In a stipulation, the landlord and tenant agree to resolve a matter without a trial. Most judges request that the parties negotiate in the hallway immediately before trial to see if there is a last opportunity to settle the dispute without a trial. Courts appreciate when the parties resolve the action themselves without taking up valuable court time and resources. There are two distinct types of stipulations:
* Stipulation for Judgment -- a judgment is entered immediately; and * Stipulation for Entry of Judgment -- judgment is not entered immediately but may be entered in the future if the tenant fails to comply with the agreement.
If the parties agree that the tenant will remain in possession of the property, a Stipulation for Entry of Judgment will be issued. In other cases, either type of stipulation is possible and the choice will depend upon the parties’ negotiations and their relative bargaining strengths. A stipulation has the same force and effect as if the judge made the decision. A judge must sign a stipulation as a judgment of the court in order for it to be enforceable.
When to use a stipulation
The decision to use a stipulation is not always easy to make. There are often many factors to consider.
Advantages of stipulations
* Some clients want to end the case quickly and prefer an amicable resolution. Avoiding the time, expense, uncertainty and anxiety of trial are strong incentives to use a stipulation.
* Settlement may produce voluntary payments and/or surrender of possession.
* There may be less risk of retaliatory property damage.
* The parties’ agreement can be enforced by the court if the tenant fails to comply with the terms. For example, many stipulations require the tenant to pay past rent, court costs and attorney’s fees according to a payment schedule. In addition, current rent must be paid as it becomes due under the stipulation (which may provide different terms than the lease). If the tenant fails to make timely payments, the owner/manager can apply for a judgment for possession of the property and monetary damages and implement involuntary collection procedures such as wage garnishment and bank levies.
* Sometimes the owner/manager is able to negotiate a stipulation that includes losses not normally recoverable in the unlawful detainer action. Most courts are lenient in their interpretation of the scope of stipulations, allowing additional rent and other amounts due to be part of the stipulated amount owed.
* A Stipulation for Entry of Judgment may be the only way to allow a tenant to remain in possession but still allow the landlord to recover possession quickly if the tenant breaches the agreement.
* If the case is weak, either because of the case facts or application of current law, a stipulation may be the only way to gain a partial “win” in the case.
Disadvantages of stipulations
* A landlord will incur attorney’s fees to prepare a stipulation that the tenant is unwilling to reimburse. However, those fees will probably be much less than fees for a trial.
* A tenant may not comply with the terms of the stipulation, requiring a landlord to enforce the judgment against the tenant involuntarily. However, a tenant’s voluntary compliance is much more likely with a stipulation than with a judgment after trial.
* Some landlords are concerned that other tenants may be aware of the litigation and may be more likely to follow the same path as the defendant/tenant if they think a favorable settlement was reached with the landlord. For instance, many times the tenant is given an extended time to remain in possession of the property or the landlord may waive some of the rent owed, which could give the wrong message to other tenants in a multi-tenant building.
It’s your decision
Stipulations have a role in unlawful detainer actions but should only be used after examination of the advantages and disadvantages in your particular case. A mutually agreeable resolution between a landlord and tenant can often have significant advantages over a judgment after trial.
Thorn is a partner with Kimball, Tirey & St. John LLP that specializes in real estate law and commercial unlawful detainer litigation. He is also general counsel and director for the Building Owners and Managers Association, San Diego.