Landlord/tenant laws are designed primarily to protect tenants in what is seen as an economically dependent relationship. Landlords control a valuable resource, and landlord/tenant laws generally ensure that people that do not own land will be able to have a stable relationship with the land they occupy. Such laws may give tenants the assurances that they will not be arbitrarily evicted, that their dwelling will be habitable, and that their rent will not be raised to unreasonable rates. Landlord/tenant laws are a constraint on the freedom to contract, justified by the unequal bargaining power between landlords and tenants.
At the same time, landlord/tenant laws do not necessarily apply helpfully in situations where the landlord is the tenant, where the tenant is part of a cooperative that serves as “landlord,” or where parties seek to collaboratively create unique agreements for the sharing of land. Many people form entities to purchase land and proceed to lease parts of the land to themselves. Although the tenants are, indirectly, owners of the property, the creation of a leasehold interest may trigger the application of landlord/tenant laws. Many of my people find the application of landlord/tenant laws counter-intuitive, since they think of themselves as owners and want the flexibility to set the terms of their agreements for the use of the land. A question remains for further research: Under what circumstances, if at all, have courts declined to apply landlord/tenant laws to a situation where the tenant owns a significant share of the entity that is the landlord?
In the meantime, here are some of the primary ways that landlord/tenant laws may restrict the kinds of agreements people can form to occupy land as both owners and tenants:
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Tenantability Laws and the Warranty of Habitability
If people form an entity to purchase land, and then grant leases to themselves to occupy self-constructed units, this brings up the question of whether the entity is responsible for ensuring the “tenantability” or “habitability” of the spaces occupied by the member-tenants. This is especially important to consider when people are living “off-the-grid” and using composting toilets, captured rainwater, and other alternatives to regular plumbing or other common amenities. Many state laws prohibit a property owner from renting a residential unit to a tenant if the unit has certain defects that could affect the health and safety of the tenant. Even if no requirements exist in statutes, courts may impose certain requirements on landlords to provide a space that is habitable to a tenant. Over time, courts have even adapted the definition of habitable to include modern amenities, such as flush toilets and running water. [79. A leading California Supreme Court case on the warranty of habitability, Green v. Superior Court, 517 P. 2d 1168 (Cal Supreme Court 1974) provides the following summary of habitability standards in footnote number 22: “The recent case of Academy Spires, Inc. v. Brown (1970) 111 N.J. Super. 477 [268 A.2d 556] gives a good indication of the general scope of the warranty of habitability. In that case, a tenant in a multi-story apartment building complained of a series of defects, including (1) the periodic failure to supply heat and water, (2) the malfunctioning of an incinerator, (3) the failure in hot water supply, (4) several leaks in the bathroom, (5) defective venetian blinds, (6) cracks in plaster walls, (7) unpainted condition of walls and (8) a nonfunctioning elevator. The Academy Spires court held: “Some of these clearly go to bare living requirements. In a modern society one cannot be expected to live in a multi-storied apartment building without heat, hot water, garbage disposal or elevator service. Failure to supply such things is a breach of the implied covenant of habitability.”] The fact that courts have used their discretion in determining what is a reasonable way to live means that courts could probably also recognize that some people consciously choose to live off the grid. Courts would hopefully allow for tenants to voluntarily assume this way of life. Now, however, some courts have also held that the warranty of habitability cannot be waived. [80. See, for example, Centex Homes v. Buecher, 95 SW 3d 266 (Texas Supreme Court 2002), holding that the implied warranty of habitability cannot be waived except under very specific circumstances, and also examining the approach taken by other state courts. ] Other courts have allowed the warranty to be waived under circumstances where it is demonstrated that the tenant or homebuyer is fully informed of the condition of the property. [81. See Crowder v. Vandendeale, 564 S.W.2d 879, 881 (Mo. 1978)]
Note that states have also likely adopted statutes that define what is or is not a “tenantable” dwelling, but these laws may allow for a landlord and tenant to waive the laws. For example, in California Civil Code Section 1941 provides that a landlord “of a building intended for the occupation of human beings must, in the absence of an agreement to the contrary, put it into a condition fit for such occupation, and repair all subsequent dilapidations thereof, which render it untenantable” (emphasis added). The definition of tenantable in Section 1941.1 includes requirements for running hot and cold water and connection to a “sewage disposal system.”
In sum, if people wish to live in such modest, “off-the-grid,” and/or experimental dwellings, and if people have formed an entity for the ownership of properties, it may be important to ensure that there is an adequate written waiver of habitability and tenantability between the individual occupants and the entity. Attorneys should also research state statutes on tenantability/habitability and common law cases on the implied warranty of habitability, in order to know if, when, and how the requirements can be waived.
Just-Cause Eviction Laws
When people form intentional communities, they may envision that community members will cooperate in various activities and make agreements to engage in or withhold from engaging in certain activities. However, in jurisdictions with just cause eviction ordinances, it may be difficult to use eviction as a means of upholding such agreements. This is because the law leans heavily in favor of protecting the tenure of renters. For example, a community may, for health reasons, wish to adhere to some of 25 Principles for Building Biology, [82. See the Principles of Building Biology at http://www.baubiologie.de/site/english/principles.php] and agree to create a community free of certain chemicals, noises, vibrations, radiation, synthetic materials, and so on. If a community member repeatedly violates lease provisions related to chemical use, the community may not be able to evict the tenant on the grounds that the tenant is in default under the lease. This is because a court may consider such provisions unreasonable as grounds for eviction. The community must instead seek other legal remedies, such as obtaining an injunction mandating that the tenant comply with the no-chemical rule.
Rights of Tenants in Condo Conversion
When a property is converted into resident-owned housing, such as a stock cooperative or condominium, local laws sometimes require that tenants present at the time of conversion be given additional rights, such as the first right to purchase the condo unit, or the right to lease the property and not be evicted, but for just cause.
Rent Control Laws
Rent control laws cap the rates at which landlords may raise rents, thereby ensuring that a tenant can continue to afford living in a unit. In the case of resident-owned housing, residents may want to vote to raise rents in order to cover operation costs. If rent control laws prevent this, however, it may be possible for the tenants to demand that everyone make additional payments as owners of a business entity, rather than as the entity’s renters.