Lease Concessions

Lease concessions are the financial incentives, lease terms, and conditions that a landlord may use as incentives to move a prospective or existing tenant forward at rent-up or renewal to initiate or renew a lease agreement.

Lease concessions may also be called rent concessions, landlord concessions, or tenant inducements. A lease concession is any benefit a landlord offers as part of lease negotiations to accommodate a tenant in making a rental decision, as example, a rent discount.

Should a landlord offer a lease concession? The reason most cited by landlords in offering a lease concession is simply that a concession is a business decision that allows a vacancy to be filled as quickly as possible, as vacancies also cost money.

Local market conditions often drive a landlord to offer lease concessions to remain competitive with other housing providers in the area. For landlords with rental property in less desirable neighborhoods, a lease concession could attract renters who may not otherwise consider the property.

Property location cannot be changed but property condition can be. If a landlord is in the process of renovating his property, a lease concession may be offered to tenants to offset any inconvenience until construction has been completed. Or, if the condition of the rental property cannot be effectively changed, as example, the property is in escrow to a new buyer, a lease concession of flexible lease terms may fill an unexpected vacancy until escrow is closed and planned updates completed.

Understanding the rental market supply and demand conditions and the local demographics aids a landlord in his business decisions for lease concessions. A change in rental policy should be a strategic business decision that makes good business sense. Lease concessions should not be offered routinely or without regard to the business bottom line. Small changes in the market do not necessarily call for automatic across the board policy changes by housing providers.

Landlords should consider lease concessions as a tool to help manage their properties. A lease concession to the tenant is an expectation of value returned to the landlord. Without mutual benefit, the landlord has exposed his business to potential loss or liability. Concessions should not be wasted on installing a tenant who is not fully qualified to usual rental standards. The tenant will fill a vacancy but there is likelihood the tenant may default once the benefit of concession has been expended.

Rental surveys in many markets show housing affordability is the most important criteria to renters when considering a move. A lease concession that allows the tenant to better manage his rental expenses will generate more interest than any other type of rental incentive.

Types of Incentives

The following types of incentives are some of the most common lease concessions. A landlord can choose to offer the type of concession that is most effective for his business and the market served.

Rent discount

A tenant may request a lower monthly rate as a discount for signing a multi-year lease. If the tenant defaults on the lease, moving out before lease expiration date, a landlord has lost rent by having offered a lease concession and has an unexpected vacancy. A landlord may want to consider including a clause in the lease regarding tenant default on concession terms stating what remedies will be taken to cure the default.

Free month of rent

For some tenants a lease concession of one month of free rent is very attractive, particularly if they have problems coming up with required deposits, fees, and rents at move-in. However a landlord should make sure his lease terms and conditions clearly state how this concession will be applied and what the renter must do to earn the concession. For example, the free month of rent may be earned after the tenant has paid full and timely rent for the previous 11 months. Tenant screening of the renter’s financial ability to pay should always be conducted.

Flexible lease terms

Many landlords offer fixed-term leases, usually for a term of one year. A landlord could be willing to offer a shorter term lease or to consider a month-to-month agreement.

Security Deposit

A lesser amount of a security deposit amount or a waiver of security deposit may be a concession for larger rental complexes but is not a good business practice for an independent landlord. A security deposit is the landlord’s protection against a tenant’s property damage or unpaid rent. Waiving the deposit or allowing the tenant to pay less than one month rent is risky business. If a new tenant is unable to pay required fees, deposits, and rents at time of move-in, it could be a red flag to the landlord of potential rent default after move-in.

A landlord might consider a tenant’s request to pay the security deposit amount in monthly installments. This could indicate a cash flow problem and usually is not a good business practice. Be aware however that some states do address this issue by statute and the tenant is allowed to pay the security deposit in installments in compliance with statute provisions.

Property upgrades

Improvements to the rental property can be attractive to many tenants particularly so for tenants renewing their lease or considering a renewal. Property upgrades benefit both the landlords and tenants and can contribute value to the rental property. Upgrades can be a landlord’s choice or a tenant may be able to choose from a list of landlord offered upgrades.

Online Tenant Services

Online tenant services make it easy for tenants to pay rent, schedule maintenance, report items needing repair, and communicate with a landlord. Rather than a lease concession, online tenant services are incentives to conduct business efficiently and effectively over a variety of devices. For some tenants a tenant portal is a requirement for their lifestyle.

Documentation

A landlord who provides a lease concession as a tenant incentive should make sure that documentation is kept of relevant information, acknowledgement, and delivery of the concession. An offer must be provided to eligible tenants in a fair and consistent manner to avoid claims of discrimination. Additionally it can be a best practice to keep records by date and detail of offers made, responses received and confirmed acceptances. The records should include a copy of the offer as published or communicated in any media, including dates advertised, beginning and ending date of the offer and terms and conditions of the offer.

The lease agreement should include clear language regarding a concession, details of the terms and conditions to earn the concessions, and the available remedies if the terms and conditions are not met by the tenant.

Notification and Disclosure

A landlord should conduct due diligence to determine if his property is covered by state and local laws regarding requirements for notification and disclosure of tenant incentives or lease concessions.

As an example, in the state of Illinois, the Illinois Landlord Tenant Act includes a Rent Concession Act (765 ILCS 730/).

Sec. 1. That the purpose of this Act is to regulate the prevalent practice of making or using written leases of real estate, which, because of concessions to the lessees, do not truly state the real net rent being paid, it being recognized that such practice can be, and frequently is, used to mislead prospective purchasers and lessees, and lenders of money on the security of such real estate, into a belief that the rental value or market value thereof is greater than it really is.

Sec. 2. A rent concession is made within the meaning of this Act, when, in case of a written lease of real estate or a part thereof, the lessor before or at the time the lease or any agreement therefor is entered into, and in consideration of such lease or agreement therefor, directly or indirectly, gives, or agrees or promises to give, to the lessee, without express mention thereof in the lease, any of the following: (1) any credit upon the rent reserved by the lease between the parties, or rebate of such rent or any part thereof after payment thereof by the lessee, or (2) the right, privilege or license to occupy the leased premises for a period other than the term created by the lease, rent free or for a rent less than the average rent fixed by the lease for the entire term, or (3) any other valuable thing, right or privilege.

Sec. 3. When a rent concession shall be made in the case of any lease hereafter entered into, it shall be the duty of the lessor, at the time or immediately after the lease is made, to cause such lease to bear a legend across the face and text thereof plainly legible and in letters not less than one-half inch in height consisting of the words “Concession Granted,” and to bear a memorandum on the margin or across the face of such lease stating the amount or extent and nature of each such concession, and any failure on the part of a lessor so to do shall be unlawful and a violation of this Act.

An employer’s practice of at-will employment is an employment agreement between employer and employee that may be terminated by either employer or employee at any time without notice and without any reason (cause). Unless there is specific company documentation, oral or written, that the company policy is employee termination for cause, the law presumes that most employment is at-will employment.

However the employer does not have carte blanche regarding employee terminations. The employer cannot terminate an employee for illegal reasons. At-will employees have rights and protections by statutory exemptions and common-law exceptions to an employer’s at-will employment practice. An employee can choose to accept at-will employment and is free to voluntarily terminate his employment at any time without notice, for his own reasons.

Statutory Exceptions

Federal, state and local anti-discrimination statutes are statutory exceptions to the employment at-will doctrine. Title VII of the Civil Rights Act of 1964 prohibits employers of 15 or more employees from basing employment decisions on an employee’s race, color, religion, sex, or national origin. The Fair Housing Amendments Act (FHAA) provides further protection against discrimination based on disability and familial status. Other federal statutes such as the Age Discrimination in Employment Act (ADEA) and the Americans with Disabilities Act (ADA) also provide anti-discrimination protection for at-will employees.

State statutes and local ordinances in many jurisdictions provide greater anti-discrimination protections than federal laws. Federal, state, and local laws protect at-will employees from termination, suspension, or other work reduction as employer retaliation against an employee for exercising rights under employment or labor law, reporting employer discrimination, reporting health and safety violations, or other issues in the workplace.

Common-law Exceptions

Common-law exceptions to at-will employment are in addition to statutory exceptions. The three major common-law exceptions are public policy, implied contract, and implied covenant of good faith and fair dealing.

Public Policy Exception

The public policy common-law exception is recognized by most states but criteria for violations of public policy can vary significantly among states depending upon how broadly the exception is construed.

Employees are protected against adverse employment actions that violate a public interest. Most states consider only public policy expressed by statute or state constitution, while a few states allow public policy to include administrative rules and regulations, professional codes of ethics, or civic duty.

Public policy exceptions may include reporting a violation of the law, exercising a statutory right, refusing to perform an act that state law prohibits, and engaging in acts that are not in the public interest. As examples, public policy violations could be termination of an employee for filing a workman’s compensation claim, filing a safety (OSHA) complaint, serving on a jury, or being called for military duty.

Implied Contract Exception

The exception of implied contract of employment is recognized by most states, but even where recognized may not be easily proved by a dismissed employee. However implied contracts can be created by oral assurances by an agent of the employer, by employee documents such as handbooks, policies, or practices or other written assurances by the employer. The employment relationship may have begun as an at-will employment with no express written agreement, but the employee may have gained an expectation of a fixed term employment based upon oral statements by supervisors, employer actions, or written employer policies adopted during the employee’s term of employment.

Implied Covenant of Good Faith and Fair Dealing

Some states recognize an implied covenant of good faith and fair dealing in employment relationships. The exception noted in this implied covenant is the understanding that the parties in the employment relationship will not treat each other in an unfair manner or act in bad faith toward each other. Thus an employee’s termination should be for cause and not for arbitrary reasons.

Courts have found employers in violation of this covenant of good faith when employees are terminated to avoid employer responsibilities in paying for employee healthcare, retirement benefits, or commissions.

Terminated employees could use this exception when filing suit against the employer for wrongful termination with no other evidence to the contrary of an implied oral or written contract.

Wrongful termination or wrongful dismissal is commonly understood to be an unfair employment termination. As noted above, wrongful termination could result from employer discrimination against a member of a protected class, as retaliation for an employee action, or from an employee’s refusal to commit an illegal act for the employer. In addition, wrongful termination could be as a result of the employer failing to follow his own stated termination policy and procedures.

However not every termination is unfair and not every unfair termination constitutes wrongful dismissal. The employer must have illegally terminated the employee for the dismissal to be considered wrongful termination. If the termination is not deemed illegal, then, it is not wrongful termination no matter how unfair it might seem. Wrongful termination can be claimed in the employment at-will relationship and under contractual employment agreements.

Filing a claim of wrongful termination can involve a variety and complexity of issues, including filing claims with government agencies or filing private lawsuits. If the claim of wrongful termination is upheld, the employee could be entitled to compensatory damages, injunctive relief, punitive damages, attorney fees, and/or reinstatement.

The presumption of at-will employment can be changed through contractual agreement between employer and employee by specific terms of employment or by allowing termination for cause only.

Just Cause Termination

Just cause termination is dismissal of an employee for a legally specific reason referred to as good cause, lawful clause or sufficient cause, to prove the employer’s right to discipline or terminate an employee.

An employment contract may specifically outline the situations or employee actions that would lead to termination for cause. Cause generally includes reasons such as unsatisfactory employee performance, employee misconduct, or employee negligence.

Employment Contract

The presumption of at-will employment can be modified by an employment contract that provides for a specific term of employment or allows termination of an employee for cause only.

An employment contract is a negotiated agreement between an employer and prospective employee that recites the obligations of each party, employment terms and conditions, and details of the employment such as employee start date, wage/salary information, and benefits. When the employment contract is signed, it becomes a legal document binding the parties to the employment terms.

An employment contract should specifically address the employment terms and conditions of employee termination. A prospective employee can negotiate language in the employment contract that provides protection for employee from termination without cause. Employment contracts may specifically address situations or actions that constitute employee termination for cause.

An employment contract can include various agreements that more fully define employer and employee obligations. As examples, an employer may require the employer to sign acknowledgement of:

• A confidentiality agreement
• A non-compete agreement
• An assignment of intellectual property agreement
• An exclusive employment agreement
• Agreement to use arbitration or mediation for dispute resolution

If an employment contract is terminated by the employer before contracted end date, the employer has breached the employment contract. The employee may be able to bring a claim for wrongful termination due to breach of contract.

Best Practices

Employers that utilize at-will employment practices should ensure that such practices are clearly detailed in all company documents and articulated by company personnel in clear understandable language so that employees are knowledgeable about the employment arrangement before consenting to at-will employment.

Best practices for an employer include legal consultation in general regarding employment policies and termination policies in particular and have procedures in place to accurately and thoroughly document employee records for performance and disciplinary issues. Employee termination as an appropriate course of action by the employer should be documented following thorough investigation of facts. All employee disciplinary actions including termination should be conducted in a fair, consistent, non-discriminatory manner as applicable to every employee.

At-will employment offers an employer flexibility to manage his workface. An employer can change the terms of the employment without notice in response to market conditions and business necessity.

As necessary, when needing to terminate an employee, at-will employment offers a more efficient release process without the need for lengthy legal resolution. If the employee clearly understands the at-will employment arrangement and consents to the employment agreement, both employer and employer have a mutual working relationship until either employer or employee exercises the right to terminate without notice.

A purchase offer contract should protect the interests of a buyer by including adequate contingency clauses for seller disclosures and property inspections. The seller should be required to provide copies of all relevant documentation related to all issues that are material factors in a buyer’s decision of whether to own the property for the price that will be offered. The buyer theoretically would have legal recourse against the seller if the seller provides false or misleading information or does not provide information material to the sale.

Contingency clauses for inspections should include a physical inspection of the exterior building and related structural and mechanical systems. Inspection of the interior of rental unit(s) should be scheduled early in the due diligence period to determine the general physical condition of the unit(s). Existing conditions should be noted for damage, repair, or replacement. A copy of the tenant’s move-in checklist can confirm the condition of the unit at time of move-in. You will want to determine that the condition of the rental unit, if damaged, will be covered by the tenant’s security deposit upon the tenant’s move-out.

The offer should require that the seller confirm that there are no lawsuits, regulatory agency actions, or other claims pending against the property related to previous or current tenants not previously disclosed in writing and require a warranty that the seller has complied with federal and state lead laws and other potential contaminants. It should require that the seller provide copies of required disclosure documents for existing tenants under federal, state, and local laws and copies of all inspection reports conducted by state and local agencies for health and safety requirements. You should also request copies of current fire safety and building code inspections as well as other inspections or requirements by subsidized housing assistance programs such as Section 8. The purchase offer contract should require that the seller provide copies of documentation related to complaints by other tenants, neighbors, and government agencies regarding any tenant.

The most important documentation in buying tenant occupied property is to request copies of all rental documents, including lease agreements; security deposits accounting, rental rules and regulations; other policy statements issued by the seller to tenants; rent payment histories; application forms, screening reports, and move-in checklists. If the property currently has a resident manager, the employment contract and associated lease agreement as well as instructions and policy statements related to management should be requested.

To further reduce risk of potential problems after-closing, you should consider execution of Estoppel Certificates by all tenants as a contingency in the purchase offer. An Estoppel Certificate is a document signed by a tenant that (1) affirms the lease documents (attached to Certificate) and the deposit/rent amounts; (2) confirms that there are no agreements outside of the attached documents; and (3) confirms the amount of security deposit, the current rent, and the date to which rent has been paid. In addition to verifying information provided by the seller, the Estoppel Certificate stops the tenant from making claims regarding the included issues after close of escrow.

Since you will be responsible for the accounting and return of tenant security deposits upon existing tenant move-out, the purchase offer contract and any subsequent escrow instructions should explicitly state that you, as the buyer, must be credited with the tenants’ security deposits at close of escrow. The seller should also be required to provide a signed letter at close of escrow notifying the tenants that the property has been sold to you as the named buyer.

The most common way to provide tenants with notice of a change of ownership is for the seller to confirm in writing at close of escrow that a transfer of ownership has been completed. The notice should provide the buyer’s name or entity, contact information, and any other information that the buyer wishes to provide. Tenants will understandably be anxious about the new ownership, whether their lease is still in place, and the possibility of potential rent increase. The notice of sale can be helpful to reassure tenants with fixed term leases that their current lease is in effect through the contracted lease expiration date and that their security deposits have been transferred to the new buyer. Tenants should be advised to contact the new owner directly with any questions or concerns.

In some localities, a landlord is required to provide written notice to the tenants of a change in ownership and/or management. There may be a requirement that the notice be provided within a specified number of days following close of escrow. You would need to research applicable laws for the location of your rental property to determine legal compliance.

In real estate, a right of first refusal agreement allows a buyer and seller to enter into an arrangement by which the potential buyer is given first opportunity to purchase a property before the seller considers any other offers. The right of first refusal can be a complex matter with contingency issues, such as deadlines, limitations, obligations, and purchase price. All parties to a potential agreement should consult with an attorney to understand all issues before entering into an agreement.

It is beyond the scope of this forum to provide adequate detail for a right of first refusal agreement. Information provided in this article should not be construed as legal advice. Readers are advised to conduct their own research on the issue. However it may be necessary to conduct research depending upon the location of your rental property. In researching this issue as a general matter, we found that in Maryland, Baltimore City has a law granting tenants the right of first refusal. The law provides that before the owner of a single-family residential rental property sells or transfers the property to another, the current tenant has the opportunity to purchase the property on commercially reasonable terms (Subtitle 6 of Article 13 of the Baltimore City Code).There may be other localities that have similar laws.

In general, as a landlord-tenant consideration, a right of first refusal clause would be written into the lease agreement between landlord and tenant. In simplest terms the landlord, in compliance with the agreement, must offer the tenant the opportunity to purchase the rental property before he, the landlord, can negotiate with other potential buyers. If your lease agreement does not specifically address the right of first refusal, you have no obligation to offer special considerations to the tenant. If the tenant is interested in purchasing the rental once the listing has been placed with your real estate agent, the tenant can make an offer as would any interested potential buyer.

Is a landlord liable when a tenant’s dog bites someone? The concern about landlord liability for injury to persons caused by a tenant’s dog often underlies a landlord’s decision whether to allow pets on the rental property. A landlord does have a valid concern about dog bite liability. The number of dog bite claims increases each year and, correspondingly, increased costs for victims’ medical care and awarded settlements.

Data has shown that more than half of dog bite injuries occur at the home. More than two-thirds of U.S. households have pets, with the majority of those pets being dogs. Many of these households are renter households. Pet-friendly rental properties are priority when these households move within the rental markets. A landlord must weigh the potential risks of a pets welcome rental policy against a potential extended vacancy of pets not allowed rental policy.

A dog bite victim’s medical costs are usually reimbursed through the dog owner’s homeowner insurance policy. When the dog owner is a renter and does not have adequate renter insurance coverage, the dog bite victim may choose to include the landlord as a defendant in a personal injury lawsuit. A landlord is perceived as having deeper pockets, i.e., more assets and better insurance coverages than the typical tenant dog owner.

Generally, landlords are not automatically held liable for dog bites. However, landlords have a duty of care responsibility to take reasonable measures to ensure their tenants’ safety and security on the rental property. An incident of a dog bite injury requires investigation of the facts to determine whether the landlord performed to his duties and responsibilities for tenant safety.

Landlords can be held liable when their actions or their failure to act increases the risk for injury or damage from an aggressive or dangerous dog attack. A landlord could be held liable if the landlord had actual knowledge that the dog was dangerous or that the landlord should have known that the dog was a threat to others. As example, if the landlord was aware that the dog had a history of aggression (previously bitten or attacked someone) yet the landlord allowed the dog to remain on the rental property, knowing that the dog could endanger the safety of other tenants, visitors, or general public, the landlord could be held partially liable for future incidents of dog bit injuries or damage.

A landlord could be held liable if he failed to warn all tenants and visitors that there was a dangerous dog on the rental premises. If the landlord knew that the dog posed a threat to others but the landlord did not have legal authority to remove the dog from the rental premises, the landlord must take appropriate actions for warnings of danger, as an example, by posting Beware of Dog signs on the rental premises.

In situations where the landlord had actual knowledge that the dog was dangerous and posed a threat to others but the landlord did not exercise his authority to remove the dog from the rental premises, the landlord could be held liable for injury and damage caused by the dog. For landlords that offer pet friendly rentals, the tenant should be required to acknowledge in a signed pet addendum that if the dog displays vicious, aggressive behavior towards others that constitutes a threat, or becomes a nuisance, the tenant must remove the dog from the rental premises. If the tenant failed to remedy the situation, the tenant breached the lease and is subject to legal action as detailed in the lease terms and conditions. If the landlord’s failed to enforce his lease terms and conditions for landlord removal of the dangerous dog, the landlord is negligent and could be held liable for any injury and damages.

A landlord could also be held liable if the landlord assumes responsibility to care for the tenant’s dog in the same manner as if the dog belonged to the landlord. By the landlord’s actions, such as feeding the dog, walking the dog, etc., or exercising any control over the dog, the landlord inherits the same liability as the dog owner’s actual liability for the dog’s behavior.

If the landlord fails to maintain the rental premises to a safe condition, which allows the tenant’s dog to escape the rental unit or rental property, and the dog bites someone, a landlord could be held liable for negligence if the landlord knew or should have known about a property defect or item needing repair. The landlord’s failure to maintain the property incurred liability for the injury even if the injury did not take place on property owned by the landlord.

While there can be some amount of risk of liability lawsuits against landlords whose tenants are pet owners, particularly dog owners, there are some risk management measures that can mitigate landlord liability for dog bite incidents.

Due Diligence

A landlord should know the applicable laws regarding landlord liability for the location of the rental property. This includes knowing whether local ordinances prohibit certain breeds of dogs considered dangerous, vicious, and aggressive.

Landlord Liability Insurance

It is always a best practice to periodically review landlord insurance coverages particularly liability coverages. A landlord must maintain the proper amount of insurance coverage to protect his business. Understanding what is covered by insurance and what is not covered by insurance such as policy exclusions and limitations, is a business necessity to adequately protect business interests, defend against claims, and formulate rental policies and practices. The type of coverage and amounts of coverage should include liability coverage for dog bite injuries and other animal liability coverage. It is a good idea to review policy exclusions on dangerous dog breeds to make sure rental pet policies are set accordingly. If a landlord knowingly allows a tenant to have a dog on the rental property that is one of the dangerous dog breeds excluded by his insurance company, a landlord risks being financially responsible for injury and damage caused by the dog.

Tenant screening

A landlord can help protect his business by conducting adequate tenant screening through previous rental history screenings, landlord references, and applicant interviews. Prospective applicants should be advised of the rental policies regarding pets. Pet ownership and the type, breed, size, and weight of a pet can be requested on the application form. As applicable, a landlord may want to meet with the pet and review the pet’s health records, licensure, and/or registration before approving the application. A pet addendum attached to the lease agreement should detail the rules and regulations for having an approved pet on the rental premises.

Renters insurance

As applicable by statute, a landlord should always require as a condition for tenancy that the new tenant purchase renters insurance to protect the tenant’s personal property and provide liability protection for the tenant. It should be made clear that the landlord’s insurance coverages will not provide coverage for the tenant’s personal property from loss or damage or provide liability coverage for injury to others. When the tenant is also a dog owner, the renters insurance should include canine liability coverage. If the tenant’s dog causes property damage or injury to someone, the tenant must look to his renters insurance for coverage.

Lease agreement

The lease agreement is the governing document for landlord-tenant duties and responsibilities. When approved pets are allowed on the rental premises, rules and regulations regarding pet ownership and conduct should be detailed in a pet addendum. Additionally the pet agreement should detail what is considered a lease violation and what remedies will be taken to cure a violation.

As noted above, a lease agreement should specify the type, species of animal, size, and weight limit of a pet, as well as restrict the number of pets per tenant household. Landlords should always prohibit any animals that are excluded from liability coverage under the landlord’s insurance policy, for example, dog breeds that are considered dangerous and aggressive. Before completing new tenant orientation a landlord should review pet owner duties and responsibilities with the tenant and have the tenant acknowledge his understanding of the terms and conditions of the lease including his pet responsibilities.

Property Inspections and Maintenance

Regular property inspections for maintenance and repairs and safety inspections as required by state and local agencies provide a means to discover property damage caused by pets before the damage becomes a larger problem requiring repair or replacement. Additionally regular inspections could uncover a health hazard regarding pet ownership and care that should be addressed promptly for safety and health reasons of the tenant and neighboring tenants.

A warning notice, oral or written, may be appropriate for a tenant’s first time violation of a lease term or condition that is not a material default of the lease or a potential threat to neighbors or property. A tenant whose previous behaviors have never been a problem may be responsive to an oral request by a landlord to remedy the situation. A landlord should document in writing the details of the landlord-tenant conversation regarding the lease violation and what the tenant must do to correct the violation. A copy of the writing should be placed in the tenant’s file.

A landlord could instead send a written warning letter to the tenant that provides details of the problem behavior including date and time of the violation; the expected corrective action to be taken by the tenant to remedy the problem; citation of the specific lease term or condition that has been violated; and the consequences if the tenant fails to take corrective action for compliance.

A warning letter can be effective in some problem situations but in many other situations, it only serves to delay serving the inevitable notice of termination of tenancy. A warning letter as an informal writing does not qualify as a formal termination notice. Property management experience may serve to guide the landlord toward the most appropriate and/or effective type of notice for the tenant problem behavior.

If a tenant has repeatedly violated terms and conditions of the lease, it is very likely a warning letter will not produce the desired change in the tenant’s behavior. If the problem situation involves dangerous behaviors such as criminal activity, drugs, or threats of violence, a landlord should immediately begin the termination process to end the tenancy.

Tenants who choose to ignore a warning letter or refuse to comply with lease terms and conditions will need to be served with a formal notice for termination of tenancy.

A landlord will need to research state landlord-tenant statutes and local city and county ordinances specific to the location of the rental property to determine whether air conditioning must be provided by law.

States and local jurisdictions may address the issue differently depending upon whether air conditioning is considered an essential service required by the implied warranty of habitability or an amenity provided by the landlord for the benefit of tenants at the property.

The implied warranty of habitability is a legal doctrine in most states that requires landlords to offer and maintain leased premises in a safe and sanitary condition fit for human habitation for the duration of the lease. Provision of housing in a safe and sanitary condition includes the provision of essential services defined by state statutes. A common essential service by most states’ statutes requires a landlord to supply water, hot water, and heat in reasonable amounts to provide fit and habitable housing. Only in a few states is the landlord specifically required by statute to supply air conditioning as an essential service. A requirement for air conditioning may be further addressed by local city and county ordinances. Local health and safety codes may require the landlord to supply air conditioning or similar air cooling service as a climate-related responsibility of the landlord to provide heat or cold necessary for fit living conditions.

Many landlords offer air conditioning as a rental amenity for the tenants’ benefit. The lease agreement should provide details of amenities supplied by the landlord including appliances or as permanent fixtures of the premises operating systems. This would include air conditioning provided by a central HVAC system, evaporative cooler or other cooling device such as a stand-alone air conditioning unit.

A visual inspection of the rental property exterior and interior spaces is one of the most effective ways to detect a moisture problem and/or the presence of mold. Although visual signs of mold are not always obvious, the musty smell of mold is another way to discover moisture problems. Mold can grow on the hidden surfaces behind paneling and wallpaper; the top of ceiling tiles; beneath carpet and pad; or inside heating and cooling ducts. Attics, crawl spaces, and basements provide many opportunities for mold growth. Areas inside the wall around plumbing or heating/cooling ducts may trap condensation and cause water damage. Hidden mold growth should be investigated cautiously since there is the potential to release new mold spores into the air causing additional problems.

Some of the ways to control moisture to help prevent mold include:

• Inspect and eliminate water leaks by repairing leaky roofs and windows.
• Repair leaking plumbing and plumbing fixtures and control sweating plumbing.
• Repair leaking plumbing and plumbing fixtures and control sweating plumbing.
• Maintain caulking associated with showers, bath tubs, and sinks.
• Inspect under-sink shutoff valves, usually hidden from view in kitchen or bathroom cabinets.
• Inspect toilets – wax rings under bowls, seals between bowls and tanks, and shutoff valves.
• Inspect valves and lines associated with air conditioning and evaporative cooling units.
• Be concerned about water-related appliances, including proper venting of clothes dryers.
• Move water away from the building foundation utilizing ground sloping and drainage systems.
• Install gutters and keep them clean.
• Ventilate crawl spaces. Cover over the dirt in crawl spaces with plastic to serve as a moisture barrier from the soil underneath.
• Inspect and maintain HVAC equipment, keeping drip pans clean and the flow unobstructed.
• Prevent condensation by increasing surface temperatures using insulation, increasing air circulation, and/or reducing humidity.
• Avoid installation of carpeting directly over concrete floors.
• Install and use exhaust fans in bathrooms, laundry rooms, and kitchens. Open windows in these rooms when available and as weather allows.
• Use fans to increase air circulation within the home.
• Move large pieces of furniture away from wall corners and the inside of exterior walls.
• Provide warm air circulation to all areas of the home.
• Open doors between rooms and keep closet doors open to promote air circulation.
• Ventilate areas with fresh air.
• Watch for condensation or wet spots.
• Keep indoor humidity low, in the 30-50 percent range if possible.
• Use air conditioning and dehumidifiers to reduce moisture in hot, humid climates.
• Use area rugs that can be taken up and washed instead of carpeting that can absorb moisture that will encourage mold growth.
• Always clean and dry wet or damp spots as soon as possible and always within 48 hours.
• Vacuum and clean household areas regularly.
• Eliminate leakage around windows and doors.
• Avoid cold spots on interior walls by proper placement of ducts.
• Install ceiling fans and consider forced air heating where not already in place, as they increase air movement which inhibits mold growth.
• Install exhaust fans in areas that have moisture sources (replace non-working existing ones), e.g., bathrooms, laundry room and kitchens to improve ventilation.
• Perform regular inspections to be sure that tenants themselves are not creating problems by failing to cooperate in using available fans, reporting leaks, etc.

A landlord’s business decision to allow pets on rental premises is an individualized assessment of potential risk of property damage and increased risk of liability for injuries caused by pet behaviors. Pet behaviors, such as chewing, scratching, and marking interior surfaces like carpets, flooring, and woodwork can cause serious property damage. Exterior landscaping can be destroyed by destructive digging behaviors of pets. Pet odors and unsanitary conditions can create waste and nuisance problems on the rental property. Noise from animals can be disruptive to neighboring tenants and excessive noise may violate tenants’ rights to quiet enjoyment of their rental units. Tenant complaints may become more frequent if the noise and disturbance are not properly addressed by the landlord through enforcement of terms and conditions of the pet agreement. Landlord insurance coverages may need to be increased to provide greater protections against claims of injury or damage.

If the business risk is unacceptable, a landlord can set a No Pets policy for his properties. If business risk is acceptable, a landlord can set a Pets Allowed policy that details the terms and conditions for pets on the rental property.

Landlords who have pet friendly properties address concerns of risk through appropriate lease clauses, the use of detailed written pet policies, written pet agreements, and pet deposits, fees, and rents. For many landlords, having pet friendly rental policies can translate into a larger applicant pool, reduced time to rent, lower tenant turnover, and potential for additional rental revenues.

In general, a tenant does not have the right to have an unauthorized pet in his rental unit. Pet ownership is currently not a protected characteristic under fair housing protections. However, landlords as housing providers under the federal Fair Housing Act are required to provide reasonable accommodation to persons with disabilities who require assistance animals. Emotional support animals are considered assistance animals under fair housing guidelines. Accordingly, a landlord must grant reasonable accommodation to a tenant with an emotional support animal even if the landlord’s rental policies prohibit pets.

All tenants, even if they do not have a pet at the time of move-in, should be required to sign the lease agreement containing a pet clause and, as referenced, a separate lease addendum detailing terms and condition of a pet agreement. This alerts tenants that should they want to have a pet at a future date, they will need to comply with lease terms and conditions to move an approved pet into their household.

It is important to address the issue of pets on the rental property in the landlord’s lease agreement. Without an applicable lease clause for pet rules and regulations, there would be nothing to prevent a tenant from keeping any number of pets, and any type of animal on the rental premises without landlord permission.

To be legally enforceable and effective for animal control, pet policies, rules and regulations must be written, specific in nature, and detailed sufficiently in a clear and unambiguous language to adequately protect property, other tenants, and control pet behavior on the property. Pet ownership duties and responsibilities by tenants during their tenancy should be detailed in the pet agreement.

There are many issues to consider when setting adequate pet policies. A landlord should clearly disclose in writing his pet policies to applicants and tenants regarding information and notification requirements for pet ownership during a tenancy. Most pet owners have a domestic cat or dog as a pet, sometimes birds, fish or other small mammals. A landlord’s pet policies can specify the type, species of animal, size, and weight limit of a pet, as well as restrict the number of pets per tenant household. Landlords should always prohibit any animals that are excluded from the liability coverage under their landlord insurance policy, for example,  dog breeds that are considered dangerous.

Pet policies should clearly state that only approved pets of tenants will be allowed on the rental property. A pet policy can prohibit tenants from pet sitting for friends or family and prohibit guests from bringing their pets onto the property.

Having a pet and having an approved pet are entirely different issues that must be clarified with applicants and tenants. Pets must be approved by landlord written authorization before being allowed to move into the tenant household.

A landlord can set pet qualification and approval standards. As examples, a landlord can require all pets to wear identification tags or collars; require proof of required vaccinations, licenses, and registrations per local ordinances; require pets to be spayed or neutered; and require pets to be house trained. Landlord approval of pets is conditional upon the tenant’s compliance with the terms and conditions of the pet agreement. Material violations of pet policies and rules and regulations detailed in the pet agreement may result in landlord action to request removal of the pet from the rental property or legal action to terminate the tenancy.

A landlord’s pet policies should make tenants responsible for their pets. Tenant duties, pet rules and regulations should be clearly detailed in the pet agreement. Some of the common tenant responsibilities include:

• Tenant has read, understood, and agrees to comply with landlord’s rental policies regarding pets.
• Tenant shall be responsible for pet at all times.
• Tenant agrees to keep pet under full control at all times.
• Tenant agrees to keep pet restrained by hand-held lease or in pet carrier at all times on or off the rental property.
• Tenant agrees to take all reasonable measures to prevent/prohibit pet from creating a nuisance, disturbance, or annoyance to neighboring tenants.
• Tenant agrees to not leave pet unattended for an unreasonable period of time.
• Tenant agrees to clean up after pet and properly and promptly dispose of pet waste inside and outside the rental premises including any and all common areas.
• Tenant agrees to not leave pet food or water outside rental unit where it may attract pests or other animals.
• Tenant has disclosed any and all pets in the tenant household. Tenant agrees to request prior landlord written approval of any additional pet or substitute pet.
• Tenant acknowledges financial responsibility for damage, loss or expense caused by pet.

Regarding the last item above, in general, a landlord can hold a tenant responsible for any damages caused by the tenant, by members of the tenant’s family, by guests of the tenant, by agents of the tenant, and by animals brought on to the leased premises. This includes damages to property of the landlord inside and outside the tenant’s particular rental unit, damages to common areas, damages to property of other tenants, and damages to property of visitors to the property. Also included are injuries caused by any of the listed persons or by their animals.

Pet policies can include requirements for additional deposits, rents, or other fees related to pets but must comply with state statutes and local ordinances. As allowed by statute and lease agreement, a landlord may require a pet deposit to cover costs of pet damages or additional cleaning required to return the rental unit to good condition upon the tenant’s move-out. Accounting and return of pet deposit funds are handled in a similar manner as tenant security deposits. Some landlords charge a non-refundable pet fee payable at tenant move-in as an administrative cost to permit the tenant to have a pet in the rental unit. In addition to the tenant’s monthly rent amount, some landlords may charge an additional amount for monthly pet rent.

For additional risk protections, a landlord, as allowed by state statute, should require tenants carry rental insurance that includes adequate liability coverages including coverage for damage caused by pet accidents. Tenants should review policy coverages carefully to make sure the policy does not contain a dog bite exclusion or other animal-related limitation.

To help mitigate business risk, a landlord should have a strong lease agreement, adequately detailed pet policies and applicable pet agreement, and utilize pet deposits, pet fees, and pet rent as applicable to business necessity and legal compliances.