§17.7 - Rent and Security

• Jurisdiction: Washington

§17.7RENT AND SECURITY

This section discusses the tenant's duty to pay, and the landlord's right to receive, rent under a lease; types of rental payments a tenant may incur; and provisions for liens, security deposits, and other forms of security for the premises.

(1) Duty to pay rent

The duty of a tenant to pay rent and the landlord's remedies for failure to pay are discussed below.

(a) Existence of the duty

A leasehold may exist without payment of rent if the parties expressly agree. 1 AM. LAW PROP. §3.64 (A. James Casner ed., 1952). Like other grants of interests in land, the grant of a leasehold need not be supported by consideration. However, in many American jurisdictions and in England, by statute or by decisional law, the duty to pay reasonable rent arises simply out of the consensual occupation of another's land, without the need of finding an express or implied agreement for rent. Id. Washington's position is not wholly clear. Early decisions suggest that permissive possession may be enough by itself to raise a requirement to pay rent. See Davis v. Jones, 15 Wn.2d 572, 131 P.2d 430 (1942). But see Woolen v. Sloan, 94 Wash. 551, 162 P. 985 (1917) (no rent due when no "implied agreement" for rent from owner's mother). Nonetheless, an implied agreement to pay rent may be found on very light evidence. A tenant's payment of monthly rent in fluctuating amounts will create a duty to pay on a quantum meruit basis. Provident Mut. Life Ins. Co. v. Thrower, 155 Wash. 613, 285 P. 654 (1930). A "general letting" upon payment of periodic rent in a fixed amount creates a tenancy by the period of the rent, with rent due in the fixed amount. See §17.3(3)(b)(ii). A landlord's demand for rent from one who previously occupied at will, rent free, creates a duty to pay rent from the date of demand. Davis, 15 Wn.2d 572; Decker v. Verloop, 73 Wash. 10, 131 P. 190 (1913).

By force of RCW 59.04.050, a trespasser is liable to pay rent. See §17.3(5)(b). See also Sarvis v. Land Res., Inc., 62 Wn.App. 888, 815 P.2d 840 (1991), review denied, 118 Wn.2d 1020 (1992). Note that a trespasser's duty to pay rent is better settled than is the duty of one who occupies permissively without an agreement for rent.

Leases generally contain language requiring the tenant to pay rent. No express covenant is necessary, as long as the intent is clear. Phrases such as "rent is to be paid," "rent is reserved," or "at an annual rent" are adequate to create the duty. Nat'l Bank of Commerce v. Dunn, 194 Wash. 472, 78 P.2d 535 (1938) ("at an annual rent"); Johnson v. Goddard, 179 Wash. 493, 38 P.2d 208 (1934) ("is to be paid"). Such phrases create only an "implied" promise of rent, however, so that if the original tenant assigns the lease it has no further liability for rent. Nat'l Bank of Commerce, 194 Wash. 472; Johnson, 179 Wash. 493.

In the absence of any agreement to the contrary, rent is not due until the end of the term or of the designated segments of the term. Bernard v. Triangle Music Co., 1 Wn.2d 41, 95 P.2d 43 (1939). Even when the lease stipulates that rent is payable in advance, there is some authority for saying that the purchaser at a tax foreclosure sale, who is entitled to receive rents, may collect them only at the end of rental periods during the redemption period. Byers v. Rothschild, 11 Wash. 296, 39 P. 688 (1895) (apparent holding). In Byers, the court's reasoning was that redemption might occur during any rental period, in which event it would turn out that the purchaser was entitled to rent for only part of the period. The same result could be argued for in connection with any foreclosure proceeding in which redemption is permitted and when the purchaser is entitled to rents until redemption occurs. RCW 6.23.110; Sec. Sav. & Loan Soc'y v. Dudley, 175 Wash. 50, 26 P.2d 384 (1933).

(b) Remedies for breach

The landlord has a broad spectrum of remedies, both common law and statutory, for a tenant's default in paying rent. First is the common-law action for breach of covenant, in which damages ordinarily are measured by the amount of unpaid rent. If the tenant defaults without ever taking possession under the lease and if the landlord knows the tenant has not taken possession, damages may be limited to the agreed rent less the fair rental value of the premises. See Oldfield v. Angeles Brewing & Malting Co., 62 Wash. 260, 113 P. 630 (1911). Oldfield was limited by a later decision holding that the landlord may recover the full amount of unpaid rent if it does not know that the tenant has failed to take possession. Greening v. Herres, 165 Wash. 470, 5 P.2d 992 (1931). When the lease contains a clause allowing the landlord a sum stipulated as liquidated damages for the tenant' s default, recovery for unpaid rent will be restricted to that sum. Mon Wai v. Parks, 43 Wn.2d 562, 262 P.2d 196 (1953). The statute of limitations on an action for rent is six years under RCW 4.16.040(3), even if the lease is oral. Marshall v. Nash, 165 Wash. 554, 5 P.2d 978 (1931).

Practice Tip: A common form of credit enhancement to lessen the risk of an uncured tenant default is a guaranty of the tenant's full performance under the lease. The value of an individual's guaranty may be lost when the guarantor dies if the landlord does not timely file a creditor's claim in the estate proceedings In re Estate of Earls,164 Wn.App. 447, 262 P.3d 832 (2011).

Washington statutes afford additional remedies to a landlord. The unlawful detainer action provided in Chapter 59.12 RCW is discussed in §17.12(2)(c). Under RCW 59.04.040, a landlord may terminate a leasehold upon a default in rent by giving a 10-day notice to pay rent or quit, and if the tenant does neither, the landlord may remove the tenant by an ejectment action. See Verline v. Hyssop, 2 Wn.2d 141, 97 P.2d 653 (1940) (court cites wrong statute). When the agreed rent does not exceed $40 per month, Chapter 59.08 RCW provides a special and summary form of unlawful detainer action for default in paying rent. For residential tenancies covered by the Residential Landlord‑ Tenant Act of 1973, Chapter 59.18 RCW, the unlawful detainer remedy and procedures are considerably different. See RCW 59.18.180, .365, .420. See also Volume 2, Chapter 19 (Residential Lease Practice) of this deskbook.

The lease instrument often gives the landlord remedies for the tenant's default in payment of rent, which may include a power to terminate the leasehold estate. If the tenant defaults and the landlord elects to terminate, the tenant's holding over becomes wrongful. In Washington, landlords have two statutory forms of ejectment action, although neither has much utility in modern practice. Under the general ejectment and quiet title section, RCW 7.28.010, a landlord may regain possession if it first makes demand for possession according to the old common-law practice, which required the demand to be made before sundown on the day rent was due, no other time being sufficient. Petsch v. Willman, 29 Wn.2d 136, 185 P.2d 992 (1947). Or the landlord may rely upon RCW 7.28.250, which gives a special form of ejectment to landlords who have a right to reenter after defaults in rent. No notice need be given other than the bringing of the suit, but the tenant may defeat reentry by paying the rental arrearages with interest and costs anytime before judgment. Id.

(c) Estoppel to deny landlord's title

In line with other jurisdictions, Washington has recognized that in an action for rent a tenant is estopped to deny the landlord's title. Port of Willapa Harbor v. Nelson Crab & Oyster Co., 15 Wn.2d 515, 131 P.2d 155 (1942) (possibly dictum); Tryon v. Davis, 8 Wash. 106, 35 P. 598 (1894); 1 AMERICAN LAW OF PROPERTY §3.65 (A. James Casner ed., 1952). In practical application this means that once a landlord-tenant relationship is established, it is irrelevant for these purposes who had title. The doctrine has some limitations and qualifications, however. It speaks of title as it existed only at the commencement of the leasehold; thus, the tenant may defend by showing some third person acquired the reversion at a point after commencement. See Wallace v. Thomas, 193 Wash. 582, 76 P.2d 1032 (1938). Nor is the tenant estopped to acquire title adverse to its landlord at an execution or foreclosure sale. Holzer v. Rhodes, 24 Wn.2d 184, 163 P.2d 811 (1945) (tax sale). The tenant may attorn to a purchaser of the reversion and apparently may do so in Washington simply by paying rent to the purchaser. Wallace, 193 Wash. 582; 1 AMERICAN LAW OF PROPERTY §3.65 (A. James Casner ed., 1952).

(2) Variable rent provisions

Rent provisions in a lease can be for fixed amounts or can be variable, based on, for example, a percentage of sales or a fixed amount with a periodic adjustment.

(a) Percentage rent

In retail leases, it is common for all or part of the rent to be expressed in terms of a percentage of...