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Is a Month-to-month penalty legal?

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Is a Month-to-month penalty legal?

Postby boog » Wed Nov 03, 2010 11:11 pm

My Landlord wants to add a clause to my lease extension that would invoke an automatic 3x the monthly rent penalty if the lease goes month-to-month upon expiration of its term. At the very least this is outlandish, but is such a severe penalty also illegal? I've heard that clauses that remove a landlords responsibility for active interest in their property are invalid- is that true and does this situation qualify?
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Postby TenantNet » Wed Nov 03, 2010 11:23 pm

The "lease" would go month-to-month if a) either the tenant or owner failed to enter into a renewal lease and b) the tenant continued to maintain possession. In effect, the lease would be extended on a monthly basis.

It sounds that the owner is, in effect, saying that if the lease is not renewed, he is tripling the rent. Obviously that's an incentive for the tenant to renew the lease. An unscrupulous LL might use that as a pretext to refuse to renew the lease. It all comes down to what's the LL's agenda here.

I don't know if it's necessarily illegal, but might be seen as unconscionable and unenforceable if it ever got to court. I don't know how it could be seen that such a clause would remove an LL's interest in its property.
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Postby boog » Wed Nov 03, 2010 11:43 pm

Thanks.

To clarify:
The thought was that it removes his interest because it puts the burden on me to maintain an extended lease.

I believe that his motivation is to have an upper-hand in negotiating future renewals, not to triple the rent in a year.

My lease actually expired 2 months ago and I have not re-signed because of my disagreement with that clause. My landlord has just stated that I should sign the extension as-is or consider vacating. Since this term is my only major disagreement, could I sign on the faith that it is unenforceable?
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Postby TenantNet » Thu Nov 04, 2010 12:01 am

We can't give you legal advice on this. Even if we were lawyers, we can't offer legal advice. I was speculating that it might be unenforceable. If you want a professional opinion in which to rely, you're going to need to get legal advice from a lawyer. Yes, it's objectionable, but a LL is able to add whatever clause they wish to a lease for an unregulated unit, assuming it's not illegal.

Even so, there's no logic to it. If you sign a lease with the clause, then you're in a lease. If you don't sign it, you're M2M but not bound by the clause.

It might result in a situation on the next renewal where any M2M tenancy would be bound by the terms of the expired lease. But again, that's not a penalty (like late fees that can be seen as usurious) but essentially a tripling of the rent. As they say, you got to bargain on it.
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Postby ronin » Thu Nov 04, 2010 12:44 am

I agree with everything Tenant says here, but would like to point out the pink elephant in the room.

The landlord can terminate your tenancy now because you are month to month. That lease clause may or may not be enforceable, but it would only come into effect when your right to stay there is over.

A LL could say to you, pay me triple what the lease says or I'll terminate your month to month and I believe it would be legal. But to put it in an automatic contract seems problematic and unconscionable. In contract law you cannot agree to agree in the future, and the clause might be unenforceable as an unlawful penalty. It puts the onus of renewing on you to such an extent that it should be read against the drafter.

But I have such little faith in many of the judges infesting our court system. From my experience, all a LL has to do is look rich and the judges will cosign almost any abuse.... (This is true in federal court (EDNY & Circuit), AD and AppTerm and housing court, but not so much State Supreme Court trial level....for reasons I haven't been able to uncover). So the actual rule of law may not be the deciding factor.
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Postby TenantNet » Fri Nov 05, 2010 8:03 pm

Here's another view that's with a similar situation. This came from Inman News (normally pro-real estate and pro-landlord) in a column written by Janet Portman, a lawyer with Nolo.

Q: I rented my home for one year and then stayed on, paying rent, with the landlord's consent. A clause in the original lease provided that if I did so, "tenant will become a month-to-month tenant, and landlord reserves the right to raise the rent 5 percent (to $1,800) for the first year, and an additional 5 percent for the second year ($1,890)."

After three months as a month-to-month tenant, I received a rent hike that's way more than 5 percent. My landlord says that he can do this because "you're only month-to-month." Who's right? --Emily D.

A: The lease clause you describe is a model of confusion. On the one hand, it provides that a tenant whose lease expires, who remains with the consent of the landlord, becomes a month-to-month tenant. That's sensible and is the law in most states anyway. But the landlord has gone further, and provided that this month-to-month tenant will enjoy a specified rent for the first 12 months that she stays in the rental, and a different rent for the next 12 months.

Trouble is, having a set rent is one of the hallmarks of a fixed-term rental, also known as a lease. If you understood it like this, it's no wonder that you're mystified at the landlord's claim that he can raise the rent beyond 5 percent during that first year.

The legal question is whether the landlord's agreement not to raise the rent on a month-to-month tenancy by more than a specified amount suggests that he intended a lease. In other words, did that promise somehow convert the monthly tenancy into a year's lease? I doubt a judge would go that far.

And if there's no lease, the judge would hardly be in a position to say that the landlord could not exercise a right that all landlords in month-to-month situations have: the right to terminate the arrangement on proper notice, for any reason that's not discriminatory or retaliatory.

This means your landlord might be able to accomplish his goal of raising the rent by giving you not a rent-hike notice, but a termination notice. It would work this way: You'd receive the notice, decide not to move, and at the end of the notice period, your landlord would either file eviction papers or offer you a new month-to-month tenancy, but only at the higher rent.

To be sure, this maneuver is a tricky sleight of hand. And for that reason, a judge who saw the practical consequences of his ruling might be bothered by it. You might find a judge who is unwilling to let a landlord benefit from his own sloppy lease-writing. Certainly, a judge who felt that the confusion was a deliberate ploy might be even less inclined to rule in the landlord's favor.

If you refuse to pay the increase and refuse to move, you'll be risking an eviction lawsuit, which is no light matter. If you go ahead and mount a defense, point out that an age-old legal rule requires that a confusing contract clause be interpreted against the interests of the party that wrote it (in this case, your landlord).

This rule makes perfect sense -- if you undertake to write a legal document and mess it up, you pay the consequences. The rule has even more punch if the writer is a business or a professional (like a landlord) and the other side is not a business, but a consumer (like a tenant).

Janet Portman is an attorney and managing editor at Nolo. She specializes in landlord/tenant law and is co-author of "Every Landlord's Legal Guide" and "Every Tenant's Legal Guide."
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Postby ronin » Sat Nov 06, 2010 1:54 am

That is similar!

The above post confirms my opinion that the Nolo people are generally some of the best legal sources. Thanks for sharing it!
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