Identifying and Eliminating Waiver Problems
Tenants violate leases. Managers enforce leases. If tenants always paid their rent on time and never caused problems, owners wouldn’t need management companies to manage their assets and enforce the rules. Managers have good intentions, but the reality is that not all lease violations are enforced, or enforced equally. Unfortunately, non-enforcement of lease violations leads to waiver scenarios. Non-enforcement of lease violations is complicated by the transitory nature of the multi-family industry. Communities are bought and sold, and as a result management comes and goes. Different owners and management companies have different rules and priorities for enforcing rules. In defending lawsuits, especially evictions, tenants often argue waiver based on past management either approving a violation, or failing to enforce the lease. If a community has waived its rights, costly litigation can result.
Two examples, both with bad potential consequences illustrate waiver problems. Our first example is about towing enforcement policies. A tenant has a non-operational vehicle. The plates are expired and the vehicle is not registered. Maintenance marks the car to be towed. Under the lease, management can tow the vehicle. The car gets towed. All procedures are followed, but the routine enforcement of a common policy (the towing of an unlicensed vehicle) turns into a major headache for the community. As it turns out, the unlicensed car had been parked in the community’s parking lot for a year. The community tagged the car multiple times, but the car was never towed. The onsite team had various discussions with the tenant. The tenant was in the process of restoring the car and promised to get it licensed. At one point the parking lot was resurfaced, and the car was towed and then put back in place. To make matters worse, when the car was finally towed off the property the tenant informs management that it was a rare classic car.
The second example is the promise to pay rent, which is the number one enforced lease clause. Every community has habitual late payers. The first of a month comes and goes, and the tenant fails to pay rent on time every month. Rent demands are posted. At some point, the tenant finally pays, either before being sent to us, or after being sent to us. Because an apartment community is almost always better off having a late paying tenant than an empty unit, many communities work with habitual late payers. Communities frequently stop working with late payers when the tenant causes some other problem (e.g. disturbs other tenants), or the onsite management has simply had enough of the late payments. The towing of the car and the refusal to accept rent when you have in the past are both examples of potentially legally binding waivers.
You don’t need to be an attorney to understand the legal concept of waiver. Most people understand the concept of waiver because of their own everyday experiences. Everyone has made conscious decisions to pass up opportunities. When you choose to pass up an opportunity, knowing that the decision is permanent, you have waived the opportunity. Similarly, the legal definition of waiver in Colorado is the intentional relinquishment of a known right. In the legal world, waiver can be based on conscious decisions similar to everyday non-legal decisions. Waiver doesn’t have to be based on words; waiver can also be based on conduct. Waiver can be based on both action and inaction. In landlord tenant world, waiver is frequently based upon failure to enforce lease rights, or community policies.
If the community has consistently not enforced a lease provision, does that mean the community can never enforce a lease provision? No. However, it does mean that you now have to put the tenant on notice that you are going to enforce the provision before you take enforcement action. You can quickly and easily put the tenant on notice by sending the tenant a letter regarding the issue. The letter should cite the applicable lease provision, and clearly state that going forward the lease provision will be enforced.
In the towing example, the community should have sent the tenant the following letter. “You are and have been in violation of your lease by having an unlicensed car parked on community property. Pursuant to your lease, we have the right to tow this car from the community at your expense. Regardless of what has been discussed in the past and what action has or has not been taken, we are putting you on notice that we intend to and will enforce this provision going forward. As a courtesy to you, we are giving you seven days to address the issue, and to otherwise come into compliance with your lease. If you are not in compliance with your lease at that time, we will enforce the lease including, but not limited to, having this car towed from the community property.”
Do you need to be concerned about waiver scenarios if your lease has a no-waiver clause? Yes. Almost every lease has a no-waiver or “anti-waiver” clause. The “no-waiver” or “anti-waiver” clause reads “no waiver of any term, provision or condition of this lease, or failure to insist upon strict compliance with the terms of this lease in any one or more instances shall be a further or continuing waiver of any such term, provision or condition.” If we have a no-waiver clause, then why do we need to be worried about waiving our rights? After all, it says right there in the lease that we can’t waive our rights. The problem is simple. Colorado case law is clear that every lease clause can be waived, including and especially, a no-waiver clause. A no-waiver clause is only going go hold up in court if the conduct establishing the waiver (the failure to enforce the lease) was a one-time event over a short period of time. If you have repeatedly failed to enforce a lease clause over a substantial period of time and there is evidence that the tenant has come to rely upon that non-enforcement (waiver), a no-waiver clause isn’t going to hold up because the court is likely to find that you have waived it.
Failure to be familiar with waiver-related concepts could lead to serious problems. If you’re not familiar with the concept of waiver or don’t know that a no-waiver clause can be waived, you’re likely to ignore critical history involving a tenant violation. Since inaction in the past doesn’t factor into the decision making process, the wrong decision is made based on the lease language alone. “We have the undisputed right to tow the car, so tow the car.” The fact that the car was tagged multiple times over an extended period, but no action was taken, is never considered. If a court finds that you waived your rights and that the tenant relied on your inaction, you are now legally exposed. The routine towing of a car now turns into an expensive lawsuit, and a possible large damage verdict. Similarly, if you accept rent month after month well into the month or the court process, and then suddenly refuse to allow a tenant to pay, the tenant can argue that you waived your rights and have to accept the rent. A winning routine eviction over non-payment turns into a loss.
Almost every community has waiver problems. Fortunately, waiver problems can be identified and eliminated by asking the right questions. How long has the resident lived there? How long has the problem been going on? Has the same onsite management team been in place for the entire duration of the problem? Is there any downside to cleaning the slate, and starting with a fresh record? If lease enforcement action is commenced, could the tenant argue waiver? A long tenancy combined with a problem that has been going on for a long time is a red flag that you have a potential waiver issue.
When you take over a property and become aware of an ongoing non-compliance issue, you should carefully evaluate whether a waiver problem exists. Specifically, do you need a member of the former onsite management team to testify? If you do need testimony from former management, the case may be doomed from the start. Without the former management testifying, the tenant is likely to defend based on waiver. The tenant will testify that the community approved the violation, or knew about it and did nothing. Anytime management changes and the former management either won’t testify or isn’t around to testify, the community is vulnerable to “the former management said it was OK” argument. Because waiver results from lack of enforcement to minor issues over long periods of time, usually there should be no urgency to take immediate enforcement action until you have eliminated the tenant’s waiver argument. Thus, if you have waiver problem, you should always take the small amount of extra time to put the tenant on proper notice that continued violations will not be tolerated.
Waiver issues are common. Onsite teams should be trained to identify waiver problems, and know how to reset the stage to eliminate them. When taking over a community, the onsite team needs to be particularly conscious of potential waiver issues, and avoid the “there’s a new sheriff in town” mentality. Instead of automatically concluding the file documentation is sufficient to enforce the lease, the new onsite team should ask key questions. Has inaction resulted in a waiver problem? Can the tenant argue that the former management approved the violation? Is it more prudent to put the tenant on notice that going forward the lease will be enforced? Finally, onsite mangers need to know that they can’t rely on a no-waiver clause to carry the day in court if the problem has been ignored for a substantial amount of time.View Resource »