USA - TEXAS Law and Practice Contributed by: Brad Holdbrook, Mary Mendoza, Michael Coleman and James Barnett, Haynes and Boone, LLP
6.5 Rent Variation The rent payable under a lease can remain the same or change, depending on the lease terms agreed upon by the landlord and tenant of Texas properties. Fixed leases keep the rent the same throughout the lease term and are less common in practice, while most leases include escalation mechanisms for rent increases at specified inter - vals or based on certain criteria, such as inflation rates or operational costs. 6.6 Determination of New Rent The determination of new rent after an increase depends on the terms specified in the lease agreement. Common methods include fixed percentage increases, adjustments based on inflation or consumer price index (CPI), or mar - ket rent reviews where the new rent is aligned with current market rates. Leases also include predetermined incremental increases at speci - fied intervals. The exact method and criteria for rent adjustments should be clearly outlined in the lease documentation. 6.7 Payment of VAT Texas does not impose a VAT (or equivalent tax) on the sale or purchase of real estate. 6.8 Costs Payable by a Tenant at the Start of a Lease At the start of a lease in Texas, tenants typically face various costs beyond just the rent. These costs can include a security deposit, which the landlord holds as a form of “insurance” against damage or non-payment by the tenant. Under Texas law, security deposit must be refunded within 60 days of vacating the premises under a commercial lease (30 days under a residen - tial lease), provided the tenant has not caused damage beyond normal wear and tear and has paid all amounts due and payable pursuant to the lease.
6.9 Payment of Maintenance and Repair In Texas, the maintenance and repair responsi - bilities in a commercial lease vary, but generally, landlords are responsible for maintaining the property’s structural integrity, while tenants are expected to take care of interior maintenance and repairs. This delineation ensures the prop - erty remains habitable and safe for tenants, while also outlining that tenants are responsible for keeping their specific leased space in good condition. This standard is quite common in commercial leases and helps to prevent legal disputes by making it clear who is responsible for what types of maintenance and repair work. 6.10 Payment of Utilities and Telecommunications A common practice for Texas properties with a single tenant is for the tenant to contract directly for utility and telecommunications services and pay the cost for those services. For multi-tenant properties with common utilities, landlords often give tenants the right to install separate meters (but it is often negotiable whether the landlord or tenant pays for utilities or telecommunications). 6.11 Insurance Issues In Texas, the responsibility for insuring real estate subject to a lease typically falls on both the landlord and the tenant, with each party having specific obligations. Landlords generally require tenants to carry commercial rental insurance, including liability insurance, to protect against accidents or injuries occurring within the leased space. This requirement helps ensure that land - lords are not financially responsible for incidents arising out of the tenant’s business operations. The COVID-19 pandemic’s unprecedented nature means there is little existing legal prec - edent for such scenarios. Tenants and land - lords are still navigating this complex territory,
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