In Georgia: What To Do When Your Tenant Files for Bankruptcy?

Over the years, we’ve learned that for landlords, time is money. A three-day delay to file an eviction can mean losing a month’s rent. Similarly, when a delinquent tenant files bankruptcy, this can cause a two or three month delay, during which time most tenants pay no rent. For a landlord, dealing with a non-paying tenant, and trying to navigate the rules and laws of bankruptcy court, is a challenge. To make things worse, this is not an easy area of law, even for practicing bankruptcy lawyers.  “Executory contracts” have been described as the most “psychedelic” law in bankruptcy. Jay Lawrence Westbrook, Article: A Functional Analysis of Executory Contracts, 74 Minn. L. Rev. 227, 228 (1989)

While there are many issues you can handle without a lawyer, this is one in which you are most likely best served by getting professional advice. This blog only scratches the surface. Please call us for a free consultation if you find yourself in this situation.

Examples of executory contracts are long-term purchase agreements; service contracts; settlement agreements; insurance contracts; employment contracts; and construction contracts. When a party to an executory contract files a bankruptcy, an “automatic stay” of all collection and enforcement proceedings goes into effect at the time of filing. The automatic stay prevents eviction proceedings or other legal action – either for possession or for money damages. As a general rule, if this happens, approval from the bankruptcy court is required to proceed in the underlying action. This means moving for relief from stay. But sometimes filing a motion for relief from stay is unnecessary.

Section 365 is the place in the bankruptcy code that provides guidance on these issues. The rationale behind section 365 is to give the debtor and/or the trustee ample opportunity to decide which prepetition contracts and unexpired leases are beneficial to the bankruptcy estate and should be assumed and retained or assigned, and which are detrimental and should be rejected. Different executory contracts and unexpired leases receive different treatment and are subject to different requirements under section 365.

1. Unexpired Residential Real Property Leases and Unexpired Personal Property Leases in Chapter 7: Under section 365(d)(1), if the trustee does not assume or reject an executory contract or lease within 60 days after the order for relief (or within such additional time as the court may fix for cause), then the contract or lease is deemed rejected. This can be helpful to a landlord, especially if the 60 days is approaching.

2. Unexpired Residential Real Property Leases and Unexpired Personal Property Leases in Chapter 11 or 13: Under section 365(d)(2), executory contracts and unexpired residential real property and personal property leases can be assumed or rejected prior to, and including, plan confirmation. However, 365(d)(2) provides that the nondebtor party may request the court to order the trustee of debtor-in-possession either accept or reject within a specified time period.

3. Unexpired Non-Residential Real Property Leases Sections 365(d)(3) and (d)(4) provide extensive protection for nondebtor parties to non-residential real property leases: Upon filing the petition (the original bankruptcy filing), the Code requires the debtor or the trustee in Chapter 7 cases to timely perform all obligations of the lease from that date until the lease is assumed or rejected. If the debtor or trustee fails in that duty, the landlord may seek relief from the automatic stay and proceed with its remedies, which include an action for possession of the premises. The trustee or debtor-in-possession cannot retain possession of the nonresidential real property without paying rent or incurring an administrative expense claim for the payment of rent in the amount called for under the lease that accrues after the order for relief. Section 365(d)(4) provides that if a lease of non-residential real property (where the debtor is the lessee) is not assumed by the earlier of (a) 120 days from the order of relief, or (b) the entry of the confirmation order – it is deemed rejected and the property must be immediately surrendered to the lessor.

Rape and Assault Cases in Georgia

In 2011, U.S. residents age 12 or older experienced an estimated 5.8 million violent victimizations, according to a report released by the Justice Department’s Bureau of Justice Statistics. These estimates are based on data from the annual National Crime Victimization Survey, which has collected information from victims of crime since 1973. Between 2010 and 2011, the rate of violent victimization increased 17 percent, from 19.3 to 22.5 victimizations per 1,000 persons age 12 or older. The increase in total violence was due to a 22 percent increase in the number of aggravated and simple assaults.

Many of these crimes are the result of inadequate security provided by a landlord or provided by a commercial establishment like a hotel. In these situations, the crime should never have happened and, in Georgia, a victim is entitled to make a claim for injuries.

To establish liability in Georgia for inadequate security, an injured party must show that the defendant has breached a duty “to exercise ordinary care in keeping the premises and approaches safe.”

With regard to third-party criminal attacks, such duty extends only to foreseeable criminal acts. In Sturbridge Partners v. Walker, 267 Ga. 785 (1997), the Supreme Court of Georgia “laid to rest the artificial notion that a crime against a person could never be foreseen by previous crimes against property” and, instead, endorsed more flexible guidelines for determining foreseeability.

To determine whether previous criminal acts are substantially similar to the occurrence causing harm, thereby establishing the foreseeability of risk, the court must inquire into the location, nature, and extent of the prior criminal activities and their likeness, proximity or other relationship to the crime in question. While the prior criminal activity must be substantially similar to the particular crime in question, that does not mean identical. What is required is that the prior incident be sufficient to attract the [defendant’s] attention to the dangerous condition which resulted in the litigated incident. Further, the question of reasonable foreseeability of a criminal attack is generally for a jury’s determination.

For example, does knowledge of two previous burglaries by a landlord create the foreseeability of a rape and aggravated sodomy that occurred in one of its apartments? Sturbridge concluded that the previous burglaries did create foreseeability because, although the burglaries “were committed when the apartments were vacant, it was reasonable to anticipate that an unauthorized entry might occur while an apartment was occupied and personal harm to a tenant could result.”

In rape and assault cases in Atlanta and all of Georgia, it is critical to obtain records from all prior crimes that occurred at the location where the crime took place. At Gomez & Golomb LLC, we have been handling these types of cases for almost 20 years. Please call us for a free consultation if you have been the victim of a rape or an assault.

If you are the victim of a crime, here are some links to organizations that will help you free of cost. This is not something you want to go through alone – so please call !!!

http://www.safehorizon.org/index.php

http://www.summitadvocates.org/

http://www.callforhelpinc.org/

http://www.victimsofcrime.org/home

Negligent Probation Supervision: Guidance from Peterson v. Reeves, 315 Ga.App. 370 (2012)

We are currently involved in a wrongful death case against a Georgia private probation company for negligent probation supervision. The probation company knew our client was a severe alcoholic, a type-1 diabetic, and had three DUI convictions. Despite this and contrary to the court’s order and Georgia law, the probation company failed to reasonably monitor our client for alcohol consumption. For example, our client violated court-ordered home alcohol monitoring testing 183 times, but this was never reported to the court. The probation company’s lenient supervision gave our client the opportunity to drink heavily for weeks on end, ultimately resulting in her death from a diabetic coma.

There are no Georgia appellate decisions directly on point. But, there is a similar case, at least with respect to claims for professional negligence. Peterson v. Reeves, 315 Ga.App. 370 (2012). In Peterson, a plaintiff sued her psychiatrist for failing to prevent injuries sustained when she attempted suicide. The psychiatrist moved for summary judgment, arguing he had no duty to involuntarily commit Plaintiff, who at the time of the suicide attempt was in an outpatient mental health care. The trial court denied the psychiatrist’s summary judgment motion. Judge McFadden, writing for the Georgia Court of Appeals, agreed with the trial court, finding that

whether [the psychiatrist] breached duties arising from the psychiatrist-patient relationship is an issue of fact . . . [t]he evidence would authorize a jury to find that [the psychiatrist] shares in the responsibility for a negligent failure to subject [the plaintiff] to a suicide or self-injury risk assessment, and adequate psychiatric evaluation, and consideration for hospitalization; that he shares in responsibility for the failure to stabilize [the plaintiff]; and that he was negligent in failing to be available for consultation, or to have another psychiatrist available . . . [a]nd the evidence would authorize a jury to find that those negligent omissions were a proximate cause of the defendant’s lack of control  over [the plaintiff] at the time of her attempted suicide as well as of the attempted suicide as well.

The underlying facts show that the psychiatrist was aware of plaintiff’s history of severe mental illness and high risk to attempt suicide, but, nonetheless, he allowed her to be discharged from a mental hospital without being subjected to a suicide assessment or considered for involuntary hospitalization. Two days later, plaintiff poured gasoline over herself and set herself on fire.

The psychiatrist argued that he was not liable because he never had control over the plaintiff. The court disagreed, finding that “control over the plaintiff” is not relevant because the psychiatrist had a duty to provide a minimum level of medical care to the plaintiff. The appellate court ruled that whether the psychiatrist’s care of the patient fell below that minimum level is up to a jury to decide.

The psychiatrist also argued that even if he has a duty, that duty does not include taking affirmative action to protect a patient. Again the court rejected that argument, finding the duty at issue is not strictly a duty to involuntarily commit the patient, but, rather, is “a duty to exercise the applicable degree of care and skill in the treatment” of the patient.

The take home is that in a doctor-patient or in a probation officer-probationee relationships, the doctor or probation officer have a duty to do their job with a minimum level of competency. What the minimum level of competency varies from situation to situation, and is a question to be resolved by a jury.

Cozy: New Internet Service Makes Renting Easier

Cozy, which launched on June 6, 2013, is a new company hoping to make day-to-day issues facing landlords and tenants easier. The company is financed by Google Ventures, among others, meaning odds are in favor of this company succeeding.

Owning rental property is a great long-term investment; likewise, renting is a convenient solution for many who can’t afford or don’t want to buy property. However, as everyone knows, being a landlord or a tenant can come with some headaches.

To start with, for a tenant, finding a place to rent requires filling out several applications, which results in tenants having to provide personal and confidential information to complete strangers. For a landlord, finding a reliable tenant involves chasing down references, expensive background checks, and oftentimes guess work. Cozy aims to solve these issues. Renters create a profile in Cozy containing the personal information required on rental applications (e.g., references and job information). This information is verified through LinkedIn. Landlords can quickly and easily access this data. Once a tenant finds a place (or stops looking), he or she is able to remove access to his or her personal information. This provides greater security than filling out an old-school paper form or online application.

Likewise, landlords are able to create a profile and list of available properties, creating a central repository for tenants looking for rentals.

An important back-end feature offered by Cozy is online payments. No more the “check got lost in the mail” excuses. Using ACH direct debit payments, a renter is able to send money directly to a landlord’s account.

The fee to use this service is borne by the landlords, who are required to pay $9/month for every unit listed. But, if this service works as advertised, we suspect landlords will be glad to pay $9/month for the convenience provided. In order to become a viable option going forward, lots of landlords and tenants will need to sign up for the service. We wish Cozy luck and hope for its success.

At Gomez & Golomb LLC, we’ve been drafting leases, negotiating landlord-tenant disputes, and filing evictions for twenty years. Please call us for a free initial consultation to discuss your commercial or residential landlord-tenant issues.

O.C.G.A. 9-11-67.1: New Law Regarding “Holt” Bad Faith Demands in Georgia

Our last blog post covered the origins of the Holt case, which for the past 20 years has protected injury victims from insurance companies who unreasonably and untimely refuse to settle straight forward injury claims.

Because Holt exposes insurance companies who act in bad faith to potentially large penalties, insurance companies have been pushing the Georgia legislature to repeal Holt time-limit settlement demands.

On March 22, 2013, the Georgia legislature passed House Bill 336, which is a compromise between plaintiffs’ lawyers and insurance companies. The new law, signed by Governor Nathan Deal, codifies the Holt settlement demand process. Fortunately, the new settlement process leaves in place the requirement that insurance companies negotiate claims in good faith.

The new law will be known as O.C.G.A. Sec. 9-11-67.1 and will apply to all automobile wrecks after July 1, 2013. Some of the highlights of the new law are: settlement demand letters now must be sent prior to filing a lawsuit, the claim must involve injuries arising out of the use of a motor vehicle, the demand must be prepared by an attorney, the demand must allow the insurance company 30 days to accept the offer, and the demand must be sent by certified or overnight mail.

The changes will give both sides a fair opportunity to fairly and timely resolve serious car wreck injury cases.

Please call us at (404) 382-9994 if you have any questions regarding the new law.