Lease Templates Are Not What Philadelphia’s Tenants Need | bonniegalam.com

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Lease Templates Are Not What Philadelphia’s Tenants Need

March 11, 2022

On Feb 8, 2022, the Philadelphia Inquirer published an article by a team from the University of Pennsylvania Law School asserting that Philadelphia’s eviction woes could somehow be ameliorated by a template residential lease agreement. The authors proposed a solution looking for a problem. There is a sense of false exceptionalism in the landlord-tenant world. […]

On Feb 8, 2022, the Philadelphia Inquirer published an article by a team from the University of Pennsylvania Law School asserting that Philadelphia’s eviction woes could somehow be ameliorated by a template residential lease agreement. The authors proposed a solution looking for a problem.

There is a sense of false exceptionalism in the landlord-tenant world. Both on part of the landlord and the tenant. Landlords believe their investments properties are a liability ticking time bomb and layer themselves in legal entities like LLCs, trusts, in an effort to shield themselves from loss and tenants, more recently emboldened by the years-long moratorium, increasingly see themselves as untouchable.

However, I believe it’s clearest to look at the landlord-tenant relationship through the lends of a business and a customer relationship – albeit a relationship with inherent legal rights

Leases are contracts and just like in any other contract between a business and a customer, illegal terms are unenforceable. The authors, in their research, put forth the volume of “as-is” clauses and “indemnity” clauses as some sort of a canary in a coal mine of the treacherous slope of contractual landlord abuses. However, this is incorrect both legally and in practice. 

To give some context, the purpose of an “As-Is” clause is to put a bookend on the condition of the property when the keys get handed over to the tenant. As-is terms do not modify the other lease terms which outline the Landlord and Tenant’s responsibilities for the condition of the property. Most often the Landlord remains responsible for major systems, the structure of the property, and safety issues with the exception of those problems caused by the tenant’s actions. Case in point is the situation when a tenant flushes things down the toilet that don’t belong in the sewer lines causing a plumbing back-up. 

Tenants also have duties under a lease. Tenants are responsible for cleanliness, proper usage of the appliances and systems, and of course, timely notifying the Landlord of issues requiring their attention. An “As-is” clause does not waive a tenant’s right to a habitability claim (or defense) for issues within the purview of the Landlord’s responsibilities much as a Landlord could not evict a Tenant for failure to handle the Landlord’s duties. As stated above, “As-Is” clauses is to put a bookend on the condition of the property and clarify essentially that “what you see is what you get.” It does not remove the Landlord’s implied warranty of habitability.

Under the law, parties to residential leases cannot waive away their rights to habitability and judicial evictions. Nor can they waive away fraud. Just like any unenforceable term in a contract, no judge in Philadelphia would enforce them. The risk of a tenant unlawfully being unhoused due to such terms is a legal impossibility. It can’t happen.

In a Slate article about the same research which takes so many uncited liberties that I debated even including it, the Slate reporter stated the following which I feel compelled to rebut: 

“Those terms might not hold up in court, but again, most people get evicted out of court. And tenants don’t know that their lease might not withstand legal scrutiny.”

To be honest, I’m not clear what “out of court” evictions the reporter is referencing as that would be illegal not only in Philadelphia but most jurisdictions. Assuming the author is stating is referencing that most evictions settle by joint consent agreement before a trial, that is correct but that is not injustice. Again, due to most evictions being the cause of nonpayment of rent, the tenant must provide the owed rent on or before the court date to avoid the eviction, otherwise, they will lose and get a judgment. These consent agreements (or “out of court” evictions in the reporter’s lingo) are actually beneficial to tenants because they can negotiate a payment plan, reduced payment, and even the date they leave. Plus, they don’t have an eviction judgment on their record for future landlords to see. This “non-court” process is in the tenant’s favor and the report’s disparaging insinuations about it are mindboggling.

Further, blanket negligence indemnity while unenforceable does not play into effect for eviction proceedings. Negligence claims are a matter of tort, not possession, which is the crux of landlord-tenant actions. 

The singling out of Landlords for using “indemnity” or “exculpatory” clauses is inexplicable. These types of clauses are so standard that it would be legal malpractice for any contract-drafting attorney, not just a real estate attorney like me, to leave it out. 

The study lists these exculpatory clauses without distinguishing between the types of exculpatory clauses contained in a lease. Lest we forget the reality of residential leases, where the tenant remains in possession and control over the property. As such landlords are often unaware of problems or changing conditions inside the property unless informed by the tenant. Some conditions which may cause liability are the responsibility of the tenant (ie. someone slipping on a spill in the kitchen) whereas others such as a slip down a staircase without a handrail would be the liability of the Landlord. Residential leases contemplate both situations, and wholly indemnify the Landlord from the action of the tenant, and rightfully so. On the flip side, limitations on the landlord’s liability are often limited to gross negligence. This limitation is not only standard but takes into account the realities of control and access between the parties and the balance of providing the Tenant’s right to quiet enjoyment.

By the authors’ own admission, neither party is reading or understanding these agreements, so could these unenforceable terms truly be a no-harm, no-foul situation?

As an extension of this false exceptionalism was the authors’ assertion that somehow a good quality lease will benefit the public at large. To characterize a lease as a social document may highlight the unique nature of a contract for the housing of our neighbors however to imply any 3rd party benefit to a contract between two private individuals would be an incredible expansion of contract theory.

We need not speculate on the implementation of lease templates in our courts. There are already several form templates in large circulation from the Pennsylvania Association of Realtors (PAR), HAPCO, and PAA. The authors did not indicate any decrease in evictions for the usage of these well-utilized lease forms. 

The answer is not to propose yet another document that neither landlord nor tenant will understand nor read. Although my proposal below does acknowledge the benefit of providing a free model lease template. 

The vast majority of Philadelphia evictions, and nationwide, are due to nonpayment of rent. That is the cause of economic factors beyond the Landlord, lease, and often tenant’s control. However, I don’t really think that, despite their promises to the contrary, eviction prevention is what the authors’ truly intend to accomplish through the implementation of a city-wide lease template. So let’s put evictions aside and talk about what is needed to create a more user-friendly and fair landlord-tenant experience in Philadelphia which is something I think we can all get on board with.

Proposal

I recognize there is an access to justice issue for both landlords and tenants in Philadelphia in the creation and implementation of leases in the city of Philadelphia. Not in small part due to the City’s own doing. The landscape of Landlord-Tenant laws in Philadelphia is rapidly shifting and communication and education about these changes are difficult to find at best and often impossible to figure out in implementation. However, I will keep the focus of this proposal on the Landlord-Tenant relationship and the role the City of Philadelphia plays in that, not the relationship between City and Landlord.

I propose the following six action steps to meaningfully protect Tenants:

  1. Education. Access to justice begins with access to education. You can’t fight for what you’re entitled to if you don’t know you’re entitled to it in the first place. Landlord education for landlords and tenants should be free, consolidated, and easily accessible. Philadelphia landlords pay to play in the city, siphoning a portion of those fees to create a resource for landlords and tenants is well within the capacity of the city of Philadelphia.

  2. Template. To the author’s proposal of a free template lease? I say why not. There’s not much to lose. It could be up on the city’s website in a matter of days. However, that lease should not favored by the courts nor incentivized by the city. Take it from a Philly landlord, free is an incentive enough, however nothing will compare and benefit both landlords and tenants more than lawyer-drafted leases and those should not be disincentives. 

  3. Courts. If our courts cannot decipher illegal terms or spend the time necessary to evaluate eviction matters, then we need further funding for eviction courts. Implementing a master-run program similar to other areas of law would allow the proceedings, while summary in nature, to provide both parties with what they are entitled – thoughtful scrutiny of their case. The city of Philadelphia should not operate a judicial eviction mill. 

  4. Inspections. There must be an expansion of city inspections of properties, particularly in subsidized housing. We need not look at the horrific fire that took the lives of 18 Philadelphians just a few months ago. The lease would not have protected them. Landlords pay for registratio and private inspections of their properties (for defects like lead). 

  5. Bill of Rights. Law to incorporate a tenant bill of rights into all Philadelphia leases. Philadelphia landlords already provide Tenants with bed bug information, lead information, why not incorporate a bill of rights outlining habitability, security deposits, notice timeframe and the like? With the recent addition of requiring wholesalers to provide a bill of rights to home sellers, there is no reason to this can’t simply be added to the litany of other documents Landlords to provide to Tenants at the time of lease execution and harbor a more educated lease signing. 

  6. Walk-through checklists. Property turnover is a huge opportunity for loss from both the Landlord and Tenant. If landlords and tenant memorialize at the outset of the lease the condition of the property then disputes over the condition at the termination of the lease are less likely. 

I invite the City of Philadelphia to a conversation with myself, other landlord groups, and tenants rights advocates to continue this conversation. We can and must do better.

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