Q: I rented an apartment that was advertised at $1,500 per month "plus discount." My yearlong lease gave me a monthly discount of $100, so my real rent was $1,400. I had to break the lease after eight months, and now have to repay the discount, $800, for those months. I know, I know — I signed the lease with this provision, but I’m still wondering if there’s any way I can challenge this fee. –Mary S.
A: You’re being hit with a reimposed discount, and you certainly can challenge it. No doubt your landlord will take this sum out of your security deposit, so you’ll have to sue in small claims court to get it back. Here’s your argument.
First, understand that your landlord is entitled to the actual losses she suffers as a result of your lease-breaking, but no more. By not paying the rent — $1,400 per month — for the rest of the lease term, or four months, you’ve potentially deprived her of four months of rent. Landlords in most states must make reasonable efforts to rerent, and once your unit rents, your obligation for the rent is over. It’s conceivable, if you’re in a soft market and the landlord can’t find a tenant, that you could even be responsible for the entire balance of the lease; and if the landlord has to drop the rent below $1,400 in order to land a tenant, you are responsible for the difference. Your landlord might also charge you for the costs of advertising and showing the unit. These rules give landlords legal ways to cover their losses when tenants break their leases.
Now, let’s look at that "discount." There’s no way your landlord can claim that she has lost an additional $800 because you broke the lease. Look at the math: Had you stayed for the whole year, your landlord would have collected an additional four payments of $1,400 each, or $5,600; and you are on the hook to make it up until a new tenant appears. But the landlord is also demanding an additional $800. She’ll end up making more money because you broke the lease than she would have if you had stayed the whole year. This means the reimposed discount is actually a penalty, which is legally defined as any sum in excess of the landlord’s true loss. Penalties have been illegal since at least the 16th century, as judges came to realize that they actually encouraged people to break contracts, which made commerce unpredictable and inefficient, and were downright unfair.
Be sure to distinguish this fee from another beloved of many landlords — the "liquidated damages" fee — that kicks in when a tenant breaks a lease. These clauses require a tenant to pay a set amount if he or she breaks the lease. Liquidated damages clauses are not legal everywhere. Even in states that allow them, they can be enforced only if they are reasonable estimates of actual losses that are extremely hard to measure precisely. Your $800 reimposed discount fails here too, because the damages your landlord will suffer as a result of your departure — loss of $1,400 rent per month — are not difficult to measure.
If you get this far with your judge, who will doubtless think he’s been transported back to law school, you’re well on your way. You’re not asking the court to go out on a judicial limb for you, or for any high-minded legal reform, because the principle you’re relying on — the illegality of penalties — is one of the oldest in our system of law. You’re also not attempting to avoid the fallout of your lease-breaking. You are simply asking the court to reject, as judges did when England emerged from feudalism, a contract clause that enriches the landlord beyond her actual losses.
Q: I’m on the maintenance staff at a large apartment complex. Our residents frequently tip us when we’re working on their units or doing landscaping nearby. The staff is required to pool the tips and share them, and we each get about $100 in tips every month. Management has just announced that we will have to include the desk staff and the shift supervisors in the tip pool because they fill in for us from time to time. I think this is very unfair, because most of the time they’re telling us what to do or sitting behind a desk. Can they do this to us? –name withheld
A: It’s legal for your employer to require that employees "tip pool" or "tip out" with each other, but employers who have tip-pooling rules must meet a number of requirements. The most important one is that only people who actually do the work that garners the tips, not the boss (or any supervisor, in some states), can share in the pool. It’s doubtful whether an occasional helping hand from the desk workers and supervisors makes them one of the workers for purposes of this rule.
Management’s attempt to grab a share of your tips may also be illegal under your state’s wage and hour rules. Under federal law and in some states, employers are allowed to pay minimum-wage employees a lower hourly rate, as long as the tips they actually receive — either directly from customers or as part of the tip pool — make up the difference. So if you or any coworkers are receiving less than the minimum wage in tips plus hourly compensation directly from the company, the policy is illegal on that score, too.
If the owner of your complex thinks the desk staff and supervisors are entitled to more money because they occasionally help out, there’s a simple solution: Pay them higher wages to compensate them for the added work.
Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord’s Legal Guide" and "Every Tenant’s Legal Guide." She can be reached at janet@inman.com.
***
What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.
