HAPTER 29
REAL PROPERTY AND LANDLORD-TENANT LAW

© Olga Danylenko/Shutterstock.com

Some men have staked claims to land for its oil; others, for its gold. But Paul Termarco and Gene Murdoch are staking their claim to an island using … hot dogs. Their quest to market frankfurters in the New Jersey wilderness has made their children blush with embarrassment, their wives shrug in bewilderment, and strangers burst into laughter. But for three years, the two friends from West Milford have sold chili dogs, cheese dogs, and the ever-traditional, hold-everything-but-the-mustard hot dogs from a tiny island in Greenwood Lake. Now it seems as though everyone knows about “Hot Dog Island.”

But Paul Termarco and Gene Murdoch are staking their claim to an island using …. hot dogs.

“People love it,” said Termarco. “They say, ‘Thank you for being here.’ I always say, ‘No. Thank you.’” The personalized service and the inexpensive prices (hot dogs cost $1.75; chili dogs, cheese dogs, and sauerkraut, $2) have cultivated a base of regulars. “I think it’s great. It’s better than going to a restaurant for two hours and spending a lot of money,” said Joan Vaillant, who frequently jet-skis to the island for hot dogs slathered in mustard.

At two-eighths of an acre, the island’s pile of craggy rocks, scrubby bushes, and a few ash trees are difficult to spot. Termarco doesn’t mind. “Not everyone can say they own an island,” he boasted. Termarco and Murdoch decided to claim the slip of land after chatting with a local restaurateur a few years ago. Termarco had just finished suggesting that the man expand his lakeside business to the island when Murdoch kicked his friend under the table.

“We left thinking, ‘We can do this ourselves,’”said Murdoch, who rushed to the township offices the following day to see who owned the island. Property records showed that the state owned the lake and lake floor, but nobody owned the island. An attorney told them about the law of adverse possession written in the 1820s. If Murdoch and Termarco could show that they used the island for five years, it would be theirs. As crazy as the scheme sounded, Murdoch figured it was worth trying.¹

Can two friends acquire an island simply by pretending they own it? Possibly. The law of adverse possession permits people to obtain title to land by using it if they meet certain criteria, which we examine later in the chapter. Real property law can provide surprises.

29-1 NATURE OF REAL PROPERTY

Property falls into three categories: real, personal, and intellectual. Real property, which is the focus of this chapter, usually consists of the following:

• Land. Land is the most common and important form of real property. In England, land was historically the greatest source of wealth and social status, far more important than industrial or commercial enterprises. As a result, the law of real property has been of paramount importance for nearly 1,000 years, developing very gradually to reflect changing conditions. Some real property terms sound medieval for the simple reason that they aremedieval. By contrast, the common law of torts and contracts is comparatively new.

• Real property usually also includes anything underground (“subsurface rights”), and some amount of airspace above land (“air rights”).

• Buildings. Buildings are real property. Houses, office buildings, apartment complexes, and factories all fall in this category.

• Plant life. Plant life growing on land is real property whether the plants are naturally occurring, such as trees, or cultivated crops. When a landowner sells his property, plant life is automatically included in the sale, unless the parties agree otherwise. A landowner may also sell the plant life separately if he wishes. A sale of the plant life alone, without the land, is a sale of goods. (Goods, as you may recall, are movable things.)

• Fixtures. Fixtures are goods that have become attached to real property. A house (which is real property) contains many fixtures. The furnace and heating ducts were goods when they were manufactured and when they were sold to the builder because they were movable. But when the builder attached them to the house, the items became fixtures. By contrast, neither the refrigerator nor the grand piano is a fixture.

When an owner sells real property, the buyer normally obtains the fixtures unless the parties specify otherwise. Sometimes it is difficult to determine whether something is a fixture. The general rule is this: An object is a fixture if a reasonable person would consider the item to be a permanent part of the property, taking into account attachment, adaptation, and other objective manifestations of permanence:

• Attachment. If an object is attached to property in such a way that removing it would damage the property, it is probably a fixture. Heating ducts could be removed from a house, but only by ripping open walls and floors, so they are fixtures.

• Adaptation. Something that is made or adapted especially for attachment to the particular property is probably a fixture, such as custom-made bookshelves fitted in a library.

• Other manifestations of permanence. If the owner of the property clearly intends the item to remain permanently, it is probably a fixture. Suppose a homeowner constructs a large concrete platform in his backyard, then buys a heavy metal shed and bolts it to the platform. His preparatory work indicates that he expects the shed to remain permanently, and a court would likely declare it a fixture.

29-2 CONCURRENT ESTATES

When two or more people own real property at the same time, they have concurrent estates. The most common forms of concurrent estates are tenancy in common, joint tenancy, and tenancy by the entirety.

29-2A TENANCY IN COMMON

The most common form of concurrent estate is tenancy in common. Suppose Patricia owns a house. Patricia agrees to sell her house to Quincy and Rebecca. When she conveys the deed (that is, transfers the deed) “to Quincy and Rebecca,” those two now have a tenancy in common. This kind of estate can also be created in a will. If Patricia had died still owning the house and left it in her will to “Sam and Tracy,” then Sam and Tracy would have a tenancy in common. Tenancy in common is the “default setting” when multiple people acquire property. Co-owners are automatically considered tenants in common unless another type of interest (joint tenancy, tenancy by the entirety) is specified.

Tenancy in common
Two or more people holding equal interest in a property, but with no right of survivorship

A tenancy in common might have two owners, or 22, or any number. The tenants in common do not own a particular section of the property; they own an equal interest in the entire property. Quincy and Rebecca each own a 50 percent interest in the entire house.

Any co-tenant may convey her interest in the property to another person. Thus, if Rebecca moves 1,000 miles away, she may sell her 50 percent interest in the house to Sidney.

PARTITION

Since any tenant in common has the power to convey her interest, some people may find themselves sharing ownership with others they do not know or, worse, dislike. What to do? Partition, or division of the property among the co-tenants. Any co-tenant is entitled to demand partition of the property. If the various co-tenants cannot agree on a fair division, a co-tenant may request a court to do it. All co-tenants have an absolute right to partition.

A court will normally attempt a partition by kind, meaning that it actually divides the land equally among the co-tenants. If three co-tenants own a 300-acre farm and the court can divide the land so that the three sections are of roughly equal value, it will perform a partition in kind, even if one or two of the co-tenants oppose partition. If partition by kind is impossible because there is no fair way to divide the property, the court will order the real estate sold and the proceeds divided equally.

Partition by kind
A court’s equal division of a property among co-tenants

29-2B JOINT TENANCY

Joint tenancy is similar to tenancy in common but is used less frequently. The parties, called joint tenants, again own a percentage of the entire property and also have the absolute right of partition. The primary difference is that a joint tenancy includes the right of survivorship. Recall that a tenant in common, by contrast, has the power to leave his interest in the real estate to his heirs. Because a joint tenant cannot leave the property to his heirs, courts do not favor this form of ownership. The law presumes that a concurrent estate is a tenancy in common; a court will interpret an estate as a joint tenancy only if the parties creating it clearly intended that result.

Joint tenancy
Two or more people holding equal interest in a property, with the right of survivorship

Joint tenancy has one other curious feature. Although joint tenants may not convey their interest by will, they may do so during their lifetime. If Frank and George own vacation property as joint tenants, Frank has the power to sell his interest to Harry. But as soon as he does so, the joint tenancy is severed, that is, broken. Harry and George are now tenants in common, and the right of survivorship is destroyed.

EXAM STRATEGY

Question: Thomas, aged 80, has spent a lifetime accumulating unspoiled land in Oregon. He owns 16,000 acres, which he plans to leave to his five children. He is not so crazy about his grandchildren. Thomas cringes at the problems the grandchildren would cause if some of them inherited an interest in the land and became part-owners along with Thomas’s own children. Should Thomas leave his land to his children as tenants in common or joint tenants?

Strategy: When a co-tenant dies, her interest in property passes to her heirs. When a joint tenant dies, his interest in the property passes to the surviving joint tenants.

Result: Thomas is better off leaving the land to his children as joint tenants. That way, when one of his children dies, that child’s interest in the land will go to Thomas’s surviving children, not to his grandchildren.

29-3 ADVERSE POSSESSION

Recall Paul Termarco and Gene Murdoch, who opened this chapter by trying to sell us a hot dog from the middle of a New Jersey lake. The pair had their sights set on more than mustard and relish: They hoped that by using the island as if they owned it, they wouldown it. They were relying on the doctrine of adverse possession. Adverse possessionallows someone to take title to land if she demonstrates possession that is (1) exclusive;(2) notor-ious; (3) adverse to all others; and (4) continuous.

Adverse possession
Allows someone to take title to land without paying for it, if she meets four specific standards

29-3A ENTRY AND EXCLUSIVE POSSESSION

The user must take physical possession of the land and must be the only one to do so. If the owner is still occupying the land, or if other members of the public share its use, there can be no adverse possession.

29-3B OPEN AND NOTORIOUS POSSESSION

The user’s presence must be visible and generally known in the area, so that the owner is on notice that his title is contested. This ensures that the owner can protect his property by ejecting the user. Someone making secret use of the land gives the owner no opportunity to do this, and hence acquires no rights in the land.

29-3C29-3B A CLAIM ADVERSE TO THE OWNER

The user must clearly assert that the land is his. He does not need to register a deed or take other legal steps, but he must act as though he is the sole owner. If the user occupies the land with the owner’s permission, there is no adverse claim, and the user acquires no rights in the property.

29-3D CONTINUOUS POSSESSION FOR THE STATUTORY PERIOD

State statutes on adverse possession prescribe a period of years for continuous use of the land. Originally, most states required about 20 years to gain adverse possession, but the trend has been to shorten this period. Many states now demand 10 years, and a few require only five years of use. The reason for shortening the period is to reward those who make use of land.

Regardless of the length required, the use must be continuous. In a residential area, the user would have to occupy the land year round for the prescribed period. In a wilderness area generally used only in the summer, a user could gain ownership by seasonal use.

How did Murdoch and Termarco fare? They certainly entered on the land and established themselves as the exclusive occupants. Their use has been open and notorious, allowing anyone who claimed ownership to take steps to eject them from the property. Their actions have been adverse to anyone else’s claim. If the two hot dog entrepreneurs have grilled those dogs for the full statutory period, they should take title to the island.

In the following case, the couple claiming adverse possession have taken up residence in a ghost town.

RAY V. BEACON HUDSON MOUNTAIN CORP.

88 N.Y.2d 154
Court of Appeals of New York, 1996

CASE SUMMARY

Facts: In 1931, Rose Ray purchased a cottage in a mountaintop resort town in the Adirondacks, at the same time agreeing to rent the land on which the structure stood. The long-term lease required her to pay the real estate taxes and provided that when the tenancy ended, the landlord would buy back the cottage at fair market value. In 1960, the landlord terminated the lease of everyone in the town, so Ray and all other residents packed up and left. She died in 1962, without ever getting a penny for the cottage. The next year, Mt. Beacon Incline Lands, Inc., bought all rights to the abandoned 156-acre resort.

Robert and Margaret Ray, the son and daughter-in-law of Rose Ray, reentered the cottage and began to use it one month per year, every summer from 1963 to 1988. They paid taxes, insured the property, installed utilities, and posted NO TRESPASSING signs.

In 1978, Beacon Hudson bought the resort in a tax foreclosure sale. Finally, in 1988, the Rays filed suit, claiming title to the cottage by adverse possession. Beacon Hudson counterclaimed, seeking to eject the Rays. The trial court ruled for the couple. The appellate court reversed, stating that the Rays had been absent too frequently to achieve adverse possession. The Rays appealed to New York’s highest court.

Issue: Did the Rays acquire title by adverse possession?

Decision: The Rays acquired title by adverse possession. Reversed.

Reasoning: To obtain property by adverse possession, the claiming party must prove continuous possession, among other elements. However, the actual occupancy need not be constant. The claimant must simply use the land as ordinary owners would.

Beacon Hudson argues that the Rays cannot demonstrate continuous possession because they only occupied the property one month per year. However, that argument fails to consider the Rays’ other acts of control over the premises. The couple maintained and improved the cottage and installed utilities. They also repelled trespassers, posted the land, and padlocked the cottage. These acts demonstrated continuous control of the property.

The Rays’ seasonal use of the cottage, along with the improvements described, put the owner on notice of the couple’s hostile and exclusive claim of ownership, especially considering that all neighboring structures had collapsed due to vandalism and neglect. The Rays have obtained title by adverse possession.

29-4 LAND USE REGULATION

29-4A ZONING

Zoning statutes are state laws that permit local communities to regulate building and land use. The local communities, whether cities, towns, or counties, then pass zoning ordinances that control many aspects of land development. For example, a town’s zoning ordinance may divide the community into an industrial zone where factories may be built, a commercial zone in which stores of a certain size are allowed, and several residential zones in which only houses may be constructed. Within the residential zones, there may be further divisions—for example, permitting two-family houses in certain areas and requiring larger lots in others.

Zoning statutes
State laws that permit local communities to regulate land use

Ethics Many people abhor “adult” businesses, such as strip clubs and pornography shops. Urban experts agree that having a large number of these concerns in a neighborhood often causes crime to increase and property values to drop. Nonetheless, many people patronize such businesses, which can earn a good profit. Should a city have the right to restrict adult businesses? Some cities have passed zoning ordinances that prohibit adult businesses from all residential neighborhoods, from some commercial districts, or from being within 500 feet of schools, houses of worship, daycare centers, or other sex shops (to avoid clustering). Owners and patrons of these shops have protested, claiming the restrictions unfairly deny access to a form of entertainment that the public obviously desires. Who are the stakeholders? What are the consequences of these restrictions?

29-4B EMINENT DOMAIN

Eminent domain is the power of the government to take private property for public use.A government may need land to construct a highway, an airport, a university, or public housing. All levels of government—federal, state, and local—have this power. But the Fifth Amendment to the United States Constitution states: “nor shall private property be taken for public use, without just compensation.” The Supreme Court has held that this clause, the Takings Clause, applies not only to the federal government, but also to state and local governments. So, although all levels of government have the power to take property, they must pay the owner a

29-4B EMINENT DOMAIN

Eminent domain is the power of the government to take private property for public use.A government may need land to construct a highway, an airport, a university, or public housing. All levels of government—federal, state, and local—have this power. But the Fifth Amendment to the United States Constitution states: “nor shall private property be taken for public use, without just compensation.” The Supreme Court has held that this clause, the Takings Clause, applies not only to the federal government, but also to state and local governments. So, although all levels of government have the power to take property, they must pay the owner a fair price.

Eminent domain
The power of the government to take private property for public use

A “fair price” generally means the reasonable market value of the land. Generally, if the property owner refuses the government’s offer, the government will file suit seeking condemnation of the land; that is, a court order specifying what compensation is just and awarding title to the government.

Condemnation
A court order awarding title of real property to the government in exchange for just compensation

A related issue arose in the following case. A city used eminent domain to take property on behalf of private developers. Was this a valid public use? The Kelodecision was controversial, and in response, some states passed statutes prohibiting eminent domain for private development.

KELO V. CITY OF NEW LONDON, CONNECTICUT

545 U.S. 469
United States Supreme Court, 2005

CASE SUMMARY

Facts: New London, Connecticut, was declining economically. The city’s unemployment rate was double that of the state generally, and the population was at its lowest point in 75 years. In response, state and local officials targeted a section of the city called Fort Trumbull for revitalization. Located on the Thames River, Fort Trumbull comprised 115 privately owned properties and 32 additional acres of an abandoned naval facility. The development plan included one section for a waterfront conference hotel and stores; a second one for 80 private residences; and one for research facilities.

The state bought most of the properties from willing sellers. However, nine owners of 15 properties refused to sell, and they filed suit. The owners claimed that the city was trying to take land for private use, not public, in violation of the Takings Clause. The case reached the United States Supreme Court.

Issue: Did the city’s plan violate the Takings Clause?

Decision: No, the plan was constitutional. Affirmed.

Reasoning: The Takings Clause allows for some transfers of real property from one private party to another, so long as the land will be used by the public. For example, land may be taken to allow for the construction of a railroad even if private railroad companies will be the primary beneficiaries of the transfer.

New London’s economic development plan aimed to create jobs and increase the city’s tax receipts. The Supreme Court had not previously considered this type of public use, but it now determined that economic development is a legitimate public purpose. New London did not violate the Takings Clause.

Dissent by Justice O’Connor: Any public benefit in this case would be incidental and secondary. Under the majority’s opinion, the government can now take private property for any purpose. This case will most likely benefit those with inside access to government officials at the expense of small property owners.

29-5 LANDLORD-TENANT LAW

Landlord-tenant law is really a combination of three areas of law: property, contract, and negligence. We begin our examination of landlord-tenant law with an analysis of the different types of tenancy.

When an owner allows another person temporary, exclusive possession of the property, the parties have created a landlord-tenant relationship. The owner is the landlord, and the person allowed to possess the property is the tenant. The landlord has conveyed a leasehold interest to the tenant, meaning the right to temporary possession. Courts also use the word tenancy to describe the tenant’s right to possession. A leasehold may be commercial or residential.

Leasehold
A right to possess real property temporarily

29-5A THREE LEGAL AREAS COMBINED

Property law influences landlord-tenant cases because the landlord is conveying rights in real property to the tenant. She is also keeping a reversionary interest in the property, meaning the right to possess the property when the lease ends. Contract law plays a role because the basic agreement between the landlord and tenant is a contract. A lease is a contract that creates a landlord-tenant relationship. And negligence law increasingly determines the liability of landlord and tenant when there is an injury to a person or property.

29-5B LEASE

The Statute of Frauds generally requires that a lease be in writing. Some states will enforce an oral lease if it is for a short term, such as one year or less, but even when an oral lease is permitted, it is wiser for the parties to put their agreement in writing because a written lease helps to avoid many misunderstandings. At a minimum, a lease must state the names of the parties, the premises being leased, the duration of the agreement, and the rent. But a well-drafted lease generally includes many provisions, called covenants and conditions. A covenant is simply a promise by either the landlord or the tenant to do something or refrain from doing something. For example, most leases include a covenant concerning the tenant’s payment of a security deposit and the landlord’s return of the deposit, a covenant describing how the tenant may use the premises, and several covenants about who must maintain and repair the property, who is liable for damage, and so forth. Generally, tenants may be fined but not evicted for violating lease covenants. A condition is similar to a covenant, but it allows for a landlord to evict a tenant if there is a violation. In many states, conditions in leases must be clearly labeled as “conditions” or “evictable offenses.”

Covenant
A promise to do or refrain from doing something

29-6 TYPES OF TENANCY

There are four types of tenancy: a tenancy for years, a periodic tenancy, a tenancy at will, and a tenancy at sufferance. The most important feature distinguishing one from the other is how each tenancy terminates. In some cases, a tenancy terminates automatically, while in others, one party must take certain steps to end the agreement.

29-6A TENANCY FOR YEARS

Any lease for a stated, fixed period is a tenancy for years. If a landlord rents a summer apartment for the months of June, July, and August of next year, that is a tenancy for years. A company that rents retail space in a mall beginning January 1, 2015, and ending December 31, 2018, also has a tenancy for years. A tenancy for years terminates automatically when the agreed period ends.

29-6B PERIODIC TENANCY

A periodic tenancy is created for a fixed period and then automatically continues for additional periods until either party notifies the other of termination. This is probably the most common variety of tenancy, and the parties may create one in either of two ways. Suppose a landlord agrees to rent you an apartment “from month to month, rent payable on the first.” That is a periodic tenancy. The tenancy automatically renews itself every month unless either party gives adequate notice to the other that she wishes to terminate. A periodic tenancy could also be for one-year periods—in which case it automatically renews for an additional year if neither party terminates—or for any other period.

29-6C TENANCY AT WILL

A tenancy at will has no fixed duration and may be terminated by either party at any time. Typically, a tenancy at will is vague, with no specified rental period and with payment, perhaps, to be made in kind. The parties might agree, for example, that a tenant farmer could use a portion of his crop as rent. Since either party can end the agreement at any time, it provides no security for either landlord or tenant.

29-6D TENANCY AT SUFFERANCE

A tenancy at sufferance occurs when a tenant remains on the premises, against the wishes of the landlord, after the expiration of a true tenancy. Thus, a tenancy at sufferance is not a true tenancy because the tenant is staying without the landlord’s agreement. The landlord has the option of seeking to evict the tenant or of forcing the tenant to pay rent for a new rental period.

29-7 LANDLORD’S DUTIES

29-7A DUTY TO DELIVER POSSESSION

The landlord’s first important duty is to deliver possession of the premises at the beginning of the tenancy; that is, to make the rented space available to the tenant. In most cases, this presents no problems, and the new tenant moves in. But what happens if the previous tenant has refused to leave when the new tenancy begins? In most states, the landlord is legally required to remove the previous tenant. In some states, it is up to the new tenant either to evict the existing occupant or begin charging him rent.

29-7B QUIET ENJOYMENT

All tenants are entitled to quiet enjoyment of the premises, meaning the right to use the property without the interference of the landlord. Most leases expressly state this covenant of quiet enjoyment. And if a lease includes no such covenant, the law implies the right of quiet enjoyment anyway, so all tenants are protected. If a landlord interferes with the tenant’s quiet enjoyment, he has breached the lease, entitling the tenant to damages.

Quiet enjoyment
The right to inhabit the property in peace

The most common interference with quiet enjoyment is an eviction, meaning some act that forces the tenant to abandon the premises. Of course, some evictions are legal, as when a tenant fails to pay the rent. But some evictions are illegal. There are two types of eviction: actual and constructive.

29-7C ACTUAL EVICTION

If a landlord prevents the tenant from possessing the premises, he has actually evicted her. Suppose a landlord decides that a group of students are “troublemakers.” Without going through lawful eviction procedures in court, the landlord simply waits until the students are out of the apartment and changes the locks. By denying the students access to the premises, the landlord has actually evicted them and has breached their right of quiet enjoyment.

29-7D CONSTRUCTIVE EVICTION

If a landlord substantially interferes with the tenant’s use and enjoyment of the premises, he has constructively evicted her. Courts construe certain behavior as the equivalent of an eviction. In these cases, the landlord has not actually prevented the tenant from possessing the premises, but has instead interfered so greatly with her use and enjoyment that the law regards the landlord’s actions as equivalent to an eviction. Suppose the heating system in an apartment house in Juneau, Alaska, fails during January. The landlord, an avid sled-dog racer, tells the tenants he is too busy to fix the problem. If the tenants move out, the landlord has constructively evicted them and is liable for all expenses they suffer.

To claim a constructive eviction, the tenant must vacate the premises. The tenant must also prove that the interference was sufficiently serious and lasted long enough that she was forced to move out. A lack of hot water for two days is not fatal, but lack of any water for two weeks creates a constructive eviction.

29-7E DUTY TO MAINTAIN PREMISES

In most states, a landlord has a duty to deliver the premises in a habitable condition and a continuing duty to maintain the habitable condition. This duty overlaps with the quiet enjoyment obligation, but it is not identical. The tenant’s right to quiet enjoyment focuses primarily on the tenant’s ability to use the rented property. The landlord’s duty to maintain the property focuses on whether the property meets a particular legal standard. The required standard may be stated in the lease, created by a state statute, or implied by law.

LEASE

The lease itself generally obligates the landlord to maintain the exterior of any buildings and the common areas. If a lease does not do so, state law may imply the obligation.

BUILDING CODES

Many state and local governments have passed building codes that mandate minimum standards for commercial property, residential property, or both. The codes are likely to be stricter for residential property and may demand such things as minimum room size, sufficient hot water, secure locks, proper working kitchens and bathrooms, absence of insects and rodents, and other basics of decent housing. Generally, all rental property must comply with the building code whether the lease mentions the code or not.

IMPLIED WARRANTY OF HABITABILITY

Students Maria Ivanow, Thomas Tecza, and Kenneth Gearin rented a house from Les and Martha Vanlandingham. The monthly rent was $900. But the roommates failed to pay any rent for the final five months of the tenancy. After they moved out, the Vanlandinghams sued. How much did the landlords recover? Nothing. The landlords had breached the implied warranty of habitability.

The implied warranty of habitability requires that a landlord meet all standards set by the local building code, or that the premises be fit for human habitation. Most states, though not all, imply this warranty of habitability, meaning that the landlord must meet this standard whether the lease includes it or not.

The Vanlandinghams breached the implied warranty. The students had complained repeatedly about a variety of problems. The washer and dryer, which were included in the lease, frequently failed. A severe roof leak caused water damage in one of the bedrooms. Defective pipes flooded the bathroom. The refrigerator frequently malfunctioned, and the roommates repaired it several times. The basement often flooded, and when it was dry, rats and opossums lived in it. The heat sometimes failed.

In warranty of habitability cases, a court normally considers the severity of the problems and their duration. In the case of Maria Ivanow and friends, the court abated (reduced) the rent 50 percent. The students had already paid more than the abated rent to the landlord, so they owed nothing for the last five months.²

DUTY TO RETURN SECURITY DEPOSIT

Most landlords require tenants to pay a security deposit, to be used to finance repairs in case the tenant damages the premises. In many states, a landlord must either return the security deposit soon after the tenant has moved out or notify the tenant of the damage and the cost of the repairs. A landlord who fails to do so may owe the tenant damages of two or even three times the deposit.

One tenant slept with blankets over her head, to keep heat in and bugs out.

Your authors are always grateful when plaintiffs volunteer to illustrate half a dozen legal issues in one lawsuit. The landlord in the following case demonstrates problems of security deposit, quiet enjoyment, constructive eviction, and, well, see how many you can count.

HARRIS V. SOLEY

2000 Me. 150
Supreme Judicial Court of Maine, 2000

CASE SUMMARY

Facts: Near Labor Day, Andrea Harris, Kimberly Nightingale, Karen Simard, and Michelle Dussault moved into a large apartment in the Old Port section of Portland, Maine. The apartment had been condemned by the city of Portland, but Joseph Soley, the landlord, assured the tenants that all problems would be repaired before they moved in. Not quite. When the women arrived, they found the condemnation notice still on the door, and the apartment an uninhabitable mess. Soley’s agent told the tenants that if they cleaned the unit themselves, they would receive a $750 credit on their first month’s rent of $1,000. So the four rented a steam cleaner, bought supplies, and cleaned the entire apartment. Unfortunately, their problems had only begun.

The tenants suffered a continuous problem with mice and cockroaches, along with a persistent odor of cat urine. They ultimately discovered a dead cat beneath the floorboards. During October, the apartment had no heat. One tenant slept with blankets over her head, to keep heat in and bugs out. In November, the women submitted a list of complaints to Soley, including a broken toilet, an inoperable garbage disposal, and a shattered skylight, as well as a leaking roof and cockroach infestation. Snow began to fall into the living room through the skylight.

Soley made no repairs, and the women stopped paying the rent. He phoned them several times, aggressively demanding payments. The tenants found another place to live, but before they had moved, Soley’s agents broke into the apartment and took many of their belongings. The tenants located Soley at the restaurant he owned and asked for their possessions back, but he refused to return the belongings unless they paid him $3,000. He threatened them by saying that he knew where their families lived.

The tenants sued, claiming breach of contract, conversion [wrongful taking of property], intentional infliction of emotional distress, wrongful eviction, and wrongful retention of a security deposit. Soley refused to respond to discovery requests, and eventually the trial court gave a default judgment for the plaintiffs. The judge instructed the jury that all allegations were deemed true, and their job was to award damages. The jury awarded damages for each of the claims, including $15,000 to each tenant for emotional distress and a total of $1 million in punitive damages. Soley appealed.

Issue: Are the tenants entitled to such large damages?

Decision: The tenants are entitled to all damages. Affirmed.

Reasoning: Soley argues that the identical awards to all four tenants indicates the verdict is a result of irrational thinking, passion, and prejudice. However, the jury could reasonably have found that the emotional distress suffered by each tenant deserved comparable compensation, even if the harm was not identical to each. Among the factual findings from the trial court was this statement:

The plaintiffs were shaken up, infuriated, violated, intimidated, and in fear for their physical safety. The conduct of [Soley] was so extreme and outrageous as to exceed all possible bounds of decency. Defendant acted intentionally, knowingly, willfully, wantonly, and with malice.

The jury was entirely justified in awarding substantial punitive damages. The tenants had to endure insect and rodent infestation, dead animals, and falling snow. Soley refused to repair conditions that made the apartment unfit for human habitation, violently removed the tenants’ property, destroyed some of their belongings, and threatened the young women. His conduct was utterly intolerable, and the verdict is reasonable.

29-8 TENANT’S DUTIES

29-8A DUTY TO PAY RENT

Rent is the compensation the tenant pays the landlord for use of the premises, and paying the rent is the tenant’s foremost obligation. The lease normally specifies the amount of rent and when it must be paid. Typically, the landlord requires that rent be paid at the beginning of each rental period, whether that is monthly, annually, or otherwise.

If the tenant fails to pay rent on time, the landlord has several remedies. She is entitled to apply the security deposit to the unpaid rent. She may also sue the tenant for nonpayment of rent, demanding the unpaid sums, cost of collection, and interest. Finally, the landlord may evict a tenant who has failed to pay rent.

State statutes prescribe the steps a landlord must take to evict a tenant for nonpayment. Typically, the landlord must serve a termination notice on the tenant and wait for a court hearing. At the hearing, the landlord must prove that the tenant has failed to pay rent on time. If the tenant has no excuse for the nonpayment, the court grants an order evicting him. The order authorizes a sheriff to remove the tenant’s goods and place them in storage, at the tenant’s expense. However, if the tenant was withholding rent because of unlivable conditions, the court may refuse to evict.

EXAM STRATEGY

Question: Leo rents an apartment from Donna for $900 per month, both parties signing a lease. After six months, Leo complains about defects, including bugs, inadequate heat, and window leaks. He asks Donna to fix the problems, but she responds that the heat is fine and that Leo caused the insects and leaks. Leo begins to send in only $700 for the monthly rent. Donna repeatedly phones Leo, asking for the remaining rent. When he refuses to pay, she waits until he leaves for the day, then has a moving company place his belongings in storage. She changes the locks, making it impossible for him to re-enter. Leo sues. What is the likely outcome?

Strategy: A landlord is entitled to begin proper eviction proceedings against a tenant who has not paid rent. However, the landlord must follow specified steps, including a termination notice and a court hearing. Review the consequences for actual eviction, described in the section “Quiet Enjoyment.”

Result: Donna has ignored the legal procedures for evicting a tenant. Instead, she engaged in actual eviction, which is quick and, in the short term, effective. However, by breaking the law, Donna has ensured that Leo will win his lawsuit. He is entitled to possession of the apartment, as well as damages for rent he may have been forced to pay elsewhere, injury to his possessions, and the cost of retrieving them. He may receive punitive damages as well. Bad strategy, Donna.

29-8B DUTY TO MITIGATE

Pickwick & Perkins, Ltd., was a store in the Burlington Square Mall in Burlington, Vermont. Pickwick had a five-year lease but abandoned the space almost two years early and ceased paying rent. The landlord waited eight months before renting the space to a new tenant and then sued, seeking the unpaid rent. Pickwick defended on the grounds that Burlington had failed to mitigate damages, that is, to keep its losses to a minimum by promptly seeking another tenant. The winner? Pickwick, the tenant. Today, most (but not all) courts rule that when a tenant breaches the lease, the landlord must make a reasonable effort to mitigate damages. Burlington failed to mitigate, so it also failed to recover its losses.

Mitigation
The duty to keep losses at a minimum

29-8C DUTY TO USE PREMISES PROPERLY

A lease normally lists what a tenant may do in the premises and prohibits other activities. For example, a residential lease allows the tenant to use the property for normal living purposes, but not for any retail, commercial, or industrial purpose. A tenant may never use the premises for an illegal activity, such as gambling or selling drugs, whether or not the lease mentions the issue. A tenant may not disturb other tenants, and a landlord has the right to evict anyone who unreasonably disturbs neighbors.

A tenant is liable to the landlord for any significant damage he causes to the property.The tenant is not liable for normal wear and tear. If, however, he knocks a hole in a wall or damages the plumbing, the landlord may collect the cost of repairs, either by using the security deposit or, if necessary, by suing.

29-9 CHANGE IN THE PARTIES

Sometimes the parties to a lease change. This can happen when the landlord sells the property or when a tenant wants to turn the leased property over to another tenant.

29-9A SALE OF THE PROPERTY

Generally, the sale of leased property does not affect the lease but merely substitutes one landlord, the purchaser, for another, the seller. The lease remains valid, and the tenant enjoys all rights and obligations until the end of the term. The new landlord may not raise the rent during the period of the existing lease or make any other changes in the tenant’s rights.

EXAM STRATEGY

Question: Julie, an MBA student, rents an apartment from Marshall for $1,500 a month. The written lease will last for two years, until Julie graduates. Julie moves in and enjoys the apartment. However, after 10 months, Marshall sells the building to Alexia, who notifies Julie that the new rent will be $1,750, effective immediately. If Julie objects, Alexia will give her one month to leave the apartment. Julie comes to you for advice. What are her options?

Strategy: What effect does the sale of leased property have on existing leases?

Result: Generally, the sale of leased property does not affect the lease but merely substitutes one landlord, the purchaser, for another, the seller. Alexia has no right to raise the rent during Julie’s tenancy. Julie is entitled to the apartment, for $1,500 per month, until the lease expires.

29-9B ASSIGNMENT AND SUBLEASE

A tenant who wishes to turn the property over to another tenant will attempt to assign the lease or to sublet it. In an assignment, the tenant transfers all of his legal interest to the other party. If a tenant validly assigns a lease, the new tenant obtains all rights and liabilities under the lease. The new tenant is permitted to use and enjoy the property and must pay the rent. However, the original tenant remains liable to the landlord unless the landlord explicitly releases him, which the landlord is unlikely to do. This means that if the new tenant fails to pay the rent on time, the landlord can sue both parties, old and new, seeking to evict both and to recover the unpaid rent from both.

Assignment
Process under which the original tenant transfers all of his rights and duties to a new tenant

A landlord generally insists on a covenant in the lease prohibiting the tenant from assigning without the landlord’s written permission. Some states permit a landlord to deny permission for any reason at all, but a growing number of courts insist that a landlord act reasonably and grant permission to sublease unless he has a valid objection to the new tenant.

29-10 INJURIES

29-10A TENANT’S LIABILITY

A tenant is generally liable for injuries occurring within the premises she is leasing, whether that is an apartment, a store, or something else. If a tenant fails to clean up a spill on the kitchen floor, and a guest slips and falls, the tenant is liable. If a merchant negligently installs display shelving that tips onto a customer, the merchant pays for the harm. Generally, a tenant is not liable for injuries occurring in common areas over which she has no control, such as exterior walkways. If a tenant’s dinner guest falls because the building’s common stairway has loose steps, the landlord is probably liable.

29-10B LANDLORD’S LIABILITY

Historically, the common law held a landlord responsible only for injuries that occurred in the common areas, or those due to the landlord’s negligent maintenance of the property. Increasingly, though, the law holds landlords liable under the normal rules of negligence law. In many states, a landlord must use reasonable care to maintain safe premises and is liable for foreseeable harm. For example, most states now have building codes that require a landlord to maintain structural elements in safe condition. States further imply a warranty of habitability, which mandates reasonably safe living conditions.

29-10C CRIME

Landlords may be liable in negligence to tenants or their guests for criminal attacks that occur on the premises. Courts have struggled with this issue and have reached opposing results in similar cases. The very prevalence of crime sharpens the debate. What must a landlord do to protect a tenant? Courts typically answer the question by looking at four factors:

1. Nature of the crime. How did the crime occur? Could the landlord have prevented it?

2. Reasonable person standard. What would a reasonable landlord have done to prevent this type of crime? What did the landlord actually do?

3. Foreseeability. Was it reasonably foreseeable that such a crime might occur? Were there earlier incidents or warnings?³

4. Prevalence of crime in the area. If the general area, or the particular premises, has a high crime rate, courts are more l