Louisiana Law on Leases: Conflict of Interest between Tenant and Owner in an Act of Sale - Research Paper Example

Legal Memorandum Draft Louisiana Law on Leases: Conflict of Interest between Tenant and Owner in an Act of Sale Donna G. Turner Kaplan Legal Research, Analysis, and Writing: LS502-01 Professor Mary White August 3, 2012 MEMORANDUM TO: Professor Mary White FROM: Donna Turner DATE: August 3, 2012 RE: Louisiana Law on Leases: Conflict of Interest between Tenant and Owner in an Act of Sale Issue/Question Presented Under Louisiana state law, if a tenant has properly executed 12 month rental lease/contract, and the tenant is not in violation of the terms of the lease, and the owner of the home decides to put the house on the market, and the sale is ready to go to Act of Sale within that lease period, does the tenant have a right to stay in the house until the lease is up, even though the tenant was properly informed of the intent to sell at the time the lease was executed? If not, what remedies or damages are available to the tenant? Brief Answer The legal relationship between the owner and the lessee is governed by contractual and statutory stipulations as an agreement between landlord and tenant that is deemed free from third party of interest, and perceived as consistent to public good (Carriere v. Bank of Louisiana, 702 So.2d 648 (La. 1996). Hence, all significant provisions stipulated in the contract of lease should be analyzed and interpreted for proper application (La. Civ. Code Arts. 1983, 2045-57). Since a lease contract is likewise governed by obligations and contract, some principles should be examined as part of the lease analysis. Unclear lease provisions must be construed against the owner and in favor of the maintenance of the lease (New Orleans Minority Business Center, Ltd. v. Duong, 703 So.2d 157 (La. App. 4th Cir. 1997). The eviction of the lessee therefore should be based on grounds mentioned in the law such as non-payment of the lease, non-renewal of the contract, damages done against leased property, and termination of the lease contract. Therefore, in the case at hand, where property owner intends to sell it at the market, the conflict of interest between lessee and landlord can still be settled out of court in an amicable settlement. Louisiana law provides that the tenant has two options to explore: seek for reimbursement of fees for unconsumed period from the landlord or may negotiate to potential buyer or new owner for a new lease agreement in case purchaser intends to subject the property for lease. All of these can be discussed and deliberated without the need for legal action. Conflicting parties can adopt peaceful remedial measures to prevent the escalation of conflicts to legal action. Clear agreement, open communication and good landlord and tenant relation could help for amicable discourse to settle impending conflicts. All courts encourage the exhaustion of amicable settlements to defer legal action and to decongest the court from cases. Confusion and conflict of interest may arise between the tenant and the landlord due to sudden eviction to sell the property and in the absence of communication. Considering all these facts, the issue being resolved in this case is determination of out of court remedies to repel any legal action. Henceforth, I will not be discussing issues pertaining to increase of rental fees. Statement of Facts 34 year-old Mr. X and his family are residents of Louisiana. They leased a house from Y and signed a Contract of Lease on November 11, 2011 and have tendered payments for the execution of a 12-month lease period. However, Y, due to some financial necessity, decided to put the house on the market. Mr. X found out that there is already a potential buyer of the real property who has manifested interest to purchase the same. Mr. X learned that the sale is ready to go to an Act of Sale, but such could transpire within the lease period. Discussion What are the key elements of a lease contract? Under the Louisiana Landlord and Tenant Laws, a lease is defined as an agreement, which binds the landlord and the tenant within a desired prescribed period of occupancy. The lease may either be oral or written, although it’s legally recommended to have written lease agreements, which serve as verifiable documents that can be used in case conflict arise, and the resolution is brought to court for adjudication (Caldwell, 2008. p. 14). A lease can be a fixed term lease, month-to-month lease, with or without a renewable clause. The fixed term lease has a specific period of time or months under the agreement, while a month-to-month lease is presumed under the law not to create an expressed period of occupancy in the agreement. The monthly lease reserves landlord the right to terminate the lessee or change the terms of the lease within 10 written days prior to the ending of the month (Caldwell, 2008. p. 14; Levasseur, 2011. pp. 2-4). In leases with an automatic renewable clause, the same lease terms would apply as in the previous term. An automatic renewal can be reneged if either of the tenant or the landlord gives written notice to vacate the property, which must be given within 30 days before the lease expires (La. Civil Code § 2668 to 2777; Caldwell, 2008). The same concept is applied to month-to-month leases, in the absence of a renewable clause, if the tenant stays in the property for a week after the lease expires, then it’s deemed that there is automatic intent to renew the lease agreement for another month (La.Civil Code § 2668 to 2777; Caldwell, 2008). Under tenancy law, the legal relationship between the owner and the lessee is governed by contractual and statutory duties. Generally, the lease contract is an agreement between the landlord and tenant unless it affects a third party of interest, or it contravenes the public good (Carriere v. Bank of Louisiana, 702 So.2d 648 (La. 1996). Hence, all significant provisions stipulated in the contract of lease should be analyzed and interpreted for proper application (La. Civ. Code Arts. 1983, 2045-57). Since a lease contract is likewise governed by obligations and contract, some principles should be examined as part of the lease analysis. Unclear lease provisions must be construed against the owner and in favor of the maintenance of the lease. New Orleans Minority Business Center, Ltd. v. Duong, 703 So.2d 157 (La. App. 4th Cir. 1997). In the case at hand, the landlord has the obligation to deliver the property to the tenant at the agreed time, and to protect the tenant’s right to peaceful possession within the duration of lease (Caldwell, 2008). The law further provides that if the landlord sells the property within the lease period stipulated under the agreement, the new owner may change the lease terms, or he may evict the tenant, which ever is sound and applicable (Caldwell, 2008). The law further directs that to avoid such undue termination of lease and unnecessary disturbance to the dweller, the lease must be recorded in the parish where the property is located (Caldwell, 2008, p. 14; Snellings, 1933-34), and the tenant may file a legal action against the landlord for loss incurred as a consequence of the sale (Caldwell, 2008, p. 14). In a case of Industrial Tile Inc. v Stewart 388 So, 2nd 171, 175, 1980), the ruling stipulated that the landlord and tenant can enter into intelligible agreement, expressly and in unequivocal language, where one party agrees to indemnify the other of losses from eventualities due to sale, then such agreement can be upheld as resolution to the issue. The tenant may seek reimbursement for advance payments and may ask for indemnification for the damages and sudden inconveniences suffered (Moore, 2008, 33-40; Bird 2011, 1). Certainly, there is no case thus far that can be a precedent to elaborate whether the tenant has the right to mitigate the damages in seeking for reimbursement fees since he is the direct victim of the quandary at hand, being the lessee. While the law is clear, under the Act of Sale, that the ownership of the property is immediately transferred to buyer after the completion of full payments, however, impending conflict of interests between landlord and lessee can be resolved through proper communication and dialogue between parties to desist mounting of legal action (McClatchey, 2006, 1-8; Tenet Healthsystem v. Jeff Parish Hosp, 2003; Baton Rouge City Court, 2012, 1). The owner must be able to communicate his plan to the lessee about selling the property to prepare the tenant for the consequences of sale, with anent transfer of ownership. Both can opt to avail a venue where matters can be deliberated amicably, so that remedies can be opted to protect the rights of the lessee, as well as, settle issues pertaining to advance payments, if there are any, and if it’s under the fixed lease terms. The situation should be amicably discussed with the new owners as well, so that options can be reviewed. All of this assumes good faith and timely actions the parties. Conclusion In Karen E. Sandrik, 72 La. L. Rev. 873 (2012) it’s asserted that legal action for indemnification of damages in Louisiana in civil cases has escalated to skyrocketing figures. Hence, it’s most appropriate that issues pertaining to leases be settled amicably to diminish threat for litigation. Open communication is plausible and applicable in this case to save both lessee and landlord the cost and the time that can be wasted in litigious processes. Settlement can also inspire better relation and goodwill, thus, discourage legal conflicts and infringement suits. Legal experts find this is significant to veer both parties from emotional and psychological impacts by protecting and extolling rights by customarily and judiciously practiced for peaceful resolution of an issue. While we affirm that the eviction of lessee is only possible in accordance to the statutes and lease policy, but in the case at hand which can be resolve out of court in an agreeable settlement. Therefore, tenant has two options to explore: seek for reimbursement of fees for unconsumed period from the landlord or may negotiate with the potential buyer or new owner for a new lease agreement. From a different vantage, tenant may also negotiate with the new owner to sustain the lease or not at all. That circumstance is wholly reliant to the plan of the new owner whether or not said property will be leased or will be occupied by the new owners themselves. Both parties, in agreement, confront the risks in lease contracts since there is no actual transfer of ownership under this policy, but rather only terms of occupancy. Part of the express assumption of risk here assumed by any tenant is possible sale of the property by the owner. This should be stipulated upon execution of agreement in a formal clause and in standard form should the landlord wishes to exculpate self from the liability for any personal injury or damage that may result from the contract of sale that could be entered in the future. Therefore, tenant would not have much bargaining power, except in accord to the lease contract. The lessee therefor should be considerate of the possibility that transaction of sale may transpire within the period of lease. As such, the lessee can better plan and opt for tenancy agreement that will not affect peaceful living. An agreement for reimbursements in case sale is executed within the leasing period can also be warranted. Negotiations can take place within arm length to exculpate both landlord and tenant from liabilities that could arise from conflict of interests. Prior agreements pertaining thereto can strengthen landlord-tenant relations, and the court may void them as a matter of public policy, and discourage the militating impact out of unnecessary inconveniences, by upholding the agreement. This is plausible, although as a general rule, the traditional causes in voiding exculpatory clauses have not been applied to leases because this is often a private affair of parties involved. The court may uphold that exculpatory clauses are valid and enforceable within the domains of ‘freedom of contract”, and the need to preserve legal rights and duties, but only when the case is brought by the tenant to legal action (Love, 1975, 18-22). Moreover, out of court settlement can unburden tenant from seeking witnesses to testify in court, thus also keep the neighbors at peace in the community. Some witnesses may even seek for payments if they appear in court as witnesses. Trials or hearings may even drag on for months, and therefore could bleed cost for transportation of expert witnesses from their residence to court. Furthermore, settlement could save the tenant from financial loss, and absolves parties from the negative emotional burden associated in escalating a case, and the unnecessary stress on all parties involved. It is also the fastest remedy available and could save both parties from emotional and psychological stress in a long span of years, depending on how the case is handled by lawyers. References Baton Rouge City Court. Eviction Procedure Guidelines, Baton Rouge, Louisiana. 1, (2012). Carriere v. Bank of Louisiana, 702 So.2d 648 (La. 1996). James D. Caldwell, A Guide to Louisiana Landlord and Tenant Laws. Lousiana Department of Justice, Louisiana. 5-30 (2008). Judge Max Lemmon,. Real Property - Rent, Lease, and Ejectment, Tenet Healthsystem v. Jeff Parish Hosp Svc, Louisiana Eastern District Court, 2:2003cv02915. La. Civ. Code. Art. 2668 to 2777 (2010). La. Civ. Code Arts. 1983 (2010), 2045-57. Mary A. Moore (2008). Indemnification Provisions in Leases: What we ask for and what really matters. Probate and Property, Louisiana, 33-40 (2008). Walter McClatchey, Louisiana Landlord - Tenant Law for Rural Rental Housing. Rural Rental Housing Association, Legal Services of Central Louisiana, Alexandria, LA. 1-8, (2006). Alain A. Levasseur. Louisiana law of sale and lease: a précis 2nd ed. Publisher 2nd ed. Edition New Providence, NJ: LexisNexis, c2011. Lousiana Civil Code § 2668 to 2777, Acts 2004, Vol. 821 (eff. Jan. 2005). La. Civ. Code Art. 2669 (2008). Industrial Tile Inc. v Stewart 388 So, 2nd 171, 175. George M. Snellings Jr., Cause and Consideration in Louisiana. 8 Tul. L. Rev. 178 (1933-1934). George M. Armstrong, Jr. & John C. LaMaster,. Implied Warranty of Habitability: Louisiana Institution, Common Law Innovation. 46 La. L. Rev. 195 (1985-1986). Love, J, Landlords Liability for Defective Premises: Caveat Lessee, Negligence, or Strict Liability?, 1975 Wisc. L. Rev. 19, 93 New Orleans Minority Business Center, Ltd. v. Duong, 703 So.2d 157 (La. App. 4th Cir. 1997). 400-Level and Graduate Grading Rubric Template; Unit 1 assignment worth 30 points Weighting Possible Points Points Earned Grammar and Spelling Proper use of grammar and punctuation Proper spelling 5% 1 1 Style and Coherence Sentences are complete in thought Sentences are concise, eliminating unnecessary words or phrases Sentences vary in structure Sentence transitions are present Words used are precise, unambiguous and used properly There is an appropriate tone for the assignment 10% 3. 2 Organization There is clear structure to the paper There is a central theme or thesis It is written for the appropriate audience Logical flow of ideas Appropriate introduction to the paper or topics being covered Logical conclusion that results from the thesis  10% 3. 3 Format Orderly presentation of materials, following general format requirements (Margins, header, footer, font size, general amount of work) Use of headings, italics, and other aids (e.g., appendices, tables of contents, when appropriate) to improve the flow of the paper 10% 3. 3 Proper citations and references to resources, following APA or Bluebook format. 15% 5 4 Content Purpose of the paper is clear All questions/requirements of the assignment are answered in a substantive manner Major topics/theories are stated clearly and are supported by details and analysis Content is comprehensive, accurate, and/or persuasive Supports generalizations/theories with appropriate evidence, detail, and analysis Research is adequate and up-to-date 50% 15 13 Total: 100% 30 Possible Points [26 ] Points Earned Additional Instructor Comments: Nice job. I feel that you have somewhat avoided discussing what happens if there IS litigation… you keep repeating the lines about amicable agreement and settlement, but that just does not always happen. Great job with the Bluebook style on your reference list. This paper is a little wordy and repetitive, but I like the way you have done your case analysis and tried to really think in a practical way about the issues. Read More