Kentucky Court of Appeals Confirms No Common Law Implied Warranty of Habitability in Landlord-Tenant Arrangements in Closely Watched Case

On July 10, 2015, a panel of the Kentucky Court of Appeals rendered a decision in Wildcat Property Management, LLC v. Franzen, 2014-CA-000964-MR, a closely-watched case in the landlord-tenant realm.  The appeal generated filings of amicus curia briefs from the Greater Lexington Apartment Association and The Louisville Apartment Association.  In Wildcat Property Management, the Appeals Court panel vacated and remanded a Fayette County trial decision that had granted partial summary judgment in favor of student tenants and their parent guarantors, and denied the landlord’s motion for summary judgment.  The Court of Appeals found the Trial Court’s decision that the residential lease in question was void and unenforceable, and therefore the Uniform Residential Landlord Tenant Act (URLTA) did not apply, was in error.  In the process, the Court confirmed Kentucky does not recognize a common law implied warranty of habitability in a landlord-tenant context.

Wildcat Property Management leased a house to several student tenants, with the tenants’ parents acting as guarantors for the lease.  The tenants failed to pay any rent under the lease, and Wildcat Property Management evicted them from the premises and brought a lawsuit for damages for unpaid rent for the months of occupancy, damages for two months following the eviction due to an inability to re-lease the premises for the same dollar amount, a claim for a “performance fee” under the lease, a claim for the security deposit, late fees, and the electric and water bills during the tenants’ occupancy.

Wildcat Property Management filed a Motion for Summary Judgment, arguing the tenants failed to pay rent and were evicted, thus breaching the lease and damaging the landlord.  The tenants filed a cross Motion for Summary Judgment, claiming, for the first time, the premises were uninhabitable, alleging the premises were dirty, in disrepair, and that the landlord failed to deliver on a promise to make certain repairs and to completely renovate the interior of the house, including installing an exterior hot tub.  Apparently, some of the renovations were made after the signing of the lease, but the hot tub was not installed.

The Trial Court denied the landlord’s Motion for Summary Judgment, and granted the tenant’s Motion for Partial Summary Judgment, holding “the property tendered by Wildcat Property was not in the condition represented in the Lease or by its oral representations.  Further, the trial court found that certain conditions on the property affected the health and safety of the Tenants.  In sum, the trial court held that the Lease was void and that URLTA, particularly KRS 383.625, did not apply to the parties’ dispute.  Finally, it concluded that the Tenants were only liable to Wildcat Property in quantum meruit for reasonable rent during the time they actually lived in the house.”

In reversing the Trial Court, the Appeals Court panel first affirmed the long-standing rule that Kentucky common law does not recognize an implied warranty of habitability in landlord-tenant arrangements.  Instead, the tenant can only obtain relief for “habitability” issues by looking to the language of the lease or to any applicable statutes.  Although the Trial Court did not expressly find an “implied warranty of habitability” in this situation, the Appeals Court noted concern that this was the basis for the ruling.  The Appeals Court panel noted a signed “move-in inspection” clause in the lease, where the tenants acknowledged they had inspected the premises to be leased and agreed they were habitable.  Further, although the tenants had argued oral representations made by the landlord prior to the execution of the lease provided evidence the house was uninhabitable, the Appeals Court panel observed the tenants did not make any claims regarding habitability for almost five years after the lease was signed, and regardless, such pre-lease oral representations were barred by an “entire agreement” clause immediately before the signature page in the lease stating: “This Lease shall not be affected by any agreement or representations not specifically contained in writing herein.  No modification or addition to the terms of this Lease shall be binding on either of the parties unless made with good and valuable consideration, and in writing signed by each of the parties.”  Accordingly, based upon the actual language of the lease and the irrelevance of the pre-signing oral representations concerning habitability the Appeals Court panel found the Trial Court erred in finding the lease was void and unenforceable, and noted “Our decision is bolstered by the lack of any implied warranty of habitability under Kentucky law.”

Since no common law implied warranty of habitability exists in Kentucky, the tenant would need to look to the actual rental agreement or to any applicable statute “for remedies when a rental unit is defective or requires repair.”  Lexington-Fayette County has adopted URLTA, the Uniform Residential Landlord Tenant Act (codified at KRS 383.500 – 383.715).  Kentucky authorizes individual counties and cities to adopt URLTA, leading to a bit of a patchwork quilt of landlord-tenant jurisprudence in the Commonwealth.  “Where adopted, URLTA, although supplemented by the common law, is the exclusive remedy.”

The Appeals Court panel cites several sections of URLTA that “express a working definition of ‘habitability’ under the statutory directives,” and then cites several of URLTA’s remedies for tenant’s aggrieved by a landlord’s failure to comply with the “habitability” provisions.  According to the Decision, the tenants continued to live in the house and did not provide any conclusive evidence regarding repairs to the house, and the tenants never proceeded under URLTA.

The Appeals Court panel signified concerns regarding the Trial Court decision: “Here, the impact of the trial court’s ruling is to create a process that is unreasonable.  First, under the trial court’s reasoning, the signing of a lease would no longer create a viable contract since a tenant could state, after the signing of a lease, that the premises are not ‘habitable’ and void the lease.  Even more troubling, tenants, in this scenario, could actually void the lease at the end of the tenancy.”

The Appeals Court panel found the lease was valid and signed in a jurisdiction where URLTA applied.  The tenants failed to pursue any remedies regarding habitability under URLTA.  Therefore, the Appeals Court panel vacated the decision of the Trial Court and remanded the case for a determination of the landlord’s damages under URLTA, and stated “If the trial court’s ruling were to prevail, tenants could ignore the procedures and policies under URLTA and void rental agreements at any point of tenancy and desecrate the uniform, comprehensive statutory scheme under URLTA that provides clear guidelines for tenants and landlords.”

The Full Text of the Opinion May Be Found HERE