Texas Landlord Remedies for Commercial Rent and Anticipatory Breach and Abandonment

If you are a commercial property owner in Texas and the tenant tells you they are leaving mid lease term, what are the options for the landlord? The Texas Supreme Court set out a Texas landlord's options for abandonment and breach of the lease as follows:

The Landlord has four causes of action against a tenant for breach of the lease and abandonment. First, the landlord can maintain the lease, suing for rent as it becomes due. Second, the landlord can treat the breach as an anticipatory repudiation, repossess, and sue for the present value of future rentals reduced by the reasonable cash market value of the property for the remainder of the lease term. Third, the landlord can treat the breach as anticipatory, repossess, release the property, and sue the tenant for the difference between the contractual rent and teh amount recived from the new tenant. Fourth, the landlord can declare the lease forfeited (if the lease so provides) and relieve the tenant of liability for future rent.

Austin Hill Country, 948 SW2d at 299-300.

It should be remembered that under Texas Property Code Sec. 91.006, a Texas landlord has a duty to mitigate (in other words, try to relet the premises). However, the actual burden of proof is on the tenant to show that the landlord failed to mitigate and also show the amount that could have been saved but for the landlord's failure to mitigate. Id.

Recovery of past rent is a rental "arrearage" while recovery of future rent is considered "future damages". PRC Kentron, Inc. v. First City Center Associates, II, 762 SW2d 279, 281 and 288 (Tex.App.-Dallas 1988, writ denied). A prevaling landlord may also recover reasonable attorneys fees. West Anderson Plaza v. Exxon Mehdi Feyznia, 876 SW2d 528, 537 (Tex. App.-Austin 1994, no writ).

It should also be noted that a Texas statutory landlord's liens in the personal property may be affected by the abandonment of the property. A landlord may need to seek a distress warrant under Texas Property Code Sec. 54.025, since a statutory landlord's lien only lasts for one month after the day the tenant abandons the property under Texas Property Code Section 54.024.

The landlord needs to select a remedy, however, since choosing to terminate a lease may eliminate the ability to recover future damages. It is suggested that a Texas landlord consult with an attorney to evaluate these options.

Changing Locks on Residential Tenants in Texas: A Dangerous Business

Texas Property Code Section 92.0081 sets out the procedures for the removal of property and lockouts on residential property. Here are some practical tips:

1. A landlord may not remove a door, window, or attic hatchway cover unless it is done pursuant to a prompt repair of the premises. In other words, you can't just take a door off to "encourage" a tenant to leave. See Texas Property Code Sec. 92.0081(a).

2. If a landlord changes the door lock of a tenant that is delinquent in rent, it must be done according to the procedures set out in Texas Property Code Sec. 92.0081(c). Namely, the landlord must place a notice that (1) states an on site location where the tenant can go 24 hours a day to obtain the new key or a telephone number that is answered 24 hours a day that the tenant may call to have a key delivered within two hours after calling the number; (2) states the fact that the landlord must provide the new key to the tenant at any hour, regardless of whether the tenant pays any of the delinquent rent; and (3) the amount of rent and other charges for which the tenant is delinquent. The landlord must also, prior to changing the locks, send a warning, either mailed five days before the lock change, or hand delivered three days before the lock change, that states the date of the anticipated lock change, the amount of rent owed that must be paid to prevent the lock out, and the name and street address of the individual to whom, or the location of the onsite management office, at which the delinquent rent may be paid during the landlord's normal business hours. The lock change may not occur on a day or day before the landlord is not available or the onsite management office is not open for the tenant to pay the delinquency. The key must be provided to the tenant whether or not the tenant pays the rent. If the tenant doesn't show, the landlord must leave a notice of the day/time they showed up, along with the address for the location of the key during normal business hours. See Texas Property Code Sec. 91.0081(d)-(g).

3. If a residential landlord violates Texas Property Code Sec. 91.0081, the tenant may recover possession of the premises or terminate the lease, and a civil penalty of one month's rent plus $500, actual damages, court costs and reasonable attorney fees, less any delinquent rent or other sums owed to landlord. If the landlord does not allow tenant to use the key to enter the property regardless of paying the rent, the tenant is entitled to one month's rent as a civil penalty.

Thus, residential property lockouts are very risky endeavors and should be done with the consultation of an attorney after reviewing sections of the Texas Property Code.

Eviction Tips in Travis County

1. The landlord should review Texas Property Code Sec. 24.005 for the notice requirements before delivering the notice to vacate.

2. An eviction action should be filed in the justice precinct where the rental property is located.

3. The landlord generally will be required to wait three days after the eviction notice is delivered before filing the eviction action, unless the lease shortens the notice requirements.

4. The notice to vacate needs to be in writing and should be unconditional. It should tell the tenant to vacate unconditionally and by a date certain.

5. When filing, an attorney will need 1) a copy of the lease; 2) a copy of the notice to vacate; 3) filing fees; 4) service fees; 5) all contact information known for the tenant.

6. All parties to the lease, even those that are not currently residing in the property, should be named in the suit.

7. A suit for rent may be filed with the eviction suit if the amount due is within the jurisdiction of the justice court, which is currently $10,000. Charges for items other than rent cannot be joined with the suit for eviction.

8. Be prepared. The trial for the suit for eviction will be set on the day the case is filed.

Texas Charging Orders – Collection Devices Available Against Limited Partnerships

Texas Charging orders are an often overlooked collection device. A charging order is a postjudgment collection device, meaning you must have already obtained a judgment in the underlying lawsuit. Charging orders in Texas are discretionary, and the Court does not have to grant one. With a charging order, a creditor can reach a debtor’s interest in a limited partnership. It is basically a lien on the debtor’s partnership interest. Payment to the creditor is ordered out of the debtor’s interest in the partnership. However, the creditor can only receive distributions that the debtor would otherwise receive. For example, if the debtor is a partner in a limited partnership, the creditor can obtain a charging order ordering the partnership to pay any distributions to which the debtor is entitled in the future to the creditor in satisfaction of the Judgment. For judgments obtained prior to September 1, 2007, the Court may, at its discretion, appoint a receiver, foreclose on the interest, and order a sale of the interest. However, due to recent changes in the law, for Judgments obtained after September 1, 2007, the lien against the debtor’s interest is the exclusive remedy. Appointment of a receiver, foreclose on the interest, and ordering the sale of the interest are no longer available.

Note: A charging order in Texas is unavailable against partners of general partnerships but is available against members of limited liability companies.

Filing Time-Barred Lawsuits Violates the Fair Debt Collection Practices Act

Creditors must ensure that they are referring files to their attorneys before the limitations period for filing suit has run. Failure to do so may prevent the attorney from filing suit due to possible liability under the FDCPA. The FDCPA prohibits a debt collector from using any false, deceptive or misleading representation or means in connection with the collection of any debt. The purpose of the Act is to eliminate abusive debt collection practices, and courts view FDCPA claims with an unsophisticated debtor standard. Generally, when a lawsuit is filed beyond the limitations period, it is the Defendant’s burden to raise the affirmative defense that the claim is time-barred, that the Plaintiff waited too long to bring suit. However, in the collections arena, filing a time-barred lawsuit may be construed as a violation of the FDCPA. An Illinois court recently ruled that a debt-collector violates the FDCPA if he files a lawsuit and knew or reasonably should have known that it was time-barred. (Ramirez v. Palisades Collection L.L.C.) If a debt collector does file a time-barred lawsuit, to defend himself against accusation of an FDCPA violation, he must be able to show that it was a bona fide error that occurred even though procedures were in place to avoid such an error.

Lien Rights of Engineers, Architects & Surveyors in Texas

The Texas Constitution provides that “[m]echanics, artisans and material men, of every class, shall have a lien upon the buildings and articles made or repaired by them for the value of their labor done thereon, or material furnished therefor; and the Legislature shall provide by law for the speedy and efficient enforcement of said liens.” Tex. Const., Article 16, Section 37. This is the basis for the so-called Constitutional Lien, and the authorizing Texas Constitutional provision, for the statutory lien as provided for in Chapter 53 of the Texas Property Code.

In 1995, the Texas Legislature added provisions to the Texas Property Code that made it much easier for engineers, architects, and surveyors to secure a lien for their work. The amendments eliminated the difficult and problematic requirement that the design professional’s contract be filed prior to the commencement of work. Now, the design professional only needs to have a written contract and properly record (file) the lien.

Thus, § 53.021 of the Texas Property Code only requires that an architect, engineer or surveyor who: (1) prepares a plan or plat, (2) under or by virtue of a written contract with the Owner or the Owner’s agent, trustee, or receiver, and (3) that the work be done in connection with the actual proposed design, construction, or repair of improvements on real property or the location of the boundaries of real property has a lien on the property. As a result, as long as the engineer, architect or surveyor has a written contract with the owner and has actually prepared the plan or plat, the engineer, architect or surveyor, he or she will have a right to the lien, without regard to whether construction on the property actually occurred. It should be noted that as with all statutory liens under Chapter 53 of the Property Code, scrupulous observance of the deadlines for the sending of notices, and recording (filing) of the lien affidavit, are still required in order to obtain or “perfect” the lien.

Domestication of Foreign Judgments

Clients sometimes come to us with a judgment that was obtained in another state that they would like to enforce in Texas. In order to enforce a judgment obtained in the United States, but outside of Texas, known as a “foreign judgment,” it is necessary to first domesticate the foreign judgment. Under the Uniform Enforcement of Foreign Judgment Act, judgments rendered in sister states, as well as judgments rendered by federal courts, may be domesticated and enforced in Texas. To domesticate a foreign judgment in Texas, a judgment creditor files an authenticated copy of the judgment with the Texas court, along with an affidavit of the creditor’s and the debtor’s last known addresses. Once the judgment has been properly filed with the Texas court, the judgment creditor is free to pursue post-judgment collection activities including abstracting the judgment in the real property records and sending post-judgment written discovery. Thirty days after filing the foreign judgment a writ of execution may be obtained.