BLAW Chapter 9 Leases

7/28/2019 BLAW Chapter 9 Leases

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CHAPTER 9

OF LEASE

Lease contracts, unlike sales and donations, do not transfer title to property. Lease

agreements provide for the use of property by someone, other than the owner, for a period of time.

Leases for the use of immovable property such as, farm land, houses, apartments and buildings have

long been widely accepted. Historically, the leasing of moveable property was not as common. In

the past few decades however, the utilization of lease agreements for movables has expanded

enormously. It is now possible to lease, rather than purchase, almost any type of moveable

property. Automobiles, office equipment and furnishings are just some of the examples of items

that are now commonly offered for lease.

LEASE OR SALE

A business normally needs equipment. Should this equipment be purchased or leased?

There is no easy answer to this question. A number of factors may have to be considered in each

particular case to determine which contract, sale or lease, would be best for the business. Financial

and tax consequences are some of the issues that usually influence the decision.

As a general rule, a lease of equipment will initially be less of a financial strain on a

business than a sale. If the equipment is leased the business will not be forced to use a larger sum of

capital for the purchase price nor will it be required to go through the steps of obtaining a loan. An

obvious downside to a lease, as opposed to a sale, is that the business will not acquire any equity or

ownership in the leased property with the lease payments. Any rights of the lessee with respect to

the property is terminated at the end of the lease term.

Tax consequences should be considered when making the decision as to whether equipment

should be leased or purchased. If the equipment is leased the business will "write-off", for tax

purposes, the entire monthly rental as a business expense. If the equipment is purchased the cost

will be capitalized and depreciated according to schedules set forth by the Internal Revenue Service.

Which is better for the business?

Most of the laws pertaining to lease contracts are found in the Louisiana Civil Code.

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Art. 2669. Lease or hire is a synallagmatic contract, to which consent alone is sufficient,and by which one party gives to the other the enjoyment of a thing, or his labor, at a fixedplace.

Art. 2670. To the contract of lease, as to that of sale, three things are absolutely necessary,to wit: the thing, the price, and the consent.

Art. 2677. He who grants a lease is called the owner or lessor. He to whom a lease is madeis called the lessee or tenant.

Art. 2683. Leases may be made either by written or verbal contract.

Art. 2684. The duration and conditions of leases are generally regulated by contract, or bymutual consent.

Art. 2685. If the renting of a house or other edifice, or of an apartment, has been madewithout fixing its duration, the lease shall be considered to have been made by the month.

Art. 2686. The parties must abide by the agreement as fixed at the time of the lease. If no

time for its duration has been agreed on, the party desiring to put an end to it must givenotice in writing to the other, at least ten days before the expiration of the month, which hasbegun to run.

It is not uncommon for parties to a contract to designate their agreement as a lease or a sale.

As long as there is no dispute between the parties the characterization of the agreement is

immaterial. However, the laws pertaining to leases and sales are not identical. In the event of a

dispute and litigation the court would not be bound by the form or name the parties gave to their

agreement, but will determine what type of contract exists by the substance of the agreement.

A conditional sale contract is a form of sale on credit. The owner agrees to sell the object to

the buyer for a stated price which will be paid in installments by the buyer over a period of time.

Possession of the object of the contract is usually given to the buyer at the time of the agreement.

The contract provides however, that title to the object will remain with the seller until the final

installment is paid. If the buyer fails to make all payments the seller can repossess the item and

retain ownership. A conditional sale contract is similar to a lease in which the lessee is given the

right to buy the item at the end of the lease, quite often for a nominal value such as $1.00. Most

states, but not Louisiana, have accepted conditional sale contracts as being valid. Louisiana treated

the conditional sale agreement as an ordinary sale in which title to the object passed to the buyer

immediately upon an agreement of object and price. The enactment of the Louisiana Lease of

Movables Act has modified the courts' view of such transactions.

In Easy TV and Appliance of Louisiana v. Secretary of Department of Revenue and

Taxation, the court ruled that a "rent-to-own" transaction, pursuant to which a business transferred

possession of an item of personal property to a customer on a "lease purchase agreement" which

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permitted the customer to discontinue payments by returning the item during the lease term was, in

fact, a "sale" contract and that the business was not liable for a use tax on its inventory. What about

the traditional "lay away" purchase contract? Generally in a "lay-away" agreement the seller retains

possession of the object until the final payment is made. Is this a sale contract in which title passes

to the buyer immediately upon agreement of object and price? Or, does title remain with the seller

until, and unless, the final payment is made?

OF THE OBLIGATIONS OF THE LESSOR

Art. 2692. The lessor is bound from the very nature of the contract, and without any clauseto that effect:

1. To deliver the thing leased to the lessee.

2. To maintain the thing in a condition such as to serve for the use for which itis hired.

3. To cause the lessee to be in a peaceable possession of the thing during thecontinuance of the lease.

Art. 2693. The lessor is bound to deliver the thing in good condition, and free from anyrepairs. He ought to make, during the continuance of the lease, all the repairs which mayaccidentally become necessary; except those which the tenant is bound to make, as hereafterdirected.

Art. 2694. If the Lessor do not make the necessary repairs in the manner required in thepreceding article, the lessee may call on him to make them. If he refuse or neglect to makethem, the lessee may himself cause them to be made, and deduct the price from the rent due,on proving that the repairs were indispensable, and that the price which he has paid was justand reasonable.

Art. 2695. The lessor guarantees the lessee against all the vices and defects of the thing,which may prevent its being used even in case it should appear he knew nothing of theexistence of such vices and defects, at the time the lease was made, and even if they havearisen since, provided they do not arise from the fault of the lessee; and if any loss shouldresult to the lessee from the vices and defects, the lessor shall be bound to indemnify him forthe same.

The above obligations of the lessor are extremely important to a lessee. A lessor is bound to

deliver the thing in good condition and to make most of the necessary repairs during the term of the

lease. If a lessor refuses to make repairs the lessee has the right to make the repairs and deduct the

cost from the rental payments. This is a valuable right to the lessee. Before the lessee exercises this

right, however, certain steps should be taken. First, the lessee should notify the lessor of the

problem or needed repairs. This notification should be done in a manner that can be later proven, if

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necessary, in court. Certified, return-receipt requested mail is a suggested method of

communication. The lessee should then give the lessor a reasonable time to make the repairs. As

an extra precaution the lessee may want to give a second notice, in a manner that can be proven, to

the lessor that if the lessor does not make the repairs the lessee will have the repairs made on a

certain date. If possible, the lessee should include an estimate as to the cost of the repairs. A lessee

should be careful before spending a substantial sum of money to correct a problem. A court may be

reluctant to enforce this provision if a lessee spent a sum which would negate all rent for a lengthy

period of time. There is a case however,KPW v. S.S. Kresge, where the court allowed the lessee to

apply $250,000. in repairs to a parking lot to future rentals.

A lease agreement may contain a waiver by the lessee of the right to have the lessor perform

needed repairs. Will the waiver be enforced by the courts? That determination will probably

depend on a number of factors. It is easy to imagine the lease of an old house which has not been

maintained containing a provision in the lease that the lessor will not be responsible for any repairs.

The lessor may rent the structure for a very low rate, but provide in the lease that the lessee will be

responsible for all repairs. This waiver could very well be upheld by the courts. But, the courts

may be reluctant to enforce a provision in a lease which relieved the lessor of the obligation to

perform repairs in a residential lease of a modern apartment.

It is common for lessors who lease commercial space to do so on what is referred to as a

"triple-net" lease. A "triple-net" lease requires the lessee to pay for the cost of insurance, taxes,

maintenance and repairs. The latter would not normally include structural work. The lessee is

usually a business and is viewed by the courts as a sophisticated party. The courts do not hesitate to

enforce "triple-net" leases.

The lessor also has the obligation to assure the lessee of peaceful possession of the thing

during the term of the lease. For example, if a third party tried to evict a lessee from an apartment

the lessor would have the duty to defend the lessee's right to remain in the apartment. A situation

that arises sometimes is that an owner/lessor will sell the apartment building to a third party during

the term of the lease. Unless the original owner/lessor obtains an agreement binding the third party-

buyer to the existing lease the buyer can evict the lessee from the premises. This would be a clear

violation by the lessor of the warranty of peaceful possession. The lessee would have an action

against the lessor for damages as a result of the disturbance. The lessee would, however, have no

right or recourse against the third party. The lessee's contract is only with the lessor, not the third

party. If the lessor cannot be located or is insolvent the lessee would be without a remedy. If the

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lessee recorded the lease at the clerk of court's office before the buyer recorded the sale, the buyer

would be subject to the lease. That is, the buyer would be bound by the terms of the lease and could

not evict the lessee.

Article 2683 provides that a lease agreement may be oral, but it is always advisable to have

contracts in writing. A written document is much better proof of the lease and the specific terms

than an oral agreement. In addition, the recordation at the clerk's office referred to above cannot be

accomplished unless the lease is in written form.

LESSOR'S RIGHTS AND REMEDIES

What are the lessor's rights in the event the lessee breaches the lease? Consider a typical

apartment lease with a twelve month term in which the lessee breaches the lease and moves out

after three months. Generally the lessor has two choices.

The lessor can file suit against the lessee to recover nine months of rental. This action

involves some time and expense on the part of the lessor. In addition, even if the lessor wins a

judgment against the lessee the lessor may never collect the money due. Technically, if the lessor

pursues the lessee for the rental balance the leased premises should remain open and available to the

lessee during the months remaining on the lease. But the lessor probably will not want to keep the

premises vacant during the remainder of the term. A second, and much simpler option, is for the

lessor to treat the breach as a cancellation of the lease and attempt to lease the premises to another

lessee.

Generally, the lessor cannot recover under both of the above described remedies. The

following case illustrates, however, that under the Louisiana Lease of Movables Act, additional

remedies, if included in the lease, are available.

AT & T INFORMATION SYSTEMSv.

NORWOOD SMITH REAL ESTATE

FACTS

On June 22, 1983, AT & T and Norwood Smith, d/b/a Norwood Smith Real Estate enteredinto a lease agreement for the lease of certain telephone equipment as well as a service contract.The original lease was for $488.50 per month. It was supplemented in August of 1983 to add someequipment at $14.00 per month. Thus the total monthly rental after that date was $502.50.

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Smith ceased making payments in January of 1986. AT & T alleges it is owed $15,629.58under the terms of the contract which provides for termination charges of "one-half (1/2) of themonthly payments for the original term or 70 percent (70%) of the sum of all remaining monthlypayments, whichever is less." In addition to the above amounts, AT & T also prays for interest,attorney fees, and costs.

TRIAL COURT

The trial court in dismissing AT & T's suit in part said:

"After careful consideration of the arguments before this Court, it is clear that defendant didindeed sign the lease agreement which plaintiff presently sues upon, this agreementcontaining a provision whereby plaintiff, upon defendant's default, could recover not onlythe equipment leased therein but also various other charges resulting from the unilateraltermination of the lease. This Court, however, hereby declares that such a provision iscontra bonos mores (against public policy) in that it permits the non-defaulting party tobecome unjustly enriched (sic) at the expense of the other party. As a result, this court findsthat defendant's return of the leased equipment to plaintiff both morally and legally satisfieddefendant's obligation to petitioner and, therefore, the latter is not entitled to any damages

resulting from the default."

ASSIGNMENTS OF ERROR

In appealing, AT & T contends the trial court erred as a matter of law:

1) By holding that the early termination provisions within the lease agreement were contrabonos mores and that the plaintiff would become unjustly enriched at the expense of thedefendant if the provisions of the lease agreement were to be enforced.

2) By not enforcing the provisions of the lease calling for early termination charges.

3) By not awarding past due rental for the four (4) months defendant used the equipmentprior to removal.

I

In 1985, the legislature enacted the Louisiana Lease of Movables Act. The Louisiana Leaseof Movables Act is found at La.R.S. 9:3301-3342. Several sections of the Louisiana Lease ofMovables Act are important to a resolution of the issues before this court.

Under the general heading "Part III. Charges" is found R.S. 9:3316--Early terminationcharges, which provides:

A. Both true and financed lease agreements, whether for consumer or commercial

purposes, may contractually provide for the assessment, imposition, and collection ofreasonable early termination charges, including but not limited to:

(1) An early termination fee in a fixed amount as contractually agreed to by thelessee.

(2) Excess mileage or use charges as provided under the lease agreement.

(3) Reasonable excess wear and tear charges as provided under the leaseagreement.

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(4) The difference between (i) the original adjusted capital cost of the leasedequipment, less (ii) accumulated depreciation calculated in accordance with thelessor's standard depreciation formula through the date of termination, less (iii) therealized value of the leased equipment following termination of the lease.

(5) Official fees and taxes imposed in connection with termination of the lease.

(6) Current or delinquent rental payments and other charges under the lease whichare then due and payable.

(7) Additional reasonable early termination charges which may be contractuallyprovided for under the lease agreement.B. Early termination charges may be assessed in addition to interest rate charges as

provided under R.S. 9:3311 and 3312.

C. Any refundable security deposit held by the lessor may be retained and shall becredited against the lessee's liability for early termination charges.

Additionally, under the general heading "Part IV. Remedies Following Lessee's Default" is

found R.S. 9:3318--Options of lessor following lessee's default, which provides:

A. (1) In the event of default by the lessee under a true lease, or under afinanced lease entered into prior to the time Chapter 9 of theLouisiana Commercial Laws becomes effective, the lessor may doany one of the following:

(a) He may file an appropriate collection action against the lessee torecover accelerated rental payments and additional amounts that arethen due and outstanding and that will become due in the future overthe full base term of the lease, as provided under R.S. 9:3319.

(b) He may cancel the lease, recover possession of the leased propertyand recover such additional amounts and liquidated damages as maybe contractually provided under the lease agreement, as providedunder R.S. 9:3320 through 3328.

(2) The above remedies following the lessee's default are not cumulativein nature. The lessor may not seek to collect accelerated rentalpayments under the lease and also cancel the lease and recoverpossession of the leased equipment.

B. In the event of default by the lessee under a financed lease entered into afterChapter 9 of the Louisiana Commercial Laws becomes effective, the lessor may at hisoption:

(1) Exercise such rights and remedies following default as are provided underthis Chapter; or

(2) Exercise such rights and remedies following default as are provided underChapter 9 of the Louisiana Commercial Laws.

Also under the same general heading is found R.S. 9:3325--Recovery of liquidateddamages, which provides:

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A. The lessor may commence any ordinary proceeding against the lessee, asprovided in R.S. 9:3324, to recover amounts then due and owing under the lease as well assuch liquidated damages as may be provided under the lease agreement. Any refundablesecurity deposit held by the lessor may be retained and shall be credited against the lessee'sliability for liquidated damages and other amounts owed the lessor.

B. The court shall award liquidated damages to the lessor only if it finds the amountthereof to be reasonable. If the court finds the amount of liquidated damages to beunreasonable, or if there is no such stipulation, then the court may, in its discretion, awardliquidated damages to the lessor.

It is clear from the above statutes, i.e., R.S. 9:3318(A)(1)(b), that the Louisiana Lease ofMovables Act contemplates and permits reasonable liquidated damages and repossession of theleased property following lessee's default. The lessee was in default of the monthly lease payments.Thus, the trial judge was in error in declaring provisions of the lease agreement contra bonos mores.

II

The trial court did not enforce the liquidated damages provisions of the lease because it

found them to be contra bonos mores, which was error. However, before the trial court can awardliquidated damages as provided in a lease agreement, the court must first determine that thedamages are reasonable. La.R.S. 9:3316 and 3325. Other than the contract of lease containing theliquidated damages provisions and testimony as to the amount due, there is no other evidence in therecord as an aid to the court in its task of determining reasonableness. Plaintiff is seeking the awardof liquidated damages and has the burden of proving reasonableness. Because there is no evidenceas to reasonableness, we remand this matter to the trial court for the purpose of taking additionalevidence.

III

Under La. R.S. 9:3325(A), the lessor may "recover amounts then due and owing under thelease as well as such liquidated damages as may be provided under the lease agreement." Lessorcan recover past due rents as well as reasonable liquidated damages.

Therefore, for the above and foregoing reasons, the judgment of the trial court is reversedand this matter is remanded for further proceedings. All costs of this appeal are assessed againstNorwood Smith, d/b/a Norwood Smith Real Estate. The assessment of any future costs will awaitjudgment after remand.

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LESSOR'S RIGHT OF EVICTION AND PRIVILEGE/PLEDGE

What can a lessor do if a lessee refuses to pay rent or refuses to leave the premises even

though the lease term has expired? In addition to the remedies described above a lessor also has the

right of eviction and a privilege/pledge on the lessee's property on the premises.

The right of privilege and pledge set forth in articles 2705 through 2709 gives the lessor, in

the event the lessee has failed to pay rent, the right to have the lessee's property located on the lease

premises seized. The property would then be sold at a public sale and the proceeds would be

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applied to the unpaid rent. Although this is a valuable right for the lessor, a seizure does involve

some time and expense. In many cases the lessor may decide that the net return on the sale of the

lessee's property would not justify the time and cost required.

Articles 2712 through 2714 provide the lessor with the right of eviction. If a lessee is

unlawfully remaining on the leased premises the lessor can get a court order and have the

appropriate law enforcement officer enforce the lessee's removal.

Art. 2705. The lessor has, for the payment of his rent, and other obligations of the lease, aright of pledge on the movable effects of the lessee, which are found on the property leased.

In the case of predial estates, this right embraces everything that serves for the laborsof the farm, the furniture of the lessee's house, and the fruits produced during the lease of theland; and in the case of houses and other edifices, it includes the furniture of the lessee, andthe merchandise contained in the house or apartment, if it be a store or shop.

But the lessee shall be entitled to retain, out of the property subjected by law to thelessor's privilege, his clothes and linen, and those of his spouse and family; his bed, beddingand bedstead, and those of his spouse and family; his arms, military accouterments, and thetools and instruments necessary for the exercise of the trade or profession by which he gainshis living and that of his family; one cooking stove and utensils of said stove; plates, dishes,knives, forks and spoons; all pots, pans and other cooking utensils; one dining table, anddining chairs necessary for himself and family.

Art. 2706. This right of pledge includes, not only the effects of the principal lessee ortenant, but those of the undertenant, so far as the latter is indebted to the principal lessee, atthe time when the proprietor chooses to exercise his right.

A payment made in anticipation, by the undertenant to his principal, does not releasehim from the owner's claim.

Art. 2707. The lessor may lawfully seize movables belonging to a third person, when theyare contained in the house or store by his own consent, express or implied. The owner isentitled to recover his property, but only by asserting his ownership prior to the judicial sale,in the manner provided by Article 1092 of the Civil Code of Procedure. If he fails to do so,the property may be sold as though it belonged to the lessee.

Art. 2708. Movables are not subject to this right, when they are only transiently oraccidentally in the house, store, or shop, such as the baggage of a traveler in an inn,merchandise sent to a workman to be made up or repaired, and effects lodged in the store ofan auctioneer to be sold.

Art. 2709. In the exercise of this right, the lessor may seize the objects subject to hisprivilege before the lessee removes them from the leased premises, or within fifteen daysafter they have been removed by the lessee without the consent of the lessor, if theycontinue to be the property of the lessee, and can be identified.

The lessor may enforce his privilege against movables which have been removedfrom the leased premises by the sheriff or other officer of the court, without the necessity ofa further seizure thereof, and as long as these movables remain in custodia legis.

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Art. 2712. The lessee may be expelled from the property if he fails to pay the rent when itbecomes due.

Art. 2713. When the lessor has given notice to the lessee, in the manner directed by law, toquit the property, and the lessee persists in remaining on it, or if the lessee has waived hisright to such notice by written waiver contained in the lease and has lost his right of

occupancy for any reason, the lessor may have him summoned before a judge or a justice ofthe peace, and condemned to depart; and if three days after notice of the judgment he hasnot obeyed, the judge or justice of the peace may order that he shall be expelled and that theproperty shall be cleared by the sheriff or constable, at his expense.

Art. 2714. The sheriff or constable charged with the execution of this order, may force thedoors and windows, if they are shut, and seize and sell such portion of the effects of thelessee as may be necessary to pay the costs.

OF THE OBLIGATIONS AND RIGHTS OF LESSEE

Art. 2711. If the lessee makes another use of the thing than that for which it was intended,and if any loss is thereby sustained by the lessor, the latter may obtain the dissolution of thelease.

The lessee, in that case, shall be bound to pay the rent, until the thing is again leasedout; and the lessee is also liable for all the losses which the owner may have sustainedthrough his misconduct.

Art. 2715. The lessee is bound to cause all necessary repairs to be made which it isincumbent on lessees to make, unless the contrary has been stipulated.

Art. 2716. The repairs, which must be made at the expense of the tenant, are those which,during the lease, it becomes necessary to make:

To the hearth, to the back of chimneys and chimney casing.

To the plastering of the lower part of interior walls.

To the pavement of rooms, when it is but partially broken, but not when it is in astate of decay.

For replacing window glass, when broken accidentally, but not when broken eitherin whole or in their greatest part by a hail storm or by any other inevitable accident.

To windows, shutters, partitions, shop windows, locks and hinges, and everything of

that kind, according to the custom of the place.Art. 2717. The expenses of the repairs, which unforeseen events or decay may rendernecessary, must be supported by the lessor, though such repairs be of the nature of thosewhich are usually done by the lessee.

Art. 2719. If an inventory has been made of the premises in which the situation, at the timeof the lease, has been stated, it shall be the duty of the lessee to deliver back everything inthe same state in which it was when taken possession of by him, making, however, thenecessary allowance for wear and tear and for unavoidable accidents.

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Art. 2720. If no inventory has been made, the lessee is presumed to have received the thingin good order, and he must return it in the same state, with the exceptions contained in thepreceding article.

Art. 2721. The lessee is liable for the injuries and losses sustained through his own fault.

Art. 2722. He is, however, liable for the waste committed by the persons of his family, orby those to whom he may have made a sublease.

Art. 2723. He can only be liable for the destruction occasioned by fire, when it is provedthat the same has happened either by his own fault or neglect, or by that of his family.

Art. 2725. The lessee has the right to underlease, or even to cede his lease to anotherperson, unless this power has been expressly interdicted. The interdiction may be for thewhole or part and this clause is always construed strictly.

Art. 2726. The right of the lessee to remove improvements and additions he has made tothe thing is governed by Articles 493, 493.1, 493.2, and 495.

LIABILITY FOR INJURIES

Article 2695 states that the lessor guarantees the lessee against all vices and defects.

Standing alone this article would result in the lessor being strictly liable for any injury to a lessee as

a result of a defect in the leased property. However, R.S. 9:3221, set forth below, allows the lessee

to waive this right unless the lessor knew or should have known of the defect. This waiver is

customarily placed in most lease contacts and negates much, but not all, of the lessor's liability

exposure. The lessor will be liable despite the assumption of responsibility by the lessee if the

lessor knew or should have know of the defect.

LA R.S. 9:3221. The owner of premises leased under a contract whereby the lesseeassumes responsibility for their condition is not liable for injury caused by any defect thereinto the lessee or anyone on the premises who derives thereon from the lessee, unless theowner knew or should have known of the defect or had received notice thereof and failed toremedy it within a reasonable time.

In the following case the plaintiff-lessee filed suit against the lessor for injuries from a fall

on a stairway. The lessor had the case dismissed by the trial court on a motion for summary

judgment. Summary judgment is a procedure in which a party can submit affidavits to a court to

establish that there is no genuine issue in dispute and therefore the matter need not be tried. The

trial court granted the lessor's summary judgment based on the lessor's argument that R.S. 9:3221

precluded the lessee's recovery. The court of appeal reversed the decision.

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OSTRANDERv.

PARKLAND VILLA

In this personal injury action arising out of an accident caused by an allegedly defective

stairway at an apartment complex, the plaintiff lessee appeals a district court judgment granting amotion for summary judgment in favor of the defendant lessor and its insurer.

The determinative issue is whether certain exculpatory language in a lease between theparties exempts the lessor from liability for injuries suffered by the lessee as he was descending astairway which was not part of the leased premises, but was a common accessory over which thelessor retained supervision and control.

The lessee, a resident of the apartment building, instituted this suit after he allegedly slippedand fell on a wet, steep metal stairway causing injury to his right knee. The lessor and its insurerdenied liability and later filed a motion for summary judgment citing a provision in the leaseagreement which absolved the lessor of responsibility for any injury or damage sustained by thelessee anywhere on the apartment grounds.

In opposition to the motion, the lessee asserted that the old and deteriorated stairwaycontained a vice or defect in the leased premises and that the lessor had notice of the stairway'sdefective condition but failed to remedy it.

The district court, relying onEnsminger v. Great Atlantic & Pacific Tea Co., held the lesseehad no right of action against the lessor based upon the disclaimer language contained in the leaseagreement.

Absent a contractual provision to the contrary, a lessor guarantees his lessee against all vicesand defects of the thing leased. Nevertheless, a lessee may contractually absolve a lessor fromresponsibility for the condition of the leased premises pursuant to LSA-R.S. 9:3221.

Although the lessor's warranty under Art. 2695 can be disclaimed under R.S. 9:3221, thedisclaimer has no effect when the lessor knew or should have known of the defect but failed toremedy it within a reasonable time.

However, R.S. 9:3221 does not apply to damages incurred by the lessee resulting from adefect in the property which is not part of the leased premises, and over which the lessee has nosupervision or control.

Here, the lessee slipped and fell on a stairway located outside his second floor apartment.Therefore, the allegedly defective property is not technically a part of the leased premises, however,it is a common accessory of the lessee's apartment.

Louisiana jurisprudence has consistently acknowledged the tenant's right to use and enjoynot only the premises but also the common accessories of the leased premises. When a commonaccessory is under the control of the lessor, the tenant can maintain an action for damages flowingfrom an injury caused by a defect in the accessory, notwithstanding his contractual assumptionunder R.S. 9:3221.

Assuming the exculpatory clause covers an injury occurring on the stairway, a genuine issueof material fact exists as to whether the lessor knew or should have known of the alleged defect.The lessee's affidavit filed in opposition to the motion for summary judgment states that the lessorwas notified that the stairs needed repair but failed to repair them. If a lessor cannot relieve himselfof liability for a defect in the leased premises of which he has knowledge, then he likewise cannot

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absolve himself of responsibility for a defect in a common accessory of the leased premises ofwhich he has knowledge and over which he retains supervision and control.

Because the lessee has alleged the lessor knew or should have known of the defect, it is notnecessary to decide at this time whether the clause relieving the lessor of liability for injuriessustained anywhere in the apartment building is ineffective as violating public policy regardless of

knowledge on the part of the lessor.

Based on the allegations set forth in the lessee's petition, his affidavit in opposition to themotion for summary judgment and the applicable law, a genuine issue of material fact exists as towhether the lessor knew or should have known of the alleged defect. Thus, the district court erredin granting the motion for summary judgment. The judgment is reversed and set aside, and the caseis remanded for further proceedings. Costs of the appeal are assessed to the defendants-appellees.

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The case below is similar to Ostrander, but has a different result. The plaintiff filed suit

against the lessor for an injury on the stairway. The trial court dismissed the case on the lessor's

summary judgment pursuant to R.S. 9:3221. The appellate court affirmed the trial court's decision.

FONTANv.

ESTOPINAL

Appeal is taken from a summary judgment dismissing plaintiff's personal injury actionagainst defendant. Plaintiff, Eva Marie Fontan, filed suit for injuries incurred when she fell downallegedly defective stairs located on premises owned by defendant, Fred N. Estopinal, and leased toher employer, Mechanical Construction Company of New Orleans (MCC). The employer'sworkers' compensation insurer, Reliance Insurance Company of Illinois, intervened seekingreimbursement for compensation benefits paid to plaintiff.

Defendant moved for summary judgment arguing that LSA-R.S. 9:3221 was applicable, andthat he had transferred liability to the lessee. The trial court agreed, dismissing plaintiff's claim.Plaintiff and intervenor now appeal the granting of summary judgment.

In the case at bar, the trial court, granted the summary judgment on the basis that pursuant toLSA-R.S. 9:3221, defendant had delegated his ownership liability under law (LSA-C.C. arts. 2317and 2322) for defective conditions of the premises to the lessee. On appeal, appellants argue thatLSA-R.S. 9:3221 does not preclude a lessor owner's liability to the lessee's employee, and presentthese issues:

Appellants raise as their first issue the question whether defendant Estopinal as the owner-lessor is liable for tort damages because he "knew or should have known of the alleged defect" inthe stairway on which plaintiff Fontan fell.

Mr. Estopinal's motion for summary judgment was supported by his own affidavit and thoseof Nicholas J. Gagliano, Vice President of MCC, and Scuddy Fontenelle, Jr., Secretary of MCC. Inhis affidavit, Mr. Estopinal stated that he had observed no defects in any stairway of the premises,and that no such defects had ever been reported to him by the lessee, MCC. He further stated thathe had neither observed nor had reported to him any events which would lead him to believe thatany defects were present. The affidavit of MCC's Vice-President states that in that capacity he

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executed the lease agreement between Mr. Estopinal and MCC, in which MCC did assumeresponsibility for the condition of the leased premises, and that Ms. Fontan was an MCC employeeand present on the leased premises in connection with her job at the time of her injury. The affidavitof the Secretary of MCC states that in that capacity he had knowledge of the condition of the leasedpremises, and that MCC had not reported the existence of any defects in the stairway to the owner,Mr. Estopinal, since MCC never observed any such defect nor were they aware of any such defects.

The affidavits presented by defendant Estopinal clearly refute that as owner he knew orshould have known of any defect. As plaintiff Fontan did not file any counter-affidavits disputingthe statements contained in the affidavits, we accept the statements as true. We further findunpersuasive appellants' argument, that Mr. Estopinal, since he is both the President of MCC andthe owner of the leased premises, should be imputed with the custodian's knowledge of the defect inthe stairway. LSA-R.S. 9:3221 does not provide for such an exception, and appellants presentnothing to support this claim other than their allegation here asserted through counsel. Hence, weare constrained to find, as did the trial judge, no genuine issue of fact here.

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La. Civil Code article 2004 states:

Any clause is null that, in advance, excludes or limits theliability of one party for intentional or gross fault that causes damageto the other party. Any clause is null that, in advance, excludes orlimits the liability of one party for causing physical injury to theother party.

InRamirez v. Fair Grounds, Ramirez was severely injured when he fell from a loft at the

Fairgrounds. The fall was allegedly the result of a dangerous condition. Ramirez had signed a

contract with the Fairgrounds in which he agreed that the Fairgrounds would not be responsible to

him for any injury that occurred while he was using the premises. The trial court dismissed

Ramirez's suit based on the waiver. The appellate court ruled that C.C. art. 2004 rendered Ramirez's

waiver null and reversed the trial court. Does R.S. 9:3221 conflict with La.C.C. art. 2004 or can the

two laws be reconciled?

LESSEE'S DEPOSIT

A common area of dispute between a lessor and lessee is the issue of the return of the

lessee's deposit at the end of the lease. Louisiana has specific laws on this subject which are found

at R.S. 9:3251. Basically the law provides that the lessor must return the lessee's deposit within one

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month of the lease termination. If the lessor retains all or a portion of the deposit for damage to the

premises the lessor must send the lessee an itemized statement reflecting the money spent on the

various items. The law provides for penalties and attorney fees if the lessor fails to comply.

R.S. 9:3251.

A. Any advance or deposit of money furnished by a tenant or lessee to a landlord orlessor to secure the performance of any part of a written or oral lease or rentalagreement shall be returned to the tenant or lessee of residential or dwellingpremises within one month after the lease shall terminate, except that the landlord orlessor may retain all or any portion of the advance or deposit which is reasonablynecessary to remedy a default of the tenant or to remedy unreasonable wear to thepremises. If any portion of an advance or deposit is retained by a landlord or lessor,he shall forward to the tenant or lessee, within one month after the date the tenancyterminates, an itemized statement accounting for the proceeds which are retainedand giving the reasons therefor. The tenant shall furnish the lessor a forwardingaddress at the termination of the lease, to which such statements may be sent.

B. In the event of a transfer of the lessor's interest in the leased premises during theterm of a lease, the transferror shall also transfer to his successor in interest the sumdeposited as security for performance of the lease and the transferror shall then berelieved of further liability with respect to the security deposit. The transferee shallbe responsible for the return of the lessee's deposit at the termination of the lease, asset forth in Subsection A of this Section.

C. Paragraph A of this Section shall not apply when the tenant abandons the premises,either without giving notice as required or prior to the termination of the lease.

R.S. 9:3252.

A. The willful failure to comply with R.S. 9:3251 shall give the tenant or lessee theright to recover actual damages or two hundred dollars, whichever is greater, fromthe landlord or lessor, or from the lessor's successor in interest. Failure to remitwithin thirty days after written demand for a refund shall constitute willful failure.

B. An action for the recovery of such damages may be brought in the parish of thelessor's domicile or in the parish where the property is situated.

R.S. 9:3253. In an action brought under R.S. 9:3252, the court may in its discretion awardcosts and attorney's fees to the prevailing party.

R.S. 9:3254. Any waiver of the right of a tenant under this part shall be null and void.

R.S. 9:3259.

A. Whenever any lessee of any apartment building, house, motel, hotel, or other suchdwelling fails to pay rent that has become due and delinquent, within twenty daysafter delivery of written demand therefor made in accordance with the provisions ofthis Section, correctly setting forth the amount of rent due and owing, the lesseeshall be liable for reasonable attorney fees for the protection and collection of suchclaim when judgment on the claim is rendered in favor of the claimant.

B. Delivery of written demand for purposes of this Section may be accomplished bymailing the written demand by certified mail to the last known address of the lessee,

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by personal delivery to the lessee or by tacking the written demand on the door ofthe leased premises.

C. The provisions of this Section shall apply to oral leases only.

A reading of the above law would seem to indicate that a written demand for the return of

the rental deposit is not necessary. Section 3252, however, indicates that a failure to remit after a

written demand is deemed to be a willful failure. In Trapani v. Morgan and Maxie v. Juban

Lumber the courts held that a lessee's failure to make a written demand precluded the lessee's

recovery of damages and attorney fees, but not the deposit. In Woodery v. Smith, the court held that

the lessor's letter stating that the lessee owed money for a water bill and the cost of a new light

fixture did not comply with the requirements for itemized deductions and held the lessor liable for

penalties.

Lessees often suspect that a lessor may be attempting to charge the lessee for damage or

wear and tear on the leased premises which existed before the lessee moved onto the premises. In

order to address this concern the lessee should consider making a careful inventory of the leased

premises and note any existing damage. The lessee should then attempt to have the lessor

acknowledge in writing that the damage existed before the lessee moved onto the premises. This

inventory and confirmation by the lessor should be accomplished at the beginning of the lease.

GOLDENv.

RIVERSIDE APARTMENTS, INC.

Riverside Apartments, Inc. has appealed a judgment from Pineville City Court requiring areturn of a $125 security deposit and a $150 pet fee posted by their tenants, Mr. and Mrs. AlanGolden. The judgment also ordered defendant to pay $200 in damages and $500 in attorney's feesfor willfully withholding the deposits without justification. We affirm as amended.

Plaintiffs leased a one bedroom apartment from defendant at 328 Main Street, ApartmentNumber 112 in the City of Pineville from May 4, 1984 through October 31, 1984. They posted a

$125 security deposit, refundable at termination of the lease if the apartment was in the samecondition as when they first moved in, aside from normal wear and tear. The lease also specificallyprovided, "Lessor agrees to deliver the premises broom clean and free from trash at the beginning ofthis lease and Lessee agrees to return same in like condition at the termination of the lease." Inaddition to the security deposit plaintiffs also paid a $150 pet "fee" or "deposit", to be forfeited uponvacating the apartment if a pet was allowed.

At the end of the lease term the plaintiffs give notice of their intent to vacate. Mrs. Goldencleaned the apartment thoroughly. Before returning the key she contacted Lois Williams, theapartment manager, for an apartment inspection. Mrs. Williams did not inspect the apartmentbefore the plaintiffs moved out.

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By check dated November 6, 1984 defendant returned $67 of the $125 security deposit.Mrs. Golden made written demand on November 9, 1984 for the remaining $58. By letter datedNovember 15, 1984 defendant refused to return the remaining deposit.

We now consider whether the trial court erred in finding defendant unjustifiably retained$58 for the security deposit. Lessor must on demand either return the damage deposit, of if used to

offset lessee's damage, provide lessee with an itemized statement accounting for the proceeds.LSA-R.S. 9:3251 et seq.

Defendant withheld $5 from the security deposit to "clean stove hood." Cleaning the stovehood exceeded the normal cleaning necessary to restore the premises to the same condition as whenfirst moved in, aside from normal wear and tear. The trial judge did not specifically address this $5charge; however, he seems to give great weight to Mrs. Golden's testimony. In written reasons forjudgment the trial court noted "... the apartment was in better condition at the time that it wasvacated than it was when they received the apartment for occupancy, and she described her cleaningof the apartment including washing down the mildewed walls of the closets, cleaning bugs from thecabinets and cobwebs from the corners of the rooms and installation of new shelf paper on theshelves in the apartment.

Mrs. Williams testified that because of the plaintiff's kittens it was necessary to deflea theapartment, wash and wax the tile floor, and shampoo the carpets. Defendant withheld $53 from thesecurity deposit for these pet related items. Defendant had $150 available in the nonrefundable petfee from which to deduct the total pet charges.

Under these circumstances we do not find the trial court manifestly erred in finding thedefendant unjustifiably retained part of the security deposit.

Penalties for Failure to Refund Deposit

We now consider whether the trial court erred in applying the penalty provisions of 9:3252for willful failure to refund a deposit. The purpose of this statute is to provide tenants with amechanism to recover rent deposits and to prevent arbitrary withholding of deposits. When alandlord cites any specious, arbitrary and capricious, unjustifiable or clearly wrong reasons forwithholding a deposit, the statute provides relief. Even if there is a valid dispute over a lease, thelessor must comply with the statutes or suffer the penalties provided.

We do not find the trial court erred in imposing the statutory penalty.

Damages

The next issue is whether the trial court properly ordered the return of the security deposit inaddition to awarding statutory penalties. The defendant owed plaintiff the full security deposit of$125 and unjustifiably refused to return it. Because plaintiffs had no proof of actual damage causedby the defendant's willful noncompliance, the trial court imposed the statutory amount of $200. The

statute provides for an award of actual damages or $200, whichever is greater, in addition to thereturn of the security deposit. We find no error in the trial court awarding both the return of thesecurity deposit and damages for willful noncompliance with the statute.

Attorney's Fees

The final issue is whether the trial judge erred in awarding attorney's fees to an attorneyappearing in proper person. We are of the opinion that the attorney's fees of $500 should not havebeen awarded since plaintiffs have not incurred the out-of-pocket expenses of retaining an attorneyas contemplated by LSA-R.S. 9:3253. In fact, we note that the plaintiff, Alan J. Golden, hasrepresented himself and his wife, in proper person, during these proceedings and has, therefore

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incurred no attorney's fees. For this reason we find the trial court erred in allowing attorney's fees inthis case, and we reverse this award.

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BLAW Chapter 9 Leases