2. 5 Property Personal Property and Bailments Real Property
Landlord and Tenant
Estates and Trusts
Insurance Law
McGraw-Hill/Irwin Business Law, 13/e
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.

3. 25 C H A P T E R
Landlord and Tenant
“Justice, though she’s painted blind, is to the weaker side inclined.”
Samuel Butler

4. Learning Objectives Nature of leases and tenancies
Landlord’s rights, duties, and liabilities
Tenant’s rights, duties, and liabilities
Termination of the leasehold
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5. History
The lease – a possessory interest in land owned by another – has been documented since ancient Babylonian times
The common law of leasing began to develop in the early Middle Ages
Specifically, a lease has been documented from Ancient Babylonia in 2000 BCE – before Christian era.
The castle pictured is Eilean Donan castle in Scotland, built in the 13th C. as protection from Viking raids.
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6. Leases Today
Typical lease today is for commercial or residential purposes
Primarily a contractual relationship
Bargaining position generally favors landlord
Duration of tenant’s possessory right depends upon type of tenancy: tenancy for a term, periodic tenancy, tenancy at will, or tenancy at sufferance
A lease is a contract under which an owner of property, the landlord (also called the lessor), conveys to the tenant (also called the lessee) the exclusive right to possess property for a period of time. The property interest conveyed to the tenant is called a leasehold estate.
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7. Characteristics of Lease Types
See page 617 for full version of Concept Review.
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8. Landlord’s Rights
Landlord entitled to receive agreed rent for the term of the lease and upon termination, landlord has the right to the return of property in as good a condition as it was when leased, except for normal wear and tear
Landlord may demand security or other deposits
A security deposit is primarily for assurance of rental payment, but other deposits – pet damage, for instance – may be required. Generally, these deposits are enforceable.
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9. Landlord’s Duties -- Warranties
Implied warranty of possession guarantees tenant’s right to possess the property for the term of the lease
Implied warranty of quiet enjoyment guarantees that a landlord’s act or omission will not interfere with tenant’s possession
Landlord may not enter leased property during the lease term except for purposes of inspection or repair as stated in the lease agreement
The implied warranty of possession means that the landlord must make sure prior tenants have left the premises.
The implied warranty of quiet enjoyment also means that a landlord may be responsible for tenants who interfere with another tenant’s use and quiet enjoyment of the leased premises.
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10. Landlord’s Duties -- Warranties
Implied warranty of habitability: like the one implied for sale of real property, landlord-grantor must deliver a habitable dwelling at the beginning of lease
For a lease, landlord-grantor also must maintain premises in a habitable condition
State law may obligate the landlord to comply with any applicable housing codes
Example: Brooks v. Lewin Realty III, Inc.
In Brooks v. Lewin Realty III, Inc., the court held that a landlord could be liable for injuries to a child that were caused by the landlord’s failure to comply with the city’s housing code.

11. Breach of Landlord’s Duties
State law remedies for breach of the implied warranty of habitability differ, but include:
Action for damages. Measured by diminished value of the leasehold
Termination of lease. Landlord’s breach must have been extreme enough to constitute material breach
Rent abatement. Tenant may withhold part of rent for period during which landlord was in breach
Repair-and-deduct. Tenant may repair defects and deduct costs from rent after notice to landlord and opportunity to cure

12. Constructive Eviction
Doctrine of constructive eviction aids a tenant when property becomes unsuitable for the rental purposes
Applies to residential and commercial property
Tenant may terminate the lease because s/he has effectively been evicted
No further rent obligation if tenant vacates promptly after giving the landlord reasonable notice and opportunity to correct problem

13. Landlord’s Duties – Federal Law
Fair Housing Act prohibits discriminatory practices in transactions affecting housing, including the rental of dwellings
Title III of the Americans with Disabilities Act requires owners and possessors of real property that is a place of public access (i.e., a commercial property) to make reasonable accommodations and physical modifications, to allow access to disabled persons
A security deposit is primarily for assurance of rental payment, but other deposits – pet damage, for instance – may be required. Generally, these deposits are enforceable.

14. Landlord’s Tort Liability
General rule: landlord has no tort liability
Current trend: landlords will be held liable for injuries for breach of the following duties:
Duty to maintain common areas
Duty to disclose hidden defects
Duty to use reasonable care in performing repairs
Duty to maintain property leased for public admission
Duty to maintain furnished dwellings
A security deposit is primarily for assurance of rental payment, but other deposits – pet damage, for instance – may be required. Generally, these deposits are enforceable.

15. Matthews v. Amberwood Associates Limited Partnership, Inc.
Facts:
Morton leased an apartment that prohibited pets
Morton kept her boyfriend’s pit bull inside, as well as outside, her apartment
Apartment management employees reported several incidents with the dog to the manager
Morton had guests visit and the dog attacked the guest’s baby, killing the baby
The baby’s parents filed a wrongful death suit against the apartment management company and the apartment owner
Morton leased an apartment in Baltimore, Maryland, from October 9, 1993, through October 31, The apartment building was managed by Monocle Management, Ltd. and owned by Amberwood Associates Limited Partnership, Inc. The lease Morton signed contained the following provisions:
“The resident agrees to comply with the following rules and regulations which shall be deemed to be part of the lease. Breach of these rules and regulations shall be deemed to be a default of the lease. * * * “18. Not to have any pets on the premises.”
Morton kept her boyfriend’s dog, a pit bull named Rampage, in her apartment. Sometimes she kept the dog chained outside, on the grounds of the apartment complex. The dog was not normally aggressive toward persons when Morton was present, but, when she was absent, the dog would attempt to attack people in his vicinity. Several employees of the building’s management had dangerous encounters involving the dog; they considered the dog to be “vicious,” and reported incidents involving the dog to the resident manager.
On February 9, 1994, Shanita Matthews and her 16-month-old son Tevin Williams visited Morton and Morton’s 5- year-old son Darnell at Morton’s apartment. The children were playing together in the living room, and the adults were seated at the dining room table putting together a puzzle when Morton was called away from the apartment. Shortly after Morton left the apartment, Rampage attacked Tevin. Rampage grabbed Tevin by the neck and was shaking him back and forth. Matthews was unable to free Tevin from Rampage’s jaws. Matthews then called 911 and yelled for Morton to assist her. Morton reentered the apartment and was also unable to free Tevin. She grabbed a knife, and, while Matthews held Tevin in her arms, Morton repeatedly stabbed Rampage causing the animal temporarily to release Tevin. Rampage continued to bite Tevin, however, until Morton finally was able to put the dog out of the apartment through the back door. By this time the ambulance had arrived, and Morton took Tevin from Matthews and ran with him to the ambulance.
Approximately one hour after arriving at the hospital, Tevin died from his injuries. Matthews and Tevin’s father, Andre Williams, filed a wrongful death action against Monocle and Amberwood Associates. They alleged that the landlord owed a duty to social guests of a tenant who, while in the tenant’s apartment, are injured or killed by a highly dangerous pit bull dog kept by the tenant, when the landlord knew of the dog’s dangerousness, when the presence of the dog was in violation of the lease, and where the landlord could have taken steps to abate the danger.

16. Matthews v. Amberwood Associates Limited Partnership, Inc.
Procedural History and Issue:
Jury found for plaintiffs and special appeals court found landlord owed no duty to plaintiffs
Issue: whether property management company and property owner owed plaintiffs a duty of abating the dangerous condition consisting of a vicious pit bull dog in the apartment
Landlord not ordinarily liable, but court held last month that landlords of shopping center may be liable for injuries incurred in a common area and caused by a tenant’s dog
A jury found Amberwood and Monocle liable and awarded damages including $5,018,750 to Matthews and $562,100 to Williams for the wrongful death of Tevin. Both sides appealed to the Maryland Court of Special Appeals, which held that, under the circumstances, Amberwood and Monocle owed no duty to social invitees of a tenant. Both parties again sought review in the Maryland Court of Appeals.
Appellate court: “The question in the instant case focuses upon … whether Amberwood and Monocle owed Matthews and Tevin a duty of abating the dangerous condition consisting of a vicious pit bull dog being in the apartment…. In a multi-unit facility, the landlord ordinarily has a duty to maintain the common areas in a reasonably safe condition…. On the other hand, … a landlord is not ordinarily liable to a tenant or guest of a tenant for injuries from a hazardous condition in the leased premises that comes into existence after the tenant has taken possession…. As with most general principles of law, however, this principle, that a landlord is not responsible for dangerous conditions in the leased premises, is not absolute and has exceptions…. Just last month, in Shields v. Wagman, this Court held that landlords of a strip shopping center may be liable for injuries sustained by a business invitee and a tenant when they were attacked by a pit bull dog owned by another tenant and kept on the leased premises….”

17. Matthews v. Amberwood Associates Limited Partnership, Inc.
Legal Reasoning and Holding:
Common thread in many cases imposing liability on landlord is degree of landlord’s control
Evidence showed landlord knew about the dog and could have enforced “no pets” clause
Morton may also have been negligent, but a balancing test shows it is not unreasonable to impose duty to guests on the landlord
Judgment for plaintiffs affirmed
“As illustrated by the Shields opinion, a common thread running through many of our cases involving circumstances in which landlords have been held liable …. is the landlord’s ability to exercise a degree of control over the defective or dangerous condition and to take steps to prevent injuries arising therefrom…. Turning to the case at bar, …The landlord retained control over the presence of a dog in the leased premises by virtue of the “no pets” clause in the lease…. the landlord, when it first received notice of the dangerous incidents involving Rampage, could have informed Morton that harboring the pit bull was in violation of her lease, could have told her to get rid of the aggressive animal, and could have threatened legal action if she failed to do so……It is true that the conduct of the tenant Morton may also have been negligent,…Under the circumstances here, and the prior cases in this Court emphasizing the factor of a landlord’s control, it is not unreasonable to impose upon the landlord a duty owed to guests who are either on the leased premises or the common areas…. We do not hold that a landlord’s retention in the lease of some control over particular matters in the leased premises is, standing alone, a sufficient basis to impose a duty upon the landlord which is owed to a guest on the premises. This Court has employed a balancing test…Judgment for Matthews affirmed.”

18. Tenant’s Duties and Rights
Primary duty of tenant is to pay rent
Tenant also has duty not to commit waste on the property (i.e., duty not to destroy premises) and to return the property to the landlord at lease termination
Tenant has rights to exclusive possession and quiet enjoyment of the property during the lease term

19. Tenant’s Liabilities
Tenant normally liable to persons who suffer harm while on the portion of the property over which tenant has control, if injuries resulted from tenant’s negligence
If a tenant breaches the lease, landlord may take action to evict the tenant
State law generally allows for speedy eviction procedure

20. Lease Assignment
Like other contracts, rights and duties may be assigned unless otherwise prohibited in the lease contract
Assignment: landlord or tenant transfers all rights under the lease to another person
Subleasing: tenant transfers some (not all) rights to possess the property to another
Relationship of tenant to sublessee becomes one of landlord and tenant

21. Assignment v. Sublease
Significance of distinction is that an assignee acquires rights and duties under the lease between landlord and original tenant, but a sublessee does not
Assignee steps into shoes of original tenant and acquires any rights original tenant had by lease
Under assignment or sublease, original tenant remains liable to landlord for commitments made in the lease

22. Test Your Knowledge True=A, False = B
A landlord has no liability for injuries a tenant’s guests suffer in or on the real property
Primary duty of tenant is to pay rent
Constructive eviction means that tenant may terminate the lease because s/he has effectively been evicted due to landlord’s breach of the warranty of habitability
False. The general rule is that a landlord has no liability to a tenant’s guests, but landlords may be held liable for breaching certain duties, such as the duty to maintain premises or duty to guarantee a tenant’s use and quiet enjoyment of property.
True.

23. Test Your Knowledge True=A, False = B
The general rule is that landlords may not require a security deposit for greater than 10% of the lease amount
The term “repair-and-deduct” means that landlord may repair defects and deduct costs from the security deposit
The Civil Rights Act prohibits discriminatory practices in housing transactions
False. There is no general rule for this, though some states might have specific laws limiting deposit amounts.
False. Repair-and-deduct means that tenant may repair defects and deduct costs from rent after notice to landlord and opportunity to cure.
False. The Fair Housing Act prohibits discriminatory practices in transactions affecting housing, including the rental of dwellings.

24. Test Your Knowledge
Multiple Choice
Barb rented a house from Steven. When she tried to move in, she found the prior tenant’s furniture and trash. Barb:
(a) may terminate the lease since the landlord breached the warranty of possession
(b) must move in and pay rent, but may deduct the cost of removing the prior tenant’s furniture and trash from her rent
(c) must file a complaint with county authorities before terminating the lease
(d) none of the above
The correct answer is (a).

25. Test Your Knowledge Multiple Choice
Jack leased a space in a shopping center from owner ABC Properties. Jack’s customer was injured when she tripped on a very large pothole in the parking lot. Who is liable for the customer’s injury?
(a) Jack since the customer was his customer
(b) The customer since she didn’t look where she was walking
(c) ABC Properties since they are liable for maintaining common areas and failed to do so
The correct answer is (c) – at least in most circumstances.

26. Thought Questions Have you ever had a problem with a lease?
Do you think the court ruled correctly in the Matthews v. Amberwood Associates Limited Partnership, Inc.? How should the landlord have handled the situation?
Opportunity to discuss lease problems – students often have great tales about leasing apartments!
Opportunity to discuss property management and ethics.