Court Enters Take Nothing Judgment in Former Tenants' Security Deposit Lawsuit

Following a bench trial, a Bexar County Judge entered a Take Nothing Judgment in a lawsuit filed against D'Ann Harper Property Management Corporation by the former tenants of a managed property in San Antonio, Texas. Trey Wilson represented the Defendant in the suit.

The tenants filed their suit when -- after vacating the property -- the property manager withheld a portion of the security deposit to pay for damage to a door frame. The damage occurred during the term of the lease, but the Tenants demanded that the landlord make and pay for the repairs. Citing a provision in the standard TREC lease form that requires tenants to pay for all repairs to doors, windows and screens, the landlord refused. Thereafter, the tenants vacated and filed suit claiming that their security deposit was wrongfully withheld.

After considering the lease, the Tenants' testimony and various other exhibits admitted into evidence, the Court granted a verdict in favor of the property management company, and denied all of the Tenants' claims.

Wilson Secures Dismissal of Tenants' Suit Against Property Manager and Owner

Trey Wilson has secured dismissal of a Bexar County District Court lawsuit seeking a declaratory judgment over the term of a Residential Lease Agreement, and the Tenants' right to occupy a San Antonio, Texas rental home. The Tenants of the property claimed that they entered a 3 year lease, while the Owner maintained that the lease was for a 1 year term. The Owner, having recently retired from the U.S. Air Force, desired to settle down in San Antonio, and permanently occupy the property he had been using as a rental during his various tours in the military.

The Owner and his property manager, Coldwell Banker D'Ann Harper Realtors Property Management, indicated that the Lease would not be renewed, and demanded that the Tenants vacate the property at the end of the 1 year term. Rather than vacate, the Tenants hired a lawyer, who sued both the Owner and Coldwell Banker D'Ann Harper Realtors. The Defendants retained Trey Wilson, who immediately went on the offensive.

After reviewing the condition of the property, and noting that the Tenants had committed several violations of the Lease, Wilson filed an eviction proceeding in the Bexar County Justice Court. The Tenants objected to the eviction proceeding, claiming that the disputes should be reserved for consideration by the District Court handling their previously-filed declaratory judgment suit. Bexar County Justice of the Peace Steve Walker disagreed, and conducted an eviction trial which lasted approximately 3 hours.

The Owner and Coldwell Banker D'Ann Harper Realtors Property Management prevailed in the eviction trial, with Judge Walker ordering the Tenants to vacate based upon breaches of the written Lease Agreement (and notwithstanding the pending district court lawsuit).

Following this victory in the Justice Court, and given the fact that the Owner was granted immediate possession of the rental property, the Tenants agreed to dismiss their district court lawsuit in exchange for a short extension of time in which to vacate the property, and a refund of their security deposit.

The district court lawsuit was then dismissed with prejudice, with all claims against the Owner and Coldwell Banker D'Ann Harper Realtors Property Management denied.

Landlord's Remedies When Tenants Abandon Leased Premises

As a real estate lawyer in San Antonio, I am frequently asked about a Landlord's options upon learning that a Tenant has moved-out without notice, or who simply abandoned the leased premises before a lease ends. The Texas Supreme Court has recognized four distict causes of action that a landlord may assert against a tenant who breaches a lease by abandoning the premises:

(1) maintain the lease and sue for rent as it becomes due;
(2) treat the breach as an anticipatory repudiation, repossess, and sue for the present value of future rentals reduced by the reasonable cash market value of the property for the remainder of the lease term;
(3)treat the breach as anticipatory, repossess, re-lease the property to a new tenant, and sue the original tenant for the difference between the contractual rent and the amount received from the new tenant; or
(4) declare the lease forfeited (if the lease so provides)and relieve the tenant of liability for future rent.

See Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293, 300 (Tex. 1997).

However, it is important to remember that a landlord has a duty to mitigate its losses/damages when a tenant abandons the leased premises and stops paying rent. Id., at 295–300. This principle recognizes that a landlord who claims anticipatory breach has a duty to mitigate because the landlord’s claim is contractual in nature. Id. at 300.

Further, the Texas Legislature has codified the landlord’s duty to mitigate as section 91.006 of the Property Code. See TEX.PROP.CODE ANN.§ 91.006 (Vernon 2007). That same section prohibits, and makes "void," lease terms that attempt to exempt a landlord from a liability or duty to mitigate its losses. Id.

Calculating the Landlord's Damages When Premises Are Re-Let after Tenant Breach

When a Tenant breaches a lease agreement by terminating or abandoning the Lease, or when a Landlord is required to terminate based upon some act or omission of the Tenant, the Landlord faces a two-sided problem: First, he or she has vacant rental property and has likely suffered damages as the result of lost rents in the past. Second, the landlord will likely suffer loss of rental proceeds in the future, all the while incurring costs associated with owning and managing the now-vacant property.

As I have previously discussed on this blog, a Landlord has a statutory obligation to mitigate the damages he suffers as the result of a Tenant's actions. See TEX. PROP. CODE ANN. § 91.006. The duty to mitigate losses or damages is usually interpreted as a requirement that the Landlord attempts to re-let the premises vacated by the original Tenant.

Many times after a breach, the condition of the premises or the overall rental climate (supply and demand) can be markedly different than it was at the time the original Tenant first occupied the property. This can result in substantial difficulty in finding a replacement Tenant. Nevertheless, a Landlord is required to use reasonable efforts to find a replacement Tenant, even if the rental proceeds from that new Tenant are less than those that would have been received had the original Tenant fulfilled her Lease obligations.

In those instances where a deficiency exists between the rent received from a replacement Tenant and the rent agreed-to by the original Tenant, a Landlord is entitled to recovery of his damages. Other elements of the Landlord's damages are the costs of re-letting the property (advertising, repairs, make-ready, Realtor commissions, modifications required by the replacement Tenant, etc), and any rents not received between the time that the original Tenant vacates and the replacement Tenant takes possession.

So...how does a Landlord calculate the measure of damages resulting from a Tenant's breach?

Consistent with its statutorily-imposed duty to mitigate, a Landlord seeking damages for anticipatory breach of a Lease Agreement must prove the present value of the future rentals under the unexpired term of the lease, REDUCED BY either the reasonable value of re-renting the leased premises or the rent paid by any new tenant. See Marshall v. Telecomm. Specialists, Inc., 806 S.W.2d 904, 907 (Tex. App.—Houston [1st Dist.] 1991, no writ).

That is, if a Landlord is able to re-let the premises at the same or more rent than the original Tenant agreed to pay, then the original Tenant is only required to pay the costs of re-letting. On the other hand, when a Landlord rents the premises for less rent, the Tenant is required to pay the re-letting costs PLUS the Landlord's shortfall over the term of the original Lease Agreement. see also Crabtree v. Southmark Commercial Mgmt., 704 S.W.2d 478, 480 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.) (limiting damages sought by landlord who treated tenant’s conduct as anticipatory breach to recovery of present value of rentals that accrue, reduced by reasonable cash-market value of unexpired term of lease); Speedee Mart, Inc. v. Stovall, 664 S.W.2d 174, 177 (Tex. App.—Amarillo 1983, no writ)(holding that landlord who treated tenant’s conduct as anticipatory breach could recover contractual rental reduced by amount received from new tenant).

Many Lease Agreements in Texas (and the standard Commercial Lease Form in New York) purport to make the Tenant responsible for all rental proceeds that he or she did not pay, irrespective of whether the Landlord re-lets the property in the future. These provisions are generally not enforceable in Texas, where the Landlord's efforst to mitigate his losses are often the subject of intense scrutiny in lawsuits advanced for recovery of lost rents.

Landlord's Remedies When Tenants Abandon Leased Premises

As a real estate lawyer in San Antonio, I am frequently asked about a Landlord's options upon learning that a Tenant has moved-out without notice, or who simply abandoned the leased premises before a lease ends. The Texas Supreme Court has recognized four distict causes of action that a landlord may assert against a tenant who breaches a lease by abandoning the premises:

(1) maintain the lease and sue for rent as it becomes due;
(2) treat the breach as an anticipatory repudiation, repossess, and sue for the present value of future rentals reduced by the reasonable cash market value of the property for the remainder of the lease term;
(3)treat the breach as anticipatory, repossess, re-lease the property to a new tenant, and sue the original tenant for the difference between the contractual rent and the amount received from the new tenant; or
(4) declare the lease forfeited (if the lease so provides)and relieve the tenant of liability for future rent.

See Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293, 300 (Tex. 1997).

However, it is important to remember that a landlord has a duty to mitigate its losses/damages when a tenant abandons the leased premises and stops paying rent. Id., at 295–300. This principle recognizes that a landlord who claims anticipatory breach has a duty to mitigate because the landlord’s claim is contractual in nature. Id. at 300.

Further, the Texas Legislature has codified the landlord’s duty to mitigate as section 91.006 of the Property Code. See TEX.PROP.CODE ANN.§ 91.006 (Vernon 2007). That same section prohibits, and makes "void," lease terms that attempt to exempt a landlord from a liability or duty to mitigate its losses. Id.

San Antonio Lease Dispute results in $2.7M Verrdict against hotel

A Bexar County jury decided to award $2.7 million this week to a local restaurant whose owners said they were fraudulently evicted last year from a North Side Drury hotel.

In the lengthy verdict, which is still pending approval from state District Judge Janet Littlejohn, jurors said Drury Southwest Inc. failed to comply with its lease with Louie Ledeaux #1 Inc.

The hotel chain also committed fraud, made a negligent misrepresentation and relied on a “false, misleading or deceptive act or practice” in dealing with the restaurant owners, the jury found Tuesday.

Louie's Hacienda Mexican Restaurant — an offshoot of a Cajun restaurant at The Forum shopping center — operated on the property of a Drury hotel near Loop 410 and Jones Maltsberger Road from December 2007 until March 2008.

Drury was the first to sue, claiming in court documents that the restaurant “closed the doors intending to not reopen.” The hotel asked the court to bar the restaurant from taking anything, other than food, from the premises because Drury was entitled under the lease to keep all improvements.

The restaurant had invested about $400,000 in equipment at the site, it said.

Louie Ledeaux #1 Inc. later filed a countersuit, claiming Drury had failed to mention during the signing of the lease that the Jones Maltsberger exit along Loop 410 was slated for closure. The hotel also said it would build a patio in an area that it did not own, and that the company would be able to add a sign under the Drury marquee, according to the counterclaim.

While the restaurant operators did meet with hotel representatives to discuss an initiative to make the restaurant more profitable, they were never delinquent in rent and never intended to close, they said in court documents.

The jury decided Drury and its lawyers deserved about $112,533 from the restaurant.

But the verdict, if upheld, will make the hotel chain responsible for paying almost $1.3 million for committing fraud and nearly $1.1 million for engaging in a false, misleading or deceptive act or practice. Jurors also awarded the restaurant $286,088 because Drury didn't comply with the lease and another $158,000 in attorney's fees.

Adapted from the Express News