H.B. 08-1356
Landlord’s Statutory Warranty of Habitability
On September 1, 2008, Colorado became one of the last states in the Country to impose a warranty from a landlord to a residential tenant that the leased premises are fit for human habitation. Whether this statute will have a significant impact in day-to-day leasing remains to be seen. Even without such a law, the ability to move gives tenants clout. Yet the law may significantly impact landlords leasing low income and student rentals. Regardless of where the property falls in the economic spectrum, the statute may complicate the relationship between landlords and property managers, and may also complicate some evictions.

The Warranty

Section 38-12-503(1) articulates the warranty stating that in every "rental agreement" the "landlord" is deemed to warrant that the "residential premises" are fit for human habitation. Section 38-12-503(2) states that the landlord breaches that warranty only if the three things listed in clauses (a), (b) and (c) there all occur.

Subsection (a) requires that the premises be "uninhabitable as described in section 38-12-505 (which contains the list of habitability factors) or otherwise unfit for human habitation." The underscored portion of that language means the § 505 laundry list is not an exclusive list of what can make the premises uninhabitable.

Subsection (b) requires that the premises be in a condition that "is materially dangerous or hazardous to the tenant's life, health, or safety." How will the quoted phrase be interpreted in the real world? From the perspective of attorneys that tend to represent residential landlords more than tenants, these authors have a concern that it won't be interpreted to require the serious problems that some of the legislators may have envisioned. Municipal officials, for example, tend to take the position that any building or health code violation is materially dangerous or hazardous to the occupant's safety.

Subsection (c) gives the landlord the opportunity to cure the tenant's alleged breach. The warranty isn't deemed to have been breached unless the landlord fails to cure the problem within a "reasonable time" after receipt of written notice of the problem. The inherent uncertainty about what is a "reasonable time" may breed disputes.

What if the tenant, or the tenant's guests damage the property? Subsection 38-12-503(3) says that when the bad condition "is caused by the misconduct of the tenant, a member of the tenant's household, a guest or invitee of the tenant, or a person under the tenant's direction or control, the condition shall not constitute a breach of the warranty of habitability." Is the distinction between "misconduct" versus just "conduct" significant? Consider a situation where there is no dispute that the tenant accidentally damaged a radon venting system. The tenant did not do so intentionally or recklessly. Because there was no misconduct, is the landlord going to be responsible? Must there be some negligence or gross negligence or intentional wrong on the part of the tenant/occupant before the landlord is off the hook under this provision?

Tenant Remedies

The tenant's remedies for a breach of the warranty, under § 38-12-507, include termination of the rental agreement (subsection (1)(a)), injunctive relief (subsection (1)(b)), and damages (subsection (1)(d)).

The termination remedy of subsection 38-12-507(1)(a) requires that a second notice be given by the tenant, providing the landlord 5 business days to cure the breach of warranty. If the landlord fails to cure the bad condition that makes the premises uninhabitable within a reasonable time after the first notice (and therefore creating a breach of the warranty per § 38-12-503(2)), then the tenant can terminate the lease under this § 38-12-507(1) if the landlord fails to "adequately remedy" the breach of the warranty within 5 business days after this second notice from the tenant. To avoid a lease termination, the language may require the landlord not only to fix the problem, but also to pay the tenant damages. The language requires the landlord to "remedy the breach" which is different than the requirement merely to "cure the problem" used in the warranty provision of the statute.

Subsection 38-12-507(1)(a) also states that, "Upon no less than ten and no more than thirty days written notice to the landlord..., a tenant may terminate the rental agreement by surrendering possession of the dwelling unit." This language seems to mean that a tenant notifies the landlord that there has been a breach of the warranty through a second notice (because of a failure to fix the specified bad condition within a reasonable time after the first notice), and that the tenant is terminating the lease effective on a specific date that is no less than 10 and no more than 30 days from the date of this termination notice. However, the landlord can avoid the termination if it "adequately remedies the breach" within 5 business days from receipt of that notice of termination.

Who is Responsible And Risk Shifting

The "landlord" makes the warranty under the statute (§ 38-12-503(1)), and it is the landlord who is liable. Unfortunately, the new statute leaves many questions unanswered as to what party or parties may have this liability as the "landlord" in particular circumstances. Landlord is defined in § 38-12-502(3) to be "...the owner, manager, lessor, or sublessor of a residential premises." However, does the "or" mean only one of those parties has liability? Or will all of such parties have liability as the landlord? For example, where a property manager enters into leases and handles the rents and the physical management, whether for a known or unknown principal (the owner), are both the property manager and the owner liable? Does "manager" include an on-site resident manager in an apartment building? Or does it just mean a licensed real estate broker who is the property manager? Leasing agents, property managers and on-site resident apartment managers should address these risks in the agreements that they have with owners.

To what extent, if any, might a landlord shift to the tenant the obligation to maintain or repair the property or the leased premises? The short answer to that question may be "not much." For example, § 38-12-504(3) states that, "Nothing in this section shall be construed to authorize a modification of a landlord’s obligations under the warranty of habitability" and § 38-12-503(5) says that, "Except as set forth in this Part 5, any agreement waiving or modifying the warranty of habitability shall be void as contrary to public policy."

Section 38-12-506 appears to provide a small window for certain landlords to impose some specific maintenance or repair obligations related to habitability on the tenant. Under § 38-12-506(1)(a), for example, if the premises in question is a single family home or if there are four or fewer units sharing common walls or located on the same parcel, then, with some exceptions, a "good faith rental agreement" can require a tenant to assume the obligations for the following § 505(1) habitability factors: keeping common areas reasonably clean, sanitary and free from accumulations of debris, filth, rubbish and garbage, and having appropriate extermination in response to the infestation of rodents or vermin (§ 38-12-505(1)(f)); providing appropriate extermination in response to the infestation of rodents or vermin throughout the residential premises (§ 38-12-505(1)(g)); and providing and keeping in good repair an adequate number of appropriate exterior receptacles for garbage and rubbish (§ 38-12-505(1)(g)).

Subsections 38-12-506(1)(b) and 506(2) address other circumstances in which a landlord and a tenant can agree in writing to have the tenant "perform specific repairs, maintenance tasks, alterations, and remodeling..." - but only if the agreement is separate from the rental agreement and supported by adequate consideration.

Arrangements to Which the Warranty Does Not Apply

Section 38-12-511 describes certain arrangements to which the new warranty of habitability will not apply, including, for example: occupancy of a dwelling unit by a buyer or seller under a sales contract; transient occupancy lasting less than 30 days in a motel or hotel; occupancy by an employee or independent contractor whose right to occupancy is conditional upon performance of services to the employer or contractor; occupancy of a structure that is located within an unincorporated area of a county, does not receive water, heat, and sewer services from a public entity, and is rented for recreational purposes, such as a hunting cabin; occupancy under an agreement covering a residential premises used by the occupant primarily for agricultural purposes; and any relationship between the owner of a mobile home park and the owner of a mobile home situated in the park.

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Owners and property managers in other states have been wrestling with statutory warranties of habitability for decades. Independent of the law, the market place creates motivation for landlords to keep tenants happy. Notwithstanding the questions raised above, it remains to be seen whether the ambiguity of the statute will impose significant practical hardships on landlords.

Jonathan A. Goodman is a shareholder with Frascona, Joiner, Goodman and Greenstein, P.C., a Colorado law firm.   His practice areas include Real Estate, Brokerage Law, Contracts, Land Use, Leasing, Real Estate Title, Association Law, Business Law, and Finance.   He can be reached at contact Jonathan Goodman.

David A. Farus is of counsel with Frascona, Joiner, Goodman and Greenstein, P.C. His practice areas include Real Estate, and Business Law. He can be reached at contact David Farus.

A version of this article appeared in the Colorado REALTOR® News, the monthly publication of the Colorado Association of REALTORS®.

Disclaimer -- Content is general information only. Information is not provided as advice for a specific matter, nor does its publication create an attorney-client relationship. Laws vary from one state to another. For legal advice on a specific matter, consult an attorney.