California leases--"discount" rent charge back clause enforceable?

[Kirk_Ferentz]

(California)

My question is about the enforceability of a lease provision that purports to allow a landlord to charge back all "discount" amounts that were given on a month-to-month basis (the landlord supposedly knocks $100 off of the "market" price each month) upon breaking of the lease. So, if a tenant leaves before the full term is up, he or she will owe the $100 "discount" amount for each of the previous months and will have to pay all subsequent months that it is unoccupied at the "market" rate. I suppose that the landlord would then rent it out at the "discount" rate and tell the lease-breaker that he or she needs to couugh up the extra $100 for each of the months after he or she leaves.

I should say that in this case, the "clause" is actually a lease adendum that is routinely (though not always) added to leases at the property.

The "market" rate is set by the property management company. The agents have no idea how it is calculated. So, I'm not sure if the "discount" is real in any way.

I have done some research on this issue and found Freeman v. United Dominion, 2008 WL 1838373, which casts a lot of doubt as to the enforceability of a promotional first month free charge back (upon violation of the lease) clause in a lease.

This case seemed to confirm what I thought, which is that this is a disguised penalty clause. The clause only kicks in upon violation of the lease, and there is no real tie to actual damages of the landlord. I tend to think that it is a penalty clause even if the rent was truly "discounted" (charging back what you already gave to a tenant in event of breaking a lease still seems to be a "penalty"), but certainly seems to be a penalty if the "discount" is illusory in any way.

For those of you experienced in landlord-tenant matters, I'm interested in both 1. the law on this, and 2. the real life procedures of how this plays out if a lease is broken and the landlord tries to collect.

Thanks in advance!

 

[HomeGuru]

(California)

My question is about the enforceability of a lease provision that purports to allow a landlord to charge back all "discount" amounts that were given on a month-to-month basis (the landlord supposedly knocks $100 off of the "market" price each month) upon breaking of the lease. So, if a tenant leaves before the full term is up, he or she will owe the $100 "discount" amount for each of the previous months and will have to pay all subsequent months that it is unoccupied at the "market" rate. I suppose that the landlord would then rent it out at the "discount" rate and tell the lease-breaker that he or she needs to couugh up the extra $100 for each of the months after he or she leaves.

I should say that in this case, the "clause" is actually a lease adendum that is routinely (though not always) added to leases at the property.

The "market" rate is set by the property management company. The agents have no idea how it is calculated. So, I'm not sure if the "discount" is real in any way.

I have done some research on this issue and found Freeman v. United Dominion, 2008 WL 1838373, which casts a lot of doubt as to the enforceability of a promotional first month free charge back (upon violation of the lease) clause in a lease.

This case seemed to confirm what I thought, which is that this is a disguised penalty clause. The clause only kicks in upon violation of the lease, and there is no real tie to actual damages of the landlord. I tend to think that it is a penalty clause even if the rent was truly "discounted" (charging back what you already gave to a tenant in event of breaking a lease still seems to be a "penalty"), but certainly seems to be a penalty if the "discount" is illusory in any way.

For those of you experienced in landlord-tenant matters, I'm interested in both 1. the law on this, and 2. the real life procedures of how this plays out if a lease is broken and the landlord tries to collect.

Thanks in advance!

**A: sounds like homework to me.

 

[Kirk_Ferentz]

yep, unlike the riveting telanovela-like other landlord-tenant posts in this forum.

 

[proud_parent]

**A: sounds like homework to me.

C'mon, HG -- the OP doesn't have time for that sort of thing. He has a big football game to prepare for.

 

[sandyclaus]

**A: sounds like homework to me.

yep, unlike the riveting telanovela-like other landlord-tenant posts in this forum.

The other LL/T posts tend to be genuine real-life inquiries about such matters. But we are pretty firm in that we don't do people's homework for them.

If you are going to law school, you need to learn how to think for yourself instead of expecting others to do your thinking (and homework) for you.

 

[Kirk_Ferentz]

This is as real life as it gets. It's my life, my lease. And my landlord uses these sorts of clauses to gain leverage over the real life tenants at my property.

If I didn't do my homework, how would I have that case? I love the attitude that with just a little elbow grease, you can answer all your legal questions ... if that were true, wouldn't be much use for lawyers. I thought that finding that case with very limited resources was pretty good for someone who isn't a real estate lawyer, but I'm sorry that I don't naturally know how these lawsuits play out in court.

I also love people who critique and complain about questions on a message board. If you don't like questions about landlorditenant law, then don't go into a forum where people ask questions about landlord-tenant law. And if you somehow think my question isn't "legitimate," then don't answer.

 

[Kirk_Ferentz]

I guess that no one thinks that this is an interesting question, but in case anyone is watching, I got some more facts from the property management company. The company originally offered me an inflated rent amount, and I talked them down to a lower amount. The management rep admitted to me that the "market" rent shown on the lease addendum would have been higher if I had signed a lease with the higher actual rent amount. So, it sounds to me like the "market" rent is probably just a function of the actual rent that the tenants pay ... that is, the actual rent is the market rent, and not some "discounted" or "promotional" amount.

She also confirmed that it is the property management company's usual practice to use these addenda.

As such, it sounds to me like the "market rent" amounts shown on the lease addendum (and the "discount" amounts that are derived from them) are largely or completely illusory. If this is right, I can't imagine this not being an unenforceable penalty, but I would love to hear the thoughts of someone who really knows about these sorts of disputes.

(By the way, I'm still thinking that the charge back of "discount" amounts is a penalty, even if the "market" rate has some basis in reality, but that seems more controversial to me.)

 

[tranquility]

Well, someone named Jon has a similar question:

In California lease, is a "discount" rent charge back enforceable? - Yahoo! Answers

maybe you'll like their answers better.

 

[Kirk_Ferentz]

Yes, unfortunately those answers are better. I thought that I would have gotten better answers in this forum, but the people here just like to spend their time criticizing posts based on imaginary reasons, such as that I am in law school doing homework (wow, someone must have signed me out without me knowing).

Is this forum just full of ambulence chaser types looking for business? It's like people are offended by a legitimate question about an interesting legal issue.

 

[tranquility]

You realize the case is not precedent, right? (It was a non-published case.) While discussion is often useful in such cases, you have to look at the discussion and follow it along before gaining any value.

Have you done that?

If you have, you'd find this is NOT an interesting question. It is a factual one. One side says one thing and the other says something else. The judge decides and then uses jargon (aka magic legal words from other cases) to write out his decision.

If this is your case and it is real, start working on your facts to show....well, you know. If this is homework, you have a lot of work to do to lay the underlying predicate to show....well, what do you want to happen?

 

[Kirk_Ferentz]

I'm not sure how many different ways I can say that this is not homework. I am not enrolled in any school or class. I wrote my post in the way I did to try to lay out the issues clearly. My question is about real leases at my property. I guess I should have written my question more like what seems to be the usual on this site -- "My roomate won't move out, what do I do!!!?"

What I want is what I asked in my OP--opinions from experienced people about 1. the law on this, and 2. the real life procedures of how this plays out if a lease is broken and the landlord tries to collect.

#2 is about the fact that I know that what the law says and whether that law is actually useful to you in a real life dispute are two different things. My understanding is that typically, if a landlord is insisting on some disputed amount when you break your lease, it will go after your credit, in which case you can dispute the issue and, if there is a legitimate dispute, get it taken off your credit. At that point, the landlord would have to sue you to collect. But in my battles, the landlord has always given up before going after my credit or doing anything else, so I don't know.

From the last post, sounds like one way that it might play out is that it could end up being a fact issue in a lawsuit. I'm guessing this means that the landlord would have to end up bringing a lawsuit and we would have to fight it out in court if it really wants to collect, but I'm not sure.

 

[Kirk_Ferentz]

By the way, I should say that the general goal is to try to figure out what I would really be liable for if I broke my lease. I don't plan on doing that, but I think that it is ridiculous if the property managers can collect thousands of dollars based on some illusory "discount" that they decided to write on a piece of paper if I have to move before the lease is up.

And I'm sorry, but I still think that this is an interesting issue. The property managers use this provision on a regular basis to intimidate people at my property into not breaking their lease even when the tenants are happy to cover any actual damages. It's interesting to us.

When I said "legal issue," I didn't mean that it was an issue of law for a judge, just an issue that has to do with the law.