A Brief Introduction About the Texas Residential Lease Agreement
When a landlord wants to let his or her property out on lease, then a Texas residential lease agreement needs to be signed.
When letting out or hiring a residential property in Texas, it is advisable to use the Texas association of realtors residential lease agreement as it conforms to the rules laid down for real estate rentals in Texas.
If you look at the Texas residential lease agreement 2018, there were some ambiguities when it came to what was a reasonable late fee that the landlord can charge the tenant. This resulted in numerous class action lawsuits.
In September 2019, Chapter 92 that deals with residential leases was changed by SB 1414. If there are more than four dwelling units involved, then a late fee of 12% would be charged, and if the number of dwellings was below 4, then a late fee of 10% would be charged.
Another significant change in 2019 would be the number of days after the due date when the late fee would be applicable. Prior to September 2019, it was a day, but now it is two days.
These changes can be found in the Texas residential lease agreement in 2019.
Who Takes the Texas Residential Lease Agreement? – People Involved
If you are looking for a property to hire on lease for residential purposes as a tenant, or if you are a landlord or property owner wanting to lease out your property on rent, then this agreement would be required.
This agreement would be drafted in accordance with the rules and regulations relating to residential tenancy in the state of Texas.
Purpose of the Texas Residential Lease Agreement – Why do You Need It?
As a landlord, when you let out your property, you expect to earn a reasonable rate of return on investment and a regular flow of income. The landlord would also like to protect himself or herself against damages caused by the tenant during the period of the tenancy. The landlord should receive the rental on time.
There should be a code of conduct that the tenant would be expected to follow. The landlord should also have a right to enter the property. The tenant should not assign or sublet the property. Alterations or improvements to the property should not be undertaken without the permission of the landlord.
As a tenant, there are certain expectations from the landlord, such as repairing any material defects in the property. The tenant should also have the right to inspect the property and certify that the condition of the property is acceptable. The tenant should mention the purpose for which the property is being taken on rent. The tenant should receive the property on time. The tenant needs to take responsibility for the repair of the property, as well.
Without an agreement, there are high possibilities that both parties would suffer. The landlord will not get the monthly rent or will get the payment late. They would have cash flow problems as the rent would irregular. The tenant could make alterations to the property without informing the landlord.
Contents of the Texas Residential Lease Agreement – Inclusions
To know the contents of such agreements, you can download the Texas residential lease agreement word and make the necessary changes required.
Here are the contents of a standard agreement:
- The names of the landlord and the tenant, the parties to the agreement
- The effective date of the agreement
- The duration of the lease: The starting and the ending date
- Description of the property being leased including the location
- Delinquent rent: The late charge to be levied in case of delay
- Returned checks: Penalty to be paid for this
- Increase in rent: If it is a monthly agreement, then the landlord may ask for a rent increase after providing 30 days notice
- Security deposit: To be adjusted against any damages caused by the tenant, and the balance returned when the tenant vacates the premises.
- Purpose of use: The premises can only be used by the tenant and his or her family and cannot be used commercially
- Attorney fees: The tenant agrees to pay any legal expenses incurred by the landlord for enforcing any clause violated by the tenant
- Assignment and subletting: The property cannot be assigned or sublet without the written permission of the landlord
- Non-delivery of possession: If the landlord is not able to hand over possession of the property within a specified period, then the agreement is terminated
- Maintenance, repairs, and rules: The premises must be maintained in good condition, and the tenant should not obstruct the passage to the premises
- Damage to premises: The agreement will be terminated if the damages are not due to the tenant’s fault.
- Access by the landlord: The landlord has the right to inspect the property and carry out repairs.
How to Draft the Texas Residential Lease Agreement?
While drafting this agreement, you can download the Texas residential lease agreement pdf to use as a reference, and then customize your agreement according to your specific requirements.
Here are the points you need to consider when drafting this agreement:
- Eligibility to enter into a contract: Both the parties to the contract, the landlord and the tenant, should be over the age of 18, of sound mind and not be under the influence of drugs or be coerced to enter the contract
- Rent payable by the tenant: You should determine the rent, which has been agreed upon the payment schedule, the due date for the rental, and the penalty on a delay of the payment. The number of dwellings is considered while calculating the penalty
- Terms of the contract: The terms should be fair to both the landlord and the tenant. The agreement should protect the tenant and the landlord, and it should not be unfair to any party
- Dispute resolution clause: In case of disputes, either arbitration or litigation will be applied, and the attorney fees will be shared by the tenant
- Termination clause: If either party wants to terminate the contract prematurely, they can do so by serving a notice to the other party
- Governing law: The laws of the state of Texas shall apply for this agreement
- Signing the contract: One page of the contract should be reserved for the signatures of the landlord and the tenant
Negotiation Strategy
When it comes to the Texas residential lease agreement, it is important for the landlord and the tenant to go through the draft agreement before signing it. The tenant should find out the fair market rent for a similar property, and then negotiate the price offered by the landlord. The tenant could negotiate some extra facilities for the rental charged by the landlord.
Benefits and Drawbacks of the Texas Residential Lease Agreement
The benefits of the Texas residential lease agreement are:
- Protection of interest: The interest of both the landlord and the tenant are protected. The landlord gets the lease rental on time, and the tenant gets property in good condition at a convenient location. The landlord adjusts any damages by the tenant against the security deposit
- Grace period for dues: The grace period of payment of dues is two days, after which there is a penalty of 12% or 10% depending on the number of dwellings owned by the landlord
- Termination of agreement: If the tenant fails to make payment after the grace period and the property is not delivered to the tenant before the closing date, then the agreement is terminated
The drawbacks of the Texas residential lease agreement are:
- Non-receipt of rental: If there is no agreement, then the landlord will not get the payment or may get delayed payment.
- No repair of defects: Defects in the property which should have been repaired by the landlord are not completed
- No legal remedy: If there is any violation by either party, no legal action can be taken in the absence of a written contract
- Frequent disputes: Without an agreement, there will be a dispute regarding all issues
What Happens in Case of Violation?
In case of violation of the Texas residential lease agreement, the two parties can try to resolve the matter between themselves amicably.
If that does not work, then the landlord sends a legal notice to the tenant informing them about the breach of contract and the penalty for it, including legal action in a court of law.
The landlord can claim monetary damages from the tenant(1). If the extent of the damage is large, then there will be a total breach claim, and if it is not significant, then a partial breach will be claimed.
If any party has used fraud or deception to get the other party to enter into the contract, then under rescission, the contract will be canceled or a fresh contract drawn by the court. When the contract is canceled, no party has any contractual obligations.
If one of the parties is not competent to continue with the contract, then the other party will go for restitution where any money or property given to the other party has to be restored to the giver.
If the contract is at an advanced stage, then the specific performance will be applied where no monetary damages are accepted. The party who has violated the contract has to fulfill their contractual obligations.
In the case of a Texas residential lease agreement, both the parties to the contract should understand the terms and conditions before signing the contract.
The tenant should ensure that the property is in good condition. The landlord should repair any defects in the property before handing over the same to the tenant.
When it comes to payment of lease rental dues, there was an announcement in September 2019 regarding the penalty that the landlord can levy. It cannot be more than 12% for more than four dwellings and 10% for less than four dwellings.
The grace period for delay in payment has also been increased from 1 day to 2 days. When the contract is being drafted, these details need to be incorporated.
The dispute resolution clause should be a part of the agreement so that there is a predetermined procedure for resolution of disputes(2), whether it be arbitration or litigation, and whether attorney fees are to be shared or not.