Illegal lease terms have grown for decades, study of Philadelphia landlords finds

  • A study by UPenn and NYU researchers found Philadelphia landlords are adding “bad” terms into leases.
  • One big reason is the rise of shared leases, available cheaply on the Internet for landlords to use.
  • One of the coauthors says landlords will use these illegal terms as soon as moratoriums expire.
  • See more stories on Insider’s business page.

A new study took a deep dive into about 170,000 Philadelphia leases from 2005 to 2019 — and found that the number of “bad” terms in them has increased “sharply” over the past 20 years.

Authors David A. Hoffman and Anton Strezhnev, of University of Pennsylvania and New York University respectively, found that “unlawful terms are surprisingly likely to be associated with more expensive leaseholds in richer, whiter parts of the city. But Black tenants are “more susceptible to eviction based on based on crime or drug use on the premises, an effect concentrated in whiter neighborhoods.” 

They find that while landlords don’t tailor their leases for tenants, they do sometimes specialize based on race. The result is that Black “tenants living in white neighborhoods are more likely (than white tenants) to be asked to sign leases that permit landlords to evict them if anyone uses drugs on the premises or commits a crime.”

“These leases make it easier for landlords to evict tenants on any number of grounds, from depriving them of statutorily created notice periods, to increasing the fees that tenants owe in eviction court,” Hoffman, one of the study’s authors, said in an email to Insider.

Hoffman, a scholar of contract law, said he thinks these terms will be exploited as soon as pandemic-era moratoriums on eviction expire. “When the moratoriums expire, landlords will use the legal tools they have shaped, as quickly as they can.”

What’s in these leases, and where they came from

So why are leases now increasingly containing a “pro-landlord tilt?” It has to do with cheap forms on the Internet, the coauthors said. Specifically, more landlords are using shared leases that originated with nonprofit landlord associations and are now available cheaply — and widely — online.

Shared leases have seen a marked increase over time. The study finds that, from 2000 to 2019, their prevalence rose from 34% to over 43%. 

The study homes in on three particular provisions that have been popping up. These “unenforceable” clauses include not having landlords liable for negligence; “as-is” clauses, meaning tenants must accept rentals “as-is”; and “holdover tenant penalty clauses,” where tenants who don’t leave by the end of the lease can be charged more.

In the case of the holdover tenant clause, the study notes a “sharp increase in prevalence” post-2010, “driven almost by changes within shared leases.” Specifically, it popped up in the 2013 edition of the Pennsylvania Association of Realtors Residential Lease.

And, broadly, those shared forms that are growing in popularity “have worse provisions than those that are declining” — meaning more unenforceable terms will become even more prevalent. The study says that advocates should target their reforms towards shared leases’ purveyors.

The research comes amidst eviction moratoriums as many fall behind on their rents

Millions of Americans have also seen their circumstances change throughout the coronavirus pandemic, and are behind on rent. In December, almost 6 million Americans were threatened by eviction and foreclosure. As Insider’s Taylor Borden reported, that’s roughly equivalent to the entire population of Singapore.

When he took office, President Joe Biden extended eviction moratoriums through the end of March. Relief measures in the newly passed and signed American Rescue Plan will also help prevent millions of evictions, according to the Center on Budget and Policy Priorities.

On Thursday, Rep. Ilhan Omar of Minnesota introduced the Rent and Mortgage Cancellation Act. As Insider’s Ayelet Sheffey reported, the act would cancel rent and mortgage payments throughout the pandemic. Omar said that, on average, 12 million Americans owe $6,000 in back-rent.

But when evictions do begin again, the leases the study focused on might come into play. So even if rent gets canceled somehow, tenants may still be vulnerable.

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