Q: My daughter will be a college senior next year and plans to live off campus. Most of the rental properties near the college are expensive and owned by landlords who are reportedly very unscrupulous; they supposedly do not take good care of their rental properties or handle tenant complaints fairly. My daughter wants to live in one of those properties (a large rental house that’s big enough for her and seven other girls from her sorority).
The landlord wants a $3,000 deposit from each of the eight girls. When I visited the house, the current renters said they had wanted to stay another year but were being kicked out. They’ve heard that the owner always keeps the total security deposit, regardless of the condition of the place, and rents to a different group every year. Can you tell me anything we can do ahead of time to prevent this from happening to our daughter and her friends? –Theresa O.
A: In a nutshell, don’t rent from this landlord! If your state limits the security deposit to a multiple of the monthly rent (in California, for example, it’s twice for unfurnished rentals; more if furnished), you know right there that this owner is flagrantly violating the law (surely the rent isn’t $12,000 per month!). If the word on the street is accurate, you can expect he’ll keep your $3,000, as well as the deposits of the other tenants.
If this happens, you could, of course, sue in small claims court for the deposit’s return, but that will be a major hassle (especially if the college is out of state). The students will be gone, on post-graduation romps, back in their hometowns, or off to new places with jobs, and no one will be eager to come back to handle a court case. In fact, you may also need the cooperation (and physical presence) of the other parents if they, like you, are putting up the deposits. Because it’s the parents’ money, a judge may insist that the parents file the lawsuit. A reunion like this is definitely not going to happen, and everyone will chalk this up to an expensive "learning experience."
You could try to set this sleazy landlord straight at the outset, but don’t count on reforming him. Check with the university housing office and if you find that he lists there, share your information. Pressure and threats of de-listing from that sector might give the landlord pause. You could also speak with the local city or district attorney, or legal aid, asking if they are interested in bringing an "unfair business practice" case. They will need someone to be the plaintiff, a former tenant who has been ripped off already, and since that hasn’t yet happened to you, you’ll have to find a willing ex-tenant.
Rather than spending energy on all this, suggest to your daughter that she and a much smaller number of roommates look for a smaller place — or perhaps a rental a little further away from campus. They’ll have more options and a greater chance of finding a reputable landlord.
Q: Our rental unit in Palm Springs has been occupied by the same tenants for four years, who renew every year. They are dream tenants, but the property management firm we hired and who procured the tenants is a nightmare! They don’t forward the rent to us (even though the tenants pay early), and even then, they make the checks out to the tenants!
We want to stop working with this company, but we’re concerned about this clause in the contract: "This agreement may be terminated by either party on 30 days’ written notice. The Owner agrees not to rent to any tenant procured by the Company for a period of one year after the last occupancy by said tenant. If the Owner does rent to such a tenant, the Owner agrees to pay the Company 20 percent of any and all rent obtained by Owner for the identified tenancy."
The company collects 10 percent of the rent per month. We are considering just giving them the 30-day notice and letting them chase us for the money for a change. What do you think? –Linda and Rueben P.
A: The management company was probably trying to ensure that, if you terminate the contract, you will pay them a portion of the rent from tenants they have found for you. But fortunately for you, they’ve done a sloppy job in writing their contract. Their clause says that you will owe them a cut of the rent if you rent to a tenant whom they procured within a year of that tenant’s "last occupancy." This means that if your current tenants move out, but move back in within a year, you have to pay the 10 percent. As long as your current tenants continuously occupy the rental, there’s no "last occupancy," so there’s no trigger to start the one-year blackout period.
If the management company objects and takes you to small claims court to collect its fee, expect that they will argue that the clause should be read as it was probably intended. Don’t buy it — and argue that the judge shouldn’t, either. If there is any ambiguity in the meaning of the clause, it should be resolved against the party that drafted the agreement: the management company. This is an age-old principle of law that should support your position.
You have a second argument to support your position that you will owe no further fees. The termination clause is intended to give you and the company a "no fault" way to end the arrangement. You would each use this method if you wanted to end the contract for any reason other than the other side’s failure to follow through with the terms and conditions of the deal. For example, if you decided to handle the rental management yourselves, you’d end the contract using this procedure.
But if one side breaches the contract by seriously failing to follow through on a critical term or condition, the other side can declare the deal to be over and all future obligations for everyone are finished. For instance, if the company simply failed to collect the rent, you could end the agreement on that basis. It would be ridiculous to expect you to continue to pay the company when their failure to collect rent violated the terms of the contract. The question here is whether their repeated failures to forward the rent to you (and any other mistakes) rise to the level of a contract-ending breach. If their conduct has been so sloppy that you aren’t getting what you’re paying for, you should be able to convince a judge that the contract is no longer binding.
There’s one final arrow in your quiver, should you need it: The management company is attempting to collect twice its usual fees if you end the contract and rent to a tenant whom they found for you. This maneuver runs afoul of another time-honored legal principle: When one side breaches a contract, the other side’s damages are limited to the actual losses they suffer, no more. Yet the management company is attempting not only to cover its lost fees, but to go further and make money on your breach. Their clause is a penalty. American jurisprudence never embraced the idea of businesspeople penalizing each other for failure to live up to a contract, and judges routinely refuse to enforce contract provisions that are punitive.
Protect yourselves by sending a written termination on 30 days’ notice, but also specify why you think the management company has breached the agreement. This way, you’re ending the relationship according to the terms of the contract, but you’re preserving your right to argue later that the management company didn’t hold up their end of the deal.
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.
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