Landlord and Tenant - Dependent and Independent Covenants

Question 1

Entity Property

Answer 1

• forms of property that allow for specialization of function
• management vs. possession - landlord/tenant, common interest communities
• management vs. beneficial interest - trusts

Question 2

Types of Leases

Answer 2

• term of years
• periodic tenancy
• tenancy at will
• tenancy at sufferance
• note that if the “end date” of your lease is the duration of an indefinite time period (ex: for the duration of the war in the example) this is a numerus clausus violation

Question 3

Term of Years

Answer 3

• terminates at a point in time predetermined in the lease
• can be for any time period so long as maximum duration is definite enough
• no notice required for termination

Question 4

Periodic Tenancy

Answer 4

• fixed duration that continues until notice given
• rolls over automatically from one time period to the next, unless one of the parties gives advance notice of termination
• under common law, 6 months notice required for year-to-year lease

Question 5

Tenancy at Will

Answer 5

• no fixed term
• continues indefinitely
• either landlord or tenant can terminate (modern form includes notice requirement)

Question 6

Tenancy at Sufferance

Answer 6

• created when tenant holds over after the termination of the lease
• tenant has greater rights than a trespasser but subject to eviction by whatever procedures the law allows

Question 7

Two Models of Landlord Tenant Law

Answer 7

• property/conveyance - independent covenants (if one is broken, that does not mean the other party no longer has an obligation to fulfill the others)
• contract - mutually dependent covenants

Question 8

Paradine v. Jane - Facts

Answer 8

• L leases agricultural land to T for a term of yrs at an apparently fixed rent, payable quarterly
• T is three years behind in rent -> L sues to recover unpaid rent
• T says has been ousted by Prince Rupert (“alien army”) + hasn’t been able to earn income from the land

Question 9

Paradine v. Jane - Decision + Significance

Answer 9

• court says T owes rent - T bears the risk of being ousted, not L
• under this traditional model, allocation of risk entirely on tenant - both windfall gains and wipeout losses
• reflects independent covenants

Question 10

Forfeiture Under Independent Covenants Model

Answer 10

• forfeiture wasn’t automatic - you don’t automatically get kicked out if you don’t pay rent

Question 11

Forfeiture Clauses

Answer 11

• landlords started adding these in to lease to resolve forfeiture issue - said if tenant violated enumerated clauses in the lease, tenant’s interest in the lease immediately forfeited
• means certain covenants are dependent when landlord wants to invoke, but tenant can’t get benefit

Question 12

Blackett v. Olanoff - Set-Up of Situation

Answer 12

• landlords rent apartments to residential tenants + also lease commercial space in another building nearby to bar or cocktail lounge
• there’s a clause in the commercial lease that the lounge will keep the noise down so can’t be heard outside the lounge, but lounge still plays super loud music + evidence of noise from patrons fighting

Question 13

Blackett v. Olanoff - Facts

Answer 13

• residential tenants repeatedly ask landlords to control the noise from the lounge -> landlords periodically complain to the lounge tenants + noise abates, but then returns
• tenants vacate -> landlords sue for unpaid rent -> Ts claim constructive eviction

Question 14

Blackett v. Olanoff - Decision + Standard

Answer 14

• court finds constructive eviction
• Constructive eviction = defense to a claim for rent that builds on the common-law rule regarding actual eviction -> says you don’t owe rent if landlord performs some action/fails to perform some action which has consequences analogous to actual eviction

Question 15

Blackett v. Olanoff - Reasoning

Answer 15

• landlords try to argue they’re not chargeable w/ or responsible for conduct of lounge tenants - court disagrees -> says natural + probable consequence of their action in permitting the lounge to operate where it did + landlords could control the actions of the lounge but failed to do so-> thus not entitled to collect rent from premises that weren’t reasonably habitable

Question 16

Rule Regarding of Tenant Nuisance

Answer 16

• given in Blackett v. Olanoff
• where landlord has the power to control the offending conduct of one tenant, + where failure to control such conduct will foreseeably injure another tenant, common law rule that landlord not responsible for nuisance of one tenant against another doesn’t apply

Question 17

Quiet Enjoyment

Answer 17

• most important covenant on landlord’s part

- must not interfere w/ tenant’s possession during the term of the lease

Question 18

Medico Dental Building Co. v. Horton and Converse - Set-Up

Answer 18

• Medico Dental Building = multi-story commercial building in LA dedicated to medical and dental offices
• tenant, Horton and Converse = drug store that rents space on the first floor
• drug store’s lease has a clause that landlord won’t lease any other part of the building to a drug store or another tenant for the purpose of “selling drugs or ampoules”
• three yrs. into lease, landlord rents 9th floor to Dr. Boonshaft -> operates a clinic, patients pay monthly fee + can receive drugs at no additional charge

Question 19

Medico Dental - Dr. Boonshaft

Answer 19

• Dr. Boonshaft’s lease says he promises not to operate a drug store or to distribute drugs to patients “except in connection w/ regular course of treatment of lessee’s own patient”
• his lease also mentions the lease to H & C and promises not to do anything that would conflict w/ that lease
• Dr. B initially obtains drugs from H & C, but then wants to buy wholesale and save sales tax -> purchases from a different H & C

Question 20

Medico Dental - Immediate Circumstances Prior to Suit

Answer 20

• H&C writes letter to landlord, demanding put a stop to Dr. B’s distribution of drugs
• landlord promises to see “what arrangements could be made” but landlord’s attorney later calls to say Dr. B won’t stop
• drugstore says it will vacate - landlord advises “use your own judgment about that” -> drugstore vacates + landlord sues for rent

Question 21

Medico Dental Building - Holding + Standard

Answer 21

• court decides in favor of the drug-store
  Court says that tenant who has suffered a substantial breach of the material covenant has three remedial options:
• can rescind the lease and be released of any further obligation to pay rent (what H&C did)
• can remain in possession and sue for damages for loss in profits suffered by reason of the breach
• can rescind, putting an end to the contract prospectively, + sue for damages suffered up to the time of rescission

Question 22

Four Groups of States Today on Commercial Leases

Answer 22

• Group 1 (TX, UT) implies a warranty of fitness into commercial leases, analogous to IWH
• Group 2 (Mass) adopts position that all lease clauses are dependent
• Group 3 (majority) adopts rule that material clauses are dependent, nonmaterial clauses are independent
• Group 4 - adopts position that all clauses except quiet possession are independent + tenant remedies are based on constructive eviction

Question 23

Implied Warranty of Habitability

Answer 23

• where it applies, IWH = more important than the covenant of quiet enjoyment
• strengthens tenants’ rights beyond constructive eviction (useful b/c w/ constructive eviction, you had to move out before even knowing whether or not you’d won the case - here, you can withhold rent w/o moving out)

Question 24

Illegal Lease Doctrine

Answer 24

• recognized by DC courts prior to IWH
• focused on violations in existence at the time the lease is executed (making the lease an “illegal contract”)
• problem: if it’s an illegal contract, your lease is void and you get evicted

Question 25

Javins v. First National Realty Corp. - Facts

Answer 25

• tenants did not pay their rent for month of April -> landlord sued
• tenants defend by alleging the premises are subject to 1,500 Housing Code violations (their “offer of proof” goes only to violations that arose after their tenancies commenced - didn’t want illegal lease doctrine)

Question 26

Javins v. First National Realty Corp. - Decision

Answer 26

• DC Circuit adopts the IWH - held that (substantial) housing code violations arising during the tenancy violate a warranty implied mandatorily into every lease + so give rise to remedies for breach of contract (means there’s a counterclaim to landlord’s rent claim)

Question 27

Javins - Reasoning

Answer 27

• tenant lack of bargaining power
• tenant’s need to rely on skill + honesty of landlord
• housing shortage
• impediments to competition in rental housing market
• racial and class discrimination
• standardized form leases

Question 28

Why make the IWH mandatory vs. default that you could contract around?

Answer 28

• asymmetric information (landlord typically knows more than tenant about property, requirements of the law, + meaning of lease provisions)
• unequal bargaining power

Question 29

Question of Impact of IWH on Low-Income Tenants

Answer 29

• if IWH increases quality of housing, demand may increase + rents may increase
• supply may also decline, if landlords find it too costly to comply w/ IWH (conversions to condos or abandonment) - might also cause increase in rents
• idea is that improvement in the quality of housing might not actually be worth more to low-income tenants than the higher rents they need to pay

Question 30

Doctrine of retaliatory eviction

Answer 30

• landlord can’t evict tenant out of retaliation for tenant reporting code violations

Question 31

Sommer v. Kridel - Facts

Answer 31

• Kridel enters into two-year lease w/ Sommer, owner of apt building
• rent is $345 per month + Kridel pays $690 (half for first month, half as security deposit)
• Kridel’s marriage gets called off + parents who were going to help pay the rent now won’t-> writes to landlord asking to be released from lease
• Sommer doesn’t respond + turns away someone else interested in renting the apt. -> finally rents it out 16 months later
• Sommer sues for full 16 months of rent + security deposit (ignored the deposit Kridel made)

Question 32

Sommer v. Kridel - Holding

Answer 32

• landlord has a duty to mitigate damages - need to make a reasonable effort to mitigate (+ landlord has the burden of showing reasonable diligence)
• if landlord doesn’t attempt to mitigate, can’t recover damages

Question 33

Sublease - Basic Principle

Answer 33

• landlord starts w/ fee simple, then carves out lease, then tenant carves out sublease, etc. (basically a nesting doll situation)
• tenant doesn’t transfer entirety of remaining interest, instead retains some element for self

Question 34

Sublease - Responsibilities

Answer 34

• prime tenant remains liable to landlord under privity of contract
• subtenant only liable to tenant - no privity of estate w/ landlord (if subtenant fails to pay rent, landlord goes to original tenant - can’t collect anything from subtenant directly)

Question 35

Assignment vs. Sublease

Answer 35

• “English” rule - distinction turns solely on whether there’s any kind of reversion retained upon transfer of tenant’s interest (if reversion, then sublease)
• American rule - tracks the parties’ intent (ex: did they intend for T2 to deal directly w/ landlord? who is T2 writing checks to?)

Question 36

Assignment - Basic Principle

Answer 36

• tenant transfers entire remaining interest in the lease to a third party
• new tenant steps into shoes of the original tenant

Question 37

Assignment - Privity

Answer 37

• old tenant has privity of contract
• new tenant has privity of estate (means new tenant must perform all obligations of the original lease that touch and concern the land)
• since old tenant still in privity of contract, old tenant is still technically liable for the rent

Question 38

Kendall v. Ernest Pestana Inc - Lease Arrangement Pre-Suit

Answer 38

• Lots of people involved in leasing + assigning of hangar space at San Jose Municipal Airport – basically, you start out w/ City of San Jose leasing it to the Perlitches, and the Perlitches then sublease it to Robert Bixler
• But after this sublease, the Perlitches assign their interest in the property to Ernest Pestana, Inc., who basically then steps into their shoes as the lessee and subleasor

Question 39

Kendall v. Ernest Pestana - Facts

Answer 39

• Bixler runs airplane maintenance business in the space -> wants to sell business (including existing lease) to Kendall + 2 other applicants
• Bixler’s lease says he can’t assign his interest to someone else w/o consent from lessor
• Pestana refuses consent, despite fact that Kendall + others had stronger financial statement + greater net worth than Bixler + were willing to be bound by the terms of the lease (implied that Pestana trying to impose higher rent + more onerous terms)

Question 40

Kendall - Procedural Posture

Answer 40

• proposed assignees brought suit for declaratory + injunctive relief + damages
• sought declaration that Pestana’s refusal = unreasonable + unlawful restraint on alienation -> trial court shuts this down (older rule said unless there was something in the contract saying otherwise, he could refuse his consent arbitrarily)

Question 41

Kendall - Holding

Answer 41

• where a lease provides for assignment only w/ prior consent of lessor, consent may be withheld only where lessor has a commercially reasonable objection to the assignment, even if lease doesn’t have a provision specifically stating that assignment can’t be unreasonably withheld