Many investors are turning to residential properties as a means of additional income. While this business can be very lucrative, understanding the potential pitfalls is extremely important. Being diligent and knowledgeable is always to your advantage.
- Know your lease. There are many template lease forms available on the internet. Make sure your lease is clear on the essential terms such as lease term, rent amount, security deposit, and whether the lease automatically renews. The lease should also be clear on the tenant and landlord’s respective responsibilities. It is also crucial that your lease complies with Texas law. For example, the Texas Property Code requires written leases to contain conspicuous language informing tenants of certain remedies. See Tex. Prop. Code § 92.056(g).
- Know your statutory duties. The Texas Property Code imposes certain duties on a landlord and there are steep penalties for failure to comply. For example, if a tenant pays rent in cash, a landlord must provide a written receipt and keep a record book. Tex. Prop. Code § 93.013. Failure to provide a receipt or maintain a record could result in statutory penalties of up to one-month rent or $500.00, whichever is greater, for each violation. Landlords also have specific duties to repair conditions on the property which materially affect the physical health or safety of a tenant when a tenant has given proper notice of same. See id., § 92.052. Moreover, there are instances wherein a landlord may be required to release a tenant before the expiration of their lease such as for family violence or military service. See Tex. Prop. Code §§ 92.016 – 92.017. These examples are only a portion of the many statutory requirements imposed on residential landlords.
- Know your statutory rights. The Texas Property Code also provides for landlords’ rights. For instance, generally, a landlord may deduct damages and charges for which a tenant is legally liable (e.g., back rent), from the security deposit, as long as an itemized list of deductions is provided in accordance with the statute. See id., § 92.104. Further, there are certain terms a landlord can include in the lease such as requiring a tenant to provide written notice (versus just oral) for certain conditions of the property that need repair. See id., § 92.052(d).
- Know how to properly evict. If a tenant has defaulted on rent or otherwise breached the lease, you may be able to evict the tenant and/or occupants. However, the procedures for eviction are complex and must be strictly followed. For example, before you can file a lawsuit to evict, written “notice to vacate” must be provided to the tenant (and/or occupants) in a certain manner, and must provide a timeframe in which to vacate the premises (generally, at least three-days).
- Know when you cannot evict. The eviction moratorium promulgated by the Centers for Disease Control (“CDC”) has been extended to at least July 31, 2021. The moratorium applies to tenants who have successfully completed a CDC declaration and have provided the declaration to the landlord. If a tenant has provided you with a proper declaration, you should refrain from filing a lawsuit for eviction until after July 31, 2021. Note that at least one federal judge in Texas ruled that the moratorium is unconstitutional. Accordingly, it appears to be up to each individual court/judge to decide whether to enforce the moratorium.