Southwood Realty Pays $7 Million to Settle Class Action Over Illegal Tenant Eviction Fees

For years, tenants at Southwood Realty properties across North Carolina received notices that included filing fees, attorney fees, and sheriff's order fees tacked onto eviction proceedings. Under North Carolina's Residential Rental Agreements Act, landlords at the time could collect eviction-related fees only up to five percent of a tenant's monthly rent. Southwood's charges exceeded that cap, and attorneys for the plaintiff class argued that the company was using those fees to pressure tenants into paying amounts the law did not permit.

The lawsuit, filed September 1, 2018 in Cumberland County Superior Court (case no. 18-CVS-6090), named Angela Denise Stewart as lead plaintiff on behalf of all tenants who rented Southwood units between September 2014 and June 2018. Two additional North Carolina property management companies faced parallel claims in coordinated proceedings, making this part of a wider enforcement action targeting the same illegal fee practice across the state.

Karl Gwaltney of Maginnis Howard, along with co-counsel Patrick Wallace of Whitfield Bryson in Raleigh, represented the plaintiff class. The legal team built the case around Southwood's own fee records, which showed a systematic pattern of charging prohibited amounts across thousands of leases over nearly four years.

Southwood agreed to pay $7,029,000 to resolve the claims. Court-approved awards to class members varied based on the fees each tenant had paid, and Stewart, as named plaintiff, was eligible for a class representative service award on top of her individual recovery. The settlement also included a cy pres component: remaining unclaimed funds were directed to Duke Law's Civil Justice Clinic and Legal Aid of North Carolina to support the Durham Eviction Diversion Program, a use that Superior Court Judge Allen Baddour approved. The total recovery across all three defendant companies reached just over $8 million.