Landlord-Tenant Law

Chapter 1, What is Property? y Freedom to use (zoning + nuisance), exclude (licensees, easements, tenancies, concurrent estates), transfer (sell), and permanence. Chapter 15, Introduction to Landlord-Tenant Law Generally: Title=Ownership, Possession=physical control y Commercial -> Tenant responsible to obtain possession y Residential -> L responsible (best position, economic efficiency, social justice) y Privity of K (E129-133) and Privity of Estate (129-133) Chapter 16, Creation of the Tenancy Hannan v. Dusch, pp. 438-441. (E121-127) y American rule v English rule The Lease pp. 428-431 (E129) y Contractual nature of lease=Conveyance & Contract; Form leases + bargaining power Fair housing statute, and problems, 431-438 (E158, 294) y Selecting tenants and sales, Fair Housing Act, discrimination based on gender, sex, Chapter 17, Condition of Leased Premises Reste Realty Corp. v. Cooper pp. 482-503. (E148) y Substantial interference with tenant use and enjoyment; flooding Hilder v. St. Peter, pp. 482-503. (E150-152) y Implied warranty of habitability (IWH); Tenant remedies for L breach of IWH Chapter 18, Transfer of Leasehold Interest Kendall v. Ernest Pestana, pp. 450-459 (E135-136) y Lease provisions restricting assignment or sublease Chapter 19, Termination of the Tenancy Berg v. Wiley, pp. 460-469 (E143) y Landlord remedies; Remedy derived from statute and ComLaw; Landlord self-help Sommer v. Kridel, pp. 469-481; pp. 427-28 (E145-146) y Landlord duty to mitigate damages caused by abandonment Chicago Board of Realtors v. City of Chicago, pp. 508-515 (E157) y Bargaining power; Affordable housing.

1. Landlord Tenant
Property has (exceptions noted): 1. 2. 3. 4. 5. I. Freedom of action (ex. zoning, nuisance, covenants, takings [home owner s assoc.]) Tangibility (ex. intellectual property, intangible property) Permanence (ex. future interest) Exclusivity ( concurrent interest, tenancies) Power to exclude (easements, tenancies, takings) Historical Background a. Feudal system: King Landlord Tenant b. Common law approach: lease as conveyance i. L transferred right of possession to the tenant; governed by property, not contract law ii. Favored the landlord prior to reforms in the 1970s 1. After transfer, O only must refrain from interfering with T s use and enjoyment; no further duty 2. Tenant had sole duty to repair and maintain structures on the premises 3. Had to pay rent even if structures were destroyed 4. Required to continue the tenancy and pay rent even if landlord breached lease 5. Landlord had no duty to mitigate damages if tenant abandoned c. Modern law: i. Agriculture Urban ii. Estate Service or product iii. Housing as individual concern Housing as social problem iv. Conveyance Contract d. Residential leases (renting a home) enjoy greater protections now from judicial decisions and statutes; inequality in bargaining power led courts to interpret terms in favor of residential tenants. But in commercial leases (anything but a home), traditional pro-landlord still e. Property Model: transfers a bundle of rights, and the dissolution of the relationship f. Contracts Model: Much more based on relationships, looks at things as if they were an ongoing set of understandings Creation of the Tenancy -> Hannan v. Dusch, pp. 438-441. (E121-127) a. Categories of estates LOOK AT INTENT TO DETERMINE i. Term of years tenancy 1. An advance agreement that will continue for a designated period of time 2. Expires: when agreed period ends. a. If year to year, 6 month notice is generally required. b. Minority: Unless no reason for year to year, converts to month to month, which requires 30 days notice. ii. Periodic tenancy 1. Lasts for initial fixed period, automatically continues for additional equal periods until either landlord or tenant terminates the tenancy by giving advance notice. 2. Classic example is month-to-month lease 3. Expires: at common law by oral or written notice, state statutes generally by 30 days notice iii. Tenancy at will 1. No fixed duration, as long as landlord and tenant desire. Most arise by implication now. Either party may end tenancy. 2. Expires: at common law whenever landlord or tenant chose, state statutes generally by 30 days notice

II.

iv. Tenancy at sufferance 1. Not a true estate, but arises when a person in rightful possession of the land wrongfully continues after the right ends. Usually arises when holdover tenant 2. Expires: L has sole discretion to decide to evict or hold tenant to a new tenancy, and can usually recover damages for the period of wrongful occupancy. Criticism is that this tends to be unfair to the tenant v. Tenancy on good behavior 1. By statute, move in and keep if not violate lease terms III. Entering into the lease agreement a. Statute of Frauds: lease for a term of more than one year must be in writing, set forth basic terms (parties, description of premises, term, rent) and must be signed b. L-T Bargaining Power certain provisions unenforceable or even illegal (i.e. confession of judgment if dispute, T agree plead guilty; L liable if put in), issues of certainty, risk allocation (asymmetric info, usu can t negotiate), rent acceleration (any violation would permit L to demand all remaining rent), or Eviction notice of less than 30 days. i. T can Negotiate rent, term, pets. ii. Policy: Government could make a STANDARD LEASE -> Require all modifications handwritten. c. Security deposits i. To protect tenants we can: 1. Mandate arbitration, L keep deposit in separate account or reduce amt, penalties for L. ii. security against vacating without notice and leaving the unit dirty and damaged and rent unpaid iii. 2/3 of states have regulatory statutes, usual provisions: limiting amount, requiring it put in trust account, interest paid, permissible deductions do not include wear and tear, refund within specified time period d. Delivering possession i. American Rule (minority) 1. L only obligated to deliver legal right when term begins, no duty to oust trespasser or holdover, or to even get in 2. Based on theory of contract, landlord has not warranted against wrongful acts of third parties 3. Less economic waste; encourages continuous leasing, as property won t lay dormant ii. English Rule 1. L must deliver actual possession in addition to legal right 2. Basis of obligation is implied covenant in the lease that premises will be vacant when term starts. 3. L-T relationship fundamentally unequal, L has superior ability to ensure the property is vacant 4. If land-locked by hostile neighbors, L fails to deliver actual possession. e. Applied: Hannan v. Dusch (1930, p459) i. Facts: tenant entering into 15 year commercial lease, earlier tenant still in possession ii. Holding: affirmed for D, upholding application of American Rule (attn: minority view!) Landlord has no obligation to make sure that the property is clear and ready for move in. iii. Reasoning: No express covenant giving landlord responsibility. 1. American rule based on view L should not be responsible for 3rd party. 2. English rule based on view L in better position, supports intent of parties, and common sense to expect possession. a. English also supports policy of efficiency and fairness. Assignments and Subleasing a. Key concepts i. Privity of contract: relationship between two parties who enter into contract to adhere to all terms, liable if breach. Privity of contract always stays until the lease is done, even if A re

IV.

executes lease or assignment, unless novation (L-T formal agree T not on hook) which repeals contract. ii. Privity of estate: One per level, Always party in possession! (can have two Privity of estate-> LT AND TS) Always less than Privity of K. Relationship between two parties re conveyance of the estate in land, rights/duties obligated to perform that run with the land as real covenants/equitable servitudes; right to sue if covenants of lease breached; portion of K that deal with land. iii. For a covenant to be binding: original parties must intend successors to be bound, must touch and concern the land (affect use and enjoyment), assignee must have notice of covenant before acquiring the interest b. Assignment i. T must transfer the ENTIRE remaining term. (If only a portion of the property is transferred for the entire term, then Partial Assignment) ii. Transfer of all of the remaining lease, A takes on all or only part of T s property obligations (i.e. can pay less rent) iii. Only bound by terms that touch and concern the land (most not have subset, but sometimes extra like T give massages) iv. Assignee is liable to the landlord, and sometimes to the tenant as well, depends on the agreements. v. L-T-A triangle 1. L/T: privity of K (no longer have estate) 2. T/A: privity of K 3. L/A: privity of estate (only with the very last A) vi. Partial assignment: transfer for rest of term, but not entire interest (eg 50 acres of the 100 you have) vii. T can sue for indemnity if he has to pay for A s mistakes. c. Sublease i. Right of re-entry or termination does NOT create a sublease. ii. Transfer of PART OF remaining term. iii. Terms are negotiated by the tenant and subtenant iv. Subtenant can t have more rights than T Hypo 1. Landlord has Privity of K with T and Privity of Estate with S. If Sublessor signs K with L, or signs same contract as L-T, L-S have privity of K. Landlord | Tenant | Sublessor Hypo 2. Landlord has Privity of K with T1 and Privity of Estate with T3. (and T2, T3 if they agree to assume all the covenants in the lease") Landlord | Tenant1 --- Tenant2 --- Tenant3 v. L-T-S triangle (think as two L/T relationships) 1. L/T: privity of K, estate 2. T/S: privity of K, estate

V.

3. L/S: privity of K (only if separate agreement) or 3P beneficiary law (a type of K, i.e. if T say S abide by all provisions of lease) vi. S obligations: 1. Sublease doesn t in theory affect L-T relationship, no legal liability connection in theory S/L. (S insulate themselves from liabiity) 2. Exceptions: if T s covenants in original lease bind successors in equitable servitudes, lessor will be able to enforce them against S, privity not required for burden to run to successors. L may sue under third party beneficiary. d. Questions to ask i. Who is liable to whom? ii. What are the parties obligations? e. HYPO: L/T relationship. T assigns to A. A stops paying rent. L can sue T under privity of contract, and A under privity of estate. f. HYPO: L/T relationship. T sublets to S. S stops paying rent. L can sue T under privity of estate and privity of contract, but cannot sue S at all. g. HYPO: L/T relationship. T assigns to A1. A1 assigns to A2. L can sue T under privity of contract. L can sue A2 under privity of estate. A1 gets off scott free. h. Assignment and Sublease compared i. How do you know which one it is? 1. majority test: period of time where the transfer is made. Whole transfer is a assignment, partial is a sublet. 2. minority test: intent of parties ii. Why does it matter? S generally can t be sued by L (where A can) BUT 1. S can be required to comply with certain general restrictions on T s lease (eg, no building a fence) 2. S is subject to eviction if T not in compliance with lease 3. S can sometimes be sued directly for rent iii. Should we abolish assignment/sublease distinction? 1. yes: contract law fairness provides that transferee accepting benefits of contract is impliedly bound to perform obligations. sublease may pose trap for unwary, inconsistent with expectations of parties. 2. no: freedom of contract; sophisticated transferee should determine liability it wishes to incur Right to assign or sublease a. L may sue S; 3rd party beneficiary doctrine (majority rule). L cannot terminate T-S, must terminate L-T agreement. b. L may sue A; Privity of estate (if A did not sign K with L) c. This is the default assumed right unless specified provision against it d. Two types of restrictions i. flat prohibition ii. landlord consent 1. sole discretion: arbitrary denial permitted; can deny for any reason whatsoever; issues of limitations on alienation, but clauses still upheld 2. reasonable denial allowed: can deny on objective, commercially reasonable basis considering factors like financial responsibility, nature of new use, suitability of new use, legality of new use, need for alterations to the premises, whether use will compete with L business or existing tenants; desire to obtain higher rent for the premises is not valid basis for refusal. 3. no standard/silent: traditionally interpreted as sole discretion, emerging modern trend to reasonable e. L can prevent assignment with Contract Language: i. Prohibit assignment -> L s absolute discretion

f.

Reasonable consent -> Can permit L to deny assignment because T is already a good tenant. (L doesn t want to risk T1; T could stop paying rent to force issue?) iii. No language on consent -> Tenant can assign however they want. iv. Percentage lease (for store profit) -> T has incredible discretion. v. Can church prevent assignment to abortion provider? P458 1B (not if A can show L performs or supports abortions) What if there is a clause that requires landlord s consent for assignment? i. Majority: L may be arbitrary! 1. L should have freedom to decide who to lease to. 2. The term is unambiguous. 3. Stare decisis. 4. L should benefit from the bargain. ii. Minority: L must still be commercially reasonable 1. Conveyance, alienability. 2. K implies fair dealing and good faith. 3. L has good economic protection. (Absent novation, T1 still Privity of K) 4. L s ownership is protected.

ii.

g. Applied: Kendall v. Pestana (p473) i. Q: Can landlord arbitrarily object to a commercial assignment? No. Must be commercially reasonable objection. ii. Facts: provision in lease of commercial hangar space that T may not assign or sublet without L s consent, but no standard whether consent may be unreasonably withheld iii. Holding: adopts rising minority view, may withhold consent only for commercially reasonable objection iv. Reasoning: 1. For T because a. K implies fair dealing b. Restraints on alienation are bad (economic efficiency, also US land speculation and more dynamic to promote investment, people not willing put money in if can t get out) 2. L argues a. should be able to look to T b. T not negotiate for it c. stare decisis but all knew changing at time d. right to get higher value of property vs. T right to get benefit of bargain but circular h. Should we extend Kendall to residential leases? consider relative reliability, sophistication of parties, non-commercial factors that will involve L, commercial justifications for alienability not as strong in residential. Kendall has not been codified by the California Legislature. VI. Landlord s Duty to Maintain Premises a. Common law: caveat lessee tilting duty toward tenant unless lease provision assigned repair to L, and even in that case T could not move out, only sue L for damages b. Trend: toward tilting duty toward L in response to the substandard housing old common law fostered c. Quiet Enjoyment Narrow legal right to possession and can t do things make T hard to do what want with land; modern extend L affirmative obligation to correct. (See Reste) i. Considerations for quiet enjoyment (Which acts as Constructive Eviction) 1. Incompatible with use 2. Fundamental 3. Independent covenants 4. Accepted conditions 5. Omission rather than an act

6. Long delay in seeking to quit lease ii. Remedies for violating Quiet Enjoyment 1. Terminate and sue for damages 2. Stay in place and sue for reduction in value. Better if: a. Adequate notice b. Act promptly d. Landlord not automatically liable for 3rd party interference with Quiet Enjoyment i. Look at lease! Noise controlled or regulated? Smoke entering apt->maybe. e. Constructive eviction: Condition that L control over that substantially interferes with tenant s beneficial use and enjoyment. T may vacate, terminate lease, and no liability for future rent (there s also partial constructive eviction, like 1 floor flood, most not enough, some ok); LL must have CLEAR duty, so even if burglary next door, not work! i. no new duty on L, rather gives T a remedy for L breach of existing duty ii. Elements 1. Wrongful conduct: any affirmative act, or omission flowing from lease, statutory duty, or limited minimal repair duties; can be act of third party if L control (i.e. neighbors loud noise) 2. Substantial interference: major enough to render dwelling uninhabitable, but not necessarily totally useless or permanent iii. Procedure: T must give notice to L, reasonable time to correct it, then must vacate premises. iv. Remedies 1. Terminate lease and sue for damages a. Special damages moving expenses b. Difference between FMV and old rent (i.e. find higher rent place, sue for difference) 2. Remain in possession and sue for damages (CL rule, pay rent but try to get some back) 3. NEVER collect back rent v. Applied: Reste Realty v. Cooper (p509) 1. Facts: D leased basement of office for jewelry firm, whenever it rained it flooded. L never fixed, and D vacated. Successor L sued for rent. 2. Holding: Concluded there had been constructive eviction, rejecting argument that permanent interference was required, and L had breached duty to repair 3. Tenant should have demanded effective remedy to flooding. a. f. Implied Warranty of Habitability (Hilder v. St Peter) i. L has burden to repair regardless of lease provisions; idea that housing is commodity/package of services, broader in everything for health and welfare. ii. Arguments for IWOH: 1. pro: typical tenant poor/not skilled in repair/looking for residential housing, and lacks negotiation skills or opportunity to negotiate, public policy adequate housing 2. anti: reduces quantity of affordable housing because compliance with warranty imposes extra costs on Ls which they pass on to Ts through increased rents which Ts will be unable to afford iii. Scope: reasonable person would find premises uninhabitable, defined by 1. Local housing codes: provides certainty, but some are skimpy or virtually no local codes at all state codes also work 2. Fitness for human habitation: Hilder v. St. Peter (p519) tons of things broken and smell of sewage and L never fixed. T got entire rent back, implication the place was valueless. iv. Procedure: provide L with notice of specific problem and allow reasonable time for repair. v. Remedies 1. Rescind lease If possible, look at terms of contract. 2. Repair and deduct Usually statutory guidelines regulate. 3. Withhold rent - risky

VII.

4. Terminate lease 5. Compensatory damages (i.e. if ceiling fall on you, difficult) 6. Punitive damages (only some jurisdictions, difficult) 7. Remember- IWOH is also a defense against eviction. Termination of the Tenancy a. Classes of termination: i. Imminent damage to property? L may obtain restraining order. ii. Surrender: T and L mutually agree to terminate lease, ending respective rights and duties. L has duty to mitigate damages. (just like contract law) iii. Violation by Tenant of lease- rent or other terms iv. Abandonment: 1. T vacates without justification, lacks present intent to return, AND defaults in payment of rent a. L has duty to mitigate damages (Just like contract law) 2. policy-pro mitigation: waste of housing resources, L better situated to relet unit; burden on L econ efficient 3. policy-con mitigation: libertarian view, lease as conveyance. shouldn t have to accept replacement tenant 4. determining reasonable effort: extent L advertised, offered/showed, remaining length of original lease, cost of preparing property, market rent for comparable units, deviation of terms in replacement lease. L need not accept replacement if not willing to pay FMV. (see Sommer v. Kridel p494 L lease 2 years to T whose wedding fell through and ask terminate, L left unit vacant for a year, ct held damages reduce cuz L duty mitigate) v. HYPO: One tenant abandons, they find a new one, then that one abandons. Which one is liable? 1. Privity of contract goes on for entire duration, unless there is novation 2. Privity of estate ends after there is a new tenant 3. If you accept the surrender, then you are basically accepting novation b. Eviction i. What can T be evicted for? 1. technically, anything that is part of T s performance 2. not much that just allows L to get damages, but if something is easily compensable (like holding deposit for spill on carpet) maybe no eviction. If there is a pattern of wanton destruction you may be able to. ii. Retaliatory eviction: when L looks to rid self of troublemaker T who makes things difficult deservedly so for him; statutory protections in most states protecting certain conduct of Ts iii. evidentiary presumption of retaliation if L takes action within certain time after protected T action iv. mixed motives: different views allowing remedy if dominant purpose, sole motive, or even slight v. good cause: present in some states, in public/federally subsidized housing, and local rent control ordinances c. Self-help eviction i. States divided 1. No self-help if tenant in possession (ok if abandoned or surrendered) 2. Berg v. Wiley p484 L spies on T, waits to leave, changes locks. No self help because even peaceable self-help can cause violence! ii. Criticism of self-help: risk of violence, possibility of unjustified eviction, and availability of alternatives iii. Court-ordered eviction 1. traditionally can be lengthy and difficult 2. Summary eviction: expedited procedure where L serves T with notice describing breach and gives opportunity to cure, and T will either do that or vacate iv. Eviction takes 3 days if uncontested and 3 months if contested.

VIII.

IX.

X.

Bargaining power between landlords and tenants- policy a. Negotiations usually center around terms where relationship is assumed to be good: rent, security deposit, additional tenant, pets, etc b. Why not negotiate the terms in case of bad relationship: tort liability, eviction procedure, etc? Thought this will generally will undermine your chance of getting apt (will look like a troublemaker), might just not think of them c. L incentives to bargain: eviction process lengthy/difficult; reason for high security deposits, rough financial terms d. Problem of affordable housing special case (see Chicago Board of Realtors v. Chicago p535 Chicago 1986 L-T ordinance bringing quality of housing up, pro cuz effects are small and speculative, limits on ability to pay , con cuz each right increases L s costs meaning raised rents and less supply as escape to condo market; ct sustain ordinance) Rent Control a. Pros: Short term use is good when sudden large increase in demand (WW2) i. During WWII, can t construct any new housing, housing fixed, demand increases ii. Poor not evicted iii. Land use regulations create artificial shortage iv. Housing is important v. Preserve community b. Cons: long term use is bad (esp with high inflation b/c it reduces construction) i. depress construction ii. hard to target who benefit iii. incentive LL not fix housing iv. bad relations between LL and T c. Moderate rent control -> much less damage Fair Housing/ Housing Segregation a. pre-1968 i. 1930 s private racial zoning and racially restrictive covenants led to Shelley v. Kraemer (1948) which made racial covenants illegal. ii. Civil Rights Act of 1866 blacks same right buy/lease property iii. Buchanan v. Warley (1917): 1st major civil rights case, prohibiting racial zoning, said Civil Rights Act of 1866 stating blacks same right to buy/lease property applies iv. 1920 s had organized private discrimination and restrictive covenants v. 1940 s up to index of dissimilarity level 90 (0 integrated, 100 apartheid) vi. private discrimination covenants not enforceable in court, because that would be putting state power behind discrimination. Practical effect was that Jews, Japanese, and Chinese did end up distributing throughout cities, but this didn t happen with blacks (ended up migrate to nearby neighborhoods and white flight) vii. CA Unhuh Act (1959): moderate help, little enforcement viii. Jones v. Mayer (1968): allowed general language of civil rights act as basis for litigation in private suits, which would cover national origin and racial discrimination b. Fair Housing Act of 1968: certain types of discrimination prohibited, based on the Civil Rights Act of 1968 i. protected categories: race, color, religion, sex, familial status, national origin, and handicap ii. For disabilities: 1. Can t discriminate based on disability 2. Must make reasonable accommodations to allow handicapped person equal opportunity to housing (though not necc pay for by LL) 3. Owners of new housing must incorporate design features that make units accessible to handicapped persons iii. not protected: sexual orientation, marital status iv. two exemptions: single family residences rented or sold without broker or advertising (so attack institutional discrimination while protect ind property rights), and owner-occupied buildings with four or less units (owner live in 4th one)

v. Weak effect at first, recommend file with governmental agency (Housing and Urban Development) who mediate first, few suits filed and ineffective vi. Effect: Overall fewer outright denial, terms and conditions similar, Hispanics differ based on perceived integration; institution non-discriminatory c. Method of obtaining relief under FHA i. P must establish prima facie case: can be done by showing discriminatory effect 1. disparate impact: D s conduct has disproportionate impact on persons in protected category 2. disparate treatment: how an individual applicant is treated ii. burden shifts to D to prove good faith legitimate reason for the discrimination iii. burden shifts back to P to show the legitimate reason served as a pretext for discriminatory purpose d. 1988 FHA Amendment i. Broadened to include families w/children (see Soules v. US HUD p439 P had 12 year old daughter, asked about child s age cuz below had elderly couple, later rented to single woman; affirmed case dismissal cuz legitimate reason and agent had offered to rent place to another family with kids); exception is senior complexes ii. Also now include disabilities (need reasonable accommodation , new standards for newlyconstructed housing include ramps, etc.) iii. Overhauled the enforcement process (although agencies complaints not enforce, litigation and American Litigation Judges proceedings useful cuz more lenient, means much more complaints and damages up) iv. Effect: Smaller cities blacks spread out and diffuse, others see expansion of black area but resegregation e. Remember you can do whatever you want if you are looking for a roommate or something. And remember that disparate impact is the same as intentional discrimination.