1.2Lease Provisions

A lease is a conveyance of some portion of an owner’s interest to a tenant for valuable consideration. Royal Oak Wholesale Co v Ford, 1 Mich App 463, 466 (1965). “A lease is a contract as well as a conveyance, and ordinary rules of contract interpretation apply.” Sprik v Univ of Mich Bd of Regents, 43 Mich App 178, 193 (1972). As noted, the consideration may be in services or money. Grant v Detroit Ass’n of Women’s Clubs, 443 Mich 596, 605 (1993). “Generally where a premises is leased to a tenant, the lease is considered as equivalent to a sale of the premises for the lease term.” McCurtis v Detroit Hilton, 68 Mich App 253, 255 (1976). This principle is the basis for the transfer of control of the property from the title owner to the person in possession. Shackett v Schwartz, 77 Mich App 518, 526-527 (1977). However, a tenant is only responsible for those areas where he or she has exclusive control, as detailed in the lease. Id. at 526-527 (lease provided for tenant’s exclusive control of only certain rooms, and thus, other areas were the landlord’s responsibility).

A.Oral Leases (Statute of Frauds)

“The statute of frauds is an affirmative defense that is not only invoked to prevent fraudulent construction of a written contract, but also to prevent disputes over what provisions were included in an oral contract.” Jim-Bob, Inc v Mehling, 178 Mich App 71, 82 (1989).

In general, with respect to landlord-tenant interests, the statute of frauds stands for the proposition that leases for terms in excess of one year must be reflected in some kind of writing. See Jim-Bob, 178 Mich App at 81-88. However, a lease longer than one year need not be written out in its entirety; a written note or memorandum representing an oral discussion of lease provisions may suffice. Id. at 83. Where no comprehensive writing of a lease agreement exists, the parol evidence rule permits the use of extrinsic evidence to supplement the content of the writing. Id.

Specifically, MCL 566.106 states:

“No estate or interest in lands, other than leases for a term not exceeding 1 year, nor any trust or power over or concerning lands, or in any manner relating thereto, shall hereafter be created, granted, assigned, surrendered or declared, unless by act or operation of law, or by a deed or conveyance in writing, subscribed by the party creating, granting, assigning, surrendering or declaring the same, or by some person thereunto by him lawfully authorized by writing.”

In addition, MCL 566.108 states, in part:

“Every contract for the leasing for a longer period than 1 year, or for the sale of any lands, or any interest in lands, shall be void, unless the contract, or some note or memorandum thereof be in writing, and signed by the party by whom the lease or sale is to be made, or by some person thereunto by him lawfully authorized in writing[.]”

B.Written Leases

Written leases are most commonly “form leases,” developed or selected by the landlord. At a minimum, written residential leases must comply with the Michigan Truth in Renting Act, MCL 554.631 et seq.¹

1.Requirements of Michigan Truth in Renting Act

The Truth in Renting Act (TRA), MCL 554.631 et seq., is applicable only to written rental agreements for residential premises. See MCL 554.632(a). The TRA serves two purposes:

•it prohibits certain objectionable provisions from being included in written residential leases, and

•it requires certain provisions to be included in written residential leases, MCL 554.634(1).

2.Judicial Interpretation of Leases

“Unclear portions of a lease are construed against lessors, unless the lessee drafted it.” Carl A Schuberg, Inc v Kroger, Inc, 113 Mich App 310, 313 (1982). However, courts should favor the free alienability of land. Id. Thus, “[e]ven when express restrictive covenants exist, courts [should] construe such provisions strictly against parties seeking their enforcement.” Id.

3.Assignments and Subleases

A tenant is presumed to have the right to sublease or assign a lease. Patterson v Butterfield, 244 Mich 330, 338 (1928) (“In the absence of statutory or contractual restrictions, a lessee . . . may assign or sublet his [or her] leasehold interest without the lessor’s consent or an express provision in the lease giving him [or her] such right.”). See also Schuberg, Inc, 113 Mich App at 314. Also, “[t]here goes with every rental of premises the right of beneficial enjoyment by the tenant for the purpose for which the premises are rented, at least to the extent disclosed to the lessor at the making of the lease.” Grinnell Brothers v Asiuliewicz, 241 Mich 186, 188 (1927); Royal Oak Wholesale Co, 1 Mich App at 466.

If the lease prohibits assignment, the tenant may still sublease.  A sublease, as distinguished from an assignment, involves the transfer to another person of some portion, but not all, of the lease. Black’s Law Dictionary (9th ed). It is a lease by the tenant to a third person of a part of the premises, or of the full premises for a period less than the term of the primary lease.  See Miller v Pond, 214 Mich 186, 193 (1921).

4.Extension of Lease

In Stancroff v Brown, 76 Mich App 589, 592-595 (1977), the Court upheld a 10-year written extension provision which was silent as to the amount of rent. Where the landlord had permitted the tenant to make substantial improvements to the premises but later refused to bargain in good faith as to the rent for the extended period, the Court held that a reasonable rent was implied in the extension agreement. Id. at 592, 595. The case was remanded to the trial court for a determination of the reasonable rental value. Id. at 596.

5.Late Fees

Many landlords impose late fees as penalties for the late payment of rent and seek to add these costs to a tenant’s rent amount. Whether such fees will be added to the rent due depends on whether the late fee provision is viewed as a penalty clause imposed by the landlord or as a liquidated damage clause. “Whether a provision is a penalty or liquidated damages is a question for the court and not the jury.” Edoff v Hecht, 270 Mich 689, 696 (1935). However, the amount of damages must be determined by the trier of fact. Hubbard v Epworth, 69 Mich 92, 94 (1888).

Michigan law has long been settled in its opposition to penalty clauses in contracts of all kinds.See Wilkinson v Lanterman, 314 Mich 568, 573 (1946) (contract involving the purchase of property). The Wilkinson Court stated that “‘[a] test as to whether a provision for stipulated damages is enforceable is the reasonableness of the amount.’” Wilkinson, 314 Mich at 575, quoting Hall v Gargaro, 310 Mich 693, 697 (1945). Therefore, late fees in a rental agreement must be reasonably related to the damages suffered by the landlord. Neither the parties’ intent nor their characterization of the charge can save a penalty clause; it will still be judged according to the nature of the sum in connection with the subject matter of the contractual provisions to which it applies. Noble v Strum, 210 Mich 462, 469 (1920).

“[A] provision for liquidated damages for breach of contract will be regarded as enforceable, and not as a penalty, where it embraces the principle of just compensation for the loss or injury actually sustained.” Roland v Kenzie, 11 Mich App 604, 612 (1968), citing Curran v Williams, 352 Mich 278 (1958).

“‘It is a well settled rule in this State that the parties to a contract can agree and stipulate in advance as to the amount to be paid in compensation for loss or injury which may result in the event of a breach of the agreement. Such a stipulation is enforceable, particularly where the damages which would result from a breach are uncertain and difficult to ascertain at [the] time [a] contract is executed. If the amount stipulated is reasonable with relation to the possible injury suffered, the courts will sustain such a stipulation.’” Roland, 11 Mich App at 612, quoting Curran, 352 Mich at 282.

“If the actual damages are uncertain and difficult to ascertain, or are of a purely speculative character, and the contract furnishes no aid in determining this amount, a provision for reasonable damages will be held to be liquidated damages and not a penalty.” Roland, 11 Mich App at 611. See Papo v Aglo Restaurants of San Jose Inc, 149 Mich App 285 (1986).

Courts have held that clauses providing the same damages for several different breaches do not provide for damages reasonably related to a specific breach and are therefore unenforceable. See e.g., Fed Electric Co v Nat’l Service Stations, 255 Mich 425, 427 (1931); Rothenberg v Follman, 19 Mich App 383, 393 (1969). This is true even if the damages caused by the actual breach in question were justified. Wilkinson, 314 Mich at 575-576.

To recover a late charge, the plaintiff must establish the reasonableness of the amount of claimed damages. See Curtis v Hartford Accident & Indemnity Co, 335 Mich 416, 418-419 (1953).

6.Court Costs and Attorney Fees

In some cases a lease will attempt to assess collection costs against a tenant which may expressly, or when enumerated, include a set amount of attorney fees or court litigation costs incurred in collecting rent or in bringing an eviction action.² However, the Truth in Renting Act specifically prohibits such clauses in residential leases.³ MCL 554.633(1)(g) states:

“(1) A rental agreement shall not include a provision that . . .

* * *

(g) [p]rovides that a party is liable for legal costs or attorney’s fees incurred by another party, in connection with a dispute arising under the rental agreement, in excess of costs or fees specifically permitted by statute.”

7.Prohibition Against Pets

A clause prohibiting a tenant from keeping a pet on the leased premises is generally valid. First Mortgage Bond Co v Saxton, 312 Mich 520, 522 (1945). However, certain federally subsidized housing developments for the elderly or persons with disabilities must comply with special rules that prohibit the exclusion of common household pets. 12 USC 1701r-1. 12 USC 1701r-1(a)(1)-(2) states:

“(a) Restrictions on ownership

No owner or manager of any federally assisted rental housing for the elderly or handicapped may—

(1) as a condition of tenancy or otherwise, prohibit or prevent any tenant in such housing from owning common household pets or having common household pets living in the dwelling accommodations of such tenant in such housing; or

(2) restrict or discriminate against any person in connection with admission to, or continued occupancy of, such housing by reason of the ownership of such pets by, or the presence of such pets in the dwelling accommodations of, such person.”⁴

The Fair Housing Act (FHA) and Section 504 of the Rehabilitation Act of 1973 (Section 504) require a landlord to make an exception to his or her “no pets” policy in order to reasonably accommodate a person with a disability who owns an assistance animal. 29 USC 794; 42 USC 3604. An assistance animal is “[a]n animal that works, provides assistance, or performs tasks for the benefit of a person with a disability, or that provides emotional support that alleviates one or more identified effects of a person’s disability.” See https://www.hud.gov/program_offices/fair_housing_equal_opp/assistance_animals. “Breed, size, and weight limitations may not be applied to an assistance animal.” See https://www.hud.gov/sites/dfiles/FHEO/documents/19ServiceAnimalNoticeFHEO_508.pdf.

For more information see also; www.animallaw.info/articles/dduspetsandhousinglaws.htm.

8.Prohibition Against Children

A provision prohibiting a tenant from having or keeping children on the premises is generally invalid. See MCL 37.2502(1), which states: “A person engaging in a real estate transaction, or a real estate broker or salesman, shall not [discriminate] on the basis of religion, race, color, national origin, age, sex, familial status, or marital status of a person or a person residing with that person[.]” (Emphasis added.) See also MCL 554.633(1)(c), which prohibits a rental agreement provision that “[e]xcludes or discriminates against a person in violation of the Elliott-Larsen civil rights act, . . . MCL 37.2101 to [MCL] 37.2804[.]”

Under MCL 37.2502(1) of the Elliott-Larsen Civil Rights Act (ELCRA), “[r]efusing to rent to a protected class of prospective tenants is proscribed [because it] constitutes a refusal to ‘engage in a real estate transaction.’” Dep’t of Civil Rights v Beznos Corp, 421 Mich 110, 118 (1984), quoting MCL 37.2502(1) (alterations added). However, setting aside specific units or buildings in a multibuilding complex to house families with children is not per se unlawful. Dep’t of Civil Rights, 421 Mich at 122. The Court reasoned that while children were protected under the ELCRA, it did “not agree that the [ELCRA] requires identical treatment of children and adults in every situation.” Id. at 119 (children are not permitted themselves to enter into a rental contract, for example). More specifically, the Court noted that “this section of the [ELCRA] does not prohibit per se, in real estate transactions, differential treatment of persons reasonably necessitated by the special nature and characteristics of children residing with such persons.” Id. at 121-122.

See also Hamad v Woodcrest Condo Ass’n, 328 F3d 224, 232 (CA 6, 2003), where the Court indicated that a party who “suffered the stigmatic harm of living in a community whose members were segregated on the basis of a prohibited classification” had standing to file suit against a condominium association for discriminating against families with children. In Hamad, the condominium association’s bylaws limited families with children to purchasing or living in first-floor units, whereas families without children were allowed to purchase or live in units on the first, second, and third floors. Id. at 229. The Hamad plaintiffs’ complaints were based on the Fair Housing Act’s provision that “prohibits discrimination in the sale or rental of housing because of ‘race, color, religion, sex, familial status, or national origin.’” Id. at 230, quoting 42 USC 3604.

Note: At first glance, Dep’t of Civil Rights v Beznos Corp, 421 Mich 110 (1984), may appear to conflict with Hamad v Woodcrest Condo Ass’n, 328 F3d 224 (CA 6, 2003). However, neither case fully decides the issue of whether families with children can be limited to, or excluded from, certain housing within a larger housing community. Beznos Corp, without deciding the issue with regard to a specific situation, decided that designating certain apartments for families with children did not per se violate the state’s civil rights act prohibiting discrimination on the basis of the age of a person residing with an adult. Hamad decided that the plaintiffs had standing to file suit under the federal housing act’s prohibition against discrimination on the basis of familial status where families with children were limited to occupying only certain units while families without children faced no limitations.

9.Prohibition Based on Income

While a landlord may refuse to rent to a potential tenant based on the tenant’s lack of sufficient income, such a refusal must be based on a good faith business determination that the potential tenant would be unable to meet the financial burden of rent.  See Opinion of the Attorney General, No. 5318, June 21, 1978 (Report of Atty General, p 490). In addition, some cities have ordinances prohibiting discrimination based on the source of income, e.g., FIP (Family Independence Program) or SSI (Supplemental Security Income). Finally, HUD (Department of Housing and Urban Development) policy for federally subsidized privately owned housing developments prohibits discrimination based upon source of income.⁵ HUD Handbook 4350.3: Occupancy Requirements of Subsidized Multifamily Housing Programs (May 2003, revised with CHG-2, effective June 2007, and CHG-3, effective June 2009), Chapter 2.

10.Waiver of Notice

A waiver of notice to which the tenant is otherwise entitled by statute is invalid. MCL 554.633(1)(f).

11.Acceleration of Rent Generally Prohibited

Some leases provide that, upon breach of the lease, all rent due for the term of the lease shall be immediately payable in full.  Attempts to enforce such a clause are common in suits to collect rent or in a summary proceeding where all rent due under the lease is alleged to be owing. But see the Truth in Renting Act, MCL 554.633(1)(i), which prohibits acceleration clauses in residential leases, “unless the [acceleration] provision also includes a statement that the tenant may not be liable for the total accelerated amount because of the landlord’s obligation to minimize damages, and that either party may have a court determine the actual amount owed, if any.”

12.Lease Where Rent Is Omitted

As long as all other terms are definite and the agreement states that the amount of rent is to be negotiated, a court should determine a reasonable amount of rent. Stancroff v Brown, 76 Mich App 589, 596 (1977).

13.Michigan Medical Marihuana Act (MMMA)

The MMMA does not require “[a] private property owner to lease residential property to any person who smokes or cultivates marihuana on the premises, if the prohibition against smoking or cultivating marihuana is in the written lease.” MCL 333.26427(c)(3).

C.Statutory Covenants of Fitness and Reasonable Repair

MCL 554.139 creates covenants to repair and maintain the property:

“(1) In every lease or license of residential premises, the lessor or licensor covenants:

(a) That the premises and all common areas are fit for the use intended by the parties.

(b) To keep the premises in reasonable repair during the term of the lease or license, and to comply with the applicable health and safety laws of the state and of the local unit of government where the premises are located, except when the disrepair or violation of the applicable health or safety laws has been caused by the tenant[’]s wilful or irresponsible conduct or lack of conduct.

(2) The parties to the lease or license may modify the obligations imposed by this section where the lease or license has a current term of at least 1 year.

(3) The provisions of this section shall be liberally construed, and the privilege of a prospective lessee or licensee to inspect the premises before concluding a lease or license shall not defeat his [or her] right to have the benefit of the covenants established herein.”

D.Leases and the Michigan Consumer Protection Act

The Consumer Protection Act (CPA), MCL 445.901 et seq., prohibits unfair, unconscionable, or deceptive methods, acts, or practices in the conduct of trade or commerce. MCL 554.633(1)(m) of the Truth in Renting Act⁶ prohibits a residential lease provision from violating the CPA, and any provision that violates MCL 554.633 of the Truth in Renting Act is void. MCL 554.633(3). Therefore, any residential lease provision that violates the CPA is void.

The CPA affects written residential leases in at least two important areas.⁷ First, lease clauses which appear to waive rights that are not subject to waiver, or otherwise create a probability of confusion or misunderstanding regarding tenants’ rights, obligations, or remedies, are prohibited. See MCL 445.903(1)(n). Thus, clauses claiming the right to attorney fees or to evict without court order are prohibited in residential leases. Even where waivers are permitted, they must be clearly stated and the tenant must consent to them.  See MCL 445.903(1)(t).

Second, landlords may not use written leases to take advantage of tenants who, because of “disability, illiteracy or inability to understand the language of the agreement” cannot protect their interests. See MCL 445.903(1)(x).

In addition, the CPA prohibits certain practices that may occur at the time of renting, including:

•failing to reveal or misrepresenting material facts of importance to the tenant, MCL 445.903(1)(s), MCL 445.903(1)(bb), MCL 445.903(1)(cc);

•failing to return a deposit when the lease agreement is not consummated, MCL 445.903(1)(u);

•misrepresenting one’s authority to lease, MCL 445.903(1)(m), or that the premises will be available within a certain period of time, MCL 445.903(1)(g); and

•providing the tenant with an apartment that is not consistent with the model shown, MCL 445.903(1)(e), MCL 445.903(1)(g).  

The existence of defects on the premises is a material fact, and the landlord’s failure to reveal such defects may give rise to liability under the CPA. MCL 445.903(1)(s); MCL 445.903(1)(cc). The CPA is also violated where the landlord retains part of the tenant’s security deposit for cleaning. Smolen v Dahlmann Apts, Ltd, 127 Mich App 108, 117-118 (1983), citing MCL 445.903(1)(u).

A party may claim statutory damages for violations of the CPA. See MCL 445.911(2). The CPA establishes the right of persons damaged by deceptive practices to sue for “actual damages or $250.00, whichever is greater, together with reasonable attorneys’ fees.”  Id.