Law - Chapter 11

TYPES OF LEASES

- Gross Lease - Net Lease - Percentage Lease - Land lease (also called ground lease)

LANDLORDS AND TENANTS ACT OF 1974

- applies only to residential tenants - establishes a set of guidelines and imposes duties and responsibilities on each side that cannot be waived - Prohibits a landlord from including certain types of provisions in a residential lease, because they are considered unfair.

COMMON LEASE CLAUSES

-Acceptable uses of the property - The right to assign or sublet - The required security deposit -Responsibility for repairs/maintenance -The landlord's right to access the property -The tenant's responsibility for alterations or damage to the property - Renewal rights - The consequences of default Ohio law requires lease to state the name and address of landlord.

Requirements of a valid lease:

-Landlord and tenant must have the legal capacity to contract (can't be incompetent or underage) -Must be an offer and acceptance -Must be consideration, which usually is money paid as rent in exchange for possession of property. - Lease must be for a lawful and possible objective. 2 additional requirements for leases of longer duration - In writing, witnessed by two witnesses. - Acknowledged before a notary and recorded.

FOUR BASIC ELEMENTS TO A TORT CLAIM

1. Duty 2. Breach 3. Injury 4. Causation Must occur in this order from a legal standpoint.

EVICTION PROCESS

1. Notice to vacate - given 3 business days before filing a lawsuit for eviction 2. Forcible entry and detainer action - landlord evicts defaulting tenant and regains possession of the property. 3. Writ of execution- court order directing a public officer to seize and/or sell property to regain possession for the owner and/or satisfy a debt. These steps must be followed, in order, as prescribed by law.

SUBLEASE TAKE TWO FORMS:

1. Tenant transfers the right to occupy only part of the lease property, while continuing to occupy the rest of it 2. Tenant transfers the right to occupy all of the property, but only for part of lease term's remainder.

LAND LEASE (GROUND LEASE)

A lease for which a tenant leases only the land from the landlord but the land tenant actually owns the building. Lease usually has a term equal to the life expectancy of the building but can be for up to 99 years.

GROSS LEASE

A lease for which the owner or landlord pays all property taxes, mortgage payments, insurance, etc, and the tenant pays all utilities. Similar to residential lease. Usually used for professional in nature (lawyers, doctors, executives)

PERCENTAGE LEASE

A lease for which the tenant pays a percentage of gross sales, often in addition to a fixed monthly rental payment. Common for retail tenants

NET LEASE

A lease for which the tenant pays all property taxes, mortgage payments, insurance, etc. as well as all utilities, in addition to a monthly rent payment

STATUTE OF FRAUDS

A lease must be in writing if it will last for more than one year, or if it will expire more than one year after the date on which the parties agreed to it. Any lease required to be in writing must be signed by the landlord, tenant usually also signs but not essential.

LIABILITY: NONRESIDENTIAL LEASES

A nonresidential landlord relinquishes control over the leased property when the tenancy begins but unless otherwise agreed, the landlord retains control over the common areas of the property (elevators, parking lots, etc.

UNCONSCIONABLE PROVISION

A provision that is so unfair it shocks the conscience of the court, and as such the court will refuse to enforce it.

NEGLIGENCE

Any conduct that falls below the standard of care that a reasonable person would exercise under the circumstances. The defendant did not act as carefully as he should have.

LANDLORDS AND TENANTS ACT OF 1974

Applies to all RESIDENTIAL leases EXCEPT: -proprietary leases for cooperative apartments -rental space in mobile home park -farm rentals with at lease two acres -hotels/motels -institutional housing (prisons, hospitals) DOES apply to college dorms

PERIODIC TENANCY

Automatically renewed for another period unless one of the parties gives the other notice of termination. (day/day, month/month, year/year) In Ohio, oral leases are considered to be month/month periodic tenancies.

LEASES (rental agreements)

Both a conveyance of a leasehold estate from the fee owner to a tenant and a contract in which one party pays the other rent in exchange for possession of the real estate.

MAINTENANCE, REPAIRS AND HABITABILITY

Both tenants and landlords have these duties. Obligations vary for nonresidential and residential leases and can be: -Express -Implied -Stated in the lease -Imposed by law.

TERMINATION OF A LEASE: FIXED-TERM LEASE

Cannot be terminated prior to term unless both landlord and tenant agree. Even if one party dies. Can be terminated before it expires in one of four ways: 1. Surrender 2. Destruction of the building 3. Eviction 4. Abandonment

LEASES

Conveyance: Transfer leasehold estate (temp possession) (Lessor) L -------> T (tenant) Contract: Capacity, offer, acceptance, consideration, lawful objective >1 year: In writing and signed >3 years: Acknowledged and recorded

EVICTION

Dispossessing or expelling someone from real property If nonresidential written lease fails to mention the tenant's obligation to pay rent, the landlord cannot evict for nonpayment. If oral lease cannot evict but the landlord can sue for payment but not regain possession of the property.

EVICTION

Dispossessing or expelling someone from real property. Can be either: ACTUAL EVICTION - Physically forcing someone off of property or preventing them from re-entering, or using the legal process to make someone leave. CONSTRUCTIVE EVICTION - When a landlord's act interferes with the tenant's quiet enjoyment of the property, or makes the property unfit for its intended use to such an extent that the tenant is forced to move out.

ABANDONMENT

Failure to occupy and use property, which may result in a loss of rights. Landlord may sue tenant for damages.

OPTION TO RENEW

Gives the tenant the right to extend the lease for an additional period. (simple 3 year lease does not need to be acknowledged and recorded BUT one with option to renew does)

SURRENDER

Giving up an estate before it expires. Both tenant and landlord agree.

NONRESIDENTIAL MARKET

Governed by the common law rules of buyer beware (caveat emptor), with severely limited rights on both sides of the lease.

Selling lease Property

If existing leases are for more than 3 years and are not recorded and the new owner had no notice, the new owner is NOT required to honor them. New owner gets all rights and duties to existing lease. If tenant gave security deposit or rent in advance, the former owner should refund that money to tenant or turn it over to the new owner.

DOCTRINE OF PART PERFORMANCE

In Ohio is used to enforce an oral or improperly executed lease if the tenant has taken possession of the property, paid rent, and made some substantial improvements that were authorized by the landlord.

RIGHTS AND DUTIES OF THE LANDLORD AND TENANT

In Ohio, essentially two bodies of law that govern the rights/duties - 1. one covering nonresidential property 2. other covering residential

DUTY TO MITIGATE DAMAGES

In Ohio, it has been ruled by the courts tha the landlord has a duty to mitigate (lessen) damages by finding a new tenant immediately after abandonment.

LANDLORD'S DUTIES: NONRESIDENTIAL

In Ohio: -Required to warn prospective tenants about know latent defects in the property. -Not required to put property into good condition before renting it -Not required to make sure that it is fit for the tenant's intended use.

DESTRUCTION

Includes fires, floods, tornados, or other disaster. In Ohio, destruction or sever damage ends the tenancy

EXCULPATORY CLAUSE

Lease can include - states the landlord cannot be held liable if the tenant or someone else is injured on the leased property. In Ohio an exculpatory clause in a nonresidential lease is enforceable - lets the landlord off the hook. In a residential lease is void. Tenant cannot waive the right to sue the landlord for personal injuries.

RENT

Most leases have a specific date it is due. Landlord can evict for failure to pay rent on time. Landlord that repeatedly accepts late payments is considered to have waived the right to terminate the tenancy for late payment.

TERMINATION OF A LEASE: NONRESIDENTIAL

Notice of termination is controlled by the lease, not by law. May require notice to be in writing, typically 30 days' notice

RESIDENTIAL SECURITY DEPOSITS:LIMITATIONS

Ohio law does not limit the amount a landlord may demand but the Landlords and Tenants act requires landlord to pay interest of 5% on any deposit or portion thereof which exceeds $50 or exceeds one month's rent - whichever is greater. ex - $200 rent with $275 security deposit, landlord must pay 5% interest on $75. Accrued interest must be turned over to the tenant annually if tenant stays > 6 months.

PRIVACY AND RIGHT OF ENTRY - Nonresidential

Part of the implied covenant of quiet enjoyment. Nonresidential tenancy - landlord does not have the right to enter leased property without consent UNLESS to stop tenant from committing waste - abusing or damaging the property.

SUBLEASING VS ASSIGNMENT

Real estate agents should never draft leases - not even experts in property management. This is an unauthorized practice of law in Ohio.

ASSIGNMENT/SUBLEASE FORMAL REQUIREMENTS

Same as those for a lease -must be in writing and signed by assignor/sublessor it it will end more than a year after it is agreed to. -must be acknowledged -must be recorded if it will last more than 3 years

SPECIAL REMEDIES

Send landlord written notice describing problems and give "reasonable" time to fix, usually has 30 days to fix. If the landlord does not respond, tenant has 3 option: 1. Move out and terminate the tenancy 2. Start depositing rent with municipal/county court 3. Apply to the courts for an order directing the landlord to fix the problems. To use any of these, the tenant must be current on rent payments. Then rent paid to the court, the judge may allow tenant to use money for necessary repairs - called REPAIR AND DEDUCT REMEDY

TENANTS DUTIES: NONRESIDENTIAL

Tenant expected to repair damage caused by: -unauthorized alterations -failure to exercise ordinary care -use of property in a way it was not intended Tenant is not liable for ordinary wear and tear.

PRIVACY AND RIGHT OF ENTRY - residential

The Landlords and Tenants Act gives landlords a right of entry to: -inspect the leased property -make ordinary, necessary, or agree repairs/improvements -deliver parcels -supply necessary or agreed services -show the property to prospective buyers, lenders, contractors, tenants. The landlord must obtain consent

TERMINATION OF A LEASE: RESIDENTIAL

The Landlords and Tenants Act governs notice of termination. At least 30 days' notice must be given. Written notice is NOT required. (month-to-month)

TENANTS DUTIES: RESIDENTIAL

The Landlords and Tenants Act imposes that the tenant is required to: -keep the rental unit safe and sanitary -dispose of rubbish and garbage -keep the plumbing fixtures clean -use all electrical and plumbing fixtures properly -comply with housing, health, and safety codes.

RESIDENTIAL MARKET

The Landlords and Tenants Act of 1974 creates obligations and remedies for both landlords and tenants which are non-negotiable. Duties/responsibilities cannot be waived even if both sides agree.

SPECIAL REMEDIES

The Landlords and Tenants Acts' special remedies apply to all residential tenancies except private college dormitories and buildings with three or fewer apartments.

COMPARATIVE NEGLIGENCE RULE

The sharing of responsibility damages between the landlord and tenant.

SECURITY DEPOSITS: NONRESIDENTIAL

These rules DO NOT APPLY. A commercial landlord in Ohio is not required to pay interest on a security deposit or give the tenant an itemized stated at the end of the tenancy. A commercial tenant, however can sue to recover any part of the deposit he feels was wrongfully withheld.

LIABILITY: LEASED PROPERTY

Typically, the landlord is not liable for injuries that occur on leased property UNLESS injuries were caused by a hidden defect the landlord new about before the tenancy began and failed to warn the tenant

LANDLORD'S DUTIES: RESIDENTIAL

Under the Landlords and Tenants Act, landlord must: -Comply with all building, housing, health, and safety code provisions -Make all repairs and do whatever is necessary to put and keep property in a fit and habitable condition -Keep the common areas safe and sanitary -Provide garbage receptacles and arrange for pickup if there are 4+ apartments -Maintain electrical, plumbing, sanitary, heating, ventilating, and AC equipment in good and safe working order -Supply running water, hot water, and heat These are referred to as the IMPLIED WARRANTY OF HABITABILITY.

TORT

When A injures B, the rules of tort law make A liable to B. A is required to pay damages compensating B for the costs of the injury. Defendant usually is not liable unless he was negligent. To win a tort lawsuit, the plaintiff also must prove that the defendant's negligence caused the injuries.

RETALIATORY EVICTION

When a landlord evicts a tenant in retaliation for complaining about the condition of the property, code violation, violations of the Landlords and Tenants Act, or for participating in a tenant's rights group. This is illegal in residential tendancies. Also prohibits landlord from raising the rent or reducing services.

SELF-HELP EVICTION

When a landlord uses physical force, a lockout, or a utility shut-off to get rid of a tenant, instead of the legal process. Nonresidential - In Ohio is valid - can't "breach the peace" (causing disturbance during business) Residential - Under the Landlords and Tenants Act, this is illegal.

ASSISIGNMENT

When a tenant transfers his ENTIRE right of possession or other interest in lease property to another person for the entire remainder of the lease term. Doesn't transfer entire liability under lease. The assignee (second tenant) and the assignor (original tenant) share legal responsibility for paying rent to a landlord . Assignee has primary liability, Assignor has second liability. Landlord can sue both

SUBLEASE

When a tenant transfers only part of his right of possession or other interest in leased property to another person for part of the lease term. SUBLEASE TRANSFERS SOMETHING LESS THAN A TENANT'S ENTIRE INTEREST. The original tenant gets sued if rent is not paid.

NOVATION

When one party to a contract withdraws and new party is substituted (this must be done with the landlord's consent)

IMPLIED RENEWAL

When the lease expires but tenant does not move out and continues to pay rent - instead of estate for years, it is now month-to-month periodic tenancy

ACKNOWLEDGED AND RECORDED

When the rental term is longer than 3 years, the lease must not only be in writing, but it must also be acknowledged in order to be enforced. Two witnesses must sign and landlord's signature has to be notarized. Must be recorded, if not new purchaser could evict.

RESIDENTIAL SECURITY DEPOSITS: RETURN

Within 30 days, the landlord must return security deposit or give tenant written itemized statement explaining why all, or part, of the deposit has been retained or the tenant can sue. Court may order landlord to pay twice the amount that was wrongfully withheld, plus attorney's fees. If tenant did not leave a forwarding address, the tenant is not entitled to damages or attorney's fees.

ENFORCEMENT OF LANDLORD'S DUTIES

You can file in municipal/county court and place rent in escrow vs stop paying rent.

L rents apartments for $500 a month. What is the most L can require a tenant to give as a security deposit?

a. $250, since this is a residential tenancy b. $500 c. $1500 d. The law does not set a limit on the amount of the deposit ANSWER: D

Quiz A notice to vacate must be given to a tenant as least

a. 3 business days before an eviction lawsuit is filed b. 30 days before an eviction lawsuit is filed c, 30 days before the lease expires d. 30 days before the writ of execution is issued. ANSWER: A

Quiz T is leasing commercial space from L for an art gallery. The lease states that L cannot be held liable for injuries that occur on the property during the tenancy. One of T's customers trips over a loose board in the gallery floor and breaks a leg. The board was okay when T moved in. Which statement is TRUE?

a. Both L and T could be held liable, because an exculpatory clause in a lease is always void. b. L could be held liable, but T could not, because a landlord always has a duty. c. L could be held liable, but T could not, because T is not the landowner. d. T could be held liable, but L could not, because an exculpatory clause in a nonresidential lease is valid. ANSWER: D - not enforceable for RESIDENTIAL lease however

A new tenant signs a two-year lease that begins on March 1, but on March 1, the previous tenant is still living in the apartment. Which statement is TRUE?

a. It is up to the new tenant to start eviction proceedings against the old tenant. b. The landlord has a duty to get the old tenant out so the new tenant can take possession c. The new tenant is entitled to damages, but does not have the right to rescind the lease d. The new tenant will not owe rent for the period that the old tenant remains in the apartment. ANSWER: B

(Quiz) L leases her house to T for a two-year term. Three months after L signs the lease, X makes a very tempting offer to buy the house. Which statement is TRUE?

a. L can sell the house, but X will take title subject to the lease b. L cannot sell the house unless T agrees to surrender the lease. c. L cannot sell the house until the lease expires, because it is a lease for a fixed term. d. L cannot sell the house without T's consent, since this is a residential lease. ANSWER: A

Quiz T turns out to be a landlord's nightmare. Before L finally gets T evicted, T has caused at least $1500 damage to the house. T's security deposit was only $500. Which statement is TRUE?

a. L can sue T for additional damages only if the lease states that T is required to repair any damage to the property that occurred during tenancy. b. L can sue T for damages in addition to keeping the security deposit. c. Once a landlord has chosen to terminate the lease, the tenant is not liable for property damage. d. The security deposit serves as liquidated damages, so T cannot be sued for additional damages. ANSWER: B

Quiz When T rented her apartment three years ago, it was in decent condition, but now it is infested with cockroaches, the living room heater does not work, and the stairs are rickety. In spite of T's frequent complaints, the landlord has not taken care of these problems. Which statement is TRUE?

a. The landlord is not required to fix these problems unless the lease says the landlord has a duty to keep the property habitable during the tenancy b. These problems are not the landlord's responsibility if the lease expressly states that the landlord has no duty to repair the property. c. Until these problems are fixed, T can be held liable only for the reasonable rental value of the property in its substandard condition d. Until these problems are fixed, T cannot be evicted if she stops paying rent ANSWER: C

Quiz Which lease does NOT have to be in writing

a. a month/month lease for a single-family home b. a one-year lease that will begin immediately and has an option to renew for one additional year c. a one-year lease that will begin in three weeks d. a two-year commercial lease with no option to renew ANSWER: A

T has a five-year lease for an office in a small building. In the lease, the landlord agreed to keep the common areas in good condition and to perform all major repairs. One rainy autumn, the roof starts leaking badly in several places. The leaks threaten T's furniture and papers and make the office impossible to work in. T informs the landlord, but the landlord does not send anyone around to repair the problem, so T moves out. This is an example of

a. actual eviction b. constructive eviction c. self-help eviction d. wrongful abandonment ANSWER: B

T leases an apartment for a one-year term-from November 1 through October 31. But in January, T's brother buys a house and asks T to come live with him. So, T rents his apartment to X from February 15 through October 31. This is call a (n)

a. assignment b. novation c. reconveyance d. sublease ANSWER: A

The tenant in Apartment 6 has a two-year lease. He has so much trash in his apartment that it is a fire hazard and the landlord wants to evict him as quickly as possible. The landlord's first step is to:

a. file the eviction lawsuit b. send him a notice stating the tenancy will terminate in 30 days if the trash is not removed. c. send him a notice to vacation d. None of the above - a residential tenant cannot be evicted for this type of problem. ANSWER: B

Quiz A residential landlord got rid of a bad tenant by shutting off the heat in January. That was legal

a. if the tenant was causing a problem that materially affects health and safety b. if the tenant was holding over after the lease expired. c. only if the lease expressly stated the landlord had that right d. under no circumstance. ANSWER: D

A forcible detainer or unlawful detainer action is a lawsuit brought by a

a. landlord against a tenant to evict the tenant b. landlord against a tenant who removes fixtures at the end of the lease c. tenant against a landlord who does not refund a security deposit. d. tenant against a landlord who wrongfully refuses to perform repairs. ANSWER: A

A landlord or tenant who wants to terminate a residential month-to-month lease must give the other party notice at least

a. one week in advance b. 15 days in advance c. 30 days in advance d. two months in advance ANSWER: C

The Landlords and Tenants Act of 1974 applies

a. only to cities with a population of 20,000 or more b. only to residential and commercial property c. only to residential property d. to all leased real property in Ohio. ANSWER: C