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Judge Finds Accepting HUD Subsidy Does Not Stop Eviction Process
Posted in Litigation

Evicting a tenant for non-payment of rent, otherwise known in Kentucky as a forcible detainer action, is usually the most straightforward method for a landlord to terminate a tenant’s right to the premises. Although Kentucky judges will offer a hearing to any tenant who requests one, one of the few accepted legal defenses a tenant can present during this hearing is proof that rent was in fact paid within the required timeframe. This is because under the Uniform Residential Landlord Tenant Act (“URLTA”), a landlord waives the right to evict a tenant if the landlord has accepted any payments (full or partial) after beginning the eviction process.

In one recent incident, a tenant stopped paying his rent and BGD assisted the landlord in pursuing a forcible detainer action. The tenant, however, was participating in the Housing Choice Voucher Program (commonly known as Section 8). The Housing Choice Voucher Program is a federal program that provides monetary assistance to low-income families, the elderly, and people with disabilities. The Housing Choice Voucher Program subsidies are paid by public housing authorities directly to private landlords. These subsidies are referred to as HUD payments (Housing and Urban Development, the entity that administers the program) and the qualifying tenants are then required to pay the difference between the market price charged and the subsidy amount. In the situation in question, the public housing authority continued to pay the HUD subsidy pursuant to its agreement with the landlord even after the tenant stopped paying his rent.

During the tenant’s eviction proceeding, the tenant raised the novel argument that the HUD subsidy constituted a partial payment of his rent and, as such, he argued that the landlord waived its right to evict him under URLTA. There is no Kentucky case law on whether the HUD subsidy constitutes a partial payment under URLTA, and BGD was asked to brief the issue for the court.

Other jurisdictions have ruled the subsidy paid to the landlord after the eviction process begins does not constitute a partial payment of the rent for purposes of waiver under URLTA. Specifically, the Illinois Supreme Court ruled the HUD subsidy was not “rent” under URLTA because 1) HUD was not a party to the lease; 2) the tenant was not a party to the contract between HUD and the public housing authority; and 3) the lease did not define or refer to the HUD subsidy as part of the tenant’s rent. See Midland Mgmt. Co. v. Helgason, 630 N.E.2d 836 (Ill. 1994).

Courts in California, Minnesota, Missouri, and Ohio have followed the decision in Midland. For example, the Court of Appeals of Ohio, facing a similar argument, ruled that although rent subsidies provide a personal benefit to the tenant, it is not personal in the sense that it is the tenant’s money. See Premiere Mgmt., LLC v. Nutt, 2010 WL 1175201, *13 (Oh. App. March 29, 2010). Therefore, it should not constitute a waiver under URLTA.

Ultimately, the Kentucky district court ruled in favor of the landlord and allowed the eviction to proceed due to the tenant’s nonpayment of rent. The crux of the landlord’s argument was that there are two contracts involved – one between the public housing authority and the landlord, and one between the tenant and landlord. The judge determined that the HUD subsidy is paid under the contract between the public housing authority and the landlord. Though the opinion will not be published, the decision was a significant victory both for BGD’s client and the HUD program as a whole. If the court had ruled otherwise, it would have proved costly and burdensome for all landlords participating in Section 8’s housing choice voucher program. Landlords would likely then be more inclined to end participation in the program and rent to families who do not need rental assistance. This would defeat the purpose of the HUD program to provide safe and decent housing to low-income individuals and families.

Bingham Greenebaum Doll LLP’s experienced attorneys work with non-profits, for-profits, housing authorities, and landlords in all aspects of community development and affordable housing. Contact us if you would like more information on this decision or have questions about how this ruling may impact you.

  • Partner

    Lauren is an attorney in the firm's Lexington office and a member of the Litigation Department. She has experience in a wide array of sophisticated litigation matters, including: complex contract disputes; commercial and ...

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