Question

When is a landlord required to notify tenants of property being sold?

Answer

Although I know for certain that most states do not require by law that the landlord notify tenants in advance of a sale, I don’t know for certain that none does. However, I’m not sure it matters because logic and my experience over more than 3 decades of real estate investment and management experience has been that it is usually best to provide such disclosure anyway.

Obviously, if a “For Sale” sign is installed on the property, the tenant will know of a possible sale. Even if the marketing of the property does not include on-site signage, the tenant will know that the property is being sold because it is almost always necessary that potential buyers (perhaps more than one) and/or their agents (e.g., lenders, appraisers, inspectors, contractors) visit the property once marketing begins, particularly after the first purchase offer is made, with this often being well in advance of escrow closing. While many of these tasks do not require access to interiors of units, it is almost certain that one or more tenants will notice strangers who are involved in surveying common areas.

For example, often prior to marketing of the property the owner hires contractors to do deferred maintenance and/or improvement and those vendors often know that they are doing the work because of a future sale. Curious tenants will likely obtain this info from those vendors. Thus, at least some tenants will know well in advance of other indications – perhaps before it is even listed for sale – that a sale will likely occur in the future. And, one tenant knowing something usually means all tenants know that thing.

Of course all access of leased premises would require advance notice of entry in accordance with state law and it would be nearly impossible and inadvisable to not disclose why access is being requested. More units often complicates matters.

Another practical issue is that an owner should do his/her best to avoid alienating tenants because this can result in tenants “bad-mouthing” the property to all who visit the property, including potential buyers. One must also keep in mind that tenants may refuse to allow access, perhaps because they’re alienated by the way they’re being treated during the marketing. This can occur in spite of the lease agreement explicitly allowing access for such reasons (as all agreements should) and if it does there is nothing that can be done about it except through the court, meaning delays. Their refusal cannot be overcome by force or deception.

Also, for multi-unit properties some of those tenants whose leases expire within the next month or so may if upset give notice of termination at the end of their lease term (30 days for month-to-month) resulting in greater than normal vacancy for the property, possibly reducing the price it can eventually be sold for and/or a lender’s willingness to make a loan, particularly in a bad rental market when tenants have more alternatives than usual. In a slow sales market that might require
many months to close escrow, the seller usually prefers to avoid vacancies.  Alienation of tenants can only increase the risk of increasing vacancies.

For reasons mentioned above and for other reasons, I feel it is usually in the interest of the owner to provide advance notice to tenants upon listing the property with an agent, even before, if there will be significant potential for disclosure by contractors as mentioned earlier. Most tenants will likely consider this to be a positive thing as it indicates that the owner has consideration for them. The owner must also keep in mind that sales can fall through, meaning that tenants’ lives must again be disturbed by the process related to some of the needs for entry.

Providing tenants with written notice of the potential sale also gives the owner a chance to reassure the tenants that their lives will go on pretty much as usual because (1) their lease agreement is fully binding on a future buyer, (2) their security deposit will be transferred to a new owner through escrow, (3) rent paid past the close of escrow will be credited to the new owner, (4) they will be notified immediately upon close of escrow and then be provided contact information regarding the new owner, (5) the need for access will be keep as minimal as possible, and (6) housekeeping will be of no interest to those permitted access. You may be able to think of other issues that might be of benefit to mention.

Although it is of value to reassure both residential tenants and commercial tenants, it can be of most importance to tenants of commercial property because commercial lease agreements are usually for multiple years (often 5 or more), include specifically scheduled rent increases, and include lease terms related to options for renewals and/or extensions. Often the survival of a tenant’s business is greatly dependent on the exact terms of the lease being in effect as originally agreed.

Because sales can and sometimes do fall through after all contractor visits related to the first potential buyer, there is potentially a multiple number of times that access will have to be provided.  Since access of leased premises is an invasion of privacy, a disturbance to peaceful enjoyment, and an inconvenience to tenants, it can be beneficial to provide tenants some financial benefit for inconveniencing the tenants. There are numerous ways to do so, but the simplest might be to reduce their rents a bit for a month or two from the time when the first sale-related access is required.

I recommend that you also do some Internet research of your own regarding the issue for your state.

Buying At Bankruptcy Auctions

Bankruptcy sale properties are probably not as well known to be potential sources of properties as are foreclosures and tax sales. However, they can be a good source for acquiring good properties at under-market prices.

Bankruptcy is a legal procedure handled by the federal judicial system. Bankruptcy cases cannot be filed in state court.  Each of the 94 Federal Judicial Districts handles bankruptcy matters, and in almost all districts, bankruptcy cases are
filed in the Bankruptcy Court. Although bankruptcy is a federal matter, state laws affect certain aspects of the matter such as exemptions regarding what assets can be retained by the debtor. Sale of real estate occurs when a person or
business entity files for bankruptcy under a chapter of the Bankruptcy Code that provides for sale of assets, usually Chapter 7, with the proceeds of sale being applied against liabilities of the debtor.

When a Chapter 7 petition is filed, the U.S. Trustee (or the Bankruptcy Court in Alabama and North Carolina) appoints an impartial case Trustee to administer the case. The primary role of a chapter 7 Trustee is to liquidate the debtor’s
nonexempt assets in a manner that maximizes the return to the debtor’s unsecured creditors. The Trustees are assisted by attorneys, accountants, appraisers, real estate brokers, and other necessary service providers, all
being paid out of the assets of the one who files bankruptcy. Real estate is usually sold at auction through a real estate broker who is licensed in the state where the property is located. The broker is responsible for marketing
the property and conducting the auction. The broker receives a percentage of the sale price, some of which might be shared with a broker who represents the successful bidder.

Exempt assets are those of the debtor’s assets exempt under the Code or are subject to valid liens, for example, a mortgage or IRS lien. Nonexempt properties, both real property and personal property, are almost always sold at auction.
This mode of liquidation is considered most likely to result in the highest sale price, thus, most likely to maximize return to creditors.

There are specific procedures that must be followed, including providing notice to the public and conduction of the actual auction. The listing real estate broker and auctioneer (often a different person) do not warrant the accuracy of any of the information provided about the property. Registered bidders are advised of the requirements in advance of auction day and on auction day. However, announcements made from the auction block will take precedence over any printed material provided or any prior oral statements made. In the event of any dispute between bidders, the Auctioneer’s decision will be final.  The Auctioneer has the right to refuse admission or ask an attendee to leave the auction.  The Auctioneer
also has the right to withdraw or add any property to the auction.

The auction will take place on a specified advertised date and may take place on-site of the subject property or at some other specified location. Usually, prospective buyers must register in order to bid at the auction. Registration may be allowed on the day of sale or be required by some date prior to that day. A specified deposit (cash or cashier’s check) is usually required to receive a bidder’s number on the day of the auction. This deposit is typically in the range of $500 to $1,000, but may be significantly more for larger properties. The funds must be cash or certified funds, usually made payable to a specified title company. This deposit will be refunded to all unsuccessful bidders immediately after the auction.

For parties interested in purchasing the property, but unable to attend the auction, arrangements can usually be made to participate by phone or written bids or via an authorized representative.

Bankruptcy auctions require a significant deposit upon successful bid, and require short escrows.  As for foreclosure and tax sales, properties are sold “as is.” Usually, no contract contingencies for financing, inspections, or other due diligence tasks will be accepted. One must complete all inspections and other due diligence and have their financing ready to go prior to the sale date. Terms are cash to the Court. The properties will usually be available for inspection by appointment only. The potential bidder may utilize professionals in performing due diligence.

It is strongly recommended that all prospective non-cash purchasers pre-qualify themselves prior to auction.  If closing is delayed by actions or failure to comply with these auction terms and conditions by a Successful Bidder, default may be declared and the earnest money deposit may be retained by the Trustee.

There may or may not be a minimum or reserve bid on the property. The successful bidder (buyer) will usually be required to immediately make a deposit, usually about ten percent (10%) of the total contract price. The deposit must usually
be a cashier’s check, or by wire transfer. This deposit is usually non-refundable except if the sale is not approved by the Court.

The successful highest bid will be subject to Court approval. However, as the major benefit of an auction is to obtain the highest possible sale price in a given market, the high bid will usually be approved by the bankruptcy court.

The balance of the price must usually be placed in escrow within a short period after the date of sale, often in the range of five to ten business days. Unless creditors chose to dispute the facts of the bankruptcy, most proceedings
regarding real estate involve a Judge only in that he usually approves (1) the price and terms of sale, (2) the terms of the listing with a broker, and (3) the actual sale to the successful bidder.

Close of escrow will be scheduled for as soon as possible thereafter, usually based on the Trustee’s estimate of the time required for Court approval and typically on the order of 30 days.

The Court will usually deliver title free and clear of secured liens as well as any other valid liens of record, but subject to tax pro-ration, restrictions, reservations, and easements of record, zoning, environmental protection, and other municipal, federal and state laws or facts which an accurate survey and/or inspection of the tract being sold might show.

A preliminary title report is often available for inspection prior to the sale.  However, if not provided, a potential bidder should certainly invest in the cost of obtaining one. Often the buyer must pay all escrow and closing costs,
including an owner’s title insurance policy if one is desired (highly recommended). Property taxes will usually be prorated to the close of escrow.

There are advantages to purchasing a property from bankruptcy compared to purchasing a foreclosure or tax sale property. One is that there is usually little risk of the property being withdrawn prior to sale due to curing of defaults. Another
is that there is no redemption period after completion of the sale. Another possible advantage is that the properties available from bankruptcy auctions are sometimes in better condition than from foreclosure or tax sale auctions,
partly because the Trustee may be willing, if funds are available in the bankruptcy estate, to invest a little money in order to maximize the sale price.

However, bankruptcy income properties usually have problems. In fact, this is sometime one of the reasons why the owner filed bankruptcy. One possible problem is high vacancy rates, even zero occupancy. This is, of course, usually more of a
problem the larger the property. It is also usually a bigger problem for commercial properties compared to residential units. This is because commercial financing is usually more difficult to obtain, particularly for a low occupancy
property, and because it can take longer to rent up commercial units compared to residential units. However, as the difficulty of renting vacant units is directly related to the rent for units of a particular quality in a particular
location, the risk depends on the price being paid for the property.

Although, as mentioned earlier, bankruptcy properties are sometimes in good condition, such is not always the case. Some properties may have serious deferred maintenance issues – after all, if the owner had insufficient funds to avoid
bankruptcy, he may have been unable to properly maintain the property for quite some time. However, this is not necessary the case for all of a given bankrupt owner’s properties being sold. The degree of deferred maintenance often depends
significantly on the time period of the owner’s descent into bankruptcy.

If specified in published auction information, a commission will be paid by the listing broker to a licensed broker who represents the buyer for the sale. To qualify for the commission, the broker or salesperson must usually register as
the prospect’s agent by some specified date prior to the auction. Furthermore, the licensed broker or salesperson must usually accompany the prospect to the auction. Some of the requirements for a particular auction are set by the
Bankruptcy Court Trustee and some by the listing broker.

Question 1

Should I rent to an applicant who has good credit (Credit Score: 790) and appears to pay his bills as agreed, but has filed 9 Chapter 7s and a Chapter 13?

Answer 1

Without additional details regarding all information you might have regarding the filings, I can only discuss some general issues related to applicants who have filed for bankruptcy.

Most importantly, landlords have the right to set specific tenant selection criteria which has a business purpose and this can include a bankruptcy filing as a reason for rejection of the application as long as the landlord has a policy that says someone who has been involved in a bankruptcy is not acceptable. The policy should be written and should state what bankruptcy issue is considered unacceptable – e.g., which Chapter(s) and whether it matters if an applicant has simply filed or the bankruptcy was completed.

Federal fair housing laws do not include a protected class for financial condition or past financial history.  If the landlord’s criterion is rejection of every applicant who has filed for bankruptcy and the criterion is applied to every applicant without discrimination, the rejection of the application is a legitimate business decision by the landlord.

While recognizing that bankruptcy is a legal right allowing relief from certain debts, a landlord wants a tenant who has a satisfactory history of credit management. Specifically, the landlord wants a tenant who has the ability and willingness to pay rent. A bankruptcy filing indicates the applicant was, apparently thought he was, or wanted creditors to think that he was unable to meet his financial obligations during a certain period. The underlying event necessitating bankruptcy may have compromised the applicant’s ability to meet future financial obligations. The landlord may not want to take a chance.

However, some landlords set financial criterion that allows some flexibility in evaluating bankruptcy filings. The reason why the applicant filed and/or completed bankruptcy can be most important. Sometimes circumstances beyond control force one to choose bankruptcy. Examples include serious medical problems or a divorce. Landlords may give greater importance to the applicant’s credit management history since the bankruptcy filing. For example, a bankruptcy filing will stay on the applicant’s credit record for seven to ten years, depending on the Chapter filed under. If the applicant is nearing the end of that record period and the bankruptcy has been fully discharged, the landlord, while still taking the bankruptcy into account, may focus on the most recent year period of credit history (for instance, the last three or four years.) The landlord may also elect to offer tenancy based on acceptance of conditions such as a co-signer or guarantor, a higher security deposit (as allowable by state statute), or a shorter-term lease. The landlord is still bound by fair housing laws and cannot discriminate by selectively offering different terms to different classes of applicants that are protected
under federal, state, or local fair housing laws.

There is another consideration in that, assuming he/she has adequate income, the applicant should be more credit worthy after a bankruptcy than before. First, discharged old debts will no longer have a claim on future income and rearranged payment plans can solve cash flow problems. Second, bankruptcy cannot be filed again for a number of years.

For applicants who have fully completed a bankruptcy, a landlord must consider under which Chapter of the Bankruptcy Code the bankruptcy was done.

Furthermore, one must realize that not having filed bankruptcy doesn’t always mean much, as anyone who has never filed for bankruptcy could file at any time because (1) even though there is nothing to indicate a problem in their record, as there are debts that don’t appear in the credit record or (2) soon after they move in unexpected medical expenses quickly drive them into bankruptcy. A landlord cannot file a lawsuit for collection or eviction once the bankruptcy filing has
occurred without permission of the Bankruptcy Court.

While a landlord might theoretically collect some of any unpaid rent from before the filing, my experience has been that it is likely the amount will be significantly less than owed or nothing at all because the Court will consider a landlord’s claims of less importance than those of other creditors.

Chapter 13 is a repayment plan for individuals based on current and expected future income. The debtors can impose a Court-approved debt management plan on the creditors and enforce the plan against uncooperative creditors. The debtor keeps his property and makes regular payments to the Trustee out of future income to pay creditors over time, usually 3 to 5 years. Repayment in Chapter 13 is usually not in full, but can range from nothing to 100% depending on the debtor’s income and the types of debt.

Accordingly, a landlord needs to know the final approved payment plan of the bankruptcy in conjunction with relatively certain income in order to determine whether the applicant can be expected to pay the rent or whether, for the same reason, an existing tenant should be allowed to remain in tenancy. If the debtor has a good job which he/she has had for a reasonably long time, he/she might be in a better financial condition and more able to pay the rent on time than many
applicants who have never filed for bankruptcy.

Chapter 7 is a liquidation proceeding in which the debtor’s non-exempt assets, if any, are sold by the Chapter 7 Trustee, with the proceeds being distributed to creditors according to the priorities among creditors established by law. A Chapter 7 usually discharges all debts except for those which the debtor agrees to keep – e.g., he/she doesn’t discharge his/her car loan because a vehicle is necessary to remain employed or keep a business going.

Filing for Chapter 7 is in no way the same as obtaining a discharge of debt under Chapter 7.  Theoretically, one could file as often as he’s willing to pay the related attorney fees and filing fees. That is, if the Court denies his filing one
month, he could file again at a later date. Such multiple filings might indicate fraud against creditors. If, however, one obtains a discharge of debt under Chapter 7, he cannot obtain another discharge for at least 8 years.

Accordingly, similar to Chapter 13, a landlord needs to know which debts were not discharged, ongoing payments regarding those items and bankruptcy in conjunction with relatively certain income in order to determine whether the applicant or an existing tenant can be expected to pay the rent.

Finally, I would comment that you should certainly be discussing the matter with the applicant if you are considering him as a tenant. Sometimes there are derogatory items in credit reports that can be ignored once the landlord has all the details of the issues and has independently confirmed them.

For a lot more discussion regarding tenant bankruptcy see our Mini Training Guide titled “9 Tenant Bankruptcy Issues.”

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Question 2

I’m trying to find out what the rate of depreciation is for carpet under California law.
Answer 2

I’m not certain whether you are inquiring about (1) depreciation under the IRS Code (which will likely be the same when reported on state income tax returns) or (2) how to take depreciation into account when charging a tenant for damages.
While they are both issues regarding depreciation, the answer will be significantly different.

The depreciation that is allowed when charging for damaged carpet is not likely defined by law. However, if the matter goes to court before a knowledgeable judge and with the tenant being knowledgeable or having a competent attorney then the method used must be reasonable. This usually means that when calculating damage the landlord must take into consideration:

• expected life of the carpet when new,
• condition of the carpet when the tenant moved in (if not new),
• length of tenancy,
• condition of the carpet when the tenant moves out, and
• that the tenant cannot be charged for normal wear & tear.

The rate of depreciation for income tax purposes is specified under the IRS Code and depends on:

• recovery class,
• applicable recovery period,
• convention,
• placed-in-service date,
• basis for depreciation, and
• depreciation method.

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Question 3

I have been using many addendums to the California Residential Lease Agreement. Which ones are currently required for residential properties leased in California in 2013 – e.g., Bedbug, Mold, Carbon Monoxide Detector, other.

Answer 3

It is my understanding that the following disclosures must be provided in CA, either, as required for some, within the lease agreement itself, or, an option for others, by an independent document or an addendum to the lease. The issues mentioned are not necessarily the only ones of concern or the latest versions of the laws, as laws are continually changing. Also, there may be federal or local laws that are more stringent than the state’s. Accordingly, I highly recommend that you independently research the disclosures and other issues related to federal, state, and local laws.

Most issues must, by law, be disclosed to the applicants/tenants prior to executing the lease agreement and most must be disclosed in writing. Even if not required by law, all disclosures should always be made prior to lease signing and be made in writing, preferably with signatures of all adult occupants – which should always be all occupants having legal capacity, i.e., all who are at least the legal age or are legally emancipated minors – so that the landlord can prove having made disclosure.

• Lead hazard disclosures as have long been required.
• Prior to commencing lead paint renovations, certain other disclosures may be required – certain types of housing units are exempt.
• Every lease agreement must include a statutorily-defined notice regarding the existence of public access to database information regarding sex offenders.
• If any gas or electric service for which the tenant will be paying for and the lease premises also serves other areas – e.g., common areas or other rental premises. If so, the manner by which costs will be fairly allocated must be
  disclosed.
• If there are military ordnance locations within one mile of the property, the landlord must disclose in writing that these locations may contain potentially explosive munitions.
• Prior to lease execution, landlord must provide written disclosure when landlord knows or has reason to know that mold exceeds permissible exposure limits or poses a health threat and must provide a consumer handbook developed by the state department of health services that describes the potential health threats from mold.
• Landlord must give each tenant a copy of the notice provided by the registered structural pest control company if a contract for periodic pest control service has been signed.
• If landlord has applied to demolish the unit, landlord must provide written notice of the fact to prospective tenants before accepting any deposits or screening fees.
• For leases signed after January 1, 2012 by someone who has not previously occupied the unit, landlord must provide a lease clause describing the areas where smoking is limited or prohibited.
• For a rental property of 1 to 4 units, prior to signing a lease agreement the landlord must provide written disclosure of the receipt of a notice of default.  This disclosure must be available in a number of languages.
• Contamination related to illegal drugs can require specific disclosures.
• Although only required for businesses that employ 10 or more persons, it is recommended that landlords post a Proposition 65 warning notice on the premises.

Again, the above discussion summarizes those issues of which I am currently aware and as I understand them. It may not include all issues of importance to CA landlords and the brief summaries provided may not include everything that a landlord must know in order to comply with federal, state, and local laws. Also, the law may require written disclosure even if the above summary does not so state.

Lease Agreements – Part 3

We continue our series regarding “Lease Agreements” with a discussion of what should be in a lease agreement and what should not be.

Lease Issues

There are many issues that must be included in all lease agreements, whether residential or commercial. There are still more issues that should be included, and yet more that will be covered in a “good” lease. In general, all leases, whether residential or commercial, may cover the following or similar issues (not necessarily in order of importance):

• Date of execution.
• Lessor (landlord) and lessee (tenant) information – may be a property management company for lessor and lessee will usually be the one responsible for paying the rent.
• Identification of the leased premises – street address, unit number, city, state.
• Term of the lease – beginning and ending dates.
• Security deposit, other deposits and fees, and/or last month’s rent – the amount must be within maximum limits allowed by state law, and should specify when and how the deposit will be returned, must disclose where deposits be
  kept in some states, and can state the rate of interest to be paid to the tenant where interest is required.
• Rent issues – amount, pro-rated amount for partial month, manners of payment (cash, personal check, bank check/money order, electronic), when due, where paid, any grace period, and sometimes specified future increases.
• Late charges – within the limits allowed by particular state.
• Penalties for returned personal checks or other transaction failures.
• Conditions of possession including rent & deposits that must be paid at execution, before possession, and/or following lease commencement.
• Any repairs or improvements to be completed by the landlord before possession or by a later specific date.
• Joint and several liability for all who sign the lease.
• Utilities paid by landlord and utilities paid by tenant.
• Appliances or equipment provided or not provided by landlord.
• Maintenance responsibilities of each party.
• Use of premises: Residential – residential purpose only, names of all occupants, and not to be used for illegal purposes. Commercial – specific allowed and prohibited business uses.
• Pet policy – prohibition or specific ones allowed or not allowed, must not discriminate against assistance animals.
• Alterations, additions – those allowed and those prohibited – including no addition or changing of locks without written permission.
• Access by landlord or landlord’s agents, specifying notice period for non-emergency; some states allow lease agreements to supersede statutes.
• Assignment and/or subletting and/or roommate, prohibition or conditions and approval process.
• Abandonment or extended absence by tenant without notice to landlord.
• What happens in event of fire or other casualty making space unusable.
• Lease renewal procedures.
• Holding over terms – usually reverts to month-to-month, but sometimes automatic renewal for specific term, often with rent increase and/or other changes in lease terms in either case.
• Hazardous materials prohibition.
• No smoking allowed – many landlords and property managers are now prohibiting smoking in their units and some city governments passing ordinances prohibiting smoking in multi-unit residential buildings.
• Eminent domain.
• Lease subordinate to mortgages and lease not to be recorded.
• Binding on heirs.
• Notices – address and manner of delivery for legal notice to each party.
• Parking restrictions and/or assignment.
• Insurance: Residential – advise or require tenant to insure own possessions;
• Commercial – requirements to provide specific insurance coverages.
• Remedies are cumulative & non-waiver (specific waiver of terms doesn’t waive future right to enforce).
• Tenant’s remedies in case of landlord default.
• Landlord’s remedies in case of tenant default.
• Tenant not to withhold rent unless there is a valid reason allowed by statute.
• Termination notice requirements and vacating procedures, including penalties in accordance with state law.
• Abandoned property – as allowed by state law.
• Homeowner/property owner association issues.
• Severability and survival of lease clauses and validity of each part.
• Grounds for termination – defaults of material terms & conditions and specific items, e.g., criminal activities.
• Estoppel and/or Attornment.
• Dispute resolution – mediation or arbitration.
• Rules and Regulations – state that they are made part of the lease agreement (usually reference to separate document).
• Attorney fees and Court costs.
• Entirety of agreement.
• Additional terms and conditions of importance that are not contained within the printed agreement – for example, modifications necessary for handicap accessibility.
• Signatures.
• List of exhibits, if any.
• Indemnity clause.
• Disclosures.

Residential leases often cover the following issues that are not usually part of a commercial lease:

• Occupancy – the maximum number of persons that will reside in the premises should be in line with federal, state, and local guidelines and must not cause discrimination against protected classes.
• Lead-based paint disclosure if built before 1978 – may be separate document and must be as specified by federal and state laws.
• Waterbed clause – may be separate agreement or in Rules & Regulations.

A pet agreement or lease clause should be clear regarding which types of “creatures” are allowed and/or prohibited. When dogs are allowed, the clause must also define breeds because certain breeds are excluded from liability insurance coverage in some policies.

Unlawful Provisions

Some types of lease provisions are not permitted by law. The lease should not contain provisions that require the tenant to waive his or her rights under federal, state, or local laws. Such waivers are unenforceable and may cause the lease to be voidable. They can make the landlord subject to penalties. The following are some common examples of unlawful lease provisions:

Provisions contrary to anti-discrimination laws – The lease may not contain provisions that violate federal, state, or local fair housing laws or the Americans with Disabilities Act. For example, it is illegal to include a lease provision that
prohibits subleasing to members of minority groups or a provision that charges a higher security deposit to a disabled tenant or to a family with children.

Eviction of the tenant without due process – The tenant may not be removed from the unit without notice or a hearing on the issue. Similarly, in almost every state leases may no longer contain a landlord lien clause, a provision that permits a landlord to take possession of the tenant’s personal property without due process because of non-payment of rent. In fact, many states have very complex laws regarding how the landlord must handle abandoned property even when the departed tenant owes the landlord a substantial amount of money.

Waiver of habitability by the tenant – The lease may not contain a provision in which the tenant agrees to waive the landlord’s warranty of habitability or hold the landlord harmless for breaches of the warranty. The “as-is” clause
that is sometimes found in real-estate purchase agreements is not a valid lease clause in most states. In most states a landlord is required to keep a residential rental premises habitable. Additionally, the landlord can be held responsible for injuries that result from the condition of a rental property, regardless of a habitability lease provision, or the tenant agreeing to correct the problem.

Typically, the term habitable includes major systems such as roof, plumbing, heating and/or cooling equipment (depending on location), structural elements, or any unsafe condition. Carpet stains, paint defects, and other cosmetic items generally do not affect the habitability of the home unless they present a health hazard.

Waiver of the landlord’s legal responsibilities – Provisions that waive the landlord’s legal responsibilities are void. Two examples are: a provision that prohibits the tenant from holding the landlord responsible for the landlord’s negligent acts or a provision that attempts to circumvent landlord tenant law.

Provisions that penalize the tenant for complying with the law – The lease may not contain a provision that penalizes the tenant for informing government authorities of any landlord violation of the law. For instance, a lease provision that calls for immediate eviction if the tenant informed the building or health authorities of an unsafe condition on the premises is not permitted. In fact, laws of most states now address so-called “retaliatory eviction” and
prohibit eviction for any cause immediately (sometimes up to 6 months) following a complaint to authorities.