by Mitchell P. Johnson

Wanna tell you a story
About the house-man blues
I come home one Friday
Had to tell the landlady I’d a lost my job
She said that don’t confront me
Long as I get my money next Friday
Now next Friday come I didn’t get the rent
And out the door I went.

“One Bourbon, One Scotch and One Beer”, as adapted by George Thorogood and the Destroyers.

THE NOVICE

In September of 2001, I was drafted by a senior partner to represent a client who had not paid her rent for four months. Unsurprisingly, she was being threatened by her landlord with eviction. “Great.” I thought to myself, “either she can pay the money to him or she can’t. If she doesn’t have the money, then the first time he serves her with proper notice, I am of no use to her at all.”

That was the first dumb thing I did. The first smart thing I did was go to see her at her house and meet with her.

THE IMPORTANCE OF LOOKING

When I got to my client’s house she showed me a three foot wide hole in her ceiling which leaked when it rained directly onto her bed. She showed me a back door that would not close and a heater that would not run at all. She showed me a rotten porch, rotten shutters, and rotten window frames that wouldn’t seal. She tells me “it’s been like this since I moved in and my landlord won’t do a thing.”

But she had never placed even one complaint in writing.

THE IMPORTANCE OF LISTENING

I learned that for five years my client had paid her rent religiously to her landlord. When she was late she drove to his house and paid her late fees.

In the course of advocating for my client’s position, I learned a number of helpful tips which I present in “primer” form in this article. I presume that these tips will be helpful to anyone interested in advocating for tenants’ rights.

THE IMPLIED WARRANTY OF HABITABILITY

In 1977, the General Assembly enacted the Residential Rental Agreements Act (the “Act”), codified at N.C. Gen. Stat. § 42-38 et seq. Pursuant to the Act, owners of rented residential property and their rental agents are “Landlords” and subject to the Act’s regulations. N.C. Gen. Stat. § 42-40(3).

Pursuant to the Act, the big three obligations of a residential Landlord are that Landlords must:

(1) comply with all housing codes, applicable to the premises at issue,

(2) make all repairs to the premises, and

(3) do whatever is necessary to put and keep premises in fit and habitable condition.

N.C. Gen. Stat. § 42-42(a)(1) and (2).

As interpreted by the Court of Appeals, an implied warranty is created in every rental agreement between a residential landlord and tenant that the rental premises will meet the above minimum standards from the time of the tenancy’s initiation. If a Landlord fails to maintain a fit and habitable premises at any time from the beginning of the tenancy to its end, then the Act provides the tenant with an affirmative right to recover damages for any period “during which they can establish that the condition of their premises was substandard as measured by the statute . . .” Miller v. C.W. Myers Trading Post, 85 N.C.App. 362, 369, 355 S.E.2d 189, 193 (1987).

Importantly, because landlords are required to put the premises in fit and habitable condition, they are required to know the condition of the premises at the beginning of the lease. Accordingly, courts will deem landlords to have constructive or actual knowledge of defects in the premises or code violations which exist at the beginning of the tenancy. A tenant’s failure to provide written or even oral notice of these defects will not relieve a landlord of his obligations. Id. at 370, 355 S.E.2d at 370.

With respect to residential defects which arise after the tenancy has begun, landlords become liable when they gain either actual or constructive knowledge of the defect. The requisite knowledge is gained when a landlord learns of the defect in writing, orally or observes the defect for himself. Written notice of a defect is not required to trigger liability under the Act when that defect renders the premises unfit. Surratt v. Newton, 99 N.C.App. 396, 405-406, 393 S.E.2d, 554, 559 (1990).

Landlords may not evade liability by showing that a tenant gave poor cooperation in the repair effort or that the Landlord made “reasonable efforts to repair” during the period of unfitness. Creekside Apartments v. Poteat, 116 N.C.App. 26, 36, 446 S.E.2d 826, 832-833 (1994). Tenants are entitled to damages for any months in which the premises are found to be unfit. Id. The rental or lease of residential premises that is “fair” or below fair rental value will not release a landlord from his statutory obligation to provide fit and habitable premises. Miller, at 370, 355 S.E.2d at 194.

The Act provides that a tenant may recover damages from a Landlord for breach of the implied warranty of habitability. Such damages are calculated on a per diem basis as the difference between the rental value as warranted (i.e. the rental value of the residence in fit and habitable condition) minus the value of the residence as delivered. Id.

A tenant’s rent abatement damages are subject to a cap. Rent abatement damages cannot exceed the total amount of rent paid over the course of the tenancy. However, special and consequential damages are also compensable and can be recovered in addition to rent abatement damages even where that recovery would exceed the rent-paid cap. Von Pettis Realty v. McKoy, 135 N.C.App. 206, 209, 519 S.E.2d 546, 548 (1999).

ILLEGAL LATE FEES

In any landlord-tenant case it is worthwhile to do a quick calculation to determine whether your client has paid illegal late charges. Boilerplate legal forms frequently require a twenty dollar legal fee without regard to the fact that when applied to many lease agreements, the law requires a lower charge. Because tenants are almost universally unaware of their rights as to late fees, it is important that counsel be informed in their stead.

The Act establishes that the maximum late fee legally chargeable to a tenant is the greater of either:

(1) fifteen dollars ($15.00), or

(2) five percent of the rental payment.

N.C. Gen. Stat. §42-46

For example, if your tenant-client is paying $350 a month in rent, then the maximum late fee allowed by law is $17.50 ($350 x .05 = $17.50). Any clause in a lease charging an illegal amount, such as twenty dollars in a $350/month lease agreement, is void and unenforceable. Therefore, a tenant who has been charged and paid illegal late fees is entitled to full reimbursement of the entire amount paid. For instance, in the above example the tenant would be entitled to a return of the full twenty dollars paid.

Importantly, the General Assembly has established that the practice of charging illegal late fees is against North Carolina’s public policy:

Any provision of a residential rental agreement contrary to the provisions of this section is against the public policy of this State and therefore void and unenforceable.

N.C. Gen. Stat. §42-46

Accordingly, cases in which illegal late fees have been charged cry out for an Unfair and Deceptive Trade Practice analysis as well as the special remedies which it provides to consumers.

UNFAIR AND DECEPTIVE TRADE PRACTICES ACT

It is a settled issue of law that renting a dwelling for residential use constitutes “commerce” for purposes of the consumer protection law against unfair and deceptive trade practices. N.C. Gen. Stat. §75-1.1; Love v. Pressley, 34 N.C.App. 503, 239 S.E.2d 574, 583 (1977).

Whether a trade practice is unfair and deceptive is a fact specific analysis and the facts of each case and the impact each practice has on the marketplace will dictate whether your case is encompassed by the statute.

In the context of landlord-tenant law, Landlords have been held liable under §75-1.1 for not providing facilities and amenities which they have promised to tenants. Marshall v. Miller, 302 N.C. 539, 548, 276 S.E.2d 397, 403 (1981).

Moreover, when a Landlord fails to maintain a rented residence in a fit and habitable condition but continues to collect rent from his Tenant he engages in an unfair and deceptive trade practice. Creekside Apartments v. Poteat, 116 N.C.App. 26, 36-37, 446 S.E.2d 826, 833 (1994).

Where an unfair and deceptive trade practice is found, the court must treble the plaintiff’s damages. Additionally, a landlord found liable for an unfair and deceptive trade practice must reimburse his tenant’s reasonable attorneys’ fees when he has made an unwarranted refusal to resolve the basis of the tenant’s claim.

CONCLUSION

There are many other aspects of North Carolina landlord-tenant law which are addressed by the Residential Rental Agreement Act, but not addressed in this article.^[1] This article provides space enough only to discuss a few of the pertinent areas for discussion. Counsel should not be reluctant to delve into the Act itself as it provides many harbors of refuge for tenants who have been treated unfairly by their landlords.

In my client’s case, we won at the first trial. On appeal, we settled for an amount considerably higher than the first verdict. Another recent case of public record in traditionally conservative Mecklenburg County produced a more than $40,000.00 verdict in district court. Accordingly, the general practitioner should not overlook this type of case as it provides the best of all opportunities – the chance to fight the good fight and receive your fees at the end of the day.

Mitchell Johnson practices in Statesville, NC with the law firm of Homesley, Jones Gaines & Dudley. Feel free to contact him by email with questions regarding tenant advocacy at: mitchjohnson@statesville.net

The CO COUNSEL BULLETIN series of information papers for JAG officers in North Carolina is a product of the NC State Bar's Standing Committee on Legal Assistance for Military Personnel (LAMP). For comments or corrections, contact LAMP Committee member Mark E. Sullivan, 919 832 8507, or at law8507@aol.com.

1. For an excellent and more thorough review of the Residential Rental Agreement Act, see Fillette, North Carolina’s Residential Rental Agreements Act: New Developments for Contract and Tort Liability in Landlord-Tenant Relations, 56 N.C.L.Rev. 785 (1978).