Indiana Law Review


Housing Code Violations and Tenant Remedies

Walter W. Krieger*

I. Introduction

In 1985, the Indiana Court of Appeals used the illegal contract

doctrine to declare a residential lease voidable where housing code vi-

olations existed.' This is a continuation of the trend of affording more

protection to residential tenants. Along with the illegality doctrine, a

tenant may be able to assert a breach of the warranty of habitability
against the landlord. This Article examines and compares the illegal

contract doctrine and the implied warranty of habitability as tenant

remedies and notes their uses and limitations.

II. Illegal Contract Doctrine

A. History Behind the Application

Under the principle of freedom of contract, courts recognize that

it is in the public interest to allow individuals broad powers to structure

their own affairs by freely entering into legally enforceable agreements.^
Occasionally, however, the courts will invoke the doctrine of illegality

and refuse to enforce a contract because its terms violate positive law,

offend public morality, or conflict with public policy.^ The doctrine of

illegality applies to all contractual agreements, including real estate leases."*

Legislation is now the major source of public policy^ and the courts

Associate Professor of Law, Indiana University School of Law—Indianapolis; A.B.,
Bellarmine College, 1959; J.D., University of Louisville, 1962; L.L.M., George Washington
University, 1969. The author wishes to extend his appreciation to Lori Torres for her assistance
in the preparation of this discussion.

'Noble v. Alis, 474 N.E.2d 109 (Ind. App. 1985). See infra notes 27-42 and accom-
panying text.

'A. Farnsworth, Contracts § 5.1 (1982).
^6A A. CoRBiN, Contracts 1373-78 (1962); 14 S. Williston, Contracts 1628-30

(3d ed. 1972). The Restatement (Second) of Contracts (1981) objects to the use of the
term "illegal" to describe the courts' refusal to enforce a contract on the grounds of public
policy. Restatement (Second) of Contracts introductory note to chapter 8 (1981). The
term "illegality" suggests that the contract itself is a crime when in fact there are many
situations where no sanctions are provided for entering into an agreement which is against
public policy. A. Farnsworth, Contracts § 5.1 (1982).

M9 Am. Jur. 2d Landlord and Tenant § 41 (1970). For discussion of the application
of the illegality doctrine to leases in general, see Hicks, The Contractual Nature of Real Prop-
erty Leases, 24 Baylor L. Rev. 443, 470-81 (1972).

'Restatement (Second) of Contracts § 179 comment b (1981). The term legislation
is used in its broadest sense to include state and federal statutes, local ordinances, and
administrative regulations.

299



300 INDIANA LAW REVIEW [Vol. 19:299

frequently remark that ''a contract made in violation of a statute is
void."^ This broad statement is not always true, however, for unless

the statute expressly states that contracts made in violation of its pro-
visions are void,^ the court will not automatically declare the contract

unenforceable, but instead will attempt to balance the interest in the

enforcement of the contract against the potential furtherance of the

legislative policy by nonenforcement of the agreement.^ Sometimes the
policy involved is so important or the conduct so serious that unen-

forceability is obvious. At other times the public interest is so trivial,
the harm to the parties resulting from nonenforcement so great, and
the conduct of the parties so free of serious moral turpitude that

enforcement of the contract should clearly be allowed. In situations

where the factors for and against enforcement are more evenly balanced,
the court must examine these factors closely in reaching a decision.^

Housing codes'^ existed as early as 1867,'' but most housing codes

are of very recent origin. In 1954, there were only fifty-six housing codes

in force in the United States,'^ but by 1968, there were no fewer than

4,904 local housing codes and at least six state-wide housing codes. '^

'See, e.g., Sandage v. Studabaker Bros. Mfg., 142 Ind. 148, 156, 41 N.E. 380, 382

(1895); Noble v. Alls, 474 N.E.2d 109, 111 (Ind. Ct. App. 1985); Maddox v. Yocum, 109
Ind. App. 416, 422, 31 N.E.2d 652, 654 (1941).

^Occasionally a statute will provide that contracts made in violation of its provisions

are null and void. In such cases the court is bound to carry out the legislative mandate.

Restatement (Second) of Contracts § 178 comment a (1981). Statutes dealing with gambling
and usury often state that contracts made in violation of the statutes are void. A. Farns-
woRTH, Contracts § 5.1 (1982).

'Restatement (Second) of Contracts § 178 (1981). For an example of the courts'

use of this balancing test, see Noble v. Alis, 474 N.E.2d 109 (Ind. Ct. App. 1985).

'For a discussion of the factors which should be considered by the courts when ap-

proaching the question of the enforceability of a contract which violates public policy, see

Restatement (Second) of Contracts §§ 178-99 (1981).

'"The term "housing codes" refers to statutes or ordinances estabhshing minimum
standards for rental units intended for human habitation. These codes regulate structure
elements, facilities, services, and number of occupants. They are to be distinguished from

building codes which only regulate structural elements. Building codes generally operate only

prospectively on structures constructed or substantially altered after enactment of the code.

Housing codes, on the other hand, are applied retroactively to all existing dwelling units

from the date of their enactment. Because housing codes apply only to dwelling units, they

do not apply to commercial units; building codes apply equally to residential and com-

merical units. See R. Cunningham, W. Stoebuck & D. Whitman, Law of Property
§ 6.37 (1984); Abbott, Housing Policy, Housing Codes and Tenant Remedies: An Integration,
56 B.U.L. Rev. 1, 40-41 (1976).

"Most scholars agree that the New York Tenement House Law of 1867, which ap-
plied only to multi-unit dwellings, was the first true housing code. For a brief discussion

of the history of housing codes, see Abbott, supra note 10, at 40-45; Cunningham, The

New Implied and Statutory Warranties of Habitability in Residential Leases: From Contract
to Status, 16 Urb. L. Ann. 3, 10-15 (1979).

'^Abbott, supra note 10, at 44.

'^R. Cunningham, W. Stoebuck and D. Whitman, supra note 10, at § 6.37 n.l5,



1986] HOUSING CODE VIOLATIONS 301

This sudden increase in the number of housing codes can be explained

by the enactment of the Housing Act of 1954."* The Act required each

municipaUty to have a federally approved "workable program" for

community improvement as a prerequisite for the receipt of federal urban

renewal funds and federal housing subsidies.'^ The Housing and Home
Finance Agency (HHFA), which administered the urban renewal program,

made the enactment of housing codes a requirement for the approval

of a "workable program. "^^ There can be Httle doubt that the desire

to obtain federal funds was as much a factor in the sudden enactment

of housing codes as was the concern for the pHght of the slum tenant.

While housing codes were enacted to comply with the "workable
program" requirement for federal funding, housing code enforcement
was not a high priority, and as a result, the administrative agencies
charged with enforcement were understaffed and underfunded.'^ Many
scholarly articles were highly critical of the ineffective administrative

enforcement of housing codes. '^ In addition, the traditional view of the
courts was that housing codes were criminal in nature and did not create
any civil remedy for the tenant or in any way affect the landlord-tenant
relationship.'^

During the late 1960's and early 1970's, the courts began to question

the traditional doctrine of caveat lessee. ^^ No doubt the enactment of

citing National Comm'n on Urban Problems, Building The American City, H.R. Doc.
No. 34, 91st Cong., 1st Sess. 276-77 (1968).

'M2 U.S.C. §§ 1701-1750, 42 U.S.C. §§ 1407-1592 (1982).

"Housing Act of 1954, ch. 649, 303, 42 U.S.C. § 1451(c) (1982) (omitted, 42 U.S.C.

§ 5316 (1982)).

'^Abbott, supra note 10, at 43. The housing code requirement was incorporated into
the statute itself in 1964. Housing Act of 1964, ch. 301(a), 42 U.S.C. § 1451(c) (1982).
The "working program" requirement was eliminated in 1969. Housing and Urban Develop-
ment Act of 1969, ch. 217(a), 42 U.S.C. § 1451(c) (1982).

'Tevy, Lewis and Martin, Cases and Materials on Social Welfare and the
Individual 1023-24 (1971).

"For a collection of the literature critical of housing code enforcement, see Acker-

man, Regulating Slum Housing Markets on Behalf of the Poor: Of Housing Codes, Housing
Subsidies and Income Redistribution Policy, 80 Yale L.J. 1093, 1094 n.2 (1971).

'"See, e.g., Fechtman v. Stover, 139 Ind. App. 166, 199 N.E.2d 354 (1964).

^°The 1960's and early 1970's were a time of civil rights activism. Some have suggested
that this activism found its way into the judicial system and may have contributed to the
radical changes in the traditional law of landlord-tenant. See Krieger and Shurn, Landlord-

Tenant Law: Indiana at the Crossroads, 10 Ind. L. Rev. 591, 592-93 (1977); Rabin, The

Revolution in Traditional Landlord-Tenant Law: Causes and Consequences, 69 Cornell

L. Rev. 517, 546-49 (1984).

During the 1960's legal scholars wrote articles highly critical of the antiquated doc-

trine of caveat lessee. See, e.g., Quinn & Phillips, The Law of Landlord-Tenant: A Critical
Evaluation of the Past with Guidelines for the Future, 38 Fordham L. Rev. 225 (1969);
Grimes, Caveat Lessee, 2 Val. L. Rev. 189 (1968); Lesar, Landlord and Tenant Reform,
35 N.Y.U. L. Rev. 1279 (1960); Schoshinski, Remedies of the Indigent Tenant: Proposals

for Change, 54 Geo. L.J. 519 (1966); Skillern, Implied Warranties in Leases: The Need

for Change, 44 Den. L.J. 387 (1967).



302 INDIANA LAW REVIEW [Vol. 19:299

housing codes creating a duty to repair and maintain rental property

seemed inconsistent with the old no repair rule of caveat lessee.^^

B. The Emergence of the Illegal Contract

Doctrine as a Tenant Remedy

In 1968, the District of Columbia Court of Appeals, in Brown v.
Southall Realty Co.,^^ allowed the illegality doctrine as a defense to a

landlord's action for possession for nonpayment of rent. The court found

that substantial housing code violations existed at the inception of the

lease and concluded that because a lease made in violation of the housing
code was void, no rent was due and owing and the landlord was not

entitled to possession based on nonpayment of rent.^^
While the District of Columbia housing regulations did not specif-

ically state that where violations of the housing code existed, the lease

was illegal, the housing regulations did provide that *'no person shall

rent or offer to rent any habitation . . . unless such habitation and its

furnishings are in a clean, safe and sanitary condition, in repair and

free from rodents or vermin."^"* In deciding whether to enforce the lease,

the court examined the public policy issues involved and concluded that

the intent of the legislature was to insure for the prospective tenant that

rental units were and would continue to be habitable. To enforce a lease
where violations of the housing code were known to exist at the time
of the agreement would be to "flout" the purposes for which the

regulations were enacted.^- Finding that the housing regulations did

"indeed 'imply a prohibition' so as to render the prohibited act void,"

the court reversed the lower court's decision that the landlord was entitled

to possession based on the tenant's nonpayment of rent.^^ Because the

tenant had in fact already vacated the premises, the court did not address

the status of a tenant remaining in possession under an illegal contract;

because the landlord was only claiming a right to rent due under the lease,

the court did not discuss the right of the landlord to recover in quantum

meruit for the benefit conferred upon the tenant from his possession.

^'In Javins v. First Nat'l Realty, 428 F.2d 1071 (D.C. Cir.), cert, denied, 400 U.S.
925 (1970), the court remarked, "In our judgment, the old no repair rule cannot coexist
with the obligations imposed upon the landlord by a typical modern housing code, and
must be abandoned in favor of an implied warranty of habitability. In the District of
Columbia, the standards of this warranty are set out in the Housing Regulation." Id. at
1076-77.

^^237 A.2d 834 (D.C. App. 1968).
^^Id. at 836-37. The tenant had in fact already vacated the premises because of

their uninhabitable condition, but the tenant was forced to defend the action for possession
based on the nonpayment of rent, or the default judgment would have established con-
clusively that rent was due in any subsequent suit by the landlord for rent. Id. at 835.

'"District of Columbia Housing Regulations § 2304 (cited at 237 A.2d at 836).
"237 A. 2d at 837.

''Id.



1986] HOUSING CODE VIOLATIONS 303

During this Survey period, the First District Indiana Court of Appeals

in Noble v. Alis^^ recognized the iilegahty defense in a suit by the

landlord to recover rent. In Alis the tenants, Andrew Noble and Steward

Odle, had leased an apartment in Bloomington, Indiana, from Linda

AHs for a term of one year beginning August 16, 1983. Prior to returning

to Bloomington, the tenants decided not to take possession of the premises

and attempted to find a sublessee. While showing the apartment to a

prospective sublessee on August 29th, the tenants discovered a number

of defects in the apartment and contacted the City of Bloomington

Housing Code Enforcement Officer, Ken Young, and requested an in-

formal inspection of the premises. ^^ Young had become aware of the

residential use of the property on August 24th, and had sent a letter

to A.B. Burnham, the legal title holder, requesting the property be

registered as a residential rental unit as required by the Bloomington

Housing Code.-^ When Young inspected the premises on September 1,
1983, he informed the tenants that the landlord did not have an occupancy

permit, a violation of the Bloomington Housing Code. Further, Young

advised that even if the property was registered, it would not pass an

inspection. ^° Believing that they could not legally sublet the apartment,

the tenants advised the landlord that they would no longer assume any

responsibility for finding a sublessee.^'

The apartment was subsequently rented to new tenants on September

15, 1983.^^ The landlord eventually brought suit against Noble and Odle

for rent and damages. The trial court awarded the landlord the sum of
$1,266.00 for rent and damages. The tenants appealed, asserting that

the lease was void or voidable because the premises were neither registered

as a residential rental unit nor had an occupancy permit as required by

the housing code. The court of appeals agreed, reversing the damage
award for rent and ordering the landlord to return the $300.00 security
deposit plus interest." In recognizing the illegal contract defense to the

action for rent, the court recited the general rule that "broadly speaking,

the law is that a contract made in violation of a statute is void."^^

^'474 N.E.2d 109 (Ind. Ct. App. 1985).

''Id. at 110.

"From the facts it appears that Alis was the lessee of Burnham and that Alis had

subleased a portion of the premises to Odle and Noble. Because the housing code required

the owner to register the rental units, notice requesting that the property be registered as

a rental unit was sent to Burnham.
"474 N.E.2d at 110.

''Id.

'''Id. Though the property was rented on September 15, 1982, the property was not

registered until October 4th, and was not inspected until October 17th, when eighty-three

violations of the housing code were cited. An occupancy permit had still not been obtained
at the time of the trial on January 26, 1984. Id. at 110-11.

''Id. at 113.

'*Id. at 111.



304 INDIANA LA W REVIEW [Vol. 19:299

Noting that the housing code did not expressly state that a contract in

violation of its provisions was void and unenforceable, the court engaged

in the balancing test discussed previously to determine whether to enforce

the contract. ^^ The court observed that where the provisions of an

ordinance, such as the housing code's requirement of registration of

rental units and issuance of an occupancy permit, are enacted under the

city's police power for the protection of the public health, safety, and

welfare, as opposed to those designed to raise revenues, courts are far

more likely to deny the enforcement of an agreement in violation of

such provisions. ^^ In examining the registration and permit requirements,

the court noted that until the unit is registered, the enforcement office

is unaware of its existence and is unable to check for code compliance.

Once it is registered, a temporary permit is issued, thus triggering an

inspection by the Housing Department.^^ Thus, these administrative pro-

visions clearly advanced the policies of public health, safety, and welfare.

In Alls, the court never found that the premises were actually

'* uninhabitable" as a result of the housing code violations. In fact, the

tenants had raised the issue of a breach of an impHed warranty of

habitability at the trial, but the trial court did not find that the warranty

was breached, and the tenants did not dispute this finding on appeal.'^

Several decisions from the District of Columbia Court of Appeals have

indicated that in order for the illegality doctrine to apply, there must be

serious violations of the housing code affecting health and safety.^' One
decision expressly held that failure to comply with registration and

occupancy permit requirements would not render the lease void because

these provisions did not affect the actual habitability of the premises. "^^

Similarly, decisions from other jurisdictions considering housing code

violations as possible breaches of the implied warranty of habitability

have found that one or two minor code violations not affecting hab-

itability might be considered "de minimus" and not a breach of the

warranty."^' The Alis decision, however, concluded that the registration

^Ud. at 113. See supra notes 6-9 and accompanying text for a discussion of the fac-

tors considered in the balancing test.

"/t/. at 111. The Indiana court treated the registration and permit requirements as

a "licensing" provision. When dealing with licensing requirements, courts distinguish be-
tween those designed only to obtain revenue and those designed to protect the health or

safety of the public. See A. Farnsworth, Contracts § 5.6 (1982). This would explain

why the Indiana court reached a decision contrary to Curry v. Dunbar House, 362 A.2d

686 (D.C. App. 1976) which did not view the licensing and permit requirements as directly

affecting health and safety.
^^474 N.E.2d at 112.

''Id. at 113.

'"E.g., Reese v. Diamond Housing Corp., 259 A.2d 112 (D.C. App. 1969); Diamond

Housing Corp. v. Robinson, 257 A.2d 492 (D.C. App. 1969).

*°Curry v. Dunbar House, 362 A.2d 686 (D.C. App. 1976).
''E.g., Javins v. First Nat'l Realty, 428 F.2d 1071 (D.C. Cir.), cert denied, 400 U.S.



1986] HOUSING CODE VIOLATIONS 305

and occupancy permit requirements were an essential part of the en-

forcement process, indicating that their violation should not be considered

*'de minimus." The decision does not, however, suggest that every code
violation, no matter how trivial, will trigger an illegal contract defense.

The second noteworthy aspect of the Alis decision is the narrow

limitation the court placed on the use of the illegality doctrine. In

allowing the tenants to plead the illegality defense, the Alis court indicated

that an important factor was that the tenants had never taken possession

of the apartment and thus never benefited in any way from the lease

agreement. '^^ If the tenants had moved into the apartment and then

discovered that it was not registered and that no occupancy permit had

been issued, their remedy would rest on their ability to prove a breach

of an implied warranty of habitability as in Breezewood Management

Co. V. Maltbie."^^ This requirement that the tenant never benefit in any

way from the lease agreement suggests the court would use an estoppel

theory to prevent the tenant from raising the illegahty defense once the

tenant had taken possession. One might seriously question why a wrong-
doer should be entitled to his unlawful bargain merely because the party

for whom the statute was designed to protect partly performed the
contract before he became aware of its illegality. Commentators have

questioned the application of the estoppel theory in an illegal contract

situation. ^"^ In raising the estoppel theory, the court seemed genuinely con-

cerned that the tenant, after living in the apartment, might at-

tempt to escape future rental payments as well as demand a refund
on past payments."*^ This concern may be unjustified, however, if the
court allows the landlord to recover the reasonable rental value of the

apartment for the time the tenant is in actual possession. "^^ While the

tenant could recover past rental payments over and above the fair rental

value of the premises, he would not escape all past rent obligations. As

to future rental payments, the tenant would be forced to vacate the

premises to avoid future liability for the fair rental value of the premises

while in possession. If the courts are concerned that the tenant might

use some "technical" code violation to void the lease, this could be
avoided by use of a "de minimus" rule. A concern that a tenant might

925 (1970); Boston Housing Authority v. Hemingway, 363 Mass. 184, 293 N.E.2d 831

(1973); King v. Moorehead, 495 S.W.2d 65 (Mo. Ct. App. 1973); Folsy v. Wyman, 83
Wash. 2d 22, 515 P. 2d 160 (1973).

'HIA N.E.2d at 112.
"' Id. (citing Breezewood Management Co. v. Maltbie, 411 N.E.2d 670 (Ind. Ct. App.

1980)).

**\1 Am. Jur. 2d Contracts § 173 (1964); A. Farnsworth, Contracts § 5.1 (1982).
^'474 N.E.2d at 112. Perhaps the court did not believe the landlord could recover

the fair rental value for the time the tenant was in actual possession. Perhaps also the

court was concerned the tenant could use the illegality theory to terminate an unfavorable

long-term lease.

"^For discussion of this issue, see infra notes 117-22 and accompanying text.



306 INDIANA LA W REVIEW [Vol. 19:299

use code violations as a pretext to void an unwanted lease after living

in the apartment for a long period of time with knowledge of the code

violations could be handled on a case-by-case basis, rather than by a
blanket prohibition against use of the illegality doctrine where the tenant

has in any way benefited from the lease. "^

III. Implied Warranty of Habitability as
AN Alternative Remedy

In AUs, the court's holding was based on the illegal contract doctrine,
but the decision also indicates that a tenant may have to look to an
implied warranty of habitability as a remedy for housing code violations
where he has benefited from the illegal lease. ""^ The opinion left open
many questions concerning the rights of the tenant when he is asserting
a breach of the warranty of habitability. Can the tenant recover damages
for breach of the warranty for the entire period of time the housing

code violations existed?"*^ Has the tenant waived his right to treat the
breach of warranty as a constructive eviction or a termination of the

lease?^^ Does the landlord's breach "suspend" future obligations to pay

"Although the District of Columiba allows the tenant to raise the illegal contract

doctrine even after the tenant has taken possession of the premises, in Watson v. Kotler,

264 A.2d 141 (D.C. App. 1970), the court rejected the tenant's illegality defense to the

landlord's suit for possession based on nonpayment of the rent where the tenant had

remained in possession under the lease for two years before she claimed the lease was

"void" after falling behind in her rental payments.

'*"In the latter case [where the tenants have received a benefit under the lease], the

tenants' remedy rests on their ability to prove a breach of an implied warranty of

habitabiUty. . . ." 474 N.E.2d at 112.

^^It would appear that the tenant could sue for damages for the entire period of

time the premises have been uninhabitable. Nevertheless«> when the tenant does not inform

the landlord of code violation and provide him with an opportunity to repair, it may be
unfair to award damages for the entire period of uninhabitability. See Berzito v. Gambino,

63 N.J. 460, 308 A.2d 17 (1973) ("As a prerequisite to maintaining such a suit [for

recovery of a portion of rent paid while the premises were in an uninhabitable condition],

the tenant must give the landlord positive and reasonable notice of the alleged defect,

must request its correction and must allow the landlord a reasonable period of time to

effect the repair or replacement."). Id.

In Thompson v. Shoemaker, 7 N.C. App. 687, 173 S.E.2d 627 (1970), the court

refused to allow a tenant to recover rent voluntarily paid to the landlord where the tenant

had remained in possession for fifty-three weeks with full knowledge of the housing code

violations.

'''If the tenant does not vacate the premises within a reasonable period of time after

the breach of the warranty by the landlord, the court may find the tenant has "waived"
this remedy. R. Cunningham, W. Stoebuck & D. Whitman, supra note 10, at §§ 6.33,
6.41. There may not, however, be any breach of the warranty until the landlord has been
notified of the condition and given a reasonable time to repair. See, e.g., Glasoe v.

Trinkle, 479 N.E.2d 915 (111. 1985); Berzito v. Gambino 63 N.J. 460, 308 A.2d 17 (1973);
Pugh V. Holmes, 486 Pa. 272, 405 A.2d 897 (1979).



1986] HOUSING CODE VIOLATIONS 307

the agreed rent and can the tenant withhold the rent until the landlord

complies with the housing code standards?^' The following discussion

answers some of these questions.

A. The Warranty in Indiana

There are only three Indiana Court of Appeals opinions even ac-

knowledging that an impUed warranty of habitability in residential leases

exists in Indiana,^^ and the Indiana Supreme Court has not yet ruled

directly on the issue." Although many states have recently enacted
comprehensive landlord-tenant codes imposing duties on the landlord to

maintain rental dwellings in a habitable condition and providing remedies

to the tenant for breach of this duty, no such modern landlord-tenant

code has been enacted by the Indiana legislature.
^"^

Breezewood Management Co. v. Maltbie^^ is the first official Indiana

Court of Appeals decision to recognize the implied warranty of habit-

-^See infra notes 86-88 and accompanying text.

"Zimmerman v. Moore, 441 N.E.2d 690 (Ind. Ct. App. 1982) (held no implied
warranty of habitability in the rental of a single family dwelling by a landlord not in

the business of leasing rental property); Welborn v. Society for Propagation of Faith,

411 N.E.2d 1267 (Ind. Ct. App. 1980) (assumed without deciding that an implied warranty

of habitability existed, but concluded tenants had failed to prove damages for its breach);

Breezewood Management Company v. Maltbie, 411 N.E.2d 670 (Ind. Ct. App. 1980)
(recognized breach of an implied warranty of habitability where serious housing code

violations existed in leased apartment and awarded damages).

"The Indiana Supreme Court has recognized an implied warranty of habitability in

the sale of a new home by a builder-vendor, Theis v. Heuer, 264 Ind. 1, 280 N.E.2d
300 (1972), and has extended the builder-vendor's warranty to a subsequent purchaser.

Barnes v. MacBrown and Co., 264 Ind. 227, 342 N.E.2d 619 (1976). In Theis v. Heuer,
the Indiana Supreme Court in a footnote acknowledged the development of a similar

implied warranty of habitability in residential leases: "There is a parallel development in

the law which is relevant but not necessary for our decision here. It is in the area of

landlord-tenant. Modern case law is now finding an implied warranty of habitability by
a landlord to his tenant." 264 Ind. at 11 n.l, 280 N.E.2d at 305 n.l.

^'The Indiana Legislature on four separate occasions from 1973-1977 rejected attempts

to enact modified revisions of the Uniform Residential Landlord Tenant Act ("URLTA").

See Krieger & Shurn, supra note 20, at 641-43. No efforts appear to have been made
since that time to enact a comprehensive landlord-tenant code. In an interesting turn of

events, the city of Bloomington enacted the Uniform Residential Landlord Tenant Act as

an ordinance. The Indiana Court of Appeals held the ordinance ultra vires because it

attempted to regulate specific terms of the lease agreement totally unrelated to housing

and safety codes. City of Bloomington v. Chuckney, 165 Ind. App. 177, 331 N.E.2d 780

(1975).

"411 N.E.2d 670 (Ind. Ct. App. 1980). The first "reported" court of appeals decision

to recognize an implied warranty of habitability in residential leases was Old Town Dev.
Co. V. Langford, 349 N.E.2d 744 (Ind. App. 1976), vacated, Ihl Ind. 176, 369 N.E.2d

404 (1977). This decision was never included in the official reports because the Indiana

Supreme Court granted transfer and later, when the parties reached a settlement, dismissed

the case without opinion. Id. The effect of the supreme court's action was to render the



308 INDIANA LAW REVIEW [Vol. 19:299

ability in Indiana and is the only Indiana decision actually to award

damages for its breach. In Breezewood, two students at Indiana University

leased an apartment in Bloomington, Indiana, for a term of one year.

Upon moving into the apartment they discovered over fifty housing code
violations, eleven of which were ''Hfe-safety" violations—hazardous to
the health of the occupant. ^^ One student vacated the premises and the
other remained in possession and paid a portion of the rent. At the

end of the term the landlord brought suit for the unpaid rent and the

tenants counterclaimed for breach of the implied warranty of habitability.

The lower court denied the landlord's claim, awarded damages to the

tenants on their counterclaim, and ordered a return of the tenants'

security deposit. ^^ In affirming the judgment, the court of appeals, noting

the development of an implied warranty of habitability in the sale of

a new house by a builder-vendor, concluded that "the seeds of the

modern trend abolishing caveat lessee and treating a lease as a contractual

relationship have been sown in Indiana. "^^ The court also quoted ex-

tensively and with apparent approval from the landmark case of Javins

V. First National Realty Corporation^^ and another leading decision,

Boston Housing Authority v. Hemingway, ^^ in support of an implied

warranty of habitability in residential leases.

The Breezewood decision raises several interesting questions regarding

the implied warranty of habitability. First, the decision seems to define

"habitability" in terms of the local housing code standards and raises

a serious question as to whether the warranty can exist without a local

housing code. In discussing the warranty, the court concluded that housing

code provisions in effect at the time of the lease are incorporated into

the lease by law.^' However, where there are no local housing codes in

effect, the court indicated that the parties might agree to rent the property

"as is" under the doctrine of freedom of contract. ^^ While Boston

Housing Authority does not seem to limit the implied warranty to

situations in which there is a local housing code or to the standards set

forth in the housing code," the ratio decidendi in Breezewood was much

opinion of the court of appeals null and void. Ind. R. App. P. 11(b)(3). Thus, Breezewood

is actually the first appellate court opinion to declare an implied warranty of habitability

in residential leases in Indiana.

Mil N.E.2d at 671.
"M at 672.
''Id. at 674.

'M28 F.2d 1071 (D.C. Cir.), cert, denied, 400 U.S. 925 (1970).
^'363 Mass. 184, 293 N.E.2d 831 (1973).
^'411 N.E.2d at 675.

''^Id. at 675 n.2. While the language was contained only in a footnote, it was

elevated into the body of the opinion by Judge Neal in Zimmerman v. Moore, 441 N.E.2d
690, 695 (Ind. Ct. App. 1982).

"363 Mass. at 184, 293 N.E.2d at 831.



1986] HOUSING CODE VIOLATIONS 309

more narrowly stated: *Tor the reasons that a housing code was in

effect and the premises violated many of its provisions, we hold that

Breezewood breached an implied warranty of habitability."^'*

B. Damages Under Breezewood 's Implied Warranty

of Habitability

The second issue regarding implied warranty raised in Breezewood

is the measure of damages for breach of the warranty. While arguably

not part of the decision itself, Judge Neal, author of the opinion, cited

with apparent approval the standard contract measure of damages applied

in Boston Housing Authority — the difference between the fair rental
value of the premises as warranted and the fair rental value of the

premises in their defective condition (hereinafter referred to as the first

formula)." Likewise, the Alis opinion, also authored by Judge Neal,

clearly indicates that the first formula is the proper measure of damages

for breach of the warranty. ^^ However, in Weiborn v. Society for Prop-

agation of Faith,^^ decided by the Indiana Court of Appeals Second

District only one day after the Breezewood decision. Judge Shields noted

that there is a split of authority as to the proper measure of damages

for breach of the warranty.^ She observed that, while some courts use

the standard contract measure of damages (first formula), others use a

different measure of damages — the difference between the rent agreed
upon in the lease and the fair rental value of the premises in their

present uninhabitable condition (hereinafter referred to as the second

formula).^^ Because no damages were proven in the Welborn decision,

the court did not indicate which of the two formulae it would use in

the future. ^°

While the measure of damages under the two formulae may appear
to be only slightly different, this is not necessarily true. There may be
no substantial difference where the agreed upon rent actually reflects

the fair rental value of the premises as warranted. But if the parties

actually contract to lease substandard housing with existing code vio-

lations, the agreed upon rent has no relation to the fair rental value
of the premises as warranted. If the first formula is used by the court,

the slum tenant will reap a windfall because the parties never contracted

to rent a habitable dwelling, and there has been no actual loss of bargain

^411 N.E.2cl at 675.

''Id.

^414 N.E.2d at 112.

"Mil N.E.2d 1267 (Ind. Ct. App. 1980).

''Id. at 1270 n.5.

'"Id. at 1271.



310 INDIANA LAW REVIEW [Vol. 19:299

to the tenant/' Under the second formula, however, there would be
little or no damages since the agreed upon rent would be the same as
the fair rental value of the premises in their present condition. ^^ This

might be more consistent with the expectations of the parties, but it
would provide little incentive for the landlord to comply with the pro-

visions of a housing code. Both formulae, however, cause difficulty and

expense in proving actual damages, i.e., the fair rental value of the

premises as warranted and the fair rental value of the premises in their

present condition. This has led a number of courts to adopt yet another
formula — the percentage diminution measure of damages. The rent is
abated by a percentage amount equal to the percentage reduction in use
and enjoyment which the trier of fact determines to have been caused

by the defects (hereinafter referred to as the third formula). ^^ The third

formula seems to be the most equitable way to determine damages. It
guarantees some rent to the landlord since it uses the agreed rent as
the starting point, while at the same time providing some relief to the
tenant by abating the rent based on the decreased use and enjoyment

caused by the defective conditions.

The difficulties that can be encountered in assessing damages are

indicated by the facts of the Welborn case. A family evicted by their
landlord was allowed to rent half of a furnished double, including utilities,

for fifty-five dollars a month from the Society for the Propagation of
the Faith. During a four-month period, the utilities on the double

amounted to $499.72.^'* While the decision does not indicate which

formula the court used, the court found that ''the record is devoid of

any evidence that the fair rental value of the premises was less than

the actual amount for which the premises were rented. "^^ If evidence

had been introduced as to the fair rental value of half a furnished

double complying with code standards, damages based on the first

formula might have proven ruinous to the landlord, especially one

apparently not motivated by profit. On the other hand, if the court
had used the second formula, it is unHkely any damages could have

been proven. While the facts in the Welborn case might suggest the use

'Several commentators have suggested that the use of the first formula might result

in damages greater than the agreed upon rent, i.e., the landlord would have to pay the

tenant to live in the uninhabitable dwelling. Abbot, supra note 10, at 21; Cunningham,

supra note 11, at 106; Krieger & Shurn, supra note 20, at 616-17; Rabin, The Revolution
in Residential Landlord-Tenant Law: Causes and Consequences, 69 Cornell L. Rev. 517,
524-25 (1984).

'^Abbot, supra note 10, at 21; Cunningham, supra note 11, at 106.

''E.g., Green v. Superior Court, 10 Cal. 3d 616, 111 Cal. Rptr. 704, 517 P. 2d 1168

(1974); McKenna v. Begin, 5 Mass. App. 304, 362 N.E.2d 548 (1977). For a general
discussion of the percentage diminution theory, see Abbott, supra note 10, at 22-24;

Academy Spires, Inc. v. Grown, 111 N.J. Super. 477, 268 A.2d 556 (1970).
^Mll N.E.2d at 1268-69.

''Id. at 1271.



1986] HOUSING CODE VIOLATIONS 311

of the third formula, the language in the Welborn decision that "the

trial court was not at liberty to speculate, guess, or surmise as to the

value of the injury"^^ may present some problems should the lower court
attempt to use the percentage diminution approach.

C. The Problem with Dependent Covenants

Another interesting aspect of the implied warranty touched upon in

the Breezewood decision is the contract doctrine of dependent covenants.

At common law, the covenants in a lease were independent of each
other, and a breach of a covenant by the landlord in no way affected

the duty of the tenant to pay the full amount of the rent in the lease. ^^

If the tenant refused to pay the rent, the landlord could evict the tenant

under the summary dispossessory statutes enacted in most states, and

the landlord's breach of a covenant in the lease would be no defense

to the tenant's nonpayment of the rent. Most of the recent decisions

recognizing an implied warranty of habitability in residential leases have

indicated, however, that the warranty and the covenant to pay rent are

dependent and that the breach of the warranty by the landlord suspends

the tenant's obligation to pay rent.^^ This may become a critical issue
where the tenant withholds all or a portion of the rent and the landlord %.
brings an action to evict the tenant for nonpayment of the rent.^^ ^

The Breezewood decision appears to recognize that the implied war-

ranty of habitability and the tenant's covenant to pay rent are dependent. «

The opinion quotes with apparent approval from Boston Housing Au- i^

thority v. Hemingway that "the landlord's breach of its implied warranty t

of habitability constitutes a total or partial defense to the landlord's

claim for rent being withheld, depending on the extent of the breach. "^°

In the same part of the Breezewood opinion, in responding to the landlord's

claim that Javins suspends the tenant's obligation to pay rent but that no

damages are recoverable by the tenant. Judge Neal noted that Javins

did not address the tenant's right to recover damages, but instead stated

that a "landlord's breach may suspend or extinguish a rental obligation
and thereby cause the lessor's action against the tenants for nonpayment
of rent to fail."^' There is nothing in the Breezewood opinion to suggest

'"•Id. at 1270.

''E.g., Magee v. Indiana Business College, 89 Ind. App. 640, 166 N.E. 607 (1929);

Bryan v. Fisher, 3 Blackf. 316 (1833).

''E.g., Javins v. First Nat'l Realty, 428 F.2d 1071 (D.C. Cir.), cert, denied, 400

U.S. 925 (1970); Boston Housing Authority v. Hemingway, 363 Mass. 184, 293 N.E.2d

831 (1973); Pugh v. Holmes, 486 Pa. 272, 405 A.2d 897 (1979); TeUer v. McCoy, 253

S.E.2d 114 (W. Va. 1978).

'"^See infra notes 86-88 and accompanying text.
*°411 N.E.2d at 675 (quoting Boston Housing Authority v. Hemingway, 363 Mass. at

203, 293 N.E.2d at 845).

^"411 N.E.2d at 675.

<:



312 INDIANA LAW REVIEW [Vol. 19:299

that the court disagreed with the Javins decision. It may seem surprising,
therefore, that in the Alls opinion, Judge Neal, after expressing his

concern that the tenant might try to demand a refund on past rental
payments and avoid future rental payments under an illegal contract

defense, would cite Breezewood in support of the position that '*such

a breach does not, however, suspend a tenant's obligation to pay rent
and allow no damages recoverable to the landlord."*^ It is doubtful that

Judge Neal ever intended these words as a commentary on the doctrine

of dependent covenants. The sentence contains two unrelated thoughts
— the tenant's obligation to pay "rent" and the landlord's right to
recover "damages" for the tenant's use and enjoyment of the premises.

It would appear that Judge Neal was simply indicating that the tenant

could not live in the apartment "rent free" merely because the landlord

had breached an implied warranty of habitability. Following this remark,

he discussed the proper measure of damages for breach of the warranty

and finally stated, "[I]n other words, tenants were obligated to pay the

actual rental value of the apartment inasmuch as they derived some
benefit from the rental arrangement."^^ From the context in which the
words were used. Judge Neal was discussing damages for breach of the

warranty and was not suggesting that the duty to pay rent and the

warranty of habitability are independent covenants.
^'^

The Welborn decision also addressed the dependency of covenants

issue. In dictum, Judge Shields noted, "[A]rguably Indiana does treat

leases as ordinary contracts containing dependent covenants. "^^

It should be noted, however, that finding the warranty of habitability

and the covenant to pay rent dependent does not totally resolve the

issue of rent withholding. In many jurisdictions, the summary dispos-
sessory statute is limited to the single issue of whether rent is due and

owing. ^ If the finder of fact should ultimately determine that some rent

is still due and owing, there is no logical reason why the court could
not grant the landlord's judgment for possession. ^^ Nevertheless, the vast

«M74 N.E.2cl at 112.

""When the court speaks obitur dictum, these casual remarks may easily be misin-
terpreted when taken out of context and applied to an issue which was not under

consideration by the court. Cf. Stoller v. Doyle, 257 111. 369, 100 N.E. 959 (1913).

*'411 N.E.2d at 1269 n.4. While not cited by the court, it is suggested that the

case of Rene's Restaurant Corp. v. Fro-Du-Co Corp., 137 Ind. App. 599, 210 N.E.2d

385 (1965) also supports the doctrine of dependent covenants.

**For an interesting discussion of the problems caused by the procedural limitations

of the summary dispossession statutes, see Chused, Contemporary Dilemmas of the Javins

Defense: A Note on the Need for Procedural Reform in Landlord-Tenant Law, 67 Geo.
L. Rev. 1385 (1978-79).

''^Despite Illinois' recognition that the covenants in the lease are dependent, empirical

evidence indicates that in the Chicago area, the courts are awarding the landlord possession

if any rent is found due and owing after deducting the damages for the landlord's breach



1986] HOUSING CODE VIOLATIONS 313

majority of jurisdictions, by case law or legislation, have allowed the

tenant this right of self-help rent withholding. When it is later determined
by the court how much rent is due after deducting damages for breach
of the warranty, the tenant is given a reasonable period of time to pay

this amount to the landlord. ^^ In spite of the cited authority supporting

the view that covenants in a lease are dependent, the issue of rent

withholding is still an open question in Indiana, and it would not be ad-

visable for the tenant to use this remedy until it is recognized by the courts

or until the legislature enacts a rent withholding statute.

D. Limitations on the Warranty of Habitability

The few Indiana decisions discussing the implied warranty of hab-

itability have all involved residential leases. While there has been no

discussion of the warranty in regard to commercial or agricultural leases,

it is very unlikely that the Indiana courts would extend the implied

warranty to cover such situations. Most courts considering the issue have

refused to extend the warranty of habitability beyond residential leases. ^^

Breezewood and Welborn did not, however, indicate any limitation on

the type of residential property involved. In Zimmerman v. Moore, '^^

the First District Indiana Court of Appeals, in an opinion also written

by Judge Neal, placed a major limitation on the use of the implied

warranty of habitability. In Zimmerman, the tenant was injured by

of his implied warranty of habitability. R. Cunningham, W. Stoebuck & D, Whitman,
supra note 10, at § 6.43. Also, in Boston Housing Authority v. Hemingway, 363 Mass.

184, 293 N.E.2d 831 (1973), the court held that while the warranty and the covenant to

pay rent were interdependent, the tenant could be evicted for withholding rent unless he

complied with the statutory rent withholding procedure. Id. at 202, 293 N.E.2d at 845.

''E.g., Javins v. First Nat'l Realty, 428 F.2d 1071 (D.C. Cir.), cert, denied, 400 U.S.

925 (1970); Green v. Superior Court, 10 Cal. 3d 616, 111 Cal. Rptr. 704, 517 P.2d

1168 (1974); Glasoe v. Trinkle, 479 N.E.2d 915 (111. 1985); King v. Moorehead, 495 S.W.2d

65 (Mo. Ct. App. 1973); Marini v. Ireland, 56 N.J. 130, 265 A.2d 526 (1970); Pugh v.

Holmes, 486 Pa.2d 272, 405 A.2d 897 (1979); Foisy v. Wyman, 83 Wash. 2d 22, 515
P. 2d 160 (1973); Teller v. McCoy, 253 S.E.2d 114 (W. Va. 1978).

Much of the recently enacted landlord-tenant legislation contains provisions au-
thorizing rent withholding under certain circumstances. For a discussion of the rent

withholding provision, see Cunningham, supra note 11. Because the right to withhold
rent would depend upon whether the landlord had breached the warranty of habitability,

this would require a trial on the merits and would in most jurisdictions change the summary
nature of the landlord's dispossessory action b^sed on nonpayment of rent. Several cases

have suggested that the court might issue a protective order requiring the tenant to pay

the rent into the court to ensure funds will be available should the landlord prevail. E.g.,

Javins v. First Nat'l Realty, 428 F.2d 1071, 1083 n.67 (D.C. Cir.), cert, denied, 400

U.S. 925 (1970); Green v. Superior Court, 10 Cal. 3d 616, 111 Cal. Rptr. 704, 517

P. 2d 1168 (1974); Fritz v. Warthen, 298 Minn. 54, 213 N.W.2d 339 (1973); King v.

Moorehead, 495 S.W.2d 65 (Mo. Ct. App. 1973).

*'See infra note 128.
*^441 N.E.2d 690 (Ind. Ct. App. 1982).



314 INDIANA LAW REVIEW [Vol. 19:299

falling down the back steps of a single family dwelling leased from a non-
merchant landlord. The landlord had acquired the house, her former

home, by virtue of a divorce settlement with her prior husband, and

had decided to rent the house after she moved into her new husband's
home. There was evidence that the design of the steps violated provisions

of the One and Two Family Dwelling Code.^' The back steps had been
poorly designed and there was no landing. The back door swung out

over the steps, and there was a raiUng on only one side of the stairway.

In reversing the lower court judgment for the tenant, the court of appeals

held that the instruction on breach of an implied warranty of habitability

was erroneous.^^ The court distinguished Breezewood on the ground that

it involved an old converted home with four apartments in one building
(which apparently made the landlord in the business of leasing apart-
ments).^^ The court also noted that cases from other jurisdictions rehed

upon by the tenants (such as Javins and Boston Housing Authority)

involved "large city apartment complexes operated and owned by profes-

sional landlords who were in the business of real estate development
and ownership. "^^ The court declined to extend an imphed warranty of

habitability to the rental of a single family, used dwelling,'^ effectively

removing all used, single family dwellings from the coverage of the

implied warranty of habitability. On the other hand, the court's emphasis
on the fact that the landlord was not a merchant^^ and the extensive

discussion of why liability under warranty or strict Hability in tort
should not be extended to a non-merchant^^ suggests that the court might

"'Id. at 692.

"'Id. at 696.

"'Id. at 695-96.

"'Id. at 695.

"'Id. at 696.

'Tor example, the sentence immediately preceding the sentence exempting used, single-

family dwellings states: "Both philosophical underpinnings [superior knowledge and ex-

pertise of the merchant and the ability to spread the risk throughout the industry where

the sale is by a merchant] are absent in our case of a non-merchant lessor who casually
rents a single family dwelling in Greencastle, Indiana." 411 N.E.2d at 696.

^The court indicates that the two principal philosophical justifications for imposing

strict liability upon a merchant or manufacturer under an implied warranty or section

402A of the Restatement (Second) of Torts are that the merchant or manufacturer has
superior expertise and knowledge and that the manufacturer can spread the risk throughout the

industry. 411 N.E.2d at 695-96. Both the Uniform Commercial Code and the Restatement
(Second) of Torts limit strict tort liability to sales by merchants. Id. One commentator notes,
however, that most of the cases rejecting the landlord's traditional immunity from tort

liability for injuries to a tenant or his guest caused by defective conditions of the leased

premises have not imposed "strict liability" standards. Instead, the courts have held the

landlord liable only where he has been found to be negligent based on notice of the

condition and an opportunity to repair. Mallor, The Implied Warranty of Habitability and

the "Non-Merchant" Landlord, 22 Dug. L. Rev. 637, 650-53 (1984). The Zimmerman court
seemed to assume that if the warranty of habitability were found to apply, then strict liability



1 986] HOUSING CODE VIOLA TIONS 3 1

5

have intended to exempt single family dwellings from the warranty only

where the landlord is not a merchant.^« Similarly, the rationale for not

extending the warranty to the casual landlord not in the business of

leasing rental units would seem to apply equally where the landlord

leases one or two apartments in the house in which he resides.^^ Whether

the Zimmerman holding will be extended to cover this situation is

unsettled.

IV. Comparisons Between the Illegal Contract Doctrine

AND THE Implied Warranty of Habitability

The illegality doctrine recognized in the Brown decision was viewed

as an important new tenant reme'&y by many of the legal commentators

of the day.'^ The doctrine, however, has not been widely used outside

the District of Columbia. •^' The obvious reason was the almost simul-

would follow. This would not be true unless the court chose to do so rather than apply

a negligence standard for breach of the warranty. 411 N.E.2d at 695-96.

''^Others have also found the holding in the Zimmerman case to be unclear: "It
may stand for the proposition that the implied warranty of habitability is inapplicable to
rentals of all single family dwellings ... or to rentals of single family houses by non-

merchants." Mallor, supra note 97, at 660-61.

^Of the states which have recently enacted modern landlord-tenant codes imposing

a duty to repair on the landlord, several states have exempted non-merchant landlords.

See supra note 97. Although the statute specifically exempts owner-occupied two or three

family dwellings from the statutory warranty, a non-merchant landlord was held liable

for injury under a judicially-imposed warranty. Crowell v. McCaffrey, 377 Mass. 443,

386 N.E.2d 1256 (1979).

"^E.g. , Note, Tenants' Rights in the District of Columbia: New Hope for Reform,
19 Cath. L. Rev. 80 (1968); Note, Leases and The Illegal Contract Theory - Judicial

Reinforcement of the Housing Code, 56 Geo. L.J. 920 (1968); Note, Housing Violations

Void Lease - A New Tenant Remedy, 25 Wash. & Lee L. Rev. 335 (1968). Most of the
commentators, however, also noted limitations of this remedy such as the ability of the

landlord to evict the tenant immediately once the tenant had successfully raised the illegality

defense in an action for rent.

'°'In the District of Columbia, residential tenants have made extensive use of the

illegal contract doctrine as an alternative to the implied warranty of habitability remedy.

Cunningham, supra note 11, at 80-81. In 1970, the illegality defense was included in the

District of Columbia Landlord-Tenant Regulations, District of Columbia Landlord-
Tenant Regulations § 2902.1 (1970).

Outside the District of Columbia, there are only a handful of cases suggesting the

use of the illegality doctrine as a defense to an action for rent where housing code

violations existed at the inception of a residential lease. Hinson v. Delis, 26 Cal. App.

3d 62, 102 Cal. Rptr. 661 (1972); Longenecker v. Hardin, 130 111. App. 2d 468, 264 N.E.2d

878 (1970); Noble v. Alis, 474 N.E.2d 109 (Ind. Ct. App. 1985); King v. Moorehead,

495 S.W.2d 65 (Mo. Ct. App. 1973); Glyco v. Schultz, 35 Ohio Misc. 25, 289 N.E.2d 919
(Ohio Mun. 1972); Riley v. Nelson, 256 S.C. 545, 183 S.E.2d 328 (1971).

At least one jurisdiction has refused to hold the lease void because of housing code

violations, suggesting that housing codes should be administratively enforced and not

enforced through the courts by tenants using civil remedies. Posnanski v. Hood, 46 Wis.

2d 172, 174 N.W.2d 528 (1970).



316 INDIANA LAW REVIEW [Vol. 19:299

taneous recognition of an implied warranty of habitability in residential

leases. '^^- The implied warranty of habitability theory provided the tenant

with an entire new range of effective contractual remedies. '^^ In the

context of residential leases, the implied warranty of habitability is in

most circumstances the superior tenant remedy.'"'* Nevertheless, the illegal

contract doctrine may still prove a useful tenant remedy.
One of the major difficulties with the illegal contract theory from

the tenant's viewpoint is the tenant's status once the court declares the

contract illegal. Although Brown did not address this issue, it is generally

agreed that because the landlord placed the tenant into possession, the

tenant would not be considered a trespasser. '^^ At common law, a tenant
under a void lease normally becomes a tenant at will.'^^ In Diamond
Housing Corp. v. Robinson, ^^^ however, the District of Columbia Court

of Appeals held that, under the District of Columbia statutes, a tenancy

at will can only be created by an express contract, and therefore the

tenant became a statutory tenant at sufferance which was in the nature

of a tenancy from month to month requiring thirty days notice to quit.'^^

'°'In the landmark decision of Javins v. First Nat'l Realty, 428 F.2d 1071 (D.C.

Cir.), cert, denied, 400 U.S. 925 (1970), the court found that "the Housing Regulations

imply a warranty of habitability, measured by the standards which they set out, into

leases of all housing that they cover." Id. at 1082. Javins was not the first decision to

recognize an implied warranty of habitability in residential leases. See, e.g., Lemle v.

Breeden, 51 Hawaii 426, 462 P. 2d 470 (1969); Reste Realty Corp. v. Cooper, 53 N.J. 444,

251 A.2d 268 (1969); Pines v. Perssion, 14 Wis. 2d 590, 111 N.W.2d 409 (1961). Javins,
however, gained national attention and is cited in nearly every subsequent decision re-

cognizing an implied warranty of habitability in a residential lease. There is an impressive

body of literature on the subject. See, e.g., Abbott, supra note 10; Cunningham, supra

note 11; R. Schoshinski, American Law of Landlord and Tenant §§ 3:10-3:45 (1980).
'°Tor a discussion of the contractual remedies available to the tenant under the

implied warranty of habitability theory, see Cunningham, supra note 11, at 98-126; Krieger

& Shurn, supra note 20, at 612-25; R. Schoshinski, supra note 102, at §§ 3:19-3:25.
"""'The illegality defense innovated in Brown v, Southall has won few adherents

outside the District of Columbia, doubtless because of its intrinsic limitations and the

comparative attractiveness of an alternative theory—the implied warranty of habitability."
P. Goldstein, Real Property 940 (1984).

Most cases and commentators have not bothered to state the obvious. Nevertheless,

the small number of decisions outside the District of Columbia using the illegal contract
doctrine as a tenant remedy and the wide use of the alternative implied warranty of

habitability theory suggest that attorneys and juries have chosen the latter as the more

attractive tenant remedy.

""Diamond Housing Corporation v. Robinson, 257 A.2d 492, 495 (D.C. App. 1969).

'""Id.; see also King v. Moorehead, 495 S.W.2d 65, 79 (Mo. Ct. App. 1973).
'"^257 A.2d 492 (D.C. App. 1969).

"*M at 495. Indiana has a statute similar to the District of Columbia statute which
provides that a tenancy at will can only be created by express agreement. Ind. Code § 32-

7-1-2 (1982). Indiana, however, would not require a notice to quit to terminate a tenancy

at sufference. Ind. Code § 32-7-1-7 (1982). The entire question is probably moot in Indiana,

however, because Noble v. Alis, 474 N.E.2d 109 (Ind. App. 1985), discussed supra, held



1986] HOUSING CODE VIOLATIONS 317

Whether the tenant is viewed as a tenant at will or a tenant at sufferance,

however, the tenant will lose any benefits under the void lease and could

be evicted immediately, or in some jurisdictions, upon giving the tenant

the statutory notice to quit (usually thirty days).'^^

Where there is a shortage of decent housing or where the tenant

has made a good bargain, he may not wish to terminate the lease under
an illegal contract theory, but instead may wish to remain in possession
under the lease and exert pressure on the landlord to comply with local

housing code provisions. This is possible under the implied warranty of

habitability theory.''^ Of course, if the tenant wishes to terminate the

that the illegal contract defense is unavailable where the tenant has benefited from the

lease by taking possession,

"^One serious problem may still confront the landlord when he attempts to evict a
tenant after the tenant has reported housing code violations to the proper authorities or

has successfully pleaded an illegality defense or an implied warranty of habitability defense

in a prior suit for possession based on the nonpayment of rent. In such a case the tenant

may well claim that the eviction is in retaliation for the tenant's exercise of his legal
rights. A classic — perhaps gothic — example of the problems that could await the
landlord is set forth in Robinson v. Diamond Housing Corp., 463 F.2d 853 (D.C. Cir.

1973), the culmination of a series of legal actions filed by the landlord in an attempt to

evict a tenant under an illegal lease. The landlord attempted to evict Mrs. Robinson for
nonpayment of rent. She successfully argued that Brown v. Southall Realty (the illegal
contract defense) prohibited the landlord from collecting accrued rent. The landlord filed

a second action to evict her as a trespasser, only to discover that she was a tenant at

sufferance. After giving her the required thirty days' notice, he once again attempted to

evict her, only to be met with a retaliatory eviction defense. The lower court allowed the

eviction, and on appeal to the District of Columbia Court of Appeals, the judgment for

possession was affirmed. However, on appeal to the federal court of appeals, the judgment was

reversed. The court noted that there had been a sudden rise in actions for possession

based on notice to quit following closely behind successful Javins (implied warranty) and

Southall Realty (illegality) defenses in actions for possession based on nonpayment of

rent. To allow the landlord to evict the tenant in such a case would be to vitiate the
tenant's legal rights recognized in Javins and Southall Realty. Thus the court concluded

that the landlord could not evict Mrs. Robinson as long as his motive was to rid himself

of the tenant because she was not paying rent. The court, however, suggested it was not

"till death do them part," for Diamond could repair the premises, or if unable or unwilling

to do so, could simply remove the property from the housing market. Id. The dissent

felt this Draconian treatment of the landlord would discourage investment in rental housing.

Id. at 872 (Robb, J., dissenting).

""In many of the implied warranty of habitability cases, the tenant chose to remain in
possession and either repair the defective condition and deduct the cost of repair from the rent

or withhold the rent until the landlord had made the necessary repairs. E.g., Javins v.

First Nat'l Realty, 428 F.2d 1071 (D.C. Cir.), cert, denied, 400 U.S. 925 (1970); Green

V. Superior Court, 10 Cal. 3d 616, 111 Cal. Rptr. 704, 517 P.2d 1168 (1974); Glasoe v.

Trinkle, 479 N.E.2d 915 (111. 1985), Marini v. Ireland, 56 N.J. 130, 265 A.2d 256 (1970);

Pugh v. Holmes, 486 Pa. 272, 405 A.2d 897 (1979).

Several decisions recognizing both the illegal contract and implied warranty of hab-

itability defenses have indicated that the two theories are inconsistent and that the illegal
contract theory is appropriate only where the tenant wishes to terminate the lease. If the

tenant wishes to remain in possession under the lease, he must elect to pursue the implied



318 INDIANA LAW REVIEW [Vol. 19:299

lease because of the landlord's breach of the implied warranty of hab-

itability, he can treat the breach as a common law constructive eviction' •'

or use the contract remedy of rescission."^

Superficially, the illegal contract doctrine may appear to be very
advantageous to one or the other of the parties. If the tenant has paid

the agreed upon rent under the lease despite housing code violations,

under the general principle of law that the courts will leave the parties

to an illegal contract where it finds them, it would appear the tenant

could not recover any past rental payments under the illegal contract."^

The courts, however, have adopted a more equitable approach to the

problem. Where the tenant is attempting to recover rent already paid
to the landlord, the courts have applied two generally recognized ex-

ceptions to the rule that the law will leave the parties to an illegal

warranty of habitability theory. Cooks v. Fowler, 459 F.2d 1269 (D.C. Cir. 1971); Hinson

V. Delis, 26 Cal. App. 3d 62, 102 Cal. Rptr. 661 (1972); King v. Moorehead, 495 S.W.2d

65 (Mo. Ct. App. 1973).

'"At common law, if the landlord substantially interfered with the tenant's use and
enjoyment of the premises, the tenant could treat the landlord's breach of the covenant

of quiet enjoyment as a constructive eviction and vacate the premises. A constructive
eviction terminates the lease and the tenant's obligation to pay rent. Lafayette Realty

Corp. V. Vonnegut's Inc., 458 N.E.2d 689 (Ind. Ct. App. 1984). There were two important

requirements before the court would treat the landlord's breach as a constructive eviction:

the landlord's breach must have been substantial, and the tenant must have vacated the

premises within a reasonable time. Sigsbee v. Swathwood, 419 N.E.2d 789 (Ind. Ct. App.

1981). For a discussion of the doctrine of constructive eviction, see R. Cunningham, W.
Stoebuck & D. Whitman, supra note 10, at § 6.33. In several of the early cases
recognizing the warranty of habitability, the tenants used the remedy of constructive

eviction and terminated the lease. Marini v. Ireland 56 N.J. 130, 265 A.2d 526 (1970);

Reste Realty Corp. v. Cooper, 53 N.J. 444, 251 A.2d 268 (1969); Pines v. Perssion, 14

Wis. 2d 590, 111 N.W.2d 409 (1961). Caveat: Most courts which have recognized a
warranty of habitability in residential leases have also indicated that before there can be

a breach of the warranty, the landlord must be notified of the defective condition and

given a reasonable time to repair. E.g., Glasoe v. Trinkle, 479 N.E.2d 915 (111. 1985);

Berzito v. Gambino, 63 N.J. 460, 308 A.2d 17 (1973); Pugh v. Holmes, 486 Pa. 272,
405 A.2d 897 (1979). Thus it would appear that the tenant could not treat the conditions

as a constructive eviction until this requirement has been met. See Restatement (Second)
OF Property § 10.1 (1977).

"^Several of the decisions have used the contract term "rescission" to describe the

tenant's right to terminate the lease where the landlord has breached the implied warranty

of habitability. E.g., Lemle v. Breedon, 51 Hawaii 426, 462 P.2d 470 (1969); King v.

Moorehead, 495 S.W.2d 65 (Mo. Ct. App. 1973); Kline v. Burns, 111 N.H. 87, 276 A.2d

248 (1971). It is not clear if the court will still require the tenant to vacate within a

"reasonable time" under a contract theory as is required under the property concept of

constructive eviction. For discussion of this point, see R. Cunningham, W. Stoebuck &
D. Whitman, supra note 10, at § 6.41 (1984).

As discussed at supra note 111, the tenant may be required to notify the landlord
and give him a reasonable opportunity to correct the defect before he can terminate the

lease. Restatement (Second) of Property § 10.1 (1977).

"U. Calamari & J. Perillo, Contracts (2d ed. 1977).



1986] HOUSING CODE VIOLATIONS 319

contract where it finds them: (1) The court will not deny recovery of

monies already paid where the parties are not in pari delicto because
of an unequal bargaining position; and (2) the court will not refuse

assistance where the statute in question was enacted for the protection

of the party seeking recovery of monies paid pursuant to the illegal

contract.'"^

If, on the other hand, the tenant has remained in possession but

has refused to pay rent, it might appear under the Brown decision that
the landlord is without any remedy because he cannot recover past due

rent under the illegal lease. ''^ However, the Brown decision did not
address the landlord's right to recover in quantum meruit for the benefit
received by the tenant from his possession. When the issue was raised
in subsequent decisions, the courts held that the landlord was entitled

to recover the reasonable rental value of the premises for the period of

time the tenant was in actual possession. ^'^ In William J. Davis, Inc.

V. Slade,^^^ the District of Columbia Court of Appeals, relying in part

on Diamond Housing Corp. v. Robinson,^^^ allowed the landlord to
recover in quantum meruit on the theory that, while the lease itself was
void and unenforceable, a tenancy at sufferance was created and thus

the tenant became liable for the reasonable rental value of his posses-
sion."^ The court in King v. Moorehead^^^ based its decision upon a much
more practical rationale: "We prefer to base our decision openly on the
hard reality that if, under existing conditions, the landlords were deprived

of all rights because of noncompliance with housing codes there would

be far fewer low income housing units available—landlords would find
it to their economic advantage to abandon their properties rather than
spend their separate resources to restore them to habitability.'"^' If the

"^William J. Davis, Inc. v. Slade, 271 A.2d 412 (D.C. App. 1970) (tenant may not

be in pari delicto because of disparity in bargaining position, but even if both parties

are in pari delicto, on occasion, public policy would be better served by rescission); Glyco v.

Schultz, 35 Ohio Misc. 2d 25, 289 N.E.2d 919 (Ohio Mun. 1972) (court will not apply in pari

delicto rule where statute in question is for protection of one of the parties and where

that party had no real choice but to acquiesce in the illegality).

"'237 A.2d at 837. Denying the landlord possession for nonpayment of rent was in

effect a finding that no rent was due and owing. Several other decisions have also indicated

that the landlord is not entitled to the rent under the illegal lease. E.g., Wm. J. Davis
Inc. V. Slade, 271 A.2d 412 (D.C. App. 1970); Diamond Housing v. Robinson, 257 A.2d

492 (D.C. App. 1969), motion denied, 433 F.2d 497 (1970).

'"•See infra notes 117-18 and 120.
"^271 A.2d 412 (D.C. App. 1970).
'"257 A.2d 492. See discussion supra notes 107-09 and accompanying text.

'"271 A.2d at 416.

'^M95 S.W.2d 65 (Mo. Ct. App. 1973).

'''Id. at 79; see also Glyco v. Schultz, 35 Ohio Misc. 25, 289 N.E.2d 919 (Ohio Mun.

1972) (total abrogation of duty to pay rent would unjustly enrich tenant and be ruinous

to landlord).



320 INDIANA LAW REVIEW [Vol. 19:299

tenant is required to pay the reasonable rental value of the premises
for the time of possession under the illegal contract doctrine, he is in

no better position than he would be under an implied warranty of
habitability theory. '^^

There are several other reasons why the tenant might prefer or even
be required to use the warranty of habitability theory. First, most of
the decisions allowing the Brown illegality defense have held that for
the illegal contract theory to apply, the housing code violations must
have been in existence at the inception of the lease. '^^ On the other
hand, cases recognizing an implied warranty of habitability in residential
leases have indicated that the warranty not only covers conditions existing

at the inception of the lease, but also creates a duty on the part of the
landlord to maintain the premises in a habitable condition throughout

the entire term of the lease.
'^"^

Second, the illegal contract theory depends upon the existence of a
local housing code — there must be an ordinance which the contract
violates before it can be declared illegal. In a number of jurisdictions,
however, judical decisions and/or landlord-tenant legislation indicates

'"Courts have adopted three different approaches to the measure of damages for

breach of the warranty of habitability. The measure of damage under standard contract

approach would be the difference between the fair rental value of the premises as warranted

and the fair rental value of the premises in their present condition. E.g., Green v. Superior

Court, 10 Cal. 3d 616, 517 P. 2d 1168, 111 Cal. Rptr. 704 (1974). Under this ap-

proach the tenant might ultimately pay less than the fair rental value of the premises

in their present condition. See discussion at supra note 71. Under the second approach

the measure of damages would be the difference between the rent reserved under the lease

and the fair rental value of the premises in their present condition. E.g., Kline v. Burns,

111 N.H. 87, 276 A.2d 248, 252 (1971). Under this approach the tenant would pay the

same rent as he would under the illegal contract theory. See R. Schoshinski, supra note 102.

Under the third approach the measure of damages would be based on the percentage of

use which the tenant lost because of the breach — the agreed rent would be reduced by
an equal percentage. E.g., Pugh v. Holmes, 486 Pa. 272, 405 A.2d 897 (1979). Once

again, this should be close to, if not the same as, the amount of rent the tenant would

be required to pay under the illegal contract theory. For a general discussion of the

measure of damages under the implied warranty of habitability theory, see supra notes

65-76 and accompanying text.

"'E.g., Hinson v. Delis, 26 Cal. App. 3d 62, 102 Cal. Rptr. 661 (1972); Winchester

Management Corp. v. Staten, 361 A.2d 187 (B.C. App. 1976); Riley v. Nelson, 256 S.C.

545, 183 S.E.2d 328 (1971).

"'E.g., Javins v. First Nat'l Realty, 428 F.2d 1071 (D.C. Cir.), cert, denied, 400

U.S. 925 (1970) (the old nonrepair rule cannot coexist with obligations imposed upon

landlord by typical modern housing code); Glasoe v. Trinkle, 479 N.E.2d 915 (111. 1985)

(warranty requires that dwelling remain habitable throughout the term of the lease); Mease

V. Fox, 200 N.W.2d 791 (Iowa 1972) (warranty of habitability creates a continuing duty
on part of landlord to maintain the habitability of the dwelling during the entire term

of the lease); Marini v. Ireland, 56 N.J. 130, 265 A.2d 526 (1970) (premises must remain

habitable throughout the term of the lease); Pugh v. Holmes, 486 Pa. 272, 405 A.2d 897

(1979) (this warranty is applicable at the beginning of the lease and throughout its duration).



1986] HOUSING CODE VIOLATIONS 321

that the implied warranty of habitability can exist independent of a local

housing code.'^^ Similarly, where local housing codes exist, they often

provide only a minimum standard of habitability and would provide no

help to the middle class tenant.
'^^ Some decisions and/or legislation

suggest the "habitability" standard of the implied warranty might be

higher than housing code standards. '^^ Thus, where there are no local

housing codes or where the local housing code does not cover the defective

condition, the implied warranty of habitability might still provide a

remedy.

Despite the recognition of an implied warranty of habitability in

residential leases, the illegality doctrine may still prove useful to the
tenant in situations where an implied warranty of habitability might not

'"Glasoe v. Trinkle, 479 N.E.2d 915 (111. 1985) (housing code standards are only one

factor to be considered in determining habitability); Boston Housing Authority v. Hemingway, ^
363 Mass. 184, 293 N.E.2d 831 (1973) (there may be instances where conditions not \J*
covered by the code regulations render the apartment uninhabitable); Pugh v. Holmes,

JJj
486 Pa. 272, 405 A.2d 897 (1979) (court declined to establish rigid standards for determining

habitability preferring gradual development "in best common law tradition"). But see
>t

Winchester Management Corp. v. Staten, 361 A.2d 187 (D.C. App. 1976) (warranty of iWj

habitability only appUed where there is a local housing code in effect). Compare Breezewood '.*

V. Maltbie, 411 N.E.2d 670 (Ind. Ct. App. 1980), where the decision is not clear whether

the warranty can exist separate and apart from a local housing code.

Much of the recently enacted landlord-tenant legislation does not use housing code
standards to define habitabiUty under the statutory warranty. For example, the Uniform

Residential Landlord Tenant Act ("URLTA") which has been enacted in some 18 states,
defines habitability in terms of essential services, but seems to apply state wide to all

residential housing, whether or not a local housing code exists. For a discussion of URLTA
and other recently enacted landlord-tenant legislation, see Cunningham, supra note 11, at

59-74.

^^^See Moskovitz, The Implied Warranty of Habitability: A New Doctrine Raising
New Issues, 62 Cal. L. Rev. 1444, 1457-58 (1974).

Additionally, where code standards are worded in vague language, a court might

interpret the statute as requiring more than "minimum" standards for habitability. See
Himmel v. Chase Manhattan Bank, 47 Misc. 2d 93, 262 N.Y.S.2d 515 (N.Y Civ. Ct.

1965) (defective air conditioning system and elevators in luxury apartment were "dangerous"

conditions within meaning of statute allowing rent abatement).

'^^Glasoe v. Trinkle, 497 N.E.2d 915 (111. 1985) (court declined to estabhsh rigid

standards for breach of warranty but gave guidelines distinct from housing code standards);

Boston Housing Authority v. Hemingway, 363 Mass. 184, 201 n.l6, 293 N.E.2d at 844 n.l6

(1973) (there may be instances where conditions not covered by the code regulations render
the apartment uninhabitable); Pugh v. Holmes, 486 Pa. 272, 405 A.2d 897 (1979) (existence

of housing code violations is only one of several evidentiary considerations that enter into

the materiality of the breach). Contra Winchester Management Corp. v. Staten, 361 A.2d

187 (D.C. App. 1976) (implied warranty measured "solely" by housing code standards);

King V. Moorehead, 495 S.W.2d 65 (Mo. Ct. App. 1973) (landlord fulfills his obligation

by substantial compliance with the relevant provisions of an applicable housing code).

Recently enacted landlord-tenant legislation such as URLTA establishes statewide
standards of habitability which are often higher than local housing code standards. See

Cunningham, supra note 11, at 65-74.



322 INDIANA LAW REVIEW [Vol. 19:299

exist. In most jurisdictions, the implied warranty of habitability has been

Hmited to residential leases and does not apply to commercial leases.'^*

Although housing codes do not apply to commercial property, '^^ where

there are existing violations of building codes, electrical codes, or plumb-

ing codes, the commercial tenant might be able to convince a court to

apply the illegal contract doctrine. '^^ Similarly, some jurisdictions by case
law or legislation have limited the types of residential dwellings or types

of leases to which the implied warranty of habitability appHes.'^' In such

a jurisdiction, the local housing codes might still apply to the residential

unit even though the court would not find an implied warranty of

habitability. The illegal contract doctrine might provide some relief to

a tenant in such a situation. Finally, there may be housing code violations
which do not necessarily affect the habitabiUty of the premises, such as

the failure to register the unit or to obtain an occupancy permit. At
least one decision has applied the illegality doctrine where such housing

code violations existed even though no actual breach of an implied

warranty of habitability was proven. '^^

V. Conclusion

During the past sixteen years there has been nothing short of a

revolution in residential landlord-tenant law. The application of the illegal

contract doctrine to housing code violations and the recognition of an

implied warranty of habitability in residential leases have replaced the old

no duty to repair rule and the doctrine of caveat lessee. Nevertheless,

'^*Most courts which have considered the issue have not extended the implied warranty

of habitability to commerical leases. See R. Schoshinski, supra note 102, at § 3:29 n.61 (1980

and Supp. 1985).

'-"See supra note 10.

'^The doctrine has been applied to leases in a variety of situations. See Hicks, supra

note 4, at 470-81.

'^'A few states have limited the warranty of habitability to "multi-unit" rental

structures. Jack Spring, Inc. v. Little, 50 111. 2d 351, 280 N.E.2d 208 (1972) (reinterpreted by

Pole Co. V. Sorrells, 84 111. 2d 178, 49 111. Dec. 283, 417 N.E.2d 1297 (1981) (warranty

of habitability applies to single family dwellings as well)); Zimmerman v. Moore, 411 N.E.2d
690 (Ind. App. 1982). At least one court has also indicated that the warranty should not

apply where the landlord is not a merchant in the business of leasing property. Zimmerman
V. Moore, 411 N.E.2d 690 (Ind. Ct. App. 1982). See also Mallor, The Implied Warranty

of Habitability and the "Non-Merchant" Landlord, 22 Dug. L. Rev. 637 (1984); KUne

V. Burns, 111 N.H. 87, 276 A.2d 248 (1971).
Other states have statutorily limited the warranty of habitability in various ways.

Mass. Gen. Laws Ann. ch. 186, § 19 (West 1981) (exempting owner-occupied two and

three family dwellings); Neb. Rev. Stat. § 76-1408(8) (1981) (excludes leases of five years

or more); Va. Code § 55-248.5 (1950) (not applicable to single family dwellings leased by

landlord owning no more than 10 such residences).

'^'Noble v. Alis, 474 N.E.2d 109 (Ind. Ct. App. 1985). See supra notes 27-42. Contra

Curry v. Dunbar House, 362 A.2d 686 (D.C. App. 1976).



1986] HOUSING CODE VIOLATIONS 323

in Indiana, the limited number of judicial decisions and the lack of
legislation have left the scope of these new tenant remedies and landlord
obligations uncertain.

For the attorney representing either the residential landlord or res-

idential tenant, the predictabiHty of the outcome of controversy under

traditional rules of landlord-tenant law no longer exists. While the

doctrine of caveat lessee may indeed be dead in Indiana, the attorney
must still exercise caution in advising his client until further developments

clarify the current residential landlord-tenant law.

isti

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