Chapter 48 Landlord-Tenant Relationships

1. Chapter 48Landlord-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.

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.

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.

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. Case 48.1: Decade 80-I v. PDQ Food Stores(Landlord’s Obligations) • FACTS: • PDQ entered into a lease with Decade 80‑I. • PDQ agreed to pay extra for a well‑maintained parking lot. If the condition continued for more than thirty days after the landlord had notice, the tenant could terminate the lease. • When potholes developed, PDQ gave Decade notice. • Three weeks later, Decade responded that it would fix the potholes later. PDQ terminated the lease. • Decade sued PDQ seeking rent on the balance of the original term. • The court ruled in favor of PDQ and Decade appealed.

27. Case 48.1: Decade 80-I v. PDQ Food Stores(Landlord’s Obligations) • HELD:AFFIRMED FOR PDQ. • The maintenance provision in the lease was part of the bargain between the parties. • The landlord’s failure to repair gave the tenant the right to get out of the lease without proving that the failure substantially damaged the tenant’s business interests. “To rule otherwise would render largely illusory any specific agreement that the owner of commercial property keep the parking lot well maintained 

28. Case 48.2: Schiernbeck v. Davis(Implied Warranty of Habitability) • FACTS: • Schiernbeck rented a house from Davis. A month after moving into the house, Schiernbeck noticed her smoke detector was missing. Schiernbeck claimed that she told Clark Davis about the missing detector. Davis did not remember the conversation. • When a fire in the house severely injured Schiernbeck, she filed a suit in a federal district court against Davis, alleging negligence and breach of contract for failing to provide a detector. • Davis claimed they had no duty to install a detector in a rental house.

29. Case 48.2: Schiernbeck v. Davis(Implied Warranty of Habitability) • HELD: FOR DAVIS. • The issue was whether the installation of a smoke detector fell within the language of the statute requiring leased premises to be “in reasonable repair and fit for human habitation.” • The court said no, concluding that “when reading the entire definition, the term ‘repair’ does not encompass replacing a missing smoke detector.” • As for the “fit for human habitation” requirement, the court stated that a lack of running water, heat, or electricity made a place unfit, while a lack of smoke detectors did not.

30. Case 48.3: Johnson County v. Endsley(Landlord’s Liability) • FACTS: • Johnson County owns an arena that it rented for a one-day barrel racing competition. During the competition, Endsley, a spectator, suffered a serious eye injury when he was struck by a rock that was kicked into the air by a horse. • Endsley sued Johnson alleging that rocks on the arena’s dirt floor created an unreasonably dangerous condition. • The court entered a summary judgment in favor of the Posse, and Endsley appealed. An intermediate state appellate court reversed, and the Posse appealed.

31. Case 48.3: Johnson County v. Endsley(Landlord’s Liability) • HELD: AFFIRMED. FOR JOHNSON COUNTY. • “The natural state of dirt, that it may be slippery when wet or may contain small rocks, can present a hazard under the right conditions, but not unreasonably so. Otherwise, a landlord would be an insurer against all injury to a tenant’s [invitees].”