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.