Real Estate Newsletter
Leases, Rental Agreements, and Security Deposits
Due to the nature of landlord-tenant relationships, it is not surprising that they can often become contentious. To prevent or address problems between landlords and their tenants, the federal government and many states have enacted laws which provide housing regulations. For example, the federal Fair Housing Act governs many rental situations. Also, the National Conference of Commissioners on Uniform State Laws drafted the Uniform Residential Landlord and Tenant Act (URLTA) in 1972. The URLTA was approved by the American Bar Association in 1974. Although all state laws governing landlord-tenant relationships vary, most states and several municipalities have passed laws which are based on the URLTA.
Lease and Rental Agreements
Laws generally do not require a lease or rental agreement to be reduced to writing. However, the relationship between landlords and tenants is becoming more complicated due to increased laws and regulations, strengthened tenant rights, and increased landlord duties. Accordingly, a well-written lease agreement may often be necessary to establish and determine rights and duties and to head off or resolve disputes. Leases are often pre-printed form agreements, but this does not mean the terms are non-negotiable. The most important lease clause for landlords typically deals with the tenant’s duty to pay rent in full and on time. The most important lease clause for tenants usually deals with the duty of the landlord to maintain the property.
Essential terms and conditions that may be covered include:
- Term of the tenancy and renewal
- Rent and any provisions for increasing it
- Amount and procedures regarding security deposits
- Landlord’s right of entry
- Responsibility to pay for utilities
- Pets
- Subletting
- Termination
Landlords May Not Make Discriminatory Tenant Selections
When selecting or rejecting a tenant for renting a unit, federal law prohibits landlords from discriminating against “protected classes” of people. In other words, landlords may not refuse a prospective tenant’s application on the basis of their race, color, religion, national origin, sex, age, familial status, physical disability or mental disability.
States and many municipalities also have similar anti-discriminatory housing laws and may prohibit additional forms of discrimination including on the basis of marital status and/or sexual orientation. In general, the landlord’s decision to rent to one tenant over another must be based on non-discriminatory, valid business criteria applied equally to all prospective tenants.
Landlords May Not Engage in Discriminatory Conduct
Federal law also prohibits most landlords from engaging in discriminatory conduct. Examples of discriminatory conduct include advertising, implying or stating preferences for or limitations on a protected class of individuals, misrepresenting the availability of a rental unit, using different sets of rules or providing different services or facilities for protected classes, refusing to rent to persons in a protected class, ending a tenancy for a discriminatory reason, or harassing a tenant.
However, the federal housing statutes do not apply to rental properties in owner occupied buildings with four or fewer units, housing offered by religious groups or private organizations for their members, housing designated for seniors, and single-family housing rented without discriminatory advertising or a real estate broker.
Security Deposits
Most landlords require a security deposit, and all states allow for security deposits. Security deposits are intended to encourage tenants to maintain the leased property in an acceptable condition and to pay rent. In addition, it discourages tenants from abandoning a lease.
At the end of a tenancy, the return of the security deposit often becomes a source of dispute. For example, in situations where the landlord uses part or all of the security deposit to clean the unit in preparation for the next tenant, the original tenant frequently disagrees about how much of the security is necessary to clean the unit. State and local laws and regulations governing security deposits vary significantly, but typically landlords may not deduct simply for “ordinary wear and tear.”
Amount and Terms of Security Deposits
The URLTA limits security deposits to one month’s rent and allows the landlord to apply all or a portion of it to accrued rent and damages to the unit. State laws vary widely in maximum allowable security deposit amounts. Some states follow the URLTA, others permit two months’ rent, and others have no set statutory limits, meaning the landlord may charge any amount.
Common provisions of security deposit clauses, regulated by state and local law, include:
- Required preliminary inspections before move-in
- Deposit amount
- How the deposit must be held: often an escrow or interest bearing account (sometimes with interest going to the tenant) is specified
- Time for the return of deposit after move-out
- Landlord’s obligation to provide an itemized accounting for deductions from the deposit
If a security deposit is illegally held, a tenant may be able to file a claim in small claims court and recover the entire deposit (sometimes the amount of recovery is double or triple the amount of the deposit). Successful actions may also result in an award of costs and attorneys’ fees, depending on applicable law.
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