Ch3. Landlord-Tenant Law and Fair Housing — US Real Estate License Exam

Special Laws in Residential Real Estate: Their Role and Importance

Exam weighting — national portion:

Landlord-Tenant Law:   ~15–20% of property law questions
Fair Housing:          ~10–15% of total exam (sometimes a standalone section)
Federal Regulations:   ~5–10%

Strategy: Fair housing is tested heavily and is zero-tolerance on licensing — memorize all protected classes and prohibited acts. Landlord-tenant lease terms and tenant protections are consistently tested.

Key Federal Statutes in Residential Real Estate

Fair Housing Act (FHA, 1968) and Amendments

Protected classes under federal law:

Original 1968 Act (7 classes):
1. Race
2. Color
3. Religion
4. National Origin
5. Sex (gender)
Plus:
6. Disability (added 1988)
7. Familial Status (added 1988) — families with children under 18,
                                   pregnant women, people seeking custody

Note: Sexual orientation and gender identity are protected under HUD administrative interpretation and the Supreme Court’s ruling in Bostock v. Clayton County (2020), though explicit statutory protection varies by state.

Prohibited acts under the FHA:

Steering: Directing buyers or renters toward or away from neighborhoods based on protected class
Blockbusting: Inducing owners to sell by claiming minority groups are moving in (panic selling)
Redlining: Refusing to lend or insure in geographic areas based on racial composition
Discriminatory advertising: Any ad that expresses a preference or limitation based on protected class
Refusal to sell, rent, or negotiate based on protected class
Discriminatory terms and conditions in any real estate transaction

Exemptions (narrow and rarely tested):

Owner-occupied building with 4 or fewer units (Mrs. Murphy exemption) — exempt from the FHA but must comply with state law
Single-family home sold by owner without a broker — one at a time exemption
Religious organizations housing their own members (non-commercial)
Private clubs housing their own members

Fair Housing Act does NOT apply to commercial property — the FHA covers residential housing only.

ADA (Americans with Disabilities Act)

For commercial property (places of public accommodation and commercial facilities):

Accessible design requirements (ramps, doorway widths, accessible parking)
Removal of barriers where readily achievable
Note: The FHA covers disability accommodation in residential housing; ADA covers commercial facilities

RESPA (Real Estate Settlement Procedures Act)

Governs the closing / settlement process for most residential mortgage loans:

Key RESPA provisions:
- Loan Estimate (LE): provided within 3 business days of mortgage application
- Closing Disclosure (CD): provided at least 3 business days before closing
- Prohibits kickbacks and unearned referral fees between settlement service providers
- Prohibits required use of affiliated service providers
- Escrow account limitations on reserve requirements

Affiliated Business Arrangement (AfBA) Disclosure: Required when a real estate company refers clients to an affiliated title, mortgage, or escrow company.

Truth in Lending Act (TILA) — Regulation Z

Requires disclosure of the Annual Percentage Rate (APR) so borrowers can compare loan costs:

APR includes interest rate plus financed fees
Right of rescission for refinances of primary residence (3 business days)
Trigger terms in advertising require full disclosure

Residential Lease Law

Types of Leases

Gross Lease (Flat Lease):
- Tenant pays fixed rent; landlord pays all operating expenses
- Common in residential rentals

Net Lease (single/double/triple net):
- Tenant pays base rent + some or all operating expenses
- Triple Net (NNN): Tenant pays rent + taxes + insurance + maintenance
- Common in commercial real estate

Percentage Lease:
- Base rent + percentage of tenant's gross sales
- Common in retail (shopping centers)

Ground Lease:
- Tenant leases the land only; tenant builds improvements
- Long-term (50–99 years); tenant owns improvements during lease term

Essential Lease Elements

1. Competent parties (landlord and tenant)
2. Legal purpose
3. Offer and acceptance
4. Consideration (rent)
5. Description of the leased premises
6. Term of the lease
7. Signatures of the parties

Tenant Rights in Residential Leases

Implied Warranty of Habitability (recognized in virtually all US states):

Landlord must maintain rental units in livable condition
Covers: working heat, plumbing, electrical, structurally sound building, no serious pest infestation
Tenant remedies if violated: repair-and-deduct, rent withholding (in states that allow it), lease termination, damages

Quiet Enjoyment:

Tenant has the right to use the rental without interference by the landlord
Landlord may not enter without notice except in emergencies (typically 24–48 hours notice required)

Security Deposits:

State law governs maximum deposit amounts and return deadlines (typically 14–30 days after move-out)
Itemized statement required for any deductions
Improper withholding penalties: double or triple damages in some states

Lease Renewals and Rent Control

Lease expiration — tenant options:

Surrender: Tenant vacates and returns possession
Renewal: New lease signed
Holdover (Tenancy at Sufferance): Tenant stays without permission
Periodic Tenancy: Month-to-month continuation (if landlord accepts rent)

Rent control / rent stabilization: A patchwork of state and local laws in high-cost markets (New York, California, Oregon, New Jersey):

Annual increase caps (e.g., CPI + 5% in California under AB 1482 for covered units)
“Just cause” eviction requirements
Owner move-in rules
Significant variation by city and building age

Federal Tenant Protections (Key)

Section 8 / Housing Choice Voucher Program:

HUD-funded rental assistance for low-income tenants
Many states and localities prohibit “source of income” discrimination — refusing to rent to voucher holders
Landlords may not be required federally to accept vouchers, but local law may require it

Lead Paint Disclosure Rule (42 U.S.C. § 4852d):

Required for residential sales and rentals of pre-1978 housing
Seller/landlord must disclose known lead paint hazards and provide EPA pamphlet
Buyer has 10-day inspection opportunity (may be waived)

Landlord and Tenant Comparison Summary

Issue	Residential Tenant	Commercial Tenant
Lease type	Gross (most common)	Net/NNN (most common)
Habitability warranty	Yes — implied by law	No — “as-is” more common
Fair housing protections	Yes — FHA applies	No — FHA is residential only
Rent control	Possible (state/local)	Generally no
Security deposit rules	Strictly regulated by state	Negotiated by contract

Critical Comparison: Residential Tenancy Terms

Issue	Typical Residential Standard
Notice to terminate month-to-month	30 days (some states 60 days for landlord)
Minimum lease period protection	State law varies; 12-month leases common but not universally required
Eviction process	Unlawful detainer (UD) action; varies by state (7–90 days notice)
Landlord entry notice	24–48 hours typical; emergency exception
Rent increase notice	30–90 days typical; governed by state law

Practice Exam Questions

Q1. A landlord refuses to rent to a family because they have three children under age 10. Which protected class has been violated?

Familial status — families with children under 18 are protected under the 1988 FHA amendments. Refusing to rent because of children is a direct FHA violation.

Q2. What is the difference between steering and blockbusting?

Steering directs buyers/renters toward or away from neighborhoods based on their protected class. Blockbusting induces existing property owners to sell by suggesting (falsely or otherwise) that members of a protected class are moving into the neighborhood.

Q3. Under RESPA, how many business days before closing must a lender provide the Closing Disclosure?

Three business days before the scheduled closing. This gives the borrower time to review final loan terms before signing.

Q4. Under the implied warranty of habitability, what can a tenant do if the landlord fails to fix broken heat in a cold-weather state?

Depending on state law, the tenant may repair and deduct (up to certain limits), withhold rent (depositing it in escrow), or terminate the lease for breach. The tenant should provide written notice before taking any self-help remedy.

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