Understanding Extensions of a Lease in the State of Texas
In the context of a residential lease agreement, a lease extension is a process whereby the tenant and landlord agree to extend the period of the original lease beyond its initial expiration date. Broadly speaking, lease agreements in Texas may contain a clause that either automatically extends the lease for a certain period of time if no action is taken by the landlord or tenant, or they may give the tenant the option to extend after the initial expiration date.
A lease extension is precisely what it sounds like, extending the period of tenancy for both the landlord and tenant. A lease extension will have no bearing on the original lease in any other way. Most commonly, a lease extension is agreed to when both parties are happy with the status quo. In other words, they both want to remain in the same place under the same conditions , but for longer than the original lease had anticipated.
The decision to extend the lease or negotiate a new lease agreement really depends on the contract already in place and the specific situation of the landlord and tenant. It is understood in the legal world that the terms of the new lease will not deviate from those terms unless otherwise specified and agreed to by both parties. However, it is extremely common for landlords to increase the rent or utilities rates, change the parking lot rules, add an updated pet policy, etc. However, it is fairly uncommon for tenants to demand to pay less rent or utilities or request fewer parking spots! These types of changes may be presented in an amendment, which in legal terms is just an additional part of the lease that provides updated information or policies.
Required Legal Conditions for an Extension of a Lease
Extension of any lease of an interest in real property in the State of Texas falls within the Statute of Frauds, and thus must be in writing, signed by the person making an agreement. See Tex. Prop. Code Ann. § 5.021 (Vernon 1996); see also Kennels, Inc. v. Watson, 546 S.W.2d 853, 855 (Tex. Civ. App.-Tyler 1977, writ ref’d n.r.e.) (applying former Act). In order to properly extend a residential lease agreement in Texas, there are two legal requirements that must be met. One is that the extension must be in written form and has to be executed by both landlord and tenant. The second is that the original lease has to be for a term greater than one year. By default, an oral extensions of longer than one year is unenforceable. An exception to this rule is Tex. Prop. Code Ann. Sec. 5.041. ("Lease for Year or More Must be in Writing"). While Tex. Prop. Code Ann. Sec. 5.041 is clear, courts have also found that the statute is not absolute. If a lease in Texas is for a specified term of one year or more, and the tenant in possession holds over after the expiration of the term and continues to pay rent, then the landlord accepts rent, and the tenant remains in possession, without notice, then the lease will be presumed to have been renewed for a full term. Under the Statute of Frauds, an oral renewal and extension of a lease (for a period greater than a year) cannot be implied when there exists an existing written lease agreement. Smith v. Harger, 83 S.W.2d 455, 456 (Tex. Civ. App.-Waco 1935, no writ); Cox v. Tinsley, 206 S.W.2d 172, 175 (Tex. Civ. App.-Texarkana 1947, no writ). The Statute of Frauds assumes that every lease agreement in Texas is terminable at the end of its term. If the lease agreement does not explicitly indicate an extension, then the court will not recognize an implicit extension. Smith v. Harger, 83 S.W.2d 455, 456 (Tex. Civ. App.-Waco 1935, no writ). The court held that a lease agreement is terminable by default, unless an explicit renewal is agreed to by the parties, either orally or in writing. Id.
Steps Required to Extend a Lease Agreement
The process of extending a lease agreement begins these days with a written email from a Texas tenant to the landlord or property manager (or vice versa). Because many landlords now have online tenant portals, the tenant may have a simple place to click indicating the intention to renew.
Once the initial notice to extended the lease is on the table, the next communication will likely be a lease amendment. If the tenant has asked for no rent increase and the landlord agrees, then the landlord may send a simple form stating that the lease term has been extended. If the tenant has asked for a rent increase, the landlord may send a form amending the rent terms only.
If the tenant is asking for an extension of some other lease term, such as repairs to the property, another tenant request, or the method of payment, the landlord may send a form amending the applicable terms in the lease. If the landlord denies the request, then the tenants may shortly notify the landlord that they do not intend to renew the lease. A fixed-term lease obligates the landlord and tenant for the entire term and does not allow the tenant to back out before the end of the term. The landlord in a fixed-term lease may send notice as the term nears, simply advising the tenant of the end date.
After the parties have agreed to lease extension terms, then the amendment will need to be signed. Both parties should keep a copy of the executed amendment with the lease agreement. It is a best practice for the landlord to return a new copy of the entire lease with the relevant pages showing the lease extension signed by both parties. This eliminates confusion of whether the tenant is legally bound by the original lease, or a renewal. In Texas, a landlord cannot backdate a lease or lease amendment, except into a prior month. Backdating is often done with unexchanged rent checks to pad the term of payment and is illegal in most states. However, in Texas, it is a common procedure for landlords to enter rent payments to facilitate an accurate bill at the end of the month for an automatic payment.
If both parties are amenable to extending the term, then the parties have agreed effectively to an extension. In the rare case that a landlord does not want to extend the term, but the tenant insists, the tenant may sue for specific performance. Otherwise, there is no cause of action to extend a lease.
Common Provisions in Lease Extensions
While a lease extension is not as long and detailed as an original residential lease agreement, it still features many of the same clauses and obligations. Here is a look at some of the typical terms and conditions that might be included and that both parties should mutually accept:
- Duration: Like an original lease, the extension should clearly spell out the length of time for protections. A standard lease might run for 12 months, so an extension could be for three, six or 12 more months. It is not a good idea for parties to enter into lease extensions that are for periods of time longer than 12 months.
- Scope of Protection: The extension should contain the full rental rate for the property and also, if you are allowing minor increases, the amount of those increases. There should be a new security deposit amount or mention of prior security deposit refund plans.
- Special Clauses: The parties may want to incorporate new clauses or modify existing ones from the original lease. For example, during initial lease negotiations, a provision was included about smoking on the premises. You may now want to add a clause indicating that smoking will no longer be allowed as part of a lease extension for a renewal.
- Controls: The agreement should discuss controls on services and utilities. If the cost of electricity or gas is increasing, the renewers may want to require that the tenants be responsible for those increases.
An extension agreement should be mutually consented upon by the signers and thoroughly review the terms of the original lease to avoid confusion. If you have any questions about what clauses or obligations should be added or modified, consult with a Texas residential real estate attorney.
Advantages and Disadvantages of Extending a Lease
Guide to Extending Residential Lease Agreements in Texas
Like any other legal agreement, there are advantages and disadvantages to extending any real estate contracts, even residential leases. From both the perspective of tenants and landlords, we will analyze some examples so that you can consider the pros and cons with respect to extending a residential lease.
As a prospective tenant, here are some of the pros: Having an extended lease can mean having more stability. Finding a new place to live can be very stressful and having stability certainly helps reduce that stress level and provides for predictability. Moreover, an extended lease means that you do not have to incur the expense of hiring a mover to move you from one location to another. The longer you can stay in one place, the less you have to spend on moving, and this allows you to start saving money towards the purchase of a home.
On the other hand, there are cons for tenants. For example, you may extend a lease, thinking that your landlord has no intention of raising the rental amount. However, that may not be the case . When negotiating an extension to the lease, you may consider using the extended term to negotiate a lower monthly rent, or at least have a provision specifying that the rent will not increase during the lease term.
As a prospective landlord, you are not without your advantages. You can usually obtain a higher rental rate for a lease extension than you can for a new lease. Often, your current tenant has cheaper utilities than you would for a property with no appliances of its own. Because the appliances usually come with the unit, you don’t have to purchase your own.
On the other hand, you may be financially better off if you find new tenants. A responsible person who pays their rent on time, but does not intend to stay for very long, is difficult to keep. You could lose money because of all the costs associated with preparing the unit for new tenants. You must pay to change the locks, clean the unit, make any repairs, and advertise to find a new tenant—all of which takes time and money. You can have significant cash flow problems if multiple tenants leave at once.
Tips for Negotiating Terms of a Lease Extension
Extending a residential lease agreement often requires negotiations between landlords and tenants. Just as signing a lease can be a protracted process, part of the negotiation can include discussing the terms of a possible extension period.
The process may begin with the tenant coming forward with a request or the landlord initiating the conversation. For example, an employer may be delayed on a new hire, and that hire wants to extend the term of their original lease in the meantime. As a landlord, consider extending the lease for a short period while obtaining necessary financial information from the new potential tenant. Take into account that the extension may be with the provision that the new candidate immediately enters into a lease once his or her application is approved. A written addendum may be the best form of this extension, with a provision that the original lease governs the relationship for the balance of time. For the tenant, be aware that the Texas Uniform Residential Lease Act requires a landlord to agree to the extension of lease if such is agreed to in writing. (Tex. Prop. Code § 92.053 (b)). Introduce the topic on your own terms. If you do not want to go through the renewal process again, tell the tenant that you intend to rent to someone else. If that is not the case and you want to continue to receive monthly rent payments from the tenant, inform them of your intent to renew well before the end of the lease period. Be ready to give and take in order to reach a mutually beneficial arrangement. If you are set on an increased amount of monthly rent, consider offering to cover certain costs such as water and electricity. In some cases, it may come down to an issue of time. Just as a tenant may request additional time to make a decision about moving into another property, a landlord may wish for some extra time to select a new tenant for the property. Tenants and landlords should be open and honest about the timeframe they need and work to find common ground. If the rent increase from the original lease is slight, a one-week grace period may be acceptable to both parties. There may be adjustments that both sides can live with. Advice from an Austin residential landlord-tenant attorney can help throughout this process.
What Happens If Agreement is Not Reached?
In the absence of an amicable renewal, the parties may be forced to litigate or arbitrate a dispute regarding the terms of the lease renewal or extension. If the parties do not have any agreement to continue to negotiate after the expiration of the initial lease term, then the landlord is under no obligation to keep the tenant in possession after the expiration of the original lease. Tex. Prop. Code §92.105.
For a summary of rights and obligations of landlords and tenants see Eviction – Residential lease agreements in Texas.
Residential Lease Extensions During COVID-19
The coronavirus pandemic has affected the extension of Texas residential lease agreements in two ways. First, the COVID-19 pandemic has caused many property owners and landlords to grant their existing tenants informal extensions of their leases. Common informal extensions are extensions of a week or a month and are usually granted at the request of the tenant. It is common for the property owner or landlord to ask no questions, knowing that the tenant’s income might have been affected by the pandemic, and an organized eviction is the last thing the owner or landlord desires during these tumultuous times. Second, the COVID-19 pandemic has triggered the enforcement of certain temporary laws relating to "stay-at-home" orders and moratoriums on evictions. These laws effect existing lease agreements that are set to expire during the COVID-19 pandemic.
Under the Texas Governor’s March 31, 2020 Shelter-in-Place Order, the Texas Governor authorized local authorities the power to issue Temporary Orders that superseded and supplemented the provisions of the Governor’s Order on an issue-by-issue basis. One of these Temporary Orders was the March 21 , 2020 Temporary Order Concerning Evictions issued by Justice Nathan Hecht of the Texas Supreme Court. This Order halted all eviction efforts statewide and declared that the Texas Justice Courts were prohibited from holding eviction proceedings during the period of the emergency declared on March 13, 2020. It also provided that "a justice court … may not issue … a writ of possession of premises enforcing an order to vacate premises for use after the emergency period ends." The Justice Courts were authorized to hear a landlord’s request for a judgment against a tenant if the lease agreement has expired and the tenant has failed to vacate the premises.
A landlord can use this Order to evict a tenant whose residential lease has expired and who has not yet received a formal extension of their lease agreement. While issuing a Judgment is usually the last step in the eviction process, the Governor’s Order concerning removals temporarily removed the requirement for an eviction proceeding. Instead, the tenant would receive a Writ of Possession in less than 10 days after the Judgment is entered.