Reference no: EM132263239

LEONARA CARUSO v. APTS. DOWNTOWN, INC.

SUPREME COURT OF IOWA (FILED IN MAY 2016, THE DECISION IS NOT YET PUBLISHED)

A landlord appeals and a tenant cross-appeals a district court ruling affirming in part and reversing in part a small claims court decision in a residential landlord–tenant dispute.

This is a case under the Iowa Uniform Residential Landlord and Tenant Act (IURLTA). The district court affirmed a magistrate’s determination in small claims court that the landlord violated the IURLTA by attempting to pass the cost of an interior door repair onto the tenants and by requiring tenants to automatically pay for the cost of carpet cleaning upon the termination of the lease. The district court also affirmed the magistrate’s award of damages for bad-faith retention of a rental deposit. Additionally, the district court affirmed the magistrate’s award of two months’ rent payments for knowing use of lease provisions prohibited by the IURLTA. While the district court awarded tenant attorneys’ fees, the district court reduced the amount to keep the total recovery below the $5,000 jurisdictional limit of small claims court.

Lenora Caruso and two others rented a three-bedroom apartment from Apts. Downtown (Apartments Downtown) starting in August 2010. Upon entering into the lease, the tenants paid a $1,270 rental deposit. The lease between the tenants and the landlord was a standard form utilized by the landlord. The contract included a provision stating that the carpets throughout the building are professionally cleaned each time apartments turn over occupancy. Tenants agree to a charge starting at $95 (efficiency) not to exceed $225 (6+ bedrooms) being deducted from the deposit for professional cleaning at the expiration of the Lease. In addition, the lease contained a provision related to certain repairs. Paragraph 33(a) read, “Unless the Landlord is negligent, Tenants are responsible for the cost of all damages/repairs to windows, screens, doors, carpet, and walls, regardless of whether such damage is caused by residents, guests or others.” After the lease ended and the tenants moved out in July 2012, the landlord deducted $904.33 from the rental deposit. Specifically, it deducted $134 as an automatic carpet-cleaning charge, $105 in other cleaning charges, $40 to replace drip pans, and $625.33 for “past due rent and fees.” The past due rent and fees included $199.33 for replacement of an interior door, which the tenants refused to pay, and monthly penalties totaling $400 for failure to pay for the door. 4 Caruso filed a small claims action. Among other claims, the tenant alleged the landlord unreasonably failed to return the rental deposit and willfully used a rental agreement with known prohibited provisions.

Legality of Automatic Cleaning Deposit. In De Stefano, we considered the legality under the IURLTA of an automatic cleaning charge identical to the provision in this lease. In De Stefano, we noted that Iowa Code section 562A.12(3) authorizes only three grounds for withholding amounts from the rental deposit.

We noted the problem with an automatic carpet-cleaning provision is that it generates a deduction from the rental deposit even if none of the conditions of Iowa Code section 562A.12(3) are met. We emphasized that a rental deposit is not designed to serve as an advance payment of amounts that will always be due under the lease. As with the attorneys’ fee issue, our holding in De Stefano is dispositive of the question of whether the automatic cleaning charge is unlawful under the IURLTA. We affirm the district court on this issue. C. Legality of the Door-Repair Provision. In this case, with respect to the door-repair issue, the magistrate held that [Iowa Code] Section 562A.15 requires the landlord, not the tenant to maintain fit premises, including making all repairs and doing whatever is necessary to put and keep the premises in a fit and habitable condition. The written provision that the tenant is liable for “repairs” removes the obligation of the landlord to maintain fit premises and assesses the cost of upkeep of the premises to the tenant. The district court affirmed the trial court. It noted that the clause in the lease requiring the tenants in this case to pay for the allegedly damaged door is illegal. Under the terms of the lease, [the landlord] is not required to show actual damage before seeking payment from the tenant for repair of items such as doors. There is not sufficient evidence in the record to show that actual damage was sustained by [the landlord] based on the claimed damage to the door.

The landlord argues that Iowa Code section 562A.9(1) generally authorizes a landlord to enter into a rental agreement with a tenant including any terms and conditions not prohibited by the statute or other rule of law. The landlord argues that the statute prohibits only a few narrow categories.

The landlord recognizes, and for purposes of the appeal accepts, that it has statutory responsibilities under Iowa Code section 562A.15. This Code provision includes the duty of the landlord to maintain the premises in a fit and habitable condition. The landlord does not claim that the repair of the door in this case does not implicate the duty to maintain the premises in a fit and habitable condition. The landlord instead only argues that the duty to maintain the premises in a fit and habitable condition simply means that the landlord has a duty to make sure that necessary repairs are made. Under the landlord’s theory, the landlord had a duty to make the repairs, but may shift the financial responsibility of those repairs to the tenant in a lease agreement. In addition to this narrow legal point, the landlord on appeal Page 1157questions the factual findings of the district court. According to the landlord, the evidence overwhelmingly showed that the door had been damaged by someone in the Caruso’s apartment and needed repair.

The tenant first responds that she testified the door was not damaged and offered photographs supporting her position. Further, the tenant notes that this court should be deferential to the factual findings below. On legal issues, the tenant, like the landlord, points to Iowa Code section 562A.15 as making landlords responsible for repair and maintenance. Like the landlord, the tenant assumes that repair of the door was required under Iowa Code section 562A.15. The tenant argues, however, that the landlord does not discharge its statutory duty by performing the repair and shifting the cost onto the tenant.

According to the tenant, the repair provision in the rental agreement makes the tenant responsible for all repairs, no matter what the cause. Based on the issue as framed by the parties, the landlord cannot prevail. In De Stefano, we concluded that a landlord cannot shift the financial costs of repairs necessary to comply with its duty of fitness and habitability under Iowa Code section 562A.15 to the tenant. ___ N.W.2d at ___. In this appeal, the landlord does not claim that the door repair is outside the scope of its mandatory statutory duty.

We take no view on the question of whether a landlord could shift the cost of a repair or damage through its lease that was not within the scope of the landlord’s duty imposed by Iowa Code section 562A.15. In any event, we note the district court also found that “[t]here is not sufficient evidence in the record to show that actual damage was sustained by [the landlord] based on the claimed damage to the door.” Although not artfully phrased, the district court in effect, in its de novo review of the record, concluded the landlord had failed to sustain its claim for damages to the door based on the record developed by the parties.

In light of the testimony of the tenant that she and her co-tenants were unaware of any damage to the door other than a slight coming or pulling apart, we conclude that the district court’s factual determination is supported by substantial evidence.

ETHICAL DECISION MAKING Question

As you read the contract elements that the tenant signed, what is your assessment of the ethics of the lease? Rely on the ethical guidelines in the WPH method to form your answer.