1. Explain the inconsistency between the landlord obligation of habitability and the provisions for repairs being billed to tenants.
2. Why was the landlord's decision to disallow the sublease upheld?
3. Explain why the court does not uphold the punitive damages.
4. What lessons do you learn from the importance of understanding lease terms? Do you have the power of negotiating terms?

Given case:

De Stefano v. Apts. Downtown (2016)

In July 2010, four University of Iowa studentsElyse De Stefano, Hillary Block, Meghan Crotty, and Jennifer Connelly (tenants)rented a four-bedroom home in Iowa City from Apts. Downtown, Inc., (Apartments Downtown/landlord) under a written lease agreement. The lease ran from July 31, 2010, to July 26, 2011. The rent was $1,635 per month, and the tenants paid a rental deposit of one month's rent.

The preprinted lease contained seventy tightly spaced paragraphs featuring many subparts and considerable detail. In paragraph 30 the lease provided, "Tenants agree to pay for all damages to the apartment windows, screens, and doors, including exterior unit doors (including random acts of vandalism)." The lease also provided in paragraph 33, "Unless the Landlord is negligent, Tenants are responsible for the cost of all damages/repairs to windows, screens, doors, carpet, and walls, regardless of whether such damage is caused by residents, guests or others." Additionally, the lease contained a $452-$690 estimated cost for the repair or replacement of a prehung entry door.

Under the lease, Iowa City Maintenance would perform all repairs at rates specified in the lease. Iowa City Maintenance is an alter ego of Apartments Downtown.

The lease also included an automatic charge for carpet cleaning at the conclusion of the lease term for a charge starting at $95 (efficiency) not to exceed $225 (6+ bedrooms).

There was a burglary at the house in October 2010. The tenants filed a police report with the Iowa City Police Department. The report stated that the burglary had left the exterior doorframe damaged and the door lock broken. The landlord had the door repaired, but then billed the tenants. The tenants refused to pay the bill.

In May 2011, the tenants found individuals to sublease the home during the summer months. The tenants contacted the landlord to ask permission to sublease, as required under their lease. The lease also provided, however, "Only apartments whose rental accounts are in good standing may sublease. All rent/fees on the account must be paid before Landlord consents to a sublease." Because of the door payment issue, the landlord refused to consent to any sublease.

The tenants paid regular rent on a monthly basis for the lease term, including for the months of June and July 2011 after failing to receive Apartments Downtown's approval for a sublease.

On August 25, 2011, the tenants received a "Security Deposit Statement" from the landlord with the following details:

Charges to the tenants' rental account:

Carpet Cleaning: $191.00

Cleaning Charges: $280.00

Past Due Rent & Fees on Acct: $1,308.45

$210.00 for lawn care

$598.46 for replacement of exterior door

$150.00 for failure to timely pay for replacement of the door

$349.99 for replacement of a refrigerator gasket and two broken screens

Lawn Clean Up: $60.00

Screens (Kitchen, BR 2): $150.00

Blinds (BR 2, 4): $99.00

Removal & Disposal of Tenants Items (Bed mattress in front lawn): $50.00

Total Deductions (-) $2,138.45

Total Due: $(503.45)

One of the tenants responded to the landlord and protested the bill for the door on the grounds that the lease provision for imposing such costs was "unconscionable and thus unenforceable by a court."

A month later, De Stefano and the other tenants received an email from the landlord with additional cleaning fees and late fees.

De Stefano responded with an email asking for the return of the deposit and characterizing the landlord's charges against the account as illegal and unreasonable. The landlord wrote back confirming the charges and tying them to provisions in the lease. The balance due of $503.45 was referred for collection.

On October 4, De Stefano brought a small claims action against Apartments Downtown. De Stefano requested $5,000 from Apartments Downtown as well as attorneys' fees and court costs.

The small claims court found that the carpet-cleaning provision in the lease was unenforceable, the lease provisions making tenants responsible for the damage to the door caused by a burglary were unconscionable and thus unenforceable, and that punitive damages were warranted. The court awarded De Stefano $4,520 in damages and $200 in statutory punitive damages for a total of $4,720.

On appeal, the district court reversed in part and affirmed in part. The court's holdings reduced the award to De Stefano to $851.54. This figure was calculated by taking the $1,635 deposit and reducing it by $385 (the deductions authorized by the small claims court and not challenged by De Stefano on appeal), and $598.46 (the charge for the door replacement), then adding on $200 in punitive damages. Both parties appealed.

ISSUES:

Could the landlord require payment for the repair of the door damaged by a break-in? Other questions emerged from this issue such as damages, rent due (if any), and the failure to grant permission for a sublease.

DECISION:

The issues were all under the Uniform Residential Landlord and Tenant Act (URLTA):

(1) whether a landlord may enter into a contract with a tenant that requires the tenant to assume the cost of making repairs necessary to maintain the premises in a fit and habitable condition. The court held no, the shift to the tenant was unconscionable and removed the legislatively-assigned duty of the landlord.

(2) whether a landlord can refuse to approve a sublease based upon the refusal of the tenant to assume the cost of maintaining the premises in a fit and habitable condition. It is reasonable for a landlord to require tenants to be in good standing before transferring rights under the lease.

(3) whether a landlord may automatically deduct a fee for carpet cleaning at the conclusion of the lease term. Cleaning fees are perfectly fine, but they cannot be automaticthey must be based on the condition of the property because the tenant might have cleaned the carpetit has to be based on what the tenant did to the property.

(4) whether statutory punitive damages are available for willful violation of the URLTA in this case. It was not willful or dishonest for the landlord to put the provision in the leasethey were wrong under the law, but the landlord was honest about itthere was full and fair, albeit inaccurate, disclosure up front.