BILL ANALYSIS C.S.H.B. 1474 By: Dutton 4-28-95 Committee Report (Substituted) BACKGROUND In Texas, if a tenant violates any provision of the lease agreement a landlord usually has the option of terminating the lease and evicting the tenant. Regardless of the severity of the default or the intentions of the tenant, landlords, through their managers, often terminate leases of good tenants. Periodically landlords and tenants dispute the interpretation of the lease, the amount of rent that is owed or other matters. Most states require landlords to provide written notice to a tenant who is in default that the tenancy will be terminated if the tenant fails to comply within three days (sometimes five or seven days) of the notice. In other words, the tenant is given the choice to "quit the premises or cure the breach" PURPOSE H.B. 1474 provides Texas tenants the same opportunity to cure a default in rent payment that tenants in other states enjoy. Specifically, landlords would have to give tenants written notice of the opportunity to cure default at least three business days before termination of the lease and the tenant's right to possession of the premises. If a tenant cures a default on or before the deadline, a landlord could not terminate the lease. If a tenant failed to pay within three days, a landlord could file a "forcible detainer" suit to regain lawful possession of the premises. If the court decides in favor of the landlord solely on the basis of nonpayment or untimely payment, then the amount necessary to cure the default is set at the sum of the delinquent rent and reasonable late fees owed to the landlord, and any court costs charged to the tenant. If a tenant cures a default before the fifth day after the court ruling, she/he will be reinstated under the lease, and the landlord may not repossess the premises. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution. SECTION BY SECTION ANALYSIS SECTION 1. Adds, Section 24.0051 to Chapter 24, Property Code. Section 24.0051. RESIDENTIAL TENANT'S RIGHT TO CURE DEFAULT. (a) A landlord may terminate the lease of a residential tenant who fails to pay rent that is due if the tenant fails to pay the rent before the fourth business day after the date the notice of default required by this section is delivered. (b) A landlord who intends to terminate the lease must notify the tenant in writing. (c) Delivery of the notice must be delivered by regular mail or by registered or certified mail, return receipt requested; delivered in person to the tenant or to any person residing at the premises who is at least 16 years of age; or affixed to the inside of the main entry door to the premises. (d) The notice must state the tenant is in default under the lease, inform the tenant of their right to cure the default, and specify the action required and the period available to cure the default. (d) A tenant does not have a right to cure a default if the default resulted from violent criminal activity or an illegal drug related activity; or the tenant earlier received, during the previous 12-month period, at least one default notice for nonpayment of rent and the tenant timely cured the default. SECTION 2. Effective date: September 1, 1995 SECTION 3. The change in law made by this act applies only to a tenant who defaults on or after the effective date. A tenant who defaults before the effective date of this Act is covered by the Law in effect at the time of the default. SECTION 4. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE SECTION 1. (a). The original bill allowed tenants who defaulted on their lease to avoid termination of the lease by complying with the lease terms by the third day. The committee substitute changes the time requirement to before the fourth business day. (b) and (c). The committee substitute separates subsection (b) of the original bill into two subsections but the content is the same. (d). Subsection (c) of the original bill is now subsection (d) of the committee substitute. (1) the committee substitute requires the notice to state that the tenant is in default due to the failure of the tenant to pay rent or due to rent being paid after it was due. (2) has no change from (c)(2) of the original bill. (3) requires the notice to specify the action required of the tenant and the period available to cure the default. Subsection (c)(3) of the original bill required the nature of the default to be specified in the notice. (e). Prevents the landlord from terminating the lease if the tenant cures the default as in the subsection (d)(1) of the original bill. Subsections (2)(3)(4) of the original bill under subsection (e) are deleted from the committee substitute. Section 24.0052, titled Residential Tenant's Right to cure Default after Eviction Suit Filed, is deleted; subsection (e) in the substitute stipulates that unless stated otherwise by the lease, the tenant does not have the right to cure default if the default resulted from illegal activity or if the tenant has had a prior default notice served. SECTION 2. Effective date is the same as in the original bill. SECTION 3. Applicability provision. SECTION 4. Emergency clause. SUMMARY OF COMMITTEE ACTION The Business and Industry Committee considered H.B. 1474 in a public hearing on April 25, 1995. The committee considered a complete committee substitute for H.B. 1474. 1 (one) amendment was offered to the substitute. The following witnesses testified in favor of H.B. 1474: Robert Doggett, representing Legal Services of North Texas; Julie Wheeler, representing herself; John Henneberger, representing Texas Low Income Housing Information Service; Katherine Stark, representing Austin Tenants Council; Fred Fuchs, representing himself; Jaynie Lindsay, representing herself; Dorothy Masterson, representing Housing Crisis Center; Pamela M. Brown, representing Texas Legal Services Center; Yasmin Thomas, representing Texas Tenant's Union. The following witnesses testified against H.B. 1474: Joe Sharp, representing Texas Apartment Association; and Larry Niemann, representing Texas Apartment Association. The following witness testified on H.B. 1474: J. Raymond Schiflett, III, representing University of Texas at Austin Students' Attorney's Office. Committee amendment #1, to the committee substitute, was adopted without objection. The committee substitute, as amended, was adopted without objection. The Chair directed the staff to incorporate the amendment into the substitute. H.B. 1474, as substituted, was reported unfavorably by a record vote of 4 (four) ayes, 3 (three) nays, 0 (zero) present-not-voting, 2 (two) absent. Without objection, a motion to reconsider the vote at a later date was granted. The committee amendment to the committee substitute was withdrawn without objection. The committee substitute was withdrawn without objection. H.B. 1474 was left pending before the committee. H.B. 1474 was reconsidered in a formal meeting on April 28, 1995. The committee considered a complete committee substitute. 1 (one) amendment was offered to the substitute. Committee amendment #1 was adopted without objection. The committee substitute, as amended, was adopted without objection. The Chair directed the staff to incorporate the amendment into the substitute. H.B. 1474, as substituted, was reported favorably with the recommendation that it do pass and be printed, by a record vote of 8 (eight) ayes, 1 (one) nays, 0 (zero) present-not-voting, 0 (zero) absent.