'Rent acceleration' unfair in most states

Rent it Right

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Dec. 2, 2010

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Rent it Right

Janet Portman
Inman News

Q: Several months ago I signed a yearlong lease, but now I need to move to take a job out of state. My standard-form, 10-page lease says that if I leave early, "all rent due under the lease will become due." This means I'll have to pay seven months' rent! This is a nice place and I know the landlord will re-rent it easily. Can it be legal to call due the rest of the rent this way? --Matt V.

A: You're describing what's known as a "rent acceleration" clause, which makes the tenant responsible for the rent for the balance of the lease if the tenant leaves early. In all but about 10 states, this provision wouldn't hold up in court for at least a couple of reasons.

First, landlords in the other 40 states are required by law to make reasonable efforts to re-rent when the tenant breaks the lease, even if the tenant has no legally justifiable reasons for taking off early. Once the unit is re-rented, the tenant's liability for the rest of the rent ends.

When the unit is attractive and the market is hot, the tenant can end up owing very little future rent. But when the unit is not so attractive, or the landlord has a poor reputation, or the market is awash with rentals, it's possible that the tenant can be responsible for the entire rest of the rent. The landlord's duty to re-rent is known as the duty to "mitigate damages."

If you live in a state that requires landlords to mitigate damages, you can see how an acceleration clause runs right up against it. If the purpose of the mitigation rule is to lessen the financial damages suffered by the landlord, what's the sense of also allowing the landlord to collect the balance of the rent immediately? An attractive rental in a hot market could re-rent immediately, resulting in a double-rent windfall for the landlord.

Such a result would not sit well with most judges. When ruling on just such a question, judges would look, as the Supreme Court of Montana did recently, at whether the accelerated-rent clause was unconscionable.

An unconscionable clause, also known as a contract of adhesion, is one in which the drafter of the contract or lease stands to benefit unreasonably from the clause, and the other side had no meaningful opportunity to negotiate a more evenly balanced compromise.

Your lease clause may fit within the definition of an unconscionable clause. The landlord wrote it, and it sets up a chance to collect double rents -- surely an unreasonable advantage. As you say, you were handed a "standard" lease, and chances are that you had no opportunity to ask that its terms be changed (few landlords, especially those with easily rentable properties, will spend time negotiating with prospective tenants).

If you could present evidence that your landlord never varied its lease terms, that would be added evidence that the contract was a "take it or leave it" proposition.

One more argument may spell the end for this lease clause. Your landlord will probably use your security deposit to partially satisfy his demand for the entire future rent, then demand that you pay the rest. But depending on your state's security deposit law, this might not be lawful.

That's because typically deposits may be used to satisfy only rent that is owing at the time the deposit is accounted for and returned -- that is, unpaid back rent. Usually, landlords may not use it for rent not yet due.

Q: I'm a renter of a single-family house. A couple of months ago, an old friend from college asked me if he could crash at my house while looking for work. I agreed, and let him sleep on the couch in my den (which I continued to use). He's gotten a job, but shows no signs of moving on, despite my increasingly blunt hints. He's never paid rent or even paid for the food he's eaten. If he refuses to leave, can I call the police and have him removed? --Roger E.

A: Your question gives me a golden opportunity to explain the difference between what the law says and what actually happens in the real world -- and you can guess which answer applies to you. You won't be pleased.

In theory, your friend is a guest because he never paid rent, to you or the landlord, or did anything else (such as contributing to other common expenses or duties) to make himself a contributing member of the household. If he had contributed, however minimally, he could have become your lodger or your subtenant, depending on your state's law.

(It's important to understand the distinction between a "guest" on the one hand, and a "lodger or subtenant" on the other, as you'll see in a minute.)

For example, suppose he cooked you dinner each Wednesday night, helped with housekeeping, or gave you a few bucks for groceries now and then. If he's the only guest you have in your home, some states (such as California) would put him in the legal category of a "lodger": a single renter who pays for a room, in rent or services, and has nonexclusive rights to share common living spaces like the kitchen and bathroom (however, your continued use of the den might destroy even your friend's lodger status).

Other states would simply label him a subtenant: someone who rents from you, paying in money or services.

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