Chapter 48: Landlord-Tenant Relationships

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Chapter 48:Chapter 48:Landlord-Tenant Landlord-Tenant

RelationshipsRelationships


IntroductionIntroduction

• 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.


§§ 1: Creation of the 1: Creation of the Landlord-Tenant RelationshipLandlord-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.


Lease AgreementLease 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.


IllegalityIllegality

• 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.


UnconscionabilityUnconscionability

• 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.


§§ 2: Parties’ Rights and Duties 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.


PossessionPossession

• 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.


EvictionEviction• 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.


Use of the PremisesUse 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.


Maintaining the PremisesMaintaining 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).

http://www.findlaw.com/11stategov/wl/wlca.html


Warranty of HabitabilityWarranty 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).

http://www.findlaw.com/casecode/courts/8th.html

http://www.findlaw.com/casecode/courts/8th.html


Tenant’s RemediesTenant’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.


RentRent• 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.


RentRent [2][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.


Landlord’s RemediesLandlord’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.


§§ 3: Liability For 3: Liability For Injuries on the PremisesInjuries 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).


Liability for Injuries Liability for Injuries [2][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.


Liability For InjuriesLiability For Injuries [3] [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.


§§ 4: Transferring Rights 4: Transferring Rights to Leased Propertyto 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.


Transferring RightsTransferring Rights [2] [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.


§§ 5: Termination or 5: Termination or Renewal of the LeaseRenewal 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.


Termination of LeaseTermination of Lease [2][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.


Renewal of the LeaseRenewal 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.


Focus on Ethics-PropertyFocus 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.


Law on the WebLaw on the Web

• Center for Environment and Land Use Law.

• Legal Research Exercise on the Web.

http://www.nyu.edu/pages/elc

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Chapter 48: Landlord-Tenant Relationships

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