C.S.H.B. 2180 78(R)    BILL ANALYSIS


C.S.H.B. 2180
By: Baxter
Business & Industry
Committee Report (Substituted)



BACKGROUND AND PURPOSE 

In 2001, Section 93.004 of the Property Code was enacted to prohibit
commercial landlords from charging their tenants any charges unless (1)
the charge was authorized in the lease and (2) either the dollar amount or
the method of computing the charge was contained in the lease.  The bill
applied to all commercial leases that were executed or renewed after that
date.  Some issues with the bill have come to light since its passage:  

_Some leases that clearly authorized a charge are silent as to the exact
dollar amount or the manner of computing the dollar amount--but the method
of computation was nonetheless implied under common law. An example is a
lease that states the tenant is liable for its prorata share of common
area expenses but the lease omits stating that the prorata formula is a
square footage basis.  Prior to the bill, when there was such an omission,
the common law would imply a commercially reasonable method or the courts
could look to the intent of the parties at the time of signing or to how
the parties actually handled the charge after the lease was signed.  The
2001 bill contained no provision to address this occasional omission. 

_Many leases that were signed before the effective date of the 2001 bill
contained a unilateral right on the part of the tenant to renew after
2001.  In those situations, when the tenant exercises its renewal option,
the landlord has no power to rewrite the renewed lease so that the lease
can comply with the statutory requirement of an express computation
method-yet the statute applies to such renewal.  Therefore, a post-2001
lease renewal of a pre-2001 lease could be in violation of the statute,
but the landlord would have no opportunity to avoid the violation. 


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. 

ANALYSIS

SECTION 1.  Amends Chapter 93, Property Code, as follows:

Sec. 93.004 is renumbered as Sec. 9012 since two bills adding a "Section
93.004" were enacted in 2001. 

Sec. 93.012(a)(2) states that if the charge is permitted in the lease and
the dollar amount or method of computation was omitted, the computation
must be by a method provided in Subsection (b) of the bill. 

Sec. 93.012(b) provides that any fee that was authorized in the lease
without stating the exact dollar amount or computation formula, must be
computed by a method customarily used by landlords in commercial leases of
a similar duration and for a similar type of commercial property. 

SECTION 2.  Provides for an effective date of September 1, 2003 and states
that if a lease was  executed prior to that effective date, all renewals
of the lease after that date that are not "negotiated" renewals will be
governed by the law in effect at the time the lease was originally signed. 






EFFECTIVE DATE

September 1, 2003



COMPARISON OF ORIGINAL TO SUBSTITUTE

The substitute does not make any substantive changes from the original
bill as introduced. It has simply been rewritten to conform to Legislative
Council drafting guidelines