Real Property Issues

N.C. Court of Appeals Speaks On "Violations" of Residential Rental Agreement Act

The North Carolina Court of Appeals reversed a trial court decision, rendered in the wake of a bench trial (i.e., tried without a jury), wherein the trial court held that a residential landlord violated the North Carolina Residential Rental Agreement Act (the “RRAA”) — N.C.G.S. Chapter 42, sections 38 to 44 — for failing to provide a rental residence with an operating smoke alarm or an operating carbon monoxide alarm.

The case is Stikeleather Realty and Investment Co. v. Broadway, No. COA14-1136 (May 19, 2015).

The RRAA does require that residential landlords “[p]rovide operable smoke alarms[]” and “[p]rovide a minimum of one operable carbon monoxide alarm per rental unit per level”.  N.C.G.S. 42-42(a)(5), (7).  No one appeared to dispute that the residence at issue did not have an “operable smoke alarm” or an “operable carbon monoxide alarm”.  However, no one appears to dispute that tenant did not suffer any injury as a result of the landlord’s failings in this regard, either.

Tenant Broadway sought, and was awarded by the trial court, rental abatement for landlord’s violation of these provisions of the RRAA.  The Court of Appeals reversed the trial court as to the violation of the RRAA and as to the award of rental abatement.  The Court of Appeals addressed each point separately.

First, the Court concludes that a violation of the letter of the RRAA is not, ipso facto without more, a violation of the RRAA.  The Court:

First, as to the alleged breach of the implied warranty of habitability, it is true the RRAA imposed upon Plaintiff-Landlord a duty to verify the property had an operable smoke alarm and carbon monoxide alarm once it became the new property owner and manager on 26 June 2013. However, the trial court never made any specific findings of the ultimate facts essential to conclude that Plaintiff-Landlord violated the RRAA. For instance, the trial court failed to make any findings as to the current applicable building and housing codes and which, if any, of the codes were violated. Nor did the trial court make any findings as to how verifying the operability of an alarm would put or keep the premises in a fit and habitable condition, or how doing so would keep the safety of the premises. Not only did the trial court fail to make findings of whether Plaintiff-Landlord knew or had reason to know the alarm provided by Mr. Kluth was not new or in good or safe working order, but also it made no findings as to how failing to verify the operability of an alarm rendered the premises unfit for human habitation, or how this unfitness devalued the fair rental value of the property such that Defendant-Tenant should be entitled to rent abatement.

Second, the Court concludes that even if there is a violation of the RRAA, rental abatement is not a proper remedy unless the tenant suffers actual damages:

Second, as to the award of rent abatement, the trial court did not articulate its rationale with any specificity in declaring how Plaintiff-Landlord’s alleged failure to verify the property had an operable smoke alarm and carbon monoxide alarm— without more—entitles Defendant-Tenant to a restitutionary remedy such as rent abatement. The trial court made no finding that the premises was uninhabitable during the period in which Defendant-Tenant paid rent. There was no finding that the premises was unfit or of the value of the premises in its “uninhabitable” state. Without a finding that the property was unfit for human habitation, or of the fair rental value of the property in its unwarranted condition as required by our case law, an award of rent abatement cannot be sustained.

The Court of Appeals rests its conclusions on that which is “lacking” from the “specific findings of the ultimate facts”, of course.  And that makes sense, as the appellate standard of review as to judgment after a bench trial is “whether there is competent evidence to support the trial court’s findings of fact and whether the findings support the conclusions of law and ensuing judgment”. Judicial findings of fact and conclusions, as well as appellate standards, are as important as the actual facts, the actual law in litigating an issue.

But more interesting to us is how the Court views the RRAA.  Has it been weakened by this decision?  Will the General Assembly respond with nondiscretionary penalty provisions?  We’ll see.  Whatever the case, it seems landlords have a little breathing room.

Would you want one of these in your home?

Mike Thelen practices in Womble Carlyle’s Real Estate Practice Group out of the Firm’s Raleigh office. He regularly represents a wide variety of clients, from local governments to businesses, in land use and real estate development litigations and transactions in state and federal venues throughout North Carolina.

Follow the North Carolina Land Use Litigator on Twitter at @nclanduselaw here and on Instagram at NCLandUseLaw here.

Categories: Real Property Issues

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