Daily Development for
Thursday, December 12, 1996

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law

The Reporter for today's case is Professor Daryl Wilson of the Stetson Law School.

VENDOR/PURCHASER; LANDLORD/TENANT: A purchase agreement that reserves a long term occupancy right in seller is not exempt from the Uniform Residential Landlord and Tenant Act (URLTA).

Rokusek v. Jensen, 548 N.W.2d 570 (Iowa 1996).

Vendor, an eighty-four year old woman sold a residential duplex under a sale agreement which incorporated a lease agreement by which the vendor could reside in one of the units. The lease term was for a period of thirty years subject to earlier termination upon her death. The monthly rental rate was set at $275.00 per month. Four years into the lease the vendee/landlords served the vendor/tenant with notice alleging breach of the rental agreement. Although tenant corrected the alleged breaches in a timely fashion, the landlords nevertheless attempted to claim a termination of the lease and offerred that the lease could be reinstated at the rate of $395.00 per month. The trial court had issued a broadly worded injunction designed to prevent the landlords from initiating similar behavior in the future. But the trial court had found that the Iowa version of the URLTA did not apply.

The Iowa Supreme Court found no basis for exempting the lease from the coverage of URLTA. Although there was no separate lease agreement executed by the parties, the lease was a separate agreement collateral to the main purpose of the parties to the sale of the land. Consquently, reversing the trial court, the supreme court concluded that this was a contract for the rental of residential property within the meaning of the Act. Further, the court held that that the Act's "occupancy under contract of sale" exclusion applied solely to circumstances involving installment contracts.

Although the agreement was covered by URLTA, the court found that the tenant was not entitled to any equitable relief and dissolved the injunction restraining the landlord from evicting her or raising her rent. Instead, the court felt that the tenant had adequate remedies at law under the forcible entry and detainer statute or pursuant to a declaratory judgment.

Reporter's Comment: It would have been much more reasonable for the court to modify the injunction than to force the tenant to endure more future litigation, especially when the probable outcome at law will be an injunction. However, remedies experts say that forcing a litigant to exercise options at law is common despite the fact that the same relief will be granted. The case certainly is another in a long line which continues to emphasize declaratory judgments as the actions of choice for disgruntled tenants.

Editor's Comment 1: The editor selected the case because of conclusions on the applicability of the Act. There are two points to make:

The court correctly points out that the residential arrangements here clearly constituted a separable contract that should have been subject to the state's residential landlord/tenant laws. In the editor's view, this would have been true whether or not there had been a separate, referenced set of contractual provisions dealing with the occupancy of the seller. Where an agreement sets up a monthly rental amount for residenttial occupancy that will continue for as long as thirty years, it is inappropriate to view this as a mere "detail."

But the court could have addressed more clearly the line of demaraction between possession arrangments that truly are ancillary to the main deal - such as where a seller occupies the premises following sale for only a month or two, or where the buyer takes occupancy a month or two before delivery of title in an executory contract. These transactions arguably are sufficiently distinct from the "standard" landlord/tenant arrangement that ordinary policies involving such matters as habitability warranties and other issues need not be applied. It seems inadequate to have the line be determined by whether the parties have used a separate agreement setting forth terms of occupancy. In cases such as the instant case, the absence of such an agreement should not have avoided the application of the URLTA. In other cases, the presence of such an agreement should not lead to its application.

Further, the court's reading of the provisions of URLTA excluding possession arrangements in purchase agreements to apply only to installment land contracts does not seem justified by the statutory language. There was no reason to make such a reading here - the URLTA provision applies specifically only to possession by the buyer. Here the possessor was the seller. But an agreement in a real estate sale contract whereby the buyer gets possession prior to closing, even when there is no installment sale arrangement, often will be a "special deal" as to which the state's general landlord/tenant policies ought not to apply.

Editor's Comment 2: Parties who draft provisions for possession in sale agreements ought to be very careful to evaluate the possible application of various state landlord tenant laws. There are security deposit laws that might have an impact, for instance on the rights of the parties regarding escrowed monies if the deal goes bad. There are statutes that make any tenancy at will a month to month agreement. And, of course, there are numerous statutes and cases imposing non-waivable responsibilities on "landlords."

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