Opinion ID: 1965367
Heading Depth: 1
Heading Rank: 4

Heading: rent abatements payable to subsidized tenant

Text: This case therefore comes down to the question whether, as between tenant and landlord, the landlord shall be (1) ordered to pay the tenant 100% of the abatements which the court found appropriate (and are not questioned here) based on the reduced value of the tenancy (measured by reference to its total monthly fair market value)thereby crediting the tenant with the amounts the court found allocable, respectively, to the tenant and to HUD; or instead (2) ordered to pay the tenant only the abatements the court found allocable to the tenant, based solely on the monthly rentals he paidthereby allowing the landlord to keep the money representing the abatements the trial court had ordered paid to HUD. The tenant claims 100% of the rent abatements by proffering two alternative, though similar, theories summarized at the outset of this opinion: benefit-of-the-bargain and third party beneficiary. For reasons that follow, the first theory works for the tenant vis-a-vis the landlord. I conclude that, as between the parties, the tenant is entitled to 100% of the court-ordered abatements, including the portion the court ordered paid to HUD. In the first place, I perceive no sound basis for shielding a private landlord from liability the landlord otherwise would have, in the absence of a subsidized tenancy, when providing substandard housing; as between landlord and tenant, it is certainly fairer to compensate [the tenant] fully than it is to allow [the landlord], which failed to act diligently and responsibly as a landlord, to retain rent payments made on [the tenant's] behalf. Cruz Management Co., 633 N.E.2d at 388 (federally subsidized Section 8 tenant awarded 50% abatement on full rent received by landlord from tenant and HUD, not just on portion paid by tenant). Second, the tenant bargained with the landlord and executed a lease for an apartment expressly reflecting the value of the tenant's rentals and HUD's subsidy combined. See supra note 5. By signing the lease, the landlord recognized the tenant's eligibility for, and thus his right to, a $560/month-, not a $168/month-, quality apartment. It follows that, as between tenant and landlord, compensation for landlord-caused diminution in the bargained-for value should be payable in full to the tenant; otherwise, the landlord would be permitted to deliver less than promised without receiving a corresponding reduction in rent. See Cruz Management Co., 633 N.E.2d at 388. [20] The fact that HUD has contributed a major portion of the rent may entitle HUD, if it wants to seek it, to recover from the tenant the portion of the abatements attributable to HUD subsidies, based on an unjust enrichment argument. Under the benefit-of-the-bargain theory, therefore, which permits the tenant to recover from the landlord 100% of the abatements, HUD may have an equitable lien on a portion of the abatements. But there is no way that the landlord could be said to have retained such an equity vis-a-vis the tenant. See generally Javins v. First Nat'l Realty Corp., 138 U.S.App.D.C. 369, 428 F.2d 1071, cert. denied, 400 U.S. 925, 91 S.Ct. 186, 27 L.Ed.2d 185 (1970). Furthermore, as indicated earlier in Part III.B., HUD's equity is not clear cut. Although I do not reach the merits of the tenant's third party beneficiary argument, see supra notes 17-18, I cannot altogether ignore the fact that the tenant, as a matter of law, may be a third party beneficiary of the HAP contract between HUD and the landlord. This possibility, like the benefit-of-the-bargain analysis, reinforces an unassailable proposition: entitlement to abatements allocable to code violations in Section 8 subsidized housing is a matter of deciding between HUD and the tenant; the landlord is not included among potential claimants under any proffered legal theory premised on abatements attributable to conceded housing code violations. As already indicated, moreover, any action HUD may have against the landlord under the HAP contract faces difficulties that very well may preclude double recovery against the landlord. In any event, if that were to occurif HUD had the right to abate Section 8 subsidy payments and were to seek them from the landlordthe landlord presumably could implead the tenant as another defendant, contending either that HUD's claim was more properly directed at the tenant as an equitable lien reserved under the benefit-of-the bargain theory, or that the tenant was a third party beneficiary of the HAP contract to whom HUD had relinquished all right to the abatements. Finally, there is a caveat. The facts here limit this opinion to a situation where the abatement based on the fair market value, reflecting the HUD subsidy and tenant rent combined, will not exceed the rent payable by the tenant. For example, a 25% abatement, see supra note 4, based on the monthly $560 market rent would be $140. When applied to the tenant's $168 monthly rent, the abatement would leave $28 in tenant rent due. If, on the other hand, there were a 50% abatement, the same market rent would yield a $280 abatement which, when applied to a tenant's $168 monthly rent, would leave a negative $112. I do not express an opinion here on whether this would trigger the landlord's obligation under the HAP contract to subsidize a negative Net Family Contribution for rent, see supra note 7, or otherwise would extend the abatement liability that far.