LEASES: AN OUNCE OF PREVENTION

TRAVIS I. DAFOE
GAFKAY & GARDNER, PLC, 175 S. MAIN STREET FRANKENMUTH, MICHIGAN 48734 TDAFOE@GAFKAYLAW.COM GAFKAYLAW.COM TDAFOELAW.COM

A. LEGISLATIVE UPDATE SB 64 & 65 Public Act 139 of 2012 M.C.L. 600.5714 Allows a property owner to recover possession of premises by summary proceedings if the tenant, a member of the tenants family, or a person under the tenants control has caused or threatened physical injury to an individual Also removes the requirement that the landlord had to be the person who filed the police report to remove a tenant for illegal drug activity. SB 269 Public Act 142 of 2012 M.C.L. 600.8401 Amended the Small Claims act and made changes to the maximum amount. The law provides: The jurisdiction of the small claims division shall be confined to cases for the recovery of money in which the amount claimed does not exceed the following: (a) Beginning September 1, 2012, $5,000.00. (b) Beginning January 1, 2015, $5,500.00. (c) Beginning January 1, 2018, $6,000.00. (d) Beginning January 1, 2021, $6,500.00 (e) Beginning January 1, 2024, $7,000.00. B. PRE-LEASE CONSIDERATIONS 1. Lease Provisions Michigan Truth in Renting Act regulates residential leases. The following terms should be found in every lease: 1. Name and Signature of the Landlord 2. Name and Signature of the Tenant 3. Rent amount, how frequently it is due, and when and where to pay it 4. Starting and ending date of the lease 5. The rental propertys address. 6. Landlords mailing address 7. Amount of the security deposit 8. Where the security deposit is being held 9. Notice of the tenants obligation to provide a forwarding address to the landlord within 4 days of terminating the tenancy 10. who is responsible for paying utilities 11. Repair and maintenance responsibilities 12. Eviction procedures Michigan Law requires the following statement to be placed in a prominent place in the lease in at least 12-point font: Michigan law establishes rights and obligations for parties to rental agreements. This agreement is required to comply with the Truth in Renting Act. If you have a

question about the interpretation or legality of a provision of this agreement, you may want to seek assistance from a lawyer or other qualified person. The following provisions are prohibited from inclusion in the lease (M.C.L. 554.633): 1. Any provision which waives or alters a remedy available to a party when the rental property is in a condition that violates the covenants of fitness and habitability. 2. Waives any right established by law in relation to security deposits 3. A provision which discriminates against an individual in violation of civil rights laws. 4. requires a person to give up legal rights in advance 5. A provision which requires the tenant to waive landlords liability for the landlords failure to perform a duty or for negligent performance of a duty imposed by law. 6. Waives or alters a partys right to demand a jury trial or any other right of notice or procedure required by law. 7. Provides that a party is liable for legal cost or attorney fees incurred by the other party. 8. A provision allowing the landlord to take a security interest in the tenants personal property. 9. A provision that provides for the acceleration of rental payments if the tenant violates a lease provision, unless the amount is determined by the court. 10. Any provision which waives or alters a partys right to possession or in eviction proceedings. 11. A provision which releases a partys duty to mitigate damages. 12. Any provision which provides a landlord with the ability to change a written lease without the tenants consent except with 30-days notice a landlord may change a clause in the lease if a) there is a change in law, ordinance, or rule affecting the landlord-tenant relationship; b) changes to rules of the rental property intended to improve or protect health, safety, and peaceful enjoyments; changes to the rental payments to cover additional costs incurred by the landlord because of increase in property taxes, increase in utilities, and increases to property insurance premiums. 13. Any provision which would violate the Consumer Protection Act. M.C.L. 445.901-.922. 14. A provision requiring the tenant to give the landlord power-of -attorney. Any provision that is covered by the law, yet still is contained in the lease is VOID. Once it is brought to the landlords attention it was must be fixed within 20 days or the tenant may bring an action against the landlord to - Void the entire lease; - Make the landlord remove the provision from all of the landlords leases

- recover $250 per action (for prohibited provisions) or $500 per action (for missing disclosure provisions required by law), or actual damages, whichever is greater A landlord is free to prohibit smoking in the rental property. A landlord may prohibit or charge a fee for pets (except service animals).

2. Repairs to make before possession The property must be fit for its intended purpose and in compliance with the health and safety laws. (M.C.L. 554.139). Other requirements may be added by City or County law. 3. Security Deposits - Getting Keeping, and Refunding a. A landlord may only collect a security deposit equal to 1 and a half times rent. b. Any refundable fee is considered to be a security deposit. Ex. if you have the tenant pay first and last months rent. the last months rent is a security deposit. If you charge the client a fee for storage, mailboxes, cleaning, etc. if they are refundable they are a security deposit under Michigan law. Fees nonrefundable fees - are not covered as security deposits and can be charged freely as long as they are described in the lease, and thus consented to by the tenant. c. The landlord MUST deposit the security deposit with a regulated financial institution or deposit a cash or surety bond to secure the entire amount with the Secretary of State. Why - the Security Deposit is considered the lawful property of the tenant. d. What happens to the Security Deposit i. The landlord must provide the tenant with notice of all the following within 14 days of the tenant moving in: a) the landlords name and address for receiving communications; and b) the name and address of the fiancial institution holding the security deposit (or that filing has been made to Sec. of State); and the tenants obligation to provide notice in writing of a forwarding address within four days. *these can be in the lease itself* ii. Inventory checklist is important because it is evidence of the condition of the property at the time it is rented. You should take photographs or videotape the premises before renting. Simply making the checklist the responsibility of the tenant is not sufficient. iii.When the tenant moves out, the tenant has four days to notify the landlord of a forwarding address. This notice triggers duties for the landlord.

iv.If the forwarding address is provided, the landlord has 30 days to provide a detailed , itemized list of damages and a check for the remainder or the entire amount. The itemized list MUST contain the following notice: You must respond to this notice by mail within 7 days after receipt of same. Otherwise you will forfeit the amount claimed as damages. v. Once the tenant receives the itemized list, the tenant must respond in 7 days. To respond the tenant must provide a reason why the tenant disputes each item of damage or why the tenant should not be liable. A blanket statement is insufficient. vi.If the tenant disputes the charges the landlord has two choices: 1) negotiate or mediate an agreement in writing with the tenant; or 2) file a lawsuit in court for money judgment. The landlord will have the burden of proving that the tenant is actually responsible for the damages. vii.If within 45 days their is no agreement and the timeline has otherwise been filed, the landlord must file suit or return the money or the landlord may be liable to the tenant for DOUBLE the amount of the security deposit retained. 4. Late Fees In Michigan an landlord may not charge a penalty for rent being paid late. However, a landlord may assess actual damages resulting from payment being late or about 6% per year.

C. SCREENING AND QUALIFYING PROSPECTIVE TENANTS LEGALLY 1. Can you keep a list of Bad Tenants - What are the criteria for placing a person on the list. - Do not put someone on the list because they exercise rights protected by the statutes mentioned here. - You can keep track of people who caused damage to your property, paid late, didnt pay, etc. 2. Fair Credit Reporting - What can you use to qualify a tenant If you are going to do a credit check, you should - Provide notice to the potential tenant and receive a signature of their consent to seeking the report; - If you intend to not rent to the person because of the something in the report you MUST - give them a copy of the report and a description in writing of their rights under the Fair Credit Reporting Act See Appendix A for Federal Trade Commissions FTC Facts for Business - What Landlords need to know

D. FAIR HOUSING ACT AND LOW INCOME HOUSING PROGRAMS Federal Law prohibits discrimination on the basis of: Race Color National Origin Religion Sex Disability Familial Status Michigan Law prohibits discrimination on the basis of: Age Marital Status Discrimination can be: No, you cannot put a ramp there No, there are not enough bedrooms for all your children. You must be 21 to rent this apartment Are you married? Do you have a mental illness? Well for people who are 25 or younger we charge a higher security deposit. That apartment building is full, but you might like the one over here. Be prepared to make reasonable accommodations for persons with disabilities. HUD.gov provides the following examples: A housing provider would make a reasonable accommodation for a tenant with mobility impairment by fulfilling the tenants request for a reserve parking space in front of the entrance to their unit, even though all parking is unreserved. Be prepared to make reasonable modifications for a person with disabilities. HUD.gov provides the following examples: Install a ramp into a building, lower the entry threshold of a unit, or install bars in a bathroom. Do NOT harass or treat people differently because they exercise rights which are protected by Michigan Law

Appendix A