FAQS ABOUT THE WARRANTY OF HABITABILITY ACT – PART IV DESTRUCTION, DEFENSES, AND RETALIATION

This month we finish our series on the new warranty of habitability law. HB19-1170 entitled the “Residential Tenants Health and Safety Act” became effective August 2, 2019. This bill amended what is commonly referred to at the Warranty of Habitability Act (WHA). The original WHA was enacted in 2008. The 2019 law significantly rewrote WHA and created significant legal obligations for Colorado landlords. The last three months we answered questions about the 2019 WHA. This month we briefly discuss destruction of the premises and landlord defenses. Also, this article has an extended discussion about how the new law has drastically altered the retaliation provisions of the 2008 WHA, significantly increasing landlord’s potential legal exposure for tenant retaliation claims.

 

What are a landlord’s defenses to WHA claims?

A landlord’s defenses to WHA claims are both technical and substantive. The technical defense is that the tenant’s claim does not meet all the required elements to establish a breach of the WHA (tenant did not provide reasonably complete written notice, remedial action was timely commenced, item not covered by the WHA, or WHA claim being asserted by non-lease holder). Probably the number one substantive defense is that the damage was caused by the tenant or the tenant’s guests or invitees. In WHA scenarios involving tenant damage, Landlords should always send the tenant a written communication that the issue isn’t covered by the WHA because the tenant caused the damage. If the tenant refuses to cooperate or interferes with remedial action, landlords may also assert this as a defense. Again, landlords should create a written record, if the tenant interferes with remedial action.

While landlords are still potentially liable if a WHA claim is asserted in an eviction case for breach of a non-monetary covenant, a tenant may not assert a WHA claim as a defense in a non-compliance eviction. For example, if a landlord is evicting a tenant for disturbing neighbors, a tenant may not defend the possession part of the eviction by asserting landlord has failed to fix the heat. However, even if the landlord obtains a judgment for possession in a non-monetary breach eviction, the court would still have to resolve the tenant’s WHA claim during the money portion of the eviction case.

 

Can a tenant assert a WHA claim if a rental is substantially damaged by a casualty event?

Maybe. Obviously significant casualty events such as floods, fires, or other acts of God can make a rental unit uninhabitable. Unless the landlord plans on demolishing the property, the property will need to be repaired in order to make it habitable. The lease determines whether the landlord needs to make the repair, in response to a WHA claim asserted by the tenant, or whether the landlord can terminate the lease and repair on the landlord’s timeline. Specifically, the WHA allows a landlord to terminate a rental agreement as a result of a casualty or catastrophe to the dwelling unit without further liability to tenant. A landlord’s right to terminate a lease is controlled by lease language. If the lease grants the landlord the right to terminate the lease upon the occurrence of a casualty event, a landlord may terminate and not be subject to liability under the WHA. If the lease does not grant landlord the right to terminate, a landlord is subject to all of the provisions of the WHA. Thus, a good lease should always give landlord the right to terminate upon a casualty event.

 

Does the 2019 WHA give tenants greater rights to claim retaliation?

Yes. The 2019 WHA re-wrote the retaliation provisions of the 2008 WHA. The 2019 law eliminated fundamental protections for landlords against retaliation claims. As a result, the new law significantly strengthened a tenant’s ability to pursue retaliation claims, when a landlord allegedly takes adverse action against a tenant for asserting a WHA claim. Adverse action includes, but is not limited to increasing the rent, decreasing services, or non-renewing a tenant after the tenant has asserted a WHA claim.

Under the old law, a landlord could not be found liable for retaliation unless a tenant proved that a landlord breached the warranty of habitability. Under the old law, landlords were also protected by two critical rebuttable presumptions. First, in evictions brought for violation of leases a landlord’s decision was presumed to be non-retaliatory. Similarly, if a landlord had the right to increase rent, to decrease service, or to terminate the tenant’s tenancy at the end of any term of the rental agreement, the landlord’s exercising of any of these rights was presumed to be non-retaliatory. Regardless of the rights being exercised by landlords, tenants could not rebut these presumptions by evidence of timing alone.

Under the new law, tenants can now assert and prevail on a WHA retaliation claim even though the landlord never breached the WHA. This is a major change that will likely result in increased litigation either at the end of a lease or during collections. For example, upon receiving notice of non-renewal, tenants can now assert that a landlord is non-renewing in retaliation for the tenant asserting a warranty of habitability claim, even though the tenant previously lost or never proved the WHA claim. Additionally, tenants can and likely will assert a WHA retaliation claim in defense of collection actions, even though the tenant lost or never proved the underlying WHA claim.

The following hypothetical demonstrates how the elimination of the rebuttable presumptions has opened the door for tenants to assert WHA retaliation claims. In this hypothetical, tenant is on a twelve-month lease expiring on July 31. Tenant files a complaint with the health department in May alleging the unit to be uninhabitable. The health department finds no merit to tenant’s claim. Because landlord was already planning on non-renewing the tenant for disturbing neighbors, landlord serves tenant a non-renewal notice shortly after the health department inspection.

Tenant files a WHA retaliation claim alleging that the “timing” of landlord’s non-renewal notice (right after tenant complained to the health department) is strong evidence of landlord’s retaliatory intent. Under the old law, tenant’s claim would be completely barred because tenant did not have a valid WHA claim. Let’s assume for a minute that tenant’s claim wasn’t barred under the old law. Landlord’s non-renewal notice was still presumed to be non-retaliatory under the old law. Tenant carried the burden of proof to show that it was retaliatory, and the tenant needed to present evidence in addition to the timing of the notice to meet this burden. Now tenant can meet its burden just by the circumstantial timing evidence.

The law does require tenant’s underlying warranty of habitability complaint to be made in good faith. However, “good faith” is subjective in most instances, and therefore won’t be much of a bar to WHA retaliation claims. When tenants prevail on WHA retaliation claims, tenants may terminate their leases, recover an amount of not more than three months’ periodic rent, or three times the tenant’s actual damages, whichever is greater, plus reasonable attorney fees and costs. Because of the significant potential liability, landlords should take protective measures. Retaliation claims based on non-renewal will be the basis for the greatest number of WHA retaliation claims.

Accordingly, a landlords’ best and most effective defense is to have sound non-renewal policies. All landlords should already have non-renewal policies to protect against fair housing retaliation claims. The changes to the WHA in 2019 make non-renewal policies even more crucial.

Revisiting the hypothetical discussed illustrates the importance of non-renewal policies. Remember, landlord non-renewed for disturbing neighbors right after the health inspection, which demonstrated there was no WHA violation. In response, tenant brings a WHA retaliation claim. If part of landlord’s non-renewal policies is to always non-renew all tenants who receive three noise disturbance complaints, landlord now has strong evidence to rebut tenant’s allegation that landlord retaliated against the tenant for making the WHA complaint by non-renewing.

Without written policies, landlord can still argue that the non-renewal was not retaliatory because landlord non-renews all tenants who disturb other tenants. But without written policies, tenant can argue that the landlord is making this up. With written policies, landlord can successfully argue that the non-renewal didn’t and couldn’t have had anything to do with the WHA complaint. Landlord non-renews all tenants who receive three or more noise disturbance complaints. Landlord is not making this up because landlord has written policies to this effect. These policies were adopted years prior to the tenant’s complaint so the non-renewal had nothing to do with tenant’s WHA complaint. Landlord has non-renewed eighty-five tenants over the last three years for the same reason.

For an extended discussion of non-renewal policies see, April 2016 edition of Landlord News. This year the rental industry will face constant and increasing challenges from all of the new laws enacted in 2019, especially from the Warranty of Habitability Act. We have already seen an increase in WHA claims and anticipate that they will only continue to increase. As always, we are here and available to provide guidance and assistance so please don’t hesitate to reach out. To all of our great clients, we wish you a Happy New Year and hope 2020 is a productive and successful year for you.

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