Texas Lease Renewals: An Introduction
Understanding the laws that apply to residential leases in Texas is important for both landlords and tenants. Many landlords and tenants will enter into a new lease each year as their leases come due, often based on an assumption that the lease will renew under whatever the same terms were when the previous term began. However, this is not always the case, and assuming that a lease does renew or just rolling over a lease without first having a new written amendment is a good way to get yourself into trouble. One of the best things you can do for yourself as either a landlord or tenant is to always have a written agreement regarding any renewal of your lease.
A common agreement for residential leases in Texas is a renewal that takes effect on a date certain with the same terms that were in effect between the parties at the start of the previous lease. In order for a renewed lease to be valid in Texas, however, both parties must agree to the terms of the renewed lease. This means that if all clauses of the previous lease are assumed to have renewed, the tenant actually must consent to renewing and continuing to abide by every single clause of the previous lease, regardless of whether they might have been happy, unhappy , or indifferent about these clauses when the lease was first signed. For this reason, it is important to review your lease and any other leases you might have on a property with your attorney after a lease has expired and you decide you want a tenant to remain on the property on fresh terms. Many amendments and renewals are likely to include clauses about consideration for the renewed lease as well as new provisions regarding the duties and obligations owed by the parties to each other.
A tenant might be interested in entering into a renewed lease because they want to stay in the property, don’t want to move, don’t have a choice in the matter because they have nowhere else to go or their credit is so bad they might not qualify for another property on the private rental market. A landlord might want a renewed lease because they want a tenant to stay with few to no changes in the terms of the previous lease and the same provisions that were already set up in that lease (e.g., cost of rent, terms of maintenance, responsibilities for repairs, etc.). It is also possible, though, that the landlord wants the tenant to leave simply because they don’t like the tenant, the rent was always late, the rent was too low, the tenant complained too much, the tenant bothered them too much, and so on.
Essential Legal Considerations for Lease Renewal in Texas
Texas has compulsory laws in place to protect both landlords and tenants in connection with the renewal of lease agreements. Primarily, landlords must give tenants with six months or longer "matured" leases a written, 30-day notice to renew the lease agreement. "Matured" means that no rent is currently owed per the lease terms. A landlord who plans to evict or not renew the lease must issue a four-month notice period.
The notice should contain the lease’s expiration date and the intended renewal date. Tenants must still pay rent whether or not they receive this notice. Without this notice in place, renters can argue that a lease does not have to be renewed, even when both the landlord and tenant wanted to extend their agreement. This provision does not apply to residential leases, however. In an apartment or house scenario, landlords and tenants can agree on specific termination dates and easily document this with a simple letter or email.
Lastly, the renewal agreement itself must comply with the Statute of Frauds. That means it must be in writing and signed by the parties to be enforced.
Notice of Renewal Period & Deadlines
When it is time to renew, the landlord and tenant generally will have some obligation to provide notice of the same. However, pursuant to Texas Property Code § 91.001(b), a landlord who has an automatic renewal lease provision is not required to give the tenant notice of the impending renewal. This said, if the lease does not include an automatic renewal provision, or any other type of renewal provision, the landlord must follow whatever notice procedure is set forth in the lease. In such leases, the landlord cannot change the rent amount without giving the required notice.
A written lease can provide that the landlord must allow the tenant 30 days to move out. If the landlord provides this notice, the tenant cannot be forced to move out before the expiration of that notice period, unless there is an emergency. Failure to provide the required notice allows the tenant to remain in the property for the length of the notice period, and may give the tenant legal grounds for a lawsuit against the landlord for damages. However, if the lease does not include a provision about notice, the landlord does not have an obligation to provide notice before the lease expiration (even if the lease allows the landlord to raise the rent amount). Even so, if the lease does not mention notice at all, the tenant should make efforts to leave by the end of the lease term.
Even when a Texas lease includes notice requirements, the parties can choose to waive the notice according to Texas Property Code § 91.001(c). In such situations, the lease cannot call for notice to be less than one month before the end of the lease term (or 30 days). Important exceptions to these notice requirements exist for rental properties with 10 or fewer units.
Common Lease Renewal Provisions
Among leading clauses in your lease for consideration with every renewal are rent increases, termination and change in terms. In the Texas Association of Realtors lease, for a renewal term there is a 10% cap on rent increases based on the current agreed price. In other words you can expect not more than a 10% increase for a one year renewal. You may have seen the percentage capped at 5-10% or even at the fair market value. There are also change in terms clauses that will require you to sign a new lease with the new rental terms or terms to be renegotiated. For example, it is common to anticipate rent increases at 5-10% per year or at the current fair market value. A renewal for 1 year at the fair market value may be expected. On January 1, 2019 an almost $1,000 increase in monthly rent is effective at the iconic Archstone Highland Village Apartments located at 3400 W. Alabama St., Houston, TX or about 10% increase from last year. At approximately 1,076 square foot that is about $1.73/sq.ft/month for rent. The market value of those apartments depend on location and amenities. Remember, a renewal with a 10% increase is an average of a $100 per month increase or $1,200 more per year. The fair market value may not take into account the average rent increase of a similar property in Houston over the past year. The importance of fair market value is highly relevant to renters as it retains current occupants in the property while controlling costs. In lieu of a renewal with an increased rent, a lessor can choose not to offer a renewal or terminate the lease. A renewal is a showing of good faith on behalf of the lessor.
Tenants and Landlords Rights upon Lease Renewal
Texas law provides certain protections to both tenant and landlord during the lease renewal process that are designed to benefit both the tenant and landlord. These rights and protections are often further described for the benefit of the tenant in the lease agreement itself and/or in the renewal notice or letter to extend the tenant’s option to renew the lease agreement. If the tenant is given a notice to renew that has conditions on it, the landlord must abide by those conditions unless the conditions violate Texas law.
Some of the rights afforded to tenants during the lease renewal process include:
-The right to receive a period of time that is at least thirty (30) days from the expiration date of the lease agreement to respond in writing to the notice of renewal;
-The prohibition for landlords from requiring tenants to give up their rights to raise defects in the premises, to complain about conditions that deteriorate the condition of the premises, such as mold or infestation of insects, rodents, pests, or vermin; and
-The prohibition against landlords from requiring tenants to release the landlord from liability for violation of local housing codes or from any other obligation of the landlord.
Some of the rights afforded to landlords during the lease renewal process include:
-The right to pay compensation in lieu of renewal of the lease agreement under section 92 . 191 of the Texas Property Code (Tenant’s Holdover to Prohibited); and
-The right to require in the lease agreement that all tenants agree to extend the lease agreement at the rent specified in the agreement for a period of the lesser of 1) a period of thirty (30) days; or 2) the period specified in the lease agreement for the exercise of extension options and the same rental terms in addition to the right to make improvements to the leased property during the renewal period.
Affirmative Obligations are contained in Section 92.055 of the Texas Property Code which provides the following:
-The tenant has a duty to reimburse the landlord for the services provided by the landlord to comply with any affirmative obligations imposed by local, state or federal housing who gave the landlord with notice as required by Subdivision (b) of this Section. The reimbursed costs include but are not limited to any:
1) Costs of work performed to repair the conditions that constitute a violation of the housing code; and
2) Reasonable attorney’s fees incurred in seeking the court to order compliance with such housing codes.
-The tenant’s duty to reimburse the landlord does not exceed, for each two (2) year period, the refundable and nonrefundable payments made by the landlord to the tenant.
Violations of the Benefits Granted to Landlord
When a landlord violates a tenant’s rights and/or the obligations of the landlord, the tenant will have a claim for damages. The damages available to a tenant include the right to recover actual damages, court costs and attorney’s fees for the legal costs incurred in bringing or defending a suit or managing action.
Resolving Lease Renewal Conflicts
While the renewal process appears simple on the surface, in practice it can be more complex, and disputes over whether a lease has been validly renewed often arise. In order to provide the clearest possible notice prior to a lease’s expiration, many Texas landlords send a notice of renewal containing language similar to the following: This lease is scheduled to expire on [insert expiration date]. At this time, please consider this notification my intention to renew this lease for an additional term of [insert period of duration] as specified in Paragraph [insert number] of the lease. If either party intends to let the lease expire without a renewal, please provide me with written notice at least [insert period of duration specified by lease] prior to the termination of the current lease term. Please note that I will expect the full and timely payment of rentals as required by the lease until you vacate or renew the lease. As evidenced by the language in the last sentence, disputes often arise in the context of an attempted renewal over (1) whether a lease has been validly renewed, or simply terminated because the landlord did not expect a renewal; and (2) the validity of a renewal where a rent increase has been proposed. The simplest resolution to these disputes is to have the parties document the renewal in writing, although the form of this writing can be informal to the point of a note on a napkin. A proper writing, however, must: (1) identify the property; (2) indicate renewal; (3) set the term; and (4) designate sufficient consideration for the renewal. This means that, even if the landlord still intends for the lease to terminate, receipt of additional consideration in exchange for a later expiration, even if only nominal consideration, may be sufficient consideration for a renewal. Thus, where a landlord communicates to a tenant that it is not interested in renewing due to a change in plans for the property, and expresses a willingness to allow the tenant to remain in the property indefinitely if the tenant pays $20.00 monthly, that arrangement may potentially extend the lease indefinitely under the text of the lease at $20.00/month. However, a court would likely consider the economic benefit to the landlord in fixing the lease in force and effect and receiving the rental amounts ($20.00) in excess of the tenant’s consideration under the expired lease ($900.00 monthly), to establish consideration sufficient to bind the landlord, notwithstanding that it is essentially a free and clear concession on the part of the landlord not to evict the tenant. Where an informal writing is not sufficient to characterize the intent of the parties, or where a tenant and landlord cannot agree to reduce their agreement to writing or disagree over the amount of consideration to be paid, options are available for reducing the agreement to writing and/or seeking appropriate relief. While these options are available to the parties at any stage in the process, disputes most often occur after a new term has commenced. It is important to realize that, as a general rule, the law and the lease enforce the creation of a new term despite the landlord’s failure to deliver a renewal agreement to the tenant and collect a new deposit; however, rather than simply rolling into a new term, the new term will be treated as a month-to-month lease. A month-to-month lease is one in which rental amounts are paid on a monthly basis. Although later disputed, Texas courts are reticent to classify relationships as month-to-month leases where the parties are not seeking to hire a residential lease, thus a presumption exists that a relationship is based on a written lease unless proven otherwise. Where a landlord believes that the agreement with its tenant is only temporary and should not be reduced to writing, a landlord can give a valid termination of the agreement by sending the tenant a proper notice of termination pursuant to the terms of the Texas property code and the lease (if any). Such notice is typically not required by month-to-month tenants but becomes necessary if the agreement with a tenant is for a fixed period of time and the landlord desires certainty in the timing of the termination of the lease.
Texas Lease Renewal Common Questions & Answers
What happens if my one-year lease is about to expire and I do not want to extend it?
Texas law allows a tenant to avoid renewing a lease agreement without penalty if the tenant provides notice three days prior to the end of the lease term. Where the lease is a one-year, or around that length, lease agreement, the required notice for the tenant to avoid a lease renewal is three days prior to the lease term expiring. However, leases of greater duration, such as for thirty-six months or greater, notice of six months is required, per Section 92.017 of the Texas Property Code.
What happens when I have a month-to-month lease and want out?
If you are displeased with your landlord or your property and want to terminate your lease, you need to provide your landlord with a thirty-day notice, signifying your intent to vacate. The thirty days starts on the day your landlord receives notice. If you cannot provide notice in accordance with the thirty-day rule, your lease will automatically renew on a month-to-month basis and the thirty-days will not become effective until the thirty-days has passed.
My landlord tells me if I do not sign the renewal lease provided by them, I will be evicted. What should I do?
In Texas, a landlord can in fact re-issue a lease for renewal, but only if the original lease stipulates such a provision. In the absence of this language, or if none was present to begin with, a landlord has no obligation to renew a lease agreement, and may in fact not be allowed to. As such, your landlord has no authority to sue you for eviction for not renewing your lease. If your landlord refuses to renew your lease, they cannot evict you unless they have grounds as stated in the Texas Property Code, which includes non-payment of rent, holding over after your fixed lease period.
My landlord wants to increase my rent if I choose to renew my lease for an additional year. Is this even legal?
Yes. Your landlord may increase your rental amount if you choose to extend your lease. There is no provision under the Texas Property Code prohibiting a landlord from raising the rate of your rent, provided the amount of rent and length of your lease are not specified in your lease agreement.
Your Guide to Lease Renewal Best Practices
Texas lease renewal laws are designed to strike a balance between the rights of landlords and tenants. It is crucial to know which rules apply to your lease as soon as you realize it is set to end within 90 days so you are prepared for either option – renewal or non-renewal. Be sure to give each party the proper notice well in advance so no deadlines are missed.
The options you have after your lease ends will depend on the type of agreement you have with your landlord. If you are on a month-to-month agreement , you have more flexibility and the right to continue your housing situation until either party takes steps to opt out. If you are not on a month-to-month agreement, and your landlord does not wish to renew, they are legally obligated to provide you with proper notification.
The best practices for both landlords and tenants is to communicate clearly and well in advance of the lease expiration. If all details are laid out and expectations are set, there should not be any surprises and a smooth transition for both parties will follow.