Privity: only someone who signed the lease can enforce the lease. So the court in Faber just undoes this concept.
Can a court strike clauses in leases (i.e., in spite of free contract)? In WI, the attorney fee clauses in leases were undone. Exculpatory clauses, likewise.
Cardozo is both eloquent and a strong judge. Strong is good. Activist is bad. :) Here he says that for a common law judge to overrule the law is creation, not destruction of valuable precedent.
Warren, likewise, says the law should be in harmony with the enlightened common sense of the country (i.e., "what I feel is good policy."). Decency before precedent, in other words.
A housing code covers existing buildings; a building code covers new construction. Most codes are not state-wide, but municipal.
Anyway, why isn't this moot? The landlord wants to evict the tenant, and the tenant leaves, after all. Well, there might be back rent issues. The court can hear moot issues, though. So they do.
Note also that the landlord lied, and we don't like that.
Well, so because the building wasn't up to code, the lease is void. If there's no lease, the landlord can't charge rent.
Note that this is a somewhat phyrric victory for the tenant: she's not really got anyplace better to go. So where should she go? So if leaving is the principal remedy, it's not terribly useful.
The tenants stop paying rent-- they say there are 1,500 defects, all of which occurred after the signing of the lease. It's a little artificial, but it's probably an attempt to expand the scope of prior rulings: we already have a holding for defects prior to the signing of the lease.
It's the old terminology-changing gambit: this isn't a property thing, it's a well-known package of goods and services.
Leases are not standard contracts, but the court says that we want a UCC-esque implied warranty (merchantability, fitness). The drafters of the UCC explicitly say that it's only for sales of movable property. Note also that the UCC covers only defects at the time of sale: defects arising later don't apply. So this is a kind of feeble citation.
But most importantly, UCC warranties are weak (low standards), and they can be waived. So if the court really wanted warranties here, following the UCC would yield the opposite result.
The court also says it likes product liability law. But that, of course is tort, not either contract or property. And what is the cost of product liability? More insurance for producers, and then the price of the product goes up. So if we have a warranty that the landlord has to cover, they'll need to up their rents. That's not what tenants want. We can't raise the price of necessities.
The theory of products liability is to shift the burden for dangerous products to the entire industry. At the far end of the spectrum, some products get ditched altogether. But we can't be taking these apartments off the market-- that doesn't really help.
Then the court dismisses the thousands of prior cases that went the other way, and then cites two precedents (sort of lowly and unrelated cites). Not clear why they just obliquely mention Pines-- it may be a matter of timing. There was a WI case touching on after-arising defects on its way to the USSC on appeal. They maybe didn't want to rely on it too strongly (Saunders).
Object lesson: when you cite a case as precedent, make sure the case is actually over. Or else you might be relying on a case that goes bad.
Landlord's side of who should pay for defects: if rent abatement is a recourse when the building is defective, and late-arising defects count, what incentive do tenants have not to create problems.
Note also that the US is in an inflation for the last 60 years or so. If the rent stays the same, the quality of the apartment should be decreasing.
The slum-lord suspicion has to be wrong. If it were so profitable, more people would want to get into it. But actually, lots of people are terrified of getting into the industry.
Landlord: these are not landlord problems, they are tenant problems. Low income housing is fraught with these: crowding (because there's not enough), people who can't pay, criminals, children. All of that leads to damage.
Of course slums and run-down buildings are bad for everyone. The tenant, of course, but also everyone else: they lower the quality of the whole neighborhood. Maybe, though, the court is just shooting the messenger here: we don't like slums, but what's the advantage of attacking the landlord? That doesn't fix the slum. Forcing someone to repair a building amounts to taking their property without just compensation.
Even though the code is silent on the issue of this remedy, the court says this is the obviously intended remedy: landlords can't collect rent on properties in court violations.
A very important footnote: there's an analogy here to industrial safety statutes: manufacturers can't contract out of liability for unsafe conditions. When the court says you can't waive this implied warranty of habitability, that means that the warranty is not implied in fact (viz the UCC argument), it is implied in law. On the other hand with industrial safety, customers in general bear the costs of safety. Here, each tenant has to bear the cost of their own safety: we're depriving tenants the ability to bargain for premises that are cheap, albeit bad.
There's also the question of what is a "fair rent." How much rent reduction should there be from a given market level if, say, the heat is low? There's no certainty about what a jury would say here. But both Pines and Javins say that a jury should be the decider. The WI statute says rent can't abate down to 0. The Javins court said otherwise. These cases more or less anticipated what the law would be in the US.
Protection for landlords: if a tenant caused the damage, the tenant can't claim it for abatement. On the other hand, if tenant A causes the damage, tenant B can claim it.
Some additional arguments not made in the case.
Courts should protect poor people and minorities: that's a niche they've carved out for themselves. On the other hand, they can't make it impossible to make any profits on low-income housing-- or, maybe if they do so, they clear the way for the legislature to raise taxes and subsidize housing without repercussions.
Of course, if there's no money, all the judicial intervention in the world is still doomed. But even so, the court should still maybe mess things up for the current private market, because it's not delivering housing for the poor. So they can make the current provate housing market unworkable by imposing an implied warranty of habitability, so it will vanish, and we can have public housing.
So when the court exercises the power to force landlords to take a loss (i.e., 30% of low-income housing has code violations), your recourse is somewhat political: you lobby the mayor, you make friends with the building inspector, and you try to get more favorable regulations. So one consequence of this ruling is the corruption of the political system. Oh, and maybe the courts as well: people begin lobbying the judicial system. This is a hazard of courts that make policy decisions.
Bit of a slippery slope: housing isn't the only problem that poor people have. What are we saying to grocery stores in poor neighborhoods, for example, if we say that landlords have to up their quality and not their prices?
Practical consequences: the property is improved, the rent is up, the landlord is convicted for taking HUD money, HUD took over the property, and 30% of the DC low-income housing pool is still below code.
Of course, doing that is shooting ourselves in the foot: it doesn't fix the problem when the court pontificates. There's no money, and the court is destroying whatever efficiencies there are in the private market. It will inevitably make things less efficient, and we'll either worsen the quality of housing or increase the price. If investment in low income housing goes down, then the prices will go up. So what we've done will hurt tenants more in the long run. If we want repairs, the last thing we should order is rent abatement: it takes away the money for the repairs. So while playing Robin Hood may be satisfying, it doesn't actually improve housing. Worse still, by pretending to address the problem, it makes people complacent about it, and the issue gets worse.
Milwauee addresses this problem by implementing an receivership system: the tenant pays rent, but not to the landlord-- to the receiver, who collects the money and makes the repairs. Of course, this still means landlords default on their mortgages.
There's also the deduct-and-repair remedy: you refuse to pay your rent, but instead put your money into a fund, which can only be used for the repairs. Again, the landlord-bankrupt problem. But also, it means that tenants won't settle for so-so repairs: they'll get gold-plated uber-repairs, because hey, why not?
Defects are noted in the floor of the porch at the time of signing, landlord promises to fix. No fix, the wife falls and injures herself.
What could they sue for? Breach of contract. They'd win, but they'd only get abatement, and maybe specific performance. Nothing for pain, suffering, doctor bills, etc. So these tenants don't call the suit contract or lease. They call it tort.
This is not a new concept to PA, and the courts have said this is not allowed. The precedent is 40 years old. That's either sacred or forgotten. There's lots of precedent from other jurisdictions, as well: 17 states plus R2T says there should be a tort remedy for this. Wow: R2T says there should be a tort remedy? Never saw that coming. Of course, that's by Prosser, Mr. Tort himself. Technically the restatement isn't precedent, of course, but a cite to it is probably better than any single cite from another jurisdiction.
The court says it follows the restatement, but then they deviate from it. The restatement covers after-arising defects, but the court says PA only cares about defects at the time of signing. They say it's tort, but they also say you need consideration, and it's only applicable if there was a contract. The restatement says the tenant gets recovery for physical harm. Does PA include pain and suffering? No clue.
The dissent complains that courts shouldn't overrule themselves so casually: stare decisis. Also, we've just overruled the principles of contributory negligence and contractual assumption of risk. And, though they do not mention it, last clear chance.
Torts is always litigation: it isn't like an administrative regulation. And about 50% (when you consider both plaintiff's and defendant's lawyer fees) goes out of the housing industry and into lawyers' pockets. Plus tort liability is open-ended, so insurance is going to cost big, so everyone's rent goes up.
The kid has lead poisoning. They sue various landlords, and they try two theories: basic tort, and implied warranty of habitability.
They lose on the latter, but succeed on the former. The implied warranty doesn't extend to them because there's no privity. But after all, lots of courts reject privity: sort of surprising that the WI court does not. Also, rent abatement is in the statute, but not compensatory damages. And why should we insert a remedy, if the legislature has specified one?
All of this is sort of gratuitous on the part of the court: the plaintiff has already won on tort grounds. But the court seems to want to limit the power of implied warranty (maybe they felt they needed to rein themselves in after Pines).
OK, so on to tort.
Now the jury instructions here are shot through with ambiguity, and it's up to them to figure out what things like "foreseeable" and "reasonable" mean. The jury can't have a dictionary, etc. The jury instructions seem to indicate that warning would satisfy the landlord's duty. This would interfere with the suit itself: the mother was on notice after she gets the medical report, but she's suing for two years after that point. So this should be summary judgment, if we're going by just the jury instruction. So it would appear that after all, warning is not adequate (else it would just be a disclaimer in the lease).
So, on the one hand, the familiar arguments: landlord has access to the property, ability to get financing, long-term interest, etc.
Also, the Wis. Const.: for every wrong there must be a remedy (article I; also Marbury v. Madison). That's what a legal system means.
Lead paint is a serious problem: it disproportionately affects low- income housing (because the buildings are old), and for some reason WI, and MKE in particular. Now recall (from Linsey) that poverty is not a suspect category, but if it indirectly affects minorities, that would be a potential equal protection avenue.
Other arguments: it's callous of the landlord to behave this way. The landlord knows the lead-based paint is bad. So if you do nothing about it, you deserve what you get. Plus, a jury might think this is worth millions: so landlords have built-in encouragements to take care of this stuff, less they get clobbered in tort. And, of course, there's the suspicion that the landlord is (unjustly) enriching himself by this act, so he can bear the cost. Finally, if rent goes up, it goes up for everyone, not just the victim.
Why should the landlord win? First off, unless he can absorb the cost, the rent will go up, perhaps to the point where the building will no longer be available to low-income lessees. If this were not the case, lots of people would be lining up to be low-rent landlords, and they're not, so this is sort of proof that the landlord can't easily afford this.
HUD estimates that upwards of 20M homes have this problem, and it's an expensive (and highly regulated) process to remove lead paint; about $3,000/room. So $6-$15K/unit, depending on the size. So nationwide, that's over $100B. So when we say the rent is going up by a distributed share of $100B, it is going up seriously. There just is not that kind of money in the industry.
Obviously, this would kill investment in low-income housing, so the prices would go way up.
Oh, and free contract: if tenants wanted to keep their apartments dust-and-chip free by cleaning, why shouldn't they be able to get lower rent? And by the way, why should the mother be able to recover for years when she was on notice about the problem?
This case raised lots of concerns about judicial capacity to expand remedies, and in insurance circles, where they fear giant liability.
Note the unintended consequence here: the courts are getting sucked into the general policy debate. In tort, if they're awarding giant amounts of money, this means that interest groups start paying much more attention to judicial placements, and they start funding the campaigns of the judges they support, etc.
There are between 14 and 40 million felonies per year. So there are at least a few million that affect rental tenants. Again, then, there could be big money at stake, both in this individual case, and over the industry at large.
Landlord has been making cuts to security staff, and crime is on the rise there. Landlord is notified about all this.
She's a month-to-month tenant, however, so we don't need to worry about whether she's getting the same security service as when she moved in, or whether inflation has eroded the value of the rent she's paying. The month-over-month decrease in security service is minor.
Inkeepers are liable in tort for crimes against their customers because they started (as a profession) to provide a haven against robbers, and we didn't want inkeepers colluding with robbers. But note also that inkeepers had a crown monopoly.
Plaintiffs can sue car owners who are so negligent as to leave the keys in the car, and then a joy-rider takes the car and clobbers someone. So, is criminal intervention foreseeable or not? Well, the analogy here is that this crime was foreseeable. Of course, taking your keys out of the car is pretty much free, whereas hiring guards is not.
Another reason why the car point is different: the car owner has plenty of incentive to stop the car thief. Also, there's no contract: the victim of the car crash has no relationship with the owner of the car. And cars are a luxury: if their price increases, that's OK. We could do with fewer, even. Not so with low-income housing.
Radon poisoning (not in this case) is a similar issue: potentially horiffic and hard to protect against. As many as 30K people might be dying each year due to radon poisoning. And this is a lot of plaintiffs, each with a substantial claim.
What if we agree that there are costs here, and say that the real issue is who is going to bear it? When we say "the landlord" should bear the cost, what we really mean is "all the other tenants." Why should homeowners not share the burden of the cost of urban decay?
Another point of view: if somebody's got to insure against this risk, the most efficient is to have landlord take out one policy, rather than each tenant taking out their own. Note that the rent would not only go up by the cost of the guards, but also by the cost of the tort system, which is inefficient. Plus, some tenants may not want to pay extra in order to avoid the risk: that should be their option.
Note also that the real solution to this problem is to lower the rate of crime: that's where the damage is coming from. Tenants say, therefore, say that this is foreseeable, and make the landlord liable. The tenants already care about getting assaulted, but the landlord doesn't (except maybe with respect to the reputation of the building), so if we make it so the landlord cares too, then we've got a stronger anti-crime force.
The landlord says, well that doesn't really cut crime overall, it just moves it out of this building: if we implement all sorts of security, the criminals who conditioned that investment simply don't show up in our building: they go elsewhere, and the same money gets spent there.
Now everybody knows the assaulter should pay: he caused the damage. But generally, he can't pay (he's "judgment proof"). Another plan would be to bill his family. That's pretty scary, though, to families.
What about holding the officials who let this person out responsible? Or the judge, or the jury, or the legislature, or the parole board? Of course, if we did this, the system would collapse in a minute, so those folks must have immunity for their mistakes.
OK, then why doesn't the state reimburse? It costs too much: there are too many victims. WI has some victim compensation legislation, but that issues peanuts compared with tort.
Still, some of these options (according to landlords) are more rational than making the landlords pay.
A 50-state criminal background check would probably cost about $1K, and take a month or two. So the rent would go up. And anyway, if we refuse to hire anyone with a criminal record, what are we saying about rehabilitation, and also what are the consequences for people with criminal records? Will they ever be able to get a job, or will they be steered right back to crime?
Who decides what decision to take, and who pays for the decision taken?
For example, should a landlord reveal to a tenant that there's a sex offender in the building? Or can they refuse such a tenant? In WI, the landlord can tell the new tenant "look it up yourself, that information is public." Even if asked specifically, the landlord does not have to tell.
His investment is subsidized (the construction work, the mortgage loan, etc.) because it's or disabled folks. The HUD program that does this subsidizing is a big deal.
FDIC insurance, incidentally, effectively subsidizes low interest rates: in order to encourage people to keep their money in banks, the fed insures them (the government has a huge liability, actually).
The issue here is about punitive damages. Punitive damages are only appropriate when the facts are outrageous. Outrageous means willful, wanton, reckless, etc... Outrageous means that punitive damages are justified. So if you're liable, you get punitive damages, and you get punitive damages if you're liable. Rarely is the absence of analysis so apparent.
Somewhat awkward precedent: you only get punitive damages for intentional courts. The court overrules this: we don't think that's right any more.
Possible remedies whose impracticality is easily explained: jimmy plates, hiring extra security, having an alarm that doesn't ring in the building but rather in the fire department, a lock on the circuit-breaker box, more thorough tenant selection (a brazen violation of fair housing). Except for the last one, these would all involve raising the rent, which can't happen here.
If we make the landlord pay, we're undoing all the incentives we put in place to get him to be an investor.