Tenants: Beware and Negotiate

In a matter of first impression before the Texas Supreme Court, the Court ruled that a Residential Lease provision that obligated the Tenant to pay for any damages that result from “any cause not due to Landlord’s negligence or fault” was not void and unenforceable.

The background facts:  A young lady, Carmen White, got her first apartment and signed a standard Texas Apartment Association (“TAA”) lease.  Her parents gave her a washer and dryer set as a gift.  While using the dryer, it caught fire and burned her apartment and others nearby.  The damages to the apartment complex exceeded $83,000.00.  The source of the ignition was unknown and no fault was placed on White or the Landlord.  The landlord’s insurance company paid the claim, subrogated, and demanded reimbursement from Ms. White.  When she refused to pay the insurance company brought suit against her. 

The Procedural facts:  The case was tried to a jury.  After trial, the jury answered “no” to a question asking if White’s negligence proximately caused the fire.  However, the jury answered “yes” to the question whether White breached the lease agreement by failing to pay the casualty loss.  The jury awarded the landlord $93,498.00 in damages.  White moved for judgment not withstanding the verdict which was granted and the trial court rendered a take-nothing judgment.  The Court of Appeals affirmed the trial court ruling holding that that the Reimbursement Provision was void as against public policy.  The Appeals Court found a fatal conflict between the Reimbursement Provision’s broad language and Chapter 92 of the Texas Property Code restricting a Landlord’s ability to contractually allocate repair responsibilities.

The Supreme Court ruling:  The Supreme Court was to determine, as a matter of first impression, whether public policy embodied in the Texas Property Code precludes enforcement of a residential lease provision imposing liability on a tenant for property losses resulting from “any other cause not due to the landlord’s negligence or fault”.  In so holding the Supreme Court (in a 5-4 decision) repeatedly stated the well known legal axiom that “Parties in Texas may contract as they wish, so long as the agreement does not violate the law or offend public policy, recognizing the the Legislature has limited the freedom of a landlord and tenant to contractually allocate responsibility for repairs materially affecting health and safety.  Interestingly in footnote 4, the court acknowledged that above the signature block, the lease prominently states that the lease can be modified by agreement of the parties, but neither party requested modifications to the Reimbursement Provision. 

The Lease contained a reimbursement provision standard in the TAA lease which obligated the Tenant to pay for any damages that result from “any cause not due to Landlord’s negligence or fault”.

As we all know it is almost impossible to get a Landlord to revise any provision in a standard form lease, but if you are to avoid the tragedy that happened to Ms. White, you must negotiate a modification of the Lease.

Be aware that the TAA Lease is a legal document and forms a binding contract.  You should consult an attorney for help revising the Lease. 

We would first add a sentence to Section 10, Special Provisions.  We would write in the blanks a sentence to limit my liability.  For instance, “Notwithstanding anything to the contrary, Tenant shall never be responsible for repair, or liable for damages to Landlord’s property, including other units in the complex, unless such damage is proximately caused by the negligence of Tenant, Tenant’s guests, or invitees.”

Secondly, we would strike out certain language contained in Section 12. We would strike out “or any other cause not due to our negligence or fault”, at the end of the first sentence of Section 12.

We firmly believe that no residential Tenant should be held responsible to repair other units damaged or for property losses “resulting from any other cause not due to the landlord’s negligence or fault.”  Do not let this happen to you.

How the Texas Business Opportunities Act Seeks to Help Consumers

One the main goals of the Texas Business Opportunity Act is to protect consumers interested in starting their own businesses from scam artists eager to defraud them out of their money. When ads appear on TV or via email — promising large profits in exchange for a small, initial investment – it’s never wise to assume a valid offer is being made.

Some of the most common business opportunity ads often claim that you’ll need to do very little work before you’ll start receiving your first profits. That’s rarely an honest offer since running a business is often hard work. Now that so many older Americans (and others) have been laid off from their jobs, it’s critical to carefully review each offer and look for “red flags” warning you of possible fraud.

The following information will help explain some of the different ways that the Texas Business Opportunity Act tries to regulate the way that many programs go about seeking investors and operating in this state.

Types of business offers governed by the Texas Business Opportunity Act

  1. Those that require the buyer to pay at least $500 to begin setting up the business that’s being sold;
  2. Where the seller claims that you’ll earn back your initial investment (or more) in profits; and
  3. The seller promises to do one or more of the following acts to close the deal:

a). Provide you with a location – or help you find one (that’s not currently owned by you or the seller) where you can use or operate the goods or services being leased or sold by the seller;

 b.) Help you create a marketing, sales and production program (unrelated to a formal franchise business governed by separate laws);

 c.) Promises to buy back products, equipment or supplies (or goods made from them) provided to you so you can run the business.

To further protect the public from dishonest business offers, the Attorney General of Texas requires parties making offers that meet the description above to first register with the Secretary of State and provide any applicable bond or trust account required.

Whenever you become interested in investing in any business opportunity that even vaguely appears to be covered by the Texas Business Opportunity Act, it’s always best to review the matter with your Houston business law attorney. Our firm can check to be sure the seller’s company has formally registered with the Texas Secretary of State’s Office and posted all required funds.

As a potential investor, you should also be provided with key information (required by law) about any company – before ever tendering any money.

Legal disclosures companies must provide

When a business offer is made in Texas and is covered by the Texas Business Opportunity Act, the seller must provide specific information to the buyer ten (or more) days before any contract is signed by the parties and before any money is paid to the seller.

Here are some of the disclosures that must be provided.

  • Names and addresses of all parties directly affiliated with the seller in the business being marketed;
  • A specific listing of all services the seller is promising to perform for the buyer (such as setting up a product marketing program);
  • An updated, current financial statement covering the seller’s finances;
  • All details covering any training program being offered by the seller;
  • How all services will be provided by the seller regarding the products and equipment being sold – and all key terms involved with the leasing agreements covering business locations being provided to the buyer;
  • Information pertaining to any of the seller’s bankruptcies (or civil judgments obtained against the seller) during the last seven years.

The importance of distinguishing multi-level marketing offers from pyramid schemes

Make sure the business you’re interested in requires you to do some type of work (such as selling products or services) before paying you any profits. If you are only being urged to solicit additional participants in the business, there’s a strong chance that you’re being “tricked” into building a pyramid scheme that may earn you short-term gains before the entire investment program collapses.

Always obtain legal advice regarding any business that sounds too much like a quick way to earn a lot of money. Attractive shortcuts to huge profits – especially those promoted in many weekend hotel and restaurant seminars – are often sham operations.

Please contact our law firm so we can provide you with the legal advice you’ll need before investing in any new business opportunities.

Texas Flood Insurance –The Basics

Texas Flood Claim Appeals:  Obtaining a Fair Settlement

The overall losses imposed by Hurricane Harvey and the other storms still forming will almost certainly set new records. At present, at least one data analytics firm that forecasts natural disaster losses has issued a preliminary estimate indicating that Houston area homeowners may suffer losses equaling $30 billion. However, only about 40 percent of that amount will be covered by insurance — with the federal government picking up the tab for most of it.

How Most Flood Insurance is Handled in Texas

While a small number of private insurance companies are underwriting flood insurance today (often providing an optional rider to your homeowner’s coverage), most stopped doing so long ago since they could not charge high enough premiums to make it a profitable endeavor. Instead, most Texas homeowners are only able to obtain a flood insurance policy through the National Flood Insurance Program (NFIP) that’s run by the Federal Emergency Management Agency (FEMA).

Since homeowner policies don’t cover windstorm and hail damage for those living in this state’s major flood zones like the Houston area, some people also purchase Texas Windstorm Insurance Association (TWIA) coverage to help with those types of losses. However, a Washington Post study indicates that as few as 17% of Houston homeowners may have any flood insurance.

Should you be among the small percentage of homeowners with an NFIP policy or hold one that covers your business property, it’s critical to move forward now and get your NFIP claim filed. However, you need to know that it’s fairly common for these types of claim to be denied – or to be offered a very small amount for your actual losses. Once your claim has been turned down, you’ll then need to work closely with the local insurance representative who sold you the policy on behalf of FEMA to be sure it was processed properly.

Deciding Whether to Appeal FEMA’s Decision About Your NFIP Coverage

Once you’re certain that all pertinent paperwork was fully examined by FEMA when it denied all or part of your NFIP claim, you’ll need to decide whether to file a formal appeal or pursue other possible remedies. Since making the right decision requires a clear understanding of each option – and because you only have 12 months to appeal the decision, it’s often best to speak with your Houston business law attorney who can help you weigh all of your options before moving forward.

In some cases, perhaps to minimize the time involved in obtaining the maximum recovery available, flood insurance policy holders may want to simply obtain a formal appraisal of their covered loss. This option is often chosen when your insurer is agreeing that a covered loss occurred – but is disagreeing with you about the correct amount that should be paid for your loss.

Keep in mind that if you choose this path, FEMA’s website states that you cannot then appeal the FEMA decision if you still don’t like the results. As you can see, you need to fully understand what you’re risking, regardless of the path you choose.

What is Covered (and Not Covered) Under A Flood Policy

The NFIP covers “direct physical damage by flood to your building and/or personal property, also known as contents.” The Standard Flood Insurance Policy (SFIP) is a single-peril (flood) policy that pays only for flood damage to your insured property, up to the policy limit which is $250,000 for a residential policy.

Covered Building Property:

-The electrical and plumbing systems

-Furnaces, water heaters, heat pumps, and sump pumps

-Refrigerators, cooking stoves, and built-in appliances such as dishwashers

-Permanently installed carpeting over an unfinished floor

-Permanently installed paneling, wallboard, bookcases, and cabinets. The damage must be directly caused by flood water. Cabinets that were not damaged by flood water are not covered, even if they match cabinets that were damaged by flood water.

-Window blinds

-Foundation walls, anchorage systems, and staircases attached to the building. There is an exclusion for “loss caused directly by earth movement even if the earth movement is caused by flood.”

-A detached garage, used for limited storage or parking. Up to 10 percent of the building coverage limit can be used, but will reduce the total amount of building coverage available.

-Solar energy equipment, and well water tanks and pumps

Covered Personal Property – Contents:

-Personal belongings such as clothing, furniture, and electronic equipment

– Curtains

-Portable and window air conditioners (easily moved or relocated)

-Portable microwave ovens and portable dishwashers

-Carpets not included in building coverage (carpet installed over wood floors, etc.)

-Clothes washers and dryers

-Certain valuable items such as original artwork and furs (up to $2,500)

-Food freezers and the food in them (but not refrigerators)

Not Covered for Building or Personal Property:

-Damage caused by moisture, mildew, or mold that could have been avoided by the property owner or which are not attributable to the flood

-Damage caused by earth movement, even if the earth movement is caused by flood

-Additional living expenses, such as temporary housing, while the building is being repaired or is unable to be occupied

-Property and belongings outside of an insured building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools

 

Obtaining Timely Advice After a Flood is Critical

Please remember that our firm is here to help you as you try to obtain a fair settlement for your flood losses so you can quickly repair or rebuild your damaged property. (Should you be among those without any insurance coverage, you may want to visit this government website provided for this needing emergency assistance.)