No. 32 May Term, 1978, Appeal from the Order of the Superior Court at No.367 March Term 1977, reversing the Order entered by the Court of Common Pleas of Franklin County, Before LARSEN, J. ROBERTS, J., filed a concurring opinion in which NIX and MANDERINO JJ., join.
Stephen E. Patterson, Waynesboro, for appellant.
David R. Woodward, Chambersburg, for appellee.
Eagen, C. J., and O'Brien, Roberts, Nix, Manderino and Larsen, JJ. Roberts, J., filed a concurring opinion in which Nix and Manderino, JJ., join.
Eloise Holmes, appellee, had been, pursuant to an oral month-to-month lease, renting a residential dwelling in Chambersburg in Franklin County at the rate of $60.00 per month from November, 1971 until recently. Her landlord, appellant J. C. Pugh, instituted two separate landlord-tenant actions against appellee before a justice of the peace, the first resulting in a judgment for unpaid rent (for the period from September, 1975 through June, 1976) and the second resulting in a judgment for unpaid rent (for the period from June, 1976 through August, 1976) and for possession of the premises. Following Mrs. Holmes' appeals to the Court of Common Pleas of Franklin County, appellant filed separate complaints, the first seeking unpaid rent and the second
seeking both unpaid rent and possession. In both actions, appellee filed answers asserting a defense of the landlord's alleged breach of an implied warranty of habitability. Additionally, in the second action, appellee asserted a setoff due in an amount which she claimed she had spent to repair a broken lock after having given appellant notice and a reasonable opportunity to repair the lock. Appellee also filed a counterclaim for the cost of repairing other allegedly defective conditions of which she had given appellant notice. Appellant filed preliminary objections to the answer and counterclaim which the Court of Common Pleas sustained finding that appellee's answer failed to set forth a legal defense to the landlord's actions, and that the counterclaim failed to set forth a legal cause of action.
On appeal, the Superior Court, by opinion of President Judge Jacobs, reversed and remanded. The Superior Court abolished the doctrine of caveat emptor as applied to residential leases and held that a warranty of habitability by the landlord will be implied in all such leases, which implied warrant would be mutually dependent upon the tenant's obligation to pay rent. Pugh v. Holmes, 253 Pa. Super. 76, 384 A.2d 1234 (1978) (Price, J. dissenting). By order dated July 20, 1978, this Court granted appellant's petition for allowance of appeal.
I. DOCTRINE OF CAVEAT EMPTOR ABOLISHED/IMPLIED WARRANTY OF HABITABILITY ADOPTED
The doctrine of caveat emptor comported with the needs of the society in which it developed. However, we find that the doctrine of caveat emptor has outlived its usefulness and must be abolished, and that, in order to keep in step with the realities of modern day leasing, it is appropriate to adopt an implied warranty of habitability in residential leases. The rule of caveat emptor, as applied to landlord-tenant relationships, developed in England in the sixteenth century and was adopted in the nineteenth century as the law of this Commonwealth in Moore v. Weber, 71 Pa. 429 (1872). Moore held "The rule here, as in other cases, is caveat emptor. The lessee's eyes are his bargain. He is
bound to examine the premises he rents, and secure himself by covenants to repair." Id. at 432. In the primarily agrarian society in which the doctrine developed, the law viewed the lease transaction as a conveyance of land for a term, and the focal interest in the conveyance was the land -- any shelters or structures existing on the land were "incidental" concerns. The rent was viewed as "coming out of the land" itself, not from the dwelling or the dweller. The feudal landlord
"had no obligations to the tenant other than those made expressly, and the tenant's obligation to pay rent was independent of the landlord's [covenants] . . . The doctrine of caveat emptor was fully applicable. The tenant's only protections were to inspect the premises before taking possession or to extract express warranties from the landlord. It was assumed that landlords and tenants held equal bargaining power in arranging their rental agreements, and that the agrarian tenant had the ability to inspect the dwelling adequately and to make simple repairs in the buildings which possessed no modern conveniences such as indoor plumbing or electrical wiring. As agrarian society declined and population centers shifted from rural to urban areas, the common law concepts of landlord-tenant relationships did not change. Despite the facts that the primary purpose of the urban leasing arrangement was housing and not land and that the tenant could neither adequately inspect nor repair urban dwelling units, landlords still were not held to any implied warranties in the places they rented and tenants leased dwellings at their own risk."
Pugh v. Holmes, 253 Pa. 80, 384 A.2d at 1237-38.*fn1
As stated by appellee, "times have changed. So has the law." (Brief for appellee at 3). Today, the doctrine of the
implied warranty of habitability has attained majority status in the United States, the doctrine having been embraced by the appellate courts and/or the legislatures of some 40 state jurisdictions and the District of Columbia.*fn2 The warranty
recognizes that the modern tenant is not interested in land, but rather bargains for a dwelling house suitable for habitation.
"Functionally viewed, the modern apartment dweller is a consumer of housing services. The contemporary leasing of residences envisions one person (landlord) exchanging for periodic payments (rent) a bundle of goods and services, rights and obligations. The now classic description of this economic reality appears in Javins v. First National Realty Corp., 138 U.S.App.D.C. 369, 428 F.2d 1071, 1074, cert. denied, 400 U.S. 925, 91 S.Ct. 186, 27 L.Ed.2d 185 (1970) (footnote omitted). When American city dwellers both rich and poor, seek 'shelter today, they seek a well known package of goods and services -- a package which includes not merely walls and ceilings, but also adequate heat, light and ventilation, serviceable plumbing facilities, secure windows and doors, proper sanitation, and proper maintenance.'"
Commonwealth v. Monumental Properties, Inc., 459 Pa. 450, 467-68, 329 A.2d 812, 820-21 (1974) (holding Unfair Trade Practices and Consumer Protection Law applicable to residential leases.)
Moreover, prospective tenants today can have vastly inferior bargaining power compared with the landlord, as was recognized in Reitmeyer v. Sprecher, 431 Pa. 284, 243 A.2d 395 (1968). In Reitmeyer this Court stated:
"Stark necessity very often forces a tenant into occupancy of premises far from desirable and in a defective state of repair. The acute housing shortage mandates that the average prospective tenant accede to the demands of the prospective landlord as to conditions of rental, which, under ordinary conditions with housing available, the average tenant would not and should not accept.
No longer does the average prospective tenant occupy a free bargaining status and no longer do the average landlord-to-be and tenant-to-be negotiate a lease on an 'arm's length' basis."
Id., 431 Pa. at 289-90, 243 A.2d at 398.
The Superior Court correctly observed that to join the trend toward an implied warranty of habitability would not be a complete and sudden break with the past, but would be the "next step in the law which has been developing in the Commonwealth for a number of years." 253 Pa. Super. at 85, 384 A.2d at 1239. Pennsylvania courts have held that a tenant's obligation to pay rent was mutually dependent on express covenants of a landlord to repair and that a material breach of the landlord's covenant to repair relieved a tenant from his obligation to pay rent. McDanel v. Mack Realty Company, 315 Pa. 174, 172 A. 97 (1934). In Reitmeyer v. Sprecher, supra, recognizing the contractual nature of modern leasing and the severe housing shortage resulting in unequal bargaining power, this Court adopted § 357 of the Restatement (Second) of Torts and imposed liability on a landlord who had breached a covenant to repair a dangerous condition on the premises, which breach resulted in injury to the tenant. In Elderkin v. Gaster, 447 Pa. 118, 288 A.2d 771 (1972), we abolished caveat emptor and adopted an implied warranty of habitability in sales of new homes to buyers by vendors/builders. In Elderkin we noted " caveat emptor developed when the ...