On June 13, 2023, the Department of Justice (“DOJ”) announced that it had settled an action against a multi-family residential property management company for alleged violations of the Servicemembers Civil Relief Act (“SCRA”) prohibition on imposing early termination charges when a servicemember lawfully terminates a residential lease after receiving military orders. Under the terms of the consent order, FPI Management Inc. (“FPI”) has agreed to pay $74,087, which includes $51,587 in redress to nine servicemembers and a $22,500 civil money penalty.
The settlement resolves litigation brought in a California federal court alleging violations by FPI of the SCRA’s early lease termination provision. Under the SCRA, a servicemember may terminate a residential lease without penalty upon entering into military service or upon receiving qualifying military orders. 50 U.S.C. § 3955(a)(1), (e)(1). Qualifying orders include orders for a permanent change of station, or for deployment with a military unit (or as an individual in support of a military operation), for a period of not less than 90 days. 50 U.S.C. § 3955(b)(1)(B).
To invoke the protection, a servicemember must provide the lessor with written notice of the termination and a copy of his or her military orders. 50 U.S.C. § 3955(c)(1)(A). The lessor may not impose an “early termination charge” against the servicemember. 50 U.S.C. § 3955(e)(1). Covered leases under this SCRA provision include residential, professional, business, or agricultural leases of premises as well as leases of motor vehicles used for personal or business transportation. 50 U.S.C. § 3955(b). The provision applies to leases entered into by a servicemember or a servicemember’s dependents. Id.
DOJ launched its investigation into FPI’s leasing practices after receiving a referral from Coast Guard Legal Assistance about two instances where FPI allegedly attempted to require servicemembers who were terminating their leases early pursuant to the SCRA to repay discounts they had received when they signed the leases. The DOJ alleged in its complaint that FPI unlawfully imposed early termination charges on a total of nine servicemembers who had exercised their right to terminate their residential leases upon receipt of qualifying military orders.
Under the terms of the settlement, in addition to requiring payment of the monetary penalties, FPI is enjoined from imposing or seeking to collect early termination charges from servicemembers or their dependents who attempt to terminate a lease in accordance with the SCRA. FPI also must implement SCRA policies and procedures for lease terminations and implement training.