Background:

Residential Landlord-Tenant Act.

The Residential Landlord-Tenant Act (RLTA) regulates the relationship between landlords and tenants, and includes provisions regarding the duties of tenants and landlords, remedies for violations of those duties, and prohibited actions.

Damage Deposits.

Landlords often collect a damage or security deposit, the purpose of which is to cover any damage caused to the property by the tenant. The RLTA requires that the deposit be placed in a trust account. Any interest earned generally belongs to the landlord.

Within 21 days after the termination of the rental agreement and vacation of the premises, or after abandonment by the tenant, the landlord must give a full and specific statement of the basis for retaining any of the deposit and pay any refund due the tenant. No portion of any deposit may be withheld on account of normal wear and tear. A landlord complies with this requirement if the required statement or payment, or both, are delivered to the tenant personally or deposited in the mail within 21 days. If damages exceed the amount of the damage deposit, the landlord may proceed against the tenant to recover those sums.

Termination by Tenant.

A tenancy for a specified time, sometimes also called a lease, is deemed terminated at the end of the specified period. A tenant who terminates a lease prior to the end of the lease period is liable for rent until the end of the period, although the landlord is required to mitigate his or her damages by attempting to re-rent the unit at a fair rental price. Alternatively, premises may be rented for an indefinite time, from period to period or month to month. Such a tenancy is automatically renewed for another period until terminated by either the landlord or the tenant by giving at least 20 days' written notice prior to the end of any of the months or periods of tenancy.

A tenant may terminate a tenancy without further obligation under a rental agreement if the tenant notifies the landlord in writing that he or she or a household member is a victim of a crime of domestic violence, sexual assault, unlawful harassment, or stalking and if:

the tenant or household member has a valid order of protection or has reported the domestic violence, sexual assault, or stalking to a "qualified third party" who has provided a written record of the report;
the tenant makes the protection order or written record available to the landlord; and
the request to terminate is made within 90 days of the reported act or event that led to the protection order or report.

"Qualified third party" means law enforcement, health professionals, court employees, licensed mental health professionals or counselors, trained advocates for crime victim/witness programs, or clergy. A written record that a report was made to a qualified third party is satisfied by a document signed by the third party that includes specified information or completion of a form that substantially complies with the form set out in the RLTA. The name of the alleged perpetrator must be provided to the qualified third party, but the perpetrator's name may not be included on the record of the report that is provided to the tenant or household member. The qualified third party must retain a copy of the record of a report and must note the name of the alleged perpetrator on the retained copy.

A tenant who terminates a rental agreement under these circumstances is liable for payment of rent for the month in which he or she quits the premises but is not responsible for the payment of rent for any future months. In addition, the tenant is entitled to a full refund of the deposit notwithstanding any lease provision that allows for forfeiture of a deposit for early termination. However, the tenant remains responsible for any damage caused to the property in excess of normal wear and tear, and the landlord may retain some or all of the damage deposit to cover that damage as with any other tenancy.

Landlord Mitigation Program.

In 2018 both the Landlord Mitigation Program Account (Account), in the custody of the State Treasurer, and the Landlord Mitigation Program (Program), in the Department of Commerce (Commerce), were created. The $10 affordable housing-for-all surcharge which is charged by county auditors for each document recorded was raised to $13. Of the remaining funds after county administrative and distribution costs, 40 percent of the revenue generated through the surcharge must be transmitted to the State Treasurer for deposit as follows:

The portion of the funds attributable to the original $10 of the surcharge must continue to be deposited into the affordable housing-for-all account.
The portion of the funds attributable to the additional $3 of the surcharge must be deposited into the Account.

Landlords of private market rental units rented to low-income tenants using a housing subsidy program may be reimbursed by the Program for certain types of claims:

improvements identified as necessary in an inspection by the tenant's source of income. In order to be eligible, a landlord must pay the first $500 for improvements and rent to the tenant whose source of income was conditioned on passing the inspection. Reimbursement may include up to 14 days of lost rental income;
reimbursement for damages as reflected in a court judgment against the tenant;
reimbursement for damages established by means of specified documentation presented to Commerce; and
reimbursement for unpaid rent and utilities to the extent that Commerce is satisfied by the evidence.

In 2019 the Program was expanded with respect to any application for a stay in the context of an unlawful detainer action for failure to pay rent, the court must issue a finding as to whether the tenant is low-income, of limited resources, or experiencing hardship in order to determine if the parties would be eligible. If the court finds that the tenant is low-income, has limited resources, or is experiencing hardship, the court may issue an order finding that the landlord is eligible to receive on behalf of the tenant and may apply for reimbursement from the Program.

Summary of Bill:

The Landlord Mitigation Program (Program) is expanded to allow landlords' claims up to $5,000 for damages to rental property when:

the tenant has terminated his or her tenancy pursuant to the provision in the Residential Landlord-Tenant Act (RLTA), which allows tenants who are victims of domestic violence, sexual assault, unlawful harassment, or stalking to terminate;
the property has sustained damage beyond normal wear and tear;
the landlord has, within 21 days of termination:
- provided the tenant with a statement regarding the basis for retaining any of the damage deposit; and
- rather than retaining any of the damage deposit for those damages, returned the full damage deposit to the tenant; and
the landlord has agreed not to proceed against the tenant to recover sums exceeding the amount of the damage deposit.

The Department of Commerce (Commerce) is tasked with providing a form on its website for landlords to apply for reimbursement. In reviewing a claim and determining eligibility, Commerce must receive acceptable documentation that the claim involves a tenancy that was terminated pursuant to the RLTA section concerning victims of domestic violence, sexual assault, unlawful harassment, or stalking, and that all other Program requirements have been met.

Any claim for reimbursement is not an entitlement. If, at any time, funds do not exist in the Account to reimburse claims that have been submitted under this new provision, Commerce must create a waitlist for claims and distribute funds in the order the claims are received. Payment of any claims on the waitlist must be made only from the Account. Commerce is not civilly or criminally liable, and may not have any penalty or cause of action of any nature arise against it regarding the provision or lack of provision of funds for reimbursement.

A landlord in receipt of reimbursement from the Program is prohibited from taking legal action against the tenant for damages attributable to the same tenancy or pursuing collection or authorizing another entity to pursue collection on the landlord's behalf.

The form set forth in the RLTA, and utilized by a qualified third party as the record of the report of domestic violence, sexual assault, unlawful harassment, or stalking, is amended to require the qualified third party to verify that he or she has informed the tenant about the Program and Commerce's form for reimbursement. The RLTA is also amended to prohibit a landlord who seeks reimbursement for damages from the Program under these circumstances from retaining any portion of the tenant's deposit or proceeding against the tenant to recover sums exceeding the amount of the tenant's deposit for damage to the property.