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Management company that wrongly evicted Virginia Beach servicemembers to pay $1.6 million settlement

By SCOTT DAUGHERTY | The Virginian-Pilot | Published: March 15, 2019

VIRGINIA BEACH, Va. (Tribune News Service) — In 2016, a Virginia Beach sailor was evicted — some would say wrongly — from her apartment.

Complaints were made. A federal investigation was launched.

She wasn't alone.

The property manager behind at least 10 apartment complexes in Virginia entered this week into what federal prosecutors described as the largest settlement ever obtained by the Justice Department against a landlord for violations of the Servicemembers Civil Relief Act.

As part of the nearly $1.6 million settlement, PRG Real Estate Management of Philadelphia acknowledged their employees improperly secured default judgment against 127 servicemembers over the span of 10½ years. Most of them were evicted.

The company also secured second judgments against 25 of them, and illegally sought termination fees against 10 others who tried to break their leases early.

“The incredible sacrifices our servicemembers make when they deploy and move frequently should never create financial or legal hardships for them,” G. Zachary Terwilliger, U.S. Attorney for the Eastern District of Virginia, said in a statement. “This settlement helps ensure that these men and women are honored for, not disadvantaged by, their military service.”

An attorney for PRG apologized for what happened, blaming it all on improper training.

"PRG accepts responsibility for its failures ... and regrets the negative impact on those servicemembers affected," Adam Carroll said. "Once informed by the Department of Justice, PRG immediately corrected its collection and eviction policy to ensure that these circumstances will never reoccur."

Carroll noted that the federal investigation looked at nine PRG communities, containing 2,800 units. They reviewed more than 10 years, he said.

"Over a two-year period, PRG produced thousands of pages of data to satisfy the Department of Justice that (the company) was not engaged in the systematic exploitation of servicemembers," Carroll said.

PRG operates at least 37 properties across the country, with the bulk in Virginia, North Carolina, South Carolina and Kentucky, according to the company's website.

Locally, they control Courtyards of Chanticleer and Linkhorn Bay in Virginia Beach and Country Club Apartments in Williamsburg. They previously ran Hilton Village Townhomes and Heritage Trace Apartments in Newport News.

In general, landlords are allowed to evict and seek judgments against tenants who don't pay their rent or cause damage.

The Servicemembers Civil Relief Act, however, offers protections for members of the military.

Landlords can still evict servicemembers, but they must first file with the court an affidavit stating whether or not the tenant is in military — or at least that they tried and failed to find out. If the tenant is in the armed forces, then the court must appoint an attorney to represent him or her before a judgment can be entered.

The act also lets servicemembers break certain leases if they receive qualifying military orders. If someone does that, the owner may not impose a fine or seek rent after the termination date.

Court documents indicate PRG failed on both counts.

Since at least January 1, 2006, the company improperly filed affidavits — actually General District Court forms — while seeking to evict tenants. And in several cases, they did so when their own files listed the tenant's employer as a branch of the armed forces.

Documents said PRG had no written policy until November 2016 requiring employees to search a public database designed to help people comply with the act. Employees also didn't review their files on any sort of a regular basis before filing the affidavits.

Through May 30, 2017, PRG obtained 25 default judgments by filing affidavits stating that a servicemember was not in the military when he or she actually was. The company also obtained 123 by filing affidavits stating that they were unable to determine a person's military status when he or she was in the armed forces.

Employees didn't file affidavits in three cases at all. In the last one, an affidavit was filed, but none of the boxes involving military service were checked.

The Justice Department launched its investigation into PRG's treatment of servicemembers in January 2017, after a Navy legal assistance attorney in Norfolk reported a sailor had been evicted using an inaccurate affidavit.

The company, however, was on notice about the problem at least nine months earlier. In April 2016, PRG settled a dispute with two other servicemembers who had made similar claims.

Despite the settlement, PRG "continued to obtain default judgments against SCRA-protected servicemembers without accurately disclosing their military statuses to the court," court documents said.

While probing the evictions, federal investigators also determined PRG had been using leases since at least October 13, 2010, that improperly charged servicemembers early termination fees.

According to a copy of the settlement agreement, PRG plans to establish a $1.498 million fund to reimburse the 127 servicemembers. The company will pay $11,500 for each of the 127 initial default judgement it secured and $1,500 for each subsequent judgement.

PRG also agreed to pay $34,920.39 to the 10 servicemembers who were charged termination fees, plus a $62,029 fine.

In the next 60 days, PRG must contract with an outside firm to administer the settlement fund. That company will then try to contact the former tenants who are due money.

The settlement also requires PRG to repair the credit of affected servicemembers, provide special training to its employees and develop new policies to ensure this doesn't happen again.

Last year, tenants of Linkhorn Bay Apartments and Courtyards at Chanticleer complained to The Virginian-Pilot that PRG was renting apartments that were significantly smaller than advertised. At the time, PRG said the issue had never come up in Linkhorn Bay's more than 30-year history.

The company's website has since changed the square footage listed for some of its apartments.

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