Understanding Austin TX Lease Agreements

Austin Lease AgreementThis year I leased 36 homes through the Austin MLS, plus some that never made it into the MLS. So probably 40+ leases this year. I would have leased another one and moved the people in this Friday the 30th, but they refused to sign the lease, so it didn’t happen.

A lease starts with an Application for Rental. Once a tenant is approved, we send the lease agreement via DocuSign, which allows the tenant to read and sign it securely online. Once I’ve signed off on behalf of my owner client, a copy of the completed lease agreement is automatically delivered via pdf attachment to all tenants who signed.

This paperless system is pretty cool, but it doesn’t provide for the face to face sit down that we had in the old days when we signed leases. Instead, tenants can email or call me with questions about the lease before signing.

The lease we use is the standard Texas Association of Realtors lease agreement. When I started leasing homes in Austin in 1990, the lease we used was 3 pages long. Today’s TAR Lease Agreement is 14 pages. Some tenants sign the lease without reading it carefully, judging by the short elapsed time between me sending and a tenant signing. Other tenants read the entire lease carefully, which is what I want every tenant to do. A lease agreement is a legally binding contract and a tenant should understand the obligations being entered into. Some tenants take issue with terms and conditions of the lease, and want me to make changes, which is what happened on the latest deal. But I don’t alter our leases for anyone, for any reason. Here’s why.

Uniformity of Operation
If you own and manage just one home, you perhaps have some flexibility to strike and change certain terms and conditions of your lease agreement, though I advise against it. Property Managers in Austin handle “portfolios” of properties and thus it’s important to have uniform and consistent terms and conditions across all lease agreements. All 40+leases that my tenants signed in 2011 have the exact same terms and conditions, excepting of course the property and tenant specific data. But, for example, all the late fee dates are the same (4th of the month), as are the late fee amounts (though we have an extremely low number of late payers – usually zero to one per month).  The items written into Special Provisions are the same for everyone. Repair provisions all exactly the same. All leases end on the last day of a month. All pet provisions are exactly the same. We don’t make changes for anyone, for any reason.

Promotes Fair and Equal Treatment of All Tenants
By establishing and maintaining this consistency across all leases, I don’t have to think about or remember anything that might be different from one lease to another. I don’t have to worry about accidentally treating one tenant differently than another. A tenant with excellent negotiating skills is not able to obtain more favorable lease terms than a tenant with marginal English speaking skills. They will have the same lease. By being consistent and not arbitrary, this also protects our owner clients from accusations of discrimination or unfair treatment. In short, it’s just good practice to be consistent across the board with all tenant leases.

But is Letting a Tenant Walk Away a Good Practice?
Yes. A tenant who can’t read and accept the standard TAR lease agreement and the additional provisions we write in disqualifies himself from leasing from us. Let me use a hypothetical example to make the point:

Applicant: The lease says I’m responsible for yard care. What does that mean?

Steve: Well, it means what it says there. But, in general, you water and take care of the yard, keep it looking good, mow and trim as needed, don’t let weeds take over.

Applicant: Specifically, how many times during the lease term will I be required to mow, and at what intervals?

Steve: The lease doesn’t specify a precise mowing schedule. It will depend on rain, temperature, etc.

Applicant: How will I know I’m not violating the lease if I’m not provided a specific mowing and watering schedule?

Steve: If your yard looks good and healthy, you’re ok. If the yard starts looking bad, you need to step it up.

Applicant: I want a specific mowing schedule and watering intervals written into the lease and a clause stating that if I follow that schedule I will be deemed in compliance with the lease no matter how the yard looks.

Steve: No, we don’t change our lease agreement language for anyone, for any reason. If you can’t clearly understand the contract as written, I won’t be able to lease to you. I’m going to return your application deposit and I wish you well finding a suitable landlord with a more suitable lease agreement.

Does the above example seem absurd? It’s a lot more reasonable than some of the conversations I get into with prospective tenants, usually over repair provisions. In the end, I’m almost always able to explain the lease and how the landlord/tenant relationship works sufficiently to get through the lease signing. Very few crater in fact. But many require more effort than needed.

Oddly, home owners are the worst at reading and understanding lease agreements. I rarely have trouble with tenants who have leased several homes previously in Austin. Especially if they’ve previously read and signed a TAR (Texas Association of Realtors) or TAA (Texas Apartment Association) lease. But a home owner moving from California who hasn’t rented a house in 15 years? They are often the worst when it comes to signing the lease. For some reason, often predisposed to think they’re going to get cheated out of the deposit or charged excessive fees, which any of my tenants can attest, simply doesn’t happen. And in that situation, it just doesn’t work for me to say “trust me, I’m honest and professional. You’re not going to be mistreated, neglected or ripped off”. Instead, I have to just say “Adios”. They’re either going to come around or I cut them loose.

Bottome Line – Read Your Lease
Read your lease. Do read it. But understand that not every conceivable scenario or situation can be expressly covered in precise detail by a lease agreement. Texas Property Code is the controlling law and the lease mirrors much of that code. Tenants have statutory protections in a number of areas, including the right to sue landlords over unresolved habitability (repair) issues.

But reasonable tenants and reasonable landlords could get by on a handshake. Unreasonable tenants and unreasonable landlords will get tangled up in disputes no matter how detailed a lease agreement might be. Almost always, this is because neither understand the lease agreement. In the end, as a Property Manager, my obligations are to my property owners. And those owners are best protected by consistent treatment of all tenants. And tenants, even the ones frustrated when I won’t write in special clauses for them, or strike wording they don’t like, are better served as well. They just have to deal with us for a while before they know it.