Lawsuit: $1.1 Million Late Fees for $1,350 Rent 

Disputed leases lead to years in the courtroom.

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For years, Sam Soter had a friendly relationship with his landlord, Kang Sik Park, so he never paid much attention to some curious clauses in his lease. Soter says he and Park agreed verbally to disregard a portion of the lease that automatically increased his $1,350-per-month rent by 5 percent each year so long as Soter and his cell-phone store staff cleaned and maintained the parking lot. But after their relationship soured, the parking lot agreement was disputed, and Park is now suing Soter for as much as $1.1 million in back rent, late fees and interest.

“I said I’m willing to pay this 5 percent, which works out to be about seven grand,” Soter says. “He said, ‘No, I want $50,000 or I’ll take you to court and you’ll pay a lot more there.’ ”

According to Park’s calculations submitted as court evidence, Soter owes at least $273,625. That’s in part because some of the unpaid rent and resulting late fees collected 1 percent interest, per day, for years. Soter says he had no way of knowing the meter was running. Initially, Park’s November 2007 complaint asked for only that amount, but that was later increased to $1.1 million.

After more than two years of litigation, both Soter’s and Park’s motions for summary judgment were denied in June, putting them on track for a trial in 3rd District Court. “The court finds this issue involves a question of fact which is not properly decided at this time,” Judge Glenn Iwasaki wrote.

The case inspired proposed legislation in 2009, but the bill failed after the Utah Apartment Association argued that someone in Soter’s position is already protected under current law. For example, Soter’s attorney says that Park waived his right to collect on many of the fees by not notifying Soter of them earlier. After some time passed, attorney Michael Petrogeorge says, Soter made business decisions—like deciding to re-sign his lease with Park in 2006—that he would not have made were he aware of his alleged debts to Park, and thus Park should not be allowed to collect on the debt now. Additionally, Petrogeorge cites the doctrine of “unclean hands,” alleging Park intentionally delayed notifying Soter of debts so that the interest would continue to build.

Soter says Park never told him about the alleged debts, and Park seems to concede that that is mostly true. Indeed, in his deposition, Park said, “there was no discussion about it, but I’m sure he was aware he didn’t pay that increase.”

“Our position is by not enforcing these provisions for an extended period of time and causing [Soter] to enter into new agreements and not pay the amounts that were owed when those amounts were small, they should be [stopped] now,” Petrogeorge says.

Park’s attorney, Robert Mansfield, declined to comment, citing the ongoing litigation in the case. Mansfield argues in court filings, however, that “nothing in the lease agreements requires notice of past due amounts be given.” In his motion for summary judgment, Mansfield wrote, “For over five years, defendants have failed to pay the required amounts under those lease agreements. … To shift the blame from their miscalculations and missteps, for example, they blame [Park] for not demanding payment earlier, or not providing a written notice of such past due amounts and fees … However, defendants were never entitled to such a notice and demand."

Read portions of documents from the case, including the calculations used to determine Soter's debt:

Soter

Could this happen to any tenant? Soter thinks so, and says his situation is a “cautionary tale” for tenants to protect themselves from potentially disastrous lease clauses. He calls for a usury law for landlords, which would restrict the interest rates they can charge tenants and lessen the incentive a landlord may have to intentionally cause a situation like his.

Not everyone is convinced, however, that the case is symptomatic of larger issues. Sen. Ross Romero, D-Salt Lake, sponsored a 2009 bill—SB267—that would have required landlords to present tenants with an annual invoice only if they believed that the tenant owed them a debt. Though it was inspired by Soter’s case, Romero says now that he’s not convinced that the problem is common enough to require legislation.

“If there had been a repeated chorus from multiple parties supporting the concept of this bill, perhaps the Legislature would have looked at it again and would have moved to pass it,” he says. “But the fact that there wasn’t a lot of support [for SB 267] seems to me to suggest not a lot of legislators were getting feedback about landlord abuses.”

In the Senate Business and Labor Committee, which rejected the bill—two Democrats voted in favor, but all five Republicans voted against—the landlord lobby complained the proposed law would be onerous for landlords and that tenants need no further protections. Tenants had no lobbyist representing them.

The landlord lobby, the Utah Apartment Association, argued that current contract law adequately protects tenants and thus Romero’s bill was unnecessary.

The executive director of that organization, L. Paul Smith, says that he’s not familiar with the details of Soter’s case and could not discuss it specifically, but said landlords do not forgo all elements of a lease because they give some leeway.

“As a general principle, it isn’t appropriate for someone to say ‘you let me get away with breaking your contract, dude, and that means I can continue to do it, and I don’t have to be responsible for what I agreed to,’ ” Smith says. “The reason we opposed that bill, frankly, is we want business principles to guide, [and] we also want people to be flexible.”

Smith says he would oppose creating usury laws for landlords, saying he prefers the “market determining cost, not government.”

After more than two years of litigation, Soter says he’s already paid about $60,000 in legal bills, has closed both businesses that were sued by Park. He worries he may not have the funds to take the case to trial.

“This is something we can fight and win [under existing law],” Soter says. “But what they don’t tell you is … it will take years of your life and even more money over the course of time to defend yourself. Not only can it happen, it does happen, and it’ll happen more frequently if [Park] does win. ... But I think I’ll win [at a jury trial]—if I can get there.”

Jesse Fruhwirth:

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