suit relays, claiming such a fee is imposed on tenants without their authorization for the payment of utility bills. The practice continues to allow the defendant to pull in late penalties on top of each other, the case charges.

“In short, being a day late on a $3.95 ‘balance’ that should have never been incurred in the first place creates an additional $100 penalty,” the complaint avers. “This stacking or pyramiding all but guarantees tenants will incur repeated late penalties, or penalties on penalties.”

According to the suit, Greystar’s penalty scheme is unlawful in that the amounts charged to tenants are “excessive” and “bear[] no relation to any actual damages incurred” by the defendant when rent or fees are paid late.

Under California law, late rent fees are presumed to be illegal unless a landlord can prove it would be “extremely difficult or infeasible” to calculate actual damages from the late payment and put forth a sufficient effort to set a reasonable amount in light of the harm caused—both of which Greystar has failed to do, the lawsuit alleges.

Moreover, the complaint alleges Greystar “systematically” deducts unlawful amounts from tenants’ security deposits, fails to sufficiently document the “nebulous” deductions, and returns security deposits later than 21 days after a tenant’s move-out date as required under California law.

The lawsuit looks to cover all of Greystar’s California tenants who were charged penalties or fees for paying rent or other charges deemed by the defendant to be late or deficient, as well as those whose security deposits were not returned within 21 days of move-out or had deductions taken without corresponding itemized statements or receipts.

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