How to Non-Renew a Lease

I’ve gotten a lot of questions recently about a landlord’s ability to refuse to renew a lease, and it seems like there’s a lot of misinformation out there. Most landlords have heard that they can “non-renew a lease for any reason” or that they “don’t have to give a reason”. Both statements are partly true, but don’t tell the entire story. That’s my goal today.

Unless the lease says otherwise, a landlord is free to refuse to renew a lease for any reason that is (1) non-discriminatory and (2) non-retaliatory. In other words, you can refuse to renew a lease as long as you don’t violate any Fair Housing laws (federal, state, or local) and you don’t violate KRS 383.705. As a reminder, KRS 383.705 only applies in those 19 jurisdictions that have adopted the Uniform Residential Landlord Tenant Act. To find out if your area has adopted the URLTA, see this article.

Discrimination

On the issue of discrimination, a landlord should make sure not to treat any tenant differently than others based on membership in a protected class (if you don’t know the protected classes or are unsure about them, please check out my other articles, videos, or attend an upcoming seminar). Don’t refuse to renew a black tenant’s lease under the similar circumstances when you’ve renewed a white tenant’s lease. Don’t refuse to renew a disabled tenant’s lease when you’ve renewed a non-disabled tenant’s lease under similar circumstances. Et cetera, et cetera.

What’s more, we have to remember that it is a violation of state and federal Fair Housing laws to retaliate against a tenant who has asserted his Fair Housing rights or who has filed a housing discrimination claim. So, a landlord should not refuse to renew a lease because a tenant has taken such action.

Retaliation

On the issue of retaliation, KRS 383.705 makes it unlawful for landlords to take certain adverse actions against tenants who have invoked or expressed their rights as tenants. Specifically, landlords are not allowed to raise the rent, decrease services they provide, or seek to regain possession of a unit after a tenant (1) has complained to Code Enforcement or a similar government agency, (2) has complained to the landlord that he has failed to comply with his maintenance obligations, or (3) has organized or joined a tenant union. If a landlord violates this provision, the tenant has a defense to an eviction and may recover up to three months’ rent and attorney’s fees.

In addition, any adverse action by the landlord (such as a non-renewal) that occurs within one year after the tenant has engaged in one of the acts listed above is presumed by the law to be in retaliation by the landlord. So, if your tenant calls Code Enforcement to complain about an issue in the rental unit in March, and you refuse to renew his lease in December, the law presumes that your refusal to renew the lease was in retaliation for the tenant’s complaint to Code Enforcement. To be clear, the fact that retaliation is presumed does not mean that the court will make a finding that the landlord retaliated, but it does mean that the landlord will have to introduce evidence to overcome that presumption, showing that there was a legitimate, non-retaliatory reason for the non-renewal (or rent increase, etc.). To find out more about retaliatory eviction cases, check out my seminar on Evictions from A-Z. 

So, how can a landlord refuse to renew a lease without creating Fair Housing issues or retaliation issues? Here are a few guidelines:

• Only refuse to renew a lease under two circumstances: (1) you have a bad tenant or (2) you intend to sell/renovate the property. Both are legitimate, non-discriminatory and non-retaliatory reasons for refusing to renew a lease. If you say you're not renewing the lease to sell or renovate the property, make sure that you actually do so. 

• Make sure you document all complaints against your tenants, even if those complaints are taken over the phone. Once you get a complaint, investigate it. If you find that it’s true and the tenant has violated the lease, give the tenant a notice of the violation and to correct the behavior. A major problem that I see is where the landlord doesn’t document complaints and/or doesn’t notify the tenant of violations, then wants to refuse to renew the lease. It's hard to show that the tenant has been a “bad tenant”when you have no record of complaints against the tenant and no notices telling the tenant to change his behavior. Under those circumstances, it’s easy for judges and Fair Housing investigators to wonder if the landlord is merely discriminating or retaliating against the tenant. On the other hand, if you've issued four notices to your tenant to keep his television turned down because he's disturbing his neighbors, that's a much stronger case.

• Have a written policy of when you will refuse to renew leases. The last thing you want if sued for housing discrimination or retaliatory eviction is to be without a policy on when you refuse to renew leases. In such cases, you will be accused of making it up as you go and of discriminating and retaliating by using your “made up” policy. You have a lot of discretion in this policy; however, don’t make it so strict (“anyone who pays rent late will be non-renewed”) that you end up having to non-renew leases of some of your better tenants.

• Be consistent in your application of your non-renewal policy. Applying your policy harshly to some and leniently (or ignoring it completely) to others who are in similar circumstances is textbook housing discrimination. You are free to make exceptions as long as those exceptions are written into your policy and that everyone in similar circumstances gets to take advantage of the exception.

• Check your lease for the amount of notice to give. Some leases automatically renew for another term or on a month-to-month basis if a certain amount of notice is not given, so make sure you give follow your lease in notifying your tenant of the non-renewal. 

• Your notice does not have to state the reason for the non-renewal. But, as the preceding paragraphs have shown, you need to actually have good reasons. 

• All of the foregoing principles apply when refusing to renew a month-to-month tenancy or a tenancy-at-will.

One final consideration: The situation sometimes arises that a tenant who just signed a renewal commits a lease violation prior to the renewal taking effect. If the tenant is evicted under the old lease, is the renewal terminated as well? The answer is not clear, and likely depends somewhat on what your leases say. So, my suggestion is to add language to your leases that makes it clear that any noncompliance with the current lease shall terminate any renewals and/or that any noncompliance subsequent to the signing of the lease and before the effective date of the lease voids that lease. The National Apartment Association lease has such language, but it is untested in court in Kentucky at this point.

As always, if you need help with your particular situation, contact your friendly neighborhood attorney. Also, if you haven't already be sure to sign up for my e-mail newsletter to stay on top of legal developments in the state's rental industry. Just click here, scroll to the bottom of the page, and enter your e-mail address.