Landlord Is Owed Back Rent From Tenant That Moved Out Of State
Question
I am owed back rent from a property in Washington State by a tenant that has now moved to Idaho and a second person on the contract that was a guarantor that lives in Iowa. Both signed the contract. I’d like to take possibly both to small claims court. Do I do this in Washington, Idaho or Iowa? The person in Iowa is most likely to pay so I’d like to take her to court first. If I win a judgment against her, is she responsible for the full amount or only half?
Answer
You ask a question that requires considerable knowledge of the laws of all three states, each of which may be significantly different and may even have conflicting procedures regarding the level of court where one must file suit regarding interstate actions. This last issue could in itself make the cost of proceeding toward obtaining a judgment against the ex-tenant or the guarantor costly and time consuming, possibly even significantly more costly than the accepting the loss. For example, it is possible that you would have to hire an attorney in one or more states.
The research that would be required to adequately respond to the matter is way beyond the scope of this forum. I don’t know if you’ve had occasion to utilize the service of an attorney lately, but even if you consider that your damages amount to several thousand dollars, it would be very easy to spend more than that amount for attorney fees and court costs before your case even went to trial. Furthermore, if the ex-tenant or guarantor decided that spending money on an attorney was preferable to paying you, it might be necessary for you to appear in a court in his/her state and be represented by an attorney in that state.
However, I will discuss some of the issues that you might face, some of which might require use of one or more attorneys.
Typically, you would file a lawsuit in the county where your claim took place, but this might also depend on laws of the other states. Then you must know where the ex-tenant can be found and be able to have the ex-tenant(s) served with the complaint as required in the state where the person is located. The ex-tenant must be properly served in order for a court to hear the case.
Assuming that you have or can obtain the ex-tenant’s and/or the guarantor’s current address or place of employment and you are willing to pay a process server to serve him/her, it is possible that the person would not show up at the hearing in your local court, in which case, if the judge was satisfied that the service was legally proper under the laws of both states you would likely get a WA judgment by default.
However, even though you file an action in WA small claims court and are able to serve the ex-tenant, the ex-tenant may be able to file a court action to have the case moved to a higher court, a court where he’d likely be represented by an attorney and for which you would also need to hire an attorney. You feel that the guarantor is more likely to be the person you want to sue. I assume that’s because you determined thorough screening of both the tenant and the guarantor that the guarantor had more income or more assets. However, if you take the guarantor to court, whether or not you are successful in winning a judgment may depend on a number of factors including the adequacy of your guaranty agreement. Even if you obtain a judgment, it may not be easy to find things you can attach. Assuming a properly written guaranty agreement one can normally collect everything from a guarantor as one can collect from the primary debtor.
A judgment obtained in one state can in theory be collected in another state through the usual processes of garnishing wages and/or attaching assets (e.g., bank accounts, personal property, or real estate owned). However, there can be reasons why the court of the other state might refuse to honor the judgment. Some small claim courts in some states will not handle out-of-state suits, requiring them to be done in civil or state courts. Or, the other state’s court may rule that you can only collect if you catch them visiting in WA.
Furthermore, even if the other court allows your judgment, finding something of value to attach or finding where the person works in order to garnish can be difficult at such a distance and would almost certainly require additional expenditures because you would likely have to hire people to do some of the work you could do yourself if they were still living, working, and banking nearby in WA. There are also various exemptions and limitations at state and federal levels regarding garnishment of wages and attachment of assets.
It is possible that the other state would allow you to file suit in that state even though the event occurred in WA, but that would also increase costs because you would likely have to spend time and money to appear in that court or hire an attorney in that state, with still having to travel there for each hearing, perhaps even multiple times.
There are many other possible issues that could be discussed, but the main thing is that you must know the laws of both WA and the other states regarding the various issues. Even then, you must consider that a particular judge might not strictly follow the law and a costly appeal might be necessary.
The bottom line is that you must decide whether or not to pursue the matter through the courts based on the amount of money you can prove is owed to you, whether or not you know where you can have the ex-tenant and/or guarantor served, and whether you have a good idea regarding the degree to which the ex-tenant and/or guarantor is willing to avoid paying you.
You don’t state whether or not you can prove that you made a demand for payment from the ex-tenant. Usually, this should be done along with the detailed accounting required under WA law for the portion of the security deposit not being returned to the tenant. As I assume you know, WA requires that the accounting for amounts not returned and balance of deposit be returned within 14 days. Failure to have done so or to have violated some other requirement of WA security deposit law could result in a countersuit by the ex-tenants that might result in financial damages being awarded to the ex-tenants.
If you wish to proceed, you should consider consulting a competent and experienced attorney, preferably one who regularly represents landlords in the court of jurisdiction for your rental property. A brief half-hour consultation should be relatively inexpensive and allow you to have quite a few questions answered if you go prepared with specific questions.
If you are in a position where it just doesn’t make sense to sue your ex-tenant because the amount owed is too little compared to the possible costs or if the ex-tenant or guarantor is not currently collectible, there are still things you can consider doing.
If you think it likely that you will end up with a default judgment because the tenant or guarantor are not particularly knowledgeable about the law and are unlikely to return to WA and if you are willing to spend the relatively low amount it costs to obtain such a default judgment because you know where they can be found by a process server, you might just go ahead and file against both, with the idea that if there is any counter-action by the defendants you can cancel the lawsuit. Even if you get a default judgment against one or both, but don’t consider it worthwhile to try to collect on the judgment at this time you can “docket” the judgment, a very simple procedure in most jurisdictions and cost very little. The judgment will accumulate interest at the rate of 10% or more per year in most states, meaning the amount owed to you will double approximately every 7 years. The judgment should show up on credit reports when the defendant attempts to obtain a real estate loan or any other type of high dollar credit. Those to whom they are applying for credit just might require them to pay the amount owed to you before approving their loan.
There is something else that be done at even lower cost and which may be just as useful as the strategy of the previous paragraph and at even less cost. After having made unsuccessful adequate written demands against the ex-tenant and guarantor, with proof of their receipts of the demands, report each to one or more major credit bureaus. You must, however, be certain of having followed proper procedures in order to avoid legal actions against you. Asking about those issues when consulting an attorney should reduce this risk. While one must be a credit bureau member to report to it, there are providers of services to landlords which can get the report on record. Our Web site once provided such a service. However, I don’t know whether the service is currently available or, if it is, don’t know the procedure or cost of the service. I suggest that you phone our Member Support (866-666-8833) regarding availability of the service.
Deciding whether or not to sue an ex-tenant for past due rent and/or damages is often not an easy decision even when another state is not involved. A lot of information and knowledge needs to be considered in order to determine if it’s worth the time, effort, money, and possible stress to follow through with a lawsuit. Basically, it depends on the amount owed you after considering the security deposit available to you, the realistic expected cost of pursuing the matter, and the chances of ever collecting even after you have a judgment.