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Fellow Weekly - Issue 159
WHAT'S THE LAW ™
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Encouraging intelligent and entertaining debate at your Shabbat table.
Fellow Weekly raises issues of business law and ethics through lively emails by featuring your real-life scenarios answered by our leading authorities and professionals. |
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CASE 276: Contingent Commitment?
Alexander Klein owned numerous high-end apartment buildings on Ft. Washington Avenue in Upper Manhattan. A two-bedroom apartment averaged at $1800 a month.
Klein though, signed a discounted three-year lease with Moshe Morrison; his grandson-in-law, for a nominal charge of $200 a month.
Two months later; Klein began upgrading the kitchens in Moshe's building. He planned on raising rents for apartments with new kitchens by $100 a month.
The granite countertops and stainless steel appliances greatly enhanced Moshe and Daniella's steal-of -a-deal.
The lease unfortunately, outlived their marriage. When Klein's granddaughter returned to her parent's home after ten months, Alex made three demands on Moshe: 1) to meet market value and pay $1600 more a month till the remainder of the three-year lease. 2) to pay $1600 retroactively from the first month 3) to pay an additional $100 a month for the months he benefitted from a new kitchen.
Moshe argued that the contract fixed the lease at $200 a month.
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CASE 275: Heads You Win Tails I Lose?
Settling in a cozy two-bedroom apartment in the close-knit Anglo-Saxon Jerusalem community in Sanhedria Murchevet, the Werner's signed a three year contract with their landlord Natan Katz for $850 a month. Three months later, the Werner's receive a call from Katz that their rental fee is changing.
Katz claimed that the agreement was signed when the shekel dollar rate was 4.2 shekels to the dollar. Now that the dollar dropped drastically to 3.2, he has no choice but demand 3570 NIS a month (850x4.2) ($1115.62) . When he committed for $850, there was no way he could have anticipated such a drastic drop.
Werner argued that if the dollar had surged to 4.7, Katz would not have called him to give him a discount...
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The Answer
We present you here with a concise ruling. For a more intricate elucidation, please see the detailed explanation below.
Katz may not raise the rent during the defined term of the contract |
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Detailed Explanation
Heads You Win, Tails I Lose? invokes the following four laws.
Background
The tenant acquires the usage rights under the terms of the contract for the duration of the interval written in the contract.
Rate Increase During the Defined Term Contract
If the rate of local rental prices increased during the duration of the defined-term contract, the landlord may not raise the prices accordingly. Similarly, if the local rental prices fell during the duration of the defined-term contract, the tenant may not compel the landlord to readjust the prices, accordingly [Choshen Mishpat 312: 9 Rema, 312: 10].
Rate Increase During the Due Consideration Term[i]
While the landlord must give the tenant due consideration and warn him/her at least thirty days before wishing to terminate an undefined-term contract, (or thirty days before the season when alternative apartments are difficult to find [see below and Issue 157]); the landlord may raise the rent in accordance with rising rental rates during the "consideration time" [Choshen Mishpat 312: 9].
Henceforth: Not Retroactive
While the landlord may raise the rent in accordance with the rising rate during the "consideration time," he/she may not do so retroactively from the commencement of the compelled "consideration time." Instead, tenancy is assumed to remain in accordance with the prior terms until specified otherwise[Choshen Mishpat 312: 9].
[i]Due Consideration for the Tenant
In order to avail the tenant reasonable time to attempt to find alternative housing, when a tenant lives in an apartment without a formal lease, (i.e. there is no defined termination date) the landlord must generally notify the tenant with ample time before wishing to evict him/her from the home.
As such, the Talmud explains that during the summer months when it is customary for people to relocate, whereby creating a market of vacant apartments, the landlord need not inform the tenant more than a month before wishing to terminate the relationship. A month's time during a season where apartments are available is deemed availing sufficient time.
However, the landlord may not evict the tenant in the midst of a season when alternative housing is presumably difficult to find. As such, the Talmud generally prohibits evicting a tenant in the middle of the rainy season when people do not move, and vacant apartments are difficult to obtain - even if the landlord gives the tenant thirty days warning. By warning the tenant thirty days before wishing to evict him/her during the rainy season, the landlord still failed to provide the tenant with a fair opportunity to seek alternative places to live.
Instead, a landlord who wishes to terminate the undefined lease term during the rainy season must avail the tenant the opportunity to look for new alternatives for one month before the onset of the rainy season [Choshen Mishpat 312: 5].
Application
Katz signed a three-year contract with the Werner's. Even if the apartment prices increase dramatically during the interim, Katz is bound to uphold the terms of the written agreement. |
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Note:
Although we aim to present the correct ruling, varying details are always important and decisively influence every individual case. Our readers are thus encouraged to present their personal cases to a competent authority and not solely rely on the information provided.
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