Breaking a Landlord/Tenant Lease

Contract

What’s a lease?  A lease, simply enough, is a contract for the rental of property.  As such, a lease is enforceable at law.  If a tenant signs a lease (which is usually for a one-year term), the tenant is liable for rental payments during that period of time.

A few scenarios exist where a tenant can lawfully break a lease: active service in the military, health, safety or privacy violations by the landlord, or domestic violence abuse.  Besides those scenarios, a tenant cannot simply walk away from a lease because they choose to.  If they do, a landlord has a right to sue the tenant for the outstanding rent.

If a landlord is in a situation where the tenant breaks the lease, the landlord should try to lessen their damages by finding a new tenant.  Even if it is possible for the landlord to sue the tenant for the full amount of owed rent, collecting a judgment against a tenant is difficult.  The landlord is best off trying to recoup their losses by finding a new tenant as soon as possible.  If the landlord does end up pursuing a case against a tenant, the landlord will have a stronger argument by showing that he or she made an effort to lessen the damages from the breach of the lease, rather than just sitting idle as the rent went unpaid.  With this in mind, landlords should keep detailed records of all efforts to find a replacement tenant.

What’s a tenant to do if they need to break a lease?  Work out a deal with the landlord.  For example, a tenant could offer to assist the landlord in finding a new replacement tenant, by helping to advertise and show the apartment.  Both sides are best off trying to find an amicable solution to the problem in lieu of taking the matter to court.

Lessons from a Landlord/Tenant Judge

 One of the benefits of being a landlord/tenant lawyer is the opportunity to attend court frequently and see real cases in action.  One advantage of this is seeing how different attorney and judges approach these cases and the issues that arise in them, especially with evictions.  Recently, while waiting for a hearing, I had an opportunity to listen to a judge who was presiding over a hearing between a landlord attorney and a pro se party (a husband and wife representing themselves in court.  The judge took a great deal of time explaining how a landlord/tenant case works and offered many pointers that I thought would be useful to share here:
  • Jury v. Bench Trial:  Parties have a right to a jury trial in an eviction case.  However, just because parties have this right does not mean they should always use it.  A jury trial requires parties to strictly follow the rules of civil procedure and evidence, which can be a real challenge for a non-lawyer.  If a party wants a jury trial, they should give serious consideration to hiring a landlord/tenant lawyer for their case.
  • Timelines in an Eviction Case:  Eviction cases (“summary process”) move at a faster pace than typical civil cases.  Even if a party decides to represent themselves pro se, they need to be prepared to handle court and filing deadlines.
  • Settlement:  As said by the judge, “litigation is like getting naked in front of a room of strangers.”  A court case is never easy for any party, and requires an enormous amount of time and costs for all parties.  As explained best by this judge, a court case requires you to go before six unknown people, who have to hear your story and make a judgment.  As said best by the judge: a settlement will almost always make everyone happier than a decision by the court—a sentiment I fully agree with.
If you find yourself as a party in an eviction case and need legal assistance, contact me for a consultation.

FAQ: I Had a Lease With My Tenant, Which Has Now Expired. The Tenant Continues to Pay Monthly Rent. Is the Lease Still in Effect?

Question:  I had a lease with my tenant, which has now expired. The tenant
continues to pay monthly rent.  Is the lease still in effect?

Answer:  Yes, to an extent.  If a tenant continues to pay rent after the expiration of the lease (and the landlord accepts it) the tenant becomes a tenant-at-will (aka “month-to-month” tenant).  The prior terms of the lease remain in effect.  The major change is that the landlord may end the landlord/tenant relationship with the tenant by giving proper notice.  The landlord must give the tenant a minimum of thirty days’ notice prior to bringing an eviction (if the tenant pays rent on a longer interval than a month, such as every two months, than the notice period must be for this length of time).

Foreclosure Requirements for FHA Mortgage Loans

Mortgage loans insured by the Federal Housing Authority (“FHA”) include specific requirements for foreclosure that homeowners need to be aware of when facing a possible foreclosure.

FHA mortgage loans are insured by the federal government and are aimed at helping low-income Americans buy a home.  Because the federal government backs these loans, lenders have a greater incentive to lend to those who might not otherwise qualify for a mortgage loan.

FHA mortgages are different than a standard residential mortgage, and include specific requirements for foreclosure.  One of the most important requirements is the “face to face” meeting prior to foreclosure.  This requirement, which comes from federal government regulations, requires lenders to have a face-to-face meeting after the borrower defaults on the mortgage loan, prior to the lender foreclosing the property. Not surprisingly, few lenders comply with these requirement.

Here in Massachusetts, a foreclosing entity needs to strictly comply with the terms of a mortgage prior to foreclosure.  Several courts have found that these FHA mortgage requirements—specifically the “face to face” meeting—is a term of the mortgage and as such, must be strictly complied by the lender in order for a foreclosure to be valid.  As such, a borrower with a FHA mortgage loan has a strong defense against foreclosure if their lender has not complied with this requirement.

If you have a FHA loan and are facing foreclosure, seek the help of an experienced foreclosure defense attorney right away.

Practice Pointers: Is It Worth Pursuing a Claim for Money Against a Tenant?

Here is a question I am often asked from my landlord clients:  Can I recover the rent that I am owed from a tenant?

The answer:  it depends.  In deciding whether to pursue a claim for damages, a landlord needs to ask themselves two questions:  (1) is the tenant working and/or have any assets and (2) can the tenant be located.

The picture above is a spoof of the old adage: you can’t get blood from a stone.  In other words, if the tenant does not have documented income and has no assets, the landlord has no way to collect their judgment.  Even if the landlord wins a claim for monetary damages, it needs a source of income or asserts to obtain the money owed.

The second major consideration is whether the landlord is able to locate the tenant, after he or she has left the rental unit.  In order to bring any type of lawsuit, a party needs to be properly served.
Locating where a person is living is difficult if they do not own real property.  It is impossible to garnish the wages if the party has a job, but again, the the landlord needs to know where the tenant is working.

With this in mind, landlords should gave careful consideration to whether it is worth pursuing a claim for monetary damages against a tenant.  In many cases, the costs of pursuing this—in both the landlord’s time and legal expenses—will far exceed anything that can be recovered from the tenant.  Often, landlords are best off “cutting their losses” by getting the tenant as quickly as possible, even if that means forgoing any claims for money.

Practice Pointers: Business Organization Issues in Landlord/Tenant Law

Landlord/tenant issues are often affected by the particular type of business organization involved in these matters.  

A landlord is either a sole proprietor or a business organization, most often a limited liability company (“LLC”) or corporation.  A sole proprietor does business in his or her name.  This is common for many residential landlords, who often are renting a unit in their home.  As a sole proprietor, the landlord personally enters into leases with the tenants and reports any rental income on their individual taxes.

One of the main drawbacks about being a sole proprietor is that the landlord is personally liable for anything that occurs as part of the landlord/tenant business.  For example, if a tenant were injured and the landlord was at fault, the landlord would be personally liable for these damages.  For this reason, landlords should consider putting their landlord/tenant business into an LLC or corporation.  Not only does this protect the landlord, it also may offer several tax advantages as well.  Landlords should consult both a business attorney and tax adviser to determine if this is the right fit for them.

Tenants need to know what type of landlord they have when dealing with a landlord/tenant matter.  This is particularly important when determining who to bring to court for a landlord/tenant case.  If the landlord is an LLC or corporation, the tenant needs to serve the businesses’s registered agent (which can be found on the Secretary of State’s website).  A registered agent is a business or individual designated to receive notice of a lawsuit, and the tenant should include the registered agent in any demand letter or legal papers sent to the landlord.

The type of business organization for a landlord is also important for court proceedings.  With the exception of small claims court, an LLC or corporation must be represented by an attorney in court.  For this reason, landlords organized as LLCs or corporations need to obtain legal counsel before bringing an eviction or other lawsuit against tenants.  Tenants, in turn, should make certain that their landlord is represented by a licensed attorney in court. 

BLOG URL:  http://malandlordtenantlawblog.sherwinlawfirm.com/2015/01/practice-pointers-business-organization.html

FAQ: Do I Need to Hire a Lawyer for a Landlord/Tenant Case?

Question: Do I need to hire a lawyer for a landlord/tenant case?

Answer:  As with all legal questions: it depends.  In Massachusetts, a business entity (ex. corporation, limited liability company) must be represented by an attorney in court (except for small claims court).  If your business organization (as opposed to you personally) is involved in a landlord/tenant matter, you need a lawyer.

If you are not a business organization, you do have the option of representing yourself in court.  While some people can represent themselves effectively in these matters, many find these issues too complex to handle without a legal background.  More importantly, many landlord/tenant matters become contentious, with both sides unable to work together for a resolution to the case.  If you find yourself in such a situation, give serious thought to hiring a lawyer for your case.

Lawful Entry of a Rented Premises

When a landlord rents an apartment, the landlord remains the owner of the property but grants possession of the premises to the tenant(s).  In other words, even though a landlord is still the owner of the property, they no longer have unlimited access to the premises.  Massachusetts law only allows a landlord to enter a rented apartment for a number of limited reasons, such as to inspect the premises, make repairs, or show the apartment to a potential new renter.

A landlord is required, however, to give the tenant(s) reasonable notice before entry.  While there is no set rule on what “reasonable notice” is, I recommend that landlords provide at least one day’s notice prior to entry.  Most importantly, landlords should provide this notice in writing, even if the landlord speaks with the tenant in person.  A quick email is one easy way to do this.

If a landlord refuses to provide a tenant with notice prior to entry, a tenant can seek damages against the landlord, including an injunction or restraining order preventing the landlord from entering the apartment.  Such steps, however, are often unnecessary; sometimes a cordial conversation between the landlord and tenant is all that is needed to resolve these problems.

FAQ: If I Am Foreclosed, Will I Owe the Bank Any Money For My Mortgage Loan?

Question:   If I am foreclosed, will I owe the bank any money from my mortgage loan?


Answer:  After a foreclosure, the bank is entitled to collect any deficiency judgment owed following the foreclosure sale.  The deficiency judgment is the difference between the amount you owe on the loan and the amount of money the home is sold for at the foreclosure sale.  For example, if you owe $400,000 on the mortgage loan and the home sells for $300,000, the deficiency judgment would be $100,000.  This is the amount that the lender could attempt to collect against you personally in a lawsuit.

A homeowner’s personal liability on the mortgage loan can be eliminated through a bankruptcy.  If you filed for bankruptcy and received a discharge on your mortgage loan, the lender cannot collect this debt against you (it can, however, still foreclose the home).

The deadline for a bank to file a deficiency judgment case on a mortgage loan is two years after the foreclosure sale (“Statute of Limitations”).  If the bank does not file in these two years, they lose their right to collect this debt.

Banks rarely attempt to collect deficiency judgments; most of the time, the homeowner will not have any assets that make such a lawsuit worthwhile.  Nonetheless, a homeowner should always ask the bank to waive the deficiency judgment against them in any settlement for a foreclosure matter.

There are several tax consequences relating to deficiency judgments.  Homeowners should always consult a tax expert before making any decisions related to these matters.