Rent it Right

Janet Portman
Inman News

Q: A year ago, my family and I leased a home for two years. We questioned the owner closely about whether he expected to encounter problems with his mortgage, and he assured us that he had favorable terms and no problems. We chose schools and a particular family car based on our assurance that wed be in this house, near good schools and convenient public transport, for two years. Now, weve learned that the property has been foreclosed, and weve been advised that we must leave in 30 days. This is causing all sorts of upheaval and distress. Do we have any recourse? –Stacy W.

A: In most states, when a landlord defaults on a mortgage that was recorded before the tenant’s lease was signed, the owner’s default and subsequent foreclosure will wipe out the lease. Since most leases are for a year or two, and many mortgages pre-date those leases, most tenants get shafted when the owners default. Lucky are the tenants in New Hampshire, Massachusetts, New Jersey, the District of Columbia, and tenants who rent under the federal “Section 8” program — when their owners default, their leases will survive. Tenants who live in cities with rent control and “just cause” eviction protection may also be protected.

The foreclosing bank has the right to continue to honor your lease, but typically the bank will want the property vacant, in order to sell it easier. That’s why you’re being given a termination notice. While there’s nothing you can do to reverse the result of the foreclosure, you do have recourse against the original owner. It’s really very simple: Having promised to lease you the house for two years, the owner has failed to make that house available to you. Your damages are the expense of finding new housing and the difference, if any, between the rent for your eventual new home and the rent you expected to pay under the first lease. You can bring a lawsuit like this in small claims court, where procedures are simple and designed for nonlawyers. And while your original landlord may not be flush with cash (after all, he couldn’t pay the mortgage), if you win you’ll end up with a judgment that will be enforceable for many years. With patience, you can probably collect.

Q: A few years ago, I signed an exclusive contract with a cable company to provide high-speed Internet and cable TV programming to my tenants. A few tenants complained and wanted to use a different company, and now theyre telling me that I have to consider the competition, and let them into the building, even though my contract with the current company lasts another three years. Can this be correct? –Dale S.

A: Indeed it is correct, as of October 2007. For years, the Federal Trade Commission ruled that as a matter of federal law, residential landlords could make exclusive deals like the one you describe (some 20 states, however, forbade such arrangements). The powerful landlords’ lobbying association, the National Multi-Housing Council, had succeeded in convincing the commissioners that when companies have to vie for exclusive, valuable contracts from large multifamily complexes, the competition is fierce and ultimately to the public’s good. But in October 2007, the FCC reversed its position, ruling that exclusive contracts cut down on the healthy competition they want to see among cable providers (interestingly, one commissioner noted the absence of any data that would support this switch). Not only did the FCC outlaw such contracts, it took the highly unusual step of making unenforceable any existing exclusive contracts (the states that forbade exclusives at least allowed existing contracts to run out, but they could not be renewed). This means that you do need to allow other companies into your building.

Q: We own a single-family home and have an agreement with our tenants that, in exchange for lower rent, they will do regular repairs and maintenance. They think that the kitchen floor, which is a bit faded and scuffed, should go, and theyd like to replace it. They could do the job, but Ive been told that there may be asbestos underneath and its a dangerous job. Is there a way we can get this done without undue danger or expense?–Jason T.

A: If your floor pre-dates 1981, the law presumes that it (or the material used to cement it to the subfloor) does indeed contain asbestos. Asbestos that has not begun to break down and become airborne is generally not a health problem, but once the fibers are released into the air — which will happen when you scrape up the old floor and disturb the adhesive material — you could create a potentially dangerous situation, in which the workers (your tenants) may inhale asbestos fibers. Unless you test for the presence of asbestos and the test rules it out, you must proceed as if it is there.

OSHA, the federal agency that regulates asbestos testing, training and removal, has set very specific guidelines on how to conduct asbestos-containing renovation jobs like yours. Although these rules are aimed at employers, so that their employees are protected, they may also pertain to you. After all, you’re allowing your tenants to take over maintenance that would normally be yours, and you’re giving them a break in the rent. Though they’re not technically your employees, they’re pretty close — close enough to have a good shot at a settlement, at least, if they claim injury and sue you. And aside from their status as quasi-employees, they have another legal argument on their side — your acknowledgment that a dangerous situation lurks beneath that floor. Once you become aware of a danger or defect, you’re duty-bound to warn tenants at least, and to take steps to minimize or remove the danger in most cases.

The course is clear for you — hire a flooring company to remove that floor. It will be up to the company to train and supervise their workers (your job is to make sure your tenants are not in harm’s way during the project). Once the old floor is up, and the debris carted away, your tenants can lay the new surface without fear. Though hiring a pro may cost a bit, it pales in comparison to the cost of fighting, or even settling, a personal injury claim.

Copyright 2008 Janet Portman

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