On the unexpected use of unenforceable contract terms: Evidence from the residential rental market

Abstract

This article explores the prevalence of unenforceable and misleading terms in residentialrental contracts. For this purpose, the study analyzes a sample of seventy residentialleases from the Greater Boston Area in terms of Massachusetts Landlord and Tenant Law.The article's findings reveal that landlords often use deceptive-as well as clearly invalid-provisions in their contracts, and regularly fail to disclose the vast majority of themandatory rights and remedies that the law bestows upon tenants in their leases.Building on psychological insights and on survey evidence, the article suggests thatthis drafting pattern may significantly affect tenants' decisions and behavior. In particular,whena problem or a dispute with the landlord arises, tenants are likely to perceive theterms in their lease agreements as enforceable and binding, and consequently forgovalid legal rights and claims. Therefore, the article expects that such clauses will persist aslong as monitoring and enforcement mechanisms do not sufficiently deter landlordsfrom using such terms in their contracts. In light of this evidence, the article discussespreliminary policy prescriptions.