Recent Court Rulings Increase the Complexity of Landlord Pitfalls

Many landlords fail to realize that certain actions subject them to massive judgment awards if done in violation of RSA 540-A, et seq. The author of this article obtained a judgment for an innocent tenant in the case of Ruma v. Kehaias, Nashua Circuit Court Docket No. 2011-LT-750, well in excess of $100,000. Similar judgments, while sometimes not so large, are not out of the ordinary and thus warrant careful attention. Normally, landlords own the tenanted property and otherwise have assets to lose, given that such assets are subject to collection.

Recent Supreme Court cases make the application of laws significantly more complex. New Hampshire statute RSA 540-A, et seq. provides the mechanism to protect both tenants and landlords from various actions, including willful destruction of the leasehold by the tenant or, extra-judicial lock out by the landlord. So long as the owner is a “landlord” and the tenant is a “tenant” as those terms are defined in RSA 540-A:1, the only remaining inquiry was whether the statutorily-prohibited action is “willful”. If the defendant’s actions are willful, say, by a landlord intentionally shutting off utilities or changing the locks, the proceeding is relatively straightforward. The Court calculates the number of days that the violation has continued, and awards $1,000 per day, plus attorney’s fees.

More recently, however, the New Hampshire Supreme Court issued its decisions in Evans v. J Four Realty, LLC and Case v. St. Mary’s Bank. These cases both carefully examine whether parties can be considered “landlords” under RSA 540-A:1. In Case v. St. Mary’s Bank, for example, the New Hampshire Supreme Court carefully examined whether a party that holds a mortgage on real estate and exercises some measure of control over same could be considered an “owner”, as that term is envisioned in RSA 540-A:1. If so, the mortgagee-bank (St. Mary’s) could be subject to the significant liability that arises out of the RSA 540-A statutory scheme. The Supreme Court carefully examined the facts surrounding the bank’s actions, as well as the timing and nature of the transfer of ownership, ultimately concluding that the Bank was not an owner as envisioned in the definition of landlord.

Similarly, the court in Evans v. J Four Realty, LLC engaged in a close examination of the landlord’s actions, the nature and acquisition of the property, and the tenant’s arrangement with the prior owner, in order to determine whether the defendant was a “landlord” under the statute. In so doing, the Supreme Court examined the nature of the tenancy with the prior owner, whether the obligations of that tenancy survived a foreclosure sale, and whether the current landlord took actions to give rise to a tenancy.

In both cases, the Supreme Court ruled that the owner was not a landlord for the purposes of that particular case. In doing so, however, the Supreme Court left the door open for property owners in similar circumstances to be subject to the prescriptions, prohibitions and significant liabilities in RSA 540-A, et seq. Had the owners in these cases behaved slightly differently, they likely would have been subject to the $1,000 per day awards set forth in RSA 540-A:4.

The goals of New Hampshire’s landlord/tenant law are to provide a straightforward and streamlined process to regain possession of real property, and to provide a clear baseline of behavior expected between landlords and tenants. Unfortunately, compliance with these statutes has become extremely complex over time. Oftentimes, close analysis of whether a tenancy is at-will, or at sufferance, or whether an owner is a mortgagee in possession or a bona fide purchaser for value must be undertaken to determine the proper course of action as well as the rights and responsibilities of the various parties. It is imperative that owners who seek out and heed the advice of their counsel in analyzing landlord tenant situations which arise. To the extent that you wish to consult with an attorney regarding these issues, please feel free to contact Chris Hilson at Donahue, Tucker & Ciandella, PLLC’s Exeter office at (603) 778-0686.