As we all know, February’s weather event wreaked havoc across Texas, leading to lost utilities, sub-freezing temperatures, serious discomfort and, in some cases, significant damage. At SmartEgg, 20 of the properties we manage in our 120-property portfolio suffered some type of damage, including broken pipes and leaks, busted water heaters, and downed tree branches. In some cases, tenants were affected by these issues and it was important for us to know what our clients’ and tenants’ rights were.
Your rental property investor clients may have turned to you for help to understand their rights and obligations. Your primary focus is likely sales but that doesn’t mean you can’t be a trusted resource for investor clients now and in the future. If you helped them lease their properties, then most likely you used the Texas Realtors® (TXR) lease, which is what we use and what I recommend. For the purposes of this article, I am assuming the TXR lease is being used. (If not, then the actual lease needs to be consulted along with the Texas Property Code.)
First off, landlords should know that tenants have obligations to protect the home they live in from adverse weather events. Paragraph 17A(7) states: Tenant, at Tenant’s expense, must . . . take all necessary precautions to prevent broken water pipes due to freezing or other causes.
Paragraph 17A(11) states: Tenant, at Tenant’s expense, must . . . know the location and operation of the main water cut-off valve and all electric breakers and how to switch the valve or breakers off at appropriate times to mitigate any potential damage.
If tenants don’t take necessary precautions and there is damage that can be attributed to their negligence, the landlord may have recourse to charge the tenants for the repairs and/or evict for breach of lease. Your clients should speak to an attorney if this happens, especially if the damage is significant enough that it could affect their insurance rates.
Repair obligations are covered by Chapter 92, Subchapter B of the Texas Property Code. First and foremost, a tenant is required to notify the landlord of the condition. It then allows for 7 days for a landlord to make a diligent effort to repair issues at the property unless there are reasons that would necessitate a different time frame, such as materials or utilities not being available (both of which have definitely been the case after this storm!). As long as the landlord is making a diligent effort to have repairs made, tenants are not to make repairs themselves. If an insurance claim is filed, then the repair doesn’t have to begin until after the landlord receives the insurance proceeds.
If after a casualty loss the home is completely uninhabitable, either the tenant or the landlord can terminate the lease. If the home is partially unusable, then the tenant may be entitled to a proportionate reduction in rent.
While the TXR lease doesn’t require renters insurance, Paragraph 34H of the TXR lease does recommend that tenants get it and explains why: Landlord’s insurance does not cover Tenant from loss of personal property. Landlord highly recommends that Tenant obtain liability insurance and insurance for casualties such as fire, flood, water damage, and theft.
Landlords are not responsible to cover a tenant’s personal property, but a proper renters insurance policy can cover them for water damage. I’m sure we all saw news stories of ceilings that broke through and flooded entire homes. I pray that these tenants have renters insurance, although I’m aware that some (maybe many) of them do not. Renters insurance is an inexpensive way to get a lot of coverage—I wish all landlords would require it so that tenants are protected. Another advantage to renters insurance may be having hotel expenses covered since landlords have no obligation to cover them. Tenants may put themselves up in a hotel even without insurance, but they don’t have the right to expect the landlord to cover it.
While this doesn’t cover every possible scenario, it does cover the main ones. If you have questions, you’re more than welcome to reach out and I’ll be happy to answer what I can. If your client needs a real estate attorney, I’m happy to make recommendations. Of course, I hope both you and your clients came through this storm as unscathed as possible but we know everyone in Texas was affected in some way and so it’s wise to know what your rights and obligations are as a rental investor.