Q: Do you feel it is ethical for a landlord to sign a one-year lease when he knows the property may be foreclosed? For that matter, what about signing a month-to-month rental agreement? True, the landlord can always terminate a month-to-month with notice, but if the tenant liked the place and had decided to stay for a while, having the bank kick him out would be very disruptive and expensive. –John W.
A: As you no doubt know, anybody can be a landlord. All you need is a piece of residential property and the determination to rent it out. Some cities, particularly those with rent control, require landlords to register their rental units, and in some cases, the units need to pass a physical inspection. But even in these situations, the moral character of the landlord is not an issue. Unlike doctors, lawyers, brokers and other professionals, landlords aren’t legally required to pass a licensing exam; they aren’t bound by a code of ethical conduct; and no state or quasi-state agency will yank their right to do business if they act in a morally repugnant way.
Voluntary state and local landlord associations, which educate and support their members, do have standards of conduct, and they offer courses and certificates that aim to teach the fundamentals of the business. But no law requires landlords to join these associations, and the associations themselves are not uniformly high-minded when it comes to setting the bar. For example, the National Apartment Association is rather modest when it comes to ethical expectations, saying merely, "Our purpose is to support an industry that offers safe, affordable multifamily housing to the public, equitably compensates its workforce, and provides investors with a fair and reasonable rate of return." The California Apartment Association appears to be more interested in its members’ behavior towards tenants, declaring, "We commit to honesty, integrity and fair dealing in our capacity as rental housing professionals." But even if a landlord joins an association with stated ethical standards and then violates them, there is little real consequence — the member may be censored or even asked to leave, but the landlord can continue to do business.
So, when you ask whether it’s "ethical" for a landlord to act in a certain way, the answer is: That’s a matter for the landlord and his conscience — and maybe his apartment association — to figure out. If you want to know whether it’s legal to act as you described, however, the answers would be clearer.
Let’s consider a landlord who signs a lease knowing that the property may be foreclosed upon during the lease term. The more likely it is that foreclosure will happen (if the landlord has already received notice of foreclosure, for example, it’s looming on the horizon), the more likely it is that this is a simple case of fraud, because the landlord is promising to do something (make the premises available for a year) that he reasonably knows he cannot do. At the other end of the spectrum, a landlord who is merely worrying about a remote possibility that he won’t be able to meet his mortgage probably doesn’t have a duty to disclose this worry. So you see, you’re dealing with a bit of a sliding scale here — at the time the lease is signed, the more certain it is that the bank will foreclose, the higher the likelihood of fraud.
The answer is a bit different for the tenant with a month-to-month rental agreement. Monthly rental agreements can be terminated with proper notice: 30 days in many states, although cities with rent control and New Jersey, New Hampshire and Washington, D.C., all require landlords to have a just cause, or good reason, to terminate a monthly agreement. A tenant who rents month-to-month is presumed to understand the rule. If the bank takes over and terminates the agreement, that consequence is but a variation of the possibility that the landlord could have done the same thing. In other words, unlike a tenant with a lease, a tenant renting month-to-month has no reasonable expectation of staying on beyond the next 30 days. For that reason (and assuming that the landlord didn’t promise to keep the rental agreement in place for a set period of time), the month-to-month tenant will have a harder time convincing a judge that the premises were offered to him under false pretenses.
Incidentally, at least one state has thought about this conundrum and has addressed it legislatively. Since 1997, Oregon landlords with properties of four or fewer units must disclose, before signing a lease, any outstanding notice of default, lawsuit to foreclose, declaration of forfeiture, or lawsuit to foreclose a tax lien. If the landlord fails to make this disclosure, and the tenant has to move as a result, the tenant can recover twice his actual damages and all prepaid rent. (Oregon Rev. Stat. §90.310.). Perhaps with the subprime meltdown, and the grief this has cost renters who have been kicked out of their homes, more states will give some thought to protecting tenants caught in the foreclosure crossfire.
Q: Is it legal for an apartment complex to raise the rent almost $100 after I’ve lived there for only five months? I signed a short, five-month lease to make sure I could swing the rent, which is higher than my previous rental. But had they told me they would raise my rent $100 at the end of that five-month lease, I would have either signed a yearlong lease or I would have looked elsewhere. –Amber D.
A: You were certainly smart to sign a short lease if you were unsure whether you could handle the rent. But the benefit of obligating yourself for a relatively short time came with a risk — that the landlord would raise your rent once the lease term ended. Unless you live in a city with rent control or in Connecticut (where you can challenge a rent hike as unreasonable), the landlord can raise the rent for any reason that isn’t retaliatory (to punish a tenant for reporting a code violation, for example) or discriminatory (to drive out someone of a particular religion, for instance).
If your landlord had known that the rent would go up in five months, it would have been kind to tell you when you first moved in: kind, but not legally required. Don’t give up yet, however. Consider asking the landlord to negotiate the rent. From the landlord’s standpoint, it is always expensive to lose a tenant. If you leave, the landlord will have to clean and ready the unit for the next occupant, advertise and show the unit, and screen and sign-up the newcomer. The industry rule of thumb is that landlords lose about two months’ rent at turnaround time, even if the unit doesn’t stand vacant for long. Bring this up and do the math — it will cost your landlord more to re-rent the place (and, incidentally, take a chance on an unknown tenant) than to compromise on the rent hike and keep a known, stable tenant.
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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