What is an Eviction Settlement Agreement?
An eviction settlement agreement is a binding contract between the landlord and the tenant to settle a dispute that arose at some point during the course of the tenancy. The most common purpose for an eviction settlement agreement is to ensure that the tenant will vacate the rental unit. Eviction settlement agreements can also be used to clarify rent payments, to delineate maintenance and repair responsibilities, or to outline other obligations the parties seek to enforce. While the terms of these agreements can vary from case-to-case or even from jurisdiction-to-jurisdiction, the end goal is always the same: the landlord should insert specific affirmative and/or negative obligations for the tenant while the tenant should strive to leave the terms as broad as possible.
Eviction settlement agreements differ from other processes in that the landlord is incentivized to draft a very specific and detailed list of obligations because the tenant’s breach will give rise to immediate consequences (e . g. the ability to proceed with the eviction action) whereas the tenant has seemingly no incentive to enter into a settlement agreement unless the terms are drafted to be very vague and non-specific.
For example, it is a best practice for the landlord to insert language giving the landlord the option to evict with 24 hours’ notice if the tenant fails to do x, y, or z. Conversely, it a should be the goal of every tenant to limit the scope of the settlement to only the items the tenant absolutely needs to complete while avoiding lengthy, detailed descriptions of prohibited conduct. In other words, if the tenant is given the option to continue living in the rental unit in exchange for destroying everything he owns and paying the landlord’s rent and attorney’s fees for one month, then take the deal because it is a very bad idea to limit the scope of your obligations.
Essential Elements of an Eviction Settlement Agreement
Eviction settlement agreements generally include several key components that help both parties understand the terms and conditions of the agreement. These elements may vary somewhat from case to case, but the most common factors include:
- Payment terms. The settlement agreement should specify the amount that the tenant is required to pay in order to satisfy his or her lease and avoid further legal action. The agreement should also detail how that payment will be made (e.g., a one-time lump sum or multiple payments) and when it will be made (e.g., within five days, on the first of the month).
- Move-out date. A clear move-out date is essential in most eviction settlement agreements. This is the date by which the tenant must vacate the premises – and may be the same date as the payment deadline, depending on the situation. Tenants who do not move out by the settlement date could be subject to legal eviction proceedings.
- Property condition. Because most leases contain stipulations about property condition and damages, settlement agreements often require tenants to return the premises to their original condition before vacating (as specified in the lease). Tenants who leave the property in disarray can usually expect to lose their security deposit.
Advantages of an Eviction Settlement Agreement
When the parties or their representatives are able to negotiate an agreement, there are many advantages to the agreement. First and foremost, it will save both parties’ time and will not add any more stress to the situation. An agreement can also help to save the tenant from a judgment of possession that goes on the rent history database that can prevent the tenant from finding a future rental. It is also more likely that the tenant will avoid having landlord attorneys send follow-up collections letters or even refer the debt to a collection agency or even court for further legal action.
For the landlord, an agreement affords the possibility that they may be able to collect all the unpaid back rent as well as any landlord attorney’s fees without having a judgment issued against the tenant. The attorney’s fees are very difficult to collect unless there is an agreement. The agreement is in effect a judgment that can be enforced upon breach or non-payment of its terms. Furthermore, an agreement allows the landlord the option of returning money to the tenant if everything under the agreement is performed. This is often much more fair than returning money as required by the landlord – basically getting less than they bargained for.
If the landlord and tenant are unable to agree to an acceptable settlement agreement, the matter will most likely be set for trial and proceed with an evidentiary hearing. It is well known that landlords win a large majority of the eviction trials that are held in civil court, but what is the carrot for the tenant to perform everything at trial? The carrot will always be the easiest way to get the tenant out of the apartment and make sure that no judgment is entered against them. It is very common that a tenant will leave in a shelter matter even though the tenant owes 2-3 months’ rent. In many of these situations, the tenant has been given a new unit in the shelter along with financial assistance to cover the back rent. That is the carrot that gets the tenant to leave, and that is the carrot that motivates the landlord and tenant to enter into an eviction settlement agreement.
Tips for Negotiating a Fair and Informed Eviction Settlement
An Eviction Settlement Agreement should be a mutually beneficial end to an often-times extremely difficult and upsetting process for both landlords and tenants, as no rental property owner wants the time, attention, energy and resources directed to the eviction process. Likewise, no tenant desires to be faced with the prospect of losing their home.
The negotiation of an Eviction Settlement Agreement involves a discussion of specific terms to alleviate or at least minimize, the expenses associated with the Eviction process. In most circumstances, the rental property owner will seek the expedited return of possession of the premises, execution of an Eviction Warrant, as well as payment of unpaid rent. The tenant typically seeks a modest amount of time (generally around 10 days) to vacate the premises, in lieu of an immediate eviction.
Other common terms involve that the tenant will not be a nuisance to other tenants, that the tenant pay a set dollar amount (usually low) for previous late rent payments (in order to expedite the end of this lawsuit), and others.
With an established principle of negotiating a mutually beneficial agreement being to focus on the other party’s immediate concern, the focus of the landlord is generally all about getting the tenant out of the home, apartment, etc., or to get the tenant to agree to leave within a particular timeframe. This should not be confused with what the tenant’s immediate question may be, which is usually surrounding how much time and/or money they have to work with in order to secure alternate housing.
The importance of establishing a basic agreement between the parties is extremely difficult to overstate. By establishing a baseline agreement, the ‘rules’ of the negotiation and Eviction Settlement Agreement process are clearly defined. When both parties are involved in the negotiation – so that it truly is a negotiation – then those parties will be much less likely to resort to unilateral next steps, which can involve the filing of a Motion to Compel or Unlawful Detainer motion/request, a request to hold either party in contempt of court, and/or simply disregarding the agreement altogether. In many cases, both parties will sign off on a written Settlement Agreement that refers and reconstructs the negotiated terms of the agreement, while providing specific detail (such as dates) that the negotiation did not provide.
Obviously, every case is unique to the previous one, and therefore there are no guarantees in any case that a Party will sign a form agreement, whether it is in a standard format (or not), or if one Party will be agreeable to its terms.
The negotiation of an Eviction Settlement Agreement is an integral component of almost every eviction case. Taking the time to understand the likely emotion, self-interests and ultimate goals of both parties, then establishing the baseline for a negotiation will set the premise for success. A good negotiation strategy to always keep in mind is that, "at the end of the day," the goal of the Parties is to reach an agreement that both Parties find – and are in reality – mutually beneficial. And that is indeed a good goal to strive for.
Legal Considerations and Protections
Landlords are often well served to enlist the assistance of counsel when negotiating and drafting an Eviction Settlement Agreement. Eviction Settlement Agreements can be contested, challenged, or ignored, where agreements are ambiguous, predicated on lack of full knowledge, or a motivated landlord is trying to impose onerous conditions on the tenant. Like any agreement, it’s important for the parties to take notice of relevant legal considerations. For tenants: (1) Are you giving up trial rights? (2) Are you waiving the right to have a lawyer represent you at trial? (3) Are you waiving the right to appeal from the trial judgment? Even where the answers to these questions are no, it’s often prudent to delay signing an agreement until after the tenant has had time to consult with an attorney (even if they have a right to represent themselves). If the agreement contains anti-tenant provisions, or provisions outside the state’s normal rules, the tenant may (or may attempt) to get them set aside, based on lack of knowledge or compulsion, especially if the agreement is signed under pressure. Moreover, if the tenant is forced to sign or appear in court, the tenant might not get the benefit of their right to seek the assistance of the court’s Self Help Program for writing your answer or discovery responses.
For landlords: (1) Do you have the right to enter into an agreement that’s inconsistent with the lease or the state’s law (or does your attorney)? (2) Are you entitled to a speedy trial without first filing (or paying for) discovery? One example of a common misunderstanding is the tenant’s right to a stay, even if the eviction judgment exceeds the tenant’s unpaid rent. If the tenant pays rent that’s past due, the tenant cannot be evicted for that rent, but may owe their landlord statutory damages for other parts of the claim . If the landlord claims that the tenant owes rent (or other damages) beyond the statutory damages, but otherwise agrees to a "fast" trial, it’s easy to see why the tenant might misconstrue that to mean that they can pay the stayed amount to avoid the usual right to a speedy trial. The Court’s Self Help Program will usually have a form that the landlord can use to waive a jury trial, and should specify which causes of action were stayed and for what amount.
In general, the more you know about how the agreement affects each party’s rights, the better able you and the other party will be to assess and agree to the terms. The more you have to give up, the more beneficial the other party’s concessions to you must be, otherwise you may be giving away your rights without sufficient benefit. In most cases, an eviction settlement agreement is an agreement to avoid or bypass the lengthy and potentially costly litigation process. Indemnities, liquidated damages, mutual releases, warranty disclaimers, and other contracting clauses may be beneficial to one party and harmful to the other, and should be negotiated as any contract could be: with corresponding consideration. Also, if contract terms seem mutual and proportionate, but do not otherwise make sense to you, ask: "whose favor is this agreement in?" Landlords sometimes overlook fairly basic protections in the tenant’s favor, such as the right to re-open the case. While exceptions and extensions must be filed if they’re necessary, the requirements can be lost or forgotten if nobody pays attention to them. As always, please verify with an attorney, or the Self Help Program, if you’re unsure of your rights under a settlement agreement.
Navigating Common Pitfalls
Eviction settlement agreements are often expected to address more than lease termination and payment of overdue rent. Especially where the tenant is a business that will remain in the same location, the parties may expect that the agreement will detail certain transition terms. Similarly, a residential tenant may have vacated the premises but not yet moved out all of his or her belongings, which can lead to agreement over the time frame for recovery of those items. However, there are times where parties miss other issues to address in their settlement agreement that will pose significant problems and potentially costs for one of the parties after the agreement is signed. For instance, parties should be careful to address any and all issues relating to the ability of the landlord to re-tenant the property and avoid an abundance of late charges or other damages where a tenant retains possession after a lease termination.
Parties may overlook their ability to address the business closing process in the settlement agreement. A tenant will want the specific right to sell its assets if the business is being sold to a third party or to sell the business as a going concern if someone is willing to buy the entire entity. However, if this is where a business shuts down, the landlord will want the tenant to provide for how the closing will take place, when the assets can be removed from the premises and the specific liabilities that should survive the parties’ agreement.
For the residential tenant, a failure to address the timing of tenant’s removal of any hanging items can be problematic for both parties. One of the chief reasons for a late-payment charge in any lease is in order to prevent late payments. With the parties’ agreement having terminated and with the hope that the parties can part ways amicably, the imposition of a late-payment fee for late removal of personal property is counterintuitive to the purpose of the parties’ agreement. An easy fix to this is to agree that the tenant will be permitted to remove the items within a certain number of days following the execution of the agreement and to provide that the parties’ agreement will terminate automatically on the expiration of that period. If the tenant ultimately fails to remove its property by the expiration of the deadline and refuses to do so after receiving notice in writing from the landlord to remove the property within so many days or pay for its storage. If the tenant does not pay for storage or remove its property promptly, the landlord should be permitted to dispose of the property upon providing the tenant with another short time period to retrieve the property. Depending on the respective business needs, parties will want to consider if this should be mutual (i.e. providing for the landlord’s ability to store but not dispose of tenant’s items and vice versa). This will provide for more certainty in the event that the matter is brought to court.
When a lease terminates, it is important to address what will happen to the personal property left behind by the tenant. While a lease typically contains a provision providing that the tenant has 30 days to remove its property from the premises, that will not suffice if the parties subsequently enter into a settlement agreement. Instead, a date certain for the removal of personal property should be inserted and the agreement should provide that this is not a mutual right to recover items. The tenant will not want to recover any items past an agreed upon date in order to prevent unwanted property from continuing to be stored at the premises. Likewise, the landlord will not want to give the tenant a essentially unlimited period to remove its property and forgo rent and other charges during the pendency of the tenant’s ability to do so. This is especially true where a tenant has a lease until the end of the month and chooses to vacate prior to that date. In such an instance, the tenant may be permitted to move its property out from the premises, but it is important to note that if the tenant is not paying rent, a landlord will be permitted to recover the goods and offset that amount against the tenant’s unpaid rent.
How to Enforce an Eviction Settlement Agreement
Eviction settlement agreements ("settlements") can be excellent ways for landlords and tenants to resolve a dispute without resorting to litigation. However, from time to time, one of the parties may not strictly comply with the terms of a settlement. The agreement is then in a sense a "contract to allow a breach of contract". How do you enforce it? In this article, I provide advice on how to enforce the terms of an eviction settlement, should either party fail to comply.
Settlements are treated as contracts When no longer parties are able to resolve their disputes amicably, they frequently enter into a settlement, sometimes called a consent order or negotiated agreement, which sets out what each party agrees to do (or, negotiate your notified agreement, not do). If one of the parties fails to comply with the agreement, the other may bring an action for breach of contract. However, the courts are quite reluctant to do so, particularly if the breach relates to a small amount of money. Most disputes may be dealt with in the Small Claims Court, thus limiting the damages to $25,000, an amount that is too low to justify the expense of a lawsuit in many cases.
Where the breach involves a wrongful eviction by a landlord, tenants need an effective and affordable recourse. Many agree that the best option is to seek an order declaring the wrongful eviction void and requiring the landlord to reinstate the tenancy. Since Ontario discontinued a landlord’s right to distrain for rent, this situation has not been an issue with most landlords . Given that the Tribunal has the power to give orders to require landlords to do something specific, there may be a better alternative.
Enforcing settlements either within or outside the tribunal The Tribunal has the power under section 204 of the Residential Tenancies Act (the "RTA") to enforce an agreement made at the Tribunal or an order made by a member. In a case where both parties are represented by counsel, the member will have the agreement or order amended on the record before filing at the Tribunal. However, if the matter does not proceed to a hearing, the member will not make the order at the Tribunal. Instead, the parties sign the order in the Sheriff’s office, pay the filing fee ($174) and register it at the Land Registry Office. It is then enforceable.
In the case of a written agreement, such as a complicated brokered settlement, the parties should have their lawyers conduct the confirmation with both sides’ consent (see first option, above). If the matter is not contested, the tenant may simply file the order at the Tribunal. If the matter is contested, however, the confirmation order must be filed both in the Tribunal and in the Superior Court of Justice. The lawyer who commissioned the settlement is required to swear an affidavit at each court action, to prove that the parties signed the order freely and voluntarily.
In my opinion, the second option is the easiest and least costly of the two. If it does not work out, the tenancy will be reinstated, allowing the parties to resume their dispute before a member of the Tribunal.