Leaseholds

Short-term rentals do not violate “residential use only” covenant

/ Concurrent or Common Ownership, Condominiums and Homeowners Associations, Leaseholds, Real Estate Transactions, Servitudes

The Mississippi Supreme Court has held that short term rental of property is not a commercial use that would violate a covenant limiting land to residential purposes. Lake Serene Prop. Owners Ass’n v. Esplin, 334 So.3d 1139 (Miss. 2022). There has been some disagreement among state courts on this question because the use of property as an Airbnb or other short term rental can be viewed as changing property to “hotel” use, at least when the owner does not share occupancy with the guest.

Tenants have mostly lost “frustration of purpose” claims when they could not pay rent during Covid-19 lockdowns

/ Leaseholds

In accord with most courts, the Connecticut Supreme Court held that a restaurant lease was not void for “frustration of purpose” when the restaurant tenant could not make rent payments because of a gubernatorial order for restaurants to shut down during the early stages of the Covid-19 disaster. AGW Sono Partners, LLC v. Downtown Soho, LLC, 273 A.3d 186 (Conn. 2022). The court found that the lease did not prevent the restaurant from selling food for take-out rather than for consumption in a sit-down restaurant. Nor did the lease contain a “force majeur” clause which (depending on its wording) might or might not classify the pandemic as an “act of God” or similar problem that would entitle the tenant to get out of its lease obligations. A Massachusetts court came to the opposite conclusion when the lease language limited the tenant to operating “only a café with a sit-down restaurant menu and …

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Extended stay hotel residents are tenants

/ Homelessness, Leaseholds

A Georgia court has ruled that residents of extended stay hotels should be classified as tenants with the protections granted by landlord-tenant law. That means they can be removed only by court eviction procedures rather than self-help. Efficiency Lodge, Inc. v. Neason, 870 S.E.2d 549 (Ga. 2022).

Covenants that prohibit all leasing restrictions include short-term rentals

/ Leaseholds, Servitudes

The Texas Supreme Court has held that covenants that prohibit all restrictions on leasing cannot prohibit short term rentals, finding that a lease is still a lease if it only lasts for one day. JBrice Holdings, LLC v. Wilcrest Walk Townhomes Ass’n, Inc., 2022 WL 1194364 (Tex. 2022). In addition, short-term rentals were held not to be “commercial” or “non-residential uses.” The court noted that the covenants provided that they could be retroactively amended through a 75% vote of the owners.

Probation on discriminating against Section 8 recipients does not violate due process

/ Antidiscrimination Law, Due Process, Leaseholds, Real Estate Transactions

The Minnesota Supreme Court has held that a state statute that prohibits landlords from refusing to rent to housing voucher (Section 8) recipients does not violate the due process or equal protection clauses of the Minnesota Constitution. Fletcher Properties, Inc. v. City of Minneapolis, 947 N.W.2d 1 (Minn. 2020). While federal law does not require landlords to rent to tenants whose rent is subsidized by housing vouchers, some states do impose this obligation on landlords. Some landlords object to the Section 8 program because it imposes procedures and costs on such landlords and some substantive terms such as prohibiting eviction without good cause. The court held that the law did not deprive landlords of due process of law because the legislature could reasonably believe that it served the public purpose of enabling voucher holders to find housing. And the fact that some landlords were exempt from the statutory obligations did not violate …

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Banks are both owners and landlords when they buy tenant-occupied property at a foreclosure sale

/ Leaseholds, Mortgages, Real Estate Transactions

Banks seem to have a hard time understanding that when they obtain title to property through a foreclosure sale that they not only own the property but have taken on themselves all the obligations that an owner has. If the property is occupied by tenants, the bank-owner is automatically the new landlord and the law imposes duties on landlords. The law also requires owners not to let their property become a nuisance. But this simple legal truth is repeatedly resisted by some banks. This rule extends to any entity that is the legal owner of the property and that includes the trustee of residential mortgage-backed securities that purchases the property at a foreclosure sale. The Maryland Court of Appeals ruled in Hector v. Bank of New York Mellon, 473 Md. 535, 251 A.3d 1102 (Md. 2021), that a lender that becomes a property owner by buying property at a foreclosure sale …

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Eviction moratorium does not violate contract clause

/ Contracts Clause, Leaseholds

The Ninth Circuit upheld a city eviction moratorium against a contracts clause challenge. Apartment Ass’n of Los Angeles County, Inc. v. City of Los Angeles, 2021 WL 3745777 (9th Cir. 2021). While the law did affect contract rights, it was reasonable and appropriate and did not constitute retroactive deprivation of vested rights as required for the clause to apply. The court cited Home Building & Loan Ass’n v. Blaisdell, 290 U.S. 398 (1934), a Supreme Court precedent that was on point and has not been repudiated by the current Court.  The Ninth Circuit also cited the recent 2018 case of Sveen v. Melin, 138 S. Ct. 1815 (2018) which adopted a two-step test, asking whether the law imposes a “substantial” impairment of contract rights, and, if so, whether the law is “appropriate” and  “reasonable” way to advance a legitimate public purpose.  The court did not reach the question of whether the …

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Sexual harassment of tenant by property manager violates Fair Housing Act

/ Antidiscrimination Law, Fair Housing Act, Leaseholds

The Eleventh Circuit joins other courts that have held that sexual harassment by a landlord (or an agent of the landlord) can constitute sex discrimination in violation of the Fair Housing Act, 42 U.S.C. §3601 to §3613 if the behavior would not have occurred but for the tenant’s sex. This formulation has been adopted by other courts, see United States v. Hurt, 676 F.3d 649 (9th Cir. 2012), Quigley v. Winter, 598 F.3d 938 (8th Cir. 2010), and suggests that a landlord that sexually harasses both men and women would not be liable for engaging in sex discrimination — a result that would enable landlords to insulate themselves from liability by choosing to harass tenants indiscriminately.

Damages awarded tenant when landlord threatens to engage in illegal self-help eviction

/ Consumer Protection, Leaseholds, Real Estate Transactions

The Maryland Supreme Court held that residential tenants can sue for damages if the landlord posts a notice telling them that they are being evicted. This constitutes a form of “nonjudicial self-help eviction” prohibited by state law, which requires landlords to use court eviction procedures to recover possession of the premises. State law would have allowed self-help eviction only if the landlord had a reasonable belief based on a reasonable inquiry that the tenants had abandoned the premises, something that did not happen in this case. Wheeling v. Selene Finance LP,2021 WL 1712318 (Md. 2021). The court found that a threat to use self-help eviction violated the statute and that this allowed a suit for damages under the state statute prohibiting self-help eviction, Md. Real Prop. art. §7-113, and a suit for emotional damages under the Maryland Consumer Protection Act, Md. Commercial Law art. §13-101 et seq.

Commercial lease disclaimer of liability for negligence held to be enforceable

/ Leaseholds

A California appeals court has found a disclaimer of liability for negligence in a commercial lease to be enforceable and not to violate public policy even though a state statute made them invalid as to cases involving fraud, willful injuries, gross negligence, or violations of law. Garcia v. D/AQ Corp., 271 Cal. Rptr. 3d 861 (Ct. App. 2020). This case did not fit in those categories since the tenant hit his head on a low beam at the top of a flight of stairs and the landlord had not engaged in an intentional tort or willfully caused the injury. Since none of the statutory categories applied, and this involved a commercial lease, the court held that the parties had the freedom to agree to the disclaimer of tort liabilty and that this did not violate public policy under either the statute or the common law.

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