Mobile app oversimplifies real estate rental contracts

Rent it Right

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Jan. 6, 2011

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Rent it Right

Janet Portman
Inman News™

Q: I visited an apartment today and liked what I saw. The landlord asked me to sign up on the spot; he created a lease on his phone, walked me back to the office, and printed it. I'm all for creative online apps, but I'm wondering: Can this be legal? --Tom B.

A: There's nothing illegal about creating a lease using an online app. The question is, will the document stand up to scrutiny? Without seeing the precise document that your landlord made, I couldn't say.

But I was curious, so I went online to the you-know-what store, and found such an app. Then I gave it a try. I'll say this -- it sure is easy. But because the app is not designed for any particular state, gives no information that would enable a user to make the lease state-law compliant, and doesn't even warn the user to check his state laws before use, it's downright dangerous.

For example, the user is asked to specify the security deposit. Just type it in! Many states limit the amount of deposit a landlord may collect, but the app doesn't mention this, let alone give you a 50-state chart with the exact limits. Ditto for late fees, whether interest is required on deposits (and if so, how much), and the amount of notice required to enter a tenant's dwelling. This is "make-it-yourself" law at its finest.

The app also completely ignores required disclosures -- information that, by federal or state law, must be in leases and rental agreements.

All landlords must comply with the federal law (Title X) that requires landlords to disclose the known presence of lead-based paint hazards on the property. Tenants must read and sign an acknowledgment form that's in or attached to the lease -- but you'd never know it from this app (violations subject the landlord to civil fines of up to $11,000).

Similarly, almost every state has one or more disclosures that must be in a lease, including California (regarding the existence of a state database of registered sex offenders -- a lease without this information subjects the landlord to liability), Illinois (any rent concessions must be described in the lease -- failure to do so is a misdemeanor), and Nevada (landlords must include a summary of state law prohibiting a tenant from creating or allowing a legal nuisance -- failure to include this information may render the whole lease unenforceable by the landlord).

These states have additional requirements, as do almost every other state. But this app is blissfully unaware.

The termination-notice option, in which users are asked to choose the amount of notice the landlord and tenant must give to terminate the agreement, is perhaps the most stunning. This makes no sense.

Leases by definition may not be terminated before the end of the term unless it's for cause (the failure of the landlord or tenant to follow the lease or the law).

By allowing the user to name a termination notice period for non-cause reasons, the app has arguably just converted a fixed-term lease into a monthly rental agreement. Imagine the surprise when a lawyer or judge notices this and informs an unhappy landlord that the "lease" isn't one at all.

So I'd say that your instincts are spot-on. Online apps have great potential, and theoretically there's no reason why a thoroughly researched and engineered app couldn't do the job. But the one I looked at seemed to be released before it was ready (and legally compliant).

Q: I'm a new real estate investor and I found a foreclosure property that sparked my interest. The price, market analysis, and potential all looked good and I was ready to make an offer.

Then I thought, "Who are the neighbors?" I ran a registered sex offender search. Sure enough, a next-door neighbor is currently registered. As a real estate investor, what are the legal, ethical, and/or moral issues presented with this situation? --Eric B.

A: I can take a stab at the legal issues presented by your question, but the moral and ethical considerations I'll leave to you, your conscience and your spiritual advisers.

Every state maintains an online registry of persons who are required by that state to register as sexual offenders (those who have been convicted of specified crimes against children or adults).

Maintaining a registry of such offenders is intended to allow the public to learn of the offenders' whereabouts, and adjust their activities accordingly.

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