1-1 By: Uresti, Reyna of Bexar H.B. No. 2803 1-2 (Senate Sponsor - Van de Putte) 1-3 (In the Senate - Received from the House May 11, 2001; 1-4 May 11, 2001, read first time and referred to Committee on Business 1-5 and Commerce; May 11, 2001, reported favorably by the following 1-6 vote: Yeas 4, Nays 0; May 11, 2001, sent to printer.) 1-7 A BILL TO BE ENTITLED 1-8 AN ACT 1-9 relating to refund or retention by a landlord of a security deposit 1-10 under a commercial lease. 1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-12 SECTION 1. Chapter 93, Property Code, is amended by adding 1-13 Sections 93.004-93.011 to read as follows: 1-14 Sec. 93.004. SECURITY DEPOSIT. A security deposit is any 1-15 advance of money, other than a rental application deposit or an 1-16 advance payment of rent, that is intended primarily to secure 1-17 performance under a lease of commercial rental property. 1-18 Sec. 93.005. OBLIGATION TO REFUND SECURITY DEPOSIT. (a) The 1-19 landlord shall refund the security deposit to the tenant not later 1-20 than the 60th day after the tenant surrenders the premises and 1-21 provides notice of the tenant's forwarding address under Section 1-22 93.009. 1-23 (b) The tenant's claim to the security deposit takes 1-24 priority over the claim of any creditor of the landlord, including 1-25 a trustee in bankruptcy. 1-26 Sec. 93.006. RETENTION OF SECURITY DEPOSIT; ACCOUNTING. (a) 1-27 Before returning a security deposit, the landlord may deduct from 1-28 the deposit damages and charges for which the tenant is legally 1-29 liable under the lease or damages and charges that result from a 1-30 breach of the lease. 1-31 (b) The landlord may not retain any portion of a security 1-32 deposit to cover normal wear and tear. In this subsection, "normal 1-33 wear and tear" means deterioration that results from the intended 1-34 use of the commercial premises, including breakage or malfunction 1-35 due to age or deteriorated condition, but the term does not include 1-36 deterioration that results from negligence, carelessness, accident, 1-37 or abuse of the premises, equipment, or chattels by the tenant or 1-38 by a guest or invitee of the tenant. 1-39 (c) If the landlord retains all or part of a security 1-40 deposit under this section, the landlord shall give to the tenant 1-41 the balance of the security deposit, if any, together with a 1-42 written description and itemized list of all deductions. The 1-43 landlord is not required to give the tenant a description and 1-44 itemized list of deductions if: 1-45 (1) the tenant owes rent when the tenant surrenders 1-46 possession of the premises; and 1-47 (2) no controversy exists concerning the amount of 1-48 rent owed. 1-49 Sec. 93.007. CESSATION OF OWNER'S INTEREST. (a) If the 1-50 owner's interest in the premises is terminated by sale, assignment, 1-51 death, appointment of a receiver, bankruptcy, or otherwise, the new 1-52 owner is liable for the return of the security deposit according to 1-53 this chapter from the date title to the premises is acquired, 1-54 regardless of whether an acknowledgement is given to the tenant 1-55 under Subsection (b). 1-56 (b) The person who no longer owns an interest in the rental 1-57 premises remains liable for a security deposit received while the 1-58 person was the owner until the new owner delivers to the tenant a 1-59 signed statement acknowledging that the new owner has received and 1-60 is responsible for the tenant's security deposit and specifying the 1-61 exact dollar amount of the deposit. The amount of the security 1-62 deposit is the greater of: 1-63 (1) the amount provided in the tenant's lease; or 1-64 (2) the amount provided in an estoppel certificate 2-1 prepared by the owner at the time the lease was executed or 2-2 prepared by the new owner at the time the commercial property is 2-3 transferred. 2-4 (c) Subsection (a) does not apply to a real estate mortgage 2-5 lienholder who acquires title by foreclosure. 2-6 Sec. 93.008. RECORDS. The landlord shall keep accurate 2-7 records of all security deposits. 2-8 Sec. 93.009. TENANT'S FORWARDING ADDRESS. (a) The landlord 2-9 is not obligated to return a tenant's security deposit or give the 2-10 tenant a written description of damages and charges until the 2-11 tenant gives the landlord a written statement of the tenant's 2-12 forwarding address for the purpose of refunding the security 2-13 deposit. 2-14 (b) The tenant does not forfeit the right to a refund of the 2-15 security deposit or the right to receive a description of damages 2-16 and charges for failing to give a forwarding address to the 2-17 landlord. 2-18 Sec. 93.010. LIABILITY FOR WITHHOLDING LAST MONTH'S RENT. 2-19 (a) The tenant may not withhold payment of any portion of the last 2-20 month's rent on grounds that the security deposit is security for 2-21 unpaid rent. 2-22 (b) A tenant who violates this section is presumed to have 2-23 acted in bad faith. A tenant who in bad faith violates this 2-24 section is liable to the landlord for an amount equal to three 2-25 times the rent wrongfully withheld and the landlord's reasonable 2-26 attorney's fees in a suit to recover the rent. 2-27 Sec. 93.011. LIABILITY OF LANDLORD. (a) A landlord who in 2-28 bad faith retains a security deposit in violation of this chapter 2-29 is liable for an amount equal to the sum of $100, three times the 2-30 portion of the deposit wrongfully withheld, and the tenant's 2-31 reasonable attorney's fees incurred in a suit to recover the 2-32 deposit after the period prescribed for returning the deposit 2-33 expires. 2-34 (b) A landlord who in bad faith does not provide a written 2-35 description and itemized list of damages and charges in violation 2-36 of this chapter: 2-37 (1) forfeits the right to withhold any portion of the 2-38 security deposit or to bring suit against the tenant for damages to 2-39 the premises; and 2-40 (2) is liable for the tenant's reasonable attorney's 2-41 fees in a suit to recover the deposit. 2-42 (c) In a suit brought by a tenant under this chapter, the 2-43 landlord has the burden of proving that the retention of any 2-44 portion of the security deposit was reasonable. 2-45 (d) A landlord who fails to return a security deposit or to 2-46 provide a written description and itemized list of deductions on or 2-47 before the 30th day after the date the tenant surrenders possession 2-48 is presumed to have acted in bad faith. 2-49 SECTION 2. This Act applies only to a lease of commercial 2-50 rental property entered into or renewed on or after the effective 2-51 date of this Act. 2-52 SECTION 3. This Act takes effect September 1, 2001. 2-53 * * * * *