San Antonio Court of Appeals Decision Limits Shifting of Costs for Damages to Rental Units

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

As real estate lawyers in San Antonio, Texas, we frequently receive calls relating to disputes between landlords and tenants over which party has responsibility to pay for damage to a rental property or its contents (usually the tenant's personal property).  Liability is frequently determined by reviewing the express terms of the lease and a simple assessment of which party caused or permitted the damages.  

Sometimes, however, it is unclear who (if anybody) caused the damages. On other occasions, it is clear that neither the landlord nor the tenant caused the damages (think criminal acts of uninvited third parties, Acts of God, etc.).  In these cases, Chapter 92 of the Texas Property Code and the lease's specific damages provisions are closely scrutinized, as both speak to assigning liability. However, as recently articulated by the Fourth Court of Appeals, there do exist limits on the rights of parties to contract (by lease) for liability for damages.

In Philadelphia Indem. Ins. Co. v. White, 421 SW 3d 252 (Tex. App. -- San Antonio, 2013), the Fourth Court was confronted with a lease that expressly imposed contractual liability on the tenant for all damages not caused by the landlord. During the term of this lease, a tenant-owned dryer malfunctioned, causing a fire in the tenant's rental unit and several neighboring units.  The landlord's insurance carrier paid for damages, and then filed suit against the tenant on a subrogation claim. A jury determined that the tenant was not negligent in causing the fire, but that she had breached the lease when she failed to pay the landlord for damages upon demand.  In essence, the jury determined that the tenant had not negligently caused the fire, but, nevertheless, was bound to pay the landlord for damages because the landlord was not responsible for causing the fire, either.  The trial court disagreed with the jury, and entered Judgment NOV.

On appeal, the Fourth Court affirmed the trial court based upon its finding that the lease was void as against public policy, because all it required to impose liability on a tenant was a showing that the damage was not caused by the landlord. Specifically, the Court stated: 

We believe the public policy of Texas, as expressed in the Property Code, is that tenants may be held responsible for damages they, their cotenants, or their guests cause, and a landlord and tenant have the freedom to contractually agree a tenant will pay for specific kinds of repair without a showing that the tenant caused the damage. See Churchill Forge, 61 S.W.3d at 370-73. Absent from this legislatively-expressed public policy is the imposition of contractual liability on a tenant for any and all damages to the apartment complex whenever the damages are not caused by the landlord. 

White, 421 SW 3d at 258. In discussion leading to this conclusion, the Court cited TEX. PROP.CODE § 92.006, but recognized that the statute applied only to specifically enumerated  kinds of repairs that the parties can, by contract, shift the duty to pay for from the landlord to the tenant. Ostensibly, leases that purport to shift other (or all ) liability to the tenant may be void.

When drafting or negotiating a residential lease agreement, it is incumbent on the parties to recognize the limitations that Chapter 92 of the Texas Property Code imposes on the ability of parties to freely contract regarding (among other things) liability for general damages to the rental unit. 

Payment of Security Deposits in the Event of a Residential Tenant's Breach of Lease

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

As an attorney who regularly provides advice, counsel and representation to residential property managers and owner/landlords, issues and disputes surrounding accounting-for and refunding a tenant's security deposit present themselves just about every week.

Security deposit disputes take various forms, including the following (to name a few):

• the landlord's alleged failure to timely account for/refund the deposit;
• allegedly unreasonable deductions by the landlord for damages to the rental property;
• treatment of a tenant's security deposit (by the Tenant) as "last month's rent;" 
• failure by the tenant to provide a forwarding address in writing; and 
• use of the security deposit by the landlord to satisfy the Tenant's rent obligations under the Lease.

Various statutes contained in Chapter 92 of the Texas Property Code are implicated in competing claims for payment of security deposits. Specifically, Property Code Sections 92.102, 92.103, 92.104, 92.1041, 92.107 and 92.109 (together with the written Residential Lease Agreement) guide the parties rights to the deposit.

In my experience, many of the most contentious security deposit disputes arise when a tenant has surrendered the property prior to expiration of the Lease term (for whatever reason), and has also provided the landlord (or his property manager) written notice of their forwarding address.  In these instances, there are 2 competing concerns and 2 very different sets of expectations.

It is axiomatic that most tenants expect to receive a refund of all or most of their Security Deposit. However unrealistic this expectation may be, and perhaps primarily because of the expense associated with moving, Tenants are largely emotionally invested in the Security Deposit.  However, when a tenant has vacated the property during the Lease term (as opposed to at the need of the term) and/or when a rent balance remains under the Lease, and perhaps primarily because of the expense associated with vacancy in a rental property, Landlords are also largely emotional about security deposits.   These competing emotions tend to limit the desire of the parties to compromise, thereby creating fertile breeding ground for rancorous disputes.

The law clearly provides that a tenant who surrenders the property at a time when an undisputed amount of rent is owed is not entitled to an accounting (i.e. an itemized list of deductions from the security deposit) or a refund of the Security Deposit. See Texas Property Code Section 92.104(c).  The fact that a tenant has provided a written forwarding address in compliance with Texas Property Code Section 92.107, does not obviate Section 92.104(c) or otherwise impose upon a Landlord to whom an undisputed amount of rent is owed any obligation to account or refund.

The most distasteful (to me) security deposit cases arise when a tenant solicits and receives an agreement from the landlord to terminate the Lease early, and then seeks statutory damages and penalties under Texas Property Code Section 92.109, when the landlord fails to account and/or refund within 30 days. Unfortunately, however, tenants can, and sometimes do, prevail in such cases if the agreement to terminate also dispenses with the Tenant's obligation to pay rent under the Lease.  That is, the Landlord's agreement to terminate the Lease early and waive future rents from the tenant makes Section 92.104(c) inapplicable, and instead, implicates Sections 92.103 and 92.104(a).

Confused yet?  The statutory scheme is admittedly tricky, and a landlord's slip-up can result in costly penalties (including an award of attorneys' fees and costs to the tenant). Thus, a landlord or property owner who is unsure of his or her obligation to account for and/or refund a tenant's security deposit is well advised to contact an experienced real estate lawyer.  Also, check out my blog post on Security Deposit FAQs from September 2008.