USA – TEXAS Law and Practice Contributed by: Taylor Cooksey, David Brooks, Serena Kramer and Philip Kinkaid, Cokinos | Young
required to construct its own building, while under a multi-tenant lease, a tenant may be completely pro - hibited from making any alterations without the land - lord’s consent. Landlords may impose any conditions they desire, but the most common are the right to review plans and the right to approve the tenant’s contractors. 6.15 Specific Regulations The Texas Property Code has separate rules for resi - dential and commercial leases. For residential leases, the Property Code imposes numerous obligations on landlords for the protection of tenants’ rights and their health and safety, and provides tenants with remedies for certain landlord violations. All leases that are not for residential purposes are classified as commercial leases and are much less heavily regulated. For commercial tenancies, the Property Code imposes limitations on a landlord’s ability to lock out a tenant or cut off their utilities, and requires landlords to return security deposits within a specified time. 6.16 Effect of the Tenant’s Insolvency A tenant becoming insolvent may be an event of default under a lease, entitling the landlord to pursue legal remedies. However, the practical impact of a tenant’s insolvency depends primarily on whether the tenant has filed for bankruptcy. Under bankruptcy law, an automatic stay arises the moment a tenant files for bankruptcy, which prohibits a landlord from evict - ing the tenant regardless of what the lease provides. Upon filing for bankruptcy, a tenant (or bankruptcy trustee) has 120 days to accept or reject the lease; this period may be extended for an additional 90 days for good cause. During this period, a landlord cannot evict a tenant without the approval of the bankruptcy court. 6.17 Right to Occupy After Termination or Expiry of a Lease A tenant’s right to occupy the premises after termina - tion or expiration typically depends on the terms of the lease. It is common for commercial leases to con - tain a holdover provision, which may allow a tenant to remain on the premises after expiration on agreed- upon terms. For leases without a holdover provision, a
tenant does not have a right under Texas law to remain on the property after the termination or expiration of the lease. However, such a right may arise if the ten - ant continues to pay rent and the landlord continues to accept such payments. 6.18 Right to Assign a Leasehold Interest Under Texas law, a tenant does not have the right to assign its leasehold interest without the land - lord’s consent. However, most commercial leases will include assignment provisions permitting assign - ment to certain types of pre-approved assignees. The most common requirements that landlords impose on assignments include the right to review the proposed assignee’s financial strength, the requirement that the assignee assume the tenant’s obligations in writing, and (in the case of many assignees) an agreed per - sonal guaranty. 6.19 Right to Terminate a Lease For commercial leases, each party usually has the right to terminate the lease if the other party defaults and fails to cure its default within a specified period of time. If a landlord terminates due to a tenant default and the tenant refuses to leave, the landlord must evict the tenant via judicial process. For residential leases, in addition to termination due to a landlord default, tenants have the right to terminate the lease under certain conditions, such as if: • the landlord has failed to keep the property habit - able; • the tenant is a victim of domestic violence; • the landlord fails to provide essential services; or • the tenant is in the military and is called to active duty. 6.20 Registration Requirements Leases in Texas do not need to be registered with local or state authorities. They must be executed by the parties or their authorised representatives, but no witnesses or acknowledgements are required. Leases are usually not recorded in property records; however, memoranda of leases are sometimes record - ed, particularly in the case of ground leases or other significant leases. A memorandum of lease must be executed and acknowledged before a notary public
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