Fidelity Mutual Life Ins v Kaminsky Brief Cases

5.
Tenant Exit: Eviction
If a tenant fails to pay rent or otherwise commits a material breach of the lease, the landlord
can elect to terminate the leasehold and evict the tenant from the property. It is undoubtedly
true that the eviction process and the subsequent scramble for a new place to live can be a
traumatic, humiliating, and disruptive occurrence. Eviction displaces children from their
schools, rends the social networks of the poor, and forces many families into shelters or onto
the streets. Matthew Desmond, a sociologist at Harvard, has found that forced relocations
are also shockingly common. In Milwaukee, the location of Desmond’s research, 17 percent
of the moves undertaken by renters over a two-year period were forced relocations. See
Matthew Desmond et al., Forced Relocation and Residential Instability Among Urban Renters, 89 SOC.
SCI. REV. 227 (2015). In response to the social cost of eviction, some American cities and
many countries around the world make it difficult for landlords to remove tenants. Should
more U.S. jurisdictions follow suit? Consider the following story:
A patient political scientist … might be able to place American cities on a left-to-right
spectrum according to how long tenants whose eviction has become a cause manage
to stay where they are. It may be, for instance that some city like Houston is on the far
right of the spectrum. . . . Houston’s most powerful citizens are known for a devotion
to private property so intense that they see routine planning and zoning as acts of naked
confiscation. . . . San Francisco might qualify for the left end of the spectrum. [I]ts
best-known evictees [are] the tenants of the run-down three-story building called the
International Hotel . . . . In the fall of 1968, about a hundred and fifty people who
were living in the hotel . . . were told to be out of the building by January 1, 1969. The
building was finally cleared—in what amounted to a military operation requiring several
hundred policemen—on August 4, 1977.
Calvin Trillin, Some Thoughts on the International Hotel Controversy, NEW YORKER, Dec. 19, 1977,
at 116.
Notes and Questions
1. Would you rather be a tenant in a place like Houston—where evictions happen
quickly—or in San Francisco—where they do not?
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2. Imagine you’re a landlord in a jurisdiction where it takes a long time to remove a tenant
for non-payment of rent. How would that change your business strategy? Would you
ever take a chance on a tenant with bad credit or a history of being evicted?
We turn now to the procedure of eviction. When a landlord believes that a tenant has
committed a material breach of the lease, how exactly does she go about removing a lessee
from the property?
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6.
Tenant Exit: Security Deposits
Most landlords require their tenants to pay a security deposit—a sum of money that the
landlord can raid if the tenant defaults on the rent, leaves the unit untidy, or damages any
property during the course of the tenancy. State law mandates that if the tenant has compiled
with all terms of the lease and kept the unit in good order, the landlord must return the security
deposit (generally within 30 or 60 days). If the tenant causes damage, the landlord has the
right to use the security to restore the unit to its previous condition, but must provide the
tenant with a list of damages and receipts for the repairs.
Although the law of security deposits is generally crystal-clear, a huge number of renters report
that they have unfairly lost deposit money to their landlords. Why is this so? Game theorists
argue that the structure of the landlord-tenant relationship makes disputes over security
deposits almost unavoidable. The key insight is that while the tenancy is ongoing, landlords
and tenants have incentives to get along and make compromises—the landlord wants the
tenant to make timely rent payments and the tenant wants the landlord to respond quickly
when problems arise. However, once the landlord and tenant decide to end their relationship,
there are few checks to prevent bad behavior. If the landlord will never interact with the
tenant again, why not fudge a little bit with security deposit? Additionally, the small amounts
of money involved security deposit disputes mean that it’s rarely worth hiring a lawyer or
taking the time to sue the landlord in small claims court.
Notes and Questions
1. Tenant self help? If tenants recognize that landlords often cheat them out of their
security deposits, why don’t more tenants respond by refusing to pay the last month’s
rent? After all, eviction procedures almost always take longer than 30 days.
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2. America v. England. To solve the security deposit dilemma, English law does not
permit landlords to keep their tenants’ deposits. Rather, they must place them with a
government-approved holding agency. If a dispute arises over the money at the end
of the lease, the parties are referred to an arbitrator who works for the organization
that holds the money. The dispute resolution service does not charge either party but
they are bound by its decision. Should jurisdictions in the U.S. move toward this
model? Would it change your opinion to know that English landlords routinely fail to
comply with these rules? Are there other solutions worth considering?
D.
The Quest for Clean, Safe, and Affordable Premises
In feudal England, policy makers and government officials expressed little concern over the
housing conditions of renters. The law was well-settled: Once a landlord turned over the right
of possession, the tenant became responsible for maintenance of the leased property. If a
tenant decided to live in squalor rather than complete basic repairs, that was the tenant’s
problem, not the landlord’s worry. Although it may seem counterintuitive to modern readers
(who rely on landlords to fix nearly everything), putting the burden on the tenant to maintain
the property actually produced efficient results in the medieval world: landlords often lived
long distances from their lessees, communication was slow, houses were simply constructed,
and most tenants had the knowledge and skills to complete basic repairs.
The basic principle that tenants are responsible for their own living conditions remained
unchallenged until the 1960s, when both academics and politicians expressed growing concern
about the rental housing stock in central cities. Many worried that exploitative landlords were
flouting safety regulations and taking advantage of tenants who had few housing choices as a
result of their poverty and the rampant discrimination in the housing market. The problems
in the poorest neighborhoods also had spillover effects in surrounding communities—disease,
vermin, and fires do not respect municipal borders. In response to these problems, the law
began to vest tenants with a new series of rights against their landlords. This subsection traces
the evolution of these rights and explores the rise of legal tools to ensure minimum housing
standards for all renters.
1.
The Covenant of Quiet Enjoyment
Traditional common law principles do not leave renters completely defenseless against
unprincipled landlords. Every lease, whether residential or commercial, contains a covenant of
quiet enjoyment. Often this promise is explicitly stated in the lease contract. Where it’s not
specifically mentioned, all courts will imply it into the agreement. The basic idea is that the
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landlord cannot interfere with the tenant’s use of the property. Most courts state the legal test
this way: A breach of the covenant of quiet enjoyment occurs when the landlord substantially
interferes with the tenant’s use or enjoyment of the premises.
Consider the following hypothetical:
Little Bo Peep Detective Services rents the second floor of a four-floor building. A
year into the five-year lease, the landlord suddenly begins a construction project
designed to update the suites on the first floor. These renovations create loud noise
and regular interruptions of electric service. The construction work has also made the
parking lot inaccessible. Employees and customers need to walk a quarter-mile to
access the building from a nearby parking garage.
Do these problems amount to a violation of the covenant of quiet enjoyment? To determine
whether the interference is “substantial” courts generally consider the purpose the premises
are leased for, the foreseeability of the problem, the potential duration, and the degree of harm.
In this example, if the construction project lasts for more than a few days, then Little Bo Peep
can most likely bring a successful claim against its landlord under the covenant of quiet
enjoyment. The problems here are not mere trifles—the noise, lack of electricity, and
inadequate parking fundamentally affect the company’s ability to use the property as they
intended.
The difficult conceptual issue with the covenant of quiet enjoyment concerns the remedy. If
the landlord breaks the covenant, what are the tenant’s options? After a breach, the tenant
can always choose to stay in the leased property, continue to pay rent, and sue the landlord for
damages.
Additionally, certain violations of the covenant of quiet enjoyment allow the tenant to consider
the lease terminated, leave, and stop paying rent. Recall from earlier in the chapter that the
landlord’s fundamental responsibility is to provide the tenant with possession (or, in some
jurisdictions, the right to possession). From that principle, courts developed a rule that in
cases where the landlord wrongfully evicts the tenant, all the tenant’s obligations under the
lease cease. Imagine:
Landlord and tenant both sign a lease that reads, “Landlord agrees to provide Tenant
with possession of 123 Meadowlark Lane for a period of 12 months beginning April 1.
Tenant agrees to pay $100 per month.” After 4 months, however, the Landlord retakes
possession of the property by forcing the tenant out and changing the locks.
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Assuming the tenant hasn’t committed a material breach, the landlord’s actions constitute an
obvious violation of the covenant of quiet enjoyment—the tenant can no longer use the
property for any purpose. Thus, any eviction where the tenant is physically denied access to
the unit ends the tenant’s obligation to pay rent and allows the tenant to sue for damages
incurred from being removed from possession (A tenant could also sue to regain the unit).
The law is very clear on this point. Relatedly, if the landlord denies the tenant access to some
portion of the rented space (say, an allotted parking space) that, too, constitutes a breach of
the covenant of quiet enjoyment. The tenant subject to such a partial eviction has the option
to terminate the lease and sue for damages.
But what if the landlord doesn’t physically interfere with her tenant’s occupancy? What if the
landlord creates an environment that’s so miserable that the tenant is forced to flee? Is this
an “eviction” that would allow the tenant to consider the lease terminated or must the tenant
stay and continue paying rent while he brings a damages lawsuit
Fidelity Mutual Life Insurance Co. v. Kaminsky
768 S.W.2d 818 (Tex. App. 1989)
MURPHY, Justice.
The issue in this landlord-tenant case is whether sufficient evidence supports the jury’s
findings that the landlord and appellant, Fidelity Mutual Life Insurance Company [“Fidelity”],
constructively evicted the tenant, Robert P. Kaminsky, M.D., P.A. [“Dr. Kaminsky”] by
breaching the express covenant of quiet enjoyment contained in the parties’ lease. We affirm.
Dr. Kaminsky is a gynecologist whose practice includes performing elective abortions. In May
1983, he executed a lease contract for the rental of approximately 2,861 square feet in the Red
Oak Atrium Building for a two year term which began on June 1, 1983. The terms of the lease
required Dr. Kaminsky to use the rented space solely as “an office for the practice of
medicine.” Fidelity owns the building and hires local companies to manage it. At some time
during the lease term, Shelter Commercial Properties [“Shelter”] replaced the Horne Company
as managing agents. Fidelity has not disputed either management company’s capacity to act as
its agent.
The parties agree that: (1) they executed a valid lease agreement; (2) Paragraph 35 of the lease
contains an express covenant of quiet enjoyment conditioned on Dr. Kaminsky’s paying rent
when due, as he did through November 1984; Dr. Kaminsky abandoned the leased premises
on or about December 3, 1984 and refused to pay additional rent; anti-abortion protestors
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began picketing at the building in June of 1984 and repeated and increased their
demonstrations outside and inside the building until Dr. Kaminsky abandoned the premises.
When Fidelity sued for the balance due under the lease contract following Dr. Kaminsky’s
abandonment of the premises, he claimed that Fidelity constructively evicted him by breaching
Paragraph 35 of the lease. Fidelity apparently conceded during trial that sufficient proof of the
constructive eviction of Dr. Kaminsky would relieve him of his contractual liability for any
remaining rent payments. Accordingly, he assumed the burden of proof and the sole issue
submitted to the jury was whether Fidelity breached Paragraph 35 of the lease, which reads as
follows:
Quiet Enjoyment.
Lessee, on paying the said Rent, and any Additional Rental, shall and may peaceably
and quietly have, hold and enjoy the Leased Premises for the said term.
A constructive eviction occurs when the tenant leaves the leased premises due to conduct by
the landlord which materially interferes with the tenant’s beneficial use of the premises. See
Downtown Realty, Inc. v. 509 Tremont Bldg., 748 S.W.2d 309, 313 (Tex.App.—Houston [14th
Dist.] 1988, n.w.h.). Texas law relieves the tenant of contractual liability for any remaining
rentals due under the lease if he can establish a constructive eviction by the landlord. . . .
In order to prevail on his claim that Fidelity constructively evicted him and thereby relieved
him of his rent obligation, Dr. Kaminsky had to show the following: 1) Fidelity intended that
he no longer enjoy the premises, which intent the trier of fact could infer from the
circumstances; 2) Fidelity, or those acting for Fidelity or with its permission, committed a
material act or omission which substantially interfered with use and enjoyment of the premises
for their leased purpose, here an office for the practice of medicine; 3) Fidelity’s act or
omission permanently deprived Dr. Kaminsky of the use and enjoyment of the premises; and
4) Dr. Kaminsky abandoned the premises within a reasonable period of time after the act or
omission. E.g., Downtown Realty, Inc., 748 S.W.2d at 311 . . . .
[T]he jury found that Dr. Kaminsky had established each element of his constructive eviction
defense. The trial court entered judgment that Fidelity take nothing on its suit for delinquent
rent.
Fidelity raises four points of error. . . .
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Fidelity’s first point of error relies on Angelo v. Deutser, 30 S.W.2d 707 (Tex.Civ.App.—
Beaumont 1930, no writ), Thomas v. Brin, 38 Tex.Civ.App. 180, 85 S.W. 842 (1905, no writ)
and Sedberry v. Verplanck, 31 S.W. 242 (Tex.Civ.App.1895, no writ). These cases all state the
general proposition that a tenant cannot complain that the landlord constructively evicted him
and breached a covenant of quiet enjoyment, express or implied, when the eviction results
from the actions of third parties acting without the landlord’s authority or permission. Fidelity
insists the evidence conclusively establishes: a) that it did nothing to encourage or sponsor the
protestors and; b) that the protestors, rather than Fidelity or its agents, caused Dr. Kaminsky
to abandon the premises. Fidelity concludes that reversible error resulted because the trial
court refused to set aside the jury’s answers to the special issues and enter judgment in
Fidelity’s favor and because the trial court denied its motion for a new trial. We disagree. . . .
The protests took place chiefly on Saturdays, the day Dr. Kaminsky generally scheduled
abortions. During the protests, the singing and chanting demonstrators picketed in the
building’s parking lot and inner lobby and atrium area. They approached patients to speak to
them, distributed literature, discouraged patients from entering the building and often accused
Dr. Kaminsky of “killing babies.” As the protests increased, the demonstrators often occupied
the stairs leading to Dr. Kaminsky’s office and prevented patients from entering the office by
blocking the doorway. Occasionally they succeeded in gaining access to the office waiting
room area.
Dr. Kaminsky complained to Fidelity through its managing agents and asked for help in
keeping the protestors away, but became increasingly frustrated by a lack of response to his
requests. The record shows that no security personnel were present on Saturdays to exclude
protestors from the building, although the lease required Fidelity to provide security service
on Saturdays. The record also shows that Fidelity’s attorneys prepared a written statement to
be handed to the protestors soon after Fidelity hired Shelter as its managing agent. The
statement tracked TEX.PENAL CODE ANN. § 30.05 (Vernon Supp.1989) and generally
served to inform trespassers that they risked criminal prosecution by failing to leave if asked
to do so. Fidelity’s attorneys instructed Shelter’s representative to “have several of these letters
printed up and be ready to distribute them and verbally demand that these people move on
and off the property.” The same representative conceded at trial that she did not distribute
these notices. Yet when Dr. Kaminsky enlisted the aid of the Sheriff’s office, officers refused
to ask the protestors to leave without a directive from Fidelity or its agent. Indeed, an attorney
had instructed the protestors to remain unless the landlord or its representative ordered them
to leave. It appears that Fidelity’s only response to the demonstrators was to state, through its
agents, that it was aware of Dr. Kaminsky’s problems.
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Both action and lack of action can constitute “conduct” by the landlord which amounts to a
constructive eviction. E.g., Downtown Realty Inc., 748 S.W.2d at 311. In Steinberg v. Medical Equip.
Rental Serv., Inc., 505 S.W.2d 692 (Tex. Civ. App.—Dallas 1974, no writ) accordingly, the court
upheld a jury’s determination that the landlord’s failure to act amounted to a constructive
eviction and breach of the covenant of quiet enjoyment. 505 S.W.2d at 697. Like Dr.
Kaminsky, the tenant in Steinberg abandoned the leased premises and refused to pay
additional rent after repeatedly complaining to the landlord. The Steinberg tenant complained
that Steinberg placed trash bins near the entrance to the business and allowed trucks to park
and block customer’s access to the tenant’s medical equipment rental business. The tenant’s
repeated complaints to Steinberg yielded only a request “to be patient.” Id. Fidelity responded
to Dr. Kaminsky’s complaints in a similar manner: although it acknowledged his problems
with the protestors, Fidelity, like Steinberg, effectively did nothing to prevent the problems.
This case shows ample instances of Fidelity’s failure to act in the fact of repeated requests for
assistance despite its having expressly covenanted Dr. Kaminsky’s quiet enjoyment of the
premises. These instances provided a legally sufficient basis for the jury to conclude that Dr.
Kaminsky abandoned the leased premises, not because of the trespassing protestors, but
because of Fidelity’s lack of response to his complaints about the protestors. Under the
circumstances, while it is undisputed that Fidelity did not “encourage” the demonstrators, its
conduct essentially allowed them to continue to trespass. The general rule of the Angelo, Thomas
and Sedberry cases, that a landlord is not responsible for the actions of third parties, applies
only when the landlord does not permit the third party to act. See e.g., Angelo, 30 S.W.2d at 710
[“the act or omission complained of must be that of the landlord and not merely of a third
person acting without his authority or permission” (emphasis added) ]. We see no distinction between
Fidelity’s lack of action here, which the record shows resulted in preventing patients’ access
to Dr. Kaminsky’s medical office, and the Steinberg case where the landlord’s inaction resulted
in trucks’ blocking customer access to the tenant’s business. We overrule the first point of
error. . . . .
In its [final] point of error, Fidelity maintains the evidence is factually insufficient to support
the jury’s finding that its conduct permanently deprived Dr. Kaminsky of use and enjoyment
of the premises. Fidelity essentially questions the permanency of Dr. Kaminsky’s being
deprived of the use and enjoyment of the leased premises. To support its contentions, Fidelity
points to testimony by Dr. Kaminsky in which he concedes that none of his patients were ever
harmed and that protests and demonstrations continued despite his leaving the Red Oak
Atrium building. Fidelity also disputes whether Dr. Kaminsky actually lost patients due to the
protests.
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The evidence shows that the protestors, whose entry into the building Fidelity failed to
prohibit, often succeeded in blocking Dr. Kaminsky’s patients’ access to his medical office.
Under the reasoning of the Steinberg case, omissions by a landlord which result in patients’ lack
of access to the office of a practicing physician would suffice to establish a permanent
deprivation of the use and enjoyment of the premises for their leased purpose, here “an office
for the practice of medicine.” Steinberg, 505 S.W.2d at 697; accord, Downtown Realty, Inc., 748
S.W.2d at 312 (noting jury’s finding that a constructive eviction resulted from the commercial
landlord’s failure to repair a heating and air conditioning system in a rooming house).
Texas law has long recited the requirement, first stated in Stillman, 266 S.W.2d at 916, that the
landlord commit a “material and permanent” act or omission in order for his tenant to claim
a constructive eviction. However, as the Steinberg and Downtown Realty, Inc. cases illustrate, the
extent to which a landlord’s acts or omissions permanently and materially deprive a tenant of
the use and enjoyment of the premises often involves a question of degree. Having reviewed
all the evidence before the jury in this case, we cannot say that its finding that Fidelity’s conduct
permanently deprived Dr. Kaminsky of the use and enjoyment of his medical office space was
so against the great weight and preponderance of the evidence as to be manifestly unjust. We
overrule the fourth point of error.
We affirm the judgment of the trial court.
Notes and Questions
1. Evolution of the doctrine. As discussed above, English judges widely recognized
that tenants could terminate the lease (and sue for damages) if the landlord physically
denied them possession of the rented property. Eventually the basic concept was
expanded to situations where the landlord commits some act that, while it falls short
of an actual eviction, so severely affects the value of the tenancy that the tenant is
forced to flee. This is known as constructive eviction.
2. Basic constrictive eviction law. To make a claim of constructive eviction a tenant
must show that some act or omission by the landlord substantially interferes with the
tenant’s use and enjoyment of the property. The tenant also needs to notify the
landlord about the problem, give the landlord an opportunity to cure the defect, and
then vacate the premise within a reasonable amount of time.
3. Stay or go? Why might a tenant contemplating bringing a constructive eviction claim
worry about the requirement to vacate the premises? Is constructive eviction a more
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powerful remedy in a place like San Francisco, which has a very tight housing market,
or Houston, which has more open units?
4. Landlord’s wrongful conduct. To make use of the doctrine of quiet enjoyment, the
tenant must show that the landlord committed some wrongful act. There’s wide
agreement that any affirmative step taken by the landlord that impedes the tenant’s use
of the property can meet the requirement of an “act.” Examples would include burning
toxic substances on the property, prolonged construction activities, or a substantial
alteration of an essential feature of the leased premises. The trickier doctrinal question
is whether a landlord’s failure to act can ever qualify as the wrongful conduct.
Traditionally, courts hesitated to impose liability on landlords for their omissions, but
the law of most states now asserts that a “lack of action” can constitute the required
act. For example, a landlord’s failure to provide heat in the winter months is generally
found to violate the covenant of quiet enjoyment. Some courts, nervous about unjustly
expanding landlords’ potential liability, deem omissions wrongful only when the
landlord fails to fulfill some clear duty—either a duty bargained for in the lease or a
statutory duty.
5. Troublesome tenants. Suppose your landlord rents the floor above your apartment
to the members of a Led Zeppelin cover band. If the band practices every night
between the hours of 3:00 am and 4:00 am, could you bring a successful constructive
eviction claim against the landlord?
6. Third parties. What if the Led Zeppelin cover band played every night at a club across
the street? If the noise from the bar kept you awake, could you sue your landlord for
constructive eviction?
2.
The Implied Warranty of Habitability
Although the covenant of quiet enjoyment offers tenants some protections, the doctrine—
without more—can leave renters exposed to dreadful living conditions. What if cockroaches
invade a tenant’s apartment? Or a sewer pipe in the basement begins to leak? What if a storm
shatters the windows of the apartment? Or a wall of a building falls down? Unless the landlord
somehow caused any of these disasters (or had a clearly articulated duty to fix them) a tenant
cannot bring a successful case under the covenant of quiet enjoyment. In Hughes v. Westchester
Development Corp., 77 F.2d 550 (D.C. Cir. 1935), for example, vermin invaded the tenant’s
apartment, making it “impossible to use the kitchen and toilet facilities.” Despite the
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infestation, the court found that the tenant remained responsible for the rent because the
landlord was not to blame for the bugs’ sudden appearance. Leases, the court ruled, contained
no implied promise that the premise was fit for the purpose it was leased. If tenants desired
more and better protection, they had the burden to bargain for such provisions in the lease.
All of this changed in the late 1960s and early 70s. The most lasting accomplishment of the
tenants’ rights movement was the widespread adoption of the implied warranty of habitability. In
the United States, only Arkansas has failed to adopt the rule. In a nutshell, the implied
warranty of habitability imposes a duty on landlords to provide residential tenants with a clean,
safe, and habitable living space.
Hilder v. St. Peter
478 A.2d 202 (Vt. 1984)
BILLINGS, Chief Justice.
Defendants appeal from a judgment rendered by the Rutland Superior Court. The court
ordered defendants to pay plaintiff damages in the amount of $4,945.00, which represented
“reimbursement of all rent paid and additional compensatory damages” for the rental of a
residential apartment over a fourteen month period in defendants’ Rutland apartment building.
Defendants filed a motion for reconsideration on the issue of the amount of damages awarded
to the plaintiff, and plaintiff filed a cross-motion for reconsideration of the court’s denial of
an award of punitive damages. The court denied both motions. On appeal, defendants raise
[two] issues for our consideration: first, whether the court correctly calculated the amount of
damages awarded the plaintiff; secondly, whether the court’s award to plaintiff of the entire
amount of rent paid to defendants was proper since the plaintiff remained in possession of
the apartment for the entire fourteen month period. . . .
The facts are uncontested. In October, 1974, plaintiff began occupying an apartment at
defendants’ 10–12 Church Street apartment building in Rutland with her three children and
new-born grandson. Plaintiff orally agreed to pay defendant Stuart St. Peter $140 a month and
a damage deposit of $50; plaintiff paid defendant the first month’s rent and the damage deposit
prior to moving in. Plaintiff has paid all rent due under her tenancy. Because the previous
tenants had left behind garbage and items of personal belongings, defendant offered to refund
plaintiff’s damage deposit if she would clean the apartment herself prior to taking possession.
Plaintiff did clean the apartment, but never received her deposit back because the defendant
denied ever receiving it. Upon moving into the apartment, plaintiff discovered a broken
kitchen window. Defendant promised to repair it, but after waiting a week and fearing that her
two year old child might cut herself on the shards of glass, plaintiff repaired the window at her
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own expense. Although defendant promised to provide a front door key, he never did. For a
period of time, whenever plaintiff left the apartment, a member of her family would remain
behind for security reasons. Eventually, plaintiff purchased and installed a padlock, again at
her own expense. After moving in, plaintiff discovered that the bathroom toilet was clogged
with paper and feces and would flush only by dumping pails of water into it. Although plaintiff
repeatedly complained about the toilet, and defendant promised to have it repaired, the toilet
remained clogged and mechanically inoperable throughout the period of plaintiff’s tenancy. In
addition, the bathroom light and wall outlet were inoperable. Again, the defendant agreed to
repair the fixtures, but never did. In order to have light in the bathroom, plaintiff attached a
fixture to the wall and connected it to an extension cord that was plugged into an adjoining
room. Plaintiff also discovered that water leaked from the water pipes of the upstairs
apartment down the ceilings and walls of both her kitchen and back bedroom. Again,
defendant promised to fix the leakage, but never did. As a result of this leakage, a large section
of plaster fell from the back bedroom ceiling onto her bed and her grandson’s crib. Other
sections of plaster remained dangling from the ceiling. This condition was brought to the
attention of the defendant, but he never corrected it. Fearing that the remaining plaster might
fall when the room was occupied, plaintiff moved her and her grandson’s bedroom furniture
into the living room and ceased using the back bedroom. During the summer months an odor
of raw sewage permeated plaintiff’s apartment. The odor was so strong that the plaintiff was
ashamed to have company in her apartment. Responding to plaintiff’s complaints, Rutland
City workers unearthed a broken sewage pipe in the basement of defendants’ building. Raw
sewage littered the floor of the basement, but defendant failed to clean it up. Plaintiff also
discovered that the electric service for her furnace was attached to her breaker box, although
defendant had agreed, at the commencement of plaintiff’s tenancy, to furnish heat.
In its conclusions of law, the court held that the state of disrepair of plaintiff’s apartment,
which was known to the defendants, substantially reduced the value of the leasehold from the
agreed rental value, thus constituting a breach of the implied warranty of habitability. The
court based its award of damages on the breach of this warranty and on breach of an express
contract. Defendant argues that the court misapplied the law of Vermont relating to
habitability because the plaintiff never abandoned the demised premises and, therefore, it was
error to award her the full amount of rent paid. Plaintiff counters that, while never expressly
recognized by this Court, the trial court was correct in applying an implied warranty of
habitability and that under this warranty, abandonment of the premises is not required.
Plaintiff urges this Court to affirmatively adopt the implied warranty of habitability.
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Historically, relations between landlords and tenants have been defined by the law of property.
Under these traditional common law property concepts, a lease was viewed as a conveyance
of real property. See Note, Judicial Expansion of Tenants’ Private Law Rights: Implied Warranties of
Habitability and Safety in Residential Urban Leases, 56 Cornell L.Q. 489, 489–90 (1971) (hereinafter
cited as Expansion of Tenants’ Rights). The relationship between landlord and tenant was
controlled by the doctrine of caveat lessee; that is, the tenant took possession of the demised
premises irrespective of their state of disrepair. Love, Landlord’s Liability for Defective Premises:
Caveat Lessee, Negligence, or Strict Liability?, 1975 Wis. L. Rev. 19, 27–28. The landlord’s only
covenant was to deliver possession to the tenant. The tenant’s obligation to pay rent existed
independently of the landlord’s duty to deliver possession, so that as long as possession
remained in the tenant, the tenant remained liable for payment of rent. The landlord was under
no duty to render the premises habitable unless there was an express covenant to repair in the
written lease. Expansion of Tenants’ Rights, supra, at 490. The land, not the dwelling, was regarded
as the essence of the conveyance.
An exception to the rule of caveat lessee was the doctrine of constructive eviction. Lemle v.
Breeden, 462 P.2d 470, 473 (Haw. 1969). Here, if the landlord wrongfully interfered with the
tenant’s enjoyment of the demised premises, or failed to render a duty to the tenant as
expressly required under the terms of the lease, the tenant could abandon the premises and
cease paying rent. Legier v. Deveneau, 126 A. 392, 393 (Vt. 1924).
Beginning in the 1960’s, American courts began recognizing that this approach to landlord
and tenant relations, which had originated during the Middle Ages, had become an
anachronism in twentieth century, urban society. Today’s tenant enters into lease agreements,
not to obtain arable land, but to obtain safe, sanitary and comfortable housing.
[T]hey seek a well known package of goods and services—a package which includes
not merely walls and ceilings, but also adequate heat, light and ventilation, serviceable
plumbing facilities, secure windows and doors, proper sanitation, and proper
maintenance.
Javins v. First National Realty Corp., 428 F.2d 1071, 1074 (D.C.Cir.), cert. denied, 400 U.S. 925,
91 S.Ct. 186, 27 L.Ed.2d 185 (1970).
Not only has the subject matter of today’s lease changed, but the characteristics of today’s
tenant have similarly evolved. The tenant of the Middle Ages was a farmer, capable of making
whatever repairs were necessary to his primitive dwelling. Green v. Superior Court, 517 P.2d 1168,
1172 (Cal. 1974). Additionally, “the common law courts assumed that an equal bargaining
44
position existed between landlord and tenant. . . .” Note, The Implied Warranty of Habitability: A
Dream Deferred, 48 UMKC L.REV. 237, 238 (1980) (hereinafter cited as A Dream Deferred).
In sharp contrast, today’s residential tenant, most commonly a city dweller, is not experienced
in performing maintenance work on urban, complex living units. Green v. Superior Court, supra,
517 P.2d at 1173. The landlord is more familiar with the dwelling unit and mechanical
equipment attached to that unit, and is more financially able to “discover and cure” any faults
and break-downs. Id. Confronted with a recognized shortage of safe, decent housing, see 24
V.S.A. § 4001(1), today’s tenant is in an inferior bargaining position compared to that of the
landlord. Park West Management Corp. v. Mitchell, 391 N.E.2d 1288, 1292 (N.Y. 1979). Tenants
vying for this limited housing are “virtually powerless to compel the performance of essential
services.” Id.
In light of these changes in the relationship between tenants and landlords, it would be wrong
for the law to continue to impose the doctrine of caveat lessee on residential leases.
The modern view favors a new approach which recognizes that a lease is essentially a
contract between the landlord and the tenant wherein the landlord promises to deliver
and maintain the demised premises in habitable condition and the tenant promises to
pay rent for such habitable premises. These promises constitute interdependent and
mutual considerations. Thus, the tenant’s obligation to pay rent is predicated on the
landlord’s obligation to deliver and maintain the premises in habitable condition.
Boston Housing Authority v. Hemingway, 293 N.E.2d 831, 842 (Mass. 1973).
Recognition of residential leases as contracts embodying the mutual covenants of habitability
and payment of rent does not represent an abrupt change in Vermont law. Our case law has
previously recognized that contract remedies are available for breaches of lease agreements.
Clarendon Mobile Home Sales, Inc. v. Fitzgerald, 381 A.2d 1063, 1065 (Vt. 1977). . . . More
significantly, our legislature, in establishing local housing authorities, 24 V.S.A. § 4003, has
officially recognized the need for assuring the existence of adequate housing.
[S]ubstandard and decadent areas exist in certain portions of the state of Vermont
and . . . there is not . . . an adequate supply of decent, safe and sanitary housing for
persons of low income and/or elderly persons of low income, available for rents which
such persons can afford to pay . . . this situation tends to cause an increase and spread
of communicable and chronic disease . . . [and] constitutes a menace to the health,
45
safety, welfare and comfort of the inhabitants of the state and is detrimental to property
values in the localities in which it exists . . . .
24 V.S.A. § 4001(4). In addition, this Court has assumed the existence of an implied warranty
of habitability in residential leases. Birkenhead v. Coombs, 465 A.2d 244, 246 (Vt. 1983).
Therefore, we now hold expressly that in the rental of any residential dwelling unit an implied
warranty exists in the lease, whether oral or written, that the landlord will deliver over and
maintain, throughout the period of the tenancy, premises that are safe, clean and fit for human
habitation. This warranty of habitability is implied in tenancies for a specific period or at will.
Boston Housing Authority v. Hemingway, supra, 293 N.E.2d at 843. Additionally, the implied
warranty of habitability covers all latent and patent defects in the essential facilities of the
residential unit. Id. Essential facilities are “facilities vital to the use of the premises for
residential purposes. . . .” Kline v. Burns, 276 A.2d 248, 252 (N.H. 1971). This means that a
tenant who enters into a lease agreement with knowledge of any defect in the essential facilities
cannot be said to have assumed the risk, thereby losing the protection of the warranty. Nor
can this implied warranty of habitability be waived by any written provision in the lease or by
oral agreement.
In determining whether there has been a breach of the implied warranty of habitability, the
courts may first look to any relevant local or municipal housing code; they may also make
reference to the minimum housing code standards enunciated in 24 V.S.A. § 5003(c)(1)–
5003(c)(5). A substantial violation of an applicable housing code shall constitute prima facie
evidence that there has been a breach of the warranty of habitability. “[O]ne or two minor
violations standing alone which do not affect” the health or safety of the tenant, shall be
considered de minimus and not a breach of the warranty. Javins v. First National Realty Corp., supra,
428 F.2d at 1082 n. 63. . . . In addition, the landlord will not be liable for defects caused by the
tenant. Javins v. First National Realty Corp., supra, 428 F.2d at 1082 n. 62.
However, these codes and standards merely provide a starting point in determining whether
there has been a breach. Not all towns and municipalities have housing codes; where there are
codes, the particular problem complained of may not be addressed. Park West Management Corp.
v. Mitchell, supra, 391 N.E.2d at 1294. In determining whether there has been a breach of the
implied warranty of habitability, courts should inquire whether the claimed defect has an
impact on the safety or health of the tenant. Id.
In order to bring a cause of action for breach of the implied warranty of habitability, the tenant
must first show that he or she notified the landlord “of the deficiency or defect not known to
46
the landlord and [allowed] a reasonable time for its correction.” King v. Moorehead, supra, 495
S.W.2d at 76.
Because we hold that the lease of a residential dwelling creates a contractual relationship
between the landlord and tenant, the standard contract remedies of rescission, reformation
and damages are available to the tenant when suing for breach of the implied warranty of
habitability. Lemle v. Breeden, supra, 462 P.2d at 475. The measure of damages shall be the
difference between the value of the dwelling as warranted and the value of the dwelling as it
exists in its defective condition. Birkenhead v. Coombs, supra, 465 A.2d at 246. In determining
the fair rental value of the dwelling as warranted, the court may look to the agreed upon rent
as evidence on this issue. Id. “[I]n residential lease disputes involving a breach of the implied
warranty of habitability, public policy militates against requiring expert testimony” concerning
the value of the defect. Id. at 247. The tenant will be liable only for “the reasonable rental value
[if any] of the property in its imperfect condition during his period of occupancy.” Berzito v.
Gambino, 308 A.2d 17, 22 (N.J. 1973).
We also find persuasive the reasoning of some commentators that damages should be allowed
for a tenant’s discomfort and annoyance arising from the landlord’s breach of the implied
warranty of habitability. See Moskovitz, The Implied Warranty of Habitability: A New Doctrine
Raising New Issues, 62 CAL. L. REV. 1444, 1470–73 (1974) (hereinafter cited as A New Doctrine);
A Dream Deferred, supra, at 250–51. Damages for annoyance and discomfort are reasonable in
light of the fact that:
the residential tenant who has suffered a breach of the warranty . . . cannot bathe as
frequently as he would like or at all if there is inadequate hot water; he must worry
about rodents harassing his children or spreading disease if the premises are infested;
or he must avoid certain rooms or worry about catching a cold if there is inadequate
weather protection or heat. Thus, discomfort and annoyance are the common injuries
caused by each breach and hence the true nature of the general damages the tenant is
claiming.
Moskovitz, A New Doctrine, supra, at 1470–71. Damages for discomfort and annoyance may be
difficult to compute; however, “[t]he trier [of fact] is not to be deterred from this duty by the
fact that the damages are not susceptible of reduction to an exact money standard.” Vermont
Electric Supply Co. v. Andrus, 315 A.2d 456, 459 (Vt. 1974).
Another remedy available to the tenant when there has been a breach of the implied warranty
of habitability is to withhold the payment of future rent. King v. Moorehead, supra, 495 S.W.2d
47
at 77. The burden and expense of bringing suit will then be on the landlord who can better
afford to bring the action. In an action for ejectment for nonpayment of rent, 12 V.S.A. §
4773, “[t]he trier of fact, upon evaluating the seriousness of the breach and the ramification
of the defect upon the health and safety of the tenant, will abate the rent at the landlord’s
expense in accordance with its findings.” A Dream Deferred, supra, at 248. The tenant must show
that: (1) the landlord had notice of the previously unknown defect and failed, within a
reasonable time, to repair it; and (2) the defect, affecting habitability, existed during the time
for which rent was withheld. See A Dream Deferred, supra, at 248–50. Whether a portion, all or
none of the rent will be awarded to the landlord will depend on the findings relative to the
extent and duration of the breach. Javins v. First National Realty Corp., supra, 428 F.2d at 1082–
83. Of course, once the landlord corrects the defect, the tenant’s obligation to pay rent
becomes due again. Id. at 1083 n. 64.
Additionally, we hold that when the landlord is notified of the defect but fails to repair it within
a reasonable amount of time, and the tenant subsequently repairs the defect, the tenant may
deduct the expense of the repair from future rent. 11 Williston on Contracts § 1404 (3d ed.
W. Jaeger 1968); Marini v. Ireland, 265 A.2d 526, 535 (N.J. 1970).
In addition to general damages, we hold that punitive damages may be available to a tenant in
the appropriate case. Although punitive damages are generally not recoverable in actions for
breach of contract, there are cases in which the breach is of such a willful and wanton or
fraudulent nature as to make appropriate the award of exemplary damages. Clarendon Mobile
Home Sales, Inc. v. Fitzgerald, supra, 381 A.2d at 1065. A willful and wanton or fraudulent breach
may be shown “by conduct manifesting personal ill will, or carried out under circumstances
of insult or oppression, or even by conduct manifesting . . . a reckless or wanton disregard of
[one’s] rights . . . . ” Sparrow v. Vermont Savings Bank, 112 A. 205, 207 (Vt. 1921). When a
landlord, after receiving notice of a defect, fails to repair the facility that is essential to the
health and safety of his or her tenant, an award of punitive damages is proper. 111 East 88th
Partners v. Simon, 434 N.Y.S.2d 886, 889 (N.Y. Civ. Ct. 1980).
The purpose of punitive damages . . . is to punish conduct which is morally culpable. . . .
Such an award serves to deter a wrongdoer . . . from repetitions of the same or similar
actions. And it tends to encourage prosecution of a claim by a victim who might not
otherwise incur the expense or inconvenience of private action. . . . The public benefit
and a display of ethical indignation are among the ends of the policy to grant punitive
damages.
Davis v. Williams, 402 N.Y.S.2d 92, 94 (N.Y.Civ.Ct.1977).
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In the instant case, the trial court’s award of damages, based in part on a breach of the implied
warranty of habitability, was not a misapplication of the law relative to habitability. Because of
our holding in this case, the doctrine of constructive eviction, wherein the tenant must
abandon in order to escape liability for rent, is no longer viable. When, as in the instant case,
the tenant seeks, not to escape rent liability, but to receive compensatory damages in the
amount of rent already paid, abandonment is similarly unnecessary. Northern Terminals, Inc. v.
Smith Grocery & Variety, Inc., supra, 418 A.2d at 26–27. Under our holding, when a landlord
breaches the implied warranty of habitability, the tenant may withhold future rent, and may
also seek damages in the amount of rent previously paid.
In its conclusions of law the trial court stated that the defendants’ failure to make repairs was
compensable by damages to the extent of reimbursement of all rent paid and additional
compensatory damages. The court awarded plaintiff a total of $4,945.00; $3,445.00 represents
the entire amount of rent plaintiff paid, plus the $50.00 deposit. . . .
Additionally, the court denied an award to plaintiff of punitive damages on the ground that
the evidence failed to support a finding of willful and wanton or fraudulent conduct. See
Clarendon Mobile Home Sales, Inc. v. Fitzgerald, supra, 381 A.2d at 1065. The facts in this case,
which defendants do not contest, evince a pattern of intentional conduct on the part of
defendants for which the term “slumlord” surely was coined. Defendants’ conduct was
culpable and demeaning to plaintiff and clearly expressive of a wanton disregard of plaintiff’s
rights. The trial court found that defendants were aware of defects in the essential facilities of
plaintiff’s apartment, promised plaintiff that repairs would be made, but never fulfilled those
promises. The court also found that plaintiff continued, throughout her tenancy, to pay her
rent, often in the face of verbal threats made by defendant Stuart St. Peter. These findings
point to the “bad spirit and wrong intention” of the defendants, Glidden v. Skinner, 458 A.2d
1142, 1144 (Vt. 1983), and would support a finding of willful and wanton or fraudulent
conduct, contrary to the conclusions of law and judgment of the trial judge. However, the
plaintiff did not appeal the court’s denial of punitive damages, and issues not appealed and
briefed are waived. R. Brown & Sons, Inc. v. International Harvester Corp., 453 A.2d 83, 84 (Vt.
1982).
Notes and Questions
1. Residential v. commercial. Unlike the covenant of quiet enjoyment, the implied
warranty of habitability only applies to residential leases. Commercial tenants still
largely operate under common-law legal rules. Commonly, commercial landlords and
49
tenants do not rely on the default rules, but rather assign the duty of upkeep and repair
with an express provision in the lease.
2. What is habitability? Do all defects in an apartment amount to violations? What is
the standard of habitability as laid out in Hilder?
3. Paternalism? Is the implied warranty of habitability too paternalistic? Some
economists argue that the poorest Americans should have more freedom over how
they spend their limited dollars. Isn’t it possible that some individuals might want to
occupy a really cheap (if slightly dangerous) dwelling so that they have more money to
spend on healthy foods, transportation, and clothes? Would it matter if the evidence
showed that such apartments were in fact cheaper than “habitable” apartments?
4. Necessary? Do you agree with the arguments made by the court in Hilder about the
necessity of the implied warranty of habitability? Don’t landlords already have
excellent incentives to maintain their buildings?
5. Arkansas and beyond. As mentioned above, Arkansas is the one state that has not
adopted the implied warranty of habitability—either by statute or judicial fiat. Is
Arkansas a Mad Max-style hellscape for renters? Are tenants there worse (or worse
off) than the tenants in other states? Some people think so. Vice magazine recently
dubbed Arkansas, “The Worst Place to Rent in America.” You can see the report on
renting in Arkansas at: https://www.youtube.com/watch?v=9G2Pk2JZP-E. But does
the implied warranty of habitability provide much practical protection? Do poor
tenants know about it? Do they have the resources to push back against aggressive
landlords who threaten lawsuits and other forms of retaliation? Professor David Super
has suggested that the decision of tenants’ rights movement to focus on habitability
over affordability and overcrowding was a strategic mistake. See David A. Super, The
Rise and Fall of the Implied Warranty of Habitability, 99 CAL. L. REV. 389-463 (2011). Is
there a nirvana for renters anywhere?
6. Procedure & remedies. If a tenant believes his apartment does not meet the standard
of habitability, he must first must notify the landlord of the defects and give the
landlord a reasonable amount of time to cure the problems. If the landlord either
cannot or will not make repairs, the implied warranty of habitability offers the renter a
menu of options. Each option presents a different combination of costs and risks to
the tenant. If the landlord breaches, the tenant may:
50
a. Leave, terminate contract. The tenant may consider the lease terminated and move
out.
b. Stay and sue for damages. As with the covenant of quiet enjoyment, a tenant may
stay in the unit and pay rent, while suing the landlord for damages. There is
significant disagreement among jurisdictions about how to calculate damages.
In Hilder, the court uses the difference between the rental price of the dwelling
if it met the standard of habitability and the value of the dwelling as it exists; the
rent charged is not evidence of actual value, but rather evidence of the
appropriate price if it met the standard of habitability. [Note that given the
court’s calculation, the value was apparently zero?] Other courts look at the
difference between the amount of rent stated in the lease and the fair market
value of the premises. What is the better approach? Should the rent charged
be considered evidence of fair market value? If not, why not?
c. Stay and charge the cost of repair. A tenant has the option to fix the defect and then
deduct the cost of repair from the rent.
d. Stay and withhold rent. In most jurisdictions, a tenant can withhold the entire rent
for violations of the implied warranty of habitability (although, a cautious tenant
should pay the rent into an escrow account). This is a very powerful remedy.
First, it gives the landlord strong incentive to respond to valid complaints from
tenants. Second, it puts the burden on the landlord (rather than the tenant) to
initiate a lawsuit when contested issues arise. Finally, if the landlord does move
to evict the tenant for non-payment, violations of the implied warranty of
habitability can serve as a defense.
e. Extreme violations. Tenants have won punitive damages in cases where the
landlord committed repeated or gruesome violations of the implied warranty.
Problem
1. The Mad Hatter and the Alice each decide to rent an apartment in Wonderland. The
Mad Hatter walks into a large apartment and sees a hole in the roof, but he decides to
rent the unit anyway. The apartment that Alice decides to lease has no obvious
problems. The next day, however, some mold spots appear by one of the vents. The
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mold grows rapidly and Alice starts to have regular headaches and some trouble
breathing. Additionally, an unknown troublemaker smashed Alice’s air conditioning
unit and it no longer works. Can either the Mad Hatter or Alice win a lawsuit against
their landlord if their problems aren’t fixed?
***
4.
Landlord’s Tort Liability
A landlord’s responsibility for injuries sustained on the leased premise has dramatically
expanded in the last 50 years. As discussed in the previous subsection, under the traditional
common law rule, the tenant had the duty to undertake all repairs and maintenance on the
rented property. As a result, the law absolved landlords from liability for injuries sustained
because of dangerous conditions in the unit. The costs of damage (to both property and
persons) sustained from rotted decks, falling plaster, and collapsing walls all fell squarely on
tenants.
Almost every jurisdiction now imposes greater duties on landlords. At the very least, landlords
must exercise reasonable care in keeping common areas safe, use reasonable care when making
repairs, and warn tenants about latent defects—unsafe conditions that would not be obvious
upon an inspection. Other jurisdictions, following the logic of the implied warranty of
habitability, have gone farther. They reason that since the landlord now has a duty to provide
tenants (and their guests) with safe and clean premises, a failure to comply with this obligation
may amount to negligence. The basic rule in these states is that a landlord must take reasonable
steps to repair defects of which the landlord becomes aware. Failure to comply exposes
landlords to liability for injuries that result from the defective conditions.
Landlords sometimes attempt to avoid the obligation to repair by inserting into the lease a
clause stating that the lessor is not responsible for personal injury or property damage that
occurs on the premise. While such exculpatory clauses are typically upheld in commercial
settings, courts increasingly strike them from residential leases as violations of public policy.
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5.
Gentrification & Rent Control
Defined broadly, gentrification is the movement of wealthier people into a poor
neighborhood, which results in a subsequent increase in rents and the ultimate displacement
of longtime residents. The stereotypic progression starts when artists and gay couples move
into a run-down but centrally located neighborhood in the urban core. They fix up houses,
open trendy cafes, and start galleries. The newcomers also demand better public services and
police protection from the local government. As the number of amenities grows, home prices
and rents begin to rise. Married couples without children start to flow into the area, followed
quickly by bankers, lawyers, and families
attracted the neighborhood’s beautiful
older homes and terrific location. As rents
continue to rise, many of the original
residents—who are often poor and
black—can no longer afford the
neighborhood. They are forced to either
move or pay an enormous percentage of
their income toward rent.
One
resident
of
a
gentrifying
neighborhood in Portland gives a personal
account of the basic problem:
Last week I heard a shuffle at my
front door and saw that my
Photo courtesy of Flickr user Keith Hamm
building manager was slipping a
notice under my door. I opened it only to read that my rent was being raised by 10%. . . .
[In the last year], my rent has gone up a total of 14%. If it continues at this pace, I’ll
have to find another place to live because I’ll be priced out of my very walkable, very
centrally-located neighborhood.
[Gentrification is] an emotional tinderbox. People who are just going about their lives
are having to face eviction, displacement, or just have to spend a lot more on housing
if they want to stay where they are because of forces completely out of their control.
In other words, you could be doing everything “right” in your life—being a responsible
citizen, earning a viable income and doing your best—but it still isn’t good enough.
Not unlike the tragedy of having your house destroyed by a natural phenomenon like
a hurricane or a flood, you could become a victim of the “greed phenomenon” where
53
developers look with dollar signs in their eyes at the house you live in with the intention
of razing it and building a hugely profitable and expensive condo building there instead.
For low-income individuals pushed out of their neighborhoods, the process of gentrification
often produces traumatic effects. In addition to the financial costs of an unwanted move,
gentrification often shatters valuable personal networks. People who have lived their entire
lives within a small geographic area may suddenly find themselves separated from the friends
and family who provide emotional support and economic resources that serve as a vital buffer
against the ills of poverty.
Many activists have suggested that rent control laws are the best solution to problems spawned
by gentrification. Rent control legislation comes in a variety of forms but most often puts
caps on the amount of rent that a landlord can charge (first-generation controls) and/or
requires that prices for rented properties do not increase by more than a certain percent each
year (second-generation controls). Rent controls, activists argue, allow existing tenants to stay
in their homes while continuing to devote the same percentage of their incomes to rent has
they have in the past.
Economists have a very different perspective on fighting gentrification with rent control
mechanisms. American legal economists are typically opposed to rent controls. Often heatedly
so. To understand why, put yourself in the shoes of a landlord in a city that holds the price
of rent below what the market will bear. How would you respond if you were forced to
provide a service for less than the market price? First and foremost, you probably wouldn’t
build any new rental housing units. Why? Because you’d almost certainly make more money
if you used your capital to build something that’s not regulated by the government. Ultimately,
the lack of proper incentive to build apartments lowers the supply of rental housing and
thereby increases the price (for anyone who doesn’t qualify for rent controls). Second, you
might decide to skimp on the maintenance of your rent-controlled unit in order to recoup
some of the lost profits. After all, will a tenant in a rent-controlled apartment really give up
their unit if you don’t respond to their request to fix the sink?
So goes the theory, at any rate—and it is a theory that has found expression in judicial
opinions, particularly among those judges of the U.S. Court of Appeals for the Seventh Circuit
who moonlight as academic legal economists of the so-called “Chicago School.” See Chicago
Board of Realtors, Inc. v. City of Chicago, 819 F.2d 732, 741-42 (7th Cir. 1987) (Opinion of
Posner, J.). In apparent agreement with these theoretical arguments, very few American
jurisdictions today maintain rent control policies—only New York, Los Angeles, and a few
places in the Bay Area have significant rent control laws. State and local governments are
54
much more likely to attack problems of affordable housing by either giving rent vouchers to
the poor or building government-owned housing projects (are these better options?).
But perhaps the legal economists of a generation ago were mistaken—or at least insufficiently
sensitive to the potential variety of rent control measures and the diversity of urban
environments in which they can be deployed. While first-generation rent control measures
have few academic defenders in the United States, there is some suggestion that the actual
empirics of second-generation rent controls and other tenant protections may diverge from
the dire theoretical predictions of the Chicago School. In particular, the effects of rent control
on the supply, quality, and distribution of rental housing may depend significantly on the
nature of the protective regulation imposed, the density of existing housing stock, availability
of vacant land, the mix of other regulatory constraints on land use in general and housing in
particular, and idiosyncrasies of the local economy—particularly the degree of competition
among landlords. See generally Richard Arnott, Time for Revisionism on Rent Control?, 9 J. ECON.
PERSPECT. 99 (1995); Bengt Turner & Stephen Malpezzi, A review of empirical evidence on the costs
and benefits of rent control, 10 SWED. ECON. POLICY REV. 11 (2003). Outside of the United States,
moreover, economists and politicians are less antagonistic toward rent control. Paris, for
example, recently passed a law capping many rents. Germany, the Netherlands, and Sweden
also have widespread limitations on how much rent landlords can charge.
Notes and Questions
1. Europe v. America. What do you think accounts for the different views on rent
control between European policy makers and their American counterparts?
2. Getting to Affordability. If rent control isn’t the answer, what steps should
government take to ensure access to affordable housing? Should the government have
any role at all in the housing market? Before the Great Depression the federal
government played almost no part housing policy. How should government housing
policy regarding affordable housing fit into the mix of economic regulations addressing
problems of poverty and equity?
E.
Wrapping Up
The following rental agreement is modeled on an actual lease that a friend of the casebook
authors was asked to sign. Do you see any potential problems for a tenant? Would you sign
this lease?
55
Residential Rental Agreement and Contract
THIS AGREEMENT (hereinafter known as the “Lease” or the “Agreement”) is made and
entered into this 1st day of September 2015, between Peter Rabbit (hereinafter referred to as
the “Tenant”) and Mr. McGregor (hereinafter referred to as the “Landlord”). In exchange
for valuable consideration, the landlord and tenant agree to the following:
1. Property. The landlord owns certain real property and improvements at 123 Vegetable
Garden Way, Potterville, Beatrixia (hereinafter referred to as the “Property” or the
“Premise”). The Landlord wishes to lease the Premise to the Tenant upon the terms and
conditions stated in this Lease. The Tenant wishes to lease the Premise from the Landlord
upon the terms and conditions stated in this Lease.
2. Term. This agreement shall commence on September 1, 2015 and shall commence on
August 31, 2018 at 11:59 PM. Upon any termination of the Agreement, the Tenant will pay
off all outstanding bills, remove all personal property from the Premise, bring the leased
premise back to the condition it was in upon move-in (excepting normal wear and tear),
peacefully vacate the premise, return all keys to the Landlord, and give the Landlord a
forwarding address.
3. Holdovers. If the Tenant holds over after the termination of the lease, a new tenancy from
month-to-month shall be created. Under the new month-to-month lease the Tenant shall be
responsible for double the agreed upon rent.
4. Rent. The Tenant shall pay the landlord $1000 per month as rent for the entire term of the
agreement. The rent shall be due on the 1st day of each calendar month. Weekends, holidays,
and religious observances do not excuse the Tenant’s obligation to make timely payments.
5. Delivery of Possession. The Landlord shall not be held liable for any failure to deliver
possession of the Premise by the starting date of the agreed upon term.
6. Late Fees. A late fee of 5% shall be due if the rent is received after the 5th day of the month.
A late of 10% shall be due if the rent is received after the 10th day of the month. Acceptance
of a late fee does not affect or waive any other right or remedy the Landlord may exercise for
Tenant’s failure to timely pay rent.
56
7. Returned Checks. In the event that any payment by the Tenant is returned for insufficient
funds or if the Tenant stops payment, the Tenant will pay $100 to the Landlord for each such
event, in addition to the Late Fees described above.
8. Security Deposit. The Tenant shall deposit with the Landlord $1500 as a security deposit
for this Agreement. All interest that accrues on such a security deposit shall belong to the
Landlord alone. The Landlord may use the deposit money for any and all purposes allowed by
law.
9. Utilities. It is the responsibility of the Tenant to obtain all utilities for the leased Property.
Tenant’s failure to make any payment for the utilities shall constitute a material breach of the
agreement. The Landlord shall not be held liable for any failure to deliver any utility service
or for any damage caused by a problem with any utility service, whatever the cause of such
problem. The Tenants do hereby waive any claim for damages that result from any problem
with utility service.
10. Keys. The Tenant shall not install any new locks anywhere on the property or make any
copies of the keys. The Tenant also shall refrain from providing any keys to any person not
listed on this Agreement. When the lease terminates, the Tenant shall return all keys to the
Landlord.
11. Pets. No pets of any kind, type, or breed shall be allowed on the property without the
Landlord’s express written consent. This consent, if given, will require an additional pet
deposit.
12. Use of the Premise. The premise shall be used and occupied solely by the Tenant. Tenant
shall not allow any other person to use or occupy the premise without first obtaining
Landlord’s written consent. No part of the Premise shall be used at any time during the term
for any business, trade, or other commercial purpose. Additionally, the tenant agrees to
comply with all local, state, and federal laws, regulations, and ordinances. No part of the
property may be used in any way that aids or advances a criminal enterprise.
13. Assignments and Subletting. The Tenant shall not license, assign, or sublet the Property
and/or this agreement without the written consent of the Landlord. An assignment, subletting
or license without the Landlord’s written consent shall be considered absolutely null and void
and, at the Landlord’s option, terminate this Agreement.
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14. Alterations. The Tenant shall make no alterations to the Premise without written consent
of the Landlord. If the Tenant makes any unauthorized improvement, modification, or change
to the Property, the landlord has the option to charge the Tenant the cost of restoring the
Premise to its original condition. In the event that the Landlord approves an alteration made
by the Tenant, such alternations shall become the property of the Landlord and remain on the
Property.
15. Maintenance & Repair. Except for normal wear and tear, the Tenant shall maintain the
Premise in the condition it was upon the starting date of the Agreement. Should any damages,
malfunctions, breakages, or other problems occur during the course of the Lease, the Landlord
shall have a reasonable amount of time to complete such repairs. During that time, the
Tenant’s rent shall remain due in full and on time despite any hardships such repairs or delays
may cause. Tenant also has a contractual duty to (1) notify Landlord of any problems with
the leased premise, (2) Deposit all trash, rubbish, refuse, and garbage in the trash cans provided
by the city, (3) keep all windows, doors, and locks in good order, (4) inspect the fire alarms
each and every month.
16. Noise. The Tenant and the Tenant’s guests shall at all times keep the level of sound down
to a level that does not annoy or interfere with other residents or neighbors.
17. Sale of the Property. The Landlord shall have the right to sell or transfer his ownership of
the Property and this Agreement at any time and without restriction. Upon sale or transfer of
the Landlord’s interest, this agreement may be terminated by either the Landlord or the party
who purchases the Landlord’s interest. The Tenant agrees to release, waive, and hold harmless
the Landlord and the Landlord’s successor from all liabilty if such a transfer occurs.
18. Access. The Landlord and his agents shall have the right to enter the Property without
notice to inspect the property, make repairs, or show the property to prospective tenants or
purchasers.
19. Condition of the Premise. The Landlord makes no guarantees or warranties about the
condition of the leased premise. The Tenant assumes all risk of injury or harm stemming from
any accidents or criminal acts occurring on or around the Premise. The Tenant agrees to hold
the Landlord harmless for all liability stemming any injury or harm to the Tenant, Tenant’s
property, or Tenant’s guests. The Tenant further agrees to indemnify, defend, and hold
harmless the Landlord from any and all claims over the condition of the premise. Should the
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Tenant damage the Premise, he shall indemnify the Landlord for all costs of repair or
replacement within 30 days.
20. Natural Disaster. In the event of a natural disaster, fire, or other catastrophic event, the
Landlord may choose not to repair the Premise, in which case the Lease shall terminate. The
Landlord may also elect to fix the Premise, in which case the Tenant must continue to pay the
full monthly rent so long as the repairs are completed within a reasonable time. In either case,
any and all damages and injuries connected to acts of the Tenant, his guests, or property shall
be the sole financial responsibility of the Tenant.
21. Eminent Domain. If a government or private entity takes the Premise or any part of the
Premise by eminent domain, this Lease shall terminate. The new termination shall be the date
of the final taking order. Any award or court judgment in favor of the Landlord in an eminent
domain case or any settlement award stemming from an eminent domain proceeding shall
belong to the Landlord in full. The Tenant shall have no claim over such awards.
22. Attorney’s Fees. Tenant agrees to pay all reasonable attorney’s fees, court costs, and other
expenses if it becomes necessary for the Landlord to enforce any of the conditions of
covenants of this Lease, including but not limited to eviction proceedings, collection of rents,
and damage to the Premise caused by the Tenant. The Tenant also agrees to indemnify the
Landlord for all attorney’s fees, court costs, and other expenses that the Landlord may incur
while successfully defending a lawsuit brought by the Tenant.
22. Abandonment. If at any time during the term of this Lease the Tenant abandons the
Premise, the Landlord may obtain possession of the Premise in any manner provided for by
law. Any personal property left behind shall be considered abandoned. The Landlord may
dispose of such personal property in any manner he deems fit and is released of all liability for
doing so.
23. Severability. If any portion of this Lease shall be found unenforceable, invalid, or void
under any law or public policy, that portion of the Lease shall be severed from the remainder
of the Agreement. All remaining portions of the Agreement will remain in effect and
enforceable.
24. Governing Law. This lease shall be governed and interpreted under the laws of the
Commonwealth of Beatrixia.
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25. Non-Waiver. No delay or non-enforcement of any term of this Agreement by the
Landlord shall not be deemed a waiver. All terms and conditions of this Agreement shall
remain fully enforceable should the Landlord seek to enforce any condition or covenant at a
later date, even if the Landlord has intentionally or unintentionally neglected to do so in a
previous instance.
26. Notices. Any notice required or permitted under this Agreement must be written on 8½
x 11 paper and sent by United Parcel Service (UPS). Notice shall be sent to the address of the
Property for the Tenant or to 345 Bunny Pie Lane, Potterville, Beatrixia for the Landlord.
27. Spelling and Grammar. Any mistakes in spelling, grammar, punctuation, or gender usage
shall not be fatal to the Agreement. Rather, they shall be interpreted to carry out the intent of
the parties.
28. Default. Tenant shall be in default of this Agreement if he fails to comply with any
covenant, condition or term and/or fails to pay rent when due and/or causes damage to the
Premise during the term which cumulatively equals or exceeds $100. Should the Tenant ever
default, the Landlord may with or without notice either (1) terminate the Lease or (2)
terminate the Tenant’s right to possession of the Premise while leaving this Agreement
operative. If the Landlord elects option (2), the Landlord will have the immediate right to
possess the Premises and the Tenant shall lose all possessory rights and have the obligation to
immediately vacate the Premise. However, the Tenant shall still have the duty to pay all rents,
fees and expenses mandated under this Agreement and/or by the judicial system until either
the agreed upon term concludes or the property is re-rented at a monthly rate not less than
the amount owned under this Agreement with any negative balance owed by the Tenant.
____________________
Tenant Signature
_____________________
Date
____________________
Landlord Signature
_____________________
Date
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How to Brief or IRAC a case:
Issue:
A good issue statement includes the party names, the name of the rule
of law the brief is analyzing, and a key fact. What is the issue before the court?
What Problem is the court trying to solve? The issue should be one or two
sentences, state the party names and the relevant legal terms.
Rule:
The rule is the law that governs the outcome of the case. It should be
stated as a general principle and not include any party names or facts. The
rule should be stated as a list or an outline- not in paragraph form.
Application:
The application is a discussion of how the rule applies to the facts of a case.
The application shows how you can analyze arguments on both sides and
is the most important skill you will learn. The application is normally paragraphs long.
It should be a written debate – not simply a statement of the conclusion. Whenever possible,
present both sides of any issue.
Conclusion:
What was the result of the case? Did the appellate or supreme court affirm,
reverse or reverse and remand the lower court’s decision? The case gives you a background
of the facts along with the judge’s reasoning and conclusion. When you brief cases,
you are summarizing the judge’s opinion.

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