By: Creighton  S.B. No. 1783
         (In the Senate - Filed March 12, 2021; March 26, 2021, read
  first time and referred to Committee on Business & Commerce;
  April 19, 2021, reported adversely, with favorable Committee
  Substitute by the following vote:  Yeas 8, Nays 0; April 19, 2021,
  sent to printer.)
Click here to see the committee vote
 
  COMMITTEE SUBSTITUTE FOR S.B. No. 1783 By:  Hancock
 
 
A BILL TO BE ENTITLED
 
AN ACT
 
  relating to a fee collected by a landlord in lieu of a security
  deposit.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subchapter C, Chapter 92, Property Code, is
  amended by adding Section 92.111 to read as follows:
         Sec. 92.111.  FEE IN LIEU OF SECURITY DEPOSIT. (a) If a
  security deposit is required by a residential lease, the landlord
  may choose to offer the tenant an option to pay a fee in lieu of a
  security deposit. If a landlord offers a tenant the option of
  paying a fee in lieu of a security deposit, the landlord:
               (1)  shall offer the tenant the option to instead pay a
  security deposit; and
               (2)  may not use a prospective tenant's choice to pay a
  fee in lieu of a security deposit or a security deposit as a
  criterion in the determination of whether to approve an application
  for occupancy.
         (b)  At the time a landlord offers to a tenant the option of
  paying a fee in lieu of a security deposit, the landlord shall
  notify the tenant in writing:
               (1)  that the tenant has the option to instead pay a
  security deposit;
               (2)  that the tenant has the option to terminate the
  agreement to pay the fee in lieu of a security deposit at any time
  and stop paying the fee, and instead, to pay a security deposit in
  the amount that is otherwise offered to new tenants for
  substantially similar housing on the date the tenant chooses to pay
  the security deposit; and
               (3)  of the charges for each option described by
  Subdivision (1) or (2).
         (c)  If the tenant decides to pay a fee in lieu of a security
  deposit, an agreement to collect the fee must be in writing and
  signed by:
               (1)  the landlord or the landlord's legal
  representative; and
               (2)  the tenant.
         (d)  A fee in lieu of a security deposit must be:
               (1)  a recurring fee of equivalent amount; and
               (2)  payable at the time each rent payment is due during
  the lease.
         (e)  A fee collected under this section may be used to
  purchase insurance coverage for damages and charges for which the
  tenant is legally liable under the lease or as a result of breaching
  the lease. A landlord may not charge the tenant a fee that is more
  than the reasonable cost of obtaining and administering the
  insurance purchased under this subsection.
         (f)  If the tenant decides to pay a fee in lieu of a security
  deposit and the landlord purchases insurance coverage as described
  by Subsection (e), an agreement required under Subsection (c) must
  clearly specify the following terms:
               (1)  the fee is being paid only to secure occupancy
  without a requirement of paying a security deposit;
               (2)  the fee, unless otherwise specified, is not
  refundable;
               (3)  payment of the fee, unless otherwise specified,
  does not eliminate, release, or otherwise limit the requirements of
  the lease, including that the tenant must pay for:
                     (A)  rent as the rent becomes due; and
                     (B)  damages for which the tenant is legally
  liable under the lease, other than normal wear and tear; and
               (4)  the fee, unless otherwise specified, is not paying
  for insurance that covers the tenant or otherwise changes the
  tenant's obligation to pay rent and damages beyond normal wear and
  tear.
         (g)  Except as provided by Subsection (h), a fee collected
  under this section is a security deposit for purposes of this
  chapter.
         (h)  A fee collected under this section is not a security
  deposit for purposes of this chapter if:
               (1)  an agreement was signed under Subsection (c); and
               (2)  the fee is used to purchase insurance coverage for
  damages and unpaid rent for which the tenant is legally liable under
  the lease or as a result of breaching the lease.
         (i)  A landlord may not charge a tenant for normal wear and
  tear of a dwelling.
         (j)  A landlord may not submit a claim for damages or unpaid
  rent to an insurer for insurance described by Subsection (e) unless
  the landlord notifies the tenant of the damages or unpaid rent
  indebtedness not later than the 30th day after the date the tenant
  surrendered possession of the dwelling. The notice must include a
  written description and itemized list of all damages, if any, and of
  unpaid rent, if any, including the dates the rent payments were due.
         (k)  If the tenant challenges the claim for damages or unpaid
  rent and that challenge results in a determination by the landlord
  or by a court that the notice of indebtedness is incorrect, the
  indebtedness is void and the landlord may not file an insurance
  claim for insurance purchased under Subsection (e) in the amount of
  the voided indebtedness.  If the landlord has already submitted to
  the insurer a claim for the voided indebtedness, the claim must be
  withdrawn.  If the insurance company has already paid the landlord
  for the invalidated claim, the landlord shall return the payment.
         (l)  If an insurer compensates a landlord for a tenant's
  damages or unpaid rent under a valid claim:
               (1)  the landlord may not seek or collect reimbursement
  from the tenant of the amounts that the insurer paid to the
  landlord;
               (2)  the insurer that has paid a landlord after receipt
  of a claim filed by a landlord, if allowed by a subrogation clause
  in the insurance described by Subsection (e) and before the first
  anniversary of the termination of the tenant's occupancy, may seek
  reimbursement from the tenant of only the amounts paid to the
  landlord; and
               (3)  the tenant is entitled to any defenses to payment
  against the insurer as against the landlord.
         (m)  If an insurer seeks reimbursement under Subsection
  (l)(2), the insurer must include in the reimbursement demand:
               (1)  evidence of damages or unpaid rent that the
  landlord submitted to the insurer;
               (2)  evidence of damage repair costs that the landlord
  submitted to the insurer; and
               (3)  a copy of the settled claim that documents
  payments made by the insurer to the landlord.
         SECTION 2.  Section 92.111, Property Code, as added by this
  Act, applies only to a lease entered into or renewed on or after the
  effective date of this Act. A lease entered into or renewed before
  the effective date of this Act is governed by the law as it existed
  immediately before the effective date of this Act, and that law is
  continued in effect for that purpose.
         SECTION 3.  This Act takes effect September 1, 2021.
 
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