Residential Landlords: Don’t Blindly Trust your Property Management Company’s Residential Lease

Lately, it seems I am doing a lot of reviews for landlord clients of leases provided to their tenants by property managers they hired to manage their residential properties. It is clear after review of many of these leases that either the property managers have: 1) obtained leases online and have not had them reviewed by an attorney; 2) not consulted with an attorney who is knowledgeable in Michigan residential landlord-tenant law in drafting their leases; or 3) modified their leases that were reviewed by a knowledgeable attorney to add provisions that are in violation of Michigan law. This Blog will discuss certain terms that Michigan residential leases must contain and those that they are prohibited from containing under The Truth in Renting Act (TIRA), MCL 554.631 et seq. The discussion in this Blog is in no way exhaustive and all residential landlords should consult with a knowledgeable attorney regarding the requirements of TIRA and other statutes as they apply to residential leases.

Prohibited Provisions and Clauses in Residential Leases under TIRA

TIRA provides that certain provisions or clauses are not allowed to be placed in residential leases. TIRA requires that landlords make certain disclosures to their residential tenants in the lease and allows tenants to recover damages from landlords that violate its terms. TIRA, specifically MCL 554.633, provides a long list of items that may not be placed in a residential lease. All of the prohibited items will not be discussed in this Blog. However, the most common prohibited items I find in residential leases sent to me for review are as follows:

1. Those that waive or alter available remedies of the parties when the premises violates the implied covenants of fitness and habitability required by MCL 554.139 (this can be altered when the lease is for a term of more than one year, MCL 554.633(1)(a));
2. Those that exculpate the landlord from liability for its failure to perform or negligent performance of a duty imposed by law. This does not include a provision “that releases a party from liability arising from loss, damage, or injury caused by fire or other casualty for which insurance is carried by the other party, under a policy which permits waiver of liability and waives the insurer’s rights of subrogation, to the extent of any recovery by the insured party under the policy.” MCL 554.633(1)(e);
3. Those that waive or alter a party’s right to jury trial or any other “right of notice or procedure required by law in a judicial proceeding” that arises out of the rental agreement, MCL 554.633(1)(f);
4. Those that require a party to pay another party’s legal costs or attorney fees (in excess of costs or fees specifically permitted by statute) for a dispute arising from the rental agreement, MCL 554.633(1)(g);
5. Those that provide for the acceleration of rental payments if the tenant breaches the rental agreement, and do not also include a provision that says that the tenant may not be liable for the total accelerated amount because the landlord must minimize damages and that either party may have a court determine the amount owed, MCL 554.633(1)(i);
6. Those that waive or alter a party’s rights under MCL 600.2918 (antilockout act); and
7. Those that release a party from its obligation to mitigate damages, MCL 554.633(1)(k);

Probably, the provision I seen most often in residential leases and violates TIRA is in regard to the landlord’s ability to recover attorney fees. Residential leases may not provide that a tenant is responsible for the landlord’s actual or reasonable attorney fees incurred as result of a tenant breaching the lease, whether that breach is for nonpayment of rent or for other reasons. The only attorney fees a residential landlord is entitled to from a tenant are set forth in MCL 600.5759 of the Summary Proceedings Act and range from $75.00 (if a consent judgment or default judgment is received by the landlord) or $150.00 (if there is a trial).

Required Provisions and Clauses in Residential Leases under TIRA

TIRA also provides for provisions that MUST be placed in residential leases.

1. A residential lease must state the name and address where the landlord will receive required notices under the TIRA, MCL 554.634(1).
2. A residential lease must “prominently” state in at least a 12-point font or legibly oriented letters of at least 1/8^th inch a notice “insubstantially the following form”:

“NOTICE: Michigan law establishes rights and obligations for parties to rental agreements. This agreement is required to comply with the Truth in Renting Act. If you have a question about the interpretation or legality of a provision of this agreement, you may want to seek assistance from a lawyer or other qualified person.”

MCL 554.634(2). I usually advise clients to place the statement set forth in paragraph 2 above in bold type in larger than 12 point font at the top of one of the pages of the lease.

Handling Violations of TIRA

All hope is not lost if you discover that your lease violates TIRA, either on your own or because you received notice from your tenant alerting you to the violation. If you discover the violation on your own, may cure a violation of the notices required under MCL 554.634 or with the prohibited provisions of MCL 554.633 by giving written notice to all tenants who are current parties to the lease with the notice setting forth the statement as provided in MCL 554.634 and advising them that the prohibited provisions are being removed from the lease.

If a tenant who is a current party to the lease notifies you of a violation, you must respond to and correct the violation by sending the notice discussed in the previous paragraph within 20 days of receiving notice of the violation from the tenant. MCL 554.636(1).

Penalties for Failing to Cure Violations of TIRA

If a landlord fails to cure TIRA violations in a lease, a person that is a current tenant to the lease[1] has several forms of relief under MCL 554.636:

1. Void the rental agreement and terminate the tenancy,”
2. Compel the landlord to cure the violation in all of its existing rental agreements that include the clause by using the notice procedure of MCL 554.635 and to enjoin the landlord from including the provision(s) in any subsequent rental agreements.
3. Recover damages in the amount of $250.00 per action, or actual damages, whichever is greater.

TIRA is not the only statute that residential leases must comply with in Michigan and it is important that a residential lease comply with all of them. If you are a residential landlord and have concerns about the leases being provided to you tenants, the attorneys at Tilchin & Hall, P.C. are here to help. Please either submit and inquiry using the form below or give us a call at (248) 349-6203.

Disclaimer: This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this Blog, you understand that there is no attorney client relationship between you and lawyer, law firm, and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

[1] Only a tenant that is a current party to a lease may sue a landlord for TIRA violations, MCL 554.636(7)