REDBOOK Blues – When Your Resident Leaves Early

by Michael Payne, Allmark, AATC's Government Affairs Chair

For non-lawyers, contracts can be confusing – just look at your latest laundry service contract! Too many therefor’s,witnesseth’s, and party’s to remember! Similar misunderstandings occur with the TAA Lease Contract. We are so familiar with this form, that we often causally refer to it as “the lease”; forgetting that it is a contract.

By far, the most misinterpreted, misread part of the TAA Lease Contractis Paragraph 10 –Unlawful Early Move-Out and Reletting Charge. You and your onsite teams need to read, reread, and fully comprehend this section of the TAA Lease Contract.

Many residents believe they can end their lease at any time by merely paying the reletting fee (which can be up to, but not exceed, 85% of the monthly rent). They cannot! The language in Paragraph 10 precisely, purposely, and in bold letters states:

The reletting charge is not a cancellation fee and does not release you from your obligations under this Lease.

You and your residents need to under both parts of that lease language. First, paying the reletting fee does not cancel the lease.  Second, paying the reletting fee does not relieve the resident of their agreed to responsibilities under this contract. More importantly, it is not a buyout. In other words, after paying the reletting fee, renters are obligated to pay rent and adhere to all parts of the TAA Lease Contractuntil either: 1) the apartment community leases the unit to someone else; or the 2) the lease term ends.

The reletting fee is simply an estimated amount of partial cost of prepare the unit to be leased. It is impossible for anyone to know the actual cost of marketing, overhead, locator services, make-ready costs, etc. prior to the unit being leased to a new tenant.

A good management and renter relations tip: when signing a new lease or up renewal have the parties to the lease (leaseholder(s) and owner/management company representative) initial and date each section of Paragraph 10. This acknowledgment ensures that the resident(s) was made aware of their obligation.  You might also ask for verbal acknowledgement (e.g. Do you fully understand Paragraph 10?).

When a tenant vacates the leased premises prior to the end of their lease, the landlord is often left with two key questions: 1) what am I required to do next, and 2) how can I collect any monies that are owe?

The Texas Property Code requires a landlord to send an itemized security deposit accounting to a tenant on or before the 30th day after the tenant surrenders the premises.

Sometimes a landlord overlooks this requirement when a tenant breaks the lease, since the tenant is unlikely entitled to any refund. Even so, the landlord is still required to mail the tenant an accounting within 30 days (if the tenant provided a forwarding address), and there are strict penalties if this isn’t done. An itemized accounting also provides helpful evidence for future collection efforts.

In order to generate a proper itemized security deposit accounting, the landlord must determine which fees are applicable to the tenant.

The tenant may also owe, among other things, unpaid rent, late fees, pet fees, damage to the apartment, and legal fees. Tenants who are judicially evicted prior to the termination of their lease are also liable for these same fees.

When determining how much a tenant owes for damages to the premises, the landlord must omit any amount resulting from normal wear and tear pursuant to section 92.104(b) of the Texas Property Code.

Once the total amount owed by the tenant is calculated, the security deposit is then applied. The term “security deposit” is defined by the Texas Property Code as follows:

“any advance of money, other than a rental application deposit or an advance payment of rent, that is intended primarily to secure performance under a lease of a dwelling that has been entered into by a landlord and a tenant.”

Consequently, pet deposits and other fees may fall under the legal definition of “security deposit.”  A landlord should carefully review the fees it charged the tenant, and seek legal advice when unsure whether a fee falls within the definition of security deposit.

Although not required, photographic evidence of any damage to the apartment is recommended. Tenants do occasionally file lawsuits against landlords, months or even years after they have vacated. It’s best to prepare for this possibility before it arises by supporting all charges relating to damages to the premises with photographic evidence.

Finally, the landlord must deduct any amount it mitigated. Section 91.006 of the Texas Property Code, and paragraph 32.6 of the TAA lease, require a landlord to mitigate its damages. Mitigation means the landlord must use objectively reasonable efforts and “exercise customary diligence” to re-let the apartment. It is important to note that a landlord is not required to re-let the premises to simply any tenant; rather Texas law requires the landlord to re-let the premises to a suitable tenant under the circumstances. In some cases, a landlord is able to re-let the premises within a few days after the tenant vacated early. If that’s the case, then the landlord must deduct the rent it receives from the amount the tenant owes.

Once all of the charges and credits are listed on the itemized security deposit accounting, the security deposit accounting is complete.  As noted previously, landlords are required to send the security deposit accounting to the tenant within 30 days of the tenant surrendering the premises.  Tenants could file a lawsuit against the landlord if this doesn’t occur.  Section 92.109 of the Texas Property Code states that a “landlord who in bad faith does not provide a written description and itemized list of damages and charges: (1) forfeits the right to withhold and portion of the security deposit or to bring suit against the tenant for damages to the premises; and (2) is liable for the tenant’s attorney’s fees to recover the deposit. This section further provides that a landlord who fails either to return a security deposit, or to provide a written description and itemization of deductions on or before the 30thday, is presumed to have acted in bad faith.

The statute is clear that not meeting the 30-day deadline is a presumption of bad faith. A presumption is a shifting of the burden of proof—not an automatic, irrebuttable conclusion. When the 30-day deadline is missed, the owner has the burden of proving that its delay was not in bad faith.

However, pursuant to section 92.107 of the Texas Property Code, the 30-day time period does not start until the tenant gives the landlord a written statement of the tenant’s forwarding address.  A landlord is presumed to have properly refunded a security deposit, or made an accounting of security deposit deductions, if the refund or accounting is placed in the United States mail andpostmarked on or before the 30thday.

Landlords are also able to send the tenant’s delinquent account to a collection agency pursuant to paragraph 32.5 of the TAA lease. Itemized security deposit accountings are helpful evidence for collection agencies, and even more helpful for the landlord’s attorney should the matter end up in court.

Following the above steps after a tenant vacates early should greatly reduce legal liability with respect to security deposits and collection efforts. If you have any questions regarding these matters, we recommend you seek legal advice.

Michael Payne, Allmark Properties, is the AATC Government Affairs Committee Chair.