Lessons from Eviction Court: Don't Make Oral Agreements with Tenants

Today’s Lesson from Eviction Court demonstrates the old adage that “no good deed goes unpunished”. For most landlords, any time a tenant becomes past due on the rental payment, a notice is sent advising the tenant that if the payment is not made within a certain number of days, depending on the applicable lease and law, the tenancy will be terminated. In some cases, the tenant pays the rent and the problem is solved. In other cases, the tenant moves out and the problem is partly solved. In still other cases, the tenant fails to pay and the landlord files for eviction. The proper step for the landlord is clear in all three of those cases.

The problem, for some landlords, arises when a tenant responds to the non-payment notice by saying that he or she can make the payment, but not within the time frame set forth in the notice. In other words, the tenant requests an extension of the time frame in which to make the payment. Anyone who has managed property for very long knows that this is a regular occurrence. There are two issues at play of which landlords need to be aware when a tenant requests an extension. The first issue is whether you are going to agree to grant an extension and under what terms. The second is how you will document the agreement.

I have no problem with landlords granting extensions to tenants. Doing so often puts more money in the landlord’s pocket and keeps him/her from having to try to re-rent a unit quickly, which is often an unsuccessful endeavor. It also keeps a tenant in housing even though he or she had a tough month. As for the terms of the extension, the landlord should simply be sure that, if the extension goes into the next month or after an eviction is filed, the amount to be collected from the tenant includes these costs.

Example from a Recent Case

From a legal perspective, the more important issue is how the agreement gets documented, if at all. Here’s the problem, as exemplified by a recent case: The tenant is given a notice of non-payment for January. He fails to pay within the notice period, so the landlord files an eviction, and the eviction hearing is scheduled for early February. After being served with the eviction, the tenant comes to the management office in late January and says he wants to pay what he owes. The property manager tells him that he owes $550.00 for January rent and late fees, plus court costs of $250.00, for a total of $800.00. The landlord tells him that if he pays that amount by the end of the month, he can stay in the unit.

The tenant shows up on February 2, the day prior to the eviction hearing, and offers $800.00 in money orders. The assistant manager contacts the property manager, who instructs the assistant to refuse to accept the money because the agreement was that the $800.00 must be paid by the end of January, and February rent is now also due. The tenant argues with the assistant manager, claiming that the property manager had agreed to accept the $800.00 any time prior to the eviction hearing.

The following day, the assistant manager and tenant appear in court for the eviction hearing, and they re-hash their argument from the day before about whether the tenant was to pay the $800.00 by the end of January, or was given until the court date. Because the agreement was not in writing, the matter became a swearing contest between the tenant and the assistant manager. Here’s the problem for the landlord: the assistant manager was not present when the property manager and the tenant made the agreement, so she cannot testify about what was said.  Under these circumstances, the tenant’s testimony about the agreement is undisputed. As a result, the court has no choice but to find that the parties agreed that the tenant was given an extension until the court date to pay $800.00, that he had complied with that agreement by offering to pay $800.00 the day prior to the hearing, and that the eviction should therefore be dismissed.

The Lessons

Now, this particular landlord had excellent legal counsel who was able to maneuver the case to a favorable outcome, but the lesson remains: do not enter into oral agreements with your tenants. When you do, you are putting your eviction case in jeopardy, for two reasons: First, when the agreement is not put in writing, there is often an unstated misunderstanding between the parties. In this case, it is entirely possible that the tenant thought that the property manager meant he could stay as long as he paid by the court date, thinking that the court date was on February 1. It is also possible that the landlord told the tenant he could pay $800.00 by February 2, thinking that it was implicit or obvious that he would also need to pay February rent in addition because it would be due by that date. Either way, there was a misunderstanding that didn’t get exposed until it was too late.  

Second, oral agreements put you on the defensive and allow tenants to gain equal, if not advantageous position in the eviction hearing. Oral agreements turn what should be an open-and-shut case whether the tenant paid by the time the written notice expired into a swearing contest about the existence and terms of an unwritten agreement. In those situations, a dishonest tenant has the advantage, because he or she can pick out the staff member who is not present in court and claim to have an agreement with him or her that extended the payment deadline. If the manager appears in court, the tenant claims to have had an agreement with the leasing agent or assistant manager, and vice versa. That puts the landlord in the position of having no one at the hearing who can dispute the tenant’s claim to an agreement.

However, if the landlord puts all agreements in writing, the terms are clear and the tenant will have a very difficult time defending the eviction. But Stephen, can’t a tenant always just lie and claim that he had an oral agreement with an absent staff member? Yes, but if the staff member who is present at the hearing can testify that he/she is aware of no oral agreement in this case, and that their policy is that all agreements must be put in writing, then the tenant will have a difficult time proving an agreement. However, if the staff member, who is under oath, acknowledges that the manager made an oral agreement, but wants to dispute the tenant’s claim about the content of the agreement, the tenant has a superior position because the staff member, admittedly, was not present when the agreement was made and thus cannot dispute the tenant's claims.

So, here are the two lessons: (1) Don’t enter into oral agreements with tenants, and (2) if an oral agreement is made, the person making the oral agreement should come to court to testify about the terms of the agreement.

As always, if you have questions, contact your friendly landlord attorney for advice.