LAYING DOWN THE LAW
with
Christopher J. Charles, Esq. and Philip A. Overcash, Esq.
Legal Headaches: Can Tenants Sue Their Landlord for Annoyance or Emotional Distress Concerning a Property’s Condition?
The Arizona Residential Landlord and Tenant Act, A.R.S. § 33–1301 et seq., (the “Act”), provides a comprehensive framework regulating the rights and responsibilities of landlords and tenants under a lease for residential properties. Arizona courts have interpreted the Act to provide broad protections to tenants, as well as a wide array of damages which the tenant may recover when the landlord breaches the lease.
In Thomas v. Goudreault, 163 Ariz. 159 (1989), the Court of Appeals held, for the first time, that a tenant who is not provided with necessary services and maintenance of the leased premises as required under the Act suffers property damage because the value of his leasehold is decreased by the absence of the necessary services (such as plumbing, heating/cooling, etc.). Thomas v. Goudreault, 163 Ariz. at 167. The Court held that the most immediate damage suffered by the tenant was the annoyance and discomfort of living in inadequate housing. Id.
A Maricopa County Superior Court judge recently agreed, and held that “[o]nce property damages have been established under the ARLTA, emotional distress damages may follow if the violation of the ARLTA constituted an interference with the tenants’ use and enjoyment of the leased property.” Thomas v. Goudreault, 163 Ariz. at 166-7. In other words, the Act entitles tenants to money damages for mental suffering, anguish, discomfort or annoyance caused by the landlord’s failure to maintain the leased property in a fit and habitable condition.
The Thomas decision runs contrary to the conventional wisdom that a tenant’s recovery was limited to contract damages. In that case, the tenants leased property which they used as a residence, and from which they also operated a bakery business. During their tenancy, the tenants made numerous complaints to the landlord concerning the condition of the premises, which complaints primarily involved the heating and air conditioning system for the main house.
During the lease, the tenants deducted various amounts from rent for sums that they had paid for maintenance of the property. The landlord made some makeshift repairs, and the tenants continued to live in the residence for another four months before surrendering possession.
The tenants filed a five-count complaint against the landlord in which they asserted a contractual claim for breach of lease and tort claims for bad faith breach of lease, intentional infliction of emotional distress, interference with business expectancies, and negligence. At trial, the superior court instructed the jury that if they found that the landlord did not comply with their obligations as landlords, then plaintiffs were entitled to recover damages they may have suffered as a result of that non-compliance, including compensation for mental suffering, anguish, discomfort or annoyance caused by the landlord’s failure to maintain the leased property in the required condition. The jury returned a verdict in favor of the tenants on their tort claim for intentional infliction of emotional distress, and landlord appealed.
A.R.S. § 33–1364(A) provides that where a landlord “negligently” or “deliberately” fails to supply an essential service, a tenant may elect either to (1) procure those services himself and deduct the cost from the rent, recover damages for diminution of the fair rental value, or (2) procure substitute housing, discontinue rent and charge the landlord for the difference between the rent and the cost of substitute housing not to exceed 25% of the rent. In addition, subsection (B) provides that when the landlord has acted “deliberately,” the tenant may recover the reasonable and actual cost of substitute housing not to exceed the rent.
The Court in Thomas found persuasive the argument that residential tenants who have suffered a breach of the warranty of habitability do not generally lose money, but rather suffer discomfort and annoyances such as not being able to bathe as frequently as they would like or at all if there is inadequate hot water, rodents harassing their children or spreading disease if the premises are infested, or avoiding certain rooms or worry about catching a cold if there is inadequate weather protection or heat.
The Court therefore concluded that tenants may state a claim in tort against their landlord for damages resulting from breach of an implied warranty of habitability. “While not every breach of a statutory duty gives rise to a cause of action for tort, we find that the types of harm protected under the ARLTA provide a basis for tort recovery for mental distress caused by the breach. We conclude that allowing such recovery is consistent with Arizona case law regarding damages for mental distress.”
The Court also addressed whether the tenant could recover loss of anticipated business profits which resulted from the landlord’s default. Here, the landlord knew that the tenant would operate a bakery business on the premises. However, the tenant in this case operated the bakery business without the requisite permit from the Maricopa County Health Department. On that basis, the Court held that the tenant should not be permitted to recover loss of anticipated profits.
Based upon the foregoing, landlords in Arizona may be held liable for all damages suffered by a tenant if they fail to maintain the premises in a habitable condition, including damages for inconvenience and annoyance which are beyond the usual contract damages under the lease.
If you or someone you know has questions regarding a lease, call our office to schedule a consultation with Attorney Philip A. Overcash or Christopher J. Charles.
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Philip A. Overcash is an Attorney with Provident Law®. Mr. Overcash practices in the areas of complex commercial and real estate litigation. He has successfully represented numerous international, national and Arizona-based corporations and individuals, government entities and insurance companies in a wide array of legal disputes involving real estate, contracts, construction defects, insurance coverage and bad faith, employment law, trademark and trade secrets, and appeals. Philip is admitted to practice in Arizona’s State and Federal Courts, and he is a Member of the Arizona State Bar Association and Maricopa County Bar Association. He can be reached via email at philip@providentlawyers.com or at 480-388-3343.
Christopher J. Charles is the Founder and Managing Partner of Provident Law®. He is a State Bar Certified Real Estate Specialist and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS® (the “AAR”). He is also an Arbitrator and Mediator for the AAR regarding real estate disputes; and he served on the State Bar of Arizona’s Civil Jury Instructions Committee from 2011-2015 where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions. Christopher is a licensed real estate instructor and he teaches continuing education classes at the Arizona School of Real Estate and Business. He can be reached at chris@providentlawyers.com or at 480-388-3343.