PROPERTY A SPRING 2017Information Memo # 3

Chapter Two: Landlord-Tenant Law (Preliminary Version (3/2/17))

CURRENT TABLE OF CONTENTS(A) List of Relevant Old Exam Questions (IM3-1)

(B) Coverage Overview (IM3-1 IM3-2)

(C) DQs 2.01-2.06: Professor’s Comments & Suggested Answers (IM3-2 IM3-6)

(D) N.Y. Roommate Law: Text & Possible Relevance (IM3-6 IM3-8)

(E) Review Problems: Comments & Best Answers (IM3-8 3-43)

(F) Tempest at the Teapot: Comments & Best Answers (IM3-43)

(A) List of Relevant Old Exam QuestionsTenant Selection: 3N 3V

Habitability & Eviction: 3G 2014-Q3 2016-Q4Both: 1H 1P 1T 4G 4U 4AB

(AB Coverage Overview * = Statutes that Could Appear on Test

A. General Information & Interests of the Parties1. Some Themes in Landlord-Tenant Law 2. The Process of Eviction; Landlord’s Remedies Generally & in Florida

a. * Fl.Stat. §83.56(2) & (3)B. Tenant Selection

1. Statutory Anti-Discrimination Law(I won’t test specific statutory language)a. General Operation of Federal & State Statutes (See Write-Up of DQ2.01-2.06 below)b. Protected Characteristics under the Federal Statutesc. Proof of Discriminatory Intent: Sorenson & Note on Evidence

2. The Right to Transfer & Reasonableness Requirementsa. Reasonableness: Implied Term & Definition: Funkb. Waivability Varies by State

3. * N.Y. Roommate Law (See Part (D) in this Memo)C. Habitability & Related Issues

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1. Claims Arising Out of the Right to Quiet Enjoyment a. Partial Actual Eviction: Barashb. Partial and Complete Constructive Eviction: Barash & Gurian c. Landlord Responsibility for 3d Party Acts

2. Implied Warranty of Habitability: Javins a. Minimum Housing Standards: Breach, Notice, Remedies, Waivability Variesb. * Fl.Stat. §§83.51; 83.52; 83.54; 83.56(1); 83.60c. * Miami-Dade County Housing Code §§17-23(1); 17-27(7) d. Possible Extensions Beyond Low Rent Residences

3. Tenant Remedies for Undesirable Neighbors: Knudsen

(C) DQs 2.01-2.06 (S36-37): Professor’s Comments & Suggested Answers

(1) Protected Characteristics

(a) Generally: Almost every anti-discrimination statute includes a list of protected characteristics. For every statute I know of except the California provision described on P85, the list provides the exclusive set of grounds for claims under the statute. I expect you to know the characteristics protected by the FHA and the Civil Rights Act of 1866. You also need to be aware (especially for lawyering problems, that state and local anti-discrimination provisions often protect additional characteristics, most frequently sexual orientation and marital status (often defined as being married, single, divorced, widowed or separated), but sometimes also source of income (if legal), political affiliation and gender identity.

(b) Coverage of Civil Rights Act of 1866 (DQ2.01): I will lay out here what the U.S. Supreme Court says this statute means and leave for you the question of whether it is a “reasonable interpretation” of the language. Based on the legislative history, the Court reads the statute as addressing all forms of “race discrimination” defined broadly to include ancestry and ethnic origin. (The 1866 Congress referred to, e.g., Mexican, Chinese, and German “races.”) As a result, the court has held explicitly that the statute prohibits discrimination against people because they are “white” and because they are “Jewish” (which in the U.S. is typically viewed as ethnicity as well as religion). Lower court cases include discrimination against “Latinos” or “Hispanics” and Sorenson and other cases include discrimination based on the race of associates, visitors, friends or family members.

(c) Who is Protected by §§3604(a) and (f)(1) of the FHA? (DQ2.02):

Directly:

o The prohibitions of discrimination on the basis of “race, color, religion, sex, … or national origin” protect everyone, since everyone has each of these (atheism and agnosticism generally are treated as forms of religion).

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o The “familial status” and “handicap” only address claims by people meeting those definitions. In other words, the statute allows housing providers to favor those living with children over those who aren’t and to favor people with disabilities over the fully ab;e-bodied.

Indirectly: My best reading of the statute and caselaw is that everybody is indirectly protected in two ways:

o The statute prohibits decisions based on the mistaken belief you have a protected characteristic. 3602((h)(3) does this explicitly for “handicap.”

o The statute prohibits decisions based on your associations with someone of a protected characteristic. 3604(f)(1)(c) and (2)(c) do this explicitly for “handicap.” Sorenson and other cases do it explicitly for race.

(d) “Familial Status” (DQ2.03) means one or more adults residing with one or more dependent minor children or planning to do so. It prevents housing providers from excluding people with children or who are pregnant or planning adoption or fosterage. Note that it does not protect exclusion based on marital status or other relationships between the adults in the household.

Why might this be a serious problem? Landlords often believe children cause more noise and damage than ault tenants. Many childless adults prefer to live without children underfoot. Probably as a result, the legislative history of the 1988 Amendments to the FHA (which added this category) includes evidence of widespread exclusion of families with children, often through “adults only” rules in apartment complexes, meaning that families with children and moderate incomes often had trouble finding affordable rental housing.

Why is there a special exception for this type of discrimination in §3607(b)? Housing designed for people 55 and over is exempt from claims of “familial status” discrimination. I call that the “been there, done that” exemption, because the idea seems to be that people who have finished raising thjeir own children should not have to deal with other people’s kids ifthey choose not to. The exemption may also be evidence of the great lobbying power of the AARP. Sadly, the exception can lead to tragedies where a set of parents die, but surviving minor children are not allowed to move in with their grandparents who live in exempted housing.

(e) Sex Discrimination in Housing (DQ2.04): In employment, near-total exclusion of women from certain professions was common before serious enforcement of federal anti-discrimination law (Title VII). By contrast, nobody believes that the FHA prevents all-male or all-female complexes or neighborhoods. The most common forms of sex discrimination in housing seem to be:

Discrimination against women in the provision of mortgages (covered by §3605, which you don’t have)

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Sexual harassment by male landlords of female tenants (usually women living alone or single mothers). This is often considered discrimination in terms and privileges under (usually women living alone or single mothers). This is often considered discrimination in terms and privileges under §3604(b). It is particular difficult for the women because the landlord has a key tyo the apartment (many reported incidents involve the landlord entering the apartment while the woman is in the shower).

Occasional rental housing discrimination against men (usually college aged).

Note that although nothing in 3604(c) draws this line, HUD will not prosecute sex-based advertising when the advertiser seeks a roommate and some recent caselaw suggests that privacy interests would make that kind of advertising lawful.

(2) Conduct Addressed by the Statutes

(a) Generally: Anti-discrimination statutes generally delineate types of conduct that are prohibited if done “because of” one of the listed protected characteristics. The Civil Rights Act of 1866 uses different language but is read to operate in a similar way, prohibiting both governments and private parties from denying people access to the listed transactions on the basis of race (as defined above). I will only test you on the operation of anti-discrimination statutes in the context of refusal to enter leases at all or on equal terms (residential leases covered by the FHA and both residential and commercial leases covered by the Civil Right Act of 1866). On a lawyering question, you might also check state and local provisions, which are likely to also address equal access to leases, but might have different protected classes or exemptions.

(b) Covered Race-Based Conduct: §1982 v. §3604(a)-(d) (DQ2.05)

(i) Race-Based Conduct Covered by §1982 but not the FHA

Transactions involving personal property (i.e., not land or attached buildings)

Transactions involving non-residential real property (commercial, agricultural, industrial, etc.)

Transactions that fall under the FHA’s exceptions for single-family homes and rooming houses (see below).

The FHA prohibits a list of specific conduct, but §1982 instead grants or ensures open-ended rights “… to inherit, purchase, lease, sell, hold, and convey real and personal property.” Thus, the more general language of §1982 may leave room for a court to hold that it covers other instances of conduct not listed specifically in the FHA.

(ii) Race-Based Conduct Covered by the FHA but not §1982:

The FHA specifically addresses advertising (3604(c)) and lying about the availability of housing (3604(d)). Not clear if §1982 does either.

§1982 is limited to claims by U.S. citizens. The FHA is not.

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(c) Blockbusting Under §3604(e) (DQ2.06(a)): Prevents real estate professionals from trying to increase their sales by suggesting to residents in a particular area that they should sell theirt houses because the [usually racial] demographics of the neighborhood are changing. In the 1950s and 1960s in particular, when the first African-American families moved in to all-white suburbs, real estate agents would widely advertise in ways that played on racial fears of white residents. As a result, many neighborhoods rapidly went from all white to mostly African-American, re-establishing segregation while providing lots of 6% commissions to the real estate industry.

(d) Reasonable Modifications Under §3604(f)(3)(A) (DQ2.06(b)): Sometimes tenants with a disability will find it difficult to utilize a rental property without making physical modifications to the premises like installing ramps, grab bars for the toilet or bath, changing door knobs or lowering light switches. This provision allows these tenants to make this type of modification at their own expense (over the landlord’s objection) where “reasonable.” Regulations interpreting the provision allow the landlord to insist that, at the end of the tenancy, the tenant undo modifications that would be undesirable to future tenants and that the tenant put money into escrow to cover the cost of the necessary changes.

(3) Exemptions:

(a) Generally: Most anti-discrimination statutes (except the Civil Rights Act of 1866) contain some exemptions/exceptions, often including those addressing small players or religious organizations. I will not ask you to parse the language of the FHA exemptions, but might tell you when they do or do not apply to a problem. For lawyering questions, you should be aware of the rough outline of the exemptions described below and of the possibility that local or state statutes will have different exemptions but might also cover conduct exempted by the FHA. Finally, you need to understand that exemptions usually (bytheir terms) address only some or all claims made under the same statutory scheme. Thus, the FHA exemptions to not create exceptions to the §1982 or to state statutes, the FHA smallholders exemptions do not reach advertising claims under 3604(c), and the exemption for housing for older persons only applies to family status claims.

(b) Smallholders Exemptions Under §3603(b): Both these provisions exempt relatively small players who are putting relatively few units on the market. These provisions have two common justifications: (i) that smaller players have greater personal and privacy interests in choosing those with whom they do business than those managing/selling more units; and (ii) eliminating the social costs of discrimination regarding only a few units may not be worth the preventative costs of regulation or litigation. Significantly, because these exemptions only limit the reach of the FHA itself, discrimination on the basis of race in these transactions is still prohibited by the Civil Rights Act of 1866.

(i) §3603(b)(2) (DQ2.06(c)): Exempts from §3604 (except for advertising limits) rentals of rooms or units in private homes or boarding houses where the owner occupies one unit and rents out not more than three others. Known as the “Mrs. Murphy” exception after a stereotypical Irish widow running a boarding house to make ends meet, the intimate setting and small economic impact make the situations it addresses strong cases for recognizing strong

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personal and privacy rights of the owners.

(ii) §3603(b)(1) (DQ2.06(e)): Exempts sales or rentals of single-family houses (SFHs) if the owner (A) has no more than three SFHs on the market; (B) does not use a professional real estate broker or agent; and (C) does not employ discriminatory advertising. Where the transactions in question are rentals, this operates similarly to (b)(2) except the three exempted rental units are all in separate buildings. Where the transactions in question are sales, it is much less clear why a seller has any strong interests in who ends up in the house. It is possible that Congress worried about interfering with continuing relations between the seller and the neighbors. In any event, the limits on the use of brokers and advertising minimize the ripple effects of allowing discrimination in the primary transaction.

(c) Religious Organizations/Private Clubs Under §3607 (a) (DQ2.06(d))

(i) Religious Organizations: Allows religious organizations and non-profits associated with them to favor members of the particular religion (as long as the religion itself is not limited by race, color or national origin). This allows, e.g.,

Religious orders like monastaries or convents to limit housing to members of the order;

A local house of worship to make housing available only to its clergy;

A religiously affiliated university to favor members of its religion in providing housing;

A religiouslyaffiliated nursing home to limit access to members of its religion

(ii) Private Clubs: Designed to coordinate with the private club exception to the federal public accommodations anti-discrimination statute (P85), it allows private clubs to charge members for places to stay overnight without triggering anti-discrimination claims.

(D) N.Y. Roommate Law: Text & Possible Relevance

(1) Text: NY Real Property Law 235-f NY “ROOMMATE LAW”)(1983)

1.As used in this section, the terms:

(a) “Tenant” means a person occupying or entitled to occupy a residential rental premises who is … a party to the lease or rental agreement for such premises ….

(b) “Occupant” means a person, other than a tenant or a member of a tenant's immediate family, occupying a premises with the consent of the tenant or tenants.

2. It shall be unlawful for a landlord to restrict occupancy of residential premises, by express lease terms or otherwise, to a tenant or tenants or to such tenants and immediate family.  Any such restriction in a lease or rental agreement entered into or

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renewed before or after the effective date of this section shall be unenforceable as against public policy.

3. Any lease or rental agreement for residential premises entered into by one tenant shall be construed to permit occupancy by the tenant, immediate family of the tenant, one additional occupant, and dependent children of the occupant provided that the tenant or the tenant's spouse occupies the premises as his primary residence.

4. Any lease or rental agreement for residential premises entered into by two or more tenants shall be construed to permit occupancy by tenants, immediate family of tenants, occupants and dependent children of occupants;  provided that the total number of tenants and occupants, excluding occupants' dependent children, does not exceed the number of tenants specified in the current lease or rental agreement, and that at least one tenant or a tenants'  [FN3] spouse occupies the premises as his primary residence.

5. The tenant shall inform the landlord of the name of any occupant within thirty days following the commencement of occupancy by such person or within thirty days following a request by the landlord.

6. No occupant nor occupant's dependent child shall, without express written permission of the landlord, acquire any right to continued occupancy in the event that the tenant vacates the premises or acquire any other rights of tenancy;  provided that nothing in this section shall be construed to reduce or impair any right or remedy otherwise available to any person residing in any housing accommodation on the effective date of this section which accrued prior to such date.

7. Any provision of a lease or rental agreement purporting to waive a provision of this section is null and void.

8. Nothing in this section shall be construed as invalidating or impairing the operation of, or the right of a landlord to restrict occupancy in order to comply with federal, state or local laws, regulations, ordinances or codes.

9. Any person aggrieved by a violation of this section may maintain an action in any court of competent jurisdiction for:

(a) an injunction to enjoin and restrain such unlawful practice;

(b) actual damages sustained as a result of such unlawful practice;  and

(c) court costs.

(2) Possible Relevance in Course: NY “ROOMMATE LAW”

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• As with other significant statutes we cover, you are responsible for recognizing and understanding it. You should be clear that it appears to give the landlord no authority to screen exclude roommates chosen by existing tenants unless their presense violates occupancy restrictions or other generally applicable laws. E-mail me if Qs.

• As far as I know, no other state has adopted similar rules via statute or caselaw.

• Can view as very significant limit on landlord’s right to exclude that nicely ties together ideas from across the first two chapters:

• Protecting ordinary relationships of tenants (cf. Shack)

• Protecting strong public policy in tenants’ ability to afford housing (cf. Schmid/JMB protecting interest in adequate effective free speech)

• Huge limit on landlord’s normal right to select /evict tenants:

• See Review Problem 2B discussing possibility of eviction for unauthorized roommate under Florida Statute. Contains relevant policy concerns on both sides in comments/model answers below

• See Funk limiting landlord’s right to deny transfers but still allowing screening & exclusion for (at least) ordinary business reasons.

• Creates effects on other tenants that might, as in Knudsen, be addressed working with quiet enjoyment and IWH approaches.

• Useful Review Exercise: Imagine a state Supreme Court (like NJ) considering whether to adopt a common law version of the NY Roommate Act. What arguments could you make (pr and con) from the materials in Chapters 1 and 2?

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(E) Review Problems: Comments & Best Answers

(1) Review Problem 2A (Tim’s Party & §83.56(2)) (S31-32)I have two sets of student answers to this problem. The first set responds to the seven individual questions I laid out for you and was done as a group project that was turned in during a past semester. The second set responded just to the fact pattern and was done on an actual exam.

(a) Mid-Semester Group Projects: All Seven QuestionsQ1: Student Answer #1: Tim's actions are more like those in 83.56(2)(a) that do not require the landlord to give an opportunity to cure because such actions constitute immediate damage. For example, the Florida Landlord-Tenant Act states that destruction, damage, or misuse of the landlord's or other tenants' property by a tenant's intentional act does not require the landlord to give the tenant an opportunity to cure. This may be because such acts cause an immediate damage. It may be argued that Tim's party constituted an intentional misuse of the landlord's property and the tenants' property by allowing the noise to get loud enough to reach the other tenants' property and disturb them. The landlord could further argue that Tim's actions could not be cured because the damage of disturbing the other tenants had already been done. Conversely, actions that require the landlord to give an opportunity to cure, such as having an unauthorized pet, parking in an unauthorized manner, or failing to keep the premises clean, are such that

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if violated one time, no damage to the property or to the tenant's property has been done. These actions are curable. They can be fixed without causing damage to the property. However, a loud party, even if it happens only once, causes irreversible damage that cannot be fixed merely by preventing it from happening again.Q1: Student Answer #2: The examples given in 83.56(2)(a) are one-time acts that cause disruption and/or damage to other tenants' property regardless if they are corrected. Tim's party caused several tenants to call the police because of the noise level. The party's noise level caused a one-time disruption to other tenants. Violations described under 83.56(2)(b) are acts that at their first occurrence may not immediately cause a disruption and/or damage to another's property. These violations, if corrected may not even cause a disturbance to other tenants. Tim's party, even if it went on the rest of the evening without disturbing the neighbors was at first disruptive and falls under the parameters set by 83.56(2)(a).Q2: Student Answer #1: There are quite apparent differences between the examples of noncompliance in 83.56(a) and 83.56(b). The examples in (a) are of a more grievous nature than those listed in (b). Tim held a party that disturbed his neighbors but was brought under control by the police. In the fact pattern, Tim did not cause any intentional damage to the property, it did not continue to disturb the neighbors, and it was the first time Tim violated the lease, so there seems to be no continuous unreasonable disturbance. Further, Tim's party can be paralleled with the violations listed in (b) in that they are not violations that are committed recklessly or with intent to cause harm to the property, therefore he should not be subjected to immediate eviction as per 83.56(a).Q2: Student Answer #2: If an act, not in compliance with the statute, is of the nature that it can easily or inexpensively be remedied by the tenant, and is only slightly annoying to other tenants then the tenant should be given the opportunity to cure the noncompliance prior to having their rental agreement terminated. Tim's noncompliance was that he permitted unauthorized guests on the property in the sense that drunk and disorderly guests are considered "unauthorized". Although the party may have been a disturbance to the neighbors, there were no additional complaints made after the police had been there, therefore his conduct cannot be regarded as subsequent or continuous. Tim's noncompliance can easily be cured he will refrain from having parties. On these grounds, and in light of the fact that this is Tim's very first violation, Linda should not be able to terminate his rental agreement immediately, but instead should give him the opportunity to cure the noncompliance.Q3: Student Answer #1: Linda can argue that as a matter of policy she should be able to evict Tim without an opportunity to cure because the nature of Tim's party and the actions of his guests placed her in a vulnerable position. According to Trentacost, Linda has an implied duty to provide a reasonable measure of security for her tenants. This implied duty to provide security exists independently of her knowledge of any risks. Therefore, Linda could have been held liable for any security violations against the other tenants by Tim's drunk and disorderly guests. Additionally, the drunk and disorderly behavior of Tim's guests could have led them to injure themselves possibly leaving Linda open to tort liabilities. Finally, some tenants may have rented in this particular building because it was quite and safe; therefore, Tim's party created a nuisance that violated the purpose of the space for which Linda could have been held liable.Q3: Student Answer #2: In this situation, the landlord should be able to evict immediately because if she were to allow a second chance as a matter of policy, that would convey a message to all other tenants that they were permitted to throw one large, wild party. They would know that they could have one party without suffering the consequences of eviction. The landlord does not want to have to deal with a lot of big, out of hand parties on her complex, especially when some of those parties might inevitably result in police intervention, as was the case with the party Tim threw. In addition, parties such as these always carry the risk of people getting hurt or property getting damaged, neither of which the landlord wants to be required to deal with due to a "one-party" policy rule. Therefore, in order to let tenants know that this type of behavior will not be tolerated, the landlord should not, as a matter of policy, allow Tim an opportunity to cure the noncompliance.

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Q4: Student Answer #1: As a matter of policy, Tim's conduct is not sufficient to allow the landlord to evict him immediately because the violation was Tim's first offense and it was not of a destructive or permanent nature. If a tenant is permitted to be thrown out because of two people who become out of control at a party, then it seems there would be no limit to the reasons a landlord may have to throw a tenant out. A line must be drawn somewhere. If Tim is thrown out, then what will happen next? An angry X comes over and creates a scene, which is out of the control of the tenant, but since a neighbor complains there is justification for eviction? Or how about the tenant is baby-sitting two rowdy brothers who start wrestling and bump against an adjoining wall of a neighbor who complains. Should this also be ground for an eviction? Perhaps if these disturbances were continual they would justify eviction. However, as a first offense, if is clear that such offenses are curable because there are times when a situation becomes out of control before a person has time to make appropriate adjustments. Therefore, a line must be drawn in order to prohibit landlords from being able to evict for any reason at all.Q4: Student Answer #2: As a matter of policy, the landlord should not be permitted to evict a tenant the first time something like this happens because that would result in too much power in the hands of the landlord. For example, without knowing exactly what would offend a new landlord, a tenant might without knowledge do something that could cause him to be evicted. This would not be a good policy because the tenant would be at the mercy of the landlord's discretion at any time. The tenant needs an opportunity to know what the landlord considers acceptable and unacceptable conduct in order for the tenant to understand his limits and/or boundaries as far as guests and parties are concerned. In addition, a policy such as this could also result in a significant number of tenants being evicted due to an accident or mistake that might occur at no fault to the tenant even though it occurred at his or her apartment. Therefore, because there exists too much opportunity for innocent misunderstanding, the tenant should not, as a matter of policy, be evicted the first time this type of conduct occurs.

Q5: Student Answer #1: In question two, we argue that Tim's party does not fall under the violations listed in 83.56(2)(a) because the disturbance was not continuously unreasonable, reckless, or with an intent to harm the property. From a policy standpoint, it seems unreasonable to allow the landlord to evict for a violation that was so easily curable and not recurrent. Because the disturbance was easily curable, did not harm the property, and was not recurrent, the party is not like the violations in 83.56(2)(as). Arguing for Linda is more difficult. In question three, we pointed out that the party was at once disruptful, coupled with a strict interpretation of the statute may lead to Tim's eviction. Practically, eviction seems like quite a jump as Tim never violated the lease before and the party's disturbance was immediately stopped. The policy argument for Linda is partially dependent on what type of apartment complex she is running. It is unlikely in a college town with usually a tight housing market that student residents or any other resident would more out on the basis of a single disturbance. Overall, Linda's push for eviction is extreme because the disturbance created no damage, was not repetitive, and was easily curable.Q5: Student Answer #2: Linda seems to have a stronger argument in this case because of all the responsibilities and obligations that flow from the landlord-tenant relationship. Linda carries a duty to insure the safety of all tenants, as well as guarantee them peaceful enjoyment of their leased premises under the implied warranty of habitability. A party is an example of noncompliance that could potentially pose major damages to the property, to the tenants, and to guests, all of which the landlord could be held responsible for. One consequence of holding a landlord liable for so many things is that landlord must take extra precautionary measures to protect themselves. Linda is simply doing what she must to ensure to the best of her ability that she will not be sued.Q6: Student Answer #1: If Linda found that there was damage to some of the common areas of the apartment complex or damage in Tim's apartment that occurred as a result of the party this would strengthen her current arguments for immediate eviction. According to section 83.56(2)(a), if there was some damage or destruction to the landlord's property, caused by a tenant's actions, this would fall under

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the reasons listed by this section of the statute as grounds for immediate eviction. If there was damage to the landlord's property this fact would not only lend strong support to the argument that the disturbance was unreasonable, but damage alone would be grounds for immediate eviction.Q6: Student Answer #2: A fact that would help Linda's legal position would be if Tim had furnished alcohol to minors. Considering that the party was attended by college age students it could be easily assumed that there was underage drinking that took place on the premises. Linda could show that Tim not only acted in an unreasonable manner but also broke the law by allowing underage persons to consume alcoholic beverages upon his premises.Q7: Student Answer #1: If it could be shown that Tim's party was not disturbing the neighbors until two of his friends showed up drunk, that he asked them to leave, that the friends started creating a disturbance to which the neighbors called the police and the disturbance was abated after the arrest of the two drunk friends, then his legal position would be strengthened. In this scenario Tim is attempting to control the situation and is being sensitive to the rights of the neighbors, but causes beyond his control are responsible for the disturbance. If this fact could be established then it would seem completely unreasonable for the Linda to punish Tim.Q7: Student Answer #2: An additional fact that would be helpful to Tim would be that the apartment building was located between two fraternity houses near the UM campus. It can be assumed that an apartment building adjacent to fraternity houses would have to tolerate a higher noise level as opposed to one located in a strictly residential neighborhood. Tim's use of his property during the night of his party would not be inconsistent with the use of the surrounding property (the frat houses). Tim's legal position would be facilitated because his actions were clearly within the acceptable norm of that particular neighborhood.

(b) Answers to Fact Pattern as Short Final Exam Question Student Answer #1: The landlord will argue that the noncompliance was of a nature that he should not be given an opportunity to cure it under 83.56(2)(a). He would argue that this party was a destruction of the property or a misuse by an intentional act(1) destruction: The landlord could say any loud party does damage to the property and should not be given an opportunity to cure. Tenant's response: There is no evidence of destruction. The states use of this word is meant to cover defacement or actual physical damage.(2) misuse by intentional act: The landlord will argue that this is a misuse of the property. People are supposed to live there, not have loud parties and it was clearly intentional--who could have such a loud party unless it were on purpose. Tenant's response: It's my property. Having parties there is a normal use of property. Or, I didn't do it on purpose. They just showed up--it got out of hand, it wasn't intentional.The tenant would argue that this was a one-time event that he should be given a chance to cure. He would equate it more with permitting unauthorized guests or failing to keep the premises clean and sanitary-events, like this, that can be easily fixed and if behavior changes, will never happen again.Given property law's general respect for the rights of people in possession of property--the tenant has psychic ties to property, he probably put some effort into fixing up the apartment suit his needs--I expect they would favor the tent in this matter. The landlord may not terminate the lease under 83.56(2).

Student Answer #2: The landlord would have to argue that the party was similar to the listed items of noncompliance in (a), which do not require him to give warning. First, she could argue that a loud, all-hours party in a residential neighborhood is misuse of the property. Certainly, it is an intentional act of T, or at least a continued unreasonable disturbance ("unreasonable" evidenced by arrests and complaints; "continued" because lasted long enough for cops to come.)

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Second, the party is not like the list in (b), which requires giving an opportunity to cure. The party is unlike parking on a lawn, or keeping the place dirty, in that others are not harmed (as was the case with the party). Also, since it would be difficult to "correct" the damage, there is no reason to give T the opportunity. Therefore, all she has to do is give T 7 days notice to vacate.T probably has a better argument. He would counter the landlord's first argument by examining the statutory language "misuse" is in context of permanent physical damage, as shown by misuse following "destruction" and "damage." A party, as not physically damaging anything, does not fit into this category. Further, although the statute does not limit the list to those three possibilities, it is reasonable to assume that a similar limit on only physical harms applies, based on the examples given.Next, since the harm from the party wasn't (2) intentional (he wasn't arrested for the problem--it was his friends) or (2) continued condition (only happened once), there doesn't seem to be a good reason for the party to be classified under sec. (a).On the other hand, there is good evidence that T's party falls under (b), as a temporary condition like a messy house. It can be fixed (by not doing it again). So he would have the chance to "cure" the problem. So the landlord shouldn't be able to evict immediately.

(2) Review Problem 2B (Additional Resident & 83.56(2)) (S32) (a) Professor's Comments: We did two similar problems in class i n 2 0 1 3 using this statute and I provided a structured analysis (literal/comparative/policy) to use to decide whether to apply (2)(a) or (2)(b) to particular conduct. However, many exam answers read as though students had never seen the statute before and very few students used my suggested structure. Instead, a lot of students made arguments that either misread the statute or were not really responsive to the Q.

(i) Doing the “Challenge": The problem asks what remedy is available under §83.56(2), which effectively is asking you to decide which part of the statute applies. As you should expect, I designed the problem so that there were serious arguments both ways. The conduct here, unauthorized residence, is similar to, but arguably more serious than the "unauthorized guest" explicitly listed in (b), but the harm is less clear than the examples explicitly listed in (a). Thus, your "challenge" was to muster as many r e l e v a n t arguments as you could for both interpretations of the statute and, ideally, to discuss which set of arguments was stronger. Unfortunately, I saw a lot of arguments that did not really address whether unauthorized residence falls under (a) or (b), classic examples of failing to "do the challenge."

A. T Did Not Violate the Lease Provision: Many students spent a lot of time on this, which was problematic for two reasons:

i. The problem says LL "found out" that the boyfriend (BF) was violating the lease from another tenant, not merely that other tenant claimed that it was true. T his wording suggests that the info in question is true.

ii. More importantly, if T hasn't violated the lease provision, the question makes no sense. Even the right to cure only applies to violations of the lease or the statute; absent a violation, the 83.56(2) is simply irrelevant. Thus, even if you disagree with me about the significance of "found out," you should briefly have

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noted that LL needed to confirm that the lease provision was violated, then gone on to address what would happen if it was.

B. The Lease Provision is Not "Material" or Not "Reasonable": The quoted terms apply to both (a) and (b), so again, these are arguments that the statute does not apply at all. Plus (in light of the harms discussed below) good luck convincing a court that a landlord requiring an application for a permanent resident is unreasonable or that failure to apply is immaterial.

C. T/BF Committed a Separate Offense that Literally Violates (a) or (b). This information does not help answer the question of whether unauthorized residence falls under (a) or (b). Of course, LL can evict right away if BF has intentionally damaged someone's property or if LL already sent a right to cure letter when T tried the same thing with her last BF, but that doesn't tell us how to treat unauthorized residence by itself. Similarly, saying that BF might have been doing unauthorized parking or making the premises unsanitary doesn't help much. Those offenses by themselves fall under (b) but that doesn't tell us what to do with this offense.(ii) Relevant Harms: The seriousness of the violation depends in part on the harms

it might cause to the landlord. I think L's strongest claim is that the application process allows her to do a background check on her prospective residents. L obviously has good reason to exclude BF if he has a criminal record or caused damage at his prior residences. (See Second Model) If he has serious financial problems, he may drain money away from T and make it hard for her to meet her rent payments. In addition, if there is a fee for applying or for the second resident, than you could view this behavior as "theft" of the fee.

Several students suggested that the eviction for deliberately violating the lease protects L because other tenants will know that they can't get away with similar violations. However, in this respect at least, this violation seems no different than keeping an unauthorized pet in the apartment. You'd need to explain why there might be some greater threat to L from hiding BF than from hiding Fido. (See 1st & 2d Models).

Some students suggested that there'd be more wear and tear on the apartment, which is true. However, if L normally allows two people to live in the apartment, then this is not harm stemming from BF's failure to apply. Some students suggested that the apartment might only be big enough for one person or the building might be limited to women. Both of these are unlikely but, if true, probably would provide independent reasons to evict T.

(iii) Suggested Analysis: Literal, Comparative, Policy A. Literal Arguments: Helpful to begin by checking to see if the violation is literally covered by any of the language of the statute. If it is not, you then will move on to comparative and policy arguments

1. 83.56(2)(a): Unauthorized residence by itself does not constitute "destruction" or "damage." The first sentence of the provision makes clear that a "subsequent or continued" violation only occurs after the landlord has already given written notice of a similar problem, and there's no evidence of that here. Thus, the statutory terms in (a) most worthy of discussion are:

a. "misuse": Many students plausibly suggested that allowing an unauthorized person to reside in your apartment is "misuse of the landlord's ... property...."

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However, as we discussed in class, calling any violation of lease or statute "misuse" would destroy the distinction between (a) and (b). There was room for a fairly extended discussion about what the legislature might have meant by "misuse," including comparing it to its neighbors, "destruction [and] damage" and discussing the seriousness of the harms flowing from this violation.b. "by intentional act": I assume the statute uses this phrase to distinguish between damage caused intentionally (e.g., graffiti) and damage caused accidentally (e.g., backing your car over a bicycle you didn't know was there). You could plausibly argue that only intentional violations can result in immediate evictions. Your answers showed a wide range of opinions as to whose intent might matter and how.

Note that normally in a criminal or tort context, "intentional" means that you intend to do the act in question, not that you intend to break the law or that you know the conduct is unlawful. The cliche, "ignorance of the law is no excuse" usually is true. The BF is probably staying with T at her invitation, so the unauthorized residence would be intentional in this sense. Indeed, the only situation in which T could unambiguously claim that her BF's residence is unintentional on her part is if she was unaware he was living in the apt (e.g., if she were away for an extended period and didn't know he was sleeping there and not just watering her plants twice a week.)

Many of you argued that the violation should be considered unintentional if T was unaware of the lease provision or unaware of what length of time turns a guest into a resident or simply forgot about the need to have BF fill out an application. I suspect a court will not be very sympathetic to a tenant who claims ignorance of an explicit lease provision (although the first and third models made pretty good policy arguments about this). I also think that, even though T and BF may have trouble identifying the precise moment when hanging-out-a-lot-and sometimes-sleeping-over becomes "LIVING TOGETHER" (and trouble admitting that it's happened), after some period of time, if BF is in the apt every night, L gets to say that he is really a resident. Similarly, I don't think BF's intent matters much; even if each morning he gets up convinced that today is the day he gets his own place, after 9 weeks his actual behavior is more important than his intentions.

2. 83.56(2)(b): T should argue that BF is an "unauthorized guest" and falls within (b). There was room for an extended two-sided discussion about whether BF really fits into this category after nine weeks, although none of the models spent much time on this. This is one of the places where you could usefully discuss whether an unauthorized resident really is different from an unauthorized pet (which usually is a permanent resident kept hidden by the tenant).

Many students also focused on the phrase "activities in contravention of the lease," often reading it to mean that all lease violations fall under (b). However, the introductory part of 83.56(2) makes clear that lease violations can fall under (a) or (b). The sentence that includes the phrase also refers to violations of the landlord-tenant statute, suggesting that lease violations are not a separate category of offenses.

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B. Comparative Arguments: As we discussed in class, for these arguments, you need to characterize the examples in one or both provisions in a way that helps you draw a usable line between them. Some examples that I liked:

With violations of (a), the damage is already done & can't be undone (See 1st

model). By contrast, violations of (b) are easy to cure/fix (See 2d & 3d models). Violations of (b) tend to be single incidents; violations where the harm is

ongoing fall under (b). (See 2d & 3d models). Violations of (a) involve damage or harm to property or to the well-being or

goodwill of other tenants. (See 2dmodel; I really like the italicized phrase). Violations of (b) frequently are things the tenant is unaware of (1st model) or

can be characterized simply as "mistakes" (2d model).C. Policy Arguments: Collectively you raised quite a few thoughtful ideas, including:

Generally, the law disfavors complete forfeiture of property rights. Although the statute does allow immediate forfeiture (eviction) in some circumstances, to further this policy, we should require a right to cure in close cases. (See 3d model)

The right to select tenants is part of the (very important) right to exclude. To protect this aspect of L's property rights, she should be able to immediately evict someone who tries to install another resident without L's consent. (See 1st

and 3d models). If T actively hid BF from L because she knew BF probably would not get

through the screening process, we should punish this deception with immediate eviction.

As noted above, sometimes the point at which a regular guest becomes a resident is not clear to either the tenant or the guest. Different students used this uncertainty to support policy arguments for both parties:o T could argue that the difficulty identifying the start of the residence may

mean that neither T nor BF were really aware when it occurred, and thus it would be fairer to give them a right to cure.

o L could argue the ambiguity might cut the other way. Suppose she gives T a right to cure and T claims that BF is no longer residing in the apt. If BF then is hanging around a lot, how can L trust that he is not still living with T, given that the couple already had violated the lease provision. Rather than forcing L constantly to monitor the couple for compliance, it might be preferable just to allow L to evict T in the first place.

b) Student Answer #1: This answer earned a grade of 9 for providing solid two-sided discussion of all three types of arguments. The student didn't see what I thought were the most significant kinds of harms from the violation, but made some very strong policy arguments.

Literal Language: In determining which category this falls under, the first step is to look at the literal language. In (a) It would be helpful to determine if T's boyfriend (BF) was causing any damage. Here, it is not clear that BF is causing any damage, or that T is causing the damage

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by having him there. However, L might argue that T and BF has caused damage because T's BF presence on L's property is arguably a violation of L's right to exclude.. This goes all the way back to Jacque. Even though there is no physical damage, damage might have been done emotionally to L [because . ..]. Also, BF could possibly be a disturbance, but there are no facts to support it. When most people think of damage and disturbance, people think of actual destruction of the property, not this. Also, the lease clearly stated that no person could live in the place without L's explicate approval. Here, BF has been and is living the the place for 9 weeks. This is clearly a misuse of L's property [because .. .].

In (b) it clearly states that having unauthorized people over is a violation that can have a chance to be cured, but (b) seems more like having them over a few times, and there is no indication if BF is unauthorized to visit, he just cannot live there, and 9 weeks seems to be like living there.

Comparing (a) and (b): The things that are listed in a, are things that have already been done and not reversible. Damage, destruction, and misuse can be repaired, but the act has been done and cannot be reversed. This as mentioned goes back to Jacque. If BF caused emotional damage, very hard to reverse.

The things in (b) however, are things where that tenants often do not know a violation occurs. [good idea; tie to list in (b)needs more defense]. Having a BF stay with you could fit in this category. A lot of people have visitors, and depending on where this building is, sometimes BF's sleep over every night even if they are not living there. This is especially true in college towns.

Policy: An argument could be made that having a boyfriend over really does not cause harm. Do we want a society where if a BF stays with you for more than a certain number of weeks, there is a chance you could get kicked out right away, especially as most people would not necessarily know this is a violation. What happens if the BF was on a long vacation, or had no other place to go so he had to be taken in otherwise he would have been homeless. It is highly unlikely that we want a society where someone could be evicted without a warning for doing a good deed.

At the same time, T clearly violated the lease. The provision said no one could live there without the specific approval of the landlord. T should have known of this provision because it was in her lease. If we allow people to get a warning before being evicted in this circumstance, it is very likely that people will try to pack as many people in a place at once until they get caught. This would probably be especially true in lower income and college communities because they would try to knock down the rent as much as possible. By giving the Ts a second chance, people will take advantage of the system in hopes of not being caught.

(c) Student Answer #2 : This answer also earned a 9 and raised a lot of useful ideas, including the security/safety concerns. The student also made two sided arguments of all three types, but I thought a few were a little overstated. Although I normally don't like answers with one party's arguments separated from the other's, there was a lot that was strong here.

No right to cure: 83.56(a) states that the tenant should not be given an opportunity to cure if she misused the landlord's property by an intentional act or a subsequent or continued unreasonable disturbance. Tracy should not be given the opportunity to cure her mistake because she has INTENTIONALLY misused Liza's property. Tracy presumably knew that she wasn't allowed to have her bf live there unless he signed a separate agreement because it was stated in a provision in her lease. Therefore, i t is fair to say that her violation was intentional.

Further, giving Tracy the opportunity to cure her mistake may be sending a bad message to the rest of the tenants. First, it's already apparent that at least one other tenant knows about Tracy's bf

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because it was another tenant who reported the issue. Therefore, it isn't inconceivable to believe that other tenants are aware of his presence either. The message L would be sending to the other tenants is, therefore, that as long as I don't find out about it you can have your significant other stay on the premises without signing an agreement; but if I do find out, then you get the opportunity to kick him/her out before you will be evicted.

The right to cure is centered around things that are more commonly classified as mistakes. Parking in the wrong spot, or having a guest over on a certain occasion are innocent mistakes that are more a one-time offense type of mistake. However, because Tracy's act was intentional (thus not innocent) and because her bf has been staying there for 9 weeks, this could not be classified as a one-time mistake. It's one thing to have an authorized guest stay the night; it's another to have your bf spend over two months at your residence.

Lastly, Liza has an interest in knowing who will be living at her premises out of her own security interests, and so allowing her tenants to circumvent this issue without the ability to evict immediately would be jeopardizing her own safety, as well as the safety of her other tenants. If someone's living at your place, but not willing to just do a little rental agreement, that suggests that that person is sketchy, has a criminal history, and ultimately would not be a responsible tenant. Liza has a right to eliminate all this at the outset.

Right to cure: The language specifically says unauthorized guests are of the nature that you get the ability to cure. Tracy's bf is an authorized guest. The amount of time he has spent there shouldn't matter because "a subsequent or continued unreasonable disturbance" should be read as meaning that if you get a warning from the landlord, and then you continue to do the same violation, you will be evicted. There has been no initial warning, so there is no "continued" or "subsequent" disturbance.

It would be different if the bf had damaged the property, been loud and drunk to the detriment of the other tenants, or committed any other kind of serious inconvenience to Liza. However, there is no evidence of any of this. No right to cure should be limited to violations that actually cause damage or destruction to the property or to the goodwill and well being of the other tenants. [Very nice characterization]. Simply having your bf live at the apartment isn't causing any of the permanent, "destructive," problems set out in (a).

Also, Tracy should be given the opportunity to cure this mistake because it is also fairly easy to correct. Just have her bf move out. If she doesn't have him move out in week, then that constitutes a "subsequent" disruption and she would be evicted anyway. Her bf has already been on the premises for 9 weeks and no material harm has occurred from what we know; why not give her any extra week to at least give her the opportunity to correct her wrong.

Lastly, having her bf live there wasn't meant to cause any intentional harm; she likely didn't want him to have to go through the trouble of signing a lease and whatnot, or maybe she just simply forgot about the provision entirely. Either way she should be given the chance to correct her mistake.

(d) Student Answer #3: This answer earned a grade of 8 for arguments that were smart but not always tied tightly enough to the question. The student made literal and comparative arguments for each position and added a strong policy discussion.

Actual Language of Statute:

Guest: T may argue that her BF was an "unauthorized guest" in (b) & she should have the right to cure; however, L will argue staying for 9 months is no longer a guest so

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doesn't actually fit w/in the language. Plus, if he was there for only a couple of days (a "real guest") no reason to believe he would be "unauthorized".

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Intentional? (a) requires an intentional act. L will argue T knew that every person living in the apt. needed to be approved, yet, she permitted him to move in any way. There are a few things we would likely want to know: is T's bf actually paying rent? Are all of his personal belongings there? If not, T may not have actually understood that him being there for so long constituted "living there" and therefore didn't understand that he needed to be approval, pursuant to the lease.

More like A orB

Continuous Disturbance? L will argue more like (a) b/c 9 weeks is like a "continuous disturbance" in that he continued to violate because he never got permission to live there. T will argue there was nothing like a "disturbance" (unless we find out there was a complaint and that is how L found out he was living there).

Easy Fix? T will argue that this like (b) b/c easily curable: he can move out immediately or he can simply fill out an app. & await to be approved. L will say this is more like (a) b/c the actual harm had already been committed- he moved in w/out permission- and there is nothing he can do besides turn back time that will fix that. L will also say that it is like (b) b/c it is the act itself which was the violation, not the consequences of the action, which would tend to be more like B. [This is an interesting idea that needs more development.]

Policy: There is a policy interest in protecting Ls' ability to choose who lives on their property. L was able to say it was ok for T to live there; by T letting her BF in, effectively taking L's right to choose. On the other hand, there are other situations where the court denies to uphold L's complete discretion on who can move in. For example, cannot deny consent to sublease based on personal taste (Funk). Perhaps the same reasoning can be applied here-- that there are significant public policy concerns that sometimes override property protection: also want to make sure that people can stay in their homes (in support of b), especially if there is a housing shortage & finding adequate housing would be difficult. Assuming T acted in good-faith, and didn't purposefully violate the lease, a policy reason for saying the violation was like b) is we fear people may be evicted for doing something they don't know is wrong. Might depend on what types of things does L ask for in the application-- is there a true purpose for it or is it really just procedural? Does she ask for a credit history?

(3) Review Problem 2C (Small Fire & 83.56(2))(S32)(forthcoming after Spring Break Sample Submissions)

(4) Review Problem 2D (Ben & Rebecca Anti-Discrimination)(S42-43)(a) Professor’s Comments: This was part of an issue-spotter I gave in a Housing Discrimination class. I’ve edited the answers to delete a variety of small issues outside the scope of the Property class. You can assume that B violated the FHA if B rejected R because he thought she wasn’t Jewish enough, because she was Israeli, or because he thought she was in an inter-faith or inter-racial relationship. You also could discuss whether requiring tenants to refrain from eating pork or shellfish constitutes discrimination on the basis of religion. As I’ve suggested, I think conduct limits like this might be OK if no tenants are forced to forego their own religious requirements. (cf. Review Problem 1B)

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(b) STUDENT ANSWER #1: Evidence against B as mgr. and as owner. He became increasingly annoyed with her as soon as he found out she didn’t adhere to Sabbath -- his “smile froze” because he realized that she wasn’t Orthodox or as serious as she was -- he reasonably thought she was or. because of her Star of David charm. He was so friendly to her that he offered his own place to her and then revoked both offers: his home &ST’s apartment

Also proof when she arrive w/ C he realized that she wasn’t as devout as he is -- Since Orthodox don’t marry from other faiths and she was there w/ an African-American w/ a cross in his ear -- different faith and he was obviously worried that she was involved w/ him because he said if you’re both going to live there, he needs to fill out application also and then was relieved when she said there were just friends.

B will argue that he has a right to have a policy that his renters eat no port or shellfish -- a seemingly innocent request to some. R has a strong case here that this is only a pretext. When he found out that she worked on Sat. -- or didn’t follow Sabbath because she wanted to look at the house on a Sat. and he froze and said he didn’t work Sats. then he tried to discourage her from seeing the place and said she didn’t really have time to see the place. So he reluctantly agreed to show her the place and he stared at C while silently showing them the place -- after he had been friendly to her. B will argue that he just didn’t like them. He can refuse to rent because he doesn’t like them or because they are rude and have a temper like he said But R will further argue that he was discrim. against her because she was with an African American and he was discrim. on the basis of the race of her friends. B will argue Sorenson that this is only proof of discrim. motive and not a violation. But R will argue that it is discrim. because once she explained they were only friends he said -- no problem. I thought you were really together -- a violation of his Orthodox religion that she can offer. Overall, she--R-- is likely to prove that his reasons were a pretext -- he didn’t want here there because she wasn’t orthodox and ate pork/shellfish and the rude/temper defense was untrue.

(b) STUDENT ANSWER #2:

R’s evid. of discrim.:

change of attitude after she mentioned getting together on Sat. (working on Sat.)

B’s reaction when she said she will eat pork and shellfish.

she fulfills the qualif.

his excitement in beg. to “no way” at end.

his staring at Christian who had cross in ear.

his talking to her during first time showing yet, could be interpreting as getting info about protected class.

B’s evid. NOT discrim.

statements:

– you can have any friend visit

-- “I’m sorry. rude person... I don’t need rudeness.” Shows he rejected her based on rudeness.

If he had rejected anyway whether rude or not, then he discrim.

R: he rejected because not devout Jew because he told me to not eat pork or shellfish. Those are parts of his religious beliefs that he tried to put on me, but when I disagreed, he got angry.

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B: No she was rude. If she answered politely, I would have allowed her to remain. Also, pork and shellfish is personal preference, not Jew. I don’t like them and I can discrim. against anyone who eats them in my place. (Smell, dirty, etc.).

Policy - here R would win because clearly pork and fish played a role. He is known to want tenants to follow this or they are not welcome. She was rude but it appears he would have rejected her anyway.

(c) STUDENT ANSWER #3: [This answer is more one-sided than I prefer or I that I’d usually select as a model. However, the student raised a lot of very good arguments for Ben on a question where the majority of answers were too slanted toward Rebecca.]

3604 (a): Benjamin did not deny Rebecca because of a protected class she belonged but because was rude and ate un-Kosher food. Non-Kosher food eaters are not a protected class. And predictably will come from every race, religion, national origin, etc. Also he can comply with his own religion (which is protected by the sacred First Amdt.) If, after Rebecca moves out, Ben (or another orthodox Jew) may have to move into this unit. If there are kitchen appliances, etc. they may be “contaminated” by the non-kosher food. Jewish law also requires Jews not to use the same dishes, stove, oven, etc. for kosher for that is used for non-kosher. Replacing these appliances would be a huge burden every time a tenant moves out.

3604 (b): The conditions with which Ben treated Rebecca appear consistent with his Orthodox religion. He simply does not work Saturdays. If he does not work for any customers, that hardly constitutes discrimination.

As for the claim that his attitude changed when asked to work on Saturday by a non-Orthodox, that does not appear to be evidence such as in Cato which indicates a change of attitude after conversation about race. He may been legitimately offended as he would be when asked to work by a member of any protected class -- not just a non-religious Jew. His reluctance to meet her may have been due to legitimate offense taken to the comment “I didn’t think anyone cared about the Sabbath.” His silence and coldness when Chris was present did not necessarily have anything to do with his race or religion (We don’t know that he saw the cross in the ear!) It may have been a remnant of her offensive comment.

Requiring Chris to separately apply is not a violation of 3604. A landlord has a right to do credit checks, etc., as long as it is consistently does to all protected class. Rebecca had to fill out the form too! Benjamin’s understanding that Rebecca and Chris were going to share the dwelling is not surprising given this was a house, not an apt. and he was looking at the house too and seemed to like it a lot. He did not express displeasure at seeing an interracial couple. His rude treatment of Rebecca while she was with Chris is no different then how he treated her earlier (“since you don’t’ really have time to see house... “)

His mention of the pork and shellfish really after she was with Chris is not inconsistent with his prior policy (as evidenced by the ad.) Therefore, it can hardly be said that the conditions and terms of the rental 3604 (b) were different due to Chris’ race. Therefore, this is not like Sorenson where there was evidence of a change in attitude after discover an interracial association.

Ben’s personal convictions (i.e., frowning upon non-religious Jews, etc.) is not pertinent here because it does not appear these sentiments were part of his decision not to rent. She was rude!!! and had a problem with his pork and shellfish policy!

While it is true that there are other alternatives to Ben’s policy (such as requiring additional deposits in case appliances get “tarnished” by pork, Rebecca did not suggest this. Her rudeness interfered with any further negotiation between the parties.

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(5) Review Problem 2E (Right to Transfer & Pizzi’s Pizza)(S44))I was looking for both the argument that Tony could sublease and some fact-based

application of the Kendall commercial reasonableness test. [2017:: Kendall sets standards similar to those in Funk.].Student Answer #1: Lease says no "assign[ing]". This is usually very strictly construed so the option would be for Tony to sublet to Pizzi. The two are differentiated as a sublet takes over a portion of the lease and assignment goes to the end of the lease. So Tony would keep a month or two at the end. How-ever, if he really doesn't want him there he could refuse to renew and then what? What type of lease is this anyway? Term of years, how many, etc. are all considerations.

Tony could attempt to force Les to allow the assignment. Traditional rule is that the lessor may arbitrarily refuse an assignee. Yet this is changing which gives hope to Pizzi's Pizzas. In Kendall, the lessee attempted a transfer under a no transfer w/o consent clause. The court held that the lessor could not unreasonably withhold consent to the transfer. So, the question becomes, is it commer cially reasonable to refuse to let Pizzi in?

Les says the pizza is bad. If this is just the denial of consent based on "personal taste" it is not commercially reasonable and not allowed per Kendall. Further, if Les is refusing because he wants to be able to scoop the rent increase he can't do that either. The policy is geared toward increased alienability, yet at the same time protecting the lessor's interest.

So is Les's interest being threatened? It would perhaps be commercially reasonable for him to deny Pizzi if the situation of Pizzi's Pizza in the mall could harm the reputation of the mall, b/c it's sooo bad or somehow hurt business by causing people to go to other malls or causing the mall's rents to decrease. Does Les own the mall? Is there another pizza place?

Tony needs to show Pizzi's Pizza would not be harmful to the mall, that he's a proper, solvent, etc., lessor and that Les' objections are strictly personal (He hates all pizza) or based on some other commercially unreasonable grounds.

Student Answer #2: Tony's first argument, in some jurisdictions, is that the landlord cannot unreasonably withhold consent without a valid commercial reason. Kendall. Tony argues that P is a very profitable business and that L doesn't have a valid reason to withhold consent b/c P can pay the rent and L might even make more $ from P if the lease includes a % to L.L can probably object b/c it's a fancy mall, pizza joint may destroy image, etc. & if the food sucks it can also harm the image. But P is profitable, L's knowledge of food is 2nd hand and if it sucked that bad P would be broke. L's argument is Pizza doesn't equal Bal Harbour.T's other alternative is to sublease to P. T's lease says assign and ct's interpret literally. Doesn't say no sublease, so sublease is usually O.K. T. wants to sublease his remaining term (-1 month) & T would want to give P all the details of his original lease and structure his sublease agreement to make L 3rd party beneficiary so T gets out of the middle & L can go directly after P (overcoming the lack of privity of estate.) However T should get plenty of $ from P b/c P can't sue L directly, P must go after T first, then T-L. L will be pissed and try to make it tough on P.

(6) Review Problem 2F (Reasonableness of Transfer: Opinion/Dissent)(S44-45)(a) Professor’s Comments: General Concerns: As always on the opinion/dissent question, I rewarded students who thoroughly defended the positions they adopted, especially by responding directly to the best arguments they made for the other side. Students lost points when they did not make clear which of the two issues particular arguments addressed and when they greatly

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overstated their arguments. E.g., as the materials indicated, different states have adopted different positions on the waiver issue. That strongly suggests that neither position is unconstitutional, neither position is a gross misuse of judicial power and that neither position will result in the downfall of Western civilization or the death of contract law.

Other common problems included: Treating cases from other jurisdictions as binding in Ainsworth. E.g., Funk limits reasonableness

inquiries to economic concerns, but Ainsworth does not have to do the same.

Arguing that L would be better off if she had allowed the transfer and that therefore she shouldn’t object to the result. Obviously, she must have thought she was better off on the whole without PP. A better, more subtle version of this argument was that, since she appeared to be economically better off if she allowed the transfer, the court should treat the refusal as unreasonable.

Unless you argue that Bellin should be overturned, you can’t argue that the court should never imply a reasonableness term; it already has done so.

I normally try not to worry about spelling errors, but quite a few students consistently typed ”tenet” when they meant “tenant,” which did not add to my sense that they knew what they were doing.

(b) Professor’s Comments: Waiver Issue:

1. Pro-Waiver Arguments: I primarily was looking for arguments based on freedom of contract and the landlord’s right to control her own land, particularly in a commercial context. Some specific points:

Arguably it is unfair for the tenant to obtain bargaining advantages for voluntarily agreeing to a waiver and then to argue that the waiver is invalid.

Allowing more reasonableness challenges leads to more litigation, both because people will try to challenge other provisions of leases as unreasonable and because the parties have to litigate the meaning of “reasonable.”

Because what is at issue is the landlord’s important right to exclude, she should be able to choose to limit the right to transfer in any way she chooses.

2. Anti-Waiver Arguments: I expected arguments about protecting less powerful tenants (particularly their right to alienate their interest), about ensuring that the rented units were not left vacant, and about the general need for fairness/reasonableness in contracts/leases. Some specific points:

Even where a commercial tenant voluntarily agrees to a waiver, its managers probably don’t anticipate being held hostage to irrational beliefs of the landlord.

Many students argued that allowing a waiver would be inconsistent with the landlord’s duty to mitigate. However, landlords with a duty to mitigate might prefer to risk finding their own replacement rather than simply accepting a proposed transferee they don’t want to work with.

Allowing “unreasonable refusals” may allow the landlord to cover up a refusal that is based in unlawful discrimination.

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(c) Professor’s Comments: Reasonableness Issue: I asked you to discuss whether two types of landlord concerns we had mentioned in class—political differences and prior rejections—should be considered reasonable in this context even if not tied to any economic interest of the landlord. I wanted two-sided discussion of both types of concerns, ideally providing and defending rules for what should be considered “reasonable.”

The student responses on this issue were generally a lot weaker than on the waiver issue largely because many of you assumed that the economic definition of reasonableness from Funk should apply and then simply argued about whether L’s concerns were economic. I gave some credit for this kind of analysis, which even the two models included. However, a major national pizza chain probably wouldn’t cause L any serious economic problems and, if she thought that they would, she probably would have provided evidence to the court.

(1) Prior Rejection: Five years had gone by here, so PP and T almost certainly had not conspired to get around L’s original rejection. You might have argued that the prior rejection ought to be irrelevant if there’s no evidence of conspiracy or that courts should treat turning down a prior reject as reasonable to discourage rejected tenants from trying to use another tenant to get around the landlord’s decision. You also could discuss whether the interests of the actual tenant should be considered strong enough to outweigh the landlord’s prior decision to exclude.

(2) Politics: Both parties have genuine political interests here. MMM has an interest in not losing out on business opportunities because of her political positions. L has an interest in not being forced to do business for ten years with someone whose political positions she abhors and perhaps in not being perceived as supporting MMM or providing MMM with profits to spend on political causes. Ideally, I would have liked to see some discussion of which of these interests seems more important, particularly in the context of a commercial lease.

(d) Best Student Answers: I had trouble assigning grades to these answers. I was using an internal scoring system to roughly assess your answers in terms of both quality and quantity of relevant points made. Under this system, the average score was about 18 and all but three answers received scores under 34. The top three papers had scores of 40, 64, and 81.5. I ended up giving the high score (the first model answer) as grade of 20 (a grade I use roughly every six or seven years), the next highest (the second model answer) a grade of 18, and the third highest (along with two other relatively strong papers with slightly lower scores under my internal system) a grade of 16. This was probably a little bit unfair to the top two papers, whose work was considerably better than anyone else’s, but it was the best system I could think of without greatly penalizing a lot of students simply for doing Question III.

(i) Student Answer #1: This is a terrific answer. The student defends his key positions and the two opinions respond to each others’ strongest points. The only notable weakness is that the student only addresses the prior rejection of PP in the dissent and not in the majority.

Majority: Waiver: The Court today considers the question whether the reasonableness requirement established, implied within contracts, by this Court can be expressly waived. We hold that it cannot. Understanding the gravitas behind this decision, we outline our rationale beginning first with the larger issue of waivability followed by discussion on whether, if the reasonableness requirement could in fact be waived, whether the Defendant's waiver would in fact meet any objective standard of reasonableness. We consistently hold that she has not articulated any reasonable reason for denying transfer of the lease.

Under normal circumstances we trust that businesses will act rationally in their decision-making. In an ideal world, businesses focus on monetary gains and would not arbitrarily contest leasehold that would

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mutually benefit all parties economically. Unfortunately, this is not the world we live in today, property owners, although concerned with money, also use their position to punish tenants, hold grudges, and even subtly discriminate against granting leaseholds. Allowing a business to contract out of the reasonableness requirement, licenses them to act arbitrarily. These arbitrary acts harm economic efficiency. This court does not want to envision a world in which a property owner may punish his tenants for any personal distaste, arbitrarily, forcing payments to be made and properties to sit vacant. We wish our lots to be used, our lands to be full, and our citizens to be productive. Forcing a bankrupt tenant to pay while a lot sits unnecessarily useless rewards the landlord for providing no service and harms the other enterprises which that land may also aid (by bringing business to the area and aiding the natural flow of commerce).

The dissent claims that we are ignoring the express grant of the contract, specifically noting that these are commercial industries we are imposing our will upon. Although the fact that these are commercial businesses may often be a short-hand for sophisticated tenants, not always is this true. The tenant in this case may have merely been a franchisee over his head, receiving poor advice, and in a poor bargaining position. Who knows whether this provision allowing the landlord absolute transfer was actually bargained for? From the facts, this is not clear. We protect not only residential lessees today but also unsophisticated individuals not afforded proper protection in negotiation. Under similar conditions, we have implied other terms into contracts when public policy warrants. This is not judicial usurpation; we are merely affording protections consistent with dignity and autonomy of the individual. We believe in individual liberty, but not economic coercion. When there is unequal bargaining power and the contract does not accurately reflect intent, we will not honor this contract. The parties may not have fully understood what they are waiving. Moreover, no business owner expects to fail, and without proper guidance many may not even consider this possibility. Consistent with State v. Shack, which the Court finds persuasive, we believe some ideas and protections are too valuable to waive.

Reasonableness: We again uphold the decision of the court of appeals. The defendant asserts absolutely no business related rationales for denying Patrick's Pizza. The defendant solely points to the CEO of the company's politics as her sole rational for not allowing the lease transfer. Again we point to the supposed rationality of commercial industries. The defendant wishes to exclude a willing buyer in the name of political differences. The defendant has not acted reasonable or prudent in any business sense. We are evaluating her actions as a business person here, this is a business transaction. The defendant has let her personal feelings destroy a potential fruitful business transaction, a perfect example of why we can't leave these types of warranties to the free market. The defendant punishes her other tenants, as well as Tyler, based on a grudge. Had the defendant simply articulated one plausible commercially-related rational to support her position she would have been reasonable. This is not a difficult standard to meet.

The dissent briefly cites to the idea that Mosley and Liz may work together, and their disagreements may hamper business. We find this unpersuasive, Mosley is the CEO of the company it is unclear how much interaction will even be required between the two of them. Many intermediaries will work between them and even if they do not, the commercial nature of the relationship means they will not be subject to the same close-knit relationship of residential landlords and tenants. In the commercial context, it should not be problematic to get along with someone you do not personally agree with. Co-workers of varying beliefs come together every day from 9 to 5; the relationship between the CEO of a company and a commercial landlord should be no different. The dissent claims we have usurped individual liberties in both the areas of contract law and property rights today. We have not placed a substantial burden on landlords, but we only require some reason rationally tied to business in the commercial setting. The court today instead protects freedom of speech over property rights. The court envisions a world (that the dissent would allow) where business owners could be disenfranchised based solely on their political affiliations, similar to the black-listing of communist entrepreneurs. Although you may disagree politically with a person, this is not a substantial foundation to deny an otherwise sound business transaction. Property values serve human values; human values are not subject to property law.

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Dissent: Waiver: The majority opinion today infringes on rights of our citizens that began as this country was born. Two businessmen have come together and negotiated an equitable contract and the court today destroys their very words. The majority destroys the predictability and comfort associated with the standard business contract. We trust the parties' ability to negotiate and do not intend to implement top-down regulations. If a party does not care about his ability to transfer, let him bargain it away. Likely, that party will receive consideration and parlay this concession into a fruitful reward through another provision. Here, we are bound to the terms of the contract, the contract states the landlord can withhold consent for any reason, so the landlord should be able to withhold that consent. We were not there when the contract was drafted, perhaps Tyler received less rent for this concession, perhaps he was rewarded with a shorter lease. The point is this court cannot know the exact terms of negotiation. What is left here for us is the document itself. We are to interpret the terms of the contract, not create a wholly new document. Business people act rationally, and we trust their judgment when it comes to making decisions. The market itself ensures favorable outcomes. The Court should not impede this process. If the parties contract, unless wholly egregious, we should not interfere.

The majority finds egregious conduct where there is none, unnecessarily usurping power from individuals and putting it into the hands of the court. In one decision, the court invalidates contract rights and the rights of the landowner to use his property as he sees fit. The right to exclude is fundamental to all of property laws, and if the Court does not protect it, it is useless. Even in the commercial context, the defendant has a right to use her property as she sees fit. The majority would see this right eroded down to nothing by imparting reasonableness onto her decision-making. If the defendant wants to exclude a tenant for any reason at all or no reason at all, that should be her right as a property owner. [MAF: As stated, this point s arguably inconsistent with Bellin.] She exercises dominion over the property, the Court does not. The majority has not even allowed her to insert provisions to regain this right, when she leases her property. Once she has signed away the property to one party, she has seemingly lost control forever (or at least for the terms of the lease), we think this unjust. The landowner remains supreme over the lessee and the express terms of the contract should protect carefully-negotiated values manifsted in writing. Predictability, security, freedom to contract, and property rights are all at stake and the majority opinion fails to instill confidence in the landowner's ability to protect or obtain any of these values.

Reasonableness: In the alternative, if the reasonableness requirement cannot be waived, the defendant has articulated a reasonable rationale for not turning over the lease. Reasonable, taken by its common definition, means not “economically reasonable” but rather “articulable.” There was a thought process and this thought process need not be tied to commercial interests. Although the lease is a commercial lease, the defendant is a human, she functions as a person first and a business person second. If she does not want to work with someone she disagrees with, that is her preference and the court should stay away. Further, interpreting this reasonableness requirement to depend on the nature of the lease opens this court up to a flood of litigation based on 'reasonable' in any given context. We should stick to a simpler, more commonly-used definition of reasonable: if articulable and not clearly discriminatory it should pass.

Even if the court were to hold that the landlord’s decision must be economically reasonable, we can derive economic rationales from the defendant's statements. First she must work with Mosley, a person she disagrees with. Disagreement can hamper a business relationship, making a good deal go sour very quickly. If both parties are passionate about politics, this can lead to a dysfunctional or even hostile work environment. Why should we force her to accept this arrangement when there could be many more suitable arrangements available? Second, the outspoken nature of Mosley's politics may hamper Liz's other clients. We do not know if Patrick's Pizza would even be welcomed. Maybe the pizza chain would open up Liz to public protest on her property harming her other tenants. Lastly, Liz has previously rejected the Partick's pizza location, simply because she has agreed to rent to another party, now she must rent to Mosley? This seems an unjust result, leading down a slippery slope where a landlords ability to choose their own tenants is all but eliminated.

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Conclusion: The majority concerns itself with tyranny related to discriminatory business practices. We concern ourselves with the much more likely tyranny of governmental intervention. Businessmen and women will act rationally and not let politics get in their way on a large scale. We see business partnerships across political beliefs in the name of profits constantly. The free market, however, can not check unyielding government intervention on private lands. The Court today stands from is non-democratically elected position and dictates terms of contract law, property law, and individual rights.

(ii) Student Answer #2: This answer may even be a little better than the first on the waiver issue, although it is quite a bit weaker (although still pretty solid) on reasonableness. Like the first model, it only addresses the prior rejection in one of the two opinions. This student chose to draft the majority and dissent for the waiver issue separately from the opinions on reasonableness, which I think is an acceptable choice under the instructions. (Bachman)

Majority (Waiver): Commercial parties to a K can waive reasonableness requirement of consent. In America, the ability to contract freely is a fundamental right. Freedom of contract allows 2 parties to obtain what they feel is in their personal best interest, and, as long as nothing illegal or against public policy is involved, the right should be respected. Commercial entities are presumed to be sophisticated as to business matters, and therefore it is not the court's place to not allow them to contract as they please. If Tyler's hamburgers, a commercial entity felt it was in its best interest to expressly waive LL's duty to not unreasonably withhold consent, it was their right to do so. If they did not like the clause, T did not have to sign the K or perhaps could have offered more money to maintain the clause, to hold the waiver invalid would be unfair to LL because she would not be getting what she bargained for in the K.

Even fundamental constitutional rights like the right to silence can be waived. And that right is often waived by much less sophisticated parties than a commercial entity. If a sophisticated commercial entity chooses to waive its right to not have consent unreasonably withheld, it should be able to do so. [MAF: nice argument.]

While the dissent’s arguments about the public policy about the reasons for implying reasonableness are certainly valid, those reasons do not trump the right of 2 commercial entities to contract as they please. Even if alienability and free commerce are affected, the rights of commercial entities to act within their own best interests is more valuable, and if poor business decisions are made it is the job of the free market, not the court, to correct those decisions.

The dissent also argues that not allowing transfer goes against the public policy of making efficient use of land, because T is going into bankruptcy while PP is expanding. Although public policy certainly promotes efficient use of land, a businesswoman like LL is in a much better position to decide what is the most economically efficient use of her land. The court should not assume that a businesswoman would act in bad faith against her own economic best interest. However, residential leases are another story. Unequal bargaining power, differences in access to information, and potential for sophisticated sellers to take advantage of unsophisticated buyers makes waiving the right to not have unreasonable refusal in property transfers inappropriate in the residential context, similar how an implied warranty of habitability cannot be waived in a residential context Javins.

Dissent (Waiver): Social policy demands that even a commercial T cannot waive the LL's duty to not unreasonably withhold consent. Even commercial entities should not be able to waive the LL's duty to not unreasonably withhold consent because such a waiver is against public policy. First of all, the majority implies that the disparities in bargaining power and access to knowledge are not present in the commercial context. However, this is patently false as evinced by the case before us today. T is might be a hamburger chain, but they are clearly in a much more financially precarious position than LL. This might explain why T decided to waive its right here. Furthermore, T is a chain, but if it is allowed to waive such a right, then smaller mom and pop stores could be coerced into making waivers as well in Ks with large developers. Preventing large landlords from unreasonably refusing transfer is vital to prevent larger entities from leveraging smaller tenants into accepting unreasonable conditions Funk.

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Furthermore, public policy supports alienability of property. If T is not allowed to assign or sublet its interest, it will potentially go into bankruptcy, leaving the building, at least temporarily, bankrupt. T has found a financially sound tenant in PP which will take over immediately and promote the public policy. T should not be allowed to K away a right that not only protects T, but is also desirable to society as a whole.

LL seems to be fine with making what would seem to be an economically unsound decision to suit her personal whims. After all, LL owns several malls and is likely doing fine financially. However, public policy is against economically unsound choices being made at the whim of individuals. Landlord's unreasonable denial of consent harms not just them, it harms the current tenant, the potential new tenant, and society as a whole. Vacancies can cause property values of a whole area to decline.

Public policy also supports making efficient use of property. Since T is going bankrupt, it’s reasonable to assume that it is not making efficient use of the property. PP is a national chain that is expanding and therefore allowing transfer to the more economically efficient company is in society's best interest. The appellate court should be affirmed and reasonableness implied.

Majority (Reasonableness): Reasonableness does not need to be for directly economic as long as the landlord could have rationally concluded the refusal was in her economic best interest: The court should not be able to decide what is in the economic best interest of a landlord. LL did not want PP as a tenant because she disagreed with the CEO's political views. If she is willing to forego having a financially sound tenant based on her political views, it is rational to believe that potential customers might stay away from the restaurant as well. If customers avoid the restaurant, they might avoid the area as a whole which therefore could affect business at the mall.

Furthermore, the prior refusal before leasing the premises to T demonstrates that the refusal here was not to leverage T in any way. It was totally within LL's rights to refuse PP as a tenant before, and she should have the same right now. To find her refusal to transfer interest unreasonable and force her to accept PP as a client, would be to force a commercial entity into an undesirable business relationship and be an extreme interference with LL's freedom of K. LL's refusal is reasonable because she had a rational basis for concluding having PP as a client could effect her economically.

Dissent (Reasonableness): Refusal was not reasonable because in business transactions refusal is only reasonable if based on articulable, direct economic concerns regarding the potential tenant. The majority seems think that LL’s refusal of PP was economically based due to a tenuous connections with MM's politics effecting business. P is a national chain looking to expand. Clearly the politics of the CEO have not had a severe adverse effect on PP's business, so it is mere speculation to assert that the CEO's politics would have an adverse economic effect here. A landlord must offer specific, articulable, direct economic concerns. For example, if a potential tenant was financially unreliable or might damage the premises, withholding consent would be reasonable. Noting of that sort is suggested in this case. LL's refusal has no direct economic basis, and allowing the refusal would go against public policy of promoting alienability and efficient use of property.

(7) Review Problem 2G (Reasonableness of Transfer & Knudsen)(S56)(Available after 3/9 DF session)

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(8) Review Problem 2H (Rent Withholding & Upscale Rental)(S57)(a) Professor’s Comments: This problem is framed as a policy question: Should the state extend a remedy it uses for the Implied Warranty of Habitability (IWH) to other substantial breaches of residential leases? I was looking for pro and con arguments for extending the remedy. Some students also usefully created interim positions (e.g., extend remedy if rent paid into escrow or if sufficient notice and time).

(1) Important arguments include:

(A) Contract Policy: C agreed to a relatively expensive lease so likely to have relied on presence of amenities and entitled to higher expectations. Withholding rent might be most effective remedy (see below). On the other hand, C still has beneficial use of the property and normal contract remedy when possession is not at issue is suit for damages after the fact. Moreover, no reason to think tenants of middle to upper class housing have bargaining power issues that might justify a different result.

(B) Effectiveness of Remedy: C would argue that suing for damages through the regular civil system is not an effective remedy because it is too time-consuming and expensive for most residential tenants and because it does not provide adequate incentives for the landlord to comply with the lease terms in a timely fashion. Hitting the landlord in the wallet is the most effective way to encourage quick repair.

O might respond that withholding rent is too extreme a remedy because it allows the tenant to act in a way that, in the short run, is very harmful to the landlord and is not necessarily proportional to the harm. Cutting off cash flow to the landlord may also make it harder to get the repairs done. Moreover, there will be line-drawing problems not present in habitability cases where the housing code often provides clear rules to determine when to apply the remedy. Presumably, tenants will not be entitled to withhold rent every time a light bulb goes out. Thus, courts will have to determine which breaches are substantial and neither tenants nor landlords will be able to predict when that will be, and lots of litigation will follow.

O also might argue that other remedies like repair-and-deduct (if the jurisdiction allows them) would be better suited for this kind of problem because the property gets fixed and the amount withheld precisely matches the harm created. However, tenants may not have cash available to fix large items like the appliances at issue here and may not have expertise necessary to locate and oversee competent repairmen.

(C) Housing/Habitability Policy As is true with the IWH, the landlord almost always has more relevant expertise and may be able to perform the work more cheaply through, e.g., discounts for multiple repairs. The landlord has a longer term interest in the premises than the tenant and often will have greater cash flow. So long as landlords gets adequate notice (which really wasn’t at issue here), it is good policy to put the burden on them. Moreover, unlike marginal “slum” housing, small extra financial burdens probably won’t drive landlords out of this kind of market.

On the other hand, courts have justified the replacement of ordinary contract remedies by relying on policy concerns about the health and safety of the residents and the tenants‘ need for minimally adequate housing. These concerns are not present here. Because the urgency is less, arguably the courts should wait for the legislature to act rather than extending the remedy themselves.

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(2) Common Problems:(A) Focus of Question: Many students apparently did not read the call of the question

carefully and thus made one or more common errors: Discussing whether the IWH was breached or the premises were uninhabitable, rather than whether the remedy should be extended even when the premises are habitable. Or similarly, discussing extending the IWH rather than simply the remedy. Not only were these questions outside the scope of the question, they were unlikely to be seriously contested. The broken items are insufficiently connected with the ability to live safely in the house to be proper subjects for the IWH. Discussing only the correct result in the case without any sense of finding the right rule for this and all similar situations. Discussing whether there had been a breach of the Implied Covenant of Quiet Enjoyment or a Constructive Eviction. The former is unlikely because usually there must be a much more severe interference to breach that covenant. Constructive eviction is very unlikely when the tenant has not left the premises. Most importantly, you were not asked to discuss these issues. Discussing whether the eviction was retaliatory. Again, you weren’t asked to do this. In addition, the retaliation analysis first depends on your answering the question I did ask. If you decide that the tenant was not entitled to withhold, then the landlord is entitled to evict for non-payment of rent and there is no retaliation. Discussing whether the remedy was provided by lease or by statute. If it was, the state would not have to reach the question I gave you.

(B) Other Common Problems: The remedy of withholding rent does not mean the tenant pays nothing. Instead it is a right to defer payment until the landlord is in compliance with the IWH, at which time the tenant pays back rent less damages for the landlord’s breach. The remedy has the effect of putting the landlord in the position that a plaintiff tenant would normally be in: no money in hand until the issues are fully resolved. Many students suggested that the landlord was not given sufficient time to fix the broken appliances. I think a court would not be very sympathetic to this claim because (i) C apparently followed the rules the jurisdiction has developed for breaches of IWH; and (ii) M told C that the landlord was not going to try to fix anything, so O is probably estopped from complaining about adequate time. Adopting any rule to resolve an issue of first impression reduces uncertainty to some extent. If you want to argue that one rule provides more certainty than the alternative, you need to explain why. The correct spelling of the most abused word on the exam is “amenities.”

Student Answer #1: This is a very strong answer, raising good arguments for both positions, considering an alternate remedy, and arguing that the breaches are similar to partial constructive eviction: Chris signed a lease for a fancy 4 br house. The things not working are the dishwasher, dryer, and pool. The remedy of withholding rent available to breaches of implied warranty of habitability should be extended to substantial breaches of a lease because they interfere with his expectations of what he was getting by signing the lease. Chris signed a lease for this dwelling based on the expectation that he would have access to these and that he would have a right to quiet enjoyment of these items. The rental price of the house in all probability reflects the presence and anticipated enjoyment of these items. If we were to compare a house w/o any of the items w/ the house Chris is occupying, the likelihood of a disparity in rental price seems high.

However, Chris can technically still “live” in the house in the sense that he can still physically inhabit the space. While a non-working pool, dryer, and dishwasher may inconvenience Chris, there are reasonable alternative actions that Chris can take. He can hand wash his dishes and air dry his clothes.

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On the swimming pool, perhaps he can use a friend’s or go to the beach. We don’t normally associate the habitability of dwelling with the state of a swimming pool. Moreover, the fact that these things are not working probably would not violate any housing codes in the city that Chris is living in and probably do not pose a danger to Chris’s health. Re the swimming pool and the 3ft. waves: Just don’t go in and you’ll be safe. Technically, one would argue that these things are luxury items that the landlord is under no duty to provide. They are simply add-ons and make the property more attractive to potential renters. That they are temporarily inoperable does not approach the threshold of habitability, which is typically associated w/ things like heat, water, working locks, etc.

As an alternative, Chris could withhold partial rent and pay an amount minus the cost of losing access to the items. However there are 2 issues: (1) How does a tenant calculate such a setoff ?; (2) If the landlord is getting at least partial payment, how will that motivate the landlord and cure the defects? Tenants are in an unequal bargaining position these days mainly due to lack of knowledge of their legal rights. Chris may be a law student, but that does not mean he is aware of all of his legal rights. Moreover, the law should apply to the average individual who will probably know less than Chris. As such , to expect tenants to engage in a calculation of how much value they have lost by not being able to access service seems unreasonable. Additionally, we want to punish landlords who don’t cure because the appearance is that they are in breach of a contract, and as a matter of policy, we do not want to encourage landlords to breach. To allow set offs would incentivize those landlords in possession of properties that are at the cusp of breaking down to lease out at premium prices. At the very least they will accrue those premium rents until the house breaks down and the tenant begins either withholding or setting off the rent. In the end, the landlord is better off if we mandate a set off. By allowing the tenant to withhold, we create a financial incentive for landlords to cure any problems.

Additionally, Chris could argue that he has been partially evicted from his home by losing access to the pool, dryer, and dishwasher. Although some could argue that physical access means actually being able to go somewhere, denial of use of a thing looks like being physically denied access to the things. In the end, not being able to use something is the same as being denied the right to get to it. In partial eviction situations, withholding the rent is a common remedy. thus, the courts should extend the remedy of withholding rent to breach of a lease that do not make the premises uninhabitable under the theory that Chris’s right to quiet enjoyment has been breached due to partial eviction.

Student Answer #2: I’m not overfond of this pro-then-con layout, but this student did a nice job raising important arguments each way. Pro: People who rent houses/apts. are renting a “bundle of goods and services.” When you rent a “fancy” house, you have expectations and needs that you have contracted for. You may need the house for entertainment, enjoyment, and even business. When these services are worked into the K (contract), a house without them is not useful as the house you want to live in.

Here C is locked into a 3 year lease which specifically says a pool, dishwasher, and dryer are part of the property. The landlord has very quickly fallen short of its promise. The best way to get a landlord’s butt in gear it to keep rent from them. C told M about the problem and 3 weeks went by with no action at all. The state of A should give C a way to stay out of court and help himself. If the hard-earned money (at least Daddy or Mommy’s) C spent on rent is not buying the house bargained for, then withholding rent is the way to get some action that is fastest and least intrusive on the court’s time.

Further, the landlord will have to fix the problems for the next tenant (or try to find someone who wants a luxury house sans pool). Why allow evictions for people trying to enforce (peacefully and with the Mighty Dollar) a bargained for level of habitability.

Con: The Warranty of Habitability is meant to mean a livable space. It protects that minimum expectations of a safe dwelling usually codified by the legislature in housing codes. Its remedies shouldn’t extend to fringe items like pools and dishwashers. These are nice but fall well short of what is needed to live safely and healthfully. Normally, the warranty is not allowed to be bargained away

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(although it can be waived in some jurisd). It should also not be allowed to be extended through contract. If someone bargains for a pool, then they can seek enforcement of this K through well-established means.

Allowing people to withhold rent for fringe items would be a slippery slope: Where would the line be drawn? The blinds don’t work? The can opener? The cable goes out? It will not reduce lawsuits, but increase them, as every dispute will turn into an action for eviction.

Withholding rent is an important tool but it should be reserved for the most egregious breaches. It also reduces the landlord’s cash flow (as is the case here) which makes it even tougher to fix smaller problems due to lack of funds.

(9) Rev Prob 2J (Opinion/Dissent: IWH Remedies in Comm’l Leases)(S57-58)

(a) Legal Standards Selected: In assessing the standards you chose, I rewarded clarity of presentation, ease of application, and whether your standards were consistent with your supporting arguments and with your application to E’s case. I deliberately left you a range of possible solutions for where one or both remedies might apply:

Type of Violations: Zero to IWH to any Type of Significant Amenity When Implied: Zero to Default Rule to Unwaivable Implied Term Type of Commercial Tenants: Zero to Small/Unsophisticated TNTs (or TNTs in multi-

TNT complexes) to All

Almost all students who chose the question did a variation on the Court of Appeals’ rule in the majority, then followed the Trial Court in their dissent. A few students added some additional rules like depositing rent into escrow prior to withholding or some added requirements for repair and deduct.

(b) Substantive Defense of Your Standards: I rewarded fully-elaborated persuasive arguments that genuinely supported your positions, serious attempts to respond to the points made in your other opinion and in the lower courts, and mustering several of the following kinds of arguments:

1. Freedom of Contract v. Need to Protect Tenants, including arguments re relative knowledge and bargaining power of commercial landlords and tenants and the relative importance of the rights involved. All three models do some nice two-sided work on these issues. Note the relationship of these points to waivability: the more protection tenants need and the more important the right, the more important it is to make it non-waivable. (See Shack.) By contrast, you need to be clear that a default rule doesn’t greatly interfere with freedom of contact because the parties are allowed to contract differently. Having these remedies as default rules does--very mildly--protect tenants because to get a waiver, landlords must both raise the issue and bargain for the terms they want. But it won’t be hard for landlords to do this if they have a substantial bargaining power advantage,

2. Commercial v. Residential Leases: In Oz, as in many states, the IWH and its standard remedies are implied and non-waivable in residential leases. Thus, you could usefully discuss whether commercial leases are sufficiently different in relevant ways that a court should reach a different result on the issues here. Both the 1st and 3d models include some very nice discussion of this comparison in their two opinions.

3. Practical Effects of IWH/Remedies, including effects on the cost of services, rental prices, incentives to do preventative maintenance, and the health and safety of tenants and

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customers. Because of economies of scale and the likelihood that landlords will have better access to infrastructure in multi-unit complexes, it often will be cheaper and easier for the landlord to perform repairs. However, tenants allowed to repair-and-deduct may not have incentives to keep costs down. And some tenants may prefer to take on the duty to repair (perhaps in the belief that they can react best to the needs of their businesses), in return for lower rent or other contract concessions. As the 3d model points out, however, if one tenant does a poor job on repairs, other tenants may suffer. The 1st model has some nice discussion of multi-unit complexes with what I think are stronger arguments in the majority. The 2d model has some very strong two-sided discussion of costs and prices.

4. Costs/Benefits of Specific Remedies in Specific Circumstances, including comparison with existing tenant remedies (constructive eviction; ordinary damages); ordinary prerequisites for these remedies (usually notice & time to cure); and likely effects on loandlord or tenant behavior. I especially liked discussions that distinguished between the two remedies or suggested that they should apply to some situations but not others (see 2d and 3d model majorities, rejecting remedies for non-essential amenities).

5. Administrability, primarily how easily a court could apply a proposed legal test. The test proposed by the concurring/dissenting judge that turns on the sophistication of the tenant raises serious administrability problems (see 1st and 3d models), but so does the line between essential and non-essential amenities (adopted by the 2d and 3d models without discussion of the issue).

6. Lawmaking by SCt v Legislature: Always a concern for state SCts. (See 2d Model dissent & both 3d Model opinions). Here, since the SCt created the IWH and remedies in residential leases, it’s helpful to explain why you think these issues become more “legislative” in the context of commercial leases.

(c) Brief Application to Allegations: The instructions specifically asked for a brief application, but several students skipped this step. In some cases, not doing the application left me unsure as to how your proposed test worked, and so lost you additional credit.

1. The application could be very simple. For example:

You could simply follow one of the lower courts (see 1st model majority and dissent; 3d model dissent);

If you were unsure of how your test would apply, you could remand to let the case go forward for discovery or fact-finding;

You could briefly describe a different outcome (see 2d model majority and dissent; intro to 3d model majority).

2. A few students (though a much smaller fraction than usual) missed the part of the instruction saying the application should be “brief,” lost track of the role of the state Supreme Court, and spent most of their opinion discussing the allegations in this case, instead of defending a rule that would be applicable to all commercial tenants in Oz (from the Emerald City to the desert bordering Munchkinland). I gave a little bit of credit for thoughtful application, but the bulk of the available points came from arguments defending the legal standards adopted.

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3. In quite a few answers, assertions made in the course of the application revealed mistakes or assumptions reading the problem. For example, some answers claims that:

The fountain was part of a common area (it was say part of E’s leased premises); E rented part of a multi-unit building (she rented an entire building in a multi-building

complex); E did not have authority to renovate the upper floor of her building (the lease

explicitly allowed this); E was very inexperienced (despite her lovely youthful appearance, nothing in the Q is

inconsistent with her having been in the business for 30 years); and KC is a large powerful real estate company (nothing in the Q says KC owns more

than this one shopping center)

(D) Student Answer #1: This was the most extensive answer, with solid two-sided work on freedom of contract, residential v. commercial leases, and the practical effects of its ruling. The student also did some of the strongest work on the difference between default rules and non-waivable rights. I especially liked the majority’s discussion on the difficulty determining which tenants are sophisticated and the dissent’s discussion about differences between residential and commercial leases.Majority: Justice Dreamy. We the great and powerful Supreme Court of Oz affirm the lower court’s holding that repair-and-deduct and withholding rent are non-waivable legal remedies in certain commercial settings.I. KC is operating a multi-business complex, which are quite common throughout our state in the form of plazas, malls, or office buildings renting out to different people. These complexes are owned by one landlord, but different parts of the complex are rented by different tenants and the common areas like bathrooms and hallways are used by all of those businesses’ clients and customers. They often will have, e.g., an interconnected system of pipes where the pipes of a first floor tenant’s bathroom go up to a second floor restaurant. Thus, KC’s position--that the landlord is not responsible for the pipes--would mean that the business owner having a problem on the second floor might have to go into the unit of another tenant on the first floor to try to address their plumbing issues. KC’s position essentially would require the Court to entitle all business owners to have easements into their neighbors’ units and would leave each tenant subject to things inside their walls that they may not be aware of and that can be altered by any construction to the building. This is such a complicated and difficult position to manage that we believe that the landlord (who logically should have all necessary blueprints and would already have to manage common areas connected to the private area) is in a better position to handle these issues. Moreover, it is less likely that a tenant will complain about the landlord coming in to deal with repairs than about entry by another tenant who rents upstairs.II. In the context of this multi-building complex, E’s assumption about the water was a logical one. E, while operating a successful small business, does not appear to have any more substantial legal background than an average person renting in a residential setting. Lack of legal training is more likely with smaller businesses renting out space in a plaza or mall. Thus people like E who run small businesses are unlikely in most cases to understand their lease any better than a residential tenant would. While it is true that the class of small business owners might have better ability to argue over the terms of a lease than a residential owner would, their lack of knowledge cripples this ability. They probably would not argue over something that logically appears to be a given, like working water. III. The dissent makes the point that E and other business owners are much more sophisticated people on average than the usual residential tenant. They note that here E clearly was able to negotiate key terms in the lease. Furthermore residential renters are, on average, of a much lower income status than someone

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who starts their own business, an expensive thing that not anyone could afford to do. These are valid points worth addressing. While there are low-end residential rental properties, there also are high end residential rental properties. There are many people who rent property for residential use on the high end whose income and education greatly surpass the capabilities of many small business owners, many of whom, after all, run nothing more than a sandwich shop. Their ability to run their business is based on their talents like cooking more than their business background.

Our state recognizes that people who rent the high end residential properties are still protected by the remedies of rent withholding and repair-and-deduct despite the fact that they are hard to describe as poor uneducated people as the dissent prefers to envision them. In fact, many successful lawyers rent high end apartments and have those remedies available to them. Since the remedy for residents reaches such a wide variety of people, the rationale that it should not be extended to commercial use because commercial parties are more capable does not appear to be the strongest position.

The dissent also argues that some failure in the commercial world is expected so commercial tenants need less protection. However, the recent economic crisis is proof that the government sometimes does need to protect economic interests and that the failure of some businesses does not always help advance economics in general.IV. We agree with the concurring and dissenting opinion that these remedies should be unwaivable and not a default rule. The basic ability to be ability to operate a tenants’ business should not be something that can be contracted around where it can be affected by common areas and other units. We are worried that, with, a sophisticated commercial landlord could include some boilerplate that would waive the rights of more unsophisticated tenants. Moreover, with multi-business complexes like malls and plazas, one tenant waiving rights could negatively impact its neighbors. Thus we are affirming the result of the court of appeals majority that E was entitled to water in her business, but on the grounds that the IWH and its remedies were not waivable. V. We disagree with the concurring and dissenting opinion that these remedies can be waived by large sophisticated commercial tenants because we find the position to be unmanageable. While it is easy to say that a small mom and pop corner drugstore is a small unsophisticated party and a K-Mart super center is a large sophisticated commercial tenant, we find the gray area in between too hard to properly manage. The position would increase the courts’ cases as we will constantly have to determine if a business is unsophisticated or not. We also believe that even some apparently large sophisticated tenants are not really sophisticated. For example, McDonald's the national company could easily be described as a large sophisticated commercial tenant, but the McDonald's in the mall may be a franchise--not run by the corporate headquarters with all its lawyers--but by some random guy whose sophistication is limited at best.1 Since this guy may be the party negotiating the lease, we do not feel comfortable defining him as large and sophisticated even though he represents a company that we would describe as such. Many modern large corporations operate in such a structure and we will not know beforehand how much control the corporate headquarters has about negotiations (or if they even will send a lawyer). Thus, making waivability turn on the tenant’s sophistication is not a workable standard.VI. Thus, we the Supreme Court of Oz believe that the concept of habitability should apply to commercial leasing in the same manner that it applies in a residential setting. We might be willing to allow this right to be waived in a complex where one or two tenants rent the whole thing, but not in the context of complicated building structures like malls and plazas with common areas and several tenants. Thus, while altering its reasoning, we affirm the lower court’s decision holding that E was entitled to both remedies.

DISSENT. Justice Sneaky. We would affirm the decision of the trial court and dismiss E’s complaint.I. The Majority is heavily focused on malls and plazas and other multi-tenant complexes. While these do make up a large and growing segment of commercial rental property, there are still many commercial tenants who rent stand-alone spaces. Furthermore the majority argues that putting the burden on the

1 [MAF: Especially if he is a random guy wearing a random clown suit and a random-er painted-on red smile.]

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tenants in these complexes would make repairs far too complicated to manage. We disagree. Ultimately the electrical wires and water pipes in the building follows some sort of logical and mathematical planned setup. It is not too difficult to analyze beforehand which units would have burdens related to others and to what extent. Furthermore, if one tenant on an electrical line is having issues it is likely the tenant after and before him are also having issues. It seems likely that, to protect their businesses, these people will be able to cooperate with each other to resolve this issue and the shared income between three or more tenants should easily cover most issues that may arise. II. Furthermore, all businesses always run the risk of something going wrong. An accounting firm has a risk of their computers crashing at a critical moment. A restaurant has a chance of the refrigerator suddenly breaking down on them. And clothing stores run the risk of casual customers damaging their clothes. All of these are risks that, absent explicit contractual provisions, the person running the business, not the landlord, is responsible for resolving. We do not see why water and electricity should be any different from these other factors might also ruin a business. We do agree with the majority that the landlords should handle the areas that they control directly as well as common areas like bathrooms or corridors where no one particular business owner is in charge. But otherwise, we do not find that the IWH and the attendant remedies should be read into commercial leases.III. Quite often commercial tenants have much more power than their residential counterparts and normally have experience and secure income that we cannot expect from residential lessees in general. While there are some more capable residential lessees, many poor people rent out properties. Since drawing a line between the capability of people renting property between skilled and unskilled is difficult (as the majority pointed out in rejecting the position of the concurring/dissenting opinion), it is proper for these remedies to exist in residential renting regardless of individual capability. On the other hand, the lowest end commercial lessee is far more skilled than the lowest end residential lessee. Thus, we in the dissent are comfortable that these people are capable of negotiating about these terms in their contract.IV. The Majority states that E made a logical assumption that water and electricity were terms that she did not need to negotiate. However, this assumption is a clear indication that these terms did occur to her but she did not bring them up during lease negotiations. In most contract cases, the court has not had much sympathy for people who thought of an issue, chose not to raise it, and then asked the gov’t to protect them. The lesson here is that if one thinks an issue is important, one should raise it and not take anything for granted. This is a basic principle taught to children in grade school we do not find sympathy for an adult ignoring that basic rule. E was a sophisticated party able to negotiate into the lease the landlord’s responsibility for the fountain’s operation. We just do not find any reason to believe that a commercial tenant capable of negotiating matters unique to their business like E and the water fountain cannot negotiate simple and basic terms like water and electricity.V. Finally, the trial court pointed out that the reason why we have these remedies in the first place is that we have a very strong interest protecting housing rights which does not apply to commercial premises. Ultimately housing is a place we retreat to at the end of the day; the one place in the world that an individual should have peace and tranquility. Because of the nature of home, we strongly protect this interest. Commercial life, on the other hand, is a constantly thriving and evolving system based on learning from the shortcomings and failures of others to grow and prosper. Ultimately it is not as sacred and important to us as our home. Furthermore, the commercial world is one where the failure of one helps the growth of another individual. When one business fails, it’s an opportunity for a new one to take its place. Therefore, it needs less protection since the same thing cannot be said about the failure of home. For these reasons, we dissent.

(e) Student Answer #2: This answer displays a nice tight exam writing style conveying lots of strong points in both majority and dissent and a good sense of each responding to the other. I especially like the arguments in both opinions about the relationship between pricing and IWH (including the dissent’s final point), the efficiency of repair arguments in the majority that get nicely tied to both remedies at issue, the

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limits placed on repair-and-deduct, the distinction between E’s two claims, and the dissent’s role-of-the-legislature argument. Majority: Should be Non-Waivable Implied Warranty of Habitability for Commercial Leases with Remedies of Rent Withholding and Repair and Deduct.Best Position to Repair: Argument could be made that business should be financially able and sophisticated enough to contract their own leases. Should be able to hire lawyer. This is true to a large extent but certain minimums should be applied. Reasoning is explicitly shown in this case: sometimes even in commercial interests necessities like water, plumbing, and electricity are integrated part of multi-unit complex. Question should not be: “Should parties be able to contract?” but rather “Who is in better position to repair?” Why? If the parties contract for their own repairs and thus giving a cheaper lease, how is a TNT going to fix an issue that exists outside of the property under their control? Under IWH, LDLD will fix. LDLD has access to entire integrated property and can make repairs to areas outside of TNT’s control that still affect TNT.

Granted, lease prices will increase. But this is like insurance where all parties benefit through guarantees that certain minimums are obtained. Likely evening out costs over time because high prices will be offset by no need to fix and costly repairs offset by higher lease income. Also, large portion of businesses are run by small business owners (SBOs). Questionable how sophisticated and how much money these owners have to have attorney review a lease. Furthermore, would raise the burden on people wanting to start a small business, something which might negatively affect the economy. SBOs would have to master their business as well as be legally informed and knowledgeable about repairs to buildings.

Dissent's opinion that parties should be given absolute freedom to contract is unreasonable. Evolution since common law in early England has slowly recognized the change towards IWH. Nature of buildings has changed from farmland to complex urban environments. IWH first recognized in New York for residential and this is a logical extension of the realization that tenancy has change since the previous no obligation rules.Remedies Allow for Efficient Repairs: Repair and deduct would allow a commercial party to affect the change it needs in the most efficient and speedy manner. No need to wait for LDLD’s earliest convenience (and without intimate knowledge of TNT’s business interests) to call repairman, have repairman coordinate with TNT. Cut out unnecessary steps. Have them contract directly. Possible concerns would be that no incentive for tenant to find cheapest price. Concern is valid. Courts should impose limitation of reasonable price of repairs to prevent fraud. Furthermore, this would simply act as an incentive for LDLDs to act proactively seeking to spot concerns and fix them before they become too costly. Would prevent business disruptions for TNT and encourage active LDLDs and lower prices.

If TNT is unable to make repairs the TNT may withhold rent. This benefits a TNT where they don’t have the financial means to repair, e.g., a large costly electrical issue or don’t have access. In most cases, withholding rent for this commercial IWH will not happen because it is in the LDLD's interest to repair. LDLD benefits from higher leases thus giving them the financial means that the tenant doesn’t have and has the access.Applying to the Facts of the Case: Elizabeth may withhold rent until the water pressure is restored. Likely too costly and too much access to determine where issue is and the appropriate repairs. Also too far outside of her business expertise. Elizabeth's ability to conduct business in the building is severely negatively impacted by the lack of access to a human need like water. Elizabeth may import water but it’s very expensive and unreasonable for an entire floor of a building.

May not deduct the cost of the fountain repair. The fountain is an aesthetic part of the building and does not affect the essential nature of the commercial lease. Elizabeth may still do business in the building even if the fountain doesn’t work. It should be up to the TNT to determine if an aesthetic non-essential item is so important to their business that they must be able repair it and then bargain for the remedy.

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Dissent: There should be no IWH for commercial properties. Freedom of Contract: Commercial parties should be free to contract however they please. An integral part of business is financial responsibility and foresight with business matters. These types of issues generally categorized as business decisions. It should be a business decision whether or not private parties want to assign the responsibility to repair to the landlord or to the tenant and there is no need to force the parties to use terms determined by the court. This gives the parties greater flexibility and keeps costs at whatever level the parties choose. This is very much like fixed price leases. Parties may choose to contract for a lease price over an extended period of time which may end up being significantly higher or lower than the market value for that property.

The majority opinion argues that SBO's should not have to be lawyers, and repairmen as well as businessmen. I would argue otherwise. A smart business owner educates themselves in as many ways as possible to gain whatever advantage she can over other business owners. So a business owner who has invested in her own knowledge should have the opportunity to profit from that knowledge by receiving lower rents. In effect, majority limits business owner opportunities by effectively forcing TNT to purchase insurance, thus making the price higher to lease a property.Leave to Legislature: Need to keep the judiciary from entering into the realm of private business where we have limited experience. If this concern is significant enough that parties are unable to freely bargain for reasonable terms and intervention is necessary then the legislature can step in and make those changes. The legislature will have greater fact finding ability. Furthermore, this is part of the democratic process. If the people don’t like the results of the legislature’s action then they can vote them out and replace them.Application: Elizabeth should not be able to withhold rent and should not be able to deduct the price of repair from her rent because this was not in the original contract. The costs for these repairs has already been deducted from the rent since the beginning of the freely bargained for agreement.

(f) Student Answer #3: This answer has strong arguments on each side, especially about freedom of contract, residential v. commercial, and the meaning of Javins. I especially liked the majority acknowledging some of the strengths of the dissent, the incorporation of some arguments from Javins, and the distinction between IWH and non-essential amenities. Majority: We affirm in part. IWH and the requested remedies of repair and deduct and rent withholding are sufficiently important to protect commercial tenant interests that they CANNOT be waived. However we decline to extend the IWH to non-essential amenities. Thus. E is entitled to withhold rent for the plumbing issues but is not entitled to repair and deduct for the fountain.A. History/Precedent to extend IWH to commercial leases: When we held, like Javins, that the implied warranty of habitability should apply to residential leases, we addressed the shifting changing social and legal times, the necessity of treating leases implying warranties as we do in contract law, and attempting to even out the balance between the bargaining power of landlords and tenants. These concerns apply here in a commercial setting.

The dissent argues that commercial tenancies are necessarily different than residential and the same policy rationales in extending IWH do not apply to commercial contexts. However, to assume that ALL commercial leases involve sophisticated tenants and equal bargaining power is not the reality of the world we live in today. Many new small businesses are forming today and, as Javins contemplated, their relative lack of knowledge and resources are relevant to the justice and fairness issues the IWH was created to address. Although we acknowledge there are times, as the dissent points out, when commercial tenants sufficiently understand the nature of their agreement, we feel the policies supporting protective remedies for residential tenants are important enough to protect tenants in a commercial setting as well.

Here we have a tenant who runs a successful commercial business and yet is not quite the equivalent of a sophisticated party. Can we say the bargaining power is the same? Is the owner of a

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salon/spa who is enlarging their business for the very first time at the same bargaining level as the landlord who runs a very large shopping center? We think it unlikely. These types of relationships are common enough that tenants need the remedies of withholding rent and repair-and-deduct in all commercial relationships. We acknowledge that this will include some parties who don’t need protection, such as a lease from a huge tenant like Target. Yet, just because we recognize that these parties exist does not mean that the landlord should not generally have the obligation to maintain the premises.B. The role of waivers and competing policy concerns: Today, we hold that in a commercial lease, the IWH cannot be waived. Therefore, the remedies of repair-and-deduct /rent withholding will always apply. We recognize that there are costs to this decision. These are strong and serious remedies and that their adoption imposes a burden on freedom of contract principles--the rights of landlords to do what they want with their land--that perhaps might impose hardships on a few landlords that they cannot afford or might be a particularly heavy burden for less sophisticated landlords. Moreover, some sophisticated commercial tenants may want to have complete control and not have the landlord responsible for anything.

However, we feel as though the strong policy concerns for safe and adequate standards [this idea could be developed more] of habitability in commercial contexts outweighs these interests. Tenants are not always at equal bargaining power, and we feel that the fair maintenance of minimum building codes regarding, e.g., running water and electricity, is so important, bargaining for them shouldn’t ever be an issue. If the parties are so “corporate” and “sophisticated” that they would want their own control, then the IWH imposes even less real burden on them. If they are sufficiently well off that the rent allows the landlord to easily maintain the minimum standards, then perhaps the remedies will never even affect them because the landlords will always stay on top of the repairs! Again, our concern is a specific group, perhaps a majority, of commercial leases where the tenant’s bargaining power is NOT at an apex of sophistication and thus, we need to stop the ability of a landlord to simply cut costs and “hide” from the lease terms, as is exemplified in the current case.

We reject the position of the concurring/dissenting judge below that the availability of a waiver for IWH should depend on the sophistication of the tenant. Yes, much of the focus of this dilemma involves the wide range of sophistication of commercial tenants. Here, Elizabeth has been in business for quite a long time. Perhaps she was knowledgeable about commercial leases; she was at least sophisticated enough to demand the lease provisions about the fountain. However, the judge’s standard leads to confusion: Who is a sophisticated party and who isn’t? This standard would unnecessarily give the courts arbitrary power to decide when the parties can waive the IWH terms. If our legislature decides they would like to dictate that we apply this test, we invite them to do so. Otherwise, the situation at hand is not necessary for the court’s to draw lines about which commercial tenants get non-waivable protection and which don’t. We feel that the IWH is so important, every commercial lease deserves protection for it.C. Relevance of minimal habitability and those involving lease amenities: Lastly, we decide that the IWH in commercial contexts should not cover non-essentials like the water fountain in this case. Our acknowledgement that remedies like repair-and-deduct and rent withholding give the tenant increasing power is the very reason we refuse to extend the scope. To do so would skew power too far in the direction of the tenant, but the role of this court is to meet these issues fairly and balance that relationship. We feel that if a nonessential structure is so important to a tenant, then in the commercial setting, they have enough bargaining power to contract for it. Here, the fountain was expressly mentioned as under the landlord’s responsibilities and the typical contract breach remedies would apply. We do not need to issue a judicial declaration extending an IMPLIED warranty to protect tenants regarding these types of non-essentials. To do so would, as the dissent kindly suggests, be a “judicial usurpation of power.”

Dissent: Today the majority upsets the delicate balance in landlord-tenant relationships in commercial leases AND exhibits a blatant judicial usurpation of power over issues that should be left to the political process and legislative discretion.

There are many significant differences between commercial and residential leases. Although the majority does not ignore them completely, they casually brush them aside as though the simple policy

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concerns that our precedent (like Javins) recognized in a residential setting, apply with equal force to commercial leases. They do provide sufficient reasons that residential and commercial leases are the same, Javins mentions the “take it or leave it” situation in many residential leases that exhibits the skewed balance of power. In an economic crisis or general housing shortage, many tenants will not have a choice to negotiate for better terms. They need a place to live, and if they don’t want to responsibility to repair the water pipes, then too bad-so sad. Javins rightly found that this was against the social policy of providing adequate housing to tenants. This rationale was CRUCIAL in determining that the IWH would be implied into residential leases. To simply “extend” Javins in a commercial setting and say the same policy rationale supports it is to miss the fundamental essence of the holding.

Not only does the majority misconstrue the precedent, it also overstates how similar residential and commercial leases are. Commercial leases, by their nature, are to further an economic purpose. The parties on both sides are contracting with their businesses at stake. Commercial leases are usually longer than residential ones, implying a more cautionary role in the tenants mind before signing. If the terms of the contract are not clear, the parties have the responsibility to not base their livelihood on assumptions. Here, Elizabeth signed a 12 year lease and assumed the landlord was going to cover the pipes. Should we reward her for a misconception? It is not essential she lease J-Building. To imply something into the contract terms is not to protect the possible cases (probably far fewer than the majority would like to believe) where commercial tenants actually are less sophisticated. Instead, it merely allows commercial tenants--who are used to running and owning businesses--to gain the benefit of not clearly checking the contract before signing.

Our most IMPORTANT disagreement with the majority is that neither commercial tenants nor landlords can waive the IWH. Yes, this is a world where many smaller businesses are leasing space. However, it is also a world where “mom and pops” are constantly being replaced by Starbucks and Walmart. While their landlords might be capable of handling the maintenance, these tenants have a strong interest in freely choosing the terms they prefer. The court gives this interest mere lip service and claims the importance of IWH trumps all. At least the majority had the sense to limit their rewriting of contract terms to those addressing “essential” minimum habitability standards.

Overall, the purpose of IWH doesn’t apply in a commercial context. I would defer to legislative control on this matter, as there are no great injustices or harms to a commercial tenant that warrant judges stepping in to override contract terms. The remedies available to commercial tenants for the inability of the landlord to supply water (i.e. actual, constructive, partial eviction) are sufficient; there is no need to require repair-and-deduct and rent withholding as non-waivable rights. [This could use more defense.] Thus, I would affirm the trial court’s decision and dismiss E’s complaint.

(10) Review Problem 2K (Lawyering) (S59)Part a: Habitability & Commercial Lease (Available after 3/9 DF Session)Part b: Quiet Enjoyment & JMB Regs (Available after 1st Sample Answers Submitted)Part c: Right to Transfer/Anti-Discrim. (Available after 1st Sample Answers Submitted)

(11) Review Problem 2L (Issue-Spotter) (S59-60)(a) 2L Part a: Tenant Responsibilities and Right to Evict (Available after 1st Sample Answers Submitted)

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(b) 2L Part b: Right to Transfer/Anti-Discr.(1) Was Stated Reason for Refusal Reasonable?

(A) Relevant Legal Background: S is committed under the terms of the lease not to refuse transferees unreasonably. Thus, Funk’s analysis of what to do when the lease doesn’t address this question is inapplicable.

(B) Reasonableness of Refusal: A landlord surely has a legitimate interest in whether the proposed transferee is able to afford the rent payments.2 B has two related points about why S’s decision here was unreasonable, both of which merited serious discussion. First, how reliable is S’s information? E.g., does he have an inside source in the company or did he overhear someone talking on the bus? Second, even if S’s information is correct, how strongly does it indicate that B is likely to have trouble paying rent? The model answers collectively do a nice job addressing the second question.

(2) Was Stated Reason a Pretext for Discrimination? On these facts, B might claim that S discriminated based on race or national origin or religion. You don’t have conclusive evidence as to S’s intent (a fact question), but I expected you to discuss the significance of the evidence you have and reasonable inferences you could draw from it. Between them, the three models make a lot of good points about this claim.

(A) Evidence Relevant to Discriminatory Intent:

(i) B will point to:

the series of awkward comments/responses by S;

B’s non-Western sounding name and non-Christian religion;

the apparent reference to 9/11;

the relatively weak claim re what S has “heard” about B’s employer;

S’s apparent change in tone when B said he wasn’t Christan.

(ii) S will point to

his comment about welcoming “all”

that he went forward with the application process until he determined B’s employer

(B) Additional Evidence You Might Look For: It would be helpful to determine:

If S performs similar background checks on all applicants

How S has treated others with similar employment issues

How S has treated others who he believed had the same religion or national origin as Beshoy.

2 Quite a few students suggested that the strength of S’s interest depended on whether the transfer was an assignment or a sublease, because with a sublease, B would not be in privity with S and JJ would remain primarily responsible for the rent payments. However, JJ remains responsible to S for rent either way and even if B is paying JJ rather than S, if B is unable to pay, S is, in the end, unlikely to get his rent money, particularly where JJ will be out of the jurisdiction.

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(c) Common Errors:

o Several students suggested that discrimination was unlikely because both B and S were non-Christians. However, the circumstances strongly suggest that S thought Beshoy was Arab or Muslim and there is nothing surprising about animosity between Jews and Arabs or Muslims.

o Several students suggested that B wouldn’t have a claim because it was unclear if he was a “minority” or belonged to a “protected class.” This misunderstands how anti-discrimination statutes work. The FHA, e.g., protects everyone from discrimination based on national origin or religion. B wins under the FHA if he can prove that S turned him down because S believed B was Arab or Muslim. S doesn’t get to defend his discriminatory decision by showing that he was mistaken about B.

o Several students incorrectly read Sorenson to hold that the landlord’s statement that he had evicted the tenants because of the race of their friends was legally irrelevant. Instead, the case holds that the statement is evidence of discriminatory intent, but that it is not conclusive, so the landlord is entitled to put on evidence to show his statement was a lie and that he evicted the tenants for some other reason.

(3) Student Answer #1: [This answer is a little disorganized, but includes strong substantive discussions on both parts. On Part B, the student provided the strongest discussion of discrim. in the class as well as solid work on reasonableness.]

Unreasonable Denial of Consent: The LL’s denial of consent to transfer can’t be unreasonable (Lease (Q); also Funk). Funk held that it’s reasonable to deny consent if the transferee will harm the property, or if there were financial concerns about his ability to pay rent; but that it is unreasonable to deny consent based on caprice, personal, taste, sensibility, etc. S’s express reason denying consent was the uncertainty of B’s income. If B’s working for a company w/ financial trouble, that might be a valid reason to withheld consent, b/c of the fear that he’ll lose his job. But just b/c a co. is having financial trouble doesn’t mean B will be laid off. Does he have seniority or is he new? Is he skilled or dispensable? Is the co. going to be sold to a solvent one or is it going totally out of business? B might argue that S had to have made these inquiries before denying consent.

Discrimination: B might also ask the questions about the process S used to come to this conclusion. Does S run a background check on all applicants or just on B, b/c he feared B might be a Muslim terrorist? If S runs background checks for all that would be in S’s favor; if not it’s a Marable situation. Also, S “looked carefully” at the application. Was he making a point to look for justification for rejecting B, or does he apply the same scrutiny to all applicants? Did S know for a fact that B’s co. was having financial difficulties, or was it just a rumor that S conveniently latched on to?

S might argue that he had brought up the conversation about B’s ethnicity not b/c of antipathy to Muslim or Muslim-seeming people, but just out of curiosity, or an attempt to make conversation. As he said “I welcome all people”. Or was the last comment slightly defensive? In almost S’s next breath, he seemed to refer to 9/11, although he stopped in mid sentence, so it not totally clear what he was referring to. S might say that even if he was thinking of 9/11, he wasn’t specifically thinking that B was a terrorist. He might say that he had already determined that B was a good chap, and was making general comments about immigration. Also, S might’ve made the side comment out of general unhappiness with the times rather than out of antipathy to foreigners. As in Sorenson, there might be a conceivable non-discriminatory explanation for his comments. Also, even if S had some fear that B was a Muslim, that

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doesn’t mean that he denied consent to transfer on that basis. S could have genuine honest concerns about B’s ability to pay. Or did S merely discover the potential financial problems b/c he scrutinized B’s application more than those of Jewish or Christian applicants & found a pretext for which he was looking? We don’t have enough info to conclusively determine S’s intent, which is crucial to see if he has been discriminating, which aside from being illegal (FHA), is also unreasonable denial of consent (caprice, personal taste). Both disputants have plausible arguments re S’s intent.

(4) Student Answer #2: [This student demonstrated a good understanding of the legal context in both parts. Part B has pretty good discussion of both major issues.]

Can Refuse Transfer: Courts have held that a landlord is allowed to refuse a transfer on the basis of financial insolvency. Thus, S could argue here that the uncertainty of BY's financial stability has shown up in the past with tenants and it has turned out bad for him. Perhaps BY works for a company such as Enron and S knows that not only will the company go down, but many of the workers will go down with the company also. On the other hand, BY could argue that just because the company might be hurting, does not meant that it is going to go out of business and that he is going to lose his job. BY could work for General Motors for all we know and it might have been hurting for a while, but it is on the upswing now. Further, BY could argue that the economy is cyclical and the company will be back on its feet in no time. Also, BY might have an inheritance or other assets that would keep him solvent even if he did lose his job. The background check performed could have involved a credit check that may have shown BY's solvency, which could support either side of the argument.

Personal Taste: Courts have held that the landlord cannot refuse a transfer based on personal taste. Here BY could argue that when he stated he liked GY's display, it went against S's personal taste and that was the reason that S refused to allow the transfer. On the other hand, S could argue that he was just trying to make conversation and that looking out the window at that display is always on his mind and it was the first thing he thought to say to make conversation with BY. Often a LL wants to make conversation with a potential tenant just to get a feel for what kind of person they are. [MAF: Not lots of evidence to support this claim by B, but an interesting idea and solid analysis.]

FHA: The FHA might support a claim here that S discriminated against BY. BY would argue that by asking how long he has been in this country was questioning what his national origin was. Further, when S began to mention Sept. 11, BY could argue that he was expressing a feeling that BY could be a terrorist or be from an Arab country. Thus, BY could argue that because of his national origin and his religion S refused to allow him to transfer. On the other hand, S could argue that he welcomes all people and even told BY that. Also, he could bring up the racial make-up of his community if there are any other tenants of Middle Eastern descent. Further, with the holiday display fresh in his mind, S might have wanted to get insight into what type of displays a new tenant might make to determine what to discuss in the closing of the lease.

(5) Student Answer #3: [This student also demonstrated a good understanding of the legal context in both parts. Part B is especially good, with very nice two-sided discussions of both major issues.]

Reasonableness: The language of the lease is similar to the language implied in Funk that consent may not be unreasonably withheld. Under that language, concern about payment of the rent is a "reasonable concern". Even if the court were not using Funk, the Yeshiva case told us that concerns that every LL would care about are reasonable and payment is something every LL would care about. Therefore finances is probably a legitimate concern. However B hasn't lost his job yet, he might have savings that could cover him even if he did, so it not a guarantee that he won't be able to pay - seems like a prospective concern not a real one right now. The court could also argue that, in today's economy, every company seems to be having "some" financial difficulties. Further it seems B doesn't have bad credit or anything since his initial background check was fine.

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Discrimination: B might have a strong case againt SS for religious discrimination and may even have a case for national origin. It seems strange that he automatically assumed b/c he wasn't Christian he wasn't born in America. Could be evidence of him being closed-minded to people of B's national origin. Also it is just weird in general: plenty of ppl in the US are not Christian and SS himself isn’t even Christian. SS could argue he told B he didn't have a problem and he welcomed "all people". However, B could argue that this was after he told SS he was an American Citizen. SS also suggested, although he did not not finish his sentence, that you can't be too careful since 9/11, which would indicate some sort of discomfort he has with renting to non-american citizens who could "look" like they were from a Muslim Country or of national origin of some "terrorist" country. Lastly, the fact that SS looked "carefully" when he ran an intial background check could hint that he was searching for a reason to decline him that would mask his true feelings. This would depend on whether he looked this extensively into other Ts. SS could argue that today's real estate market and economy ensure than a LL has to go through extra precautions.

(F) Tempest at the Teapot (S54-56): Comments & Best Answers(forthcoming)

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