Legal question re: apartment lease application and deposit

[drewc]

So a friend found an apartment she wanted, met on Friday with the landlord, wrote a check for $750 and picked up the rental application. On Monday she electronically signed the application, but today had second thoughts and doesn't want the place. I don't know what transpired between applicant and landlord this morning, if anything, but she had her bank put a stop pay on the deposit check.

Later this afternoon the landlord told the applicant that her deposit was now valid consideration for the not-yet-signed lease and advised the applicant he was going to pursue recovery in court. Applicant never signed a lease and doesn't want the apartment.

What troubles me is this language in the application, which she did sign:

This application must be signed by all adults who will occupy the apartment before it can be considered by Landlord. Acceptance of this application and any monies deposited herewith, is not binding until approved by Landlord. If approved, all monies deposited with this application will be held by Landlord.

By signing, the applicant recognizes that the Landlord or his agent may investigate the information supplied by the applicant and full disclosure of pertinent facts may be made to the Landlord. The Landlord may also require a credit report from a credit reporting agency and by signing the applicant(s) authorizes this.

Does "acceptance" whatever that means, constitute an offer for which applicant's $750 is now valid consideration? Can the landlord just decide he'll rent the place to her, though before actually communicating this to her she has her own change of heart and backs out first? What if she told the landlord she just changed her mind, and without formally offering it to her he just said "well I'm still keeping your check"?

This is New York State by the way.

At what point is this application an enforceable contract?

[Gleena]

Originally Posted by drewc

So a friend found an apartment she wanted, met on Friday with the landlord, wrote a check for $750 and picked up the rental application. On Monday she electronically signed the application, but today had second thoughts and doesn't want the place. I don't know what transpired between applicant and landlord this morning, if anything, but she had her bank put a stop pay on the deposit check.

Later this afternoon the landlord told the applicant that her deposit was now valid consideration for the not-yet-signed lease and advised the applicant he was going to pursue recovery in court. Applicant never signed a lease and doesn't want the apartment.

What troubles me is this language in the application, which she did sign:


Does "acceptance" whatever that means, constitute an offer for which applicant's $750 is now valid consideration? Can the landlord just decide he'll rent the place to her, though before actually communicating this to her she has her own change of heart and backs out first? What if she told the landlord she just changed her mind, and without formally offering it to her he just said "well I'm still keeping your check"?

This is New York State by the way.

At what point is this application an enforceable contract?

She may have signed the contract. In my jurisdiction, there is law surrounding the 'electronic signature' - agreeing to something electronically via e-mail, clicking I Accept on a website and so forth. The way I understand the law where I live, that could have (I'm not sure what electronic signature means here) been seen as accepting the offer and giving consideration for the offer, which is a valid contract. If it's a valid signature, it will satisfy whatever Statute of Frauds type law NY has in terms of contracts regarding property needing to be in writing.

Communication of acceptance of the landlady's offer to rent property was made via the signature. Even if that is not valid to be a signed contract, if the landlady acted to her detriment on the basis of that signature - for example, refusing other tenants, she may be entitled to damages based on equitable estoppel. (Supported here by Walton Stores v Mahr).

I'm not a lawyer, contract was last semester, I'm not even in your country and I don't know NY law on electronic signatures. But that's what I think and that's what I'd check in to.

[Kimmy_Gibbler]

Originally Posted by Gleena

Communication of acceptance of the landlady's offer to rent property was made via the signature. Even if that is not valid to be a signed contract, if the landlady acted to her detriment on the basis of that signature - for example, refusing other tenants, she may be entitled to damages based on equitable estoppel. (Supported here by Walton Stores v Mahr).

Counselor, where do you see an offer to rent an apartment in the above recitation of facts? A rental application, as I understand it, is a document authorizing a property owner to investigate the credit/employment/residential history of a potential renter. It is, at best, a preliminary invitation to treat.

The most significant fact is no lease was ever agreed to, either orally, or in writing, or electronically, or in semaphore, or via smoke signal, or by any other means of expressing mutual assent to a minimal set of terms and conditions that a court could enforce.

Oh, and let's not go nuts with promissory estoppel, which basically only exists in law school lecture halls.

[Gleena]

Originally Posted by Kimmy_Gibbler

Counselor, where do you see an offer to rent an apartment in the above recitation of facts? A rental application, as I understand it, is a document authorizing a property owner to investigate the credit/employment/residential history of a potential renter. It is, at best, a preliminary invitation to treat.

The most significant fact is no lease was ever agreed to, either orally, or in writing, or electronically, or in semaphore, or via smoke signal, or by any other means of expressing mutual assent to a minimal set of terms and conditions that a court could enforce.

Oh, and let's not go nuts with promissory estoppel, which basically only exists in law school lecture halls.

Equitable estoppel, judging by the sheer number of cases I had to read, is a real, true thing over here and gets used a great deal.

You are correct about the lease. I argue alternative then. If promissory (or equitable) estoppel is not an option, I will discount it.

However, you have the offer to sign a lease, which was accepted for consideration, the deposit. The signing of the lease is the object of the contract.

Do you have no concept of a collateral contract in the US? Esso Petroleum Ltd v Commissioners of Customs & Excise?

[Kimmy_Gibbler]

Originally Posted by Gleena

Equitable estoppel, judging by the sheer number of cases I had to read, is a real, true thing over here and gets used a great deal.

You are correct about the lease. I argue alternative then. If promissory (or equitable) estoppel is not an option, I will discount it.

However, you have the offer to sign a lease, which was accepted for consideration, the deposit. The signing of the lease is the object of the contract.

Do you have no concept of a collateral contract in the US? Esso Petroleum Ltd v Commissioners of Customs & Excise?

Promissory estoppel does exist in American law. But if you're prosecuting breach, you don't want PE to be your case-in-chief. American judges (and I surmise most Australian judges too) still want to see a meeting of the minds. I'd hazard PE loses much more often than it wins, it's just that successful motions for summary judgment don't make into the casebooks.

I don't think there was an offer to lease. I think the landlord said "Fill out this app. I'll check your employer and past landlord references and pull your credit report. If all that comes out OK and your check clears, we'll have you come in to sign the lease." (This, obviously, is speculative on my part. But I have a strong hunch that's how it went down.)

No offer has been made in that instance.

[drewc]

Originally Posted by Kimmy_Gibbler

I don't think there was an offer to lease. I think the landlord said "Fill out this app. I'll check your employer and past landlord references and pull your credit report. If all that comes out OK and your check clears, we'll have you come in to sign the lease." (This, obviously, is speculative on my part. But I have a strong hunch that's how it went down.)

No offer has been made in that instance.

From what I gather this is pretty much how it was. For all I know the landlord was "ready" to offer the property, but until lessee actually signs the lease, is the lessee bound by the original application terms re: once the application is "accepted" the deposit becomes the landlord's to do as he sees fit regardless of whether the applicant signs the lease or not?

In other words... is the Application a separate, enforceable contract (separate from any actual lease) due to the clause about landlord keeping the deposit once he blesses the applicant's qualifications, an Application which was duly signed by the applicant? Does the landlord actually have to make the offer ("hey Applicant, you passed the checks, come on down and sign the lease") *to* the applicant, for it to become enforceable? What if the landlord actually did call the applicant, began his spiel about coming down to sign the lease, when applicant said no thanks? Is she still bound by that original signed application with that language contained within, since by asking the applicant to enter into the lease agreement he's "accepted" the application?

If the landlord *hasn't* called/emailed/faxed/pack muled the offer to lease, but is planning on doing so because he's blessed the application but has to go to lunch first before contacting the applicant, is the original Application now a valid, enforceable contract since it was signed by the applicant regardless of whether the applicant heard back from the landlord or not?

Applicant has no problem paying any credit check costs, etc, regardless of whether she wanted the place or not. For $750 the credit check must come back with a gold ingot certifying its validity...

[Gleena]

Originally Posted by Kimmy_Gibbler

Promissory estoppel does exist in American law. But if you're prosecuting breach, you don't want PE to be your case-in-chief. American judges (and I surmise most Australian judges too) still want to see a meeting of the minds. I'd hazard PE loses much more often than it wins, it's just that successful motions for summary judgment don't make into the casebooks.

I don't think there was an offer to lease. I think the landlord said "Fill out this app. I'll check your employer and past landlord references and pull your credit report. If all that comes out OK and your check clears, we'll have you come in to sign the lease." (This, obviously, is speculative on my part. But I have a strong hunch that's how it went down.)

No offer has been made in that instance.

You're right of course, if it's not noteworthy it doesn't get on the case list. And I lack the practical experience.

You're probably right about the offer as well (although I have my reservations about that and am not convinced, they are probably more theoretical and less practical - whether the landlord enters into a lease or not appears to be a condition subsequent which can lead to termination - doesn't matter anyway).

In any case thinking about it further, even if I'm right, damages would be nominal. Property was off the market for just a couple of days. It wouldn't be $750 of damages for the breach if it went to court. Even if that's in the application, it seems to me that'd be a fine and not a true measure of damages. So even if the landlord goes to court and I'm right and wins, a nominal award (and probably costs? here a nominal award can mean costs are paid by the winner) isn't worth it. You wouldn't get specific performance, that's just silly.

[Eva Luna]

That's bonkers. What if the applicant, on reading the lease, discovered some clause she wasn't willing to agree to, and refused to sign it? Woudn't she get her deposit back? (I've had landlords try to pull stuff like that on me - like presenting a lease that said "no pets" when the apartment was advertised as "cats allowed" and I had dutifully listed a cat on the application. What did they think, I was going to get rid of the cat I'd had for 14 years? There are other apartments out there. The "no pets" clause was duly removed from the lease, and I signed it.)

[AK84]

I don't think there is a contract; though to be sure I will have to read the full application.

[astro]

IANAL but I have never seen a landlord be able to claim a residential deposit in these scenarios without the lease being signed. If the landlord does not have the deposit, and no signed lease, the chances of them prevailing would seem to be minimal.

[I Love Me, Vol. I]

It seems like the $750 was a rental deposit. Why would anyone pay a deposit until they had signed the lease (not the application)? If it wasn't a rental deposit then what else could it be if it was only bound to the application and not to a signed lease and occupancy of the apartment? Does the landlord consider it a non-refundable $750 application fee? That's nuts!

I'm guessing you may have some of the facts wrong and she actually signed the lease, or otherwise.... hello Mr. (or Ms.) Attorney General!

[Cheesesteak]

Doesn't the concept of a deposit include the idea that the money isn't simply the landlord's, but is being held by the landlord, and is to be returned to the renter upon severing the business relationship? The attached language doesn't say anything about the deposit becoming the property of the landlord, merely that he holds it.

If he has any real damages, fee from his bank for the stopped check, costs of a credit check, etc. I think your friend has an honest responsibility to cover those damages. She should offer to pay those, as itemized by the landlord, in prelude to telling him to pound sand over anything else.

[MsRobyn]

Originally Posted by I Love Me, Vol. I

It seems like the $750 was a rental deposit. Why would anyone pay a deposit until they had signed the lease (not the application)? If it wasn't a rental deposit then what else could it be if it was only bound to the application and not to a signed lease and occupancy of the apartment? Does the landlord consider it a non-refundable $750 application fee? That's nuts!

I'm guessing you may have some of the facts wrong and she actually signed the lease, or otherwise.... hello Mr. (or Ms.) Attorney General!

IANAL, but my experience as a tenant is that you write two checks when you apply for an apartment. The first is cashed and pays for the actual processing of the application. The second is not; it merely holds the apartment off the market while the application process is going on and is deposited when the applicant signs the lease and takes the keys. (If the application is denied for some reason, this check is generally returned uncashed.) YMMV, though.

That said, I think the landlord is full of shit. Aside from bank fees for the stopped check, he didn't suffer any damages that would require the applicant to make him whole. She never signed a lease or took possession of the apartment. He could have easily found another tenant. In any event, the deposit doesn't even belong to him, strictly speaking.

But let me guess. This guy owns the building and is trying to run it himself, without a professional manager. If this is the case, he's probably working from a book he read or some advice he got from a fellow landlord and doesn't really know the law in his jurisdiction.

[Really Not All That Bright]

You can't have valid consideration for a contract that doesn't exist. If she had signed a lease, things might be different, but I see the rental application the same way Kimmy does.