Reletting, Never Boring
I have a question for those FWAA members who are parents. It is summer. Kids are out of school. How many times since June 1 have you heard one or more of your kids say, “I’m bored!” or “That’s boring!” If I had said that to my mother, I would have spent the next 8 hours cleaning the house, mowing the yard, and engaging in any other vigorous activity my mother deemed necessary to combat my lackadaisical attitude!
Battling boredom continues after childhood. If we were honest, most of us get severe boredom when reading the TAA Lease and TAA lease forms. I see you nodding your head. The TAA Lease is about as exciting as reading Leviticus, War and Peace, or the latest Pillow Talk article (Perry, you know that is true). Did you know we measure the length of a Pillow Talk article in units called Pillow Talk Units, or PTUs for short? To give you a frame of reference, War and Peace is about 5 PTUs.
Have you ever read the entire TAA Lease contract? Frankly, most FWAAC members have not. Let us be honest: It is a legal document, a contract, and tedious—and that is its best quality! But the TAA Lease and lease forms are the operational foundation for our industry in Texas! It’s boring, for sure, but in this case, boring is good.
It is critical that Texas multifamily owners and operators understand the TAA Leases and addendums. TAA General Counsel Sandy Hoy, along with the best landlord-tenant lawyers in the nation, frequently reviews and revises the TAA Lease, lease forms, and REDBOOK articles. The TAA Lease is so good that it is the model for the NAA National Lease.
Because lawyers write the TAA Lease to be used by non-lawyers and rental housing owners/operators, it contains lots of confusing legalese that protect owners/operators. This month’s article takes a deep dive into reletting.
Per usual, REDBOOK Blues does not provide legal advice. If you need legal advice, contact one of FWAA’s member attorneys (https://www.aatcnet.org/legal-services-program).
Paragraph 7 “Reletting and Early Lease Termination” is the most misunderstood and misapplied portion of the TAA Lease. To help you, your colleagues and residents have the best possible rental experience, below are helpful tips.
Tip #1: You, all onsite office staff, and all corporate operations staff read, re-read, and read again Paragraph 7. Learn it, know it, and understand it. You must be prepared to explain it to your residents. Fully understanding Paragraph 7 helps you be confident and stand your ground when an angry resident challenges you about reletting.
Tip #2: Tenants who vacate early will at least owe the reletting charge (which can be up to, but not exceed, 85% of the monthly rent) as set forth in Paragraph 7.1 – Reletting Charge.
Tip #3: Paragraph 7:1 states that the reletting fee is not: 1) a termination, cancellation, or buyout fee and 2) does not release the resident from their obligations under the TAA Lease, including liability for future or past-due rent. Hint: 7:1 is the key to understanding reletting. Most renters assume that if they pay the reletting fee their obligations end—out of sight out of mind. Not so!! Renters seeking to exercise paragraph 7 remain obligated to pay rent and other sums until a new tenant signs a contract for that unit.
Tip #4: When executing a new lease and upon renewal, have all leaseholders read aloud the entirety of paragraph 7. Ask each leaseholder individually for verbal (not just a head-nod) acknowledgement that they have read and understand paragraphs 7.
Tip #5: Bold print in the TAA Lease means these words are important. The below phrase appears in bold at the end of paragraph 7.3 – Special Termination Rights.
“You may have the right under Texas law to terminate the Lease early in certain situations involving military deployment or transfer, family violence, certain sexual offenses, stalking, or death of a sole resident.”
Tip #6: Paragraph 7.2 allows residents to terminate their lease early if they satisfy all the requirements under Lease Details Paragraph J. Industry best practices are generally a termination fee equivalent to 2-months of rent.
Understanding and communicating the procedures and implications when a resident seeks to terminate their lease early is essential to operational success.
If you are still bored, please re-read this article!
April Royal, Birchstone Residential, is FWAA’s 2024 Treasurer and Government Affairs Committee Chair.
