A landlord company that charged Navy sailors in Virginia thousands of dollars in illegal lease termination fees and extra rental payments has agreed to pay damages and stop those practices as part of a federal settlement, Justice Department officials said.
The DOJ alleges that McGowan Realty LLC, a Charlotte, North Carolina firm that does business as RedSail Property Management, broke a federal law as the landlord for two Navy sailors in apartments just outside Norfolk, Virginia by penalizing them when they were moved to new assignments.
Those fees violated the Servicemembers Civil Relief Act, which allows military personnel to break leases with landlords if they receive Permanent Change of Station orders.
“This case should put all housing providers on notice that if a service member 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,” Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division said in a release.
Under the settlement, which needs to be approved by the federal district court, RedSail would pay $10,225.65 to one Navy petty officer, according to a DOJ press release. He was originally forced to pay $3,408.55 in additional rent and a termination fee. Officials did not address an award for the second sailor.
The federal SCRA allows military personnel to break leases when the military forces them to move, but in charging at least two sailors termination fees and extra rent, the company cited a Virginia state law that appeared to put limits on those rights.
As part of the settlement with the DOJ, the company acknowledged in the settlement that the state law does not override the federal law and agreed to provide SCRA training to its employees and develop new policies consistent with the SCRA.
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A request for comment sent by Task & Purpose lawyers representing McGowan Realty was not returned.
“Early termination fees impose financial burdens on servicemembers and their families and negatively impact military readiness,” the DOJ said in its complaint filed Monday.
The settlement ends a DOJ civil lawsuit against Red Sail that filed under the SCRA which provides “some relief to servicemembers who would otherwise be forced to pay rent for housing they cannot occupy because they have been ordered to move to another location,” according to the DOJ complaint.
The company claimed that its actions were permitted under a Virginia law that exempts sailors from SCRA protection if their new station is less than 35 miles from their previous one. Such reassignments are common for sailors stationed in the Norfolk region, which is a major hub of Navy ships, bases and airfields.
“State statutes cannot deprive servicemembers of the full scope of their rights under federal law,” the DOJ said in a press release.
The DOJ alleges that since at least 2017, RedSail used leases with military personnel which omitted SCRA rights and since 2018 used language defending the right to apply Virginia landlord laws. The DOJ filed suit after RedSail allegedly asserted the Virginia state policy for in the cases of different sailors.
One active duty sailor and his spouse were denied early lease termination for their apartment in Portsmouth, Virginia in August 2018. The issue was only settled with RedSail after Navy attorneys got involved.
Then in April 2022, the company again refused to terminate the Suffolk, Virginia lease of a Naval fire controlman petty officer and his wife after a re-assignment. The sailor was assigned to the USS Stout, which is based in Norfolk, but was re-assigned to Surface Combat Systems Training Command in Virginia Beach, Virginia in June 2022.
“Given the traffic, it would take him a minimum of 50 minutes to drive each way, which would more than double his prior commute time,” the DOJ said in its complaint.
Since 2011, the DOJ has obtained more than $481 million in monetary relief for 147,000 military members through SCRA enforcement. In October 2023, the DOJ settled with JAG Management Company LLC for illegal fees charged to nine troops in New Jersey.
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