Brad Pettit—Senior Attorney, National Legal Research Group
Although the general rule is that in the absence of an express agreement between a landlord and a tenant to the contrary, the tenant cannot recover from his or her landlord the costs of improvements that he or she made to the leased residential property, recent decisions by Idaho trial and appellate courts in the same case suggest that a tenant can obtain equitable restitution from his or her landlord on the grounds of unjust enrichment for improvements to the leased premises that he or she made while the parties were mutually contemplating a future conveyance of the premises to the tenant as long as the landlord was aware of the improvements and never objected to them. Asher v. McMillan, No. 47684, 2021 WL 443227, at *4 (Idaho Feb. 9, 2021) (not yet released for publication; until released, it is subject to revision or withdrawal). It is significant to note that the Asher court ruled that although the parties' relationship was grounded in contract, the tenants were not limited to seeking legal relief under breach-of-contract theories and could obtain restitution from their landlord under the equitable theory of unjust enrichment:
[W]e can infer from the district court's findings that the Ashers were not "mere tenants" when they made the electrical improvements and removed the tree. The district court's determination that the Ashers were not officious intermeddlers was based not only upon the contract between the parties, but also upon the nature of the improvements themselves. Specifically, the district court found that the Ashers' expectation of ownership was demonstrated by repairs that were "beyond what mere tenants typically make to a rental property." Because electrical improvements and tree removal are beyond the repairs typically undertaken by "mere tenants," we will not upset the district court's award of restitution for these improvements. Reding v. Reding, 141 Idaho 369, 372, 109 P.3d 1111, 1114 (2005) ("A trial judge's findings of fact in a court-tried case will be liberally construed on appeal in favor of the judgment entered, in view of the trial judge's role as trier of fact.").
In light of Hertz [v. Fiscus, 98 Idaho 456, 567 P.2d 1 (1977)], Haskin [v. Glass, 102 Idaho 785, 640 P.2d 1186 (Ct. App. 1982)], and the Restatement, the facts in the record support the district court's determination that McMillan would be unjustly enriched if he were to retain the Ashers’ improvements without paying for their value. The district court did not abuse its discretion in awarding restitution to the Ashers.
Id. at *5-6.
The Asher decision is a warning to landlords who stand idly by and allow tenants to make significant improvements to the leased premises, especially if the parties may have intended that the tenant would eventually acquire the property from the landlord but the acquisition part of their arrangement is/was either uncertain or falls through.
The reader is advised to consult 50-APR Real Estate Law Report NL 2 (Westlaw Apr. 2021) for an excellent discussion of the Asher case and how the trial and appellate judges reached their decisions.