Damages and Your Property – How To Deal With Legal Issues

After the recent extreme weather, we’ve heard from a large number of landlords that are dealing with frozen pipe issues. Whenever you’re dealing with frozen pipes or any other condition that may cause damage to a rental unit, there are several key things you should consider.

Property damage 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.

The vast majority of leases require the landlord to make repairs, and the WHA requires this as well. If the damage to a tenant’s unit makes 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. Whether a rental unit is habitable is a question of fact to be determined by the court.

The WHA act, adopted initially in 2008 and revised since that time, 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 largely 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 could find that substantial damage was dangerous to a tenant’s health or safety.

Landlords may want to terminate a tenant’s lease for any number of reasons relating to property damage. 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 property 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 termination situations aren’t governed by common law because most leases address damage to the premises scenarios. Specifically, a good lease gives the landlord the right to terminate the lease for damage to the premises (the BARHA Lease provides this language in the Casualty Clause). 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 to complete if the tenant continues 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.” 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 the landlord’s cost. If no unit is available and the landlord doesn’t want to risk losing under the WHA, 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 made timely. 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 them within a reasonable time.

A number of clients have asked us whether the tenant still has to pay rent after the property damage”¦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 damage 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 (the BARHA Lease does). Frequently, leases provide that if the premises are damaged but repairable, the tenant’s rent stops from the date the premises became uninhabitable to the date the tenant can reoccupy the premises. However, if the damage or casualty event is due to the tenant, the rent does not abate.

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 the 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 damage to the unit, even if the tenant continued to occupy it.

Overall, if the damage is not severe and you can repair it quickly, a tenant probably cannot terminate a lease, and rent does not abate.

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