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Code Dodgers: Landlord Use of LLCs and Housing Code Enforcement

In depressed real estate markets across the United States, landlords are placing each of their properties in separate LLCs. Their aim in doing so is to avoid the full brunt of housing code enforcement by limiting their exposure to potential fines. The increasing prevalence of single-property LLCs ha...

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Bibliographic Details
Published in:Yale law & policy review 2019-04, Vol.37 (2), p.647-681
Main Author: Horner, James
Format: Article
Language:English
Online Access:Get full text
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Summary:In depressed real estate markets across the United States, landlords are placing each of their properties in separate LLCs. Their aim in doing so is to avoid the full brunt of housing code enforcement by limiting their exposure to potential fines. The increasing prevalence of single-property LLCs has significant, negative consequences for lowincome tenants. First, their buildings are less likely to be well maintained. Additionally, in certain circumstances, a single-property LLC strategy enables landlords to use superior bargaining power to extract enormous profits from tenants in dilapidated properties. Then, when the property accumulates too many fines, landlords can simply walk away from the buildings. This, in turn, increases blight and reduces the affordable housing stock in a city. Current legal schemes—such as typical housing codes, criminal penalties, and consumer protections—do not adequately address this problem. Instead, this Note recommends that local governments pursue a policy of limited corporate veil piercing for landlords based on ERISA's common control liability provisions. This scheme would prevent landlords from evading full liability for housing code violations.
ISSN:0740-8048