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Mid-America Apartment Faces Rent Late-Fee Practices Lawsuit

Zacks Equity Research
Mid-America Apartment Faces Rent Late-Fee Practices Lawsuit

Mid-America Apartment Communities, Inc. MAA — commonly referred as MAA — is facing two lawsuits regarding rent late-fee practices.

Plaintiffs Cathi Cleven and Tara Cleven as well as Nathanael Brown in two Class Action lawsuits had earlier alleged that the residential real estate investment trust (REIT) is in violation of Section 92.019 of the Texas Property Code. Per the code, a landlord cannot charge a tenant a late fee for failing to pay rent unless “the fee is a reasonable estimate of uncertain damages to the landlord that are incapable of precise calculation and result from late payment of rent.”  

Both respective plaintiffs filed a motion for partial summary judgment and argued that the company failed to conduct a prospective estimate of its damages before assessing a late fee, required by Section 92.019.

Per the company’s recent 8-K filing, it charges $75 on the fourth day of the month if the rent is unpaid and $10 for each additional day, up to 15 days.

On Sep 5, 2018, the U.S. District Court for the Western District of Texas, Austin Division, approved the Cleven and Brown classes proposed by the plaintiffs. Following this, on Sep 18, the court granted the plaintiffs' motions for partial summary judgment, which applies to each of the classes and denied MAA's motions for summary judgment.

For both cases, the District Court concluded that MAA had violated Section 92.019 because it failed to provide documentation or other evidence of the estimation process in which it engaged, and consequently, any rent late fee charged by the company violated the statute.

MAA estimates that its maximum exposure in Cleven is $54.6 million and $8.4 million in Brown, aggregating $63 million in damages. Nonetheless, the company believes it is not in violation of Texas law and intends to “vigorously defend” itself and pursue all available appeals of the trial court’s decision.

Shares of this Zacks Rank #3 (Hold) company have gained 16.3%, outperforming its industry’s rally of 13% over the past six months.

 


 

Key Picks

Some better-ranked stocks from the REIT space are VICI Properties VICI, Park Hotels and Resorts, Inc. PK and W.P. Carey Inc. WPC. All three stocks carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

VICI Properties’ Zacks Consensus Estimate for 2018 FFO per share has been revised upward by a cent to $1.50 over the past 60 days. Its shares have gained 13.9% in the past six months.

Park Hotels and Resorts’ FFO per share estimates for 2018 have witnessed 2% upward revision to $2.93 in two months’ time. Its shares have appreciated 25.9% over the past six months.

W.P.Carry’s FFO per share estimates for the current year have moved up marginally in the past 30 days to $5.14. The stock has rallied 7.9% in six months’ time.

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Mid-America Apartment Communities, Inc. (MAA) : Free Stock Analysis Report
 
Park Hotels & Resorts Inc. (PK) : Free Stock Analysis Report
 
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