Leaseholds

Los Angeles rent escrow program upheld under constitutional challenge

/ Consumer Protection, Leaseholds

The Ninth Circuit upheld Los Angeles’s Rent Escrow Account Program that enables tenants to pay rent to a public account rather than to the landlord if the landlord fails to repair habitability violations. Sylvia Landfield Trust v. Los Angeles, 2013 WL 4779664 (9th Cir. 2013). The court found that the program served the legitimate government goal of ensuring compliance with regulations ensuring safe and habitable housing for tenants and that the program had adequate procedural safeguards to ensure it was not applied arbitrarily.

California Homeowner Bill of Rights regulate foreclosures

/ Consumer Protection, Leaseholds, Mortgages, Real Estate Transactions

California passed a statute on Jan. 1, 2013 called the California Homeowner Bill of Rights (Assembly Bill 278, ch. 86, adopted July 11, 2012) (effective Jan. 1, 2013). Among other things, it prohibits banks from proceeding with foreclosures if the homeowners is seeking a loan modification and it requires the bank to act on qualified applications for loan modifications. Cal. Civ. §2923.5.It also subjects banks to a penalty for recording unverified documents. Cal. Civ. §2924.17. It also prevents eviction of tenants who have fixed-term leases as long as those leases last even if the landlord loses the property to foreclosure before the end of the lease term and even if the lease was created after the mortgage. Cal. Civ. Proc. §1161b(b).

Landlord’s interference with 12 square feet of space (out of 15,000) is not a partial eviction entitlement tenant to full rent abatement

/ Leaseholds, Trespass

The New York Court of Appeals relaxed a traditional rule of property law by holding that a commercial landlord’s interference with possession of 12 square feet of space out of a total of 15,000 square feet does not constitute a partial actual eviction entitling the tenant to a full rent abatement. Eastside Exhibition Corp. v. 210 East 86th Street Corp., 965 N.E.2d 246 (N.Y. 2012). The court noted that withholding of the entire amount of rent is the proper remedy when there has been a partial eviction by a landlord but a partial eviction will not be found if the landlord’s intrusion is trivial and has no effect on the tenant’s use or enjoyment of the property. In this case, the landlord merely placed cross-bracing between two steel support columns on both of tenant’s floors in a manner that did not affect the tenant’s use or enjoyment of the leased premises. …

Landlord’s interference with 12 square feet of space (out of 15,000) is not a partial eviction entitlement tenant to full rent abatement Read More »

Loft landlord denied right to evict until housing is brought up to code

/ Consumer Protection, Leaseholds

The New York Court of Appeals has held that a loft owner who has not complied with regulations designed to ensure that lofts are habitable cannot collect rent or evict the residential tenant from her home. Chazon v. Maugenest, 971 N.E.2d 852 (N.Y. 2012). In one sense this is a straight-forward application of modern landlord/tenant law. The case is unusual because the tenant has been living in the loft without paying rent for nine years and because the tenant’s initial occupation was illegal since the property had been formerly used for commercial purposes and rented to a residential tenant in violation of New York City ordinances. The Court felt it had no discretion given the clear language of the loft law. That law had been intended to induce loft landlords to upgrade the property to make it habitable but hundreds of such landlords have still not complied with it despite the …

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Commercial landlord owes no duty of care to visitors inside leased premises

/ Leaseholds

The Massachusetts Appeals Court reaffirms that, unlike residential landlords, commercial landlords have no duty to repair the leased premises in the absence of a contractual obligation to do so. Marino v. Mystic Realty Trust, 2012 WL 4033738, 82 Mass. App. Ct. 1113 (Sept. 14, 2012). The opinion applied established Massachusetts law. Humphrey v. Byron, 850 N.E. 2d 1044 (Mass. 2006). A consequence of this no duty rule is that commercial landlords owe no duty to exercise reasonable care to assure that visitors are not subject to unreasonable risk of harm while on the leased premises. Commercial landlords do have a duty to maintain common areas and thus must protect visitors from unreasonable risk of harm there.

$2 million settlement agreement by landlord & building superintendent for systematic sexual harassment of tenants

/ Antidiscrimination Law, Fair Housing Act, Leaseholds, Trespass

On May 8, 2012, the U.S. Attorney’s office in Manhattan announced a $2 million settlement by a landlord, his building superintendent and the superintendent’s son to pay fines to tenants who were sexually harassed by the superintendent. The building superintendent was a convicted sex offender who served 14 years in prison for molesting or raping 3 girls and a woman before being hired by the landlord to run three buildings. The superintendent would enter women’s apartments while drunk and demand sex, retaliating when he did not get his way. Both the landlord and the superintendent are also barred by the agreement from owning or managing occupied properties. read article

Banks as landlords

/ Consumer Protection, Leaseholds, Mortgages, Real Estate Transactions

Banks that have obtained title to foreclosed properties traditionally would sell them quickly but the current real estate malaise resulting from the subprime crisis has made it difficult for them to do so. The result is that many properties remain on the books of the banks. Under state property law, the banks have the obligations all landowners have to comply with housing codes and the warranty of habitability. But many banks do not have established procedures for keeping track of all the individual properties they own, especially when the mortgages to those properties were securitized, making the owner of the trust that owns those mortgages the effective landlord of thousands of homes. Both localities and tenants are having to deal with the failure of banks to comply with regulations mandating maintenance of rental properties. read article.

Court enforces acceleration clause in a commercial lease without regard to whether landlord mitigated damages

/ Leaseholds, Real Estate Transactions

Many courts uphold acceleration clauses in commercial leases that require tenants to pay the rest of the rent due for the remainder of the lease term if the tenant breaches the lease. Such clauses are usually not enforced in the context of residential leases because they disclaim the duty to mitigate damages. The only issue for acceleration clauses in commercial leases is whether the amount exceeds a reasonable estimate of the likely damages from breach and thus constitute an invalid “penalty” rather than a valid liquidated damages clause. See, e.g., Cummings Properties, LLC v. National Communications Corp., 869 N.E.2d 617 (Mass. 2007). Many courts make this determination by assuming that the landlord still has a duty to mitigate damages by attempting to relet the premises and thus the remaining rent will be invalid if it far exceeds the damages that would be sustained if the landlord found a replacement tenant. See HealthSouth Rehabilitation Corp. …

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Eighth Circuit upholds finding that landlord sexually harassed a tenant in violation of the Fair Housing Act but affirms the trial court’s reduction of the jury’s punitive damages award

/ Antidiscrimination Law, Due Process, Fair Housing Act, Leaseholds

In Quigley v. Winter, 598 F.3d 938 (8th Cir. 2010),the Eighth Circuit upheld a trial court ruling that landlord sexually harassed tenant in violation of the Fair Housing Act (FHA), but it affirmed the  trial court’s reduction of the jury’s punitive damages award. The jury awarded $13,685 in compensatory damages and $250,000 in punitive damages. The trial court reduced the punitive damages award to $20,527.50. The landlord engaged in a variety of inappropriate behavior, rubbing tenant’s arm, standing close to her and rubbing his genital area, following tenant and her sister into the bedroom while conducting an inspection and they were in their pajamas and then refusing to leave until asked to do so three times, calling tenant while drunk at 2:30 or 3:00 am.  The Eighth Circuit held that a claim for hostile housing environment created by sexual harassment is actionable under the FHA, that there was sufficient evidence to find that landlord’s …

Eighth Circuit upholds finding that landlord sexually harassed a tenant in violation of the Fair Housing Act but affirms the trial court’s reduction of the jury’s punitive damages award Read More »

Texas courts allow fraud claims in real estate transactions despite a non-reliance clause

/ Leaseholds, Real Estate Transactions, Statute of Frauds

The states disagree about whether parties to real estate transactions can sue each other for fraud when the contract of sale contains a “non-reliance clause” stating that neither party is relying on any representations made by the other party that are not included in the written contract. Some states allow such claims on the ground that “fraud vitiates consent” and such clauses do not amount to agreements to be defrauded. But other states hold that such clauses immunize the contracting parties from claims of fraud based on oral statements made prior to the deal. The Texas Supreme Court has waffled on this issue, first holding that contracts can be avoided on the ground of fraudulent inducement, Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990), and then ruling that the sophisticated parties are free to bargain around this rule by non-reliance clauses, Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171 …

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