Rules of increasing security deposit midlease

Rent it Right

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Dec. 28, 2011

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Rent it Right

Janet Portman
Inman News®

Q: I've been given a lease to sign that says the landlord can increase the security deposit during the term of the lease. I thought the whole point of a lease is to prevent this sort of thing. Is this legal? --Bella B.

A: It's understandable that you'd be confused after encountering a clause like the one you describe. When we think of leases, we expect that the key terms, such as the rent and the length of the lease, will be set and unalterable (unless both parties agree). After all, that's the main advantage of a lease over a month-to-month rental agreement -- the tenant knows he can stay for the lease term (barring any bad behavior), and that he won't be hit with a rent increase.

But just as a landlord and tenant may decide later to end the lease early, so too can they provide for an early ending right in the lease itself.

For example, a landlord who plans to sell the property may specify that, upon sale, the lease will terminate in 60 days. Such a clause will surely affect the marketability of the property, but it's not illegal. Or the lease may provide for an increase in rent after a certain number of months. As long as these changes are clear and agreed to by both sides (the tenant's signature on the lease signifies consent), they're legally OK.

Increasing the deposit midterm may be similar. If your state regulates the amount that a landlord can collect (many states specify one or two months), and if the initial deposit asked of you when you signed the lease isn't already at the maximum, providing for an increase in the lease can be legal. However, the amount of the increase must be specific, and the landlord should provide you with a notice period.

For example, if the landlord collected one month's rent and could legally have asked for two, a lease provision could state that an additional month's deposit will be due after the landlord gives you a certain number of days' notice. To be safe, landlords should use the notice period that's legally required when they change a term of the tenancy for a month-to-month tenant (typically 30 days, but it varies among states).

Why would a landlord use such a clause? Why not just collect the maximum deposit at the start of the tenancy? Perhaps your landlord realized that coming up with the full deposit would be difficult for many otherwise qualified applicants, so he dropped the amount in order to have a wider pool of applicants from which to choose.

As the lease term goes on, the landlord will have the opportunity to see whether the tenants are taking reasonable care of the property and paying their rent on time; and if all is going well, he may decide to leave the deposit where it is. But if the property is showing signs of hard use that goes beyond normal wear and tear, the landlord might want to give himself a bigger deposit to remedy damage he expects he'll see at the end of the lease term.

Or if the tenants are chronically late with the rent, the landlord might want more money in the deposit to cover unpaid rent plus damage, should he have to terminate for rent nonpayment.

Q: We'd like to add an exercise room to our modest apartment complex, as a way to attract tenants. But I'm worried about liability. Is there any way I can protect myself from a lawsuit if, for example, someone gets injured and claims that I was negligent in caring for the equipment? --Dennis R.

A: You're wise to be thinking ahead about the consequences of adding an exercise room to your property. Like a swimming pool, exercise equipment poses some risk. The machines, even if maintained regularly, can break; tenants might misuse them and injure themselves or others; and there's always the possibility of just plain accidents, no matter how well you maintain the equipment.

A lawyer's answer to such a question is likely to begin with a question about your liability insurance -- if you have adequate coverage, you can take some solace there. You may also hear a suggestion that you consider using an "exculpatory clause." That's a more complicated matter.

An exculpatory clause limits someone's responsibility for the consequences of his careless acts in advance, before any harm has occurred. They're usually dressed up in legal jargon, but they mean essentially this: If you get hurt in the future as a result of my negligence (carelessness), you agree now that I won't be responsible.

Until relatively recently, exculpatory clauses were common in residential leases. Countless landlords got tenants to agree not to hold them responsible if shoddy maintenance practices resulted in a tenant's injury. Starting in the 1970s, however, landlords were required to offer fit and habitable housing. Along with that duty came a ban on using exculpatory clauses to absolve the landlord if he fell short. Most states ban them outright, realizing that to allow them would essentially gut the requirement that housing be safe.

Would such a clause, applied to injuries resulting from use of the exercise room, come within a state's ban on exculpatory clauses in general? You would have to check the statute that forbids them. For example, California law bans "... any provision ... of a lease ... that attempts to waive [the tenant's] right to have the landlord exercise a duty of care to prevent personal injury or personal property damage where that duty is imposed by law." (CA Civ. Code § 1953 (a)(5).)

A California court recently looked at just this question (Lewis Operating Corp. v. Superior Court, 2011 WL 5429554, 2011.). A tenant sued his landlord when he was hurt after falling from a treadmill (an exercise ball was wedged underneath, causing it to tip). Without even looking at who (if anyone) had been careless, the judge sided with the landlord and tossed the case based on an exculpatory clause the tenant had signed, which absolved the landlord from any injuries the tenant might suffer in the exercise room. The trial judge bought the landlord's argument that although he couldn't get out from under the consequences of failing to offer safe housing, he could exculpate himself for "amenities" and for "noncore functions" of a lease. The tenant appealed the decision, but lost when two of three appellate justices agreed with the trial court.

The remaining justice disagreed, pointing out that nothing in the statute limited the ban on exculpatory clauses to only "core" portions of a tenant's leasing experience (whatever that "core experience" might be). The language of the anti-exculpatory statute is plain, and if the legislature wants to exempt amenities, it (not the judiciary) needs to do so. Those who like to think of California as a den of activist, pro-tenant judges, take note: These appellate justices activated themselves in favor of landlords.

Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord's Legal Guide" and "Every Tenant's Legal Guide." She can be reached at janet@inman.com.

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