It's the Law

By HOWARD BOOKSTAFF, Hoover Slovacek LLP , HAA General Counsel

WHAT CAN YOU CHARGE?

To a delinquent resident who skipped, according to the new TAA lease.

IT’S THE BEST day ever! You just signed up your first resident on the new TAA lease. You will now get rent of a $1,000 per month for a 12-month term.

Then, after only two weeks, your worst nightmare occurs. (Maybe that’s a little dramatic.) While you were enjoying your morning coffee, you read your delinquency report. It’s the fourth day of the month and you discover the resident you just leased to only days ago has failed to pay rent. While making your rounds to deliver your notices to vacate, you realize the resident skipped.

Now comes the job of filling out a moveout statement. You have to itemize what the resident owes, but since you have never filled out a statement for amounts owed under the new lease, you have a number of questions. What can you charge?

Reletting Charge – Yes (LEASE DETAILS paragraph I and paragraph 7.1)

The amount of the reletting fee is identified on the first page in the “LEASE DETAILS” section. As with the prior TAA lease, the reletting fee is not to exceed 85% of the highest monthly rent during the lease term. It is important that this blank is filled in. If not, you won’t have the right to charge a reletting fee.

Pursuant to paragraph 7.1, the resident is liable for the reletting charge if the resident: (A) fails to move in, or fails to give written moveout notice as required by the lease; (B) moves out without paying rent in full for the entire lease term or renewal period; (C) moves out at the owner’s demand because of the resident’s default; or (D) is judicially evicted.

Keep in mind, the reletting charge does not compensate the owner for unpaid rent. The reletting charge is a liquidated amount covering only part of the owner’s damages for the owner’s time, effort and expense in finding and processing a replacement resident. The reletting charge is not a termination, cancellation or buyout fee and does not release the resident from obligations under the lease, including liability for future or past-due rent, charges for damages or other sums due. Now comes the job of filling out a move-out statement. You have to itemize what the resident owes, but since you have never filled out a statement for amounts owed under the new lease, you have a number of questions.

Accelerated Rent – Yes (paragraph 23.3) What can you charge?

Similar to the old lease, the new lease provides that unless the owner has elected not to accelerate rent, all monthly rent for the rest of the lease term or renewal period will be accelerated automatically without notice or demand and will be immediately due if, without the owner’s consent: (A) the resident moves out, removes property in preparing to move out, or the resident or any occupant gives oral or written notice of intent to move out before the lease term or renewal period ends; and (B) the resident hasn’t paid all rent for the entire lease term or renewal period. Remaining rent is also accelerated if the resident is judicially evicted or moves out when the owner demands because the resident has defaulted.

Paying Back Concessions – Yes (paragraph 23.5)

Like the old lease, the new lease provides that if the resident defaults, the resident will pay, in addition to other sums due, any rental discounts or concessions agreed to in writing that have been applied to the resident’s account. Consequently, any rent discounts or concessions that have already been given through the date the resident skips are required to be reimbursed.

Attorney’s Fees and Eviction Costs – Yes (paragraph 23.5)

The lease states that the owner may recover attorney's fees in connection with enforcing the owner’s rights under the lease. The lease also provides that the resident is liable for a charge (not to exceed $150) to cover the owner’s time, costs and expense for an eviction proceeding against the resident, plus the owner’s attorney’s fees and expenses, court costs and filing fees actually paid.

Of course, attorney’s fees and eviction costs will only be recoverable if the owner actually incurs these fees and costs. If no attorney was involved or no eviction was filed, these fees and costs should not be assessed.

Damages, Charges and Fees – Yes (paragraph 9 and other provisions throughout the lease)

Paragraph 9 provides that the resident must promptly pay or reimburse the owner for loss, damage, consequential damages, government fines or charges or costs of repair or service in the apartment community because of a lease or community policy violation, improper use, negligence or other conduct by the resident, the resident’s invitees, occupants or guests; or any other cause not due the owner’s negligence or fault as allowed by law, except for damages by acts of God to the extent they couldn’t be mitigated by the resident’s action or inaction.

There are also a number of other provisions in the lease that place the responsibility on the resident to pay damages, charges and fees.

The key to being able to charge damages, charges and fees is to identify the provision that makes it the resident’s responsibility to pay the damage, charge or fee. Pursuant to paragraph 9, if the resident or any occupants or guests damage the property, the resident is responsible for paying for the costs of repairs or service. If you cannot put your finger on the lease provision that places the responsibility on the resident, the damage, charge or fee should not be assessed.

Termination Fee – No

The early termination option was previously included in a separate addendum identified as the “Lease Addendum for Early Termination of the Lease Contract.” The concept of this lease addendum is now incorporated into the lease. However, it is important to note that the early termination option is only available to the resident if the resident is not in default.

Pursuant to paragraph J of the “LEASE DETAILS”, the resident is not eligible for early termination if the resident is in default of the lease. Pursuant to paragraph 7.2, if the resident is in default of the lease, the lease remedies (identified above) apply.

Insufficient Notice Fee – No

The standard TAA lease does not incorporate an insufficient notice fee. If the resident vacates the unit without proper notice, the resident would be held responsible for rent due for the remainder of the term of the lease through the accelerated rent provision.

Mitigation of Damages – Yes

Under the old TAA lease, the owner agreed to exercise customary diligence to relet and minimize damages and credit all later rent that the owner actually received from subsequent residents against the delinquent resident’s liability for past-due and future rent and other sums due.

Although this provision has been removed from the new TAA lease, Texas law provides that a landlord has a duty to mitigate damages if a tenant abandons the leased premises in violation of the lease. A provision of a lease that purports to waive a right or to exempt a landlord from a liability or duty under this section is void.

Consequently, even though the language is no longer in the TAA lease, an owner has a duty to mitigate damages. Although the statutory provision is subject to interpretation, if the unit is relet, it would be unlikely that a court would allow the owner to recover double rent from both the previous resident and the current resident. Consequently, you should continue to exercise customary diligence to relet the unit and minimize damages. If the unit is relet, you would then credit any amounts received from the subsequent resident against the liability of the previous resident.

Knowing what to charge to a delinquent resident who has skipped out can be challenging. By complying with the terms of the lease, you should be able to avoid unnecessary problems.

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