Freaked out, applicant says will sue

70 Replies

Hi! First time I’ve had an applicant threaten to sue. We said we could overlook credit with good landlord references, last landlord had documented that they owe a balance from withholding rent, so we denied. Tenant disclosed this on their application, however when we had talked in person prior to submitting the app they said good references wouldn’t be a problem I know I’m legally within my rights to deny for this reason, but can they sue anyway? I live in Washington, a tenant friendly state.

Really, anyone can sue for whatever they want to. Unfortunately, the lawsuit being filed doesn’t depend on whether or not you’re legally correct. 

If you’re within your legal rights, the suit will probably be in your favor, but there are still fees involved in going to court. 

This may be only a threat to try to push your hand. I’m not giving legal advice (I’m not a lawyer and don’t claim to be). If you’re truly concerned they may sue, it might be good to contact your real estate lawyer to see how they suggest you proceed in dealing with the situation.

@Rachel Luoto Hi Rachel, I agree with Kelli Gaul. This sounds like them trying to bully you into a lease and I can't see you losing a lawsuit(Though I'm not your attorney). That said, for the future, you can completely avoid this type of situation again with an asset protection structure which makes it near impossible for people to file frivolous lawsuit like this against you. 

@Rachel Luoto you’re DEFINITELY within your rights but have written documentation for the rejection and make sure there’s nothing in that rejection note that can be considered discriminatory in any way. There are good templates online or use landlord software that will give you safe language to use and document.

If they had a problem paying their previous landlord I doubt they have money to sue you.  This is why you have written guidelines and stick to them.  Don't loose any sleep over it. 

If they're talking about suing you prior to lease up and withheld rent from their previous landlord that's what we call a professional tenant. Talk to your legal counsel and run the other way. 

Originally posted by @Weston Couch :

@Rachel Luoto Hi Rachel, I agree with Kelli Gaul. This sounds like them trying to bully you into a lease and I can't see you losing a lawsuit(Though I'm not your attorney). That said, for the future, you can completely avoid this type of situation again with an asset protection structure which makes it near impossible for people to file frivolous lawsuit like this against you. If you're interested in hear more about that preemptive protection, feel free to connect with me.

 tenants have no money to sue you.. don't let paranoia of litigation run your life.   the chances that 99% of landlords ever end up in an actual trial is so slim to none.. its like a water landing it can happen but the chances are remote.. that's why umbrella insurance is so cheap.

@Rachel Luoto sorry to hear you are in that situation, welcome to the club.  I believe almost everyone who owns real estate has either been sued, or threatened with a suit, so you are in good company.

If you have not added a lawyer to your team it would be a good time to do so.  I have found that if you are being threatened with a lawsuit you can provide them with your attorney's name and contact info and let them know that the matter has been referred to legal representation and any future contact should be handled via your attorney.  

As most people are bluffing this stops the issue, they will never reach out to your attorney.  If they are serious using your attorney as a point of contact may save you an accusation or from making a mistake in the process.  Good luck.

Originally posted by @Jay Hinrichs :
Originally posted by @Weston Couch:

@Rachel Luoto Hi Rachel, I agree with Kelli Gaul. This sounds like them trying to bully you into a lease and I can't see you losing a lawsuit(Though I'm not your attorney). That said, for the future, you can completely avoid this type of situation again with an asset protection structure which makes it near impossible for people to file frivolous lawsuit like this against you. If you're interested in hear more about that preemptive protection, feel free to connect with me.

 tenants have no money to sue you.. don't let paranoia of litigation run your life.   the chances that 99% of landlords ever end up in an actual trial is so slim to none.. its like a water landing it can happen but the chances are remote.. that's why umbrella insurance is so cheap.

I'm sure you mean well, but where are you getting that 99% figure from Jay? I'd definitely agree umbrella insurance is the most fundamental form of protection after just being professional as a landlord, but using a legal structure isn't any more expensive than insurance over a few years if done right( potentially even cheaper if you're a smaller investor), and the chances of it being useful are a lot higher than %1 over the course of years, especially if you own multiple properties. I can search for some hard stats if you're interested.

Hey Rachel, 

@Jay Hinrichs is right. If you have a business insurance policy, any potential lawsuit may be covered on the general liability section of that policy. If you have a $1,000,000 per occurrence general liability limit, that is how much coverage you'd have. If the lawsuit exceeds that amount, then an umbrella policy would kick in and potentially cover any overages. 

Jay is also right on the cost. The difference between $300,000 in liability coverage on a policy to $1,000,000 in liability is often only $50-100...if that. I always encourage people to pursue as much liability insurance as they need to feel comfortable. 

If you have any other questions about that, I'd be happy to help. I'm not licensed in WA so not trying and won't try to sell you...I'm an investor as well and just want to help other investors understand their policies for times like this :) 

Don't let them pressure you. Your reason for rejection is plenty. I learned a lot during my first C-class rental... What a nightmare that was trying to rent out in November. Im a nice guy, so when I rejected somebody I felt like I needed to explain, because I wanted to give them a shot but the history told me otherwise. I would get emails, and multiple calls asking for chances. Some even tried to bait me into saying the wrong thing.

My advice is when rejecting someone, give them a reason and move on. Don't get sucked into nonsense. 

You don't have to respond.

Originally posted by @Weston Couch :
Originally posted by @Jay Hinrichs:
Originally posted by @Weston Couch:

@Rachel Luoto Hi Rachel, I agree with Kelli Gaul. This sounds like them trying to bully you into a lease and I can't see you losing a lawsuit(Though I'm not your attorney). That said, for the future, you can completely avoid this type of situation again with an asset protection structure which makes it near impossible for people to file frivolous lawsuit like this against you. If you're interested in hear more about that preemptive protection, feel free to connect with me.

 tenants have no money to sue you.. don't let paranoia of litigation run your life.   the chances that 99% of landlords ever end up in an actual trial is so slim to none.. its like a water landing it can happen but the chances are remote.. that's why umbrella insurance is so cheap.

I'm sure you mean well, but where are you getting that 99% figure from Jay? I'd definitely agree umbrella insurance is the most fundamental form of protection after just being professional as a landlord, but using a legal structure isn't any more expensive than insurance over a few years if done right( potentially even cheaper if you're a smaller investor), and the chances of it being useful are a lot higher than %1 over the course of years, especially if you own multiple properties. I can search for some hard stats if you're interested.

I guess from personal experience. I have owned over 500 SFR homes over the years.. and the only beefs I have gotten into are over deposits. litigation in real estate in my world is generally over contracts .. way more risk with contractors stealing money from us than a tenant suing us.. again though if your not a slumlord.. And my point is 1% would ever see the interior or a courtroom in a full blown trial.

these things all get settled in mediation or arbitration that's my personal experience. and you can have all the asset protection you want but if someone sues you   you still have to pay to defend.. they may not collect the judgement but your still out the defense dollars right ? 

I get asset protection for those with significant assets to protect but as it relates to most BP investors who might have 1 to 10 doors and put minimum down there just is not a lot of equity to chase.. Anyway.. its a personal choice.. 

I like to keep business cards for my attorney. When someone tells me they want to sue, I hand them a card and instruct them to forward all future communication to my attorney. They never come back.

If I had a dollar for every time someone said they were going to sue me, I would have dozens of dollars.

Originally posted by @Nathan G. :

I like to keep business cards for my attorney. When someone tells me they want to sue, I hand them a card and instruct them to forward all future communication to my attorney. They never come back.

If I had a dollar for every time someone said they were going to sue me, I would have dozens of dollars.

especially tenants.. I mean you know your tenants how many of them have enough money to pay a retainer for an attorney and pay their bills. ???  how many attorneys are going to take this on  via contingency  about Zero.. unless its a case were there is insurance money to go after..  the reality of litigation is just so remote.. its expensive.. I know from personal experience.  the only way I see tenant doing anything is if your really in the wrong they call a state agency and those folks come after you.. like the famous lead based paint one were the kid died from eating paint chips..  

Or the one in Oakland were 30 or 40 perished in a bad fire..  or the ones were 12 kids partying on a deck that collapsed and lives were lost it happens.. but its just very rare.. so in this instance where you simply turning down an applicant I just don't see the risk

@Rachel Luoto

I’ve been threatened by these litigious customers quite a few times. They NEVER sue. 1) No lawyer will take that case 2)Going the small claims route takes some money and effort. They need an apartment soon.... The tenant threat just like the infamous ‘death threat’ is typically just that, a colorful bluff. Ignore them and sleep well.

Originally posted by @Jay Hinrichs :
Originally posted by @Weston Couch:

@Rachel Luoto Hi Rachel, I agree with Kelli Gaul. This sounds like them trying to bully you into a lease and I can't see you losing a lawsuit(Though I'm not your attorney). That said, for the future, you can completely avoid this type of situation again with an asset protection structure which makes it near impossible for people to file frivolous lawsuit like this against you. If you're interested in hear more about that preemptive protection, feel free to connect with me.

 tenants have no money to sue you.. don't let paranoia of litigation run your life.   the chances that 99% of landlords ever end up in an actual trial is so slim to none.. its like a water landing it can happen but the chances are remote.. that's why umbrella insurance is so cheap.

Jay has lots of experience but I will second his views.

I get threatened to be sued fairly regularly (if has been over half a year since the last person that threatened to sue me so I am on a longer period without a threat of law suit).  Guess how many times I have been sued for something RE related?  Zero.  I would guess I have been threatened with suit close to 2 dozen times.

The second item I want to refer to from Jay's response is not only does the low cost of umbrella coverage reflect the fairly low odds of being sued but it is also a reason that landlords should have asset protection like that provided by an umbrella coverage.  It is cheap and provides asset protection.  I have an umbrella coverage in an amount that should exceed anyone's suit.  Not only is it good to know that I have the asset protection but if/when someone actually does file a law suit, I will have someone in my corner (the umbrella coverage insurance carrier) that has more to lose than I have to lose, has lots of experience, and has big pockets to cover if we (note not I) were to lose in court.

There is no way I would rent to those tenants.  It would set a bad precedence in that relationship but also a bad precedence in future tenant placements.  You have the unit and the risk; you need to do what you can to protect yourself which includes placing only  qualified, vetted tenants into your units.  Let some other landlord take on the risk of this tenant.

Good luck

@Nate Bell Of all the times I have referred someone who has threatened to sue to my attorney there has not been a single call.  If they are bluffing they are not going to call anyway so it doesn't cost a dime.  

Ignoring them works well, everyone will have their own opinions but that approach has worked for me.  Have a good one.

People are crazy. No one is going to sue you. I feel like weak minded people say that as a way of venting and or trying to intimidate you. Had a guy threaten to sue me a month ago because I dared explain to him that his family income was below the income requirement and he felt I was discriminating based on race. Lol what dude, did you not hear a word I just said?

These kinds of actions are so stupid.  Like threatening to sue a landlord is going to change the landlord's mind into renting you the dwelling.  "I'll sue" is just an idle threat that people use when their own actions have caused them to be denied a new home.  They feel insulted, like things are unfair because they are angry with themselves for being in this situation with the pressure of needing a place to stay.  Like other have said, Sleep well!  Highly unlikely anything will ever come of it.

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