Category Archives: Blawg

Current court schedule for landlord-tenant cases

The Boone County Circuit Court’s schedule for hearing landlord-tenant cases changes from time to time based on the staffing and needs of the court. This post, updated as of Nov. 20, 2018 sets out the current schedule and projected future schedule. The next time the schedule may change is January 2019.

Until the end of 2018, almost all landlord-tenant cases will be heard by Associate Circuit Judge Joshua C. Devine, Division 11. Here is Judge Devine’s schedule for these cases:

  • Mondays at 9 a.m. – first appearances (returns)
  • Mondays at 10 a.m. – trials
  • Thursdays at 9 a.m. – first appearances (returns) in some landlord-tenant cases in which possession of premises is not at issue
  • Thursdays at 1:30 p.m. – trials in more complicated cases

Judge Devine will be leaving the court at the end of 2018 because Stephanie Morrell was elected Division 11 Associate Circuit Judge in the Nov. 6, 2018 election for a term beginning in January 2019.

Tentatively, beginning in January 2019, new Associate Circuit Judge Tracy Gonzalez, Division 9, will hear landlord-tenant cases on the same schedule Judge Devine now follows.

Associate Circuit Judge Kimberly Shaw, Division 5, also hears some landlord-tenant cases, primarily those in which possession of premises is not at issue. Here is Judge Shaw’s current schedule:

  • Tuesdays at 1:30 p.m. – trials
  • Fridays at 10:30 a.m. – first appearances (returns)

Copyright © Scott Law Firm Professional Corporation

Validity of collection fees clauses in leases

A question sometimes asked by landlords is whether a lease may include a clause saying that collection fees will be added to the amount due under the lease. Our opinion is that such a clause is legal. However, there is a distinction between collection fees that can be charged before a lawsuit is filed and after a judgment is entered in a lawsuit.

Sample clause

As stated, we believe a lease may contain a clause saying that collection fees will be added to the amount due under the lease.

Here is a sample clause that may be used:

Lessee agrees that if lessor utilizes the services of an attorney and/or collection agency to enforce any of the provisions of this lease, or to recover possession of the premises, or in connection with any lawsuit described in the paragraph above headed “Lawsuits,” or in connection with any administrative proceeding arising out of or related to this lease and/or lessee’s use and occupancy of the premises, lessee shall be liable to lessor for all of lessor’s expenses connected therewith, including but not limited to reasonable attorney fees, litigation expenses, court costs and collection agency fees, all of which shall be deemed additional rent.

Collection fees before and after lawsuit

There is a distinction between collection fees that can be recovered before a lawsuit is filed and after a judgment is entered in a lawsuit.

If a landlord uses such a clause and refers a tenant debt to a collection agency before a lawsuit is filed, the collection fees may be included in the amount the agency attempts to collect. If the collection agency cannot collect the debt (including collection fees) on a voluntary basis and the agency refers the debt to an attorney to file a lawsuit, the collection fees can be included in the total amount claimed in the lawsuit.

Similarly, if a landlord has first tried to collect a tenant’s debt using a collection agency, and then the landlord files suit, any collection fees paid by the landlord can be included in the total amount claimed in the lawsuit.

However, if a lawsuit results in a judgment against the tenant that includes previously incurred collection fees, the amount of the judgment is fixed and cannot be increased by additional collection fees incurred thereafter.

The only exception to the fixed amount of the judgment is that additional court costs incurred in enforcing the judgment can be added to the amount to be collected under the judgment. For example, garnishment court costs consisting of the garnishment filing fee and the process server’s fee to serve the garnishment are added to the total amount to be collected under the garnishment. Likewise, if there is an execution on the judgment to seize property and have it sold to satisfy the judgment, the court and sheriff’s fees for the execution are added to the amount to be collected.

Internet misinformation

Some landlords have expressed concern about a statement on one website that purports to summarize collection laws to the effect that Missouri law does not allow collection fees unless the total debt exceeds $1,000. This is an apparent reference to Section 408.096 of the Missouri statutes.

We believe this statement is incorrect because our opinion is that Section 408.096 only applies to persons or companies that are in the business of arranging credit and therefore does not apply to landlords or property managers.

Our search of Missouri statutes has not located any other statute that would prevent landlords and property managers from including a clause in their leases providing for collection fees.

Copyright © Scott Law Firm Professional Corporation

Assistance and service animals

By Steve Scott, Attorney
Scott Law Firm PC

In recent years landlords and property managers have experienced a surge of requests by tenants to keep “emotional support animals” even when animals are not usually permitted. In the law the correct legal term for such animals is “assistance animal.” There is another legal category called “service animal.” For both categories, the law prohibits charging a pet deposit or pet fee. This post explains the law on assistance and service animals and how to evaluate tenant requests to keep them.

HUD guidelines

The most recent guidelines issued by the U.S. Department of Housing and Urban Development (HUD) concerning “assistance animals” and “service animals” were published in April 2013. According to those guidelines, there are three federal laws that include provisions relating to “assistance animals” and “service animals,” which are different categories of animals. The three laws are:

  1. Fair Housing Act (FHAct), which applies to virtually all types of housing.
  2. Section 504 of the Rehabilitation Act (Section 504), which covers housing providers that receive federal financial assistance through HUD. This would include landlords who accept Section 8 tenants with respect to rental units occupied by those tenants.
  3. Americans with Disabilities Act (ADA), which in the housing context applies to public housing agencies, public universities and colleges that provide housing, and public accommodations including rental offices.

No provisions of Missouri law impose requirements greater than these three laws. Therefore, the following summary of requirements is based on the above-mentioned HUD guidelines.

Assistance Animals – FHAct and Section 504

Both the FHAct and Section 504 require “reasonable accommodation” of persons with disabilities and must be taken into account when persons with disabilities use (or seek to use) assistance animals in housing where the provider ordinarily prohibits animals or imposes restrictions or conditions relating to animals.

Under these laws, an assistance animal is not deemed to be a pet. Rather, an assistance animal is one that works, provides assistance, or performs tasks for the benefit of a person with a disability, or provides emotional support that alleviates one or more identified symptoms or effects of a person’s disability. Neither of these laws require an assistance animal to be individually trained or certified. While dogs are the most common assistance animals, other species can also be assistance animals.

When a housing provider receives a request to use an assistance animal as a reasonable accommodation for disability, the provider must consider two issues:

1. Does the person seeking to use and live with the animal have a disability, i.e., a physical or mental impairment that substantially limits one or more major life activities?

2. Does the person making the request have a disability-related need for an assistance animal? I.e., does the animal work, provide assistance, perform tasks or services for the benefit of a person with a disability, or provide emotional support that alleviates one or more of the identified symptoms of a person’s existing disability?

● If the answer to either 1 or 2 is “no,” then the FHAct and Section 504 do not require the housing provider to modify a “no pets” policy or modify other restrictions on pets, and the reasonable accommodation request may be denied.

● If the answer to both 1 and 2 is “yes,” then the FHAct and Section 504 require the housing provider to modify or provide an exception to “no pets” rules or other pet restrictions and allow the person with a disability to live with and use an assistance animal in all areas of the premises where persons are normally allowed to go, unless:

a. Making the exception would impose an undue financial and administrative burden on the provider or would fundamentally alter the nature of the housing provider’s services; or

b. The specific assistance animal in question poses a direct threat to the health or safety of others that cannot be reduced or eliminated by another reasonable accommodation; or

c. The specific assistance animal in question would cause substantial physical damage to the property of others that cannot be reduced or eliminated by another reasonable accommodation.

Note: In making a determination under b. and c., breed, size and weight limitations may not be applied to an assistance animal. A determination that an assistance animal poses a direct threat of harm to others or would cause substantial physical damage to property must be based on an individualized assessment that relies on objective evidence about the specific animal’s actual behavior – not on mere speculation or fear about the types of harm or damage an animal might cause and not on evidence about harm or damage that other animals have caused.

Assessing an Assistance Animal Request: A housing provider may not deny a request to have an assistance animal simply because the provider is not totally certain the applicant qualifies. Responses to assistance animal requests may not be unreasonably delayed. The following rules apply:

1. If the applicant has a readily apparent disability and need for an assistance animal, such as a blind or low-vision person using a guide dog, or if the disability and need is already known to the housing provider, the provider may not request documentation of disability and need and must allow the animal.

2. If the disability is readily apparent or known, but the disability-related need for an assistance animal is not readily apparent or known, the housing provider may ask the applicant to provide documentation of the disability-related need for the animal.

3. If no disability is readily apparent or known to the housing provider, the provider may ask an applicant to submit documentation of the disability and disability-related need for an assistance animal.

Notes: In situations 2 and 3, the housing provider may either require the applicant to have this form completed by a professional and submitted to the housing provider before a determination is made or require the applicant to provide essentially the same information in the form of a signed letter or note from the professional who examined the applicant. However, the housing provider is not entitled to request access to medical records or to request permission to interview healthcare professionals. We believe the housing provider may insist that the documentation of need be based on an in-person examination by a qualified professional because there is general agreement among the healing professions that an appropriate diagnosis cannot be made without such an examination; therefore, in our opinion, housing providers are not required to accept a “certificate” obtained by a tenant from a website where the tenant simply pays a fee and fills out an online questionnaire to obtain the certificate without being examined in person by the certificate issuer.

If it is determined that a person must be allowed to use and live with an assistance animal, a housing provider may not impose conditions and restrictions on the animal that it otherwise imposes on pets, including size and breed limitations. Also, a housing provider may not require a pet deposit or pet fee. Any pet agreement or pet clause in a lease must be modified to eliminate any pet deposit/fee requirement. However, the housing provider may require a tenant at the conclusion of a lease to pay the cost of repairs for damage an assistance animal caused to the tenant’s dwelling unit or common areas beyond ordinary wear and tear so long as it is the provider’s normal practice to charge all tenants for damage to the premises beyond ordinary wear and tear.

Service Animals – ADA

As mentioned above, the Americans with Disabilities Act (ADA) applies in the housing context to public housing agencies, public universities and schools that provide housing, and public accommodations including rental offices. Thus, private-sector landlords and property managers will most often need to keep this law in mind with regard to housing applicants who seek to enter a rental office open to the public while accompanied by a service dog.

Under ADA regulations promulgated by the U.S. Department of Justice, a “service animal” is defined narrowly as a dog that is individually trained to do work or perform tasks for the benefit of an individual with a disability, including a physical, sensory, psychiatric, intellectual, or other mental disability. The regulations specify that “the provision of emotional support, well-being, comfort, or companionship do not constitute work or tasks for the purposes of this definition.” Thus, emotional support animals are expressly excluded from the definition of service animals under the ADA.

An individual’s use of a qualified service dog in a rental office or other ADA-covered facility must not be handled as a request for reasonable accommodation under the FHAct or Section 504. Rather, in ADA-covered facilities, the dog need only meet the definition of “service animal” to be allowed into the facility.

If it is readily apparent that the dog is trained to do work or perform tasks for a person with a disability (e.g., the dog is observed guiding a blind person), no inquiry is permitted.

If it is not readily apparent that the dog is trained to help a person with a disability, the facility may ask only these two questions:

1. Is this a service animal that is required because of a disability?

2. What work or tasks has the animal been trained to perform?

Note: No documentation may be required to support the responses to these questions.

If it is determined the dog is a qualified service animal, the dog must be allowed access to all areas of the facility where members of the public are normally allowed to go and may not be denied access unless:

1. The dog is out of control and its handler does not take effective action to control it; or

2. The dog is not housebroken, i.e., not trained to control urination and defecation; or

3. The dog poses a direct threat to the health or safety of others that cannot be eliminated or reduced to an acceptable level by a reasonable modification to the facility’s policies, practices and procedures. This determination must be based on an individualized assessment of the dog’s actual behavior – not on fears, stereotypes or generalization.

If a person entering a rental office with a service dog submits an application to reside at rental premises with the dog, the application then must be evaluated under the FHAct and Section 504 guidelines set out in the preceding section. In almost all situations, a service dog will clearly qualify as an assistance animal that must be allowed.

Copyright © Scott Law Firm Professional Corporation

Using criminal records to screen rental applicants

Landlords who routinely request criminal background checks on prospective tenants and use the results to decide whether or not to lease to particular individuals may face a discrimination claim by a rejected applicant. Blanket refusal to lease to a person with any kind of criminal history is particularly problematic. This post explores the relevant law and suggests how to avoid such discrimination claims.

Contents:

Introduction

On April 4, 2016, the Department of Housing and Urban Development (HUD) issued new guidelines titled “Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions.” The guidelines can be found online here.

The essence of the guidelines is that rejection of housing applicants based on criminal records may constitute illegal discrimination on the basis of race, color or national origin under the legal theories of “discriminatory effect” and “disparate treatment.”

The term “housing provider” is used in this document to refer to anyone involved in the sale, leasing and/or financing of housing or other housing-related activities.

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What’s New and What’s Not

First, what’s not new?

Answer: The legal principles on which the guidelines are based. Those principles have been in place for years.

So what is new?

Answer: HUD’s issuance of the guidelines signals new attention to this area of law and the likelihood of increased enforcement actions.

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Exception to General Anti-Discrimination Rules

Housing providers may continue to automatically reject leasing applicants who have been convicted of the manufacture and/or distribution of illegal drugs. This is because these categories are specifically excepted from discrimination statutes.

However, this exception does not apply to convictions for possession of illegal drugs. Thus, such convictions must be considered in light of the following discussion.

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Factual Background

As many as 100 million U.S. adults – or nearly one-third of the population – have a criminal record of some sort.

African Americans and Hispanics are arrested, convicted and incarcerated at rates higher than their share of the general population. As a result, HUD finds that criminal records-based barriers to housing have a disproportionate impact on minorities.

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Legal Background

The Fair Housing Act (FHA) prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities on the basis of race, color, religion, sex, disability, familial status or national origin.

While it is not illegal per se under the FHA to reject leasing applicants who have criminal records, blanket rejection of applicants based on having criminal records can constitute a violation of the FHA if, without justification, persons of one race, color or national origin are rejected more often. This is called “discriminatory effect” discrimination and is discussed in more detail below along with the concept of “justification.”

Also, intentional discrimination in violation of the FHA occurs when a housing provider treats applicants with comparable criminal histories differently because of their race, color, national origin or other protected characteristic. For example, it would be discriminatory to reject an African American applicant having a criminal record while approving a white applicant having a comparable criminal record. This is called “disparate treatment” discrimination and is discussed in more detail below.

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“Discriminatory Effect” Discrimination

A housing provider can be held in violation of the FHA if the housing provider’s policies and/or practices have an unjustified discriminatory effect, even when the housing provider had no intent to discriminate.

In other words, a facially-neutral policy or practice that has a discriminatory effect violates the FHA if it is not supported by a legally sufficient justification. To explain, when a leasing policy or practice based on criminal history results in persons of a particular race, color, national origin or other protected category being rejected more often, the policy or practice is unlawful if it is not necessary to serve a substantial, legitimate, nondiscriminatory interest of the housing provider, or if that interest could be served by another practice that has a less discriminatory effect.

An administrative agency or court hearing a claim that a housing provider is liable for discriminatory effect discrimination will consider the claim under the following three-step process:

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Step 1 – Evaluating Whether the Criminal History Policy or Practice Has a Discriminatory Effect

The complaining party has the burden to prove that the criminal history policy has a discriminatory effect – that is, that the policy results in a disparate impact on a group of persons because of their race, color or national origin.

This burden is satisfied by presenting statistical evidence establishing that the challenged practice actually or predictably results in a disparate impact. Generally, local market area statistics are presented if available, but national statistics on racial and ethnic disparities in the criminal justice system may be used when state or local statistics are not readily available and there is no reason to believe they would differ markedly from national statistics.

For example, national statistics establish that racial and ethnic minorities face disproportionately high rates of arrest and incarceration. In 2013, African Americans were arrested at a rate more than double their proportion of the general population. In 2014, African Americans comprised approximately 36 percent of the total prison population in the United States, but only about 12 percent of the country’s total population – in other words, African Americans were incarcerated at a rate nearly three times their proportion of the general population. Hispanics were similarly incarcerated at a rate disproportionate to their share of the general population – Hispanic individuals comprised about 22 percent of the prison population, but only about 17 percent of the total U.S. population. In contrast, non-Hispanic Whites comprised approximately 62 percent of the total U.S. population but only about 34 percent of the prison population in 2014.

Additional evidence, such as applicant data, tenant files, census demographic data and localized criminal justice data, may be considered by the administrative agency or court in determining whether local statistics are consistent with national statistics and whether there is reasonable cause to believe that the challenged policy or practice causes a disparate impact.

The housing provider would then be given an opportunity to offer evidence to refute the claim that its policy or practice causes a disparate impact on one or more protected classes.

Determining whether a policy or practice results in a disparate impact is something that can only be determined on a case-by-case basis. If the agency or court determines there was no disparate impact, the discrimination complaint fails, and the additional steps in the process do not take place.

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Step 2 – Evaluating Whether the Challenged Policy or Practice is Necessary to Achieve a Substantial, Legitimate, Nondiscriminatory Interest

If disparate impact has been established to the satisfaction of the agency or court in Step 1, the burden then shifts to the housing provider to prove that the challenged policy or practice is justified. To do so, the housing provider must establish that:

● The policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest of the provider, and

● The policy or practice actually serves that interest.

Housing providers typically assert that excluding prospective tenants who have criminal records is necessary for the protection of other residents and their property. Ensuring resident safety and protecting property are often considered among the fundamental responsibilities of a housing provider, and agencies/courts may consider such interests to be both substantial and legitimate, assuming they are the actual reasons for the policy or practice.

However, a housing provider must be able to prove through reliable evidence that its policy or practice of making housing decisions based on criminal history actually assists in protecting resident safety and/or property. The generalization that any individual with an arrest or conviction record poses a greater risk than any individual without such a record is not sufficient to satisfy this burden.

Exclusions Because of Prior Arrest – A Big “No No”

HUD states that a housing provider with a policy or practice of excluding individuals because of one or more prior arrests (without any conviction) cannot meet the housing provider’s burden to show that the policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest and actually assists in protecting resident safety and/or property.

This is because, as the U.S. Supreme Court has stated, “[t]he mere fact that a man has been arrested has very little, if any, probative value in showing that he has engaged in any misconduct. An arrest shows nothing more than that someone probably suspected the person apprehended of an offense.” HUD states that because arrest records do not constitute proof of past unlawful conduct and are often incomplete, the fact of an arrest is not a reliable basis for assessing the potential risk to resident safety or property posed by a particular individual.

Exclusions Because of Prior Conviction

In almost all cases, a record of conviction (as opposed to an arrest) will be sufficient evidence to establish that an individual engaged in criminal conduct. However, housing providers who apply a policy or practice that excludes persons with prior convictions must still be able to prove that such policy or practice is necessary to achieve a substantial, legitimate, nondiscriminatory interest.

HUD’s position is that a housing provider who imposes a blanket prohibition on all persons having a conviction record – no matter when the conviction occurred, what the underlying conduct entailed, or what the convicted person has done since then – will be unable to establish a substantial, legitimate, nondiscriminatory interest.

HUD further states that a housing provider with a more tailored policy or practice that excludes individuals with only certain types of convictions must still prove that its policy is necessary to serve a “substantial, legitimate, nondiscriminatory interest.” To do this, the housing provider must show that the policy accurately distinguishes between criminal conduct indicative of real risk to resident safety and/or property and criminal conduct that does not indicate such risk.

According to HUD, a policy or practice that fails to take into account the nature and severity of an individual’s conviction is unlikely to establish a substantial, legitimate, nondiscriminatory interest.

Similarly, HUD says that a policy or practice that does not consider the amount of time that has passed since the criminal conduct occurred is unlikely to satisfy this standard, especially in light of research showing that, over time, the likelihood that a person with a prior criminal record will engage in additional criminal conduct decreases until it approximates the likelihood that a person with no criminal history will commit an offense.

As was the case in Step 1, whether the housing provider’s policy or practice serves a substantial, legitimate, nondiscriminatory interest can only be determined on a case-by-case basis.

If the housing provider is able to establish that its policy or practice protects a substantial, legitimate, nondiscriminatory interest, the inquiry proceeds to Step 3. If the housing provider fails to establish this, the housing provider loses and Step 3 does not apply.

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Step 3 – Evaluating Whether There Is a Less Discriminatory Alternative

The third step of the discriminatory effects analysis process applies only if the housing provider successfully proves in Step 2 that its criminal history policy or practice serves a substantial, legitimate, nondiscriminatory interest.

In the third step, the burden shifts back to the complaining party to prove that the housing provider’s interest could be served by another practice that has a less discriminatory effect.

HUD says that although identifying a less discriminatory alternative will depend on the particulars of the criminal history policy or practice being challenged, individualized consideration of relevant mitigating information beyond that contained in an individual’s criminal record is likely to have a less discriminatory effect than categorical exclusions that do not take such additional information into account. Relevant individualized evidence might include:

● The facts or circumstances surrounding the criminal conduct
● The age of the individual at the time of the conduct
● The passage of time since the criminal conduct
● Whether the individual has maintained history of good conduct before and/or after the conviction or conduct
● Evidence of rehabilitation efforts

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“Disparate Treatment” (Intentional) Discrimination and Use of Criminal History

A housing provider may also be liable for discrimination under the FHA if the housing provider intentionally discriminates in using criminal history information.

Such intentional discrimination (disparate treatment) will occur if the housing provider uses criminal record histories in a manner that treats an applicant or renter differently because of race, color, national origin or another protected characteristic. Examples:

● Rejecting an Hispanic applicant based on his criminal record, but admitting a non-Hispanic white applicant with a comparable criminal record.

● Having a policy of not renting to persons with certain convictions, but making exceptions for whites but not African Americans.

● Assisting a white applicant in securing approval of his rental application despite his potentially disqualifying criminal record under the housing provider’s screening policy, but not providing such assistance to an African American applicant with a potentially disqualifying criminal record.

● Responding to inquiries from prospective applicants, a housing provider tells African Americans that a criminal record would be a disqualification, but does not similarly discourage a white individual with a comparable criminal record from applying.

● Renting to whites with convictions for manufacture or distribution of illegal drugs, but not renting to African Americans with such convictions (despite the general exception that such convictions may be used as a blanket basis for rejecting applications).

An intentional discrimination claim may be proved by direct evidence of discriminatory statements by a housing provider, but this is seldom possible unless the housing provider has made careless statements.

If there is no overt, direct evidence of discrimination, administrative agencies and courts use the following analysis to decide if illegal discrimination occurred:

First, the evidence must establish disparate treatment. This may be shown in a refusal-to-rent case by evidence that:

● The complaining party is a member of a protected class.

● The complaining party applied for a dwelling from the housing provider.

● The housing provider rejected the complaining party because of his or her criminal history.

● The housing provider offered housing to a similarly-situated applicant not of the complaining party’s protected class, but with a comparable criminal record.

Second, the burden shifts to the housing provider to offer evidence of a legitimate, nondiscriminatory reason for the adverse housing decision. The reason must be clear, reasonably specific, and supported by evidence. Purely subjective or arbitrary reasons will not be sufficient.

While a criminal record can constitute a legitimate, nondiscriminatory reason for a refusal to rent or other adverse action by a housing provider, a complaining party can still prevail by showing that the criminal record was not the true reason for the adverse housing decision, but was instead a mere pretext for unlawful discrimination. Examples:

● The fact that a housing provider acted upon comparable criminal history information differently for one or more individuals of a different protected class than the complaining party is strong evidence that the housing provider was not considering criminal history information uniformly or did not in fact have a criminal history policy.

● The fact that a housing provider did not actually know of an applicant’s criminal record at the time of the alleged discrimination.

● Changing or inconsistent explanations offered by a housing provider for the denial of an application may also provide evidence of pretext.

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Early Responses to HUD Guidance

Some housing screening companies have responded to HUD’s April 4, 2016 guidance by recommending that housing providers accept or reject applicants with criminal records based on a list of various types of offenses and times frames for rejection. Following is one example:

FELONY
Theft of Property (exclude by check) – 10 years from completion of sentence
Damage to Property – 10 years from completion of sentence
Drug Violation – 10 years from completion of sentence
Weapons – 10 years from completion of sentence
Violence – No time limit
Crime/Injury to Persons – No time limit
Sexual Offenses – No time limit

MISDEMEANOR
Theft of Property (exclude by check) – 7 years from completion of sentence
Damage to Property – 7 years from completion of sentence
Drug Violation – 7 years from completion of sentence
Weapons – 7 years from completion of sentence
Violence – No time limit
Crime/Injury to Persons – No time limit
Sexual Offenses – No time limit

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Recommendations

First, do not reject any applicant based solely on arrest records. This clearly runs afoul of the HUD guidelines in all cases. If you have a question about arrests on your application form, delete it.

Second, if you are going to exclude applicants convicted of manufacture or distribution of illegal drugs, you must do so across the board and not make any exceptions on the basis of race or another protected category.

Third, regarding other convictions (whether by pleading guilty or being found guilty in a trial), we believe that adopting a criminal record policy like the one mentioned in the preceding section is dangerous because the HUD guidance makes clear that, in HUD’s view, the use of criminal records for resident screening is suspect generally, unless housing providers soften the potential impact through individualized consideration of the following factors at a minimum:

● The facts or circumstances surrounding the criminal conduct
● Nature and severity of the criminal conduct
● The age of the individual at the time of the conduct
● The passage of time since the criminal conduct without similar repeat conduct
● Whether the individual has maintained a history of good conduct before and/or after the conviction or conduct
● Evidence of rehabilitation efforts

A special note regarding sexual offenses: On its face, a policy excluding all applicants who have a conviction for a sexual offense might seem reasonable. However, consider the example of a teenage boy who has voluntary sex with his underage girlfriend and is convicted of statutory rape – it’s highly unlikely that this young man is or will be a sexual predator. There are other so-called sexual offenses that do not reliably indicate that a person is a sexual predator or serial rapist. Therefore, we recommend that sexual offenses be reviewed on the same basis as other convictions.

Housing providers understandably prefer black-and-white, easy-to-apply rules and will be reluctant to undertake this kind of analysis involving many shades of gray – but we believe it is necessary to interview applicants who have criminal records and individually consider their circumstances using the factors listed above in order to avoid potentially successful discrimination complaints.

After hearing out an applicant, gathering other relevant information, and taking the above factors into account, you can deny the applicant if you believe that leasing to him or her would involve a substantial risk to the safety and/or property of other tenants. We believe that as long as you make a good-faith decision based on the above factors, you minimize the risk of discrimination complaints.

Whatever you decide, you should carefully document the facts obtained from the applicant and other sources, the decision you made, the reason(s) for the decision, and how the facts relate to the factors you took into account in making the decision.

Finally, it’s probably no consolation, but keep in mind that the basic law involved here has not changed and you could have been found liable for discrimination based on a blanket criminal record policy in the past. What is new is that HUD is now looking over your shoulder more carefully. In other words, you should have been engaging in this kind of individualized consideration of criminal records all along.

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Copyright © Scott Law Firm Professional Corporation

Security deposit issues

A 2015 court decision makes it clear that language in a lease cannot override the provisions of the Missouri security deposit statute. This post covers how this ruling may affect landlords and property managers. See our Security Deposits page for general information about deposits.

In Younker et al. v. Investment Realty, Inc., decided in February 2015 by the Missouri Court of Appeals, the court stated (emphasis added):

Section 535.300 was enacted for the protection of both the landlord and tenant, is conducive to the public good, provides the tenant his exclusive remedy for the wrongful withholding of a security deposit, and is to be liberally construed to effect that purpose. …

… section 535.300 also indicates an intent by the legislature to control a consumer relationship in a manner such that the requirements of the statute designed to protect a tenant’s interests cannot be contractually defeated by a landlord who may be in a superior bargaining position and with whom the tenant is not on equal footing. The legislature correspondingly protected the landlord’s interests in this type of consumer transaction, however, by exclusively limiting a tenant’s recovery for any violation to not more than twice the security deposit amount.

What this means is that if a lease contains provisions relating to a security deposit that are not in accordance with the statute, those provisions will be invalid and unenforceable. Further, such invalid clauses can lead to litigation results unfavorable to the landlord.

Under the security deposit statute, 535.300, only three types of monetary amounts may be deducted from a security deposit:

  1. Unpaid rent
  2. Damage to the premises beyond ordinary wear and tear
  3. Compensation for actual loss sustained by the landlord as a result of the tenant’s failure to give adequate notice to terminate the tenancy pursuant to law or the rental agreement

At least two types of typical lease clauses relating to security deposits are therefore invalid and should not be included in leases:

  1. Clauses that provide for deductions from security deposits in specified amounts for particular repair/replacement items. This is because you must be prepared to show that particular items are beyond ordinary wear and tear and that the amounts charged are reasonable amounts based on the actual costs and not some arbitrary amount.
  2. Clauses that allow a security deposit refund for multiple tenants to be paid to only one tenant. This is because you have an obligation to refund to each tenant who paid, and you cannot guarantee that issuing one check will result in all tenants receiving what they should.

There may be other provisions in some leases that run afoul of the statute and should be stricken. Your leases should be carefully reviewed by an attorney to ensure compliance with the statute.

Following is the security deposit clause we are currently recommending:

SECURITY DEPOSIT: Upon signing this lease and before being allowed to take possession of the premises, lessee shall deposit with lessor the amount of $___________, to be held as a security deposit for the performance of this lease by lessee. Interest received on the security deposit shall be the property of lessor. The security deposit is not a substitute for the last month’s rent, and lessee agrees to make timely payment of the last month’s rent. Lessor shall be entitled to deduct from the security deposit: (a) All unpaid rent owed through the end of this lease; (b) any unpaid additional charges described in this lease as additional rent; (c) expenses related to repairs, painting or cleaning necessary to restore the premises and furnishings to their condition as at the beginning of the lease, ordinary wear and tear excepted; and (d) $________ which shall be deducted for carpet cleaning unless lessee provides proof that the carpets have been cleaned by a professional carpet cleaning company acceptable to lessor at or near the time lessee vacates the premises. Lessee agrees to be liable for all such charges that exceed the security deposit. Lessee is notified that there may be a larger deduction from the security deposit for carpet cleaning than specified above if more expensive carpet cleaning is required because of carpet conditions beyond ordinary wear and tear. Lessee agrees to follow any written move-out instructions provided by lessor. Lessor will give lessee reasonable written notice at lessee’s last-known address, or in person, of the date and time when lessor will inspect the premises to determine the amount of the security deposit to be withheld, if any, and lessee will have the right to be present during inspection. Any statements or estimates made by lessor or lessor’s representative during inspection are subject to correction or modification before final security deposit accounting. Pursuant to law, within 30 days after termination of this lease, lessor will mail to lessee, at lessee’s last-known address, a written itemized list of charges withheld from the security deposit (if any), a copy of the carpet cleaning receipt, and the unexpended portion of the security deposit (if any). Lessee must provide a forwarding address; if no forwarding address is provided, lessee agrees that the inspection notice, itemization of charges (if any), carpet cleaning receipt, and refund (if any), may be mailed to the address of the premises. If more than one lessee signed this lease and paid a security deposit, all deductions from security deposits shall be pro-rated according to the amount of the deposit paid by each lessee, and a separate accounting and refund (if any) shall be sent to each lessee. If lessee vacates the premises on or after the termination date of this lease, the 30-day period to account for the security deposit shall begin only when all of lessee’s property has been removed, all occupants have departed, and all keys and other access devices (such as garage door openers) have been delivered to lessor. If lessee abandons the premises before the termination date of this lease, the 30-day period to account for the security deposit shall begin on said termination date or the date lessor re-rents the premises, whichever is earlier.

While it is going to be more work for landlords to issue separate security deposit refunds when there are multiple tenants, we believe it must be done. Here’s an example of how it would work to pro-rate the deposit refunds: Let’s say you have a $1,000 total deposit of which $250 was paid by each of four tenants. Therefore, each tenant paid 25% of the total deposit, and 25% of the deductions should be deducted from each tenant’s refund check.

Copyright © Scott Law Firm Professional Corporation

Corporation or limited liability company?

Landlords and property managers seeking to limit their personal liability for tenant claims often consider forming a corporation or limited liability company.  This post compares the two options so an intelligent choice can be made.

For more information on protecting assets and limiting liability, see our blawg post Protection of Assets.

Corporations

Potential Benefits
  • Payroll deductions from stockholders’ salaries instead of paying estimated taxes.
  • Fringe benefits:
    • A corporation which does not elect Subchapter S tax treatment can provide stockholder employees with benefits that are not taxable to them and which are deductible by the corporation, such as health insurance, life insurance, etc.
    • Benefits such as life insurance, health and accident insurance, medical reimbursements and the like are treated as expenses of the owners. The costs are not tax deductible, with the exception of health insurance, which is partially deductible.
    • If a stockholder owns the firm’s company’s office space, the stockholder can receive rent from the corporation which will not be subject to withholding taxes but will necessitate estimated income tax payments.
  • Insulation from personal financial liability.
Disadvantage

Annual maintenance – filing of annual registration report with the Secretary of State and documenting at least annual meetings of stockholders and directors.

Other Considerations

If corporation is profitable, its stockholders can receive a return on their investment through the payment of dividends. Dividends must be approved by the board of directors and are taxable to the stockholders as ordinary income.

Dividends are not the only way stockholders can receive money from a corporation. Additional possibilities include:

  • A stockholder can be paid a salary if employed by the corporation. If the salary is reasonable, it will be a deductible expense in its entirety for the corporation. Of course, the salary will be taxable to the stockholder.
  • If a stockholder has loaned money to the corporation (as distinct from purchasing stock), the corporation’s principal repayments will be non-taxable to the stockholder while the interest payments will be taxable. The corporation can deduct the interest payments but not the principal payments.
  • If a stockholder leases real or personal property to the corporation, the rent payments will be deductible for the corporation and taxable to the stockholder.
Taxation

Unless a corporation elects special tax treatment under Subchapter S of the Internal Revenue Code, the corporation’s net income is subject to taxation at rates sometimes higher than those applying to individuals. This raises the possibility of double taxation of dividends – the money is taxed once at the corporate level and again at the personal level when reported on stockholders’ personal tax returns.

To avoid this consequence, many stockholders in corporations which have not elected Subchapter S treatment ensure that all net income is paid out to the stockholders in the form of dividends, bonuses or salary before the end of the year. Then, if necessary, the stockholders can loan money back to the corporation at the beginning of the next calendar year to provide necessary operating capital; these loans can be paid off during the year as money becomes available.

Another way to avoid the double-taxation effect, subject to certain restrictions, is to elect corporate tax treatment under Subchapter S of the Internal Revenue Code. If this election is made, the corporation is treated virtually the same as a partnership for tax purposes. Although the corporation must file an informational return with the IRS, its net income is not taxed at the corporate level but rather is “passed through” to the stockholders for reporting on their personal returns. Corporate losses can also pass through and be taken as losses on the stockholders’ personal returns. If a corporation elects Subchapter S, health insurance and other benefits will be taxable to stockholders and not deductible by the corporation. Consultation with an accountant is highly recommended before deciding whether to elect Subchapter S.

Limited Liability Companies

A limited liability company (LLC) is a relatively new form of business organization allowed in Missouri.

In concept, an LLC functions much like a partnership, but it has most of the advantages of a corporation in terms of limiting the individual liability of its owners for business obligations.

An LLC is formed by filing relatively simple Articles of Organization with the Secretary of State. The owners of the LLC, who are called members, manage the company unless they agree in the Articles of Organization to provide for centralized management by one or more managers. The statutes also require the members of an LLC to adopt an Operating Agreement. The Operating Agreement covers such matters as governance, capital contributions, sharing of profits and losses, admission of new members, and buy-outs of existing members.

Advantages of LLC Compared with Corporation
  • Income distribution need not be proportional to ownership interests. This is in contrast to partnerships, where tax rules require allocation of profits and losses in proportion to ownership interests, and corporations, where corporate law requires dividends to be paid in proportion to stock ownership (although corporations can pay varying amounts of salary to stockholder-owners).
  • Many of the on-going formalities required in a corporation are not required of an LLC. There are no requirements for annual registration or formal documentation of company decisions.
  • An LLC can elect in its Articles of Organization to be treated much like a partnership for tax purposes, whereas a corporation must file a special Subchapter S election with the Internal Revenue Service to achieve similar tax treatment. An LLC which elects partnership tax treatment does not pay tax itself, but reports its income (or loss) on an informational tax return which also allocates the income or loss to the owners. The owners then report the income or loss on their personal tax returns.
  • An LLC also can elect to be taxed as if it were a corporation. If it does so, it can make a further election for Subchapter S treatment.
Disadvantages of LLCs Compared with Corporations

An LLC can be more expensive and time-consuming to set up initially. This is because the higher degree of flexibility in organizing an LLC may require a more complicated organizational document (Operating Agreement), which must be tailored to meet the organizers’ particular desires.

Because LLCs are a relatively new phenomenon, there are some unresolved questions about how particular legal issues will be resolved by the courts when they arise through litigation. However, most practitioners now believe that issues not yet addressed by appellate decisions will be resolved in general accordance with the body of law governing corporations.

Caveat: Personal Guarantees

As noted above, stockholders in a corporation and members of an LLC are generally shielded from entity-level obligations.

However, for small companies, corporate stockholders and LLC members are commonly required to give personal guarantees for such obligations as leases or loans, but that will occur by agreement and not by operation of law.

Copyright © Scott Law Firm Professional Corporation

Preventing and defending mold claims

In recent years the courts saw an increasing number of lawsuits filed claiming injuries from so-called “toxic mold.” While the number of such cases seems to be decreasing, landlords and property managers should take proactive steps to avoid mold claims and be prepared to defend such claims if they are filed.

Preventing mold claims

Mold is pervasive in the environment. There are more than 100,000 known species of mold and probably a similar number of species not yet cataloged. There is almost always at least some background level of various types of mold spores in both outdoor air and indoor air, the levels varying depending on environmental conditions.

There are four critical requirements for mold growth:

  • Available mold spores
  • Available mold food
  • Appropriate temperatures
  • Considerable moisture

The removal of any one of these items will prohibit mold growth. Unfortunately, the first three are virtually impossible to control for the following reasons:

  • Mold Spores: Ranging in size from 3 to 40 microns (human hair is 100-150 microns), mold spores are ubiquitous – they are literally everywhere. There is no reasonable, reliable and cost-effective means of eliminating them from human environments.
  • Mold Food: If all three other requirements are met, almost any substance that contains carbon atoms (organic substance) will provide sufficient nutrients to support mold growth. Even the skin oil that is left when a person touches an otherwise unsuitable surface, like stainless steel, or the soap residue left from a good cleaning, will provide sufficient nutrients to support the growth of some molds. And many of the most common materials found in homes like wood, paper and organic fibers are among the most preferred of mold nutrients. Thus, eliminating mold food from human environments is virtually impossible.
  • Appropriate Temperatures: Unfortunately, most molds grow very well at the same temperatures that humans prefer. In addition, anyone who has cleaned out their refrigerator quickly realizes that temperatures close to freezing are not cold enough to prevent mold growth, and temperatures that are much warmer than humans prefer, like those of the tropics, will grow abundant quantities of mold. Therefore, it is not feasible to control mold growth in human environments through temperature control.

This leaves the Considerable Moisture requirement for mold growth, and happily this is something that is subject to human control in order to minimize and prevent mold growth. The various species of mold have different water requirements, but the vast majority of mold species require moisture in the material on which they grow corresponding to a relative humidity of at least 70%. In fact, the great majority of serious mold outbreaks inside buildings occur where porous, cellulose-type materials have literally been kept wet by liquid water or sustained condensation.

Thankfully, humans prefer humidity below the critical relative humidity for mold growth. Thus, of the four basic requirements for mold growth, moisture availability is the only feasible mold growth requirement to control in human environments. Therefore, the consensus is that effective mold control strategies consist of the combination of:

  • Reducing the availability of moisture, and
  • Killing and removing active mold growth colonies

Following is a summary of practices that will minimize mold growth:

  1. Air Conditioner Operation: Advise tenants to always set the fan mode switch of a central air conditioner in the AUTO position, never in the ON position. Why? When set to the ON position the blower fan runs continuously and the moisture which has condensed on the air conditioner’s evaporator coil during cooling is re-evaporated and blown back into the unit before it can drain off the coil. This causes relative humidity to be significantly greater than if the air conditioner fan mode switch is set to the AUTO position.
  2. Air conditioner sizing: Oversizing of air conditioners is common. The more an air conditioner is oversized, the poorer its humidity removal performance, especially at higher thermostat settings. This is because, during each air conditioning on cycle, the moisture removal does not reach full capacity for about the first three minutes of operation. The more the system is oversized, the shorter the on-cycle during which moisture is removed.
  3. Air Conditioner Thermostat Set Point: Set the summertime thermostat to the highest temperature that is comfortable. A temperature of 78 F or greater is recommended. Setting the thermostat temperature lower does two things that are counter to the goal of reducing moisture. First, it actually slightly increases the indoor relative humidity. Second, and more important, it decreases the temperature of the materials in the living spaces, thereby significantly increasing the potential for actual moisture condensation on those materials.
  4. Interior Doors: Interior doors should be kept open when air conditioning unless the heating and cooling system has a fully ducted return air system from each room of the home or unless specific and sufficient return air transfer pathways have been installed to ensure that closed interior doors do not result in space depressurization problems in the home.
  5. Space Pressurization: It is important that homes in hot, humid climates be pressurized slightly with respect to outdoors. The reason is fairly straightforward but not very obvious. If homes are depressurized with respect to the outdoors, then hot, humid outdoor air will be pulled through the very small air pathways that exist in all building envelopes, where it is likely to condense on the cooler surfaces inside (including on the back side of drywall).
  6. Vinyl Wall Covering: Impermeable interior surfaces like vinyl wall coverings can result in severe mold problems in hot humid climates. Moisture coming from outdoors can accumulate within the drywall that is behind the vinyl wall covering.
  7. Bathrooms: Most bathrooms, particularly tile in and around showers and tubs is regularly wet. As a result, most bathrooms grow mold and require regular cleaning. A weak solution of water and common household bleach can be used to regularly clean these areas and keep them free of mold. Low-noise bathroom fans are also recommended to remove excess moisture during periods when it is being generated by bathing or showering. (See also exhaust fans.)
  8. Open Windows and Whole-House Ventilation Fans: Open windows and use of whole-house ventilation fans should be avoided when it is humid outdoors.
  9. Air Conditioner Maintenance: Filters should be changed regularly, and air conditioners should be professionally serviced annually to make sure the coils are clean, the condensate drains properly, and the drain pan has no mold.
  10. Exterior Water Management: Redirect water away from the unit’s exterior. Set sprinklers so they don’t spray on exterior walls. Do not landscape in a way that directs water flow towards the unit. Use gutters. Keep down-spouts free of debris and direct outflow away from the home.
  11. Small Leaks: Even small water leaks will cause mold problems. Plumbing leaks and rainwater leaks from improperly flashed windows, wall and roof penetrations should be promptly repaired. Periodically inspect under sinks and vanities for signs of water leakage.
  12. Water Damage: Water damage from flooding or other major water intrusion in homes should be dried within 24 hours if at all possible. For severe flooding and severe water damage for more than 48 hours, a trained restoration professional should be consulted regarding cleanup procedures.
  13. Exhaust Fans: Make sure the clothes dryer vent goes all the way to the outside of the home, not to the crawlspace or to the inside of the attic or the house. The same goes for bathroom vent fans. It is also important for the kitchen range hood to vent to the exterior. Recirculating stove and kitchen vents provide no removal of stovetop moisture and inferior control of cooking-related pollutants compared with venting completely to the outdoors. Kitchen and bath exhaust fans should only be used while cooking or using the bathroom to remove excess moisture generated by these activities.
  14. Closets: Mold likes like the dark, and closets are rarely supplied with conditioned air as a standard part of air conditioning systems. As a result it is not uncommon to have mold or mildew occur in closets, especially on leather. Leaving closet doors open to provide more conditioned air circulation or leaving the closet lights on with the door closed so as to raise the temperature (which lowers relative humidity) can reduce these problems.
  15. House Plants: Minimize live house plants, especially if there is difficulty controlling the relative humidity in the unit.

To prevent mold claims by tenants, it is recommended that landlords incorporate mold-related information and requirements into Rules and Regulations which are incorporated into the lease. A suggested format follows (which should be revised appropriately based on the foregoing information and particular characteristics of the unit being leased):

Suggested mold-prevention rules for tenants

Mold spores are present in the environment, both indoors and outdoors, and cannot be eliminated. Excess moisture is the primary cause of mold growth indoors. Most sources of moisture, however, can be controlled by simple procedures under the tenant’s control. The landlord will not be liable and tenants will be responsible for all personal and property damage resulting from their failure to comply with these guidelines:

1. Minimize humidity in your rental premises.

a. When central air conditioning is in use, set the fan switch to AUTO rather than ON. When set to the ON position, the blower fan runs continuously and the moisture which has condensed on the air conditioner’s evaporator coil during cooling is re-evaporated and blown back into the unit before it can drain off the coil.

b. When central air conditioning is in use, set the temperature to the highest comfortable level, preferably at least 78 degrees. Lower settings can cause condensation on interior surfaces.

c. Allow at least one inch between the furniture and walls to aid ventilation.

d. Open closet doors to allow ventilation.

e. Use the bathroom fan during and for 10 minutes after bathing or showering. If no fan is available, open the bathroom window slightly for the same duration.

f. Use the fan in the laundry area during and for 20 minutes after using the washer or dryer. If no fan is available, open a window slightly for ventilation during the use of the appliances and for a little while after use as deemed appropriate.

g. Use the exhaust fan above the stove or open a window slightly whenever cooking, especially if steaming.

h. Use a dehumidifier during humid months as applicable.

i. Cover fish tanks.

j. Do not keep an excessive number of house plants.

2. Clean thoroughly and regularly. The following is the cleaning method recommended by the EPA:

a. Mold growth can be removed with commercial cleaning products or a weak bleach solution (one cup bleach in one gallon water).Wear gloves during cleanup and be careful not to spread the mold. Sensitive people who have to cleanup mold should wear a tight-fitting face mask.

b. Use mold killing products when cleaning kitchens and bathrooms.

c. If mold or mildew appears on walls, ceilings, floors or around tubs or sinks, immediately remove the mold or mildew.

d. Dry any water that spills from showers, tubs or sinks immediately.

e. Clean up spills onto carpets, rugs or floors and thoroughly dry the rug or carpet.

f. Regularly check and clean the windows and window tracks and keep free of condensation.

3. You are obligated to notify the landlord immediately of excess moisture problems such as rainwater or groundwater leakage, leaking plumbing, leaking tubs or showers, or running toilets. If you have attempted to clean mold or mildew and it reappears quickly or you are not able to remove it, report the problem to the landlord immediately.

Defending hold claims

In the past 20 years or so, there was an explosion in the number of mold claims, some resulting in substantial judgments against landlords. Although the number of such claims seems to be decreasing currently, it is clear that much of this litigation was fueled by a great deal of misinformation and “junk science” readily accessible on the Internet. For example, a current Google search on the term “toxic mold” results in about 28 million “hits.”

The surge in mold litigation led many insurers to decline to provide coverage for mold claims, thus eliminating what otherwise would be a primary line of defense against such claims. Even when insurance is available, this writer has observed that insurers are inclined to settle mold claims quickly rather than spend time and money defending them – which has the perverse effect of encouraging such claims.

Fortunately, the consensus in the medical and scientific communities is coalescing around some conclusions which make it relatively easy to defend most mold claims. Perhaps the most important conclusions of the medical experts are:

  1. That exposure to airborne mold spores has no permanent adverse health effects. Rather, the effects are short-term and are abated when the mold exposure is reduced or eliminated. The primary short-term effects are allergic reactions and aggravation of pre-existing asthma conditions in sensitive individuals.
  2. That individuals sensitive to molds are sensitive only to some molds and not all molds.
  3. That reliable medical testing for mold sensitivities requires skin prick tests and blood tests for IgE and IgG antibodies.

These conclusions are expressed in an article titled “The Medical Effects of Mold Exposure” published in the Journal of Allergy and Clinical Immunology in February 2006. This article was described in a relatively recent court decision as the best summary of current mainstream medical opinion on the subject.

The scientific/medical community also is in broad agreement that stringent protocols must be observed to achieve accuracy in testing for airborne mold spores. The recommended protocols require testing not only indoor air, but also the outdoor air in the immediate vicinity of the building to determine whether background levels of mold differ markedly in the indoor air. The protocols also require multiple tests over a period of several days to ensure that transient conditions have not unduly affected the test results. Conducting tests according to these accepted protocols is quite expensive, and most air-testing companies do not follow these protocols.

The foregoing discussion provides several points of attack when defending mold claims. In essence, in order to prove a mold claim, a plaintiff will have to present the following evidence:

  1. That mold spores of one or more particular species were present in excess quantities in the air in the leased premises, which will require expensive testing for airborne mold according to accepted scientific protocols. Further, both the company which performed the actual air testing and the laboratory which analyzed the air samples would have to provide witnesses to testify to their work and the results in order to avoid hearsay problems.
  2. That the plaintiff has an allergic sensitivity to the particular species of mold revealed by the airborne mold testing. As noted above, this would require skin prick testing and blood tests for IgE and IgG antibodies. A medical expert, or at least the medical records custodian of the testing facility, would have to testify about the test procedures and results in order to avoid hearsay problems.
  3. That the plaintiff suffered adverse health consequences as a direct result of exposure to the specific species of airborne mold to which he or she has an allergic sensitivity and to which he or she was exposed. This “causation” element would require the expert testimony, within reasonable medical certainty, of a physician with sufficient expertise in the area.

If the plaintiff fails to establish any one or more of the three points listed above, the plaintiff’s claim should fail. And it will be difficult, if not impossible, for most tenants to prove all of these things, both because they (and their attorneys, if represented) may not understand everything that needs to be proved and because all of the above proof steps require substantial expenditures. Further, in view of the fact that the medical consensus is that mold exposure has no permanent adverse health effects, most attorneys, if representing a plaintiff, will not be willing to advance such expenses because the potential judgment resulting from a short-term illness is small.

Accordingly, at an early stage in a mold lawsuit, discovery questions should be sent to the plaintiff to determine:

  • Whether the plaintiff has had skin prick tests and/or blood tests for IgE and IgG antibodies to determine allergic reactions to particular species of mold, and, if so, the results of the tests.
  • Whether a physician has expressed the medical opinion that any physical condition of the plaintiff was caused by exposure to mold to which the plaintiff is sensitive.
    • Most of the time it will be found that no such testing has been done and/or that no physician has ventured such an opinion, either of which should be sufficient to get the plaintiff’s claim dismissed.
  • What type of testing, if any, was done to determine the presence of particular species of mold. Possible types of tests are “bulk mold” and “airborne mold.”
    • “Bulk mold” testing simply refers to taking a sample of mold from a surface and analyzing that mold to determine its species. Such a test is useless from the plaintiff’s perspective because it does not prove that any mold spores of that species were present in the air (one presumes the plaintiff did not attempt somehow to ingest the bulk mold, and, if he or she did so, it’s hardly the landlord’s fault).
    • If testing was done for airborne mold, what protocols were used and what were the test results.

Most of the time it will be found that no such testing has been done. Even when testing has been done, it often will be useless “bulk mold” testing. Even when airborne mold testing has been done, most of the time it will be found that the appropriate protocols were not followed. If the only testing was for bulk mold, or if airborne testing did not follow the proper protocols, it should be possible to get the plaintiff’s claim dismissed.

Procedurally, the best way to “cut off” a mold lawsuit at an early stage is to file a Motion for Summary Judgment after discovery responses have been received. Such a motion also may require an affidavit from an expert that the claim cannot be established in view of the discovery responses. If granted, the motion will result in dismissal of the plaintiff’s claim.

If, for some reason, the Motion for Summary Judgment is not granted, the foregoing information provides ample ammunition for defending the claim at trial.

Copyright © Scott Law Firm Professional Corporation

Protection of assets

By Steve Scott, Attorney
Scott Law Firm, PC

Introduction – common claims

Only a lucky few among landlords and property management companies will escape being sued if they are in business for any length of time. Of course, not all lawsuits are successful (anyone who can scrape up the filing fee can file a lawsuit – that doesn’t mean it will be successful). But even if a lawsuit is unsuccessful, the landlord will need to spend time and money defending the lawsuit.

Probably the most serious claims arise from injury (or even death) and property damage caused by allegedly unsafe conditions. As a general proposition, if the landlord is liable to repair or maintain leased premises under any legal theory, the landlord will be liable for personal injuries, death and property damage resulting from failure to maintain the premises in a reasonably safe and habitable condition. To understand a landlord’s liability for repair and maintenance, review our blawg post Landlord’s Repair and Maintenance Liability.

An increasingly common injury claim arises from mold within rental premises. However, mold claims are very difficult for tenants to pursue successfully because they must be prepared to present (a) expert testimony which identifies the type of mold present, and (b) medical testimony which links the specific type of mold to the physical problem alleged (e.g., asthma). Very few tenants are prepared to present such evidence. For more on this subject, see our blawg post Preventing and Defending Mold Claims.

Other claims may arise from the landlord-tenant relationship itself and are often presented as counterclaims to lawsuits filed by landlords. The most common claims of this nature are security deposit claims and wrongful evictions. The only way to guard against security deposit claims is to scrupulously handle security deposits in accordance with the security deposit statute – see our Security Deposits page. Preventing wrongful eviction claims is a matter of remembering that the only legal way to evict a tenant under Missouri law is to file an eviction lawsuit, obtain a judgment for possession, and have that judgment enforced by a sheriff’s deputy; any other method of forcing a tenant to vacate can constitute wrongful eviction (known in the law as “forcible entry and detainer”).

Asset exposure – the basics

For purposes of this discussion, assume we are dealing with an unmarried individual landlord who owns and leases rental properties in his or her own name. Under Missouri law, if a lawsuit judgment is entered against this hypothetical landlord, the law gives the successful claimant several mechanisms to collect the judgment from the landlord’s assets if the landlord does not pay the judgment voluntarily.

One judgment collection mechanism is garnishment. The successful claimant holding a judgment can ask the court to issue documents to garnish bank accounts and wages. Thus, the landlord could find that his or her bank account has been stripped of all funds to apply to the judgment. Or, if the landlord also holds a job, he or she could find that a percentage of earnings is being deducted from every paycheck to apply to the judgment. The amount that can be garnished from paychecks is 10% of the net after withholding taxes if the debtor is a “head of household”; otherwise, the garnishment percentage is 25%. Qualification as a head of household only requires that at least one other person be wholly or partially dependent on the debtor for financial support.

Another judgment collection mechanism is seizure and sale of real and personal property. The claimant holding the judgment can, for example, ask the court to issue an order to the sheriff to seize particular items of personal property and sell them at public sale, with the net proceeds being applied to the judgment. More seriously, the claimant can ask the court to issue an order to the sheriff to seize particular real estate owned by the landlord for public sale, with the net sale proceeds being applied to the judgment.

In our hypothetical situation of an unmarried landlord who owns and leases properties in his or her own name, all of the landlord’s assets are potentially at risk of being seized for application to the judgment – with the exception of certain exemptions granted by statute. Exemptions must be claimed by informing the sheriff when an execution order is served and include:

  • $3,000 worth of household furnishings and goods, wearing apparel, appliances, books, animals, crops or musical instruments held for family, personal or household use.
  • $500 for jewelry.
  • $600 for any other property (“wildcard” exemption – can be added to other exemptions).
  • $1,250 “wildcard” exemption for head of family, plus $350 for each dependent under 18 and/or other dependent determined to be disabled by the Social Security Administration (can be added to other exemptions).
  • $3,000 for implements, professional books or tools of the trade of the judgment debtor or a dependent of the judgment debtor.
  • $3,000 for any one motor vehicle.
  • $5,000 for mobile home used for principal residence which is not on or attached to realty owed in fee by the judgment debtor.
  • Unmatured life insurance policies, including cash value and loan values thereof.
  • Professionally prescribed health aids.
  • Right to receive: Social Security; unemployment compensation; local public assistance benefit; veteran’s benefit; disability, illness or unemployment benefit.
  • $750/month in alimony/maintenance.
  • Right to receive private or public pensions, disability payments, stock bonuses, profit-sharing plan, or death benefit plan.
    m. 90% of any debt, income, salary or wages payable to a head of household (meaning only 10% can be garnished; 25% can be garnished if not head of household).
  • $15,000 for homestead (residence, land and appurtenances).

Due diligence

One form of asset protection is for the landlord to exercise “due diligence” to prevent or at least minimize possible claims that could result in a judgment against the landlord. This can be thought of as the “first line of defense.”

Due diligence with regard to the physical condition of the premises includes making routine inspections to determine whether there are possibly unsafe conditions which need to be corrected and, if so, promptly making those corrections in a workmanlike manner.

Another form of due diligence is to make sure that leasing forms contain appropriate clauses, including:

  • Require the tenant to certify that he has inspected the premises and finds them satisfactory.
  • Require the tenant to promptly report unsatisfactory conditions.
  • Include rules governing proper use of the premises by the tenant.
  • Require the tenant to keep the premises clean and in good order.
  • Require the tenant to maintain smoke detectors, including changing batteries.
  • Exclude liability of the landlord to the tenant for injury or property damage except injury or damage resulting from the landlord “gross or willful” negligence” or intentional acts.
  • Inform tenants that security is not provided and that the tenant is responsible for protecting his own person and property from acts of outsiders.
  • Require that all lawsuits be filed in Boone County to minimize defense expense.
  • Waive jury trial to reduce defense expense.
  • Require the tenant to pay the landlord’s attorney fees if the landlord wins a lawsuit.
  • Allow abandoned property to be disposed of without liability to the tenant.

These lease clauses can help reduce the landlord’s exposure but cannot guarantee that all claims will be precluded.

Liability insurance

Obtaining and maintaining adequate liability insurance is actually a form of due diligence but deserves its own heading because of its importance.

Landlords should work closely with their insurance agents and other insurance advisers to make sure they have liability insurance which:

  • Covers all likely types of claims, consistent with affordability of premiums.
  • Provides sufficient monetary coverage (i.e., the policy limits are high enough to cover anticipated claims – the landlord’s assets can be at risk if a claim results in a judgment exceeding policy limits), again consistent with affordability of premiums.

Some insurers now seek to exclude mold claims and other types of claims in rental housing, or may charge additional premiums to include coverage of such claims.

Liability insurance includes a commitment by the insurance company to pay for an attorney to defend any lawsuit filed which is covered by the policy. Most policies treat the attorney expense as an addition to the policy limits; however, some policies deduct legal expenses from policy limits, so be sure you know what you are getting in this regard. Typically the insurer will select the attorney and you will have no say in who is selected; however, you also have the right to retain your own attorney at your own expense to assist in defending a claim.

WARNING: If a lawsuit is filed against you, you should immediately report the lawsuit to your insurer, provide a copy of the lawsuit to the insurer, and document that you have done so. In fact, if you suspect a claim will be made before a lawsuit is filed, it is a good idea to inform the insurer of the potential claim as soon as you become aware of it. Typically you inform the insurer by giving the information to your agent, but some companies have different procedures, so be sure you know to whom claims must be reported. If you fail to promptly report a claim, and your delay somehow prejudices the insurer’s ability to defend the claim, the insurer may be able to avoid defending the claim and paying any judgment (up to policy limits) entered against you.

Tenancy by the entirety

Another form of asset protection can result from the married status of a landlord. A married couple can own many forms of property, including real estate, bank accounts and motor vehicles, in what is known as a “tenancy by the entirety.”

A tenancy by the entirety can have the effect of protecting assets because a claimant who holds a judgment against only one of the spouses cannot enforce that judgment against any item of property which is owned by both spouses in a tenancy by the entirety.

However, entirety property is subject to judgment enforcement if the claimant obtains a judgment against both spouses. This suggests that, absent other protections, it is a good idea for only one spouse to be actively involved in leasing activities. However, if the rental properties are owned by both spouses in tenancies by the entirety, that fact alone could be enough to allow a judgment to be entered against both spouses, even if only one spouse is active in the rental business, thus possibly exposing at least the property involved in the claim to judgment enforcement. Protecting against a judgment against both spouses, therefore, has more efficacy in conjunction with formation of a separate leasing entity (see the last paragraph in the next section).

Leasing entity

The most common leasing entities formed by landlords are corporations and limited liability companies (LLCs). Corporations used to be more common, but now the vast majority of leasing entities are formed as LLCs because LLCs are less expensive to set up and require minimal ongoing maintenance.

The legal effects of forming a corporation or LLC are the same (although the tax treatment can differ somewhat). A corporation or an LLC is deemed to be a separate “fictional legal person,” capable of conducting business and being sued or suing in its own name. If a rental business is conducted in the form of a corporation or LLC, then only the company’s assets are at risk in the event of a judgment being entered against the company, but the personal assets of the company’s owners (except their investments in the company) are not at risk.

If you decide to form a corporation or LLC, it is recommended that you consult with an accountant on the tax implications and work with an attorney on the details of formation and maintenance. One common problem is that LLCs are often formed by filing Articles of Organization with the Secretary of State but failing to prepare and have the owners sign an “Operating Agreement.” The law requires an Operating Agreement for a valid LLC.

WARNING: Even if a corporation or LLC is formed to operate a rental business, there are some ways in which the company’s owners can be held individually liable for claims made against the company unless the following guidelines are followed:

  • All the corporate or LLC formalities required by statute must be carefully observed. The entity must be properly formed, and it must act in accordance with its governing documents and state statutes. In the case of a corporation, certain annual “maintenance” is required, including filing a registration report with the Secretary of State and maintaining minutes of at least annual meetings of the shareholders and directors. Both corporations and LLCs should maintain written documentation of important decisions by the shareholders, directors, owners, and managers.
  • Corporate and LLC representatives must be careful not to sign documents as individuals or otherwise give the impression that they are acting as individuals rather than as representatives of the company. For example, a proper signature format would be “COMPANY NAME by Name of Representative, Title.” Just signing your name without making it clear that you are signing on behalf of the company can give rise to individual liability.

Some landlords go so far as to form separate LLCs for each property owned, on the theory that this limits the liability claim exposure in a particular case to only the particular property involved. While this approach may have some validity, it can create complications and confusion. Unless you are a detail-oriented person who can keep straight what property is owned by what entity, this approach may cause more harm than good.

Other possible entities that might be formed to own and manage rental properties include trusts and limited partnerships.

If a married couple forms a corporation or LLC to own and manage rental properties, it is highly recommended that only one of the spouses be formally designated as an owner of the company. If this is done, any creditor who is somehow able to “pierce the company veil” and obtain a judgment against the owner of the company will not be able to collect that judgment from assets owned by both spouses in tenancy-by-the-entirety form. The spouse who is not designated as a company owner should have no concern about his or her rights in the event of a marriage dissolution, however, because under Missouri law the company would clearly be treated as “marital property” in a dissolution if it was formed during the marriage.

Copyright © Scott Law Firm Professional Corporation

How to prepare for trial

By Steve  Scott, Attorney
Scott Law Firm, PC

Introduction

“Preparing to Fail” means preparing in advance – before a landlord-tenant relationship even begins – and continuing to prepare as the relationship continues, for the possibility that the relationship will somehow fail and you will need to file a lawsuit and ultimately be a witness on your behalf in a trial in the lawsuit.

If you have taken the appropriate steps so that you are prepared for the failure of the landlord-tenant relationship, then you are also well on the way to “Preparing to Succeed” – that is, to win the lawsuit. Or, if the relationship does not fail, then your preparation may well be one of the reasons it succeeded.

First Things First – Qualify Your Tenants

If “location, location, location” is the mantra of Realtors®, then “qualify, qualify, qualify” should be the mantra of landlords.

The single most important thing you can do to ensure a successful landlord-tenant relationship is to properly qualify prospective tenants before you lease to them. Later, if the relationship breaks down anyway, the information you gathered in the qualification process can be a big help in winning an eviction lawsuit and collecting a judgment.

So use all the resources at your disposal to check on prospective tenants. Every adult renting from you should fill out a separate application form (and should also be required to sign the lease so they will be “jointly and severally liable” – more on that later). Run credit checks. Review court records for criminal cases and civil lawsuits.

And don’t hesitate not to rent to applicants if they appear to be too big a risk based on what you find out. Down the road you stand to lose more money on bad tenants than by waiting a little longer to rent a vacant unit.

Next, Have the Tenants Sign a Written Lease

Most landlords use written leases, but a few still rely on oral leases. Written leases are highly preferable because they can cover many issues not covered by oral leases. Most important in terms of later success – and more complete success – if you need to file an eviction lawsuit, are the following points:

1. All adults who will reside in the premises should be required to sign the lease; further, it is particularly important to have both husband and wife sign the lease if you rent to a married couple. Also, the lease should specify that all lessees are jointly and severally liable. This way, you are more certain of being able to hold all tenants jointly liable if you need to sue and being able to collect from the jointly-owned assets of a married couple. (These issues are discussed more under “Enforcing Your Judgment” below.)

2. Include a clause saying that the tenants have inspected the premises and find them satisfactory and that any problems they notice after moving in must be reported within, say, 48 hours, or it will be conclusively presumed there are no problems.

3. The lease should specify the order in which payments will be applied. This can become important in a rent-and-possession case if you really want the tenants out, as explained below.

4. Because tenants sometimes raise security deposit issues in lawsuits based on statements made by the landlord during a check-out inspection, the lease should contain language to this effect: “Any statements or estimates made by lessor or lessor’s representative during inspection are subject to correction or modification before final security deposit accounting.”

5. The lease should specify that only the persons named on the tenants’ applications are authorized to live there. Such a clause gives you a lever to terminate the lease if the tenants allow additional people to reside in the unit.

6. You may want to inspect the premises during the tenancy to determine if there is damage before filing suit. Many leases do not contain language that would allow this. A good lease should set out a “laundry list” of reasons the landlord can enter, including to: (a) Inspect for damage; (b) determine whether lessee is in violation of the lease; (c) remedy any lease violations known by lessor; (d) remove unauthorized animals or items prohibited by the lease or the Rules and Regulations; (e) remove perishable foodstuffs if electricity has been turned off; (f) retrieve property owned by lessor or former lessees; (g) make necessary repairs, whether or not requested by lessee; (h) protect persons and property in case of an emergency; (i) show the premises to government inspectors, fire marshals, lenders, appraisers, contractors and insurance agents; (j) allow access by law enforcement personnel executing an arrest or search warrant or in hot pursuit; (k) show the premises to prospective buyers; (l) show the premises to prospective lessees during the 90 days before expiration of the lease; and (m) deliver or post notices to lessee. The inspection clause should contain some “teeth” – for example: “Lessee’s failure to allow entry under this paragraph shall be sufficient cause to terminate this lease; alternatively, lessee shall be liable for liquidated damages of $200 for each failure to allow entry, which shall be deemed additional rent.”

7. You may need to serve notices on the tenants before filing suit. Make it easier on yourself by including appropriate notice language in the lease. For example: “Lessee agrees that any notice given by lessor relating to this lease may be given by any one or more of the following methods, each of which shall be equally sufficient: (a) by personal delivery of the notice to any one or more of the persons signing this lease as lessee or any person residing in the premises who is at least 16 years old; (b) by posting the notice on the main entrance door of the premises; or (c) by mailing the notice to lessee at lessee’s last-known address by certified mail, return receipt requested. Notices which are personally delivered or posted shall be deemed given on the date of delivery or posting; notices which are mailed shall be deemed given on the next mail delivery date after the date of mailing, whether or not the return receipt is signed and returned. Any notice given as stated in this paragraph shall be binding on all lessees under this lease and all other persons occupying the premises with lessees’ permission.”

8. The lease should contain a multi-part clause allowing you to declare defaults, with these important options among others:

a. Declaring a termination of the lease after 10 days notice.

b. In the case of minor violations, when you are willing for the tenants to stay if the default is corrected, allowing you to give notice that the lease will be terminated after 10 days notice unless the default is corrected.

c. Allowing you to demand possession of the premises so they can be re-rented without terminating the lease, in which case the tenants’ liability will continue until you enter into a new lease or the old leases expires, whichever happens first. Such a clause should also make it clear that the tenants are responsible for costs you incur in re-renting the premises.

9. For effective enforcement of the lease and the fastest, least expensive litigation, the lease should specify:

a. That all lawsuits relating to the lease and the tenants’ occupancy of the premises must be filed in Boone County. This is important if tenants skip and move to another county in Missouri because, technically, you would otherwise be required to sue them in the county where they now live.

b. That both you and the tenant waive jury trial. This is crucial because jury trials are much more expensive than trials heard by a judge and take much longer to schedule.

c. That each tenant is considered the agent of all other tenants for purposes of service of a lawsuit.

d. That the tenants will be liable for all expenses you incur in enforcing the lease, including reasonable attorney fees, litigation expenses, court costs and collection agency fees.

A final point about the leasing process: Do not, under any circumstances, allow tenants to take possession of leased premises without first collecting the full security deposit. After the tenants move in, you have no leverage to collect the unpaid balance of the security deposit because the court will not award a judgment for an unpaid security deposit. This is for the reason that the court’s judgment will take account of the damages you claim, and the tenants would be entitled to credit for the security deposit against those damages, so also awarding judgment for an unpaid security deposit would result in unjustifiably increasing damages.

Move-In/Move-Out Procedures

You’ve qualified the tenants, they’ve signed a good written lease, and now it’s time for them to move in. This can be a crucial point in time for later litigation if the condition of the premises becomes an issue. One of the more common defenses raised by tenants in landlords’ lawsuits is that the premises were in bad condition.

So, plan to protect yourself in advance against such a defense by documenting the condition of the premises at the time the tenants take possession. There are two key things to be done:

1. Have a standard check-in inspection form where you document the condition of the unit upon move-in. The form should contain space for the tenants to make their own notations. It should also state that unless the tenants return the form with differing comments within 48 hours of move-in, they will be deemed responsible for any unnoted problems existing at the time they move out. When you’ve filled it out, give a copy to the tenants and point out that they have 48 hours to return it with their comments.

2. Take photographs of the unit immediately before the tenants move in. Make sure the date-display feature of your camera is turned on and the date is set correctly. If you’re using a film camera, you do not have to get the pictures printed, but you should have the film developed and keep the negatives in the tenants’ file so they can be printed later if necessary. If you’re using a digital camera, you can simply store the digital photographs in a known location on your computer so they can be printed later if necessary. (Do not use a video camera for this purpose. They do not produce as high-resolution images, and judges get impatient sitting through videos.)

Also, if you have done any refurbishing of the unit before the tenants moved in – say, for example, installing new carpet – either put the bills (or copies) for that work in the tenants’ file or put a note in the file to remind you of the work and where the original records are located.

A similar procedure should be followed at the end of the lease. Do an inspection and prepare a check-out form (some landlords use a combination check-in/check-out form so that conditions at the beginning and end of the tenancy can be easily compared). Take photographs again, particularly if there is any significant damage or cleanup problem that you may want to charge against the tenants. This inspection can be combined with the security deposit inspection mentioned below.

Maintaining Your Business Records

Many landlords now use property management software which essentially maintains much of the same information that would otherwise be kept in the form of paper records. If you use such software, be sure that you know how to extract the necessary information when the need arises.

Even with a computer-based management system, however, you need some paper files. To ensure later success if a lawsuit must be filed, here are the recommended guidelines for keeping records:

1. You should have a file for each tenant/unit which contains all paperwork relating to the particular tenancy, including applications, background checks, the lease, the check-in/check-out forms, all correspondence to and from the tenant, all notes of phone calls and personal contacts to and from the tenant, the originals (or copies, with reference to the location of the originals) of bills and work orders for maintenance and other work done during the tenancy, and notices and demands served on the tenants. Also, every once in a while, make a photocopy of the tenants’ rent checks so you’ll know where they bank and throw the copies in the file (this is helpful in collecting a judgment later). In short, all information relating to the tenant/unit should be in the file. If your computer system maintains some of this information, be sure you can print out everything to put in the paper file if the need for litigation arises.

2. A separate ledger – either handwritten or computerized – should be maintained for each tenant/unit. (Aggregate ledgers including other tenants/units become unwieldy in the courtroom and risk compromising the privacy of other tenants.) More on tenant ledgers below.

3. Although mentioned above, it is important that you document all contacts to and from the tenant, whether in writing, on the phone, or in person. All such notes should include the date, and, if appropriate, the time of day. If you contact the tenant about late rent, note it in the file. If you serve a notice or demand on the tenant, put a copy in the file along with information on how and when it was served. If the tenant calls to complain about some condition in the unit, make notes of the complaint and how and when you responded.

4. If you spend any money on the unit during the tenancy, document it in the file. Throw in the originals or copies of bills, work orders, etc. (If you include copies, make sure you know how to find the originals in your central files.)

More on Tenant Ledgers

As mentioned above, you should have a separate tenant ledger for each tenant/unit. This can take the form of a traditional paper ledger sheet, a computer spreadsheet, or the ledger functions built into property management software.

The traditional ledger format will generally track date, description, charges, payments, and balance, something like this:

Date Description Charges Payments Balance
1/1/18 Rent $800.00 $800.00
1/3/18 Payment ($800.00) $0.00

 

This is a fine system for your internal purposes, but it has some inadequacies for lawsuit purposes, and you may need to break out and summarize various charges, and how payments were credited, in a different format for trial. Such charges might include rent, late fees, utilities, bad check charges, attorney fees, court costs, etc.

In the section above on written leases, it was recommend that you include a clause specifying the order of application of payments. This can become important in some rent-and-possession cases because of the fact that under Missouri law, if a tenant pays all rent due plus court costs on or before the date judgment is entered, the tenant cannot be evicted (although you can still get a monetary judgment for other amounts owed).

Here is a suggested clause specifying the order of application of payments: “Absent lessor’s contrary agreement, payments by lessee shall be credited to first to delinquent and current charges owed by lessee other than late charges or rent, second to delinquent and current late charges, third to delinquent rent, and last to current rent, regardless of any notations to the contrary on lessee’s check or other payment advice.” This modifies the traditional rule of accounting and law that absent other agreement, payments are always credited first to the oldest charges.

To understand how the order of application of payments can affect a rent-and-possession case, consider the following simple example using the traditional rule:

Date Description Rent Rent
Balance
Late fee Late fee
Balance
Overall
Balance
1/1/18 Rent $800.00 $800.00 $800.00
1/25/18 Late fee $125.00 $125.00 $925.00
1/25/18 Payment ($800.00) $0.00 $125.00

 

This simple example demonstrates that the January 25 payment had to be attributed to the January rent under the traditional legal/accounting rule because that was the oldest charge. However, using a clause such as recommended above would result in the payment being attributed first to the late fees, in which case only $675.00 would be applied to rent, leaving an unpaid rent balance of $125.00. This may sound trivial, but when there is a lengthy series of financial transactions with a tenant, the difference in how much rent is owed over time versus other charges can be significant and can determine the outcome in a rent-and-possession case.

Whether or not you have a clause such as the one recommended above in your lease, for purposes of litigation you may have to prepare a detailed breakdown of how each payment was credited and what the balance is for various categories of charges. Your attorney can do this for you if you want, but you may pay more for the privilege.

You may also need to prepare a separate breakdown of unpaid charges depending on the amount of late fees you charge for late payments. Many landlords’ leases specify late charges of $10.00 per day or more after the fifth of a month. However, in almost all cases, judges in Boone County allow only $5.00 per day. If you have accrued late charges on your tenant ledger at a rate higher than $5.00 per day, that adjustment will need to be made.

Whatever form your accounting and other records take, they should be maintained on a regular basis using regular procedures as part of your rental business. If so kept, your records can be introduced into evidence under an exception to the hearsay rule known as the “Business Records as Evidence Law.” This will be explained in the later section on trials.

The Relationship Fails – What Next?

Say you have decided the landlord-tenant relationship is just not working out and you need a “divorce” – i.e., an eviction. What next? The answer is: It depends. There are many variables depending on what form of litigation is filed and what grounds you have.

If the problem is solely non-payment of rent, a rent-and-possession case is appropriate. The key requirement before filing such a case is that you demand payment of the unpaid rent. This can be done orally or in writing, and the fact of demand is almost never disputed by tenants. For proof purposes, a written demand is a little better, and if you have an appropriate notice clause in your lease, it will be easy to serve the demand and prove that you did so. If it’s served by certified mail, you simply produce the certified receipt. If it’s delivered to the tenant or posted, the person who did the delivery or posting should be available to testify that it was done.

An unlawful detainer case may be appropriate in other situations (rarely for mere non-payment of rent). If the lease has expired by its own terms and the tenants are holding over, no prior notices are required before filing suit. However, if you want to declare the lease breached and terminate the lease, an appropriate notice will need to be served on the tenants; the notice would legally terminate the lease 10 days after being given (assuming the court finds that the breach occurred), and you would then be entitled to file for unlawful detainer. In certain other cases, a more lengthy notice period is necessary to terminate a lease. Check with your attorney to make sure the proper notice is given in a timely fashion.

Another possible type of eviction case is so-called “expedited eviction,” which deals mostly with illegal drug dealing, possession or use in and near the leased premises.

The fourth type of case that landlords can file is called a “contract action.” This is filed when the tenants have moved out still owing money for rent, late fees, physical damages to the property, etc.

Many times it is not clear what type of action is most appropriate and what needs to be done before filing suit. This is when you pick up the phone and ask your attorney for advice.

Warning: Be sure you handle the tenants’ security deposit properly. The security deposit statute requires the following:

1. You must give written notice in writing to the tenants of the date and time when you will inspect the premises to determine the amount, if any, to be withheld from the security deposit. (Don’t forget the recommended lease clause above to the effect that your statements during the inspection will not be binding and are subject to correction or modification before final accounting.)

2. The tenants must have an opportunity to be present during the inspection if they wish.

3. Within 30 days after the tenancy ends, you must either:

a. Refund the entire security deposit; or

b. Send the tenants a written itemization of what has been deducted from the security deposit together with the balance of the deposit, if any.

Note: Sometimes it is difficult to determine when the “tenancy ends” for the purpose of starting the 30-day period to account for the deposit. This is particularly true when tenants move out before the end of the lease term. If you have any doubt whatsoever when the 30-day period starts, consult with your attorney.

4. If you fail to comply with the foregoing requirements in any respect, the tenants can recover from you twice the amount of the deposit that was wrongfully withheld. This can severely limit, or even negate, any recovery you might make from the tenants.

If you have given any necessary pre-suit notices and want to proceed with a lawsuit, you will need to give your attorney certain minimum information. Your attorney may not want your entire file and accounting records right away, but will need the following minimum information to file suit:

1. Names and current addresses of tenants. If other adults are living in the unit, they should also be named as defendants so you can get an eviction judgment against all adults living there.

2. Copy of your lease.

3. Amount(s) owed.

4. The particulars of how and when the tenants violated the lease.

If the case needs to be tried, your attorney will want to review all of your records before trial to select the appropriate records to use as exhibits at trial.

Getting Ready for Trial

Uh oh. Your lawsuit was filed, the tenant was served, the first court date was held, and your case is not among the lucky 50% of landlord suits resolved by default or consent judgment – instead, the tenant has disputed all or part of your lawsuit, and there’s going to be a trial. So how to you get ready?

Remember all those wonderful records you’ve been keeping? You and your attorney are going to need to cull through them and pick out the records necessary to prove the particular claims made in your lawsuit. They will be identified at trial and offered as exhibits. This is where the “Business Records as Evidence Law” mentioned above comes in very handy. Ordinarily documents are considered inadmissible hearsay, but the law creates an exception for business records if the right conditions are present. Here’s how the questions and answers go to admit a document in evidence as a business record:

Q: Is this document a business record of XYZ Rentals?
A: Yes.

Q: Was this document made and kept in the regular and ordinary course of business of XYZ Rentals?
A: Yes.

Q: Are you a custodian of this document?
A: Yes.

Q: Do you have personal knowledge of the manner in which this document was prepared and kept?
A: Yes.

Q: Were the entries made in this document at or near the time the particular items of information were received?
A: Yes.

Q: Were the entries made in this document by persons having a business duty to enter them correctly?
A: Yes.

Bingo! The formula above results in the document being admitted into evidence as a business record. Once it has been admitted, unless the information contained in the document is rebutted by other evidence, the document is considered sufficient proof of the information it contains.

There may be other documents to be be introduced which are not, strictly speaking, business records, and you and your attorney will need to decide how to authenticate those documents and whether there is an applicable exception to the hearsay rule. Sometimes a witness other than a person affiliated with your rental business may be a necessary witness to authenticate a particular document.

How about those photographs you or your employee took? They are easily admissible, too, with the following questions by your attorney and answers by the person who took the photos:

Q: Did you take these photographs?
A: Yes.

Q: When did you take them?
A: On [date], the day after the tenants moved out.

Q: Were any changes made to the unit, such as moving anything or cleaning up anything, before these photographs were taken?
A: No.

Q: Have these photographs been modified or edited in any way?
A: No.

Q: Is each of these photographs a fair and accurate depiction of the scene shown as of the time you took them?
A: Yes.

Besides documents and photographs, you will need at least one witness with personal knowledge of the relevant facts to testify. In many cases, only one landlord witness is needed – that can be you, or perhaps your office manager – who also authenticates documents (and possibly photographs, if needed).

However, sometimes additional witnesses may be needed to establish particular facts crucial to your case. Suppose, for example, that you served a lease termination notice on your tenants because neighbors complained about constant excessive noise, the tenants did not move out in response to the notice, and you sued for unlawful detainer. You cannot testify as to what the neighbors said about the noise – that would be hearsay. Instead, at least one of those neighbors is going to need to testify. You and your attorney will need to decide before trial what witnesses are needed. And, if you are not absolutely certain that a particular witness will appear voluntarily, a subpoena should be issued to that witness.

In the final analysis, you will find that if you have kept good records as recommended above, it will be easy to prove your case, and you will receive a judgment against the tenants.

Enforcing Your Judgment

If you have a judgment for eviction, it is relatively easily enforced by submitting a request to the Circuit Clerk to issue an “execution for possession” order to the sheriff. If the judgment was entered by consent of the tenants, this request can be submitted immediately after judgment. However, if the judgment was entered by default or after a trial, then you have to wait 10 business days after judgment before the clerk will issue the execution order (this is because in default and trial cases, the tenants have 10 days to appeal). Most of the time, however, tenants see the handwriting on the wall and move voluntarily before the sheriff comes around.

For more information about enforcing a judgment for possession of the premises, see the Enforcement of Judgments page.

If you have a monetary judgment, enforcement will be much easier if you have followed the record-keeping recommendations above. There are four main possibilities for collecting a monetary judgment:

1. Garnishment of wages. This is where your application forms come in handy. Your form does ask for employment information and Social Security Number, doesn’t it? You should also try to keep updated on employment information during the tenancy by whatever means possible. If you intend to renew or extend a tenant’s lease, make filling out a new application, or updating the old one, a condition of signing the extension or renewal. (You can sometimes obtain current employment information from credit reports, but you may have to wait a few months after a change of job for that information to show up on a credit report.)

2. Garnishment of bank accounts. You do ask for banking information on your application forms, don’t you? And you did occasionally put copies of the tenant’s checks in your tenant file, didn’t you? If so, you are in a good position to garnish a bank account.

3. Seizure and sale of personal property. If the tenant has personal property of some value, such as a car or expensive furniture or appliances, you can have an order issued to the sheriff to seize the property and sell it. The net proceeds of the sale after payment of sale expenses is then applied to your judgment.

4. Sale of real property. This may be the least likely method of being able to collect a monetary judgment from a tenant. After all, why are they renting from you if they own real estate? However, the possibility should be kept in mind. If it turns out that the tenant does own real estate, you can have an order issued to the sheriff to sell the property and apply the net sale proceeds to your judgment. It is easy to check public records to determine if a person owns real estate, but this has to be done on a county-by-county basis.

If you can’t collect your monetary judgment right away (and, in fact, many judgments obtained by landlords against tenants prove to be uncollectible), keep in mind that you have up to 10 years from the date the judgment was entered to enforce it (and that can be extended for additional 10 year periods if the proper procedures are followed). This suggests another desirable form of record-keeping: You should set up a system to periodically review judgments you have received in the past to determine if there is any way to collect them within 10 years and, if not, whether you need to ask the court to extend the judgment for another 10 years.

Mentioned near the beginning were the issues of “joint and several liability” and married couples. If you have a judgment against more than one tenant, as a general rule you can enforce the entire judgment against any one or all of them so long as your lease contains appropriate language and does not exclude joint and several liability. This means, in effect, that you could collect the entire judgment from just one of several defendants (it would then be up to the defendant who had to pay more than his fair share to seek contribution from the other defendants). This is highly advantageous in collecting judgments. The wrinkle with married couples is that if you obtain a judgment against only one spouse, you cannot collect your judgment out of assets the spouses own jointly. That is why it is very important to ensure that both spouses sign your lease so you can get a judgment against both.

Conclusion

Be a Boy Scout – Be Prepared! Make the tips mentioned above a part of your regular routine, and you will be prepared to succeed in a lawsuit against your tenants if the landlord-tenant relationship fails.

Copyright © Scott Law Firm Professional Corporation

Landlord’s repair and maintenance liability

By Steve Scott, Attorney
Scott Law Firm PC

Contents:

Overview

At common law, absent agreement, the landlord had no duty to repair or maintain leased premises. Over the years, this rule has been modified by a number of exceptions, making the landlord liable for repair and maintenance in many, but not all, situations.

Still, however, with limited exceptions, the tenant cannot withhold rent because of the landlord’s failure to repair or maintain.

The common law rules and the exceptions engrafted upon them over the years are outlined below.

Top of Page

Common Law Rules

A good summary of the main common law rules relating to repair/maintenance of leased premises appears in King v. Moorehead, 495 S.W.2d 65, 68-69 (Mo.App., K.C. 1973):

“At early common law, a lease was considered a conveyance of an estate in land and was equivalent to a sale of the premises for the term of the demise. Warner v. Fry, 360 Mo. 496, 228 S.W.2d 729, 730(1) (1950); 2 Powell, The Law of Real Property, §221(1) at 178. As a purchaser of an estate in land, the tenant was subject to the strict property rule of caveat emptor – let the buyer beware. The lessee’s eyes were his bargain. He had the duty to inspect the property for defects and took the land as he found it. ‘(F)raud apart, there (was) no law against letting a tumble-down house.’ Robbins v. Jones, 15 CBNS 221, 143 Eng.Rep. 768, 776 (1863). There was no implied warranty by the lessor that the leased premises were habitable or fit. The common law traditionally assumed that the landlord and tenant were of equal bargaining power. So, if the tenant wished to protect himself as to the fitness of the premises, he could exact an express covenant from the landlord for that purpose. Burnes v. Fuchs, 28 Mo.App. 279, 281 (1887); Griffin v. Freeborn, 181 Mo.App. 203, 168 S.W. 219, 220 (1914); See also, “Landlord and Tenant – Implied Warranty of Habitability – Demise of the Traditional Doctrine of Caveat Emptor,” 20 DePaul L.Rev. 955 (1970-1971).

“The law of leasehold originated in an era of agrarian economy which assumed that the land was the most important feature of the conveyance. The tenant was only the conduit for the rent which was conceived to issue from the land itself ‘without reference to the condition of the buildings or structures on it.’ Hart v. Windsor, 12 M & W 68, 152 Eng.Rep. 1114, 1119. If the buildings were not habitable, the rent – which was the quid pro quo of the tenant’s possession – was still due from him. Thus, even where the tenant was successful in exacting a covenant that the lessor make repairs, this covenant was considered only incidental to the land and independent of the tenant’s covenant to pay rent. Hence a breach by the landlord did not suspend the obligation of rent; the tenant’s only remedy was to sue for damages arising from the breach. For all practical purposes, the obligation to pay rent was absolute.”

The common law not only did not require the landlord to maintain leased premises, but also prohibited the landlord from entering the premises to make repairs absent agreement with the tenant. Bert v. Rhodes, 258 S.W. 40 (Mo.App., St.L. 1924); Forsythe v. Shryack-Thom Grocery Co., 223 S.W. 39 (Mo. 1920); and McKinley v. Alliance Trust Co., 66 S.W. 153 (Mo. 1901).

The rule that a tenant may not withhold rent because of the landlord’s failure to repair or maintain remains alive and well today, with certain exceptions noted in subsequent sections of these materials. See, e.g., Broken Heart Venture, L.P. v. A&F Restaurant, 859 S.W.2d 282 (Mo.App., E.D. 1993), and C&J Deliver v. Vineyard & Lee & Partners, 647 S.W.2d 563 (Mo.App., E.D. 1983), both holding that payment of rent is an independent covenant of the tenant which is not excused if the landlord breaches an essential term of the lease. In O’Neil v. Flanagan, 64 Mo.App. 87 (1895), the tenant was not discharged from his obligation to pay rent although the building was destroyed by fire. In Burnes v. Fuchs, 28 Mo.App. 279 (1887), the obligation to pay rent was not discharged although the premises were in such deplorable condition as to be condemned by municipal authorities. (For a case showing perhaps slight movement away from this rule, see Hiatt Inv. Co. v. Buehler, 16 S.W.2d 219 (Mo.App., K.C. 1929)). Of course, a lease agreement can give the tenant the right to withhold rent to compensate the tenant for repairs the landlord was contractually obligated to make. Edith Investment Company, Inc. v. Fair Drug, Inc., 617 S.W.2d 567 (Mo.App., W.D. 1981).

At common law, the tenant had the right, but not the duty, to make repairs and maintain the demised premises; however, the tenant also had to refrain from committing waste, which in some situations might give rise to a duty to perform some repairs or maintenance. Rumiche Corp. v. Eisenreich, 40 NY2d 174, 386 NYS2d 208, 352 N.E.2d 125 (NY). Waste recently was defined as “the failure of a lessee to exercise ordinary care in the use of the leased premises or property that causes material and permanent injury thereto over and above ordinary wear and tear.” McLane v. Wal-Mart Stores, Inc., 10 S.W.3d 602, 605 (Mo.App., E.D. 2000). Even when the tenant voluntarily repaired or maintained the leased premises, there was no right to be reimbursed by the landlord absent agreement. Wilson v. Watt, 327 S.W.2d 841 (Mo. 1959). In any event, the tenant is liable at common law for the repair of conditions caused by the tenant’s neglect or intentional act. King v. Moorehead, supra, at 76.

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Constructive Eviction

The doctrine of constructive eviction can be seen as an early step toward holding the landlord liable for repairs under some circumstances. King v. Moorehead, supra, at 69-70, explains the development of the constructive eviction doctrine as follows:

“. . . even the earliest common law lease was understood to be ‘a contract for title to the estate’ and thus to imply a covenant of quiet enjoyment of the demised premises. If the landlord evicts a tenant by physically depriving him of possession, he breaches the implied covenant of quiet enjoyment and the obligation of the tenant to pay rent is suspended. Dolph v. Barry, 165 Mo.App. 659, 148 S.W. 196, 198 (1912). The covenant of quiet enjoyment is not only an exception to caveat emptor but also to the doctrine that the covenants of a lease are independent.

“Upon this exception was built another exception, the doctrine of constructive eviction. The courts soon came to realize that a tenant’s possession and quiet enjoyment could be molested by something less than physical extrusion by the landlord. A constructive eviction arises when the lessor, by wrongful conduct or by the omission of a duty placed upon him in the lease, substantially interferes with the lessee’s beneficial enjoyment of the demised premises. Under this doctrine the tenant is allowed to abandon the lease and excuse himself from the obligations of rent because the landlord’s conduct, or omission, not only substantially breaches the implied covenant of quiet enjoyment but also ‘operates to impair the consideration for the lease.’ Dolph v. Barry, 165 Mo.App. 659, 148 S.W. 196, 198 (1912). Thus, the first remedy created by the courts to insure habitability, and to exonerate the tenant’s obligation for rent under a lease for lack of it, was ‘designed to operate as though there were a substantial breach of a material covenant in a bilateral contract.’ Lemle v. Breeden, 51 Haw. 426, 462 P.2d 470, 475(5) (1969).”

A Missouri case often cited for the constructive eviction doctrine is Yaffe v. American Fixture, Inc., 345 S.W.2d 195 (Mo. 1961), in which the landlord was slow performing a contractual obligation in the lease to repair the roof of a warehouse damaged by a windstorm. The tenant retained possession for a period of time after the roof was damaged but then abandoned the premises, claiming constructive eviction. The key issue in the case was whether the tenant waived constructive eviction by remaining in possession as long as it did. The Missouri Supreme Court held that under the circumstances, the issue of waiver was a jury question and remanded the case for a new trial.

Under constructive eviction, the tenant treats the lease as materially breached by the landlord and moves out. If the landlord later sues for rent accruing after the material breach, the tenant must raise constructive eviction as an affirmative defense. The possibility that a constructive eviction defense may be valid can have the effect of impelling a landlord to make necessary repairs.
According to Wulff v. Washington, 631 S.W.2d 109 (Mo.App., W.D. 1982), the defenses of constructive eviction and breach of warranty habitability are “coterminous” in the sense that the conditions that will trigger a habitability defense generally also will give rise to constructive eviction.

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Warranty of Habitability

In 1973 King v. Moorehead, supra, was the first Missouri case to adopt an implied warranty of habitability in residential leases. The doctrine was later endorsed by the Missouri Supreme Court in Detling v. Edelbrock, 671 S.W.2d 265 (Mo. banc 1984).

Before explaining the habitability theory, it is important to note that later cases have made clear there is no warranty of habitability, suitability or fitness in connection with a lease of commercial property. Mobil Oil Credit Corporation v. DST Realty, Inc., 689 S.W.2d 658 (Mo.App., W.D. 1985); and Kootman v. Kaye, 744 S.W.2d 898 (Mo.App., E.D. 1988).

After a lengthy discussion of cases from other states and certain legislation adopted by the Missouri General Assembly, the King court stated, King v. Moorehead, supra, at 75: “It is consistent with these legislative policies that in every residential lease there be an implied warranty by the landlord that the dwelling is habitable and fit for living at the inception of the term and that it will remain so during the entire term. The warranty of the landlord is that he will provide facilities and services vital to the life, health and safety of the tenant and to the use of the premises for residential purposes. It is an obligation which the landlord fulfills by substantial compliance with the relevant provisions of an applicable housing code.” The King court elaborated the doctrine, id. at 75-77, as follows:

“We adopt the view that a lease is not only a conveyance but also gives rise to a contractual relationship between the landlord and tenant from which the law implies a warranty of habitability and fitness by the landlord. Under contract principles a tenant’s obligation to pay rent is dependent upon the landlord’s performance of his obligation to provide a habitable dwelling during the tenancy. [Citations omitted.] A more responsive set of remedies are thus made available to the tenant, the basic remedies for contract law, including damages, reformation and rescission. [Citations omitted.]

“The materiality of a breach of warranty claimed by a tenant shall be determined by factors, among others, of the nature of the deficiency or defect, its effect on the life, health or safety of the tenant, length of time it has persisted and the age of the structure. Minor housing code violations which do not affect habitability will be considered de minimis. Also, the violation must affect the tenant’s dwelling unit or the common areas which he uses. The tenant is under an obligation to give the landlord notice of the deficiency or defect not known to the landlord and to allow a reasonable time for its correction. The contract principle that a person may not benefit from his own wrong will exonerate a landlord for a defect or deficiency caused by a tenant’s wrongful conduct. [Citations omitted.] . . . .

“. . . A tenant who retains possession, however, shall be required to deposit the rent as it becomes due, in custodia legis pending the litigation. [Citations omitted.] This procedure assures the landlord that those rents adjudicated for distribution to him will be available to correct the defects in habitability, and will also encourage the landlord to minimize the tenant’s damages by making tenantable repairs at the earliest time. Also, for good cause and in a manner consistent with the ultimate right between the parties, a trial court will have discretion to make partial distribution to the landlord before final adjudication when to deny it would result in irreparable loss to him.”

In endorsing the King court’s decision, the Missouri Supreme Court outlined the elements of a habitability claim as follows, Detling v. Edelbrock, supra, at 270:

“. . . a tenant seeking to state a cause of action for breach of the warranty of habitability must allege facts satisfying the following elements: (1) entry into a lease for residential property; (2) the subsequent development of dangerous or unsanitary conditions on the premises materially affecting the life, health and safety of the tenant; (3) reasonable notice of the defects to the landlord; and (4) subsequent failure to restore the premises to habitability.

Subsequent cases confirm that the habitability doctrine requires that the landlord be given notice of defects and reasonable time for repairs. Proffer v. Randall, 755 S.W.2d 655 (Mo.App., E.D. 1988); and Loven v. Davis, 783 S.W.2d 152 (Mo.App., S.D. 1990). Further, the landlord cannot be liable under the habitability doctrine for a latent defect absent the landlord’s actual knowledge or constructive notice of the defect. Henderson v. W.C. Haas Realty Management, Inc., 561 S.W.2d 382 (Mo.App., K.C. 1977).

For almost five decades, the King court’s holding that tenants claiming uninhabitability must deposit ongoing rent with the court while a case is pending was not clarified, and some cases questioned whether there was such a requirement.  Clarification finally came on July 3, 2018 when the Missouri Supreme Court decided Kohner Properties, Inc. v. Johnson, No. SC95944. The court held:

“. . . the circuit courts have the discretion to institute a suitable protective procedure upon either party’s request and after notice and an opportunity to be heard by the opposing party. See Unif. Residential Landlord & Tenant Act § 408(b) & cmt. (expanding upon § 4.105 and stating, ‘[i]f a tenant is in possession of the dwelling unit when the landlord files an action based on nonpayment of rent, either party may seek a court order directing the tenant to pay all or part of the unpaid rent and all additional rent as it accrues into an escrow account with the court’).”

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Local Housing, Fire and Safety Codes

Many cities and some counties have adopted ordinances embodying housing, fire and/or safety codes which place affirmative duties on landlords to maintain rental properties in compliance with the ordinances. Most such ordinances make it illegal to rent properties which do not comply with the codes and for which a certificate of compliance has not been issued.

Because these codes, and enforcement practices, vary from place to place, a landlord should make careful inquiry in his or her locale and be prepared to perform whatever repairs and maintenance are required.

From a tenant’s perspective, often the best way to compel a landlord perform a repair is to complain to the local government’s code enforcement agency.

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Limited Statutory Right to Repair and Deduct from Rent

A statute enacted in 1997, §441.234 RSMo., gives tenants the right, under limited conditions, to deduct repair costs from rent. This new right cannot be waived by a written lease clause. To be eligible, the tenant must have lived in the leased premises for six consecutive months, have paid all rent and charges, and not have received any written notice from the landlord of any lease violation which was not subsequently cured.

The condition to be repaired must detrimentally affect the habitability, sanitation or security of the premises, must constitute a violation of a local municipal housing or building code, and must not have been caused by the deliberate or negligent act or omission of the tenant, a member of the tenant’s family, or another person on the premises with the tenant’s consent.

The reasonable cost to correct the condition must be less than the greater of $300 or one-half of the monthly rent, provided that the cost may not exceed one month’s rent and that a tenant may not deduct more than one month’s rent during any 12-month period.

Before proceeding, the tenant must give written notice to the landlord of the tenant’s intention to correct the condition at the landlord’s expense. If the landlord fails to correct the condition within 14 days after receiving written notice, or as promptly as required in case of an emergency, the tenant may cause the work to be done in a workmanlike manner. If the tenant has the work done, the tenant may deduct from rent the actual and reasonable cost of the work, not exceeding the amount specified above, upon giving the landlord an itemized statement including receipts.

However, if the landlord provides to the tenant within the 14-day period a written notice disputing the necessity of the repair, then the tenant may not deduct the repair cost from rent without securing, before the repairs are performed, a written certification from a local governmental body that the condition to be repaired constitutes a violation of a housing or building code. If this certification is issued, the tenant may have the work done as described above only if the landlord fails to correct the condition within 14 days after receiving notice of the certification, or as promptly as required in case of an emergency.

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Substandard Housing Statute

Landlord liability to repair and maintain also can arise under §§ 441.500 – 441. 643 RSMo., which provide remedies to tenants of housing facilities that do not comply with applicable housing or building codes. A civil action may be commenced in the circuit court of the circuit where the property is located on the ground that a nuisance exists with respect to such property. Such an action may be filed by: (1) The municipality where the property is located through its code enforcement agency, (2) by the occupants of one-third or more of the dwelling units within the affected building, (3) by a non-profit organization organized to enhance housing opportunities, or (4) by any owner or tenant of real property within 1,200 feet in any direction of the property in question who can show a substantial effect by the alleged nuisance. §441.510 RSMo.

The verified petition must name as defendants the last owner of record of the property and the last holder of record of any mortgage, deed of trust, or other lien of record against the property. §441.520 RSMo. The verified petition must state the facts constituting the nuisance and allege that violations of the housing code exist as determined by a notice of deficiency, that the owner of the property has failed within a reasonable time to remove the nuisance, and that the relief sought is authorized by §§ 441.570 and 441.590 RSMo. If the action is brought by the occupants of a building, the number of dwelling units occupied by the plaintiffs and the number of dwelling units in the building also must be alleged. §441.530 RSMo.

The term “nuisance” means a violation of provisions of the housing code applying to the maintenance of the building or dwelling unit which, if not promptly corrected, will constitute a fire hazard or substantial threat to the life, health or safety of the occupants and/or the general public. thereof. §441.500(10) RSMo.

If the court finds that the dwelling unit or building constitutes a nuisance as defined, the court may appoint a receiver and direct that present and future rents be deposited with the receiver, who may use the rent monies to remedy the deficiencies. §§ 441.570 and 441.590 RSMo. A court order directing payment of rent to a receiver is a valid defense to any eviction lawsuit by the landlord based on non-payment of rent. §441.580 RSMo.

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Latent Defects

In general, if there are latent defects in leased premises which are known to the landlord but not to the tenant, and which the tenant cannot discover in the exercise of ordinary care, the landlord is under a duty to disclose the defect, and the landlord’s failure to disclose the defect, or concealment of the defect, renders the landlord liable for injuries to the tenant, the tenant’s family, and the tenant’s invitees resulting from the defect. Horstman v. Glatt, 436 S.W.2d 639 (Mo. 1969); Janis v. Jost, 412 S.W.2d 498 (Mo. 1967); Knox v. Sands, 421 S.W.2d 497 (Mo. 1967); and Caples v. Earthgrains Company, 43 S.W.3d 444 (Mo.App., E.D. 2001).

However, assuming the latent defect is not required to be repaired by the landlord under some other theory, the landlord is not liable to the tenant or others if the defect is disclosed. Mitchell v. O’Hearne, 795 S.W.2d 603 (Mo.App., E.D. 1990).

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Common Areas

It has long been the rule in Missouri that landlords must keep common areas of leased buildings in a safe condition and must use reasonable diligence in doing so. McKinley v. Alliance Trust Co., 66 S.W. 153 (Mo. 1901). See also Lemm v. Gould, 425 S.W.2d 190 (Mo. 1968). Common areas include hallways, stairs, lobbies, walkways, porches, yards, etc. which are maintained for the use of multiple tenants. In contrast, any portion of a leased building which is exclusively within the tenant’s control is not a common area, and the landlord generally has no duty to maintain such tenant-controlled areas (except under other theories mentioned in these materials). Pate v. Reeves, 719 S.W.2d 956 (Mo.App., S.D. 1986).

Sometimes there is a dispute whether a particular location is a common area or not. Such disputes are resolved under the facts in the particular case. Caples v. Earthgrains Company, 43 S.W.3d 444 (Mo.App., E.D. 2001).

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Agreement to Repair and Reserved Control

A landlord can assume the duty to make repairs within the demised premises (as opposed to common areas) by contractual agreement. Janis v. Jost, 412 S.W.2d 498 (Mo. 1967); Hornbeck v. All American Indoor Sports, Inc., 898 S.W.2d 717 (Mo.App. W.D. 1995). If the landlord makes such an agreement, he must maintain the areas of the demised premises over which he assumes the duty of repair in reasonably safe condition for the intended uses. Green v. Kahn, 391 S.W.2d 269 (Mo. 1965).

It is also possible for the landlord to retain sufficient control over the demised premises for the purpose of inspecting and making repairs such that the landlord will be deemed to have assumed the liability for making repairs and maintaining the portion of the demised premises within his control in reasonably safe condition for its intended uses. Lemm v. Gould, 425 S.W.2d 190 (Mo. 1968). However, a mere undertaking by a landlord to make repairs and/or the mere reservation of a right to inspect will not necessarily constitute sufficient control to render the landlord liable. Even a landlord’s reserved right to make repairs at the tenant’s expense if not made by the tenant will not necessarily constitute sufficient control to hold the landlord liable. Horstman v. Glatt, 436 S.W.2d 639 (Mo. 1969). In order to hold the landlord liable, it must be shown that the tenant has given up his right of exclusive possession and control and has yielded to the landlord some degree of control and dominion over the demised premises; it is not necessary for the landlord to have the power to admit or exclude third parties from the premises, but the landlord will have sufficient control to be held liable if he retains general supervision of the premises for a limited purpose such as making repairs and has the right to enter the premises to make repairs on his own initiative and responsibility. Lemm v. Gould, supra. For an illustrative case, see Harrison v. Roberts, 800 S.W.2d 40 (Mo.App. W.D. 1991), in which the landlord was deemed to have retained sufficient control over the exterior porch of a rented single-family home to be liable for an injury suffered by the tenant when the porch guardrail collapsed.

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Structural Repairs

As mentioned above, there is no warranty of habitability, suitability or fitness in a lease of commercial premises. Mobil Oil Credit Corporation v. DST Realty, Inc., 689 S.W.2d 658 (Mo.App. W.D. 1985). The same case establishes the proposition that absent an express agreement by a tenant to make structural repairs to a leased building, the tenant has no liability for structural repairs. This is true even if the lease obligates the tenant to make general repairs, unless the lease specifically imposes the duty on the tenant to make structural repairs. Thus, where a lease is silent on who must pay for substantial structural repairs, the burden will fall on the landlord.

Presumably this same principle would apply with even more force to a residential lease, to the extent the structural repairs did not become the landlord’s obligation under another theory such as habitability or violation of housing codes.

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Commercial Leases

The general common law principle that neither the landlord nor the lessor need make repairs if the lease is silent on the issue does not comport with the realities of modern commercial leasing. Accordingly, conventional commercial leases ordinarily assign maintenance and repair responsibilities to the landlord and the tenant.

A common provision is that the landlord will maintain the exterior of the buildings and the tenant will maintain the interior, fixtures and equipment. This type of provision may be adequate for simple situations, but in leases of larger properties, it frequently will prove to be inadequate. Ordinarily, the parties intend that day-to-day maintenance and minor repairs be made and paid for by the tenant, and that repairs due to obsolescence or old age and more in the nature of a replacement or a capital expenditure be made and paid for by the landlord. The problem becomes acute in view of the cost of making major replacements or repairs to such things as elevators, boilers and large air-conditioning units. There are two common solutions to the drafting problem:

  1. A provision to the effect that the tenant’s expenditures for items such as elevator, boiler or air-conditioning maintenance shall not exceed a specified amount in any one year, and that expenditures exceeding that amount will be paid by the landlord; or
  2. A provision that the tenant agrees to make ordinary repairs, while the landlord agrees to make repairs and replacements due to obsolescence or old age.

Neither of these clauses is perfect, and it behooves the lawyer to work with a landlord or tenant client to determine the potential costs of performing various maintenance and repair work and to allocate those costs appropriately in the lease.

A common problem that arises in commercial leases relates to doors and windows. Typically, while assigning exterior maintenance to the landlord, a commercial lease also specifies that the tenant must replace glass in doors and windows. A common question that then arises is whether doors and windows are considered part of the interior or the exterior of the premises. The matter can be resolved by providing in the lease that the tenant will take care of glass but that “doors, door frames and sills, windows, window frames and sills and door opening and closing devices will be maintained and repaired by the landlord.”

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Personal Injury Liability

WARNING: As a general proposition, if the landlord is liable to repair or maintain under any theory, the landlord will be liable for personal injuries resulting from failure to maintain the premises in a reasonably safe condition. Green v. Kahn, 391 S.W.2d 269 (Mo. 1965); Horstman v. Glatt, 436 S.W.2d 639 (Mo. 1969).

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Summary of Key Points

A landlord is not required to repair/maintain leased premises except as follows:

  1. When conditions may prompt the tenant to claim constructive eviction, whereupon the landlord must consider whether to make repairs to forestall the claim.
  2. When conditions violate the implied warranty of habitability.
  3. When conditions violate local housing, fire and/or safety codes and the codes place the repair/maintenance obligation on the landlord/owner.
  4. When the tenant exercises the limited statutory right to deduct rent from repairs under §441.234 RSMo.
  5. When the landlord is compelled to repair/maintain under the substandard housing statutes, §§ 441.500 – 441.643 RSMo.
  6. When conditions in common areas are unreasonably dangerous to tenants and invitees.
  7. When the landlord has reserved the rights to make repairs within the demised premises and to enter the demised premises on his own initiative to do so.
  8. When the landlord has undertaken a contractual obligation in the lease to make repairs.
  9. When necessary repairs would be classified as “structural” in nature, absent agreement by the tenant to make structural repairs (but an agreement by a residential tenant to make structural repairs probably is not valid under the warranty of habitability doctrine).

A tenant cannot withhold rent from the landlord because of the landlord’s failure to maintain or repair except as follows:

  1. Pursuant to agreement with the landlord.
  2. Upon substantial breach of the lease by the landlord which constitutes constructive eviction (but note the tenant will need to plead and prove constructive eviction as a defense if the landlord sues).
  3. When the premises are wholly or partially uninhabitable, provided that if the tenant remains in possession, a court can require the tenant to deposit rent rent with the court. Note again that the tenant will need to plead breach of warranty of habitability as a defense if the landlord sues, whereupon the landlord has the option of filing a motion to compel rent to be paid to the court while the case is pending; if the motion is granted, the court would then determine disposition of the rent payments as part of its judgment.
  4. The tenant may be entitled to withhold a limited amount of rent for repairs made by the tenant upon compliance with §441.234 RSMo.
  5. In an action pursuant to §§ 441.500 – 441. 643 RSMo., rent may be paid to a receiver instead of the landlord if ordered by the court.

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