Monthly Archives: May 2011

Screening Tenants, Even the French

 

Readers are doubtless familiar with the arrest of the head of the International Monetary Fund, Dominique Strauss-Kahn, for sexual assault on a housekeeper in a Manhattan hotel. Initially denied bail, Mr. Strauss-Kahn was eventually released on $1 million cash bail, with the condition that he be subject to house arrest. Because DSK, as he’s called in France, doesn’t have a house in the United States, he had to find one. He was about to become a renter.

DSK’s wife initially approached the Bristol Plaza, a very ritzy abode comprised of long-term rentals and “extended stay” guests—those who stay more than 30 days. The amenities are grand (“Daily maid service with fresh towels and quality linens!”). The price is steep (reported to be $13,000 per month for an apartment), but no matter—with a lease apparently in hand, the legal team headed confidently to court, prepared to spring their man to the Plaza. But unfortunately for DSK, the building’s residents were unwelcoming. The prospect of round-the-clock security details and swarming media hoards brought them out in force, complaining to the management. The deal was off.

So what happened here, and what lesson can less glamorous landlords take from this episode? Consider the very telling report in the New York Times:

“Mr. Taylor, one of Mr. Strauss-Kahn’s lawyers, said Mr. Strauss-Kahn could have insisted on staying in the Bristol Plaza, but his family decided to withdraw out of courtesy for tenants and the landlord, who he said had raised objections. (A spokesman for Howard Milstein, the chairman of Milstein Properties, which controls the building, said, “Howard is on the West Coast and not aware of this.)”

So it seems that a rental agreement was signed. How can it be that this landlord failed to appreciate the circumstances of the tenancy that it was about to create? Landlords in any state would be on solid ground to refuse to allow their properties to be turned into a private jail, even if the detainee isn’t notorious. The decision is especially curious when one realizes that the same hotel refused to house Bernard Madoff, another house-detainee, for fear of the same media circus and upset tenants. But sign it they did—and Howard, the man at the top, was on the West Coast, blissfully unaware.

Had DSK’s lawyers decided to insist on the deal, the Bristol might have had a hard time getting out from under this rental agreement. To legally void the contract, they’d need to show that they were misled, but management knew the circumstances (DSK’s wife rented two apartments, the second for use by the security detail), so they can hardly claim ignorance of the special arrangements surrounding this tenancy. DSK has enough legal troubles; he hardly needed a fight over a lease contract, so letting it go was clearly the smart thing to do. But a lesser luminary, disappointed at the loss of a fine place to stay, might have dug in. In exchange for agreeing to not move in, such a tenant might have insisted, for example, on the “benefit of his bargain”—the monetary value of the lost accommodations in case he was not able to procure similar digs.

Landlords, take note: Screen well, anticipate problem tenants and avoid them, and keep tabs on what’s happening at your properties.

Bedbugs: Maybe More Than Just Annoying

They come out at night to gorge on human blood, but can last a year between meals. A single female will lay 500 eggs in her lifetime. You’ll find them in sleazy digs with slobby tenants, as well as upscale apartments with conscientious landlords and fastidious residents. They’re expert hitchhikers who can catch a ride on your suitcase or clothing. No one really knows how to kill them. What are they? They’re 21st century bedbugs, and if they show up at your rental property or in your apartment, you’ll probably conclude that mold, asbestos, or even lead-based paint are benign by comparison.

Until a few days ago, it’s been reassuring to know that, unlike lead-based paint, asbestos, and some molds, bedbugs do not seriously harm your health. For sure, their bites are maddening and unsightly, and dealing with them will disrupt your life (or your landlording business) in a major way. And the psychological effects of living with bedbugs can be difficult. But you aren’t likely to get seriously sick. The Centers for Disease Control still tell us, “Bed bugs, a problem worldwide, are resurging, causing property loss, expense, and inconvenience. The good news is that bed bugs do not transmit disease. The best way to prevent bed bugs is regular inspection for signs of an infestation.”

Maybe not. In an advance electronic publication of an article slated to be published in Emerging Infections Diseases, researchers in Vancouver reported the discovery of particularly nasty bacterium on bedbugs who were taken from patients admitted to an inner-city hospital. The bugs were carrying methicillin-resistant Staphylococcus aureus (MRSA) and vancomycin-resistant Enterococcus faecium (VRE). These bacterium cause serious staph infections that are very resistant to antibiotics.

The study’s authors concluded that they may have discovered a new pathway, or vector, for the transmission of these bacterium. Much like the mosquito carries malaria, perhaps the bedbug carries the bacteria, dropping it off as it bites its human host. However, further study is needed to determine whether the bugs are simple transmitters, or have the staph infection themselves; and even whether the bugs infected the humans, or the other way around. The researchers also noted that their findings occurred in an area of dense, poor housing, whose residents already had a high incidence of MRSA infections.

The implications of this study for landlords and tenants are significant. A widespread bedbug infestation qualifies as a habitability problem, which, if not addressed, will enable tenants in many states to break their leases and leave without liability for future rent, or withhold rent until the problem is fixed, or take steps to deal with it themselves and deduct the cost from the rent.

But if bedbugs are proven to be vectors for staph infections on the order of MRSA, the implications for landlords and tenants are dramatic. Tenants may be facing more than annoyance and disruption when dealing with the bugs. Landlords who fail to respond to an infestation or utilize ineffective treatments risk exposing their tenants to a devastating infection. Sickened tenants would have a lot more to sue over than just the value of their ruined belongings or the cost of having to move.

Landlord “Fines” Guests for Smoking, Plus a Lesson Learned

I write a nationally-syndicated newspaper and website column, Rent It Right, in which I answer questions from landlords and tenants. For almost three years now, I’ve been writing about controversial topics like breaking a lease, who pays for bedbug eradication, and rent control. But no subject—even renting to registered sex offenders—has generated as many responses as did a recent column on a vacation rental landlord’s practice of “fining” guests $300 when they smoke in her no-smoking unit. The renters’ adult children had smoked while the parents were away one evening and “you could smell the smoke.”

My answer, which was legally correct, pointed out that “fines” are generally illegal in consumer contracts because they’re really a liquidated damages provision. Liquidated damages are allowed only in situations when it would be very hard to measure the consequences of misbehavior, and both parties to the contract specifically agree beforehand that this is so. Often, liquidated damages clauses must contain specific language in order to be enforceable. On the assumption that this rental contract had no such language, I wrote that the tenant stood a good chance of prevailing if he refused to pay it and had to defend himself in court.

Well. Several people begged to differ. No one challenged the legal analysis, but the writers (passionate non-smokers all) told me that paying $300 for breaking the smoking rule was actually a windfall for these tenants. The writers assumed that the smoke had permeated the furnishings and carpets to the extent that deep steam cleaning throughout would be needed. Arranging for and performing this type of cleaning would cost several hundred dollars or more, and would likely take the unit off the market, depriving the owner of future rents. In addition, some advised me that if the landlord didn’t do a thorough job, and subsequently rented to non-smokers, many such tenants would refuse to take the rental, resulting in more lost rent and damage to the landlord’s reputation. These writers advised me that having to pay only $300 was a good deal, and that rules-breaking renters should shut up and count themselves lucky. The final cut, however, was unjustified—practically everyone assumed I was a smoker, and “on their side.” Nope, never smoked.

But personal accusations aside, my correspondents’ points are all well taken. It’s a good lesson: Sometimes it pays to stop and think of the practical consequences of standing upon the letter of the law. But I’m not sure what the best advice is for owners who want to be compensated for smoke residue. If the tenants know the law and challenge the “fine,” they will likely win, and a judge may not allow the landlord to turn around and sue for actual—and higher—damages. Knowing this, landlords may decide to use a liquidated damages clause and hope that they’ll be dealing with tenants who either won’t know the law or who will willingly pay the amount. Three-hundred dollars might suffice when the smoking was minimal, but if the residue is extensive, it would not cover the real cost of removing it. But over the long run, hoping to collect $300 from all rules-breakers may be more cost-effective than individually suing tenants when the real cost of cleaning is higher.

Hopefully, the crow will be delicious.

 

Ohio Landlord’s Good Deed Turns Deadly

Ohio landlord Steven Snow had known the family for 20 years. Tammy McDaniel and her three kids needed a place to stay after Tammy’s break-up with her boyfriend; Steven had a vacant rental home that he was fixing up. Steven says that Tammy was at the house waiting for the electricity to be turned on; he lent her a generator to warm the place temporarily. But she stayed the night with her kids, and in the morning, Steven found all of them dead of carbon monoxide poisoning. The house did not have a carbon monoxide detector; Steven has been charged with four counts of reckless homicide.

Reckless homicide is the killing of another person by acting, according to Black’s Law Dictionary, “with conscious indifference toward that person’s life.” On either side of reckless homicide sit murder (which requires an intent to kill), and negligent homicide (death caused by careless acts, otherwise known as an accident and not a criminal offense).

Contacted to comment on the situation, a spokesman for the National Apartment Association, a lobbying group that represents about 50,000 apartment companies, referred to the increasing number of states and cities that require carbon monoxide detectors in multifamily rentals (Ohio is not among them). Landlords are concerned, the spokesman claimed, that they might be held liable for injuries or deaths that result from CO poisoning if a tenant had removed batteries or failed to notify a landlord of a malfunctioning device.

It’s unfortunate that the National Apartment Association used this tragedy to air their constituents’ worries about installing detectors in general, rather than focusing on what appears to have happened here. CO poisoning results from the unvented burning of fossil fuels, including gasoline. Running a generator inside a house is really no different than running a car in a closed garage. It’s hard to imagine how this escaped the landlord’s attention; even his intention to use the generator temporarily exposed the family to deadly fumes.

The spokesman’s stated fears–that tenants who remove batteries or fail to report broken monitors will still be able to hold landlords liable–are not relevant here. Death involving a disabled or malfunctioning device is not what happened at Steven Snow’s house. Mr. Snow is charged with recklessly placing a CO source in an unvented place, where he knew people would be.

Landlords can’t prevent tenants from foolishly removing batteries, or from failing to ask for repairs or replacements; nor can they inspect rental premises constantly. For these reasons, when landlords follow the law and install monitors as required, they will usually escape liability if the tenant disables the unit or carelessly fails to report a problem.

Requiring CO monitors in Ohio and other states that do not yet do so is a common sense move, akin to the widespread mandate for smoke detectors. We know these devices save lives; we also know that tenants who install them on their own risk deductions from their security deposits for “damage” to the walls or ceilings. Having to pay for installing a widely acknowledged safety device is not something we should expect of tenants. Landlords who fear that tenant sloppiness or meddling will make them liable for subsequent injuries or deaths need to be reassured by their lobbying group that this is not likely to happen.