New Multifamily Laws Take Effect!

by Michael Payne, Allmark Properties

From my perspective, our industry had a successful 2019 Texas legislative session. TAA’s top priority Late Fee Clarification passed, as did property tax and school finance reform; however, our industry did not get everything we wanted this year. For example, our city fee transparency bill failed to get a vote in Texas House, so there is still work to do in 2021; but, overall, a very positive session for our industry.

More than 7,500 bills and resolutions were introduced this session of which more than 1,400 passed—approximately 19%—including a resolution sponsored by Stephanie Klick that honored AATC’s 50th anniversary. AATC Past President Nicolle Block and I were present in the Texas House gallery when the resolution was read and passed – a really cool experience.

TAA actively tracked more than 390 bills with 68 of these passing (17.5%). In addition to late fees and taxes, significant issues that passed that impact our industry include: 1) revisions to domestic violence early lease termination law; 2) clarification on lease termination for deceased residents; 3) parking permits; 4) guns on property; 5) development issues; and 6) affordable housing legislation.

More importantly, lots of bills that would have been bad for our industry did not pass, including 1) repealing source of income preemption (SOI); 2) flood disclosure; 3) mandatory CO detectors; and 4) limits on eviction records dissemination.

Big thank you to everyone who attended TAA’s Day at the Capitol in February and to AATC members who contacted legislators throughout the session about bills vital to the industry. Your voice and input made a difference. Thanks to AATC member attorney Jim Floyd for serving on the TAA Late Fee working group and AATC executive officers Jason Busboom, The Busboom Group, and Char McCurdy, Summit Property Management, for serving on TAA Legislative Committee.

Special thanks to our TAA lobbying team: Chris Newton, David Mintz, Sandy Hoy, and Kyle Jackson. They, along with our outside consultants, did their usual amazing job keeping bad things from passing and getting good bills through to the Governor. Thanks also to AATC’s Director of Government Affairs Perry Pillow. Finally, a big shout-out to AATC member state representatives Craig Goldman and Stephanie Klick for their service. Craig served on the powerful Calendars Committee this session and Stephanie was recently named Chair of the Texas House Republican Caucus. AATC is well represented in Austin.

As you know, when the Governor signs legislation, it effective either immediately, September 1, or January 1. Following are the 2019 Legislature Session highlights:

Late Fee Clarification (effective September 1, 2019) – Given the potential legal liability Texas landlords faced regarding the reasonableness of late fees, this legislation was TAA’s top priority. This legislation clarifies current law by stating that a late fee must be reasonable and repeals confusing language regarding the need for a late fee to be an “estimate of uncertain damages.” Most importantly, the new law provides that a late fee up to 10% for multifamily and up to 12% for 1-4-unit properties is considered reasonable. A late fee that exceeds those percentages is considered reasonable if direct or indirect damages associated with late payment of rent exceed those amounts. The new law increases the grace period by a day, i.e. if rent is due on 1st, late fee may not be collected until the 4th.

Tenants are now allowed to request an accounting of any late fees owed. The law also provides that to be liable for being unreasonable a late fee must be “collected” rather than “charged” and that the late fee applies to any “portion of the tenant’s rent” that is late.

Property Tax & School Finance Reform (effective January 1, 2020) – A member of the Tarrant County legislature delegation pointed out that the legislature did property tax and school reform, not relief.  The property tax law limits year over year property tax levy increases for cities, counties and special districts to 3.5% (currently 8%) and forces an automatic November election if an entity (city, county, etc.) wants to increase by more than 3.5%.

This law creates specialized Appraisal Review Boards (ARB) in counties with 1 million-plus population (including Tarrant County) for properties valued at $50 million or more adjusted for inflation. It eliminates challenges by local governments to value of an entire category of properties before an ARB and enhances the Comptroller’s role in standardizing tax rate calculations and data gathering. Finally, this law increases electronic financial disclosures by taxing units.

The school finance legislation (effective September 1, 2019) increases the state’s share of school funding; reduces recapture rates for property-wealthy school districts; and lowers the school property tax rates by an average of 8 cents in 2020 and 13 cents in 2021.

Family Violence Lease Termination (effective September 1, 2019) – TAA worked closely with Tarrant County State Senator Jane Nelson to pass this legislation. This law amends family violence lease termination to allow a tenant to provide additional forms of documentation to terminate the lease including an emergency order by a magistrate or documentation from:

  • a licensed health care services provider;
  • a licensed mental health services provider; or
  • a trained family violence shelter “advocate.”

Death of a Sole Resident (effective January 1, 2020) – This law codifies (already in TAA Lease) the right to terminate lease upon death of a sole resident upon the later of either: 30 days after landlord receives written notice from a representative of the estate, or written notice has been provided, the tenant’s belongings have been removed, and the representative has signed an inventory, if requested.

Parking (effective January 1, 2020) – This law requires parking permits to be coterminous with a lease.

Guns (effective September 1, 2019) – This law provides that a landlord may not prohibit a tenant or guest from lawfully having a firearm or ammunition in the rental unit, leased premises, or vehicle in the parking lot, or in other areas necessary to go to and from the rental unit, leased premises or vehicle.

The law makes such possession a defense to criminal trespass, concealed carry or open carry prohibitions. Most importantly, the law does not allow weapons to be displayed in a threatening manner.

Development (effective May 21, 2019) – This law prohibits cities from basing residential building permits or inspection fees required for construction or improvements on the value of the dwelling or the cost of constructing or improving the dwelling. It also says that cities may not require disclosure of information related to the value of or cost of constructing or improving a residential dwelling as a condition of obtaining a building permit (except as required by FEMA).

As of September 1, 2019, a governmental entity is prohibited from adopting or enforcing a requirement that prohibits or limits the use of a building product or material that is approved under a national model code (with certain exceptions such as for historic buildings).

Justice of the Peace Court Jurisdiction Limits (effective September 1, 2020) – This law increases the jurisdiction of JP courts in civil matters to include disputes of up to $20,000 (increased from $10,000). It does not affect the handling or prioritization of eviction cases.

If you have any questions about these or other bills, be sure to give Perry Pillow call at (817) 616-0354 or email him at ppillow@aatcnet.org.

Michael Payne, Allmark Properties, is the AATC Treasurer.