The Maryland Court of Appeals recently addressed a Joint Motion to Certify a Question of Law” from the United States District Court for the District of Maryland, addressing the following question:
Is the legal rate of post-judgment interest on a judgment awarded in a breach of contract action where the underlying contract is a residential lease ten percent (10%)[,] as stated in [CJ] § 11-107(a)[,] or is it six percent (6%)[,] as stated in [CJ] § 11-107(b), which states that it is applicable to “a money judgment for rent of residential premises,” where the judgment in the breach of contract action does not specifically delineate what portion, if any, of the judgment was awarded for unpaid rent?
The Court held “where a landlord sues a tenant for breach of contract based on a residential lease, and the trial court enters judgment in the landlord’s favor against the tenant and the judgment includes amounts for unpaid rent and other expenses, a post-judgment interest rate of 6% applies to the judgment pursuant to CJ § 11-107(b).” Amber Ben-Davies at 39.
The statute in question, Md. Code Ann., Cts. & Jud. Proc. § 11-107(b) states “The legal rate of interest on a money judgment for rent of residential premises shall be at the rate of 6 percent per annum on the amount of the judgment.” The Defendant, representing the landlord, argued that the 6 percent interest rate did not apply to actions for breach of contract and only applied to actions where the landlord sought possession of the premises in an eviction action. See Amber Ben-Davies at 40-41.
The Court rejected this reasoning based on the legislative history and the plain language of the statute, stating “nothing in CJ § 11-107(b)’s plain language renders it inapplicable to actions for breach of contract between landlords and tenants . . . . That said, CJ (1980) § 11-107(b)’s obvious purpose was to protect tenants by not subjecting them to an increased post-judgment interest rate on money judgments for rent of residential premises. In other words, it is evident that the General Assembly carved out an exception to the default post-judgment interest rate of 10% for the benefit of residential tenants.” See Amber Ben-Davies at 42-43.
The Court of Appeals also emphasized that the 6 percent post-judgment interest rate only applies to the principal and not to any claim of costs or attorneys’ fees. The court explained that although Md. Code Ann., Cts. & Jud. Proc. § 11-107 does not expressly allow or prohibit interest on court costs and attorneys’ fees, the statute expressly provides only for interest on a “judgment” itself, and because the awards of costs and attorneys’ fees did not constitute part of the judgments, they were not subject to post-judgment interest. See Amber Ben-Davies at 50.
Therefore, when collecting back rent from a residential tenant, whether in an eviction action or a breach of contract action, always seek 6 percent interest (not 10 percent) on the judgment and only apply the interest to the principal, not to fees and costs.