There are new laws affecting multifamily leases in the state of Texas. While we see no monumental shifts, some of these changes can provide new revenue, while others will require amendments to your current lease form. Following is a summary of some of the new laws:
EFFECTIVE SEPTEMBER 1, 2009
1. WATER SUBMETERING SERVICE CHARGE NOW AUTHORIZED. Senate Bill 2126 modifies §13.503 of the Water Code to allow the owner of an apartment complex containing five or more units where water use is submetered to have tenants pay a “service charge” of not more than nine percent of the submetered water costs and applicable taxes and surcharges that are charged by the retail public utility to the owner; however, the law specifically excludes Section 8 residents and apartments that have received an allocation of low income housing tax credits.
Discussion: The service charge was previously available for owners of mobile home rental communities, but the Legislature, in an effort to encourage submetering of water rather than master metering and allocation of water costs, expanded the service charge to apartments. It appears that the nine percent charge is to be calculated on the average water cost per gallon (or other measure) times the tenant’s usage, with the water cost including the taxes and surcharges to the owner. It should be noted, however, that the service charge calculation relates to submetered water costs and may not apply to the additional costs related to wastewater.
2. LATE FEES. House Bill 1109 modifies §92.019(a) of the Texas Property Code (the “TPC”) to clarify one of the requirements for charging late fees for rent by providing that the rent must have remained unpaid for at least one full day after the date originally due.
Discussion: The prior requirement was that the rent “remains unpaid after the second day after the date” originally due. The language was confusing. Now, if rent is due on the fifth and still not paid on the sixth, a late charge can be instituted on the seventh (assuming the other requirements of notice in the lease and reasonability are met).
3. SIREN ACTIVATED GATE OPENERS. House Bill 1063 adds §352.1145 to the Local Government Code and allows the County Commissioner’s Court to require that electric gates to a gated multifamily project located outside of municipal boundaries open on the sounding of an emergency vehicle siren.
Discussion: This provision reduces the number of keys fire departments carry to gain entry to gated communities. If the County Commissioner’s Court authorizes the action, the owner will be required to add a siren-sensing opening system to the electric gate.
4. MINIMUM HABITABILITY STANDARDS IN HOUSTON, TEXAS. House Bill 1819 adds §214.219 to the Local Government Code to require that cities with populations of 1.7 million or more (Houston) establish minimum habitability standards for multifamily rental buildings including required maintenance and proper operating conditions.
EFFECTIVE JANUARY 1, 2010
1. SMOKE ALARM ACCOMMODATION FOR THE HEARING IMPAIRED. Senate Bill 1715 modifies §92.254 of the TPC to require that a landlord, if requested by a tenant as an accommodation for a person with a hearing disability, install a smoke detector meeting the other requirements of the Section, which is also capable of alerting a hearing-impaired person in his/her bedroom.
Discussion: The tenant can request the installation (it appears to be at landlord’s expense) for an occupant (not necessarily the tenant) for the bedroom occupied by a hearing-impaired person (not necessarily the remainder of the premises). Once the request is made, if the tenant provides a written notice to landlord that tenant may exercise certain remedies under the subchapter if landlord doesn’t comply with the request within seven days, the tenant may seek, among other things, to terminate the lease and sue for damages and attorneys’ fees.
2. LIABILITY OF LEASE GUARANTORS. House Bill 534 adds §92.021 to the TPC regarding renewable residential lease guaranties. This new section provides that the guaranty of a lease is good only for the original lease term (and not any renewal) unless the lease contains certain written disclosures stating (a) the last date, as specified by the guarantor, on which the renewal will occur, (b) the guarantor is liable for renewals occurring on or before such date, and (c) the guarantor continues to be liable under the renewal only if the parties are the same as in the original lease and the renewal does not increase the guarantor’s financial obligation for rent over that which existed under the original lease.
Discussion: While this does not preclude the landlord from obtaining a newly executed guaranty in connection with a renewal of a lease, if the landlord is depending on an existing guaranty to secure the renewal obligations, without appropriate disclosure language the continuation of the guaranty will not be enforceable. Note that even with the proper language, the overall financial obligation of the guarantor cannot increase — thus, a landlord’s damages against a continuing guarantor on a properly documented renewal lease may be capped. For renewals, you may want to have a new guaranty or an acknowledgment of the revised obligations signed by the guarantor.
3. RIGHT TO MOVE OUT AND AVOID LIABILITY FOLLOWING CERTAIN SEX OFFENSES. Senate Bill 83 expands §92.016 of the TPC regarding a tenant’s ability to terminate and move out for “Family Violence” to now include certain specific sex offenses (including, if the tenant is the victim of a sexual assault, a parent or guardian of a victim of a sexual assault or aggravated sexual assault, or a parent or guardian of a child against whom continuous abuse took place within the prior six month period on or at a dwelling in the premises). A tenant can, with 30 days prior written notice (unless the family violence is committed by a cotenant or other occupant of the premises, in which case no notice is needed), terminate his/her rights under a lease, vacate the premises, and avoid liability for future rent and other sums due under the lease for an early termination if the tenant provides certain notices and copies of documents to the landlord relating to the family violence or the sexual assault (NOTE: The family violence will no longer be confined to a cotenant or other occupant of the premises). Additionally, unless the lease contains language regarding the tenant’s statutory right of termination for the assaults or abuse, a proper termination by the tenant will also release the tenant from all liability for delinquent, unpaid rent. The language suggested by the statute is “Tenants may have special statutory rights to terminate the lease early in certain situations involving sexual assault or sexual abuse.”
Discussion: This law expands a tenant’s rights to terminate the lease. In the past, a tenant had a right to terminate for family violence (if the abuser was a cotenant or occupant) and military deployment or transfer. This law (a) removes the requirement that the abuser must be a cotenant or an occupant, and (b) if the necessary documentation is delivered to landlord, adds to the existing categories of family violence, various sexual assaults that took place during the preceding six month period on the premises or in any unit on the premises against the tenant or against a child or other person if the tenant is the parent or guardian. While this allows the victim/parent/guardian the right to vacate the premises without liability for termination, it does not appear to affect the liabilities of other cotenants of the dwelling. Depending on the structure of your lease, you may want to combine the new statutory notice and the prior notice on family violence and military deployment or transfer into one, such as: “Tenants may have special statutory rights to terminate the lease early in certain situations involving family violence, sexual assault, sexual abuse, or military deployment or transfer.”
4. UTILITY DISCONNECTION. House Bill 882 modifies §92.008(b) of the TPC to make it illegal for a landlord to disconnect utilities (water, wastewater, gas, or electric service) except for bona fide repairs, construction, or emergencies.
Discussion: Prior to this modification, a landlord could interrupt utility service in certain limited circumstances. Those circumstances have been eliminated. If a landlord interrupts utility service after the effective date of the law, and the landlord or the person served with a writ of restoration fails to return the utility to service, the landlord or the person served may be held in contempt of court and subject to an indefinite jail term, without bail, until purged of the contempt. The simple rule going forward is: Do not interrupt utilities in response to a tenant’s default.
5. PERSONAL LIABILITY FOR EMPLOYEE OF OWNER OR MANAGER. Senate Bill 1945 amended §250.003 of the Local Government Code to provide that an employee of an owner or manager of real property who receives a citation for violation of city ordinances is not personally liable for criminal or civil penalties if they disclose certain owner identification information within five days after the issuance of the citation.
Discussion: It appears that if the employee fails to provide the name, current address and phone number of the current owner within the time period, the employee could be personally liable for fines and jail time for violations of city ordinances.
The summaries are provided for information purposes only and are not intended to be a thorough analysis of the new laws or of their potential effects. Should you have further questions, please consult your local Texas counsel. A copy of the specific legislation can be obtained at Texas Legislature Online: www.capitol.state.tx.us or you can contact us and we will provide you with a copy.