In the last several months I’ve seen a couple Rent to Own Agreements relating to homes which have gone seriously wrong.  There are a lot of products that you can “rent to own” in addition to homes.  Most rent to own agreements involve the purchase of furniture, electronics, cars and other high cost items.

A Lease Option is a type of rent to own agreement which relates to the purchase of a home.  In these agreements a tenant usually agrees to lease the home at a higher price than they would normally rent the property.  Often, the rent will be set aside and saved as part of a down payment and people are willing to pay above the market rate on rent because they believe they are essentially buying the house anyway.  In this way the tenant, who usually has entered into this agreement because they don’t have good credit and cannot qualify for a regular mortgage, has time to build up their credit and save towards a down payment on a house.  They also usually make what they consider a “down-payment” in order to enter into this lease option.

There are a few things that regularly go wrong (in the tenants’ mind) with these agreements and they relate to what happens if the renter/rent-to-owner defaults on the rent.

1.  Say the renter has been paying an inflated amount of rent which will go to the down payment and they have defaulted on the rent and can no longer pay.  Usually the agreement says that the renter loses the share of money that they have been paying in rent, even the inflated amount of rent the person paid to buy the home.  Or put another way, the renter will not usually get the money that they have been over-paying back if they can no longer pay rent or decide to break a lease.  So a renter has effectively put themselves into a situation where they have been overpaying for their home and they have signed a contract that says that if they default or break the contract they can’t get that money back.

2.  Say the renter/buyer has put a bunch of work into the house based on the idea that they will own it some day and they want to make improvements now.  Usually the agreement says that the renter has to pay for the work done on the house but they still have to get permission from the landlord/seller.  In this type of agreement it is unlikely that a renter/buyer will get compensated for the work they have put into the house even if the renter/buyer decides not to buy the house.

3.  Say the renter has put a down payment on the house and they default in the rent.  Usually the lease option agreement says that if the renter defaults on the rent the landlord gets to keep the down payment.  This is because according to an average rent to own/lease option contract the “down payment” is actually the money paid to the landlord in order to purchase the OPTION to purchase.  If you end up exercising the option then, and only then, does the money to purchase the option get put towards the down payment on the home.  Let me say this again: YOU ARE ONLY PURCHASING THE OPTION TO BUY THE HOUSE, YOU ARE NOT MAKING A DOWN PAYMENT ON THE HOUSE UNTIL YOU EXERCISE THE OPTION TO PURCHASE.  Until you exercise the option the relationship you have with the seller is actually more like a landlord/tenant relationship.  Be careful!

Lease Option Agreements are not all bad, they can be a way for someone who does not have good credit to buy a home.  However, it is vital that you read through the entire document and understand it so that you know what is going to happen to the money that you are investing.  If you do not understand the document then its important that you take steps to educate yourself before you sign the contract by talking to a lawyer.  I know it can be expensive, but you will end up saving money in the long run if things don’t go as planned.

In Washington State a tenant must consent to a landlord’s reasonable request to enter the rented property (RCW 59.18.150(1)).  Under the statute the landlord may enter for the following purposes:

1. To  inspect the premises,
2. To make necessary or agreed repairs, alterations, or improvements,
3. To supply necessary or agreed services, or
4. To exhibit the dwelling unit to prospective or actual purchasers, mortgagees, tenants, workers, or contractors
5. (Fire officials may seek a search warrant if a landlord or tenant deny them access to search the premise for fire code violations.)

So that leaves it pretty much open as to why a landlord can enter the premise. However, under the same statute, a landlord may not abuse the right of access or use it to harass the tenant (RCW 59.18.150(5)).  As a general rule, unless there is an emergency, they must give at least 2 days notice that they intend to enter and when they enter they must do so at reasonable times.  When the landlord is planning on showing the home to prospective buyers or tenants they must give 1 day notice of the intent to enter at a specific time.  At the same time, a landlord may not unreasonably interfere with a tenant’s enjoyment of the home by excessively exhibiting the home.

This leaves us with two questions:

1.  What should a tenant do if a landlord is entering the property without a tenant’s consent or using their right of entry to harass the tenant?

2.  What should a landlord do if a tenant is unreasonably withholding consent to enter the property?

The answer is relatively easy in theory:

A landlord or tenant who continues to violate the rights of the tenant or landlord must be served with one written notification which lists the date(s) and time(s) of the violation(s).  In other words, a landlord or tenant must basically tell the offending person that they did not fulfill their duty as a landlord or tenant on a specific date.  If the offending behavior continues the landlord or tenant is liable for up to one hundred dollars for each violation after receipt of the notice. The prevailing landlord or tenant may recover costs of the suit or arbitration under this section, and may also recover reasonable attorneys’ fees (RCW 59.18.150(7)).  One way to make this claim is by taking the issue to small claims court where there are no attorneys.

This is another post coming out of my experience with the Housing Justice Project in Thurston County. I’ve seen a couple of these pass through the court room now and so far it has not ended well for anyone involved.

To understand why a Tenant working for their Landlord might have problems you just have to imagine what happens when the relationship goes sour.  The Landlord has a lot of control over your life.  They control the place you live, your job, and to some extent your future because you may have to ask this person for a housing or work reference.

This is a lot of power to give to someone and avoiding those situations would be a good idea if they weren’t so beneficial.  If the relationship stays positive there are a lot of benefits to working for a landlord – from discounted rent to a convenient working at home or barter arrangement. These types of tenant/landlord agreements can be extremely advantageous for both parties.

With that in mind, its important to take precautions t0 ensure you protect yourself. First, if you are about to enter into an arrangement where you are working for your landlord ensure you get a lease.  In a lease you will know how much rent is owed per month, how long the tenancy is going to last and other important terms of your tenancy like whether or not you are required to give the landlord a deposit and whether there are fees for late rent.

If the choice is between a year lease vs. a month to month, while a month to month does allow for flexibility, it provides less protection to the Tenant because the Landlord is only required to give the Tenant 30 days written notice before they must move out RCW 59.04.020.  Although a Landlord may not retaliate against a Tenant who exercises their rights under the RLTA, it is not retaliation if a Landlord ends the month to month tenancy in a lawful way, giving proper, written 30 days notice.  Example: It is not retaliation if you quit your job with the Landlord on Monday and your Landlord gives you 30 days written notice that you have to move out of your house on Tuesday.  If you have a lease, then the Landlord cannot terminate the lease early unless you have breached the lease, and that is much harder to prove.

Second, get the work agreement in writing and keep the work schedule in writing and updated.  The tenant and landlord should write an agreement which outlines terms like: how much the the tenant will be paid per hour of work and how many hours they should work, whether the tenant will be paid by deductions in rent or whether they will receive cash, and what the tenant should do if they need to work over the maximum hours (do they get the landlord’s permission?), etc.  The tenant should keep accurate time sheets and records of the amount of work done and any receipts of payment.

Avoid situations where the Landlord takes rent directly from your paycheck.  While on the surface it appears easier if the Landlord just deducts rent from a paycheck, trust me, the effort of sending a rent check will be worth it if there is a dispute about what you are owed or how much rent you should pay.  The more separate your work is from your home, the better.

Make sure you get receipts whenever money changes hands.  Whether you are getting a paycheck or paying rent, you should get some kind of paper evidence that you have paid.  If you do not have a bank account or checks this becomes even more important because there is no record that you paid rent (money orders are not good enough because there is no evidence that you gave the money order to the landlord, all that can be proven is that someone cashed the money order).

If you are in a situation right now where you are being taken advantage of by your employer/landlord you can file a complaint with the Washington State Dept. of Labor and Industries, which works on enforcing worker’s rights.

Post script: In Washington the Residential Landlord Tenant Act (RLTA) (RCW 59.18.040(8)) explicitly states that it does not cover circumstances were there is an “Occupancy by an employee of a landlord whose right to occupy is conditioned upon employment in or about the premises.”

This does not mean that a tenant cannot work for a landlord, rather, it means one cannot have the housing only because they are working for the landlord.  For example if you live in the home because of the job or as a part of the job (like a live-in health care provider) the RLTA does not apply. If you are a nanny and rent a home from the family who you work for and its separate from your employment (you are free to live there even if you don’t work for them anymore) the RLTA would apply.

This may seem obvious, and in many ways it is, but when people are wronged rational behavior can sometimes go flying out the window.  So I am going to say it again:  For tenants to be entitled to the full protections of Washington’s Residential Landlord/Tenant Act (RLTA) their rent has to be current.  RCW 59.18.080. (Generally, RLTA covers rental agreements involving residential homes, mobile homes are governed by different rules.  Please see the following link for laws covering other types of rental agreements. )

Usually people want to stop paying rent because they feel the home has fallen into disrepair and the landlord has not fixed the problem.  The RLTA does allow for this but there are a set of very strict requirements that one must meet before rents can change or rental agreements can be terminated.  Procedure in this statute is key so you must read the statute and follow the sections step by step in order to do it right.

Notice:   A landlord must get written notice of the problem that needs to be fixed.  RCW 59.18.070 Says: “written notice to the person designated in RCW 59.18.060(11), or to the person who collects the rent, which notice shall specify the premises involved, the name of the owner, if known, and the nature of the defective condition.”

Time to Cure:  The RLTA also gives the amount of time a landlord has to fix the problem.  “The landlord shall commence remedial action after receipt of such notice by the tenant as soon as possible but not later than the following time periods, except where circumstances are beyond the landlord’s control:

(1) Not more than twenty-four hours, where the defective condition deprives the tenant of hot or cold water, heat, or electricity, or is imminently hazardous to life;

(2) Not more than seventy-two hours, where the defective condition deprives the tenant of the use of a refrigerator, range and oven, or a major plumbing fixture supplied by the landlord; and

(3) Not more than ten days in all other cases.” RCW 59.18.070

Tenant’s Choices:  RCW 50.18.090 gives a tenant’s choices if the landlord fails to fix the problem and the tenant has met all the notice requirements and given the landlord an opportunity to cure (fix) the problem.  A tenant has several choices under this statute available to them.  They may terminate the rental agreement and leave the home after giving the landlord written notice.  At that point you are not responsible for rent after the date you leave the home.  The other choices are that the tenant may bring an action in court or pursue other remedies in the RLTA (keep reading).

Many people misunderstand RCW 59.18.100 (Landlord’s failure to carry out duties – Repairs effected by tenant – Procedure – Deduction of cost from rent – Limitations.) probably because they see “deduction of cost from rent” and scan over “procedure.” Again, procedure is key.  Unfortunately the statute is fairly complicated and involves a number of requirements.  The basic gist is that a tenant must get a good faith estimate for the repair (this can be submitted with the RCW 59.18.070 Notice to cure the problem).  The amount of the repair  cannot exceed one month’s rent (This is difficult because most big repairs cost more than one month’s rent. If this is the case then the problem is indeed large and terminating the rental agreement in RCW 59.18.090(1) might make more sense or RCW 59.18.115 – see below).  If the landlord hasn’t fixed the problem then the tenant may get the damage fixed being very careful to follow the requirements on notice in RCW 59.18,100(2) and deduct the costs of the repair from the rent, not to exceed one month’s rent.

As I’m writing this it seems very complicated and it is but if you are following the statute and read it carefully giving the landlord WRITTEN notice of everything that you do and then making sure to SERVE the notice on the landlord properly according to RCW 59.18.100(1) you will set yourself up for success.

If the situation in the home is more serious and affecting the health and safety of the tenants then RCW 50.18.115 applies.  This statute has another set of specific procedural requirements involving agencies and governmental inspections etc. so you should be very certain that your situation is covered by the statute.  The requirements are as follows:

“(2)(a) If a landlord fails to fulfill any substantial obligation imposed by RCW 59.18.060 that substantially endangers or impairs the health or safety of a tenant, including (i) structural members that are of insufficient size or strength to carry imposed loads with safety, (ii) exposure of the occupants to the weather, (iii) plumbing and sanitation defects that directly expose the occupants to the risk of illness or injury, (iv) lack of water, including hot water, (v) heating or ventilation systems that are not functional or are hazardous, (vi) defective, hazardous, or missing electrical wiring or electrical service, (vii) defective or inadequate exits that increase the risk of injury to occupants, and (viii) conditions that increase the risk of fire, the tenant shall give notice in writing to the landlord, specifying the conditions, acts, omissions, or violations. Such notice shall be sent to the landlord or to the person or place where rent is normally paid.” RCW 59.18.115.

Be sure to read through the whole section before you start down this path so that you understand all the consequences.  Here, if a government agency determines that there is imminent risk to the health and safety of the tenant then the tenant may set up an escrow account to pay rent while the courts figure out how best to solve the problem (You may get this money back if the courts decide that the value of the home did not merit the amount of rent paid, but you never know).  This means that the tenant cannot stop paying rent.  In other words, there’s no such thing as a free lunch.

A long time ago a good friend of mine asked me to post something about landlord/tenant law, namely: how does a tenant make sure they get their deposit back?  Here is what I know as a lawyer and a tenant:

1.  It Starts on Day One. You have to start working on getting your deposit back from the very beginning, before you even sign a lease.  This is a relationship, and as we all know, in a relationship if you start out badly its likely to end badly.  Alternatively, if it starts out well the way to keep it good is to set up clear boundaries (like in a written lease) and keep the lines of communication open.  If you assert your rights from the beginning then a landlord will know that you intend to assert your rights throughout the tenancy.

2. Choose Wisely. If you have a bad feeling about your landlord because they avoid answering questions or give only partial answers, then its likely they will act that way during the rest of your relationship with them.  Even if you are desperate to find a home you should consider the consequences of having a landlord who may keep your deposit, fail to make necessary repairs, and even try to evict you.  If you are nervous about your landlord but still think you want to rent from them then at least you are aware of the potential problem and can take the necessary precautions (read further).

3. Get it in writing and do a walk-through. In Washington, if you give the landlord a deposit then there must be a written rental agreement that outlines the terms of the lease and a written checklist describing the property.  If they do not do this then they are not entitled to take your deposit.  Make sure that you get a copy of the lease.

4. What is normal wear and tear? A landlord may not withhold your deposit for damage to the property that is “normal wear and tear.”  Unfortunately normal wear and tear is not defined in the Residential Landlord/Tenant Act (RLTA).  This is one of those vague legal phrases that is useful because its flexible and not-so-useful because its (ehem) flexible.  As a general rule it refers to the gradual deterioration of the home resulting from use, lapse of time, and to a certain extent the operation of the elements (earth, air, wind, but probably not fire).  In court a landlord has the burden to show evidence of damage above normal wear and tear, thus the checklist from #3.

5.  Keep a Landlord Diary. If you have a feeling that your landlord is trying to pull a fast one its a good idea to write a down a brief description of the contact you have with your landlord.  Write down the date, what you talked about, and a short description of what happened: if you talked on the phone, if they came by the home, or if they talked to you at the grocery store.  Hold on to all receipts, letters, and emails you exchange (keep copies of everything that you send to the landlord too).  This helps for two reasons, first, if the landlord knows that you are keeping track of everything they are less likely to want to try to take advantage of you.  Second, you have a paper record of your relationship that you can submit as an attachment to a declaration if your dispute gets all the way into court.  These types of statements are much more persuasive than a statement like, “Some time in July my landlord told me I had to move out in August.”

6.  Mow the lawn, take out the trash. I know not everyone has a rental with a lawn but this suggestion has to do with keeping the home looking well-kept.  Landlords must give tenants 24 hours notice before they can enter the property, but that does not prevent them from driving by the home and looking at the general state of affairs from the street.  The less reason you give a landlord to suspect there is damage to their home, the less likely they are going to harass you.  At evictions court, trash and lawn disrepair is a popular landlord complaint.  The idea here is do the best you can to keep the outside of the house looking like its not neglected.

7.  Get your deposit if you sublease the house. If you decide to sublease the home, make sure t0 get a deposit from the person who is subleasing.  You are still liable for the damage the subleasor does to the property because your name is on the lease.  You should also get permission in writing to sublease because usually that is what the original lease requires and, more importantly, its another way to protect yourself from a future dispute.

8.  Don’t allow extra tenants without writing. If you want to get a roommate then you should get written permission from the landlord.  Another frequent complaint from landlords is that the tenant has allowed other people who are not on the lease to live in the home.  They either want more rent from that person or attribute some of the damage to a home to the extra tenant.

9.  Written statement of deposits money spent required. In Washington a landlord is required to give a tenant’s deposit back within 14 days of the end of the lease term.  Along with the deposit they are required to give the tenant a written statement of the money spent on repairs above normal wear an tear.  If the landlord fails to give you back your deposit with a statement describing what money was spent within that time period then the tenant is entitled to get back the full deposit amount.  To enforce this law you have to make sure to give the landlord your forwarding address.

If the landlord refuses to give you your deposit back and doesn’t give you an accounting of the expenses using the deposit then you may take the issue to small claims court (for links to municipal and district Cts).

10.  Don’t trash the place. Obviously.

It would be really great to hear what has worked for other people!  If you have suggestions or stories we would really like comments on this post.

Foreclosures are starting to pick up around Washington.  I noticed last Friday morning at the Thurston County Court House when the foreclosure sales occur.  For the last few months the group of buyers has grown in proportion to the number of houses up for sale.

They stand outside under the awning and conduct the sales right there in the open air, auction style.  It seems obscene to me to have such a public  and irreverent sale of someone’s home.  But to be fair, there isn’t a room to spare in the courthouse and anyway, in the winter its not exactly comfortable.

I see this group gathering every Friday on my way to help out with the Housing Justice Project.  Thurston County Volunteer Legal Services organizes attorneys who help people defend against evictions. We have seen an increase in circumstances where tenants are being evicted because the landlord defaulted on the mortgage and the house has been foreclosed upon.  This is the case for approximately 40% of all foreclosures in Washington State. There are two laws which are important for renters to know about in these situations.

First, at the federal level, the Protecting Tenants Foreclosure Act of 2009 says that a tenant must have 90 days written notice before they can be evicted.  If the tenant has a lease they must be allowed to occupy the property until the end of the lease unless the purchaser intends to live in the home.  If the purchaser intends to live in the home then they must still give the tenant 90 days to move out before they can begin eviction proceedings.  Under this law the tenant must continue to pay rent to the new landlord.

Second, the Washington State Legislature passed a law this year which provides protections for tenants living in foreclosed homes.  S.B. 5810, effective July 26, 2009, requires that the tenant must have 60 days notice before the landlord can evict.  The beneficial part of this law is that the tenant is not required to pay rent, the idea being that the tenant is not likely to receive their deposit back from the old landlord.

Remember, S.B. 5810 is effective on July 26, 2009 so don’t stop paying rent if you are living in a foreclosed home and have received notice of a pending foreclosure.  If you are in this situation contact an attorney for legal advice or if you cannot afford an attorney contact CLEAR for a referral to legal services.

The pertinent part of S.B. 5810 reads:

NEW SECTION.  Sec. 3.  A new section is added to chapter 61.24 RCW
to read as follows:

If the trustee elects to foreclose the interest of any occupant of tenant-occupied property, upon posting a notice of trustee’s sale under RCW 61.24.040, the trustee or its authorized agent shall post in the manner required under RCW 61.24.040(1)(e) and shall mail at the same time in an envelope addressed to the “Resident of property subject to foreclosure sale” the following notice: “The foreclosure process has begun on this property, which may affect your right to continue to live in this property.  Ninety days or more after the date of this notice, this property may be sold at p. 7 ESB 5810.SL foreclosure.  If you are renting this property, the new property owner may either give you a new rental agreement or provide you with a sixty- day notice to vacate the property.  You may wish to contact a lawyer or your local legal aid or housing counseling agency to discuss any rights that you may have.”