Box 22, Folder 19, Document 5

Box 22, Folder 19, Document 5

Preliminary Draft — LANDLORD-TENANT LAW REFORM

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Archaic landlord—-tenant law and practices, once appropriate to an
agricultural society, must be reformed and modernized to meet the
need of industrialized urban America.

Ancient legal doctrine, construing a lease as a conveyance of an
interest in land rather than an agreement, leads to the holding that
the obligation of the tenant to pay rent is independent of the duty

of the landlord to repair and maintain the premises. The sole reme-
dies thus available to the tenant to secure his rights are limited

to his vacating the premises and then claiming termination of the
lease or himself repairing the premises, financing the cost and there-
after claiming a set-off against future rents.

Such limitations, while onerous to all tenants, are intolerable in
their application to poor people. Their choice of accommodations
within their means is minimal; they can neither finance repairs nor,
often, even gain access to the parts of the premises requiring repair.
While states and local governments, in proper concern for the lives,
health and safety of all citizens, prescribe minimum standards for
housing accommodations, out-—dated legal practices thwart the poor in
direct assertion of their rights.

Il

Reformation of landlord-tenant law is a state and local government
responsibility burdened with consequence to the National welfare.

While appropriate solutions may vary between jurisdictions, certain
broad principles must apply throughout:

A. State and local enforcement of building, health and safety codes
must be streamlined and improved. Administrative flexibility and
faet finding must be fostered and the power of local courts
strengthened. The obligation of code compliance must be a prior
charge on the property itself and all rights therein, rather than
merely a personal obligation of the owner.

B, Compliance with law must be a basic part of every agreement and
every right. Obligations of landlord and tenant alike, as pro-
vided in building, health and safety codes, must be construed as
creating independent rights enforceable by direct legal action.
Determination of such issues in the courtroom must be facilitated.

C. Public funds must not reward illegal -conduct. Appropriate rent
withholding procedures must be developed for the welfare tenant.
Appropriate actions must be taken in all public acquisitions to
the end that prices paid disregard values achieved from income
derived in property operation contrary to minimum building, health
and safety codes.

OF Se EE Re 9 OE

While these responsibilities are local, the Federal Government can and
has assisted:

1. The establishment of neighborhood legal centers in slums by
the Director of the Office of Economic Opportunity, who are
making a major effort to help tenants secure their rights to
safe and sanitary housing.

2. The convening of a Conference by the Attorney General to de-
velop new procedures to insure that the rights of tenants are
fully and effectively enforced.

3. The appointment of a Commission to make a comprehensive review
of codes, zoning, taxation and development standards.

III

Programs and activities of the Federal Government, while indirect in
that enforcement of fire prevention, housing, building, health and
sanitation law is a responsibility of local government, can be of de-
cisive importance:

A. 1. Section 101(a) of Public Law 171 qualifies Federal assistance
upon the appropriate local public bodies undertaking "positive
programs" and "a workable program" for community improvement
through the

“adoption, modernization, administration and enforcement
of housing, zoning, building and other local laws, codes
and regulations relating to-land use and adequate stan-=
dards of health, sanitation and safety for buildings, in-
cluding the use and occupancy of dwellings,"

Administrative regulations heretofore issued by the Secretary
of Housing and Urban Development should be further clarified to
direct specific enumeration and attention to the application
and enforcement of local codes and ordinances related to life,
health and safety throughout the locality and to demonstrate
increased effort and progress in such enforcement. Such en-
forcement of minimum codes shall be required as protection of
lives and health of occupants, irrespective of whether a basic-
ally sound and stable area is thereby created.

2. The Secretary of Housing and Urban Development can further im-
plement the purposes of the legislation through the development
of national uniform statistical reporting, whereby yardsticks
of comparable municipal performance may be established,

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3. The Secretary of Housing and Urban Development can tighten
existing regulations to the end that mortgage insurance avail-
able through the Federal Housing Administration for property
acquisition, rehabilitation and improvement must be condition=
ed upon code compliance. At the same time, mortgage insurance
and grants under Section 312 can be promoted and expedited.
Special personnel can be. designated in each insuring office of
the Federal Housing Administration with the specific assignment
of coordinating the insuring activities of that agency with
city building departments and community organizations to the
end that provision of proper financing for complete rehabili-
tation to meet code standards be greatly expedited.

The Secretary of Health, Education and Welfare can, by administra-
tive regulation, require that each local authority participating
in administration and disbursement of relief funds establish, in
collaboration with appropriate local authorities, ‘systems of hous-—
ing inspection and certification to the end that appropriate with-
holding of rents, where justified, be undertaken.

All Departments of Government concerned with property acquisition,
wherever Federal investment is involved, can require that the ac—
quiring public authority demonstrate and certify that no part of
the award granted or payment made represents values achieved by
operation contrary to local codes-of building, health and safety.

All Departments of Government dealing with the audit and verifica-
tion of real estate and mortgage loan assets can require certifi-
cation that as to the property concerned no complaints are present—
ly pending by any local authority charging violation of local mini-
mum codes of building, health and safety.

IV

At this time property owners in deteriorated or declining city areas
assume that the municipality either cannot or will not enforce its
building, housing, health and sanitation laws == an assumption based
on experience and occasionally supported by Federal statement:

"Characteristic of a typical slum area is the overcrowding
of housing units well beyond the levels permitted by local
codes. Any effort to enforce the occupancy standards of
the code would have as its immediate consequence a massive

displacement of the families occupying the overcrowded units.
This might be acceptable if it were coupled with a concurrent
program to make available to such families decent housing at
prices they can afford. Unfortunately, the latter tends to
be far slower and more costly than the carrying out of code
enforcement. In many cases local courts have recognized

this consequence and, as a matter of public policy, have
refused to permit enforcement action.

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"By its very nature, a program of code enforcement requires
property owners to make substantial investments in repairs
and improvements in order to avoid prosecution. Unless

that investment is coupled to an increase in rental returns
or property values, the owner is likely never to be able to
recover the cost. But since we are still dealing with a
seriously blighted area, neither the increase in rentals or
property values is likely to occur. The present tenants
usually cannot afford higher rentals, particularly if occu-
pancy is reduced and there are fewer wage earners to pay

the rent. Tenants with higher incomes usually cannot be
persuaded to move into a still blighted area. The value of
the property in a private sale cannot be expected to increase
unless the rentals increase nor would the repairs or improve-
ments add significantly to the property value in the event

of a future public condemnation.

"It has been argued that rigid code enforcement in deteri-
orated areas will so depress property values that new pur-
chasers will be able to afford to make the necessary repairs
without increasing rents. In fact, this does not happen on
any broad scale. While our understanding of the factors
which motivate owners of slum property is very limited, a
recent study does cast some light on this. The large
'sophisticated' owners of slum property usually have so
little of their own money invested that any feasible reduc-—
tion in cost of purchasing could not equal the cost of need-—
ed repairs. On the other hand, the small ‘unsophisticated!
investor is usually incapable of taking advantage of any
such economic effects.

"In sum, it is our belief that concentrated code enforcement
by itself in badly blighted areas would result in more tur-
moil than improvement of housing conditions. But to say that
this one approach will not work is not a satisfactory answer
to a very real and pressing problem. Although we have not
yet arrived at anything we regard as an adequate solution,
it would be extremely valuable to present some of the prob-—-
lems and possible approaches in order to get broader con-
sideration." (Staff Report, Housing and Urban Development,
forwarded by the Secretary to Senator John Sparkman, Chair-—-
man, Subcommittee on Housing, Senate Committee on Banking
and Currency, 7/26/66)

The assumption becomes a self-fulfilling prophecy:

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Property owners reduce expenditures for property maintenance and
repair wherever possible.

Tenant and community morale collapse.

Constructive community leadership is denied credibility.

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If it be assumed that power of state and local government to regulate -
housing condition in order to preserve life, health and safety is a
prior charge on all interests in property, then the equation as to the
feasibility of property repair to minimum standard is simply whether
the gross rent roll will cover current operating expense, current taxes,
and principal and interest payments to cover the cost of repair. Ante-
cedent mortgage commitments, as well as the equity investment, are ir-
relevant to the issue, Were mortgagees and property owners, contrary
to existing assumptions, convinced of this contingency, their conduct
concerning property repair and maintenance would be altered significant-—
ly. In these circumstances, it would not be necessary that public ac-
tion be asserted against each property in a given neighborhood in order
to reverse the prior assumptions.

A formidable case exists, therefore, for selection of a few neighbor-
hoods in which, after complete inventory of structure condition, owner-
ship, mortgage debt, and prior history of code enforcement, an experi-
mental program be undertaken by the appropriate local public authority,
working in collaboration with the local community, in which a number of
the possible Federal sanctions here enumerated were employed, The ef-
fort is attractive in:

1. Presenting a new attack upon the syndrome of community decline
and collapse.

2. Offering promise of reduced public expenditures by imposing
costs upon non-conforming properties.

3. Generating increased voluntary compliance with minimum codes
-and standards.