Chapter 48: Landlord-Tenant Relationships

1. Chapter 48:Landlord-Tenant Relationships

2. Introduction • Anyone who rents housing to the public for commercial purposes subjects herself to various state and federal Landlord-Tenant laws. • Owner of the property is the LESSOR and Tenant is LESSEE; the contract is called the LEASE. The property interest is called a leasehold estate.

3. § 1: Creation of the Landlord-Tenant Relationship • Lease Agreement can be oral or written (oral may not be enforceable). Lease gives Tenant the temporary right to exclusively possess the property. • Sources of Law: • Common Law. • State and Local Statutes, and • The Uniform Residential Landlord and Tenant Act (URLTA) which has been adopted by 1/4 of the states.

4. Lease Agreement • Form of the Lease: • Must express intent to establish the lease. • Provide for transfer of possession to the Tenant. • Provide for the Landlord’s “reversionary” interest. • Describe the property. • Indicate length of the term, amount of rent, when and where rent paid.

5. Illegality • URLTA prohibits clauses requiring Tenants to pay attorney fees in enforcement actions. • State statutes prohibit leasing when property is not in compliance with local building codes. • Landlords cannot lease in violation of state (gambling) or federal (discrimination) laws.

6. Unconscionability • The unconscionablity doctrine of the UCC has begun to be followed in some states’ lease laws. • Courts are finding that a clause or even the whole contract may be unconscionable and therefore unenforceable. • Clauses attempting to absolve Landlord from liability for common areas or essential services may be unconscionable.

7. § 2: Parties’ Rights and Duties • Trend in the law is to curtail, by contract and real estate law, the immense freedom that Landlords had in the past. • Possession. • Using the Premises. • Maintaining the Premises. • Rent.

8. Possession • Landlord has a duty to deliver actual physical possession under URLTA or legal right to possession (“American” rule). • Tenant’s right to exclusive possession is only subject to Landlord’s limited right to come unto the property. • Tenant has a “covenant of quiet enjoyment” by which Landlord promises Tenant’s peace and enjoyment of the property.

9. Eviction • Occurs when Landlord: • Deprives Tenant of possession of the leased property; or • Interferes with this use or enjoyment of the property to the extent that Tenant cannot use or enjoy. • Constructive eviction occurs when Landlord: • Breaches lease or covenant or quiet enjoyment; and • Makes it impossible for the Tenant to use and enjoy the property.

10. Use of the Premises • Tenant’s Duty Not To Commit Waste: • Tenant is liable for destruction or abuse of the property. • Tenant not liable for normal wear and tear or depreciation in value over time. • Altering the Premises: • Tenant needs Landlord’s consent to make material alterations. • Installation of fixtures become the property of the Landlord. Whether Tenant can remove depends on state law and consent of Landlord.

11. Maintaining the Premises • Residential property -- Landlord must furnish premises in habitable condition. • Landlord is responsible for maintaining common areas such as stairs, parking lots, elevators and swimming pools. • Commercial property -- may still require Tenant to maintain depending on the lease. • Case 48.1: Decade 80-1 Ltd v. PDQ Food Stores(1999).

12. Warranty of Habitability • Implied Warranty of Habitability applies to major (substantial) defects if Landlord knew or should have known about & he had a reasonable time to repair. • To determine breach, Courts consider: • Whether Tenant caused damage. • How long defect existed and age of building. • Defects impact on Tenant’s safety and health. • Whether defect contravenes relevant statutes. • Case 48.2: Schiernbeck v. Davis(1998).

13. Tenant’s Remedies • If Landlord breaches the warranty of habitability, depending on state law, Tenant may: • Withhold rent -- put in escrow. • Repair and Deduct -- notify, repair, and deduct repair from rent. • Cancel the Lease -- must be constructive eviction or breach of habitability. • Sue for Damages -- difference between what paid for and what received.

14. Rent • Rent is Tenant’s payment to the Landlord for the Tenant’s occupancy or use of the Landlord’s real property. • Payment based on agreement, custom, state statute, waiver. • Security Deposits. • A deposit by Tenant which Landlord may retain for non-payment of rent or damage to premises. • URLTA has specific provisions as to when it may be kept and when it must be returned.

15. Rent[2] • Late Charges. • Legal, if reasonable. • Rent Escalation. • Not unless provided in lease, or at termination of lease and beginning of new lease. • Property taxes. • Landlord is usually responsible for property taxes.

16. Landlord’s Remedies • Landlord’s Lien on all Tenant’s personal property. • Lawsuit to Recover Possession -- ejectment or unlawful detainer. • Landlord’s Duty to Mitigate Damages. • Must make reasonable efforts to re-rent the premises.

17. § 3: Liability For Injuries on the Premises • Landlord is liable to Tenants and Licensees (Tenant’s guests) based on who has the right to controls the area where the injury occurred. • Landlord is liable for injuries caused by defects in common areas. “Attractive nuisance” doctrine for children and an unfenced swimming pool. • Case 48.3: Johnson County Posse v. Endsley (1996).

18. Liability for Injuries [2] • If Landlord makes any repairs, they must be done with reasonable care. • LL may be liable for injuries caused by crimes or third persons when reasonably foreseeable. • Exculpatory clauses may be unenforceable if injury results from violation of statutory duty.

19. Liability For Injuries [3] • Tenant’s Liability? • Tenant has a duty to maintain safe conditions in those areas under her control. • In commercial leases, both Landlord and Tenant may be responsible and liable for same area.

20. § 4: Transferring Rights to Leased Property • Transferring Landlord's Interest. • Landlord may sell any and all of his rights in the real property. • New owner buys “subject to the lease,” if lease is recorded. • Transferring Tenant’s Interest. • Landlord’s consent may or may not be required by statute or the lease itself.

21. Transferring Rights [2] • Transferring the Tenant’s Interest (cont’d) • Assignments: Tenant transfers his entire interest in the lease to a third person. Original Tenant is not released from liability under the lease. • Subleases: Tenant transfers all or part of his interest in the lease for a shorter period of time than the lease. Original Tenant is not relieved of liability under the lease.

22. § 5: Termination or Renewal of the Lease • Leases can be terminated by: • Notice—how much notice depends on lease or term. • Release and Merger—Tenant becomes owner, needs writing. • Surrender By Agreement—Parties agree to terminate early, need writing. • Abandonment—Tenant abandons; automatic termination, no writing required.

23. Termination of Lease[2] • Termination of Lease (cont’d): • Landlord takes possession -- considered acceptance of surrender. • Forfeiture -- clause in lease which makes termination automatic upon the happening of a condition. • Destruction of the Property -- from some cause outside Landlord’s control.

24. Renewal of the Lease • Lease may provide. • usually requires notification on intent to renew in advance of termination. • Parties may agree to renew. • Tenant stays on property after lease ends and does not renew – trespasser.

25. Focus on Ethics-Property • Defining Rights in Personal Property. • Finders’ Rights. • Ethics and Bailments. • Private vs. Public Property Rights. • Fair Housing vs. Religious Freedom. • Discrimination in Housing.

26. Law on the Web • Center for Environment and Land Use Law. • Legal Research Exercise on the Web.