Q: When my lease was up last week, I began talking with the landlord about renewing, and what the new rent would be. She surprised me by setting a high figure, so I’m not going to renew and plan to leave next week. Now she says I owe her two months’ rent, because my lease had a clause in it that says if I "hold over" after the lease ends, she can collect two months’ rent or twice the "actual damages" she suffered by my overstay, whichever is greater. This is a great place and I know it will rent right away. I’m certainly willing to pay for my overstay (two weeks), but do I have to pay this exorbitant amount? –Brad P.
A: You’ve encountered a lease clause that’s designed to pressure you into either vacating on time when your lease is up or renewing in advance. Doubling the rent for any time you spend on the property after the lease has expired — known as "holdover rent" — isn’t a consequence most tenants will willingly endure, and most will make sure they don’t get themselves into this jam.
The landlord is certainly entitled to be compensated for the extra time you occupied your rental. If the market rent is higher now than your old rent, you should be prepared to pay it. Tenants can even find themselves liable to the landlord and a new tenant if their delay in moving out prevents the new tenant from moving in as planned. Both the landlord and the disappointed tenant have valid claims against a holdover who has cost them additional expense — having to find substitute housing (the new tenant) or having to re-advertise and wait for a suitable new occupant when the planned new tenant leaves in disgust (the landlord).
In many states, a lease clause stating that holdovers will be slapped with double rent won’t stand up in court, however. That’s because the double rent is an arbitrary figure that bears no relation to the actual damages that the landlord and new tenant (if any) will suffer as a result of the current tenant’s continued residency. Who knows, a year in advance, what the current value of the rental will be, and how can the landlord know whether he’ll have a tenant ready to move in when the current tenant fails to leave on time? Lease provisions that set damages in advance are rarely upheld when it’s not difficult to determine, when the holdover occurs, what the real damages have been.
Your landlord could have demanded that you leave when the lease was up. When tenants with leases stay on with the landlord’s permission, they become month-to-month tenants who may terminate their tenancy with the proper amount of notice (30 days in most states). This means that you’re on the hook for rent for the time you’ve overstayed, plus the notice period. You should be willing to pay the rent for this time period based on the market value of the rental, but no more.
Don’t be surprised if the landlord retains your security deposit to make up for that double rent she thinks she’s owed. You’ll have to sue in small claims court to get it back, and you’ll need to convince the judge that the landlord’s only actual damages were market rent for the period of your overstay plus the notice time. As long as the landlord didn’t have a new tenant signed up (which apparently she didn’t, judging by her willingness to continue to rent to you), she cannot fairly stick you with advertising and screening costs. Be sure to cooperate with her as she shows the unit while you’re still there — and next time, discuss whether you’ll remain in your rental before the end of the lease.
Q: I own and manage several single-family rentals. When I discovered widespread water damage in one of them, I had to relocate my tenants for two months while my crew and I did repairs. One evening after we quit work, a fire started and damaged the house. My insurance company tells me that because the house was vacant, my policy won’t cover. I can’t believe this — can it be so? –Dale S.
A: You’ve encountered the "vacancy exclusion," which is commonly found in property insurance. This exclusion eliminates insurance coverage if the building was vacant for a certain number of consecutive days before the event leading to the loss or damage. This makes sense because unoccupied properties have no one around to notice and fix problems or to deter vandalism. Empty buildings face an increased risk of damage, whether from neglect or from property-related crime such as theft or vandalism. And that increased risk wasn’t what the insurance company had in mind when it set your premiums.
Fortunately, buildings under construction do not fall within the "unoccupied building" elimination. Again, common sense tells you why: When a site is under construction, there should be plenty of workers around to deter crime, and neglect of the structure is unlikely. (Other kinds of accidents and damage can, of course, be caused by construction itself, and there’s special insurance to cover that.) But your house was not exactly "under construction," as in "being built." You were engaged in repairs and renovation, and the question for you and your carrier is whether the work you were doing should bring you within the "under construction" exception.
The sensible way to figure this out is to think about what was going on at the property during renovations, given the reasons for the vacancy exclusion and the construction exception. If there was a crew of workers on the property every day, that’s similar to what would happen if you were building a house. Your rental should be protected from neglect and vandalism just as any new construction. On the other hand, if "renovation" consisted of you and a handyman working for a few hours every Saturday, then arguably your rental was as good as vacant and your carrier might be justified in denying coverage.
State courts around the country have not uniformly embraced this sensible approach of focusing on the facts of the situation. Some courts have said "under construction" means "being built," and nothing else. If your carrier continues to deny coverage, it might be worthwhile to challenge its basis for doing so. An hour or so with a good lawyer may get you the answer you need — and if the law is in your favor or at least undecided in your state, you may have a good shot at pressing your carrier for coverage.
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." She can be reached at janet@sandbox.inman.com.
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