BILL ANALYSIS


                                                        H.B. 3028
                                          By: Ehrhardt (Gallegos)
                                                    State Affairs
                                                         05-22-95
                              Senate Committee Report (Unamended)
BACKGROUND

Texas law does not require landlords to protect, segregate, or pay
interest on tenants' security deposits.  Foreclosing mortgagors and
trustees in bankruptcy, as judgment-proof landlords, are not
obligated to return the tenant's deposits.  Thus, many Texas
tenants lose their deposits to failed landlords each year.  There
is also no specific requirement that an application deposit be
returned within a reasonable time after rejecting a prospective
tenant, or any limitation on how long a landlord may hold a deposit
while the application is being considered.  A search for housing
can be disrupted indefinitely by a delay in the return of these
deposits.

PURPOSE

As proposed, H.B. 3028 sets forth requirements regarding the return
of a security deposit or application deposit provided by
residential tenants or prospective residential tenants and lease
obligations of certain landlords; provides a civil penalty.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not grant any
additional rulemaking authority to a state officer, institution, or
agency.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 92.101, Property Code, to apply this
subchapter to all residential leases, rather than a lease executed
or entered into after September 1, 1973.

SECTION 2. Amends Section 92.102, Property Code, to provide that
a security deposit is any advance of money, other than a rental
application deposit or an advance payment of rent, that is intended
primarily to secure performance under a lease of a dwelling that
has been entered into by a landlord and a tenant.

SECTION 3. Amends Section 92.103, Property Code, by amending
Subsection (c) and adding Subsection (d), to provide that the
tenant's claim to the security deposit takes priority over the
claim of any creditor of the landlord, including, rather than
except, a trustee in bankruptcy.  Provides that if a dwelling
occupied by a tenant is purchased at a foreclosure or tax sale or
is purchased from a bankruptcy trustee and if the new owner accepts
rent from the tenant or honors any landlord obligation under the
lease (obligation), the new owner is liable for performing all
obligations, including the return of any security deposit.

SECTION 4. Amends Chapter 92C, Property Code, by adding Section
92.1041, as follows:

     Sec. 92.1041.  PRESUMPTION OF REFUND OR ACCOUNTING.  Provides
     that a landlord is presumed to have refunded a security
     deposit or made an account of the deductions if the refund or
     accounting is placed in the mail and postmarked on or before
     the required date.
SECTION 5. Amends Chapter 92, Property Code, by adding Subchapter
H, as follows:

            SUBCHAPTER H.  RENTAL APPLICATION DEPOSITS

     Sec. 92.331.  DEFINITIONS.  Defines "application deposit,"
     "applicant" or "rental applicant," "co-applicant,"
     "deposited," "landlord," and "required date."
     
     Sec. 92.332.  REJECTION OF APPLICANT.  (a) Provides that the
     applicant is deemed rejected by the landlord if the landlord
     does not give notice of acceptance of the applicant within a
     certain time period.
     
     (b) Requires a landlord's rejection of one co-applicant to
       be deemed as a rejection of all co-applicants.
     Sec. 92.333.  PROCEDURES FOR NOTICE OR REFUND.  (a) Provides
     that a landlord is presumed to have given notice of an
     applicant's acceptance or rejection if the notice is given in
     a certain manner and time period.
     
     (b) Provides that a landlord is presumed to have refunded an
       application deposit on or before the required date if the
       landlord's refund check is sent or made available to the
       applicant in a certain manner, except as provided by
       Subsection (c).
       
       (c) Requires the landlord to mail the refund check to the
       applicant at the address furnished by the applicant by the
       required date if an applicant requests that any acceptance
       of the applicant or any refund of the application deposit be
       mailed to the applicant.
       
       (d) Requires the date of required notice to be extended to
       the end of the next day following a Saturday, Sunday, or
       holiday if the date of required notice of acceptance or
       refund is a Saturday, Sunday, or state or federal holiday.
       
     Sec. 92.334.  LIABILITY OF LANDLORD.  (a) Provides that a
     landlord who in bad faith fails to refund an application
     deposit in violation of this subchapter is liable for the sum
     of $100, three times the amount of the application deposit,
     and the applicant's attorney fees in a suit to recover the
     deposit.
     
     (b) Provides that a landlord who fails to refund an
       application deposit by the required date is presumed to have
       acted in bad faith.  
     SECTION 6.     (a) Effective date: January 1, 1996.  Makes application
of this Act prospective.

     (b) Provides that a landlord who accepts funds from a
     prospective tenant and has not rejected the applicant as a
     tenant before the effective date of this Act is presumed to
     have rejected the applicant as a tenant before the seventh day
     after the effective date of this Act.
     
     SECTION 7.     Emergency clause.