Uniform Residential Landlord-Tenant Law: Changes on the Way John Ahlen & Lynn Foster

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1 Magazine May/June 2014 Volume 28 No 4 Uniform Residential Landlord-Tenant Law: Changes on the Way John Ahlen & Lynn Foster John Ahlen is the reading clerk at the Arkansas House of Representatives and a graduating 3L at the University of Arkansas at Little Rock William H. Bowen School of Law. Lynn Foster is the Arkansas Bar Foundation Professor at the University of Arkansas at Little Rock William H. Bowen School of Law and an associate articles editor of Probate & Property. Forty years after its initial drafting, the Uniform Residential Landlord and Tenant Act is undergoing a tune-up. Although many of the act s provisions have withstood the test of time including its groundbreaking warranty of habitability the Uniform Law Commission is considering revisions that will fill in some gaps in the act s coverage and respond to new issues of importance to landlords and tenants. This article discusses some of the most notable among the proposed changes, including new protections for tenants who have been the victims of domestic violence, sexual assault, dating violence, or stalking, and expanded treatment of landlord responsibilities in handling tenant security deposits. Background The Uniform Residential Landlord and Tenant Act (URLTA), adopted by the Uniform Law Commission (ULC) in 1972, ushered in a new era of landlord-tenant law. It shifted the balance between landlord and tenant, most notably by inserting an implied warranty of habitability in every residential lease but also by preventing landlords from evicting tenants in retaliation for tenant complaints about defects in the premises and modifying the common law of landlord-tenant in other ways. Twenty-one states eventually enacted the URLTA. See, e.g., Ala. Code 35-9A-201 et seq. Many other states were influenced by it, particularly the implied warranty of habitability. See, e.g., Nev. Rev. Stat. 118A.290; N.C. Gen. Stat At the recommendation of the Joint Editorial Board for Uniform Real Property Acts (JEB URPA), the ULC appointed a Study Committee in 2010 to consider possible changes to the URLTA. The Study Committee responded with 16 areas where changes to the URLTA were needed and recommended that the URLTA be revised, rather than simply amended. In most cases, these changes were to areas where state law was either in conflict or non-existent and changes to the URLTA would offer guidance and uniformity to the law between states. Following up on the Study Committee s recommendations, the ULC appointed a Drafting Committee in 2011 and charged it with drafting a new, updated URLTA. Memorandum from Sheldon F. Kurtz, Chair of the Study Committee,

2 to Scope and Program Committee (May 18, 2011), 20landlord%20and%20tenant/urlta_studycmtereport_ pdf; Letter from R. Wilson Freyermuth, Executive Director, JEB URPA, to Uniform Law Commission Scope and Program Committee (June 1, 2010), org/shared/docs/residential%20landlord%20and%20tenant/urlta_jeburpa_proposal_ pdf. Two years into the drafting process, this article provides a snapshot of the current content of the Revised Uniform Residential Landlord and Tenant Act (RURLTA), which will undergo its second reading to the ULC s Committee of the Whole at its annual conference in July It will discuss what is new and what has changed. For those interested in a more detailed discussion of the RURLTA, the full text of all drafts and other supplemental materials may be found on the Drafting Committee on Revised Uniform Residential Landlord and Tenant Act s web page. See Uniform Law Commission, Residential Landlord Tenant Act, nt%20act. What s New Domestic Violence, Dating Violence, Sexual Assault, and Stalking Domestic violence is a significant problem in the United States. According to a recent report, one in three women and one in four men have been stalked, been raped, or experienced physical violence by an intimate partner. Michele C. Black et al., The National Intimate Partner and Sexual Violence Survey: 2010 Summary Report 2 (2011), Domestic violence affects leases in several different major ways. First, a tenant victim may wish early termination of a lease to escape abuse because the abuser either lives in the residence or simply knows the tenant victim lives there. Either way, the tenant victim no longer feels safe in the residence. Second, a landlord may want to terminate a victim s lease because of domestic disturbances that interfere with the use and enjoyment of other tenants, notwithstanding the victim s desire to stay. Third, a landlord may wish to terminate an abuser s lease. The URLTA contained no provisions on the subject of domestic violence. Two decades after its adoption, however, the federal government and some states began to recognize the housing issues present in domestic violence situations and enacted statutory protections for victims. In 1994, the federal government enacted the Violence Against Women Act (VAWA), Pub. L. No , 108 Stat. 1796, which applies to public housing landlords, and at least 15 states have enacted statutes addressing rights and obligations of tenant-victims of domestic violence. See, e.g., Or. Rev. Stat The revised URLTA has followed this trend, aiming for uniform treatment. Like VAWA, it concerns victims of domestic violence (which is defined in the act to include victims of

3 dating violence, stalking, and sexual assault), but relies on each state s own definition of domestic violence and dating violence. Revised Unif. Residential Landlord & Tenant Act 101 (interim draft April 2014) (RURLTA). The most important domestic violence provisions concern safety and early lease termination. The RURLTA allows the changing of locks in response to domestic violence by the tenant, who must give new keys to the landlord and any innocent cotenants. The landlord may re-key the premises later if the locks need to be compatible with a master key or to accommodate the landlord s other commercial requirements. This second re-keying also will be at the tenant s expense. Id The RURLTA also allows early termination of the lease of a tenant who is a domestic violence victim. Under the current draft of the RURLTA, such tenants may terminate their leases by giving the landlord (1) a copy of a court order restraining the perpetrator from contact with the tenant or immediate family member, (2) a copy of the perpetrator s conviction for an act of domestic violence against the tenant or immediate family member, or (3) a verification record signed by the tenant and an attesting third party. The comments contain a sample verification form. Who may serve as attesting third parties has been the topic of continuing discussion by the Drafting Committee. At this point in time they include law enforcement officials, licensed health-care professionals, victims advocates, victim-services providers, or family members. RURLTA Domestic violence groups have advocated that attorneys and clergy be added. Memorandum from Sybil Hebb, Director of Policy Advocacy of the Oregon Law Center, to Members of the URLTA Drafting Committee (Oct. 10, 2012), /docs/residential%20landlord%20and%20tenant/2012oct10_urlta_olc_hebb%20 comments.pdf. If a lease terminates early in such a manner, the tenant-victim is not liable for rent that would have become due after the early termination date. If other tenants are on the lease, however, the lease does not terminate for the other tenants, and in such a case a perpetrator might be liable to the remaining cotenants for the victim-tenant s share of the rent. RURLTA On the flip side of the coin, the RURLTA allows for the termination of the lease of a tenant who is the perpetrator of domestic violence against any occupant of the premises. Such termination may occur when a court issues an order requiring a perpetrator to vacate a dwelling unit. But an ex parte order, issued without the perpetrator s having notice and an opportunity to respond, would not terminate the perpetrator s lease interest. RURLTA Alternatively, a landlord may unilaterally terminate the perpetrator s lease. In an action between the landlord and the perpetrator, the burden of proof is on the landlord to prove by a preponderance of the evidence that the perpetrator committed an act of domestic violence. RURLTA In either case, any other tenants under the lease may recover damages from the perpetrator that result from the termination.

4 Death of a Tenant Another new RURLTA section covers termination on the death of a tenant. On the death of a tenant, either the landlord or the tenant representative may terminate the lease. A tenant representative includes the personal representative of the tenant s estate, a contact person designated by the tenant under RURLTA, or an heir of the tenant. RURLTA 802. If, however, the tenant is survived by a spouse or partner already residing in the unit (but not a party to the lease), that individual may assume the lease. If a tenant dies and the lease is terminated, the tenant representative has rights in the tenant s personal property, which will be held for at least 60 days after the tenant s death. RURLTA Tenant s Abandoned Property Under the RURLTA, several changes have been made concerning the final disposition of property of the tenant left behind after the relinquishment of possession. Relinquishment of possession occurs when the tenant is evicted, the lease ends, or with the tenant s abandonment of the premises. The RURLTA allows a landlord to charge the tenant for the landlord s moving and storage costs for the tenant s property and gives the tenant a 15-day window to retrieve items the tenant may have inadvertently left behind. The RURLTA also clarifies that, if the tenant neither contacts the landlord nor retrieves the property, it will be deemed abandoned. If the landlord estimates in good faith that the property s fair market value is no more than $1,000, the landlord may dispose of the property as the landlord sees fit. But, if the landlord estimates that the property is worth more than $1,000, the landlord can sell it in a commercially reasonable manner and treat the proceeds as part of the tenant s security deposit. RURLTA What s Changed Security Deposits Security deposits were the second major reason for undertaking the revision of the URLTA. The original URLTA did not specify the nature of a tenant s security deposit, once it is given to the landlord. Courts considering the issue have categorized them in one of three different ways: as a trust, a pledge, or a debt. Each of these approaches is problematic for the tenant, landlord, or both. If the security deposit is characterized as a trust, the landlord is obligated to invest the security deposit for the tenant s benefit and is not permitted to commingle the security deposit with other funds. If the security deposit is viewed as a pledge, the landlord may commingle the deposit with his own funds. In addition, the landlord is under no obligation to invest the security deposit for the tenant s benefit, but if the landlord does, the landlord must return any accrued interest to the tenant. If the security deposit is considered a debt, it means the deposit becomes the landlord s property, which effectively makes it an interest-free loan from the tenant to the landlord. The landlord could commingle the deposit with other funds, and the landlord could invest the deposit and keep any accrued interest. Under the debt approach, the tenant retains no interest in the money and has only a contractual claim so long as the tenant fully performs the terms of the lease. Research Memorandum from Co-Reporters

5 Sheldon Kurtz & Alice Noble-Allgire to Members of the URLTA Drafting Committee (Sept. 21, 2012), www. uniformlaws.org/shared/docs/ Residential%20Landlord%20and%20Tenant/2012sep21_URLTA_ IssuesMemo.pdf. The current RURLTA draft (March 2014) expressly characterizes the security deposit as a security interest as defined under Article 9 of the UCC, but carves out its own rules about how the security deposit is handled. In addition to clarifying this area of the law, making the security deposit a security interest is beneficial for both the landlord and tenant. The landlord is given a priority interest over the tenant s other creditors should the tenant file for bankruptcy. The tenant also benefits from the security deposit s status as a secured interest because the deposit as a secured interest is clearly an asset of the tenant and is not subject to claims of the landlord s creditors. Although the landlord s creditors could succeed to the landlord s interest in the security deposit, the landlord s creditors would have no greater interest in the deposit than the landlord. Thus, they could keep the security deposit at the end of the lease only if the tenant had damaged the dwelling unit or otherwise failed to comply with the lease obligations. RURLTA 1202 cmt. The RURLTA also requires that the landlord keep the security deposit in a separate bank account and not commingle security deposit funds with the landlord s other funds, whether personal or business. The RURLTA, however, does allow security deposits from tenants to be commingled in a single account. In addition, the RURLTA clarifies that if the security deposit is deposited in a bank account with other tenants deposits, the tenant s interest in the deposit is not destroyed if it is commingled. And, unless the lease provides otherwise, the landlord is under no obligation to place security deposit funds in an interest-bearing account or to pay the tenant any interest on the funds, should the funds be so placed. Id cmt. The RURLTA clarifies that a tenant may not use a security deposit to pay the last month s rent. Id. 1202(c). It also requires that the tenant s security deposit should be transferred to the new owner of the rental property, should the landlord sell, assign, or otherwise end the landlord s interest in the property. Id A related issue that the Drafting Committee struggled with was limits, if any, on what a landlord may charge a tenant at the beginning of the lease term. The amount settled on at this point in time is a total of two months rent (in addition to the first month s rent). The comment to section 1101 states this is intended to permit the common practice of charging the first and last month s rent plus a security deposit (in the amount of one month s rent). In addition to this amount, however, a landlord may also charge for such items as an application fee, insurance premium, cleaning fee, and pet deposit. Id Implied Warranty of Habitability The implied warranty of habitability, the most notable feature of the original URLTA, has been expanded to provide additional guidance on what constitutes habitability. The RURLTA keeps the 1974 act s general requirement that landlords ensure that the

6 premises are in a fit and habitable condition, supplemented by a laundry list of specific requirements regarding various aspects of the dwelling unit. The RURLTA has added new specific requirements, summarized as follows: effective waterproofing and weather protection of the roof and exterior walls; reasonable measures to control vermin or exposure to hazardous substances; floor, doors, windows, walls, ceilings, stairs, and railings in good repair; working locks or other security devices on exterior doors and windows; and safety equipment (such as carbon monoxide detectors) required by applicable law. In addition, original requirements for plumbing, electricity, and similar attributes are separate provisions with more detail than in the previous act. Recycling receptacles are required (if services are provided by the local government) in addition to waste receptacles. Id Retaliatory Eviction The enhanced tenants rights under the URLTA would have been of little importance without a protection from retaliatory eviction by landlords. The RURLTA expands protected conduct of the tenant to include good faith complaints to a governmental agency responsible for enforcing governmental housing, wage, price, or rent controls, pursuit of a legal action against the landlord, or testifying against the landlord in court. Presumed retaliatory acts by the landlord are expanded to include increasing the tenant s obligations, materially altering the terms of the lease, bringing an action for possession (except for nonpayment of rent), terminating or refusing to renew the lease, or conduct prohibited by the criminal code. Id But new types of conduct of the tenant that are not protected are actions by the tenant that constitute harassment of the landlord, conduct that presents a threat to the health or safety of another tenant, use of the premises for an illegal purpose, or engaging in what would be protected conduct only after receiving notice of a valid notice to terminate the lease. Id Landlord s Access Provisions involving a landlord s access to the premises also have been revised. In nonemergency situations landlords need give tenants only one day s notice, rather than the former two days. In an emergency situation, a landlord is required to give reasonable notice under the circumstances and to post a notice of such an entry if the tenant was not home at the time. Id Attorney s Fees RURLTA 205 is devoted to attorney s fees. It imposes a default rule that a court may award the prevailing party costs and reasonable attorney s fees if the court determines that the other party did not act in good faith or deliberately performed (or refrained from performing) an act prohibited by either the act or a lease. There is one exception: a

7 landlord may not be awarded costs and fees in an uncontested action for possession. In a case in which no party prevails, no party may recover fees and costs. Id Status of Revisions The RURLTA Drafting Committee will give the proposed act its second reading in July 2014 at the National Conference of Commissioners on Uniform State Laws. Because of the length of the proposed act, it will receive a third reading in All drafts, memos, committee correspondence, and comments from various groups are posted at nt%20act. Also on this page is a link for those who wish to sign up to receive information about the committee s activities or submit comments about proposed drafts. Conclusion The RURLTA will bring landlord-tenant law into the 21st century. Its most significant changes are the addition of protections for victims of domestic violence. In addition, however, it affects the law of security deposits, termination at the tenant s death, retaliatory eviction, and the landlord s access to the abandoned property. Although not changing the balance of landlord-tenant law as significantly as did the URLTA, it nonetheless updates and builds on the original foundation of the URLTA. The RURLTA drafting process is still ongoing, and it is not too late to submit comments or suggestions to the drafting committee.