After the Lease Expires: Holdover Tenants

In a general month-to-month tenancy in Ohio, the landlord must give a tenant at least thirty (30) days notice of termination prior to the periodic rental date, which is the date on which rent is due. For example, if monthly rent is due on May 1, the landlord must give notice on or before April 1. If the landlord does not give notice until April 3, however, the tenant can stay until May 31.

But what happens if notice is given but the tenant does not leave? A landlord can either 1) have the tenant evicted or 2) accept payment from the holdover tenant. (Baltimore & Ohio RR. Co. v. West, 57 Ohio St. 161, 165-166 (1897)). If a lease expires and the tenant continues to pay rent, and the landlord continues to accept the rent payment, the “holdover tenant” has created a new periodic tenancy.

The length of the term of the new tenancy is based on the expired lease. A lease that provided for annual rent will be held as a year-to-year tenancy, and one that required rent to be paid monthly will be a month-to-month tenancy. A provision that states an annual Base Rent payable in equal monthly installments is considered, under Ohio law, a year-to-year tenancy. (Cesta v. Manfredi, 101 Ohio App.3d 326, 329 (1995)).

For example, imagine a tenant who rents a commercial space for $12,000 annually (payable in monthly installments) from June 1, 2012 until May 31, 2013. If the tenant continues to pay rent after the lease expires, and the rent is accepted by the landlord, a new one year term is created. Assuming the tenant is still paying the annual rent in equal $1000 monthly installments, he can argue that a year tenancy was created and can occupy the premises until May 31, 2014, regardless of when notice to vacate is given by the landlord. If the holdover tenant vacates prior to the end of the term, the landlord can require him to pay the annual $12,000 that is due for the entire new term, but the landlord is still under a duty to mitigate damages, including finding a new tenant.

As always, it is essential for both landlords and tenants – particularly in commercial settings – to ensure that their lease has a well-drafted holdover clause.

Landlords Must Keep Premises Safe for Guests

The Ohio Supreme Court has ruled that landlords have the same duty to the guests of tenants as they do to tenants to keep their common areas safe. 
 
The case in question, Mann v. Northgate Investors, L.L.C., grew out of a 2007 incident in which a woman visited her friend's Columbus apartment.  When leaving at night, she fell down a stairwell that lacked adequate lighting and was severely injured.
 
In the February 12 decision, the court unanimously agreed that a landlord's duty under Ohio law to “[k]eep all common areas of the premises in a safe and sanitary condition” also extends to guests of tenants. Violation of this duty is negligence per se.

For more, read the full opinion or the Columbus Dispatch report on the case.

A Tenant's Unpaid Water Bill: Who's Responsible?

Imagine this scenario. A tenant suddenly vacates her apartment and moves out of state, leaving her water bill unpaid. Who is liable for the outstanding bill?

Under Ohio law, landlords can be held responsible for a tenant’s unpaid water bills. A municipality has the power to place a lien on the property and collect the payment through property taxes or bring a lawsuit against the property owner to recoup the money.

Unpaid bills can mean a large financial loss for the city, so government leaders have a high incentive to collect. For example, a 2013 investigation in Toledo found that the city was owed almost $24 million in unpaid water bills.  If cities seek to recover these missing funds from property owners, a landlord's credit and bottom line can both be affected.

As a result, landlords should take some proactive steps to protect themselves and reduce their liability for a tenant's delinquent bills, such as:

1. Perform credit checks on prospective tenants as part of a background check. This can eliminate potentially risky tenants who might be unable to pay a bill. 
2. Consider requiring a co-signer for some tenants, such as students with limited income. 
3. Rather than putting water service in the tenant's name, put the service in the landlord's name and charge additional rent to cover the cost of water. 
4. Modify the lease to make a continued tenancy contingent on the payment of water bills. If the tenant does not pay the water bills, landlords may be able to begin eviction proceedings. 
5. In order to monitor and prevent potential problems, ask the utility company to send the landlord a copy of the tenant’s monthly bills.
6. Educate and encourage tenants to check for leaks or prevent wasteful water practices in order to reduce the possibility of unusually high bills.

Indemnification in Property Management Agreements

An important part of a management agreement between property owners and property managers is the indemnification clause, in which the owner protects the manager from certain types of liabilities. In the sample clause below, the owner indemnifies the manager against all claims except for five specific exclusions:

Owner shall indemnify and hold harmless Manager against any and all claims made against Manager arising out of the management, ownership, leasing, supervision or operation of the Property by Manager, except for claims arising from or related to (i) the gross negligence of Manager or its officers, agents, or employees; (ii) wrongful willful acts of Managers or its officers, agents or employees; (iii) acts or omissions of Manager or its officers, agents or employees which are outside of the scope of authority established by this Agreement or which are in breach of the obligations of Manager under this Agreement; (iv) misapplication of funds by Manager, its officers, agents or employees; or (v) fraud of Manager, its officers, agents or employees.

However, if the manager allegedly violates the Fair Housing Act, both the owner and manager may be sued by the aggrieved renter. While such actions may be considered gross negligence under the contract, it is wise to explicitly include a clause in the agreement of this type: “Manager will manage the property in full compliance with the requirements of the Fair Housing Act, and Manager is authorized to take those steps deemed appropriate to effectuate the purposes of the Act.”

Since Ohio courts look to the plain language of indemnification clauses (see Stambaugh v. T.C. Wood Realty, Inc., 2010-Ohio-3763 (Ohio Ct. App. 2010)), it is important for property owners to consult an attorney to ensure that they are properly protected by the management agreement.