United Communities SCRA Settlement: JB McGuire-Dix-Lakehurst Housing

What happened

United Communities, LLC was sued by the United States in federal court in New Jersey on September 27, 2018, and the two sides signed a settlement agreement the same day. The complaint describes a Delaware company based in Haddon Township, New Jersey, a subsidiary or affiliate of First Montgomery Group, that manages the military family housing at Joint Base McGuire-Dix-Lakehurst under an operating agreement the Air Force entered into in September 2006. Under that agreement, as the complaint describes it, Air Force housing personnel had to review and approve any change to the company's form lease, and servicemembers who lived on the base signed leases directly with United Communities and owed the rent personally (complaint paragraphs 7 and 9 to 13).

The problem was a Lease Incentive Addendum that, the complaint says, the Air Force never reviewed or approved (paragraph 21). In its lead example an Army captain was promised his first month "rent-free" in return for a 24-month lease in September 2014, then signed an addendum acknowledging an $899.20 incentive. It excused him from the full term on PCS, separation or retirement orders only after at least six months, and for any other reason made him responsible for paying the incentive back (paragraphs 14 and 15).

On or about April 7, 2016, five months before the lease would have ended, he received orders to deploy to Qatar for up to 365 days as part of Operation Inherent Resolve. He gave notice with the orders on or about April 14, was charged $899.20, paid it, and complained to the U.S. Attorney's Office for the District of New Jersey on May 10, 2017. DOJ notified United Communities of its investigation by letter dated October 18, 2017 (paragraphs 16 to 20); DOJ's release says the referral came from Air Force Community Legal Services.

The United States alleged the addendum broke § 3955(e)(1) two ways: it charged the incentive for any termination other than a PCS, separation or retirement, so qualifying deployment orders did not excuse it, and it charged anyone who left within six months of signing for any reason at all. The United States further alleged that approximately 577 servicemembers signed it and that 13 were made to repay. United Communities did not admit that its incentives produced a prohibited charge, describing them as terms servicemembers voluntarily agreed to in a lease addendum (agreement paragraphs 3 and 4).

The law behind this: 50 U.S.C. § 3955

Termination of residential or motor vehicle leases: read the statute , or read § 3955 in plain English, with its enforcement record .

Members of the Army, Navy, and Air Force at Joint Base McGuire-Dix-Lakehurst, and servicemembers nationwide, have the right to terminate their leases without penalty when their military orders send them elsewhere,

When the brave men and women of our armed services answer the call of duty, they should be confident that they and their families will receive every protection the SCRA offers,

Who was covered

Thirteen instances since October 18, 2012, listed for United Communities by the United States, in which servicemembers who terminated under the SCRA were required to repay lease incentives received at lease signing (agreement paragraph 19). The complaint counts the captain and twelve others who terminated in or after April 2015 (complaint paragraph 26), and DOJ's release puts the charges at $138 to $3,100. Co-lessees on those leases shared in the refunds, and no payee, servicemember or co-lessee, got a check without a signed Appendix B release (agreement paragraphs 20 and 22 to 24).

What the settlement paid

• $45,001.78 to be deposited in an interest-bearing escrow account no later than 14 days after the effective date (agreement paragraph 21). DOJ's release calls it $45,001.78 in damages to 13 servicemembers and announces $62,501.78 in all.
• Each instance was to pay out in two pieces: the charge itself, split evenly between the servicemember and anyone else on the lease, and a second sum equal to that refund that belonged to the servicemember alone (paragraph 20). The Twin Creek agreement signed September 11, 2018 set its additional payment at two times the refund.
• A $17,500 civil penalty within 14 days (paragraph 29). Checks were to reach counsel for the United States within ten days of notice of a signed release and could be cashed for six months, and escrow money undistributed after five years was payable to the Treasury (paragraphs 23 to 26).
• Alongside the payments, United Communities had to ask all credit bureaus that get its data to delete negative entries that existed only because of the charge (paragraph 28). Its new policies had to accept notice by hand, private carrier, U.S. Mail or e-mail, with a commanding officer's notification counting as orders, stop requiring repayment of lease incentives received at signing, and post SCRA eligibility on its website (paragraph 10). The agreement ran five years from September 27, 2018 (paragraph 44).

Why this case matters

On-base family housing run by a private company is still a residential lease under § 3955. The Air Force had a right to approve changes to this form lease, yet the complaint says the incentive addendum never went through that review. A move-in incentive tied to a minimum stay, the United States alleged, becomes an early termination charge when it is collected from someone leaving on qualifying orders. DOJ's release counted this case and Twin Creek as the Department's first two SCRA cases about lease incentives. If your base housing lease came with an incentive addendum, check whether it excuses deployment orders; this one did not.