Rent Demand Notices and the Fair Debt Collection Practices Act
By Elias Eliopoulos, Esq. ^[i]

Adopted in 1977 to prevent abusive consumer debt collection practices, the Federal Debt Collection Practices Act² (“FDCPA”) has found application in the past few years by residential tenants and their advocates as a defense in landlord-tenant actions. However, cases such as East 77th Realty L.L.C. v. Alin³ show that the viability of the FDCPA as a tenant defense in nonpayment proceedings has diminished in New York, and provide guidance to landlords and their attorneys in making rent demands so as not to run afoul of the FDCPA.

   Generally, the FDCPA prohibits debt collectors from using “false, deceptive or misleading representation or means in connection with the collection of any debt.”⁴  Since an attorney who regularly engages in consumer debt collection activities through litigation on behalf of a creditor is a debt collector,⁵ certain notices by such attorneys may be subject to the provisions of the FDCPA (violation of which could make such attorneys subject to statutory penalties). Among other things, the FDCPA requires a debt collector to provide a creditor with written notice (commonly known as a “validation notice”) that unless the creditor disputes the validity of the debt in writing to the debt collector within thirty days, the debt will be assumed valid by the debt collector.⁶

In East 77th Realty, the respondent tenant moved to dismiss the petition in a summary residential nonpayment proceeding because, inter alia, the written rent demand notice failed to comply with the FDCPA. The notice requiring the payment of rent or surrender of the premises, pursuant to Section 711 of the New York Real Property Actions and Procedure Law (“RPAPL”), was printed on the letterhead of petitioner's counsel and was executed by the assistant secretary of the corporate member of the petitioner limited liability company.

   The tenant relied upon the holding in Eina Realty v. Calixte,⁷ which relied upon Romea v. Heiberger & Associates,⁸ in arguing that the notice was ineffective as a prerequisite to instituting the subject proceeding.

   In Romea, the Southern District held that a notice by a debt collector (rather than the creditor-landlord) to a tenant demanding unpaid rent, such as the three day notice required under RPAPL Section 711(2), is a “communication" subject to the FDCPA [COMMENT1]   [COMMENT2]  .⁹  In effect, lawyers deemed to be debt collectors would be liable under the FDCPA unless their three day notices became thirty day "validation" notices. While acknowledging that this position could have a broad impact on the efficient resolution of landlord-tenant rent disputes, the Southern District noted that it “will be for the state courts, at least in the first instance, to determine whether a violation of the FDCPA in an attorney-signed three day notice is a defense to a non-payment proceeding.¹⁰ 

Like other lower state court rulings which assumed the Federal court ruling binding, Eina Realty built upon Romea.  In Eina Realty, although the landlord's name was typewritten on the rent demand notice, the notice was printed on landlord's counsel's letterhead and signed by counsel. Applying the "least sophisticated consumer" standard, the court found that the tenant would have believed that the notice was sent by landlord's attorney, so that the FDCPA was applicable. Ultimately, the court in Eina Realty held that RPAPL Section 711(2) was preempted by the FDCPA and that an attorney-signed rent demand notice which violates the FDCPA may not serve as an adequate predicate for a nonpayment proceeding.

   Unswayed, the court in East 77th Realty refused to follow the path set out by Eina Realty, instead favoring petitioner landlord's argument and the holding in Wilson Han Association v. Arthur.¹¹

On the issue of whether the notice sent on landlord's counsel's letterhead constituted a communication by a debt collector subject to the FDCPA, the court rejected the respondent's argument that a least sophisticated consumer would believe that the attorney was collecting the debt.  Although use of counsel's letterhead was "inappropriate," the notice was signed by the landlord, demands that payment be sent to the landlord and does not direct tenant to contact landlord's counsel regarding the debt.  Based on these factors, the court viewed the notice as being sent by the landlord-creditor and, thus, outside of the provisions of the FDCPA.

Even assuming that the notice was "sent" by a debt collector and violative of the FDCPA, the court rejected the notion that a defective notice would require dismissal of the summary proceeding.  In Wilson Han, the Appellate Term of the Supreme Court of New York reasoned that because the FDCPA "imposes no sanctions upon creditors, dismissal of a nonpayment proceeding brought by a landlord-creditor, based on an alleged violation by his agent, is beyond the scope of the FDCPA." The East 77th Realty court was thus bound by Wilson Han's holding that a defective notice under RPAPL Section 711 would still be a sufficient predicate to a nonpayment proceeding.

   Following Wilson Han and East 77th Realty, it appears unlikely that a purported violation of the FDCPA would constitute an effective defense to a nonpayment proceeding based on an otherwise proper notice under RPAPL Section 711(2).  Indeed, the Southern District has itself acknowledged the recent state court rulings setting forth this position.¹² Of course, since the provisions of the FDCPA do not apply when a creditor attempts to collect a debt, landlord and their counsel may avoid entanglement with the FDCPA by having rent demand notices signed by the landlord -- the FDCPA is only triggered when a debt-collecting attorney is deemed to have “sent” a rent demand.

^{[i] .} The author is a Partner in the Real Estate Department at McDermott, Will & Emery in New York City.

^2. 15 U.S.C. § 1692 et seq. (1977).

^3. N.Y.L.J., November 24, 1999, p. 32, col. 2 (Civ. Ct., N.Y. Co. 1999).  See also Missionary Sisters of the Sacred Heart v. Dowling, 703 N.Y.S.2d 362 (Civ. Ct., N.Y. Co. 1999).

^4. 15 U.S.C. § 1692e. Unpaid rental payments constitute “debt” for purposes of the FDCPA.  See Romea v. Heiberger & Associates, 988 F. Supp. 712 (S.D.N.Y. 1997).

^5. Heintz v. Jenkins, 514 U.S. 291 (1995).

^6. 15 U.S.C. § 1692g.

^7. 679 N.Y.S.2d 796 (Civ. Ct., Kings Co. 1998).

^8. 988 F. Supp. 712 (S.D.N.Y. 1997).

^9. Id. at 715.

^10. Romea v. Heiberger & Associates, 988 F. Supp. 715, 718 (S.D.N.Y. 1998), aff'd 163 F.3d 111 (2d Cir. 1998). The FDCPA does not annul, alter or affect state law unless those laws are inconsistent with any provision of the FDCPA, and then only to the extent of such inconsistency.  15 U.S.C. § 1692n.

^11. N.Y.L.J., July 6, 1999, p. 29, col. 4 (App. T. 2d and 11th Jud. Dists.).  See also Dearie v. Hunter, 705 N.Y.S.2d 519 (App. T. 1st Dept. 2000).

^12.  Arrey v. Beaux Arts II, LLC, 101 F. Supp. 225, 226 (S.D.N.Y. 2000).