October – 2013

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Flood Damages and Your Property: How To Deal With Your Legal Issues
Meet the Newest Attorney To Join the Firm
The Do’s and Don’ts of Demands

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Volume 14 • Issue 10 October 2013 Landlord News 3600 South Yosemite Street Suite 828, Denver, Colorado 80237 thsnews@thslawfirm.com www.thslawfirm.com Denver Phone 303.766.8004 FAX Completed Eviction Forms To: 303.766.1181 or 303.766.1819 Colorado Springs Phone 719.550.8004 FAX Completed Eviction Forms To: 719.227.1181 MEET THE NEWEST ATTORNEY TO JOIN THE FIRM For those who read the Landlord News every month, this is not a re-run of last month’s news regarding a new attorney at THS. We, indeed, added another highly qualified attorney to the Firm. We are very pleased and excited to announce that Karen Harvey is now a member of the THS Legal Team. Karen brings over twenty years of legal experience, primarily in the field of landlord/ tenant law, to her position at the Firm. Many of you may already be acquainted with her, as she is well known and respected in the Colorado multi-family rental housing industry. Karen served as Colorado Legal Counsel and headed up the In-House Corporate Legal Support Team at Carmel Partners, Inc. for the past fifteen years where during her tenure she dealt with legal issues involving 30 properties and 15,000 rental units. Prior to joining Carmel, she did legal work in Colorado in both Real Estate and Title Insurance. Karen even did a stint in the practice of Criminal Defense Law in her home state of Illinois before moving to Colorado. A native Chicagoan, she graduated with a BA in Criminal Justice from the University of Illinois Chicago and received her JD from the Illinois Institute of Technology Chicago Kent College of Law. Karen has substantive experience in teaching legal issues that impact the multi-family housing industry, in particular Fair Housing. We are excited to be able to have her join the ranks of our Firm Workshop Instructors and are pleased that many of our clients will benefit from her experience and expertise in teaching our classes continued on page 2 FLOOD DAMAGES AND YOUR PROPERTY HOW TO DEAL WITH YOUR LEGAL ISSUES Sadly, the recent floods have affected countless rental units and tenants. The floods’ devastation has resulted in possibly over a billion dollars in damage, and tragic loss of life. In addition to the human and monetary costs, the floods have raised countless legal issues for the rental industry. The most common questions we have been asked center on repairs, lease termination, and rent abatement. Some issues are governed by previous court decisions. However, the vast majority of flood-related issues are determined by lease language and the Colorado Warranty of Habitability Act (the “WHA”). Regardless of what your lease says, the WHA may control some scenarios. Overall, you’re likely to stay out of flood-related legal trouble by exercising a caring attitude to those unfortunate enough to be affected by Mother Nature’s wrath. Landlords may want to terminate a tenant’s lease for several reasons because of the floods. The landlord may not be able to make repairs in a timely or cost effective manner. The rental unit may have been damaged to the extent that it is uninhabitable. A tenant may be refusing to move because they have nowhere to go or can’t afford to move. Can a landlord terminate a tenant’s lease because of flood related damage? Probably, but it depends on the facts. At common law, absent a lease or a specific law governing the situation, a lease is not terminated by damage to the premises unless repairs cannot be made within a reasonable time. Most flood related termination situations aren’t governed by common law because most leases address damage to the premises scenarios. Specifically, continued on page 2 FLOOD DAMAGES AND YOUR PROPERTY HOW TO DEAL WITH YOUR LEGAL ISSUES continued from page 1 a good lease gives the landlord the right to terminate the lease for damage to the premises. The extent of the damage necessary for a landlord to terminate a lease is also determined by the lease. Some leases require the premises to be untenable or uninhabitable for the landlord to terminate. Other leases require significantly less damage for the landlord to be able to terminate. If your lease is well drafted, you can terminate, regardless of the extent of the damage, if repairs are either dangerous or impractical if the tenant continued to occupy the premises. Some tenants may argue that the WHA requires a landlord to repair under all circumstances. However, the WHA specifically states that nothing “shall prevent a landlord from terminating a rental agreement as a result of a casualty or catastrophe to the dwelling unit without further liability to the landlord or tenant.” However, landlords can only terminate based on an applicable lease provision, or based on the premises not being able to be repaired within a reasonable time. If a landlord’s basis for termination is weak, the tenant’s WHA argument that the landlord is required to make the premises habitable under the WHA has much more merit. If this scenario arises (premises not completely uninhabitable and no specific right to terminate), the landlord can either choose to press their right to terminate argument with accompanying legal risk if they lose, or move the tenant to another unit at landlord’s cost. If no unit is available and the landlord doesn’t want to risk losing under the WHA, then the landlord should negotiate a resolution with the tenant. If the tenant wants out but the landlord doesn’t want to set the tenant free, a tenant has three potential grounds to terminate a lease. A lease might contain specific rights to terminate if the premises were significantly damaged, and repairs are not timely made. Tenants also have the right to terminate a lease if the covenant of quiet enjoyment is breached. Similarly, the WHA gives tenants specific statutory rights to terminate a lease if the premises are uninhabitable and the landlord refuses to repair within a reasonable time. continued on page 3 Landlord News October 2013 Page 2 MEET THE NEWEST ATTORNEY TO JOIN THE FIRM continued from page 1 that are up-coming in 2014. In addition to her familiarity with rental property legal issues she is skilled in the practice of legal matters that impact both real estate and commercial property leasing. Since joining the Firm Karen has expressed enthusiasm for the diversity of work she has undertaken for our clients, especially in dealing with and resolving problems that come in daily through our Situation Desk. Karen has said that she is looking forward to expanding her professional knowledge in the area of subsidized housing and getting to know more of our clients on a one-on-one basis. Karen and her husband, who is a middle-school teacher, have a high school son Chase, age 16, and a middle school son Colton, age 11. When not helping THS clients and practicing law, Karen enjoys turning out to support her son’s football teams and spending quality time with her family. Please join us in welcoming Karen to the Firm and be sure to take time to say hello and welcome her at our next client lunch. JJJJJJJJJJJ IMPORTANT THS OCTOBER DATES October 9th Evictions Workshop THS Lower Conference Center 3600 S. Yosemite Street Denver, CO 8:30 a.m. – 11:30 a.m. October 12th AAMD Chili Cook-Off Redi Carpet Warehouse 14800 E. 35th Place Aurora, CO 80011 11:00 a.m. – 3:00 p.m. October 14th ALL COURTS CLOSED EXCEPT DENVER COLUMBUS DAY HOLIDAY October 17th Colorado Springs Client Lunch Ritz Grill 15 S. Tejon Street Colorado Springs, CO 80903 11:30 a.m. – 1:00 p.m. October 18th South Client Lunch Dave & Busters 2000 S. Colorado Blvd *11:15 a.m. – 1:00 p.m. LAST LUNCH FOR 2013 FLOOD DAMAGES AND YOUR PROPERTY HOW TO DEAL WITH YOUR LEGAL ISSUES continued from page 2 The vast majority of multi-family leases require the landlord to make repairs. If the floods damaged a tenant’s unit making the unit untenable or uninhabitable, the tenant can assert the right to terminate based on frustration of purpose. A residential rental becomes untenable when damage results to the extent that the premises cannot be used for the purpose for which they were rented, and cannot be restored to a fit condition by ordinary repairs made without unreasonable interruption of the tenant’s use. A tenant’s continued occupancy of a residential unit is evidence that the property is habitable. Whether a rental unit is habitable is a question of fact to be determined by the court. Unless expressly agreed otherwise, every lease contains an implied covenant of quiet enjoyment in Colorado. The covenant covers repairs. A covenant of quiet enjoyment is breached when the premises become unfit for the purposes for which they were leased, or the tenant is deprived of the beneficial enjoyment of the premises. Anything a landlord does or doesn’t do that renders the premises unfit for occupancy, or deprives the resident of his beneficial enjoyment, theoretically breaches the covenant of quiet enjoyment. Thus, if a landlord has the responsibility to make repairs after a flood and fails to do so, the tenant may have the right to break his lease and move out without penalty. In a well-written lease, the tenant waives the implied covenant of quiet enjoyment. However, even if a tenant has waived the right to quiet enjoyment, the lease contains no other provisions giving the tenant the right to terminate the lease, and creates no repair responsibilities on the landlord, the tenant may still have a right under the WHA to terminate the lease under the right set of facts. The WHA act, adopted in 2008, places the burden on landlords for making the premises habitable. The WHA contains a lengthy list of conditions that make a rental unit uninhabitable. However, the list is irrelevant in court because the law also provides that the premises may also be uninhabitable if any condition exists that makes the premises unfit for human habitation. The WHA also requires the premises to be in a condition that is materially dangerous or hazardous to the tenant’s life, health, or safety. Based on our experience in court, under the right set of facts, judges continued on page 3 THE DO’S AND DON’TS OF DEMANDS Avoiding the potential loss of a court date can easily be avoided if you develop good procedures and habits in how you prepare your demands. It is more than good policy to routinely check, double-check, triple-check and even quadruple-check all of your demands before you send them to us to be filed. As with anything that you routinely do over and over again, like preparing demands, it is only human to expect a minor “oops” from time to time. It is so easy to prepare a demand, review it and never even notice a minor glitch that can turn into a major delay for you. Two sets of eyes are always better than one. So once you prepare and review a demand it is a good idea to have someone else take a fresh look and review it before you send it. As the old saying goes “an ounce of prevention is worth a pound of cure”, or in this case checking your demands multiple times can save you time and money. The most important factors to check for are: 1. Give a full and complete street address including: a. City b. Zip Code c. Correct County d. Street Type (Street, Boulevard, Parkway, Lane, Circle etc.) e. Street Direction – North, South, East, West 2. Is the ROS dated for the correct date that the notice was served on? 3. Is the ROS marked on how the notice was served? (Posted or hand delivered) a.If hand delivered, make sure to fill in the full name of the person to whom it was delivered (It has to be a lease holder or occupant of the premises over the age of 15). b. Is the ROS signed? c. Are all of the lines filled in with the correct information? 4. For monetary demands, you must carefully check your itemization –Do the amounts add up correctly and are they the correct amount currently owed by the resident? 5. Is the copy that the resident received accurate and does it accurately match the copy that we are filing on? REMEMBER THAT A FEW EXTRA MINUTES AT THE BEGINNING OF FILING DEMANDS CAN BE WORTH DAYS. Remember by getting into the habit of following these simple do’s and don’ts. Landlord News October 2013 Page 3 Landlord News October 2013 Page 4 FLOOD DAMAGES AND YOUR PROPERTY HOW TO DEAL WITH YOUR LEGAL ISSUES continued from page 3 could find that substantial flood damage was dangerous to a tenant’s health or safety. A number of clients have asked us whether the tenant still has to pay rent after the floods. Maybe. The answer depends on the extent of the damage to the rental and how quickly repairs are made. If there is no applicable lease provision or statute, the tenant’s liability for rent after the flood depends on the extent of the damage to the unit. If damage is not significant or complete, and repairs either don’t interfere with the tenant’s occupancy or can be made within a reasonable time, the tenant is still liable for rent. If a unit is uninhabitable and cannot be repaired within a reasonable time, the tenant would have the right to terminate the lease, and rent would abate completely. Many residential leases address rent abatement when the premises are damaged. Frequently, leases provide that if the premises are damaged but repairable, tenant’s rent stops from the date the premises became uninhabitable to the date the tenant can reoccupy the premises. Unless the damage or casualty event is due to tenant, then the rent does not abate. We have seen some leases that shift the risk of loss back onto the tenant. Specifically, these leases provide that rent does not abate upon flood damage. Under these leases, theoretically, the tenant’s rent wouldn’t abate per the lease. A court may enforce this provision in a commercial setting. However, a court is unlikely to make a displaced residential tenant pay rent in most circumstances. If the tenant’s lease required the tenant to maintain alternative living accommodations insurance coverage, the result may be different. Even if the lease provided that the tenant’s rent does not abate because of the flood, the tenant could argue that the WHA reduces or eliminates all rent due. Under the WHA, the landlord is responsible for making the premises habitable. If the landlord breaches the warranty of habitability, the tenant can recover all damages arising directly from landlord’s breach of the warranty of habitability. Tenant’s damages in a WHA action include any reduction in the fair rental value of the unit. If the unit is completely uninhabitable, its fair market rental value is $0. Under the WHA, the court could greatly reduce the monthly rent based on flood damages even if the tenant continued to occupy. Even if a lease contained a non-abatement clause, a landlord might incur significant liability under the WHA for attempting to collect full rent when the rent should be completely or partially abated. The tenant refuses to pay. The landlord sues to collect full rent based on the nonabatement clause. The court finds that the premises were uninhabitable, and thus the fair market rental value of the premises is $0. Accordingly, the court awards no damages to the landlord. Under certain circumstances, the court could award several thousands of dollars in attorneys’ fees to the tenant. Because the WHA makes any lease void that attempts to modify or waive the warranty of habitability, a court could also find that the nonabatement clause is void as against public policy. Overall, if damage is not severe and you can repair quickly, a tenant probably cannot terminate a lease, and rent does not abate. However, regardless of your legal rights, you should consider the reasons not to fight and the overall optics of the floods. The floods significantly impacted the lives of countless people. The floods have rightfully generated great public sympathy for those affected. Under these circumstances, an overly aggressive landlord or perhaps even a mildly aggressive one is not likely to be viewed favorable by the court. Regardless of the law, judges are human. Because you’re not going to get full rent on significantly impacted units, why fight a tenant’s desire to terminate the lease? Even if you allow the tenant to walk away by terminating the lease, you may be opening yourself to needless liability by chasing rent the court is not going to award. You may be in a better position to make repairs if the unit is vacant. You should also consider that rental units aren’t staying vacant long given the current strength of the rental market in Colorado. JJJJJJJJJJJ DID YOU KNOW ! THE SIX STEPS to becoming a better listener form a LADDER: L : Look at the person speaking to you. A : Ask questions. D : Don’t interrupt. D : Don’t change the subject. E : Empathize. R : Respond verbally and non-verbally. JJJJJJJJJJJ Landlord News October 2013 Page 5 AAMD Chili Cook-Off October 12 11:00 a.m – 3:00 p.m. Redi Carpet Warehouse 14800 E. 35th Place Aurora Don’t Miss Out On The Fun! Stop By the THS Booth For Chili And A Lot More