Suing Your Tenant for Damages – Can You Recover Attorney’s Fees?

It’s one of the larger mines in the minefield of renting out property as a landlord – what happens when the tenant breaches the lease? What happens when the tenant doesn’t pay? In and among the questions presented by such a scenario is whether a suit against the tenant would be cost-effective. The landlord’s decision may, in large part, depend on whether the landlord is entitled to recover its costs and attorney fees associated with prosecuting its claim against the tenant. And, in Kentucky, the landlord’s right to recover costs and attorney fees depends on the circumstances surrounding the tenant’s breach of the lease.

Kentucky has adopted the Uniform Residential Landlord and Tenant Act (KRS 383.500 to 383705)(hereinafter the “Act”), which governs transactions between those parties in jurisdictions where the Act has been adopted and enacted.[1] The discussion herein is limited to jurisdictions where the Act has been adopted. Pursuant to the Act, KRS 383.570 lists provisions that landlords are prohibited from including in lease agreements. Specifically, KRS 383.570(1)(c) prohibits provisions that require tenants to agree to pay the landlord’s attorney fees under any circumstances.

However, while lease agreements may not require the payment of attorney fees from the outset, the recovery of attorney fees and costs by the landlord is permitted under other parts of the Act. For instance, KRS 383.660(3) states that “If the tenant’s noncompliance is willful the landlord may recover actual damages and reasonable attorney’s fees.” However, it must be determined whether the tenant’s conduct is “willful” before any such recovery is permitted under the Act.

In Batson v. Clark, 980 S.W.2d 566 (Ky. App. 1998), the Kentucky Court of Appeals noted Kentucky’s general policy against awarding attorney’s fees as costs in the absence of a statute or contract provision specifically allowing for recovery. With regard to the award of attorney’s fees under KRS 383.660, the Kentucky Court of Appeals very clearly stated that it views the prohibitions in KRS 383.570 as a strong indicator of “public policy disfavoring a landlord’s recovery of attorney’s fees incurred in an action against a tenant.”[2] The Court determined the mere failure to pay rent, accompanied by requests for more time or promises to pay, did not rise to the level of “willful” as defined by the statute.[3] The Court found a strong presumption against the award of attorney fees and set a high bar with regard to declaring a tenant’s noncompliance with a lease “willful.”

Hispanic couple outside home for rentHowever, there are circumstances where attorney fees are recoverable. In Palladino v. Shropshire, 2013 WL 6730733 (Ky. App. 2013), the Kentucky Court of Appeals held that a tenant’s deliberate damaging of the premises and keeping a pet in contravention of the lease rose to the level of willfulness as envisioned by the statute and left an award of attorney’s fees intact.

Thus, while the burden is high in establishing the right to recover attorney fees and costs, it is not insurmountable. In most situations, landlords will not be entitled to recover attorney fees when seeking damages from tenants for the nonpayment of rent. However, the landlord may be entitled to its attorney fees and costs where there is deliberate damage to the premises by the tenant and for other willful violations of the lease. For more information on the remedies available to landlords under the Uniform Residential Landlord and Tenant Act, contact the attorneys at McBrayer.

BYatesBrendan Yates joined the Lexington office of the firm as an associate in 2002. Brendan is a member of the firm’s Litigation Department, where he focuses his practice on construction and real estate litigation, workers’ compensation defense litigation, insurance defense and commercial litigation. He has successfully defended his clients in state and federal courts, the Kentucky Court of Appeals, the Kentucky Supreme Court, and in administrative agency proceedings in Kentucky. He can be reached at byates@mmlk.com or (859) 231-8780, ext. 208.

This article is intended as a summary of state and federal law and does not constitute legal advice.

[1] See KRS 383.500. It is important to note that, if adopted, the provisions of the Act must be adopted in their entirety and without amendment.

[2] O’Rourke v. Lexington Real Estate Company L.L.C., 365 S.W.3d 584, 586 (Ky. App. 2011).

[3] Id.

Disclosures Landlords Must Make in Kentucky

There are certain required disclosures that a landlord must make when renting property located within a jurisdiction that has adopted Kentucky’s Uniform Residential Landlord and Tenant Act (“URLTA”). While these disclosure requirements are straightforward, a landlord’s failure to comply can have serious consequences for both the landlord and the tenant.

Tenancy AgreementLandlords requiring security deposits from their tenants must deposit those funds in an account used only for that purpose and must disclose the location of that account, as well as the account number, to the tenant.[1] This ensures that the security deposit is a legitimate hedge against damages to the premises and/or other breaches by the tenant of its obligations under the lease. Making the aforementioned disclosures aids in protecting the security deposit from being utilized/appropriated by the landlord for purposes prohibited under URLTA. This is especially important due the fact that the security deposit is essentially the property of the tenant being held in trust by the landlord.

Prior to receipt of the security deposit, however, the landlord is required to provide the prospective tenant with a comprehensive listing of all then-existing damage to the premises which might later serve as the basis for a charge against the tenant’s security deposit.[2] This disclosure by the landlord must also include the estimated cost of repairing the existing damage.[3] This protects the tenant from fraudulent charges against the security deposit upon move-out, and allows the tenant to inspect the unit to determine the accuracy of the list.

In the event that the landlord fails to comply with the URLTA requirements regarding security deposits, the landlord is not entitled to retain any portion of the security deposit.[4]

Finally, the landlord must provide a written disclosure to the tenant at the commencement of the lease which identifies the name and address of the person authorized to manage the premises, as well as the name and address of the owner or agent of the owner who shall service as the process agent and who is authorized to receive all notices and demands concerning the premises.[5] If, at any time during the tenancy, the landlord sells/conveys the subject premises to a third party and/or the manager of the premises terminates his management of the premises, the landlord and/or manager must provide notice to the tenant of such sale/conveyance and/or termination.[6] Otherwise, the landlord’s and/or manager’s liability with regard to the premises will continue beyond the date of sale/conveyance and/or termination.[7]

These minimum disclosure requirements for URLTA jurisdictions protect the interests of both the landlord and the tenant. Moreover, compliance with these disclosures, as the saying goes, isn’t just a good idea, it’s the law. If you have any questions regarding landlord-tenant issues, don’t hesitate to contact the attorneys at McBrayer.

BYates

Brendan Yates joined the Lexington office of the firm as an associate in 2002. Brendan is a member of the firm’s Litigation Department, where he focuses his practice on construction and real estate litigation, workers’ compensation defense litigation, insurance defense and commercial litigation. He has successfully defended his clients in state and federal courts, the Kentucky Court of Appeals, the Kentucky Supreme Court, and in administrative agency proceedings in Kentucky. He can be reached at byates@mmlk.com or (859) 231-8780, ext. 208.

This article is intended as a summary of state and federal law and does not constitute legal advice.

[1] See KRS 383.580(1).

[2] See KRS 383.580(2).

[3] See KRS 383.580(2).

[4] See KRS 383.580(4).

[5] See KRS 383.585(1).

[6] See KRS 383.600.

[7] See KRS 383.600.

Tenant Absence During the Lease Term: Protecting Your Property

Every landlord’s goal is to have his/her rental property under lease and occupied by tenants who will not only pay their rent on time, but who will properly use and maintain the property. After all, the property is an investment by the landlord of both time and money. While landlords typically relate property damage to tenants’ use of the property (i.e. throwing wild parties or vandalism), nonuse can also result in significant damage to the property, not only causing damage to the structure itself, but a diminution in value of the property overall. This is especially true during the winter months. For example, a tenant may take an extended vacation for the holidays or even abandon the property altogether. Any time a property is unoccupied for an extended period of time, maintenance issues may go undetected and/or other problems may arise unbeknownst to the tenant(s) or the landlord. These issues/problems may include the heat being turned off by the tenant, running water left on, a leaky faucet, a stove being left on, an electrical issue, or the shut off of one or more utilities by the respective utility company for nonpayment. Such issues can result in damage to the property, including, but not limited to, frozen/burst pipes, flooding, or fire. Moreover, the damage can extend to other units and/or affect the safety of neighboring tenants. Thus, it is important for a landlord to know when a tenant is going to be gone for an extended period of time.

Grey Mailbox full of mail isolated on a white background

In Kentucky, pursuant to the Uniform Residential Landlord and Tenant Act (“URLTA”)(KRS 383.505 to 383.705)[1], unless otherwise agreed to by the landlord, the tenant is required to occupy the property in a residential capacity throughout the entire lease term.[2] Furthermore, the landlord is permitted to include a provision in the lease agreement requiring the tenant(s) to provide the landlord with advance notice of any extended absence from the property in excess of seven (7) days.[3] This notice serves as a protective measure in that it allows the landlord to stay apprised of the condition of the property and any maintenance issues which may arise during the tenant’s absence. However, such a requirement must be included in the lease agreement to be enforceable.

In the event that a tenant is absent from the property for more than seven (7) days and has not provided the landlord with the notice required by the lease agreement, the landlord may recover from the tenant actual damages incurred as a result of the tenant’s absence.[4] Also, during such absence, the landlord may enter the property at times reasonably necessary to perform an inspection and/or address any maintenance issues.[5]   The landlord is also entitled to access the property at any time in the event of an emergency.[6] Should the landlord determine that the tenant has abandoned the property, the landlord may, in addition to accessing the property for inspection/maintenance issues, seek to recover possession of the property pursuant to the eviction process.

Requiring tenants to provide notice to the landlord of any extended absence from the property is a safeguard to both the property and neighboring tenants. It not only allows for proper maintenance of the property itself, but provides protection of the landlord’s investment.

BYates

Brendan Yates joined the Lexington office of the firm as an associate in 2002. Brendan is a member of the firm’s Litigation Department, where he focuses his practice on construction and real estate litigation, workers’ compensation defense litigation, insurance defense and commercial litigation. He has successfully defended his clients in state and federal courts, the Kentucky Court of Appeals, the Kentucky Supreme Court, and in administrative agency proceedings in Kentucky. He can be reached at byates@mmlk.com or (859) 231-8780, ext. 208.

This article is intended as a summary of state and federal law and does not constitute legal advice.

[1] Please note that the URLTA governs counties who have expressly adopted it. This article assumes adoption of the URLTA and is based on its provisions.

[2] KRS 383.620.

[3] KRS 383.620.

[4] KRS 383.670(1).

[5] KRS 383.670(2).

[6] KRS 383.615.

“Let It Snow, Let It Snow, Let It Snow…But Should Someone Else Be Clearing it?”

Winners, shopping in Calgary

Winter has made its early debut. The snow has begun falling and the salt trucks are already covering the roads (and our cars), and it’s not even December! Despite the bleak forecasts, people are out and about in large numbers, especially in light of the approaching holidays. With the snow comes the ice, and shopkeepers and property owners alike are getting their own shovels and salt stashes ready to clear their walkways and sidewalks for their customers and tenants. Along with the bad weather also come the questions regarding a property owner’s or lessee’s obligations to a tenant or customer to create a safe, and ice or snow free, place to come and go. It’s best to have a plan of action with regard to your property before the bad weather hits and understand your duties to those visiting your property during the winter season. If you’re a landlord, business owner or retail lessee, consider the following:

Landlord/Tenant Obligations

Generally, a landlord has a duty to exercise reasonable care to keep common areas held in the landlord’s control in a safe condition for their tenants, as well as recognize changing conditions and remedy them as they arise. This is especially an issue when the weather turns for the worse. Landlords need to be aware of potential issues as the snow and ice starts to accumulate, keeping on hand the proper materials to keep the walkways clear and safe and be cognizant of problems as they arise so they are fixed in a reasonable manner and within reasonable time.

Business Owners/Lessees

For tenants leasing a retail space, it is important to first look to your retail lease to determine exactly who is obligated, if anyone, to clear and salt the walkways and storefront in bad weather such as snow and ice. If your business or property sits on a municipality owned walkway or roadway, look to your city ordinances to determine whose obligation this may be in inclement weather. Determining whose responsibility it is to take action when winter hits is the first step in preventing injuries on your premises as well as liability for yourself or your business. Whether you’re a retail landlord or tenant, consider whether you need to incorporate language into your lease that speaks to duties with regard to snow and ice if these obligations are not clear.

If your business, like many others, clears and salts its sidewalks and parking lots to encourage people to come in despite the wintery conditions, it is important to have a consistent policy in keeping your premises clear and as safe as possible. With a change in Kentucky law over the last 5 years, even if it is obvious to your customers that weather is poor and the sidewalks slick, the entity occupying the property could still face liability if it doesn’t ensure the care towards its premises is reasonable under the circumstances.

By addressing these potential issues early, landlords, business owners and lessee’s can reduce the possibility of incidents on their premises and injuries to their customers or tenants during the winter season. If you are a landlord, retail owner or tenant and have questions about your obligations, contact the attorneys at McBrayer today.

BMacGregor

Brittany MacGregor is an associate attorney practicing in the Lexington office of McBrayer, McGinnis, Leslie & Kirkland, PLLC. She is a graduate of Transylvania University and the University of Kentucky College of Law. Ms. MacGregor’s practice focuses on real estate law, including title examination, title insurance, clearing title issues, deeds, settlement statements, preparation of loan documentation, contract negotiation and preparation, and lease negotiation and preparation. She may be reached at bmacgregor@mmlk.com or at (859) 231-8780.

This article is intended as a summary of federal and state law activities and does not constitute legal advice.

‘Tis The Season To Think About Your Retail Lease

With November nearly upon us, the holiday shopping season is right around the corner. For retailers, the peak season can bring a whole host of issues to be considered in connection with a commercial lease. The best time to think about these issues is now – before the droves of eager customers start lining up at the doors. So, if you are a retailer and lease a space for your business, take a few minutes and consider the following:

  1. Does your lease require that you only operate during certain hours, preventing you from participating in “Black Friday” or staying open late during especially busy days?
  2. Is there available parking for seasonal employees?
  3. Are there any limitations in the lease about the type of signage or decorations? Must signs or decorations be approved by a landlord?
  4. Are there any provisions prohibiting special activities in or around the store (i.e., having carolers, a gift wrapping station, or passing out hot chocolate to bystanders)?
  5. If you are in a multi-unit building, how will advertising and general maintenance costs be divided? In other words, who is really paying for Santa and his elves to be stationed in the center?

Shopping Christmas Santa

By addressing these issues early, landlords and tenants can reduce the possibility of misunderstandings and disputes during the shopping season. A little forethought and communication can go a long way in making everything merry and bright. If you are a landlord or tenant and have questions about your commercial lease, contact the attorneys at McBrayer today.

CRichardson

Christopher A. Richardson is an associate at McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Louisville, KY office. Mr. Richardson concentrates primarily in real estate, where he is experienced in residential and commercial closing transactions, landlord/tenant relations, and mortgage lien enforcement/foreclosure. Mr. Richardson has closed innumerable secondary market and portfolio residential real estate transactions and his commercial practice ranges from short-term collateralized financing and construction lending to development revolving lines of credit. He can be reached at 502-327-5400 or crichardson@mmlk.com.

This article is intended as a summary of  federal and state law and does not constitute legal advice.

Why Use an Exclusive Use Clause?

If you are a business owner and in the process of negotiating the terms of your commercial lease, you will want to be sure to include an exclusive use clause to the document and negotiate the terms with the landlord. Exclusive use clauses are intended to protect a tenant’s business by ensuring that the named tenant is the only tenant in a particular shopping center that can sell or offer to sell specific products or services. In some cases (generally, where a tenant has more bargaining power), an exclusive use clause may extend to any other properties owned by the landlord or an affiliate of the landlord within a certain radius.

The scope of the exclusive clause greatly depends on the nature of the business. Narrowly-focused businesses can be served with narrow clauses; however, if a business offers a wide scope of products or services, then the clause will have to be carefully considered by both parties. For instance, a national retailer that sells coffee for on-site consumption may have an interest in protecting against another store selling any kind of hot beverage, even though it only derives minimal profit from its hot tea and hot chocolate sales. A clause that prohibited another store from selling any hot beverage would significantly restrict the landlord’s options for possible tenants. Bookstores that offer hot chocolate or even a gas station that offers self-serve coffee would be prohibited from leasing in the same retail space even though these places are not in direct competition with the coffee chain. Landlords will be reluctant to restrict its other spaces from ancillary uses that do not directly pose a threat to the tenant’s primary business.

A landlord and tenant could reach a compromise when it comes to the scenario above by agreeing to place a capped amount on the sales that another tenant may derive from the ancillary uses of the negotiating tenant (i.e., the sale of hot beverages). Alternatively, the parties could agree to restrictions on advertising or display areas that other tenants would have to abide by if leasing the space. When it comes to exclusive use clauses, there are several ways to help both landlord and tenant strike the right bargain. A well-drafted clause offers the tenant adequate protection from competition without stifling the landlord’s ability to attract other compatible businesses for the retail area.

If you are considering entering into a commercial lease and need assistance in reviewing or drafting provisions, contact a McBrayer real estate attorney today.

CRichardson

Christopher A. Richardson is an associate at McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Louisville, KY office. Mr. Richardson concentrates primarily in real estate, where he is experienced in residential and commercial closing transactions, landlord/tenant relations, and mortgage lien enforcement/foreclosure. Mr. Richardson has closed innumerable secondary market and portfolio residential real estate transactions and his commercial practice ranges from short-term collateralized financing and construction lending to development revolving lines of credit. He can be reached at 502-327-5400 or crichardson@mmlk.com.

This article is intended as a summary of  federal and state law and does not constitute legal advice.