Student tenants, with help from Student Legal Services, won a significant victory on Thursday in Larimer County Small Claims Court! Magistrate Schwartz ruled that the landlord in the case could not enforce a written lease that purported to rent to only three tenants when, in fact, the landlord intended from the beginning to rent to more than three. The magistrate stated that the court cannot put form over substance and the court is allowed to look beyond the written lease to the true intent of the parties.
Big thanks go to the valiant students who refused to let their landlord bully them into paying full rent after their fourth roommate moved out due to an order by the City under the “Three Unrelated Rule.”
Our three peaceful warriors, Maura Dunn, Anna Rivera, and Stephen Rodgers, signed a lease last fall only after several conversations with the landlord confirming the landlord’s approval of a fourth roommate. All involved knew that the arrangement violated the law. In an effort to protect himself, the landlord made sure that only three of the tenants signed the City’s required disclosure statement and the lease.
In January, the City investigated this group of occupants, found a violation of the ordinance, and ordered compliance within 30 days to avoid fines. The fourth roommate promptly moved out, and immediately, the three remaining attempted to negotiate a new legal arrangement with the landlord. The landlord completely refused. He took the startling position that he was not aware of the fourth roommate and he expected the remaining three tenants to pay full rent. Not appreciating this sort of treatment, the three remaining tenants gave late written notice and moved out of the house.
The landlord immediately sued for over $6,000, claiming breach of the lease. Magistrate Schwartz expressed that this is an important issue for which tenants and landlords need guidance and that it was an issue of “first impression” (one not ruled on before) for him and likely for any of the Larimer County judges. He graciously allowed Student Legal Services to present legal authority and to argue that if he enforced the written lease, he would be sending a message to landlords encouraging them to rent to as many tenants as they liked, as long as they put only three on the lease. Normally, small claims hearings proceed without attorneys, and in the rare situation where attorneys are present, their input is usually limited.
The next part of the magistrate’s ruling is also very instructive and based, I believe, on sound reasoning. After the fourth roommate in this case moved out, the remaining three paid full rent for the following month while they were attempting to negotiate with the landlord and deciding whether to go along with the landlord’s demands. The magistrate found that during this month, there was a tenancy of some kind, not one governed by the illegal, written lease, but one in which the three remaining tenants paid rent and clearly remained in the house with the landlord’s consent. The magistrate found that this tenancy had to be either an “at-will” or a “month-to-month” tenancy. The first, under the law, requires three days written notice to terminate. The second requires ten days written notice before the end of the month. The late written notice given by these students did not satisfy either notice requirement, so they were held responsible for one month’s rent. The tenants hadn’t given earlier notice because they were hoping the landlord would negotiate with them. They’d put their negotiation efforts in writing, but these did not specifically say the tenants would terminate by the end of the month. From hindsight, it would have been better for the early letters to notify of termination and then go on to invite the landlord to negotiate.
What does this case mean for other tenants and landlords? First, a ruling at trial (as opposed to a ruling on appeal) is a disposition of a particular dispute turning on particular facts. Magistrate Schwartz’s ruling on this particular set of facts does not bind any other trial judge when ruling on another set of facts. However, his reasoning is sound and based on long precedent in which courts refuse to give any enforcement aid to parties to an illegal contract. It’s safe to say that the other trial judges in this district will take into consideration Magistrate Schwartz’s ruling.
That said, I think this case does mean that landlords won’t be able to enforce a lease when tenants can prove with clear and convincing evidence that the landlord intended to rent to more than three. It certainly means that any tenant declaring a lease void for violating “Three Unrelated” should play it safe and give the landlord at least ten days written notice before the end of the month. This may not be required if all tenants move out at the same time in response to a City violation notice and there is no length of time where a “legal” tenancy of no more than three exists.
We must not misunderstand this ruling. It certainly does not mean tenants can live in the landlord’s property and use the fact of an illegal lease as an excuse to get out of paying rent for the time they lived there. When you receive value, you must give value. It also doesn’t mean that all tenants in over-occupied situations can claim an unenforceable lease – only when you have clear evidence that the landlord intended to rent to more than three.
There are key questions that remain unanswered that await another case and another day. We don’t know for sure whether the magistrate’s reasoning would be the same in a case where there hasn’t been an actual finding of violation and order to move out by the City. My opinion is the magistrate’s rationale would still apply – the lease is illegal the minute the landlord intends to rent to more than three. Therefore, I believe a tenant who is facing only the threat of a City investigation rather than an actual one could give ten days notice and be done with the landlord (except for settling up for any property damage or past unpaid bills).
We also don’t know whether the ruling would come out the same if the tenants in an over-occupied situation called in a complaint to the City on themselves in order to set up an exit plan for themselves. Again, my opinion is that the legal theory results in the same conclusion, but we don’t know for sure.
Finally, the most important question that still remains unanswered is whether Larimer County judges will enforce the occupancy ordinance itself. That question must await a group of tenants (or landlords) who are willing to challenge the City when they are cited for violation. That battle may be a much harder one with a much less certain outcome.