Many landlords go to court seeking unpaid rent from evicted tenants. But few cases take nearly a decade to resolve. Indeed, many landlords wouldn’t even bother continuing a case that long, but a July 10 decision by an appeals court in Kentucky proved one landlord to be the exception.
In April 2005, four college students in Lexington signed a one-year lease (co-signed by their fathers) to rent a house for $1,450 per month. The lease contained a standard “MOVE-IN INSPECTION” clause, which held the tenants responsible for making “an inspection of the premises” before occupying the property and informing the landlord of any issues. By moving into the house, the tenants agreed the property was in “good and satisfactory condition.”
The tenants moved in that August and almost immediately claimed a number of items were in need of repair. Whether these items were addressed remains unclear, but in any event, the tenants refused to pay the rent for five months. The landlord subsequently obtained a judicial eviction in December 2005.
But that was just the beginning. The landlord filed a second lawsuit seeking payment of $5,075 in back rent plus additional damages under the terms of the lease. The court ordered both sides into mediation, which proved unsuccessful.
The landlord’s attorney was then elected as a judge, and no further action was taken on the lawsuit until 2008, when the tenants moved to dismiss the case for “lack of prosecution.” That issue was not settled until December 2009, when the Kentucky Court of Appeals said the landlord could move forward with the suit.
By then, nearly five years had passed since the tenants’ eviction. At this point one of the tenants alleged, for the first time, that the lease was invalid because “the premises were dirty and in disrepair” at the time of move-in. A judge agreed with this argument and limited damages to the four months of unpaid rent.
URLTA v. Implied Warranty of Habitability
The landlord appealed, arguing the trial court effectively read an “implied warranty of habitability” into the lease, which is not recognized by Kentucky law. The tenants said the court merely held “the property was uninhabitable in contravention of the lease and oral representations.”
But as two landlord groups, the Louisville Apartment Association and the Greater Lexington Apartment Association, noted in a “friend of the court” brief to the Kentucky Court of Appeals, the tenants should have addressed any concerns about the property’s condition under the Uniform Residential Landlord and Tenant Act (URLTA).
This law, adopted in about 20 states, defines the contractual relationship between a landlord and tenant. Kentucky is unusual in that it does not enforce URLTA — statewide, that is. Instead, individual cities and counties, such as Lexington, may choose whether to adopt URLTA.
Under Kentucky’s URLTA, “if there is a material noncompliance by the landlord with the rental agreement,” the tenant may terminate the lease after providing 30 days written notice of the alleged defect in the property, provided the landlord does not correct the problem within 14 days. In this case, the tenants never provided this required notice to the landlord. Additionally, as explained above, they didn’t even raise the “habitability” issue until five years after their eviction.
Contrary to the trial court, the Court of Appeals saw no reason URLTA didn’t apply in this case. Judge Denise Clayton, writing for the Court of Appeals, said the whole point of URLTA was “to make uniform laws with respect to landlord-tenant relationships and to encourage landlords and tenants to maintain and improve the quality of housing.”
Here, the tenants advocated ignoring URLTA in favor of an implied warranty of habitability. But Judge Clayton said that would mean “the signing of a lease would no longer create a viable contract,” as tenants could essentially void a lease after signing it — indeed, after the lease had run its full term — by claiming the premises were not habitable after the fact. Accordingly, Judge Clayton said the lease here was valid and remanded the case back to the trial court for calculation of additional damages owed by the tenants.
Litigate or Settle?
While the landlord’s litigation strategy ultimately prevailed, it came after 10 years and no doubt thousands of dollars in legal fees. Many property owners don’t have the stomach (or financial resources) to wage such a war.
But there are still some useful lessons every owner and property manager can take away from this case:
- Know your state’s laws. Some states follow URLTA, but the majority don’t. Kentucky doesn’t recognize an implied warranty of habitability, but many states do. These laws govern how courts may interpret — and sometimes void — a residential lease, so it is essential you understand your rights and responsibilities under them.
- Well-drafted leases are essential. In the Kentucky case, the Court of Appeals cited the move-in inspection clause as proof there was no express warranty of habitability. It’s important tenants understand a lease encompasses the entirety of their agreement with you. In other words, a written lease overrides any alleged oral representations that were made beforehand.
- Resolve matters involving back rent as quickly as possible. The Kentucky case was apparently delayed several years by a procedural argument prompted by the landlord’s failure to secure a new attorney. This is just a waste of everyone’s time and money. Even when a settlement isn’t possible, the landlord should take every step to ensure there are no unnecessary delays in litigating its case.
What do you think about this property owner’s legal strategy? What would you have done differently? Leave a comment below and let your colleagues know.Read more on Legal Considerations