[WSBARP] Residential Lease: Liquidated Damages Question

[Andrew Hay]

I would consider structuring it as a demand note with the balance decreasing over time.

Andrew Hay
Hay & Swann PLLC
201 South 34th Street
Tacoma, WA  98418
Phone: (253) 272-2400
Fax:     (253) 267-8947
www.washingtonlaw.net<http://www.washingtonlaw.net/>


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From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Kary Krismer
Sent: Wednesday, May 06, 2020 9:12 AM
To: wsbarp at lists.wsbarppt.com
Subject: Re: [WSBARP] Residential Lease: Liquidated Damages Question


I'm not seeing that breaking the lease early would result in "damages" related to the new flooring in that presumably the house is worth more with the new flooring than without.  Conversely, I'm also not seeing that the schedule you propose deals with the actual harm possibly caused if the breach is late in the term.  Assuming we're not talking about carpet, the floors should still be in good condition in 10 years, but what if it's been so damaged it needs to be replaced?  Would this system prevent any recovery for the landlord if the lease went to term and the tenant destroyed the floors?

Also, I'm having some "this is so bizarre it must be wrong" alarms going off.  Seems like a really bad idea from both sides.  First, I'd be very skeptical of any tenant willing to enter into such a contract.  Second, assuming the property is encumbered, would the landlord face liability to the tenant in the event of foreclosure?  Third, if there were a breach would the landlord be able to actually recover for the breach.  Stated differently, are they actually getting anything non-illusory for tying up their property for 10 years?  Fourth, if this property is in Seattle are they aware that in 2026 new legislation will provide that landlords will be tarred and feathered each time they collect rent?

Kary L. Krismer

206 723-2148
On 5/6/2020 8:46 AM, Gabriel Dietz wrote:
Good Morning Fellow List Mates:

I have a potential client, a landlord who is considering a 10-year residential lease in Seattle. Before the lease begins, landlord and tenant want to install new floors throughout the premises. Landlord proposes to pay for the costs of the floor installation. Tenant, in theory, would agree to a liquidated damages clause where tenant reimburses landlord for some of the costs of the floor install in the event that the tenant breaks the lease early. The amount of damages would be a straight-line amortization over the life of the lease. For example, if tenant breaks the lease in month 1, tenant would be responsible for 50% of damages. If tenant breaks the lease in month 120, tenant would not be responsible at all. Other than the typical limitations on liquidated damages under Washington law, is there anything in the Washington Residential Landlord-Tenant Act or otherwise that would prohibit/limit this structure?

Thank you in advance,
Gabe


Gabriel A. Dietz Partner (206) 451-3859

gabe at hdpnw.com<mailto:gabe at hdpnw.com>

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