Stopping Frivolous Lawsuits BEFORE They Happen?

Question

My company has been inundated with frivolous lawsuits and governmental complaints. We own a property management company and really try to do good things. We work with the VA homeless veterans program, mental health services, youth homeless shelter, and United way to help people in need find clean, safe, and affordable housing. This helps us fill low rent units that would otherwise be filled with dirtbags and drugdealers. We really go out of our way to make our company's presence a positive for the city.

The challenge is that these people can often be full blown leaches and when they don't get what they want, they sue. Or in one case we're dealing with, complain to the commission for human rights. This one is complaining that we're racist because we won't turn up her heat and it's only because she's of a particular race. (The reality is that her unit is 85 degrees, she's mentally ill, and to top it off my maintenance guy who's telling me her heat works fine is of the same race!!) I've even got a State senators chief of staff suing me because I charged them less than $60 from their security deposit!!

Here's my question: What is a good big picture strategy as a company to stop these BS lawsuits and complaints BEFORE they happen. Yes, we're an LLC. Yes, I have a bullet proof lease drawn up by an attorney. Yes, we work on building relationships with the tenants so they like us. But how do I make it so terrifying to sue me they never try? I've even gone to these organizations and told them that our relationship with them was in jeopardy if they weren't willing to back us up when this stuff happens. There's a lot out there in regards to insurance and asset protection that helps AFTER the suit, but what are some ideas for stopping them before lawyers get involved.

Idea #1. Take the Wal-Mart strategy and NEVER settle. Fight everything tooth and nail till word gets around that we are not to be ****ed with. You sue us? We countersue for more. Pretty soon the lawsuits go away.

Idea #2. We stop helping people all together. I send a letter and tell these organizations that we will no longer be taking risks with their clients, we're very sorry, but we are a small company and can't handle the legal costs. Then we dump all our low end properties back into the arms of the slum lord type operations here in town and just say F-'em.

Idea #3. Stay the course and just insure the hell out of ourselves. Forward anyone to our attorney(s) and eat the cost but let the attorneys deal with the stress.

For clarification. I'm not nearly as worried about losing money as I am about the stress and loss of time/productivity that comes with these suits & complaints

Nicole A. · Answer

From the sounds of the two examples of lawsuits, they would lose anyway (provided you have your paperwork in order--especially for the security deposit suit). These are actually FILED suits?...or just threatened that they will? If just threats, they typically stay that way, but I guess you've not been that lucky.Do you make all of your potential tenants go through an application process? You say you're bringing in people who need help and that otherwise, the units would be filled with "dirtbags and drugdealers". Well, sounds like you didn't avoid the dirtbag part. One question in your application should be "have you ever sued a landlord or property management company?" If yes, they need to explain. That will usually tell you if they're are the suing type so you can avoid that person.I feel like you may possibly need a more stringent application process.Otherwise, I'd say option 2 or option 3.BTW, welcome to the site. Please fill out your profile so we can know more about you. This site will be very helpful to you.

Dawn Brenengen · Answer

Wow! I'd really be tempted to go with option #2 and just stop working with these people. However, if your option without these tenants are drug dealers and other riff raff, I'm not sure that that's a better option. I don't really have any advice, but I just wanted to say how sorry I am to see that no good deed goes unpunished. I love that your business model encompasses helping people in need, but you need to figure out if it's a sustainable business model for you to continue.If you can afford option #3, I would go that route.

Account Closed · Answer

Option 2. Nice guys finish last. Or...put a lawyer, As ben affleck in good will hunting puts it, REEE TAAAIN ERRR...Retainer

Elizabeth Colegrove · Answer

I am a small corporation of 9 houses. They are single family higher income but we have alot of military (btw we are also military!) and other people that feel that the lease is just a suggestion. While we have not been threatened to sue, we have had alot of people try to pressure us into their way. We have found that a change in our procedure has prevented alot of these problems. We have everything hand written. I would start by setting up a meeting with your non-problem children. Explain to the organizations that you are a small company being pressed with these issues. That you need their assurances that they will work with their clients to make sure that "frivolous" lawsuits don't happen other wise you will have to close up shops. This way you are having them but skin in the game. For us this was key! If they care they will work ing with you!I have found that while I have a heart I treat it like a business. So you can't take any of this personally. I started out trying to take care of everyone and now I just provide an honest business, providing a stable business and practice. We take care of ourselves, which allows us to keep the doors open taking care of tenants.First off, I would not settle. I would have create a lease template that is approved by your lawyer. I would actually have two, one for organizations and one for personals.The organization one I would say, that while we are honored to have the opportunity to work with them and their clients. We need their assistance to continue this relationship and provide this great service. At this moment "fill in the blanks" service is threatening our relationship to offer this service. Therefore unless this matter is dropped, we will no longer be able to work with X. IF this continues we will be forced to continue on with legal action threatening the long term liability of this great resource. We hope to be able to solve this problem ASAP to prevent the loss in a wonderful relationship.If they don't want to preserve the relationship than walk. If you don't need them, then dump them!2nd- Personal, I would in the lease have a warning system. That one warning and afterwards you don't renew (30 days leases). Again if your service is as awesome as you state it is. People will want to stay and this threat will be menaiful. If they don't enforce it and force them out. I hope this makes sense! It is late and Im not use I am coherent but I saw this! Feel free to pm me if you want to compare notes. I totally understand where you are coming from. I had to go from being "nice" to mean. Honestly I am happier and have a much better business and stress level. It's sad to say, but its life.

Fred Heller · Answer

Not sure what state you're in, but here in Texas the law requires all real estate disputes to go through mediation, which is a lot less expensive than a lawsuit. Only after mediation fails are the parties allowed to proceed with a lawsuit. And the law also requires the loser to pay the winner's legal fees. Every real estate contract in the state of Texas has that clause and and it makes one think twice before filing a frivolous lawsuit.