WHEN YOU RENT AN APARTMENT OR A HOUSE, YOU AND YOUR LANDLORD enter into a kind of contract called a lease (or a rental agreement). Although a lease has the essential aspects of the contract we talked about in Chapter 2, the specific terms you’ll find are typically regulated by state (and occasionally city) law. Because of this, most landlords use pre-formatted rental agreements tailored for specific communities. These are available via the Internet and sold in office supply stores. Although these standard forms honor local lease requirements, they are invariably designed to protect the landlord’s interests. For starters, they leave a prospective tenant little or no opportunity to make changes. The “take it or leave it” attitude will be even stronger during periods when your community has a shortage of available rental units.
I call this hypothetical the Rental on Elm Street . . . and Yes!, it is a horror story—but only because landlord/tenant issues got out of hand and escalated into monster problems. It didn’t have to happen that way. Landlords and tenants have been battling for millennia—too often because they start their relationship as near-adversaries, anticipating fights to come. The far better approach—as many wise tenants and landlords have found out—is to understand each others’ rights and duties under everyday law.
Our story begins (cue the scary music) when a married couple named Les and Penny Wise decided to rent an apartment. They found what they thought was an ideal apartment on Elm Street in a building owned and managed by Evan Slicker.
Every horror flick has a scene when one of the characters—known among horror movie fans as the stupid victim—does something incredibly foolish, like walking down a dark staircase into a pitch-black basement where everyone knows the killer is hiding behind the furnace. Well . . . Les and Penny Wise did something just as foolish: They signed a lease they didn’t understand.
A residential rental agreement—simply a lease to most people—is a legally binding contract that describes the property being rented, names the landlord and tenant, and specifies the terms of the rental—including the length of the rental period and the amount of rent—and also details the essential rights and responsibilities of both landlord and tenant.
Alas, the lease that Evan Slicker handed to the Wises was written in complex legalese. Moreover, the “original” that Les and Penny signed was a fifth-generation photocopy that was barely legible—many clauses they tried to read were indecipherable.
As a result, the Wises never noticed that the document was chock full of things they had to do—and couldn’t do—as tenants.
The lion’s share of residential leases fall into one of two categories that depends on the kind of rental tenancy the lease creates. Tenancy in a rental context (see Chapter 9 for tenancies in land ownership) is the possession and use of real estate owned by another party. These are the two common tenancies:
1. Fixed-term tenancy (also called a tenancy for years) lasts for a definite period of time—anything from a week to ninety-nine years. The rent—typically payable each month—remains the same for the duration of the lease (unless the parties agree to other arrangements). Neither party has to give notification at the end of the lease. The lease expires automatically at the end of the definite time period.
2. Periodic tenancy (also called a month-to-month lease) continues from period to period—renewing automatically for another period—until either the landlord or tenant gives timely notice to end the lease. The most common periodic leases are by the month and by the week. If the lease document doesn’t define timely notice, it’s typically thirty days for a by-the-month lease and seven days for a by-the-week lease. The landlord can increase the rent for future periods any time, upon the same timely notice as a lease cancellation.
The Wises signed a two-year—twenty-four month—fixed-term lease. They wanted a shorter lease, but Elm Street is a highly desirable neighborhood and Evan Slicker wasn’t willing to negotiate a shorter term.
Most states require that a fixed-term lease for longer than one year be in writing. Short-term leases and by-the-month or by-the-week leases can be oral—and are as binding as written leases. But the terms of an oral agreement are always subject to “I said/You said” disagreements if disputes develop about duties and responsibilities—and oral leases can be difficult to enforce in court. Consequently, all leases should be in writing.
Most landlords use pre-prepared standard lease forms, which, as I noted earlier, usually favor landlords. This makes it even more important for a tenant to read the document carefully and understand its different clauses and terms. Even when a landlord offers a “take it or leave it” lease, the tenant who takes the time to peruse the document will understand from the get-go what the landlord has committed to do—and not to do.
Few tenants take advantage of the opportunities they have to gain an early familiarity with the kind of lease they’ll likely be offered. Standard leases for many parts of the United States can be read for free on the Internet. Use a search engine to look for “residential lease [city] [state].” You’re likely to find several that meet local requirements. Chances are good that your future landlord will use one of them.
DISCRIMINATION IN RENTING
Surprise: The Condition of the Wise’s New Apartment
Les Wise distinctly remembered reading the following phrase in the lease: “Tenants acknowledge that the rental unit he and she are renting is in good condition without damage or problems.” This recitation was certainly true of the model apartment they saw before the Wises signed the lease. Unfortunately, their apartment proved to be full of minor problems—and a few serious deficiencies.
The lesson: The Wises should have conducted a walk-through of the apartment before signing the lease—and check systems, appliances, doors, windows, and decor items.
WHERE’S MY PAINTBRUSH?
Any defects discovered during a walk-through—from minor cosmetic problems to malfunctioning appliances—should be presented to the landlord in writing. The tenant should ask for a signed copy in return—along with a promise (ideally also in writing) that serious defects will be repaired within a reasonable period of time. Tenants who’ve lived through disputes with landlords recommend taking photos of all existing defects (an easy job with a digital camera or a cell phone with a built-in camera). A picture can be worth much more than a thousand words when shown to a judge.
Surprise: Some Utilities Not Included
The ad in the paper said “utilities included.” Had Les and Penny read the lease that Evan Slicker—wearing a big smile—slid across the desktop, they would have discovered that water, sewer, and trash collection are included, but that gas or electricity are specifically excluded from the list of provided utilities.
Different landlords have different policies; so it’s wise for the tenant to request that the lease clarify what’s included in the rent. An assigned parking space in the complex’s garage? Use of the pool and gym room? Use of washers and dryers? A central office to receive packages delivered during the day?
Surprise: Some Rights Are Built
into Every Lease
Not all the “news” was bad for Les and Penny Wise. Two important benefits are built into a lease by the action of state law even though they’re not explicitly mentioned in the document: The right of quiet enjoyment and the warranty of habitability.
The Right of Quiet Enjoyment
We’re talking here about legal quiet—the right of a tenant to use his or her rental property without interferences that deprive the tenant of expectations under the lease (and probably reduce its value). For example:
A landlord rents the same apartment to two tenants (both can complain that their rights of quiet enjoyment have been violated).
A landlord renovates the apartments on either side of the tenant’s unit, filling the air with dirt and dust, the smell of paint, and the sounds of heavy machinery.
A neighbor’s vicious dog—though on a chain—represents a constant threat every time the tenant enters or leaves the apartment.
A landlord places a dumpster next to the tenant’s apartment—causing foul odors and noise at all hours of the day and night.
A landlord tries to drive a tenant out of his or her apartment by various kinds of intimidation.
Courts have long held that a landlord covenants (promises) quiet enjoyment to a tenant. A breach of quiet enjoyment must be more than a minor annoyance—it must be a serious inconvenience that fundamentally interferes with the tenant’s use of the rental property.
WHEN A LANDLORD FACES FORECLOSURE
Warranty of Habitability
In most states, every lease has an implied warranty of habitability—the landlord’s presumed promise that the rental unit will remain fit for human beings to live in during the life of the lease. This is not luxury living—or an aesthetically pleasing residence—but rather a minimum standard for decent, safe, sanitary housing.
The definition of habitability varies from state to state. Some are broad and include such factors as no torn or loose carpeting, faucets that don’t leak, and air conditioning that works. In other states, a rental unit must merely substantially comply with those building and safety code standards that materially affect tenants’ health and safety. This can be little more than an apartment that’s free of vermin, does not pose any fire or health hazards, and has a working toilet.
The landlord is responsible for making repairs necessary to bring a rental unit up to habitability standards when he or she knows about the deficiency. This requires that the tenant notify the landlord about nonobvious defects. In turn, a tenant is required to take reasonable care of the rental unit and to keep it clean. Tenants are generally responsible for damage caused by their neglect or abuse.
Surprise: An Expensive Pet Policy
On the day Les and Penny moved into their apartment, Evan Slicker dropped by to announce the Wises’ rent had just increased by $50 a month. Because they hadn’t read the lease carefully, they hadn’t noticed a clause that required “tenant to pay $50 ‘small pet fee’ for any month in which a dog or cat resides in the apartment for more than eight hours.” Another clause explained that no pets are permitted in the apartment without the landlord’s written consent, but that such consent would be given—on a month-by-month basis for “small cats and dogs” upon payment of a “small-pet fee.”
Is it legal? Yes—if a landlord charges pet rent to all tenants with small pets. Landlords justify the additional fee by arguing that maintenance and management costs increase when tenants’ own pets. The Wises didn’t think that made much sense—few tenants do—but they agreed to pay a small-pet fee.
Surprise: Exorbitant Late Fees
The Wises also agreed to add a hefty late fee if they don’t pay the rent on time. Their lease calls for a 15-percent fee after a five-day grace period. Reasonable late fees are generally enforceable—after all, legislatures and courts recognize that landlords need to be paid on time and that a late fee provides tenants with an incentive to honor their financial duties under the lease (and also covers the additional costs of dealing with late-arriving payments). Some states have statutory definitions of reasonable—for example, North Carolina allows a maximum late fee that is the greater of either $15 or 5 percent of the rental payment.
However, the late fees called for in many rental leases have no relation to the landlord’s real costs and effectively punish the tenant. Although they are unenforceable in court, the landlord is likely to withdraw unpaid late charges from the tenant’s security deposit—or even threaten to evict the tenant. Consequently, most tenants simply pay the exorbitant fees and avoid the tumult of a court battle with their landlord.
Surprise: A Promise to Pay Evan’s Legal Fees
One of the standard clauses in the lease that the Wises signed—a clause found in most rental leases—makes the tenant responsible for the landlord’s attorney’s fees if Evan has to take legal action should the tenant default (fail to comply with their duties under the lease). Many states limit the clause: The landlord can recover attorney’s fees only if he or she wins in court. Other states impose reciprocity to an attorney-fees clause: The landlord must pay for the tenant’s lawyer if the tenants win a lawsuit brought by the landlord.
Surprise: Too Much “Right of Entry”
Every rental lease gives a landlord the right to enter a rented dwelling upon reasonable notice to make inspections and repairs—and typically also to show the apartment to prospective tenants at the end of the lease. A landlord can enter the apartment without notice in the event of an emergency (say, a burst pipe). However, a landlord who abuses his right of entry by repeatedly entering at unreasonable times, without reasonable notice, and without a valid emergency can be sued for trespass—or for breaching the tenant’s right of quiet enjoyment (see above).
Reasonable notice is often twenty-four to forty-eight hours, although some states allow the landlord to specify required notice time in a lease. Les and Penny Wise soon discovered that Evan Slicker had defined reasonable notice as a mere eight hours—and that state law allowed him to do so.
Even worse, Evan had inserted the following sentence: “Tenants agree that ‘convenient time’ (‘reasonable time’) to enter their apartment shall be any hour between 7:00 a.m. and 11:00 p.m.” This too passed legal muster, because state law allowed the parties to a lease to decide the meaning of convenient.
Surprise: The Wises Are Responsible for Many “Routine” Repairs
Landlords are generally responsible for maintaining the premises and making necessary repairs—fixtures, heating equipment, air conditioning, and other major systems. A landlord also has the responsibility to repair appliances that are “included” in the lease.
I emphasized included because Evan Slicker placed the following sentence in the lease that the Wises signed: “Tenants acknowledge that the washing machine and dryer currently in the apartment are not ‘included’ appliances that the landlord must maintain. Tenants are free to use both appliances and to keep them in working order, as they wish.”
A few clauses below, the lease also provided: “Tenants acknowledge that they have received a 10 percent reduction from the usual rent charged for their apartment. In exchange for this reduction in rent, tenants agree to maintain easily accessible plumbing and electrical devices, including faucets, flush toilet mechanisms, light switches, light-bulb sockets in lighting fixtures, and all light bulbs. At the end of the lease period, tenants agree to professionally clean the carpeting in the apartment at their expense.”
Can the Wises challenge these clauses? Probably not.
Even in a community with tenant-friendly laws and courts, people are allowed to set reasonable terms in a residential lease. There’s nothing unreasonable about excluding nonessential appliances or trading lower rent payments for certain maintenance responsibilities. Courts are unsympathetic to people who don’t take the time to read the documents they sign.
Evan Slicker’s lease affirmed—as most leases do—that the landlord will make repairs that are the responsibility of the landlord within a reasonable period of time. The tenant is responsible for notifying the landlord that repairs are necessary. What reasonable means depends on the facts of the situation. A broken water line, a failed heating system in winter, or a faulty air conditioner in the height of summer demands quicker action from the landlord than a jammed garbage disposal.
TENANT-CAUSED DAMAGE
Surprise: A Festival of Breakdowns
In quick succession, the roof began to leak, the air conditioning stopped working (it was summertime), and an infestation of ants made life difficult—and itchy. The Wises notified Evan Slicker per the requirements of the lease (at this point in their tenancy, Les and Penny had read the document so many times that they almost knew the terms by heart). Unfortunately, Evan replied with a long list of excuses, but no repair people. The Wises wondered if they could force Evan to live up to his responsibilities under the lease by refusing to pay rent.
RENT STRIKES
More than a few tenants reach this point in their relationship with their landlords—but as a general principle, a tenant’s duty to pay rent flows from the lease he or she signed and continues even if the landlord fails to meet his or her maintenance obligations under the lease. However, this general principle has been modified by law in many states, giving unhappy tenants two powerful weapons to counteract a nonresponsive landlord:
1. Repair and deduct statutes (also called self-help for minor defects laws) empower a tenant to redirect a rent payment to pay for essential minor repairs that a landlord ignores. But the tenant typically must notify the landlord of his or her intention to deduct rent money to pay for a repair. There are typically limits on the amount of rent a tenant can deduct (often a maximum of one month’s rent); most laws require the work to be done by a licensed contractor; and the landlord must have a reasonable time (which obviously will depend on the nature of the problem) to respond to the notice.
2. Termination of the rental agreement laws empower a tenant to terminate a rental lease in the event that the landlord is in material noncompliance with the terms of the lease. Failure to maintain the rental unit in a habitable condition qualifies as material noncompliance. Statutes generally require a tenant to give the landlord adequate notice of termination—typically fourteen days—unless the noncompliance impacts health and safety (violations here will shorten the notice requirements).
If a landlord wrongfully ignores his or her responsibility to supply such essentials as heat, hot water, air conditioning (in some locations), water, or working toilets, some states allow a tenant to move to reasonable substitute housing until the problem is corrected—and redirect rent payments to cover the cost of the substitute apartment.
Also, a tenant can sue the landlord to recover the diminished value of the rental because of the landlord’s failure to maintain the apartment or because a problem (such as a leaky roof) caused damage to the tenant’s personal property.
Les and Penny Wise—tired of dealing with Evan Slicker—decided to terminate the rental agreement. Evan didn’t challenge their decision, but when the time came to return their security deposit he took . . . forever.
UNFAIR AND DECEPTIVE TRADE PRACTICES
Surprise: How Do We Get Our
Security Deposit Back?
In most states, a landlord can request a security deposit to cover such costs as abnormal wear and tear on the apartment, unpaid rent, late charges, and actual damages caused by the tenant’s breach of the lease. Many states set statutory limits to the amount a landlord can collect as a security deposit (typically one and one-half times or two times the monthly rent). But, a landlord may also be able to collect other front-end fees and deposits: application fee, cleaning fee, pet damage deposit, key deposit, and an advance rent deposit.
The lease that Les and Penny Wise signed left the decision of what is normal wear and tear to the landlord’s discretion and determination. Simply put, it’s what Evan Slicker says it is. Not surprisingly, he compiled a list of damaged items that totaled the full amount of their deposit. The Wises have the right to contest his decision to keep their whole deposit, but they have little evidence to present to a small claims judge because they never made an initial walk-through or documented the apartment’s existing problems.
Normal wear and tear is a vague concept that can mean many things to many people. Bare patches on an old carpet may be the result of normal wear and tear, but they can also be caused by heavy, inappropriately placed furniture. On the other hand, most people recognize that certain kinds of damage don’t count as normal wear and tear:
Gouges in walls
Pet stains on carpets
Burn marks on counter tops
Broken windows and glass door panels
Lost keys that force the landlord to rekey the locks
Clogged drains caused by misuse of sinks or toilets
Infestations of fleas caused by tenants’ pets
Excessive mildew accumulation on bathroom tiles (the tenant has a responsibility to keep the apartment reasonably clean). Note that some leases try to make tenants responsible for any mold accumulation in the apartment, which can be exceedingly expensive to repair.
In many states, security deposits must be kept in a segregated bank account, with interest accruing to the benefit of the tenant. A landlord generally has a reasonable period of time to return the deposit and is required to account for any sums subtracted from the deposit at the end of the lease. A landlord acting in bad faith can be liable for the full return of the deposit and (sometimes) punitive damages.
Other Things Worth Knowing
about Renting a Home
Some leases include a confession of judgment clause—a bewildering provision that many people have never heard of, and few non-lawyers understand. Simply put, the clause takes away the tenant’s right to contest (fight in court) any legal claim that the landlord makes under the lease.
By confessing judgment, the tenant pleads guilty to any civil claim that the landlord may make—from failure to pay rent, to doing excessive damage—regardless of the actual facts of the case. The clause was once an easy way for a landlord to evict a tenant without going through a formal eviction procedure. Many states have banned confession of judgment clauses in residential leases, although some older standard form leases in use may still have them.
A tenant should be wary of signing a lease that requires confession of judgment in any state where the clause is still enforceable.
Unless the terms of a written lease provide otherwise, terminating a month-to-month lease requires thirty days’ notice by either the landlord or tenant. There is one exception to this general rule: If the tenant fails to pay rent, the landlord can ask the tenant to vacate without any further notice. However, if the tenant refuses to leave, the landlord must go through the state’s usual eviction procedures.
A landlord and tenant can mutually agree to terminate a tenancy for years at any time. This is called surrendering the lease. If more than one year of tenancy remains on the lease, the surrender must be agreed to in writing. If the landlord refuses to accept the tenant’s surrender, the tenant can abandon the apartment by moving out. At that point, the landlord can do two things:
Accept the tenant’s surrender of the apartment, thus terminating the lease. The tenant remains obligated to pay any past due rent and the cost of any damages that exceed the security deposit.
Make a good-faith attempt to re-rent the apartment. The tenant remains obligated for any months in which the apartment is empty, and for any shortfall in rent for the balance of the lease if the landlord is forced to re-rent the apartment at a lower monthly rental than in the original lease.
Most residential leases prohibit a tenant from subleasing a rental unit without the landlord’s written consent. The obvious reason is that the landlord wants a say in who’s living in—and caring for—an apartment.
Legally speaking, a sublease transfers part of a lease to a third party. For example, a sublease might convey the right to possess an apartment for three months of a twenty-four-month lease. By contrast, an assignment transfers all the rights and responsibilities of the lease to a third party.
For example, assume that one year into their lease, the Wises decided to move. They tried to assign their lease (which still had a year to run) to another person who would take over their rights and responsibilities under the lease. (They quickly discovered that Evan Slicker’s lease also prohibited assignments without his permission.)
Keep in mind that a tenant who assigns or subleases a rental unit now becomes a landlord in his or her own right—and needs the protection of a written lease that includes the right of entry and makes provision for a security deposit.
When a Landlord Wants the Tenant Out
Let’s turn the hypothetical around and assume that Evan grew tired of the Wises as tenants. Broadly speaking, a landlord can’t interfere with a tenant’s right of quiet enjoyment (see above), deny a tenant access to the apartment, or turn off the tenant’s utilities if the tenant is living up to his or her responsibilities—and is paying rent on time. In many states, an illegal lockout (unlawful eviction) or other bad-faith behavior by a landlord virtually invites a judge to award punitive damages to the tenants.
If the Wises had behaved badly—say, by disturbing other tenants or by creating a fire or health hazard—or had repeatedly not paid their rent on time, Evan Slicker could have begun a legal proceeding to evict the Wises. In some parts of the country, eviction is a long, drawn-out procedure. But most states have a streamlined process—called summary eviction or an unlawful detainer action—that can remove a tenant in less than thirty days.