[co-author: Stephanie Kozol]*
Vermont Attorney General (AG) Charity Clark recently announced the resolution of an investigation into the withholding of security deposits across five motels that were participating in the state’s Transitional Housing Program, also referred to as the “Motel Program.” The settlement establishes a $310,000 restitution pool to provide payments to impacted Vermonters who stayed in motels owned by Anil Sachdev (or companies he controls), along with injunctive relief. Sachdev will also be required to pay $523,600 to the state, which will be suspended for cooperation with the resolution of the matter, including putting adequate funds toward the repair, maintenance, and improvement of the properties he owns.
In 2020, in response to the COVID-19 pandemic, Vermont initiated the Motel Program to increase access to temporary shelter at the state’s expense, while also expanding eligibility under the traditional General Assistance Emergency Housing Program. Under the terms of the program, the state’s Department for Children and Families (DCF) solicited motels to enter into occupancy agreements with residents in need of housing in exchange for direct monthly payments from DCF. In addition, DCF also provided participating motels with security deposits in the amount of $3,300 per occupied unit as a source for reimbursement in the event of damage or loss of furnishings. This deposit was refundable to DCF within 30 days after an occupancy agreement was terminated unless the motel owner could provide photographic evidence of damage or excessive wear, along with an estimate of the cost for repair or replacement. For occupants who resided in a unit for at least four months, the program provided a provision whereby they were eligible to receive the entire deposit, subject to the same terms and conditions as DCF.
Over the course of the program’s existence, motels owned by Sachdev entered into 429 agreements. When the occupants moved out, some of them received notices they were asked to sign stating that they “may have” caused damage to their rooms, which waived portions of their security deposits. The AG asserted that these notices were unfair or deceptive in violation of the state’s consumer protection laws. There were other instances where occupants had deposits withheld in full or in part, but the records could not expressly verify who caused the alleged damages, or they were submitted without adequate supporting photographic evidence. The settlement provides that occupants who received deficient notices are entitled to receive up to the full amount of the $3,300 security deposit. All other qualified occupants are eligible to receive $500, not to exceed $3,300 if they received a partial payment at time of their exit from the program.
Why It Matters
State AGs continue investigating and bringing enforcement actions over COVID-19-related fraud and predatory practices, especially as it relates to the housing industry. Regulatory activity related to deficient consumer notices across all sectors has also increased, with regulators stressing the particular importance of transparency and fairness for individuals who are experiencing economic distress. As homelessness and affordable housing crises persist across the U.S., we expect this to remain an area of heightened scrutiny and regulatory focus.
*Senior Government Relations Manager
