Sailor Wins Settlement from Virginia Property Management Company over Improper Fees for Ending Lease

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Sailors at Naval Station Norfolk
Sailors at Naval Station Norfolk in Norfolk, Virginia on Feb. 3, 2023. (Billy Schuerman/Virginian Pilot Staff)

A property management company operating across Hampton Roads settled a federal lawsuit following a complaint alleging it violated the Servicemembers Civil Relief Act.

McGowan Realty LLC, doing business as RedSail Property Management, agreed to pay $13,225.65 to settle a complaint that it and one of its landlord-homeowners imposed early lease termination charges and additional rent on a Virginia Beach-based Navy sailor who received permanent change of station orders, according to an announcement from the Eastern District of Virginia U.S. Attorney’s Office. The agreement comes after a 14-month legal battle in U.S. District Court.

The Servicemembers Civil Relief Act allows a service member to terminate a residential lease early if the military member receives permanent change of station orders or enters military service during the term of the lease. If the tenant terminates a lease pursuant to the relief act, the landlord may not impose any early termination fee or rent beyond the effective termination date.

The sailor had received orders to a new duty station located around 12 miles from his Virginia Beach residence, according to court documents. The sailor paid $3,408.55 in early termination charges and additional rent to RedSail, a Newport News-based property management firm that operates across Hampton Roads and surrounding cities. The full termination fee was given to the homeowner.

Brian McGowan, principal broker for RedSail, said the company acted within Virginia law as advised by its attorney.

Virginia law states service members qualify for early termination of a lease if ordered to relocate 35 miles or more from their residence.

“As a real estate broker in Virginia, I’m told to follow the Virginia Residential Landlord and Tenant Act, as it’s the law. From my understanding, the verbiage concerning the 35 radius was added to Virginia law, because Hampton Roads is home to over 15 Military installations. It’s common, for example, for a servicemember to get permanent change of station orders from a Norfolk Navy base to Oceana,” McGowan said Tuesday in a statement to The Virginian-Pilot.

But federal law places no mileage restrictions on a service member’s residential lease termination rights.

“This case should put all housing providers on notice that if a servicemember meets the requirements of the federal Servicemembers Civil Relief Act, they are entitled to all its benefits, regardless of what any state law may provide,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division.

After 14 months and $50,000 in attorney fees, McGowan said RedSail made the decision to settle the lawsuit. The company will pay $10,225.65 to the Navy sailor and another $3,000 in civil penalties.

“We are a small business and do not have the means to fight the Department of Justice, so we settled in order to avoid an expensive federal court case,” McGowan said.

RedSail will also be required to provide Servicemembers Civil Relief Act training to its employees. RedSail has agreed to refrain from imposing Virginia’s 35-mile limitation on qualifying service members or their dependents who seek to terminate leases under the act.

Service members and their dependents who believe their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance office. The Justice Department’s enforcement of the act is conducted by the Civil Rights Division’s Housing and Civil Enforcement Section and U.S. attorney’s offices throughout the country. Additional information is available at justice.gov/servicemembers.

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