ZENO BAKALIAN P.S. LEGAL AND ESCROW SERVICES

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1 AARON M. NEILSON Phone: x223 Fax: Lake Washington Blvd NE, #100 Kirkland, WA ZENO BAKALIAN P.S. LEGAL AND ESCROW SERVICES PRACTICE EMPHASIS Landlord-Tenant Real Estate Finance & Banking Business Advice Civil Litigation Estate Planning I advise commercial and residential landlords on a wide range of real estate, lending and business matters. I form holding companies, prepare leases, resolve tenancy disputes including evictions, and otherwise help landlords with their legal needs. For landlords seeking financing, I am a prior loan officer with knowledge of the banking industry and experience in secured lending. Achieving my clients' goals in an efficient, cost-effective manner is of the utmost importance to me. REPRESENTATIVE MATTERS EDUCATION Prepared numerous residential and commercial leases. Formed holding companies to protect individuals from liability exposure. Advised landlords about best practices relating to violent tenants, marijuana issues, and non-compliant tenants. Successfully evicted defaulting tenants. Advised landlords throughout the foreclosure process. Negotiated landlord-tenant disputes. J.D., University of Montana School of Law, cum laude, 2010 Business Editor, Montana Law Review B.A., University of Montana, magna cum laude, 2006 PROFESSIONAL AND CIVIC INVOLVEMENT Washington State Bar Association, Member State Bar of Montana, Member King County Bar Association, Member East King County Bar Association, Trustee Bellevue Chamber of Commerce Eastside Legal Assistance Program, Volunteer Bellevue Presbyterian Church, Volunteer PERSONAL Aaron enjoys fishing, baseball, basketball, hiking, attending concerts and spending time with his wife, son, family, friends and his dog, Gus. Page - 1

2 G. Michael Zeno, Jr. Allan B. Bakalian * Aaron M. Neilson+ *admitted in WA & OR +admitted in WA & MT ZENO BAKALIAN P.S. LEGAL AND ESCROW SERVICES 4020 LAKE WASHINGTON BLVD. NE, SUITE 100 KIRKLAND, WASHINGTON (425) FAX (425) LEGAL LIABILITY TRAPS FOR LANDLORDS 1 Washington Landlord Association June 8, 2013 Tacoma, WA By: Aaron Neilson, Attorney x223 aneilson@zenobakalian.com 1 NOTICE: The law cited in this publication is subject to change by the Washington legislature and Congress. This publication is not intended to be relied upon as legal authority, nor does it create an attorney-client relationship. Please check current law or consult with an attorney to verify the accuracy of the information in this publication in the future. Page - 2

3 LL = Landlord / T = Tenant / RLTA = WA's Residential Landlord Tenant Act, RCW ) Not owning the rental property through a limited liability entity. 2) Inadequate property and liability insurance. o Rental Dwelling Policy ( RDP ) Covers accidental, direct physical loss to LL s rental dwelling and LL s personal property, with exceptions. Coverages include: (1) dwelling; (2) personal property; (3) loss of rent; (4) business liability; and (5) premises medical payments; o Rental Condominium Unitowners Policy ( RCUP ) o Optional Endorsements: (1) Back-up of Sewers or Drains; (2) Building Ordinance or Law; (3) Earthquake or Volcanic Eruption; (4) Replacement Cost on Personal Property; (5) Additional Insureds; (6) etc. o Renters Insurance - covers Ts from liability and loss to property. o Ex. LL s management company authorized removal of tree without permit; $17,000 fine; LL bought Ordinance and Law Endorsement; Insurance defended. 3) No written lease or an inadequate written lease. 4) Unsuitable Living Conditions Warranty of Habitability. o T gives LL a notice of defect and LL does not begin remedial action in the following time periods (RCW ): 24 hours hot/cold water; heat; electricity; imminent hazard to life; 72 hours refrigerator; range/oven; major plumbing fixture; and 10 days all other issues. o T's remedies after T gives LL written notice of the defect and LL fails to make the necessary repairs after a reasonable time (RCW ;.100): (1) terminate the lease, (2) move out, (3) not pay rent after the move out date, and (4) get whatever security deposit T is entitled to. Sue for money damages, to rescind the lease, or for specific performance. (1) submit an estimate of the cost to remedy the defect, and after LL does not act in a timely manner (2) hire a licensed contractor to do the repair work, and (3) deduct the following amounts from T's rent: (a) up to one month's rent for each repair, or (b) up to two month's rent for in any 12 month-period. 5) Discriminatory leasing practices (race, color, religion, sex, handicap, familial status, marital status, creed, the presence of sensory/mental/physical disability) o Under federal law, it is illegal to discriminate against someone on the basis of the person's race, color, religion, sex, familial status, handicap, or national origin (42 USC 3604(a)-(e)). Liability Exposure (1) Actual damages, (2) punitive damages, and (3) costs and attorney fees (42 USC 3613(a), (c)). Ex. Religious LL refusing to rent to unmarried couple. o The same is true under Washington law, however, protected classes include: sex, marital status, sexual orientation, race, creed, color, national origin, families with children status, honorably discharged veteran, disability, or use of a trained service dog (RCW ,.340,.030(2)). Enforcement WA State Human Rights Commission Liability exposure (1) money damages, (2) costs, (3) attorney fees. Page - 3

4 6) Illegal LL action. o Lockouts without court order (RCW ): T's remedies: (1) recover possession or terminate the lease, and (2) recover (a) money damages, (b) costs, and (c) attorney fees. o Utility shutoffs (RCW ): Liability exposure: actual damages; plus $100 / day / tenant penalty; plus costs and attorney fees. o Taking/Selling T's property without proper notice (RCW ;.230(4)): Proper Notice: If T abandons the property after nonpayment of rent, LL may (1) take possession of the premises, (2) store T's possessions in a secure place. LL must (3) give T reasonable notice at least 45 days of (a) LL's name/address, (b) where the property is stored, (c) the date of sale, and (d) T's right to have the property returned if T pays the reasonable transportation and storage costs. Liability exposure: (1) actual damages and, if LL's taking is intentional, (2) damages of $500 / day up to $5,000; (3) costs, and (4) attorney fees. o Renting condemned property (RCW ): If LL does so intentionally, T may recover (1) 3 month's rent or 3x actual damages, whichever is greater, (2) costs, (3) attorney fees. T may also (4) terminate the lease, and (5) recover the full security deposit and all prepaid rent. If LL does not do so intentionally, but knew or reasonably should know of the existence of the dilapidated property, then LL must pay (1) to relocate T to a suitable residence the greater of (a) $2,000 per unit, and (b) 3x the monthly rent, (2) T the security deposit, and (3) T all prepaid rent. If LL does not voluntarily pay the relocation fees, a municipality may front the fees and sue LL to recover costs, attorney fees, and a penalty of $50 / day / tenant. o Retaliation (RCW ,.250). While T is in compliance with the RLTA, LL cannot retaliate for T's (1) complaint to a gov't authority, or (2) assertion of T's rights under the RLTA. For example, LL cannot threaten: Eviction; To increase rent; Reduced services to T; Increased T responsibilities. If LL makes such a threat within 90 days of any gov't agency investigation or assertion of T's lawful right, then courts presume LL's actions were retaliatory. The presumption is rebuttable, however. Liability exposure: costs and reasonable attorney fees. 7) Smoke detectors / carbon monoxide detectors (RCW (11) / ): o At the time the lease is signed, LL must give T written notice of (1) the smoke and carbon monoxide detectors, (2) T's duty to maintain the devices, and (3) the potential penalties for not complying. o If the property is not a single-family residence, the LL must give several other notices regarding the devices. See RCW (11). Page - 4

5 8) Marijuana o LLs can ban smoking, including marijuana, in their rental properties. o I-502: allows social users over 21 to possess up to an ounce of pot. o Federal Law: all types of marijuana are illegal. o Issues: what about edible and liquid forms of marijuana? Can LLs evict Ts who use/possess marijuana? 9) Threatening Behavior o Threatening Behavior By T (RCW ) IF (1) a T notifies the LL that he/she, or another T, was threatened by another T, and (2) the threat was with a firearm or deadly weapon, and (3) the threatening T is arrested, and (4) LL does not file an unlawful detainer lawsuit against the threatening T within 7 days of being notified of the arrest, THEN the notifying T (a) may quit the premises after giving notice to LL, (b) is discharged from paying rent after the quit date, (c) is entitled to a pro rata return of prepaid rent, and (d) is entitled to a return of the security deposit to which the notifying T is entitled. o Threatening Behavior By LL (RCW ). IF (1) T was threatened by LL, and (2) the threat was with a firearm or deadly weapon, and (3) LL is arrested, THEN T (a) may quit the premises, (b) is discharged from paying rent after the quit date, (c) is entitled to a pro rata return of prepaid rent, and (d) is entitled to a return of the security deposit to which the T is entitled. 10) Victim Protection (RCW ,.580) o IF (1) T notifies LL that T was a victim of domestic violence, sexual assault, unlawful harassment, or stalking, and either (2a) T has a valid protection order, or (2b) T has reported the domestic violence, sexual assault, etc. to a qualified third party who provides T with a written report, and (3) T gives LL a copy of the protection order or report signed by the qualified third party, and a request to terminate the rental agreement within 90 days of the reported act, THEN T (a) need not pay rent beyond the last day of the month in which the T quits the premises, (b) is entitled to a refund of a security deposit. All other Ts remain liable under the rental agreement. o LL may not terminate a tenancy, refuse to renew a tenancy, or refuse to enter into a lease agreement because of the T s or applicant s status as a victim of domestic violence, sexual assault, or stalking. A LL who violates this rule may be liable for (1) money damages, (2) court costs, and (3) attorney fees. 11) Improper Procedure re Deposits (RCW ,.270): o Deposit to secure occupancy (RCW ): LL cannot require a deposit to place T on a waiting list to be considered as a tenant. LL may, however, charge a deposit to hold a unit. LL must then give T a written receipt of the deposit and a statement of the conditions, if any, under which the deposit may be retained. If T moves in, LL must credit the deposit amount to T's first month's rent or T's security deposit. If T does not move in, LL may keep the deposit in compliance with the written statement. Page - 5

6 If LL violates these duties, T may sue for (1) up to 2x the deposit, plus (2) costs, and (3) attorney fees. o Security Deposit (RCW ,.270,.280): If LL collects a security deposit (1) the lease must (a) be in writing, and (b) explain the conditions under which the deposit may be withheld, and (2) LL must give T a written checklist at the commencement of the lease, which checklist must be signed and dated by LL and T. Deposit must be put in a trust account, and LL must notify T in writing which bank holds the account. Within 14 days of lease termination or abandonment, LL must give a "full and specific" statement of the bases for withholding all or a portion of the deposit. LL cannot withhold any portion of the deposit for normal wear & tear. Liability exposure: Generally, the amount of the deposit, plus costs and attorney fees. But if LL is found to have intentionally not given T the statement of explanation or the proper refund, LL may be liable for 2x the deposit, plus costs and attorney fees. o Non-Refundable Fees (RCW ): A deposit is not a non-refundable fee. If the LL collects a non-refundable fee, the lease must be in writing and it must clarify the fee is nonrefundable. If LL does not provide a written lease, LL is liable to T for the amount of the nonrefundable fee. 12) Improper Treatment of T s Property (RCW (4); ;.310;.312(4)) o Lien Against Personal Property - a provision in a rental agreement creating a lien against T s personal property for unpaid rent is void and unenforceable. o Lien Against / Retention of Personal Property - a LL who (1) takes T s personal property without T s written authority, or (2) refuses to return T s personal property to T after written demand from T is liable to T for (a) the value of the personal property, (b) money damages, (c) court costs, and (d) attorney fees. If LL s refusal to return the personal property to T is intentional, LL may also be liable to T for (e) $500 per day up to $5,000. o Storage of T s Personal Property After Writ of Restitution When LL takes possession of the rental property via a writ of restitution, LL may take possession of T s personal property. LL may (1) store T s personal property in a secure place, and (2) sell/dispose of the property. LL must store T s personal property if T serves a written request to do so on LL within 3 days of T being served with the writ of restitution. If T does not request storage of T s property, LL may put T s property upon the nearest public property. T is entitled to T s property after T pays the reasonable storage and transportation costs. o Sale of Personal Property After Writ of Restitution If T s property is worth $200 or more, LL must notify T of the date when T s property will be sold at least 30 days before the sale date. If T s property is worth less than $200, LL must notify T of the date when T s property will be sold at least 7 days before the sale date. If the cumulative value of T s property is $200 or more, LL may sell T s personal papers, family pictures, keepsakes, etc. But if T s property is worth less than $200, then LL may not sell such items. o Storage and Sale of T s Personal Property After Abandonment If T abandons the rental property, LL may (1) immediately enter the rental property and take possession of T s property Page - 6

7 and (2) store that property in a secure place. LL may then sell T s property after giving 48 days advanced written notice of the sale date. If T s property is worth less than $200, LL may not sell T s personal papers, family pictures, keepsakes, etc. T is entitled to the property only if T pays the reasonable storage and transportation costs. 13) Waiver LL s continued acceptance of late rent with knowledge of other breaches o Generally, if LL accept rent with full knowledge of a prior breach, then LL waives T s prior breaches and LL s ability to evict T based on those breaches. 14) Multiple tenants, 1 deposit o Lease should say landlord satisfies its duties by giving the security deposit to any of the tenants. 15) Improperly increasing rent during the lease term (RCW ). o To increase rent LL must give each T at least 30 days written notice, and that notice is effective (1) upon completion of the rental agreement term, or (2) sooner upon mutual consent. o The City of Seattle requires a 60 day notice (SMC (A)). 16) Duty to Mitigate Damages o LL and T must make an "honest and reasonable effort to mitigate damages." o Iverson v. Marine Bancorporation, 86 Wn.2d 562 (1976). o LL evicted T, putting T's property on the sidewalk outside the apartment. T paid $300 for delivery services and $51 / month storage thereafter. T left the property in storage for a long time, then sued LL for her entire $2,000 storage bill. Trial court awarded T $1,000. T appealed. WA Supreme Court affirmed because T did not act reasonably by letting her personal property stay in the storage unit for too long. T failed to mitigate her damages. 17) Illegal Lease Provisions (RCW ,.085(6)(c)): o T agrees to waive rights or remedies. o T authorizes any person to confess judgment on claims under the lease. o T agrees to indemnify LL or limit LL's liability for acts that, by law, LL is responsible for. o T and LL agree to an arbitrator at the time the lease is signed. o T agrees to lease condemned premises and waive related remedies. o T agrees LL has a lien against T s personal property. 18) LL s duties (RCW ). LL has a duty to: o Maintain the premises in substantial compliance with applicable laws. o Maintain the roof, floors, walls, chimney, fireplaces, foundations, etc. o Keep common areas clean & safe from defects that increase accidents. o Control infestation by insects, rodents & pests. o Keep the premises in good condition (except for normal wear & tear). o Provide reasonably adequate locks. o Maintain electrical, plumbing, heating, etc. in good working order. o Prevent water intrusion. o Give T smoke detector and carbon monoxide detector notices. o Give T the mold disclosure form from the WA State Department of Health. o Identify the name/address of LL on the lease. Page - 7

8 19) Landlord cannot unreasonably withhold consent language o Commercial lease said LL could not unreasonably withhold consent to T s assignment of the lease. T tried to assign its lease to Value Village. LL withheld consent. T sued LL, arguing LL withholding consent was unreasonable. Ernst Home Center, Inc. v. Sato, 80 Wn.App. 473 (1996). LL argued consent was withheld because Value Village brought an image to the rental facility that LL did not want. o Test Would a reasonably prudent person in the LL s position have refused to consent to the assignment? Most courts do not consider a LL s personal taste. Instead, they consider the new tenant s financial status, level of responsibility, the legality of the new tenant s proposed use of the property, and the nature of the occupancy. o Fix put provision in rental agreement that T may not assign or sublet the premises unless LL consents to the assignment or subletting, which consent may be withheld for any reason. Page - 8