This article is part of a larger collection of articles that has been combined into an e-Book. Click here for the full e-Book on Landlording & the Law.
A. How can I recover my attorneys’ fees and court costs when I file an eviction?
In Indiana, when it comes to attorneys’ fees and court costs, we follow what is called the American Rule. The rule is that each party pays his/her/its own fees and costs, unless: (1) there is a statute that provides for recovery; or (2) the parties have a contract that specifically provides for recovery.
A landlord can ensure his/her ability to recover attorneys’ fees and court costs by drafting specific language in the lease agreement. However, this is easier said than done. Many landlords will attempt this by including language such as “all costs associated with eviction” or “landlord’s court fees.” While these phrases are broad in scope, the Indiana Court of Appeals has consistently held that “fees are fees and costs are costs.” This means that a contract that provides for recovery must specifically state “attorneys’ fees” and “court costs” or the landlord could inadvertently limit his/her recovery.
Even worse, some landlords will limit their recovery and even extend their own liability by adding language that awards attorneys’ fees and court costs to the “prevailing party.” This means that if the tenant were to prevail at trial, the landlord would have to pay the tenant’s fees and costs!
A landlord should always consult a knowledgeable attorney when drafting a lease agreement. The minimal cost of having a professional review your contracts could potentially save you thousands of dollars in litigation expenses and headaches in the future.
B. What is a “Savings Clause” and do I need one in my lease agreement?
There is an important rule of landlord-tenant law that essentially says this: A landlord can (1) evict a tenant; or (2) sue a tenant for unpaid rent; but not both.
For example, let’s say a tenant signed a one-year lease agreement starting January 1st. The tenant then failed to pay March rent. The landlord could either (1) evict the tenant and get the property back; or (2) sue the tenant for the entire balance of the lease agreement (the rest of the year), but the tenant would be allowed to stay in the property.
There is an important exception to this rule of law: the Savings Clause. A Savings Clause is specific language in a lease that allows a landlord to sue for back rent, future rent, and possession. In order to be enforceable, very clear language is required in a written lease signed by the tenant. Unfortunately, even with a Savings Clause, a landlord will typically only be allowed to recover unpaid rent up until a new tenant is found and begins paying rent. However, a Savings Clause at least allows the landlord to recover some unpaid rent and get the property back.
Whether a Savings Clause will be enforced by an Indiana court rests on how the lease has been written. If you are a landlord or property manager and are unsure whether the lease agreement form you use contains a properly drafted Savings Clause, you should contact a knowledgeable attorney.
C. How should I address mold and environmental conditions?
Tenants often will assert an environmental problem as a way of escaping their obligation to pay rent. Thus, every residential lease agreement should contain provisions that address accusations by a tenant that the tenant is suffering from an environmental condition at the rental property. A good lease agreement will address these issues in part by allowing the landlord to terminate the lease before the term has expired. The lease should also lay out the tenant’s notice requirements in the event of an environmental hazard.
A landlord cannot change the terms of a lease agreement after the lease has been signed. However, a good lease can lawfully permit a landlord to change “rules” after the lease has been signed. Generally, “rules” address common areas, such as hallways, parking lots, laundry facilities, etc. Rules also address and can prohibit certain types of tenant behavior, such as smoking, painting, remodeling, etc.
E. Other common drafting errors
Because so many property managers and landlords purchase form lease agreements online or piece together different lease provisions from different lease agreements over time, it is common for property managers and landlords to have trouble enforcing their leases because of poor drafting.
For example, property managers often name themselves as the landlord on the lease agreement when, in fact, the property manager does not own the property and is merely an agent of the property owner. This can become a big problem when a property owner changes property management companies before the end of the lease term. This problem gets worse in litigation, because the property manager is named as a party to the lawsuit, but should not be a party to the lease agreement. In these cases, the property manager might have obligations, but no rights, under the lease agreement.
Another common mistake made by landlords and property managers is in the signature portion of the lease agreement. Many landlords and property managers form limited liability entities (LLC or Corp.) to hold or manage their properties, which is a great form of asset protection. However, these entities can actually be quite vulnerable when signatories are ignorant of the law. There are three things that should always be present when signing on behalf of an LLC or corporation: (1) the name of the entity; (2) the name of the signatory; and (3) the signatory’s title with the entity. If these three things are not present in the signature portion, the signatory could potentially subject him/herself to personal liability under the lease agreement.