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Rent it Right Janet Portman, Inman NewsHouse in hands photoQ: I’m in a bit of a bind. I own a unique, lovely duplex (we live upstairs) that I easily rented in our town of few rentals and high demand.

I signed a one-year lease with the new tenants, then learned that my daughter and her husband lost their jobs and need to move.
I want to offer them this unit rent-free, and I’m prepared to pay the new tenants what it takes to find another unit, and even any additional rent for a comparable place. But they insist that they have the right to move in, because “a lease is a lease.” Can they force me to go through with the lease? –Arnold S.A: Your tenants’ starting point is really, “a lease is a contract.” You’re announcing that you don’t intend to honor the contract, and the legal question becomes, what is your tenants’ remedy? Is it “damages” (money to compensate them for the consequences to them of your breach, such as application expenses, additional rent for a similar unit, and so on) or an order from the court that you must go ahead and live up to the contract (known in legalese as “specific performance”)? Here’s how a judge might think about it.

First, understand that a judge will start by assuming that money damages will suffice. There’s a very practical reason for this preference: Judges like resolutions that don’t require ongoing supervision. For example, if a judge rules that you must pay a certain amount of money, your tenants will have a relatively easy way of getting the money if you don’t follow through (through attachment of your bank accounts or garnishing your wages). Neither of these methods involves going back to court.

But if the court tells you to honor the lease and you drag your heels or make it impossible or difficult for the tenants to move in, their only recourse will be to go back to court and complain to the judge that his order isn’t being honored. This will involve another fact-heavy hearing, followed by a decision (contempt, anyone?), which will take time and effort. You get the picture. But don’t take your checkbook out just yet.

With some broken contracts, specific performance is the right remedy, notably when money damages just won’t make the other party “whole,” or satisfied. This typically happens when the object of the contract is unique and not easily replaced. Real estate can be precisely this sort of thing — one house or piece of land, the subject of a sales contract or lease, may be so unique that no amount of money will put the buyer or tenant in a similar position had the other side not breached the contract.

For example, renting a beachfront home in an area that has no other beachfront rentals would put that rental, should the landlord renege, in line for an order from the judge to rent it out as promised, period.

The chances that a judge would order you to honor the contract, rather than pay money damages, will largely depend on the nature of the duplex and the rental market. You have described it as lovely and unique — setting it up for specific performance, if the tenants can show that nothing nearby approaches this rental in features and location.

The state of the market will affect things, too — if it’s a hot market, with few rentals available, it may be even more difficult to find even a close approximation of your unique duplex. The market figures into the equation in another way, too — why can’t your daughter and her husband live elsewhere, in a rental that you pay for?

After all, you were willing to let them live for free in your rental, thus foregoing the rent. It will make little or no difference to you if you collect the rent from your tenants, then channel that to the cost of renting a place for your daughter.

Again, if rentals in general are plentiful, a judge might find that your desire to have your family under your roof, though understandable, should not trump your contractual obligations.

One final factor may affect the remedy your tenants will receive in court. Judges are leery of ordering specific performance if it will mean that the parties, now plenty mad at each other, will have to interact in an ongoing way. For example, in the employment context, specific performance of an employment contract is rare, because the law recognizes that, however unique a worker’s skills may be, it’s generally not a good idea to force someone to work for someone else.

On the other hand, when dealing with a contract for a one-time sale of goods, specific performance might be just the ticket, because it won’t involve future personal interactions. Your situation is more like the former — you will not only be the tenants’ landlord for a year, but will also be living upstairs. Forcing you to honor this lease could be a recipe for unpleasantness all around — something your tenants themselves might want to think about before demanding the keys.

Copyright 2009 Janet Portman
See Janet Portman’s feature, Not All Violations Warrant Eviction.
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