With legislation around the eviction moratorium, rent relief programs, and security deposits constantly evolving, Texas property owners and operators need to stay up-to-date on the latest rental housing laws. What are the biggest challenges facing both operators and their residents, and what do multifamily experts in the region have to say? What does the newest security deposit bill passed in May 2021 mean for the industry?

States continue to roll out rental assistance programs, and a wave of security deposit legislation is sweeping across the nation, so we invited esteemed industry experts from AMLI Residential and Madera Residential to discuss key concerns, including:

• How to navigate federal and state eviction moratoriums
• Tips for accessing rent assistance
• Analysis of state security deposit bill
• Options to replace security deposits
• What this legislation means for multifamily operators and what’s required to be compliant

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Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this article without seeking legal or other professional advice. The contents of this article contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site. This article contains links to other websites. We are not responsible for the privacy practices or the content of such websites, and we do not endorse such sites.

Texas Eviction Moratoriums & Rent Assistance Program

The CDC eviction moratorium is set to expire June 30, 2021. As of March 31, the Texas Supreme Court’s 34th Emergency Order, which applied the provisions of the CDC moratorium to Texas courts, has expired. This means eviction proceedings can take place, barring where local government protections apply.

To help make sense of the various regulations, we hosted an educational presentation and expert panel to help inform apartment operators in the state of Texas — below is a recap of the webinar.

Federal Rent Assistance

The CAA and ARPA bring a combined total of $45 billion in federal funding to cover rental arrears. Based on population, the program allocates $1.3 billion in funding for Texas.

Note: For the full letter of the law, access CAA here and ARPA here.

CAA & ARPA Funding Eligibility Requirements

The eligibility criteria for both the CAA and ARPA funding programs require that:

1. Combined household total gross income cannot exceed 80% the area median income for the location where the property is located.
2. Household must demonstrate a risk of homelessness or instability.
3. Household has experienced loss of income due to Covid-19.

Texas Tent Relief Program

The 2021 Texas Rent Relief Program (TRRP) — which is intended to distribute the $1.3 billion in federal funding available in Texas — is currently available and being distributed. Those interested in applying should visit texasrentrelief.com.

Applicants are eligible for up to 15 months of assistance, covering past due rent from the previous 12 months and future rental assistance for three months. While there is no maximum grant allowance per household, rent may not exceed $4,600 per month. Units that exceed the limit are not eligible for assistance from the Texas Rent Relief Program.

Operators can begin the process of applying for funds themselves, but renter participation is required in order for an application to be accepted. For a list of program FAQs, visit here.

Texas Eviction Diversion Program

The Texas Eviction Diversion Program (TEDP) is a voluntary program that allows eligible landlords and tenants to mutually agree on a resolution to an eviction case before displacing a resident. The program was created to prevent evictions that are already on court dockets, as a last resort to keep renters in apartments.

TEDP is a program specific to Texas, and is designed to encourage mediation to resolve past-due rent issues between operators and their residents, rather than evict or displace renters. Applicants are given funding priority over those utilizing the Texas Rent Relief Program, making this an attractive option for operators. For a full list of program requirements, visit here.

SB 1783: The New Texas Security Deposit Law

In May 2021, new security deposit legislation was passed in Texas, marking a big win for both operators and renters in the state. Effective September 1, 2021, SB 1783 codifies the current practice of utilizing a small monthly deposit waiver fee instead of a large upfront deposit upon move-in. The bill outlines the following:

• If the property requires a security deposit, operators can instead choose to offer the renter an option to pay a fee in lieu of a security deposit, however there is no mandate that operators offer such an option
• The fee must be memorialized in an agreement and signed by both the property and renter (this requirement could be covered through a lease addendum)
• The fee can either be recurring monthly or payable on any schedule so long as it’s agreed to between the renter and property
• The statute also specifically states that an operator may use the fee to purchase insurance covering renter defaults like unpaid rent and physical damage to a unit under the lease (otherwise known as lease insurance)

SB 1783 specifically says that the fee collected under this section is not a security deposit, meaning the fee does not need to comply with the security deposit statute.

What the New Texas Deposit Law Means for Multifamily

A Move Away From Deposits

Considering today’s economic climate, it’s increasingly important for operators to meet the needs of renters who are dealing with financial strain. Most Texas operators understand that renters prefer not to pay large upfront deposits. In the great state of Texas, we’ve seen more and more operators try to address affordability by charging, sometimes, only $100 for deposits.

What’s the issue with this approach? It doesn’t mitigate risk. So, what happens when these security deposits aren’t enough?

Lately, we’ve seen a trend to move away from deposits toward risk fees. But these fees do not always provide sufficient coverage for operators in relation to the risk they’re taking on. Operators need better backend protection, which is why across the country, we’re seeing rapid movement toward deposit replacement solutions, like Zero Deposit lease insurance, to protect against rent loss.

In fact, since the start of 2020, there’s been a 58% increase in Zero Deposit properties across Texas.

How SB 1783 Is Different From Renter’s Choice Laws

Legislation like SB 1783 takes Renter’s Choice laws — which require deposit alternatives like surety bonds be offered — a step further in eliminating the issues associated with deposits and their alternatives. In other words, deposit replacement laws provide apartment operators true deposit replacement solutions while leaving it up to the operator to determine the best deposit replacement option.

Ultimately, deposit replacement laws like SB 1783 enable operators a secure way to choose a deposit solution like lease insurance while also creating more affordable move-ins for renters.

SB 1783 marks an important victory for the multifamily industry. LeaseLock supports legislation that gives operators a true — and secure — choice in selecting deposit solutions that they determine is best for their properties and which, at the same time, can make renting more affordable for their residents.

Top Operator Concerns With Security Deposits & Deposit Alternatives

More operators are seeking out deposit solutions more than ever before. Some key concerns operators are looking to tackle include:

• Administrative burdens for both onsite staff and accounting teams
• Increased risk exposure if the renter defaults prior to having paid the full deposit amount
• Complexities that slow the leasing process due to administrative burdens and compliance issues
• Compliance issues for owners with properties across several states and cities — each with its own legal requirements.

The Security Deposit Solutions Market

Operators should understand the key differentiators between the deposit solutions available: deposit replacements and deposit alternatives.

Security Deposit Alternatives

Deposit alternatives (i.e., surety bonds) create operational complexity as they require onsite training, third-party applications, and background checks and/or FICO scores. Because they’re out-of-workflow, deposit alternatives often lead to low adoption.

Security Deposit Replacements

Deposit replacement solutions (i.e., lease insurance) totally eliminate deposits. Lease insurance eases administrative burdens, streamlines back-office workflows, and provides significantly more protection for rent and damages compared to traditional deposits and deposit alternatives.

Texas Rental Housing Laws Expert Panel Discussion

LeaseLock hosted an educational webinar and expert panel session on the many legislative challenges facing owners and operators in Texas. Moderated by our very own Ed Wolff – Chief Revenue Officer, the panel featured industry thought leaders, Jeffery Lowry – Chief Operating Officer at Madera Residential and Traci Hall – President – West Region at AMLI Residential.

Below is a preview of the panel questions covered:

1. As the pandemic ends and eviction moratoriums are lifted, how can operators properly prepare for eviction filings?
2. Renters and operators are feeling overwhelmed and confused about applying for rent relief — what can operators do to help direct residents to rental assistance?
3. How should operators think about risk mitigation in today’s economic climate?
4. Renter fraud has become a more pressing issue across all asset classes — how are operators addressing this?
5. What types of tools should operators have in their tech stack that integrate into the workflow to maximize efficiency and reduce disruptions?

To access a recording of the of the rental housing laws presentation and panel, fill out the form below:

California lawmakers extended a statewide eviction moratorium through June 2021 and passed an emergency measure to deliver $2.6 billion in rent relief. Local jurisdictions in San Diego and Los Angeles counties have also passed their own eviction moratoriums.

With strict rent control in cities such as Santa Monica, and tightening security deposit legislation across the state, what do these California rental laws mean for property owners and property management companies in the region?

California’s Eviction Moratorium, Rent Relief, Rent Control, Deposit Laws & More

Having trouble keeping up with California’s eviction moratorium, rental assistance, rent control, and security deposit laws? We recently hosted a webinar to educate apartment operators based in California, and below is a recap of what we covered.

Disclaimer: The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this article without seeking legal or other professional advice. The contents of this article contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site. This article contains links to other websites. We are not responsible for the privacy practices or the content of such web sites, and we do not endorse such sites.

The Letter of the Law: SB 91 Tenant Relief Act

SB 91 was passed on Jan 31, 2021, and extends the protections under AB 3088 (also known as the Tenant Relief Act). Originally set to expire on Jan 31, 2021, the eviction moratorium now extends through June 30, 2021.

The Southern California Rental Housing Association (SCRHA) has been proactive in educating housing providers on how to navigate the Tenant Relief Act and provides their perspective on SB 91:

“Housing providers should pay careful attention to all the details of the eviction protection law/SB 91. There are many moving parts and potential pitfalls with mandatory notifications, specific language in pay or quit notices, and the immediate application of just cause protections for most California renters. With anti-displacement a top priority for elected leaders, ending a tenancy has become more complicated. Housing providers should rely on professional associations to help guide them and consult with legal counsel prior to taking decisive action.”

Note: Access SB 91 in its entirety here.

Eviction Moratorium Extension

What does SB 91 mean for rental housing providers? In effect, the moratorium extension prevents properties from evicting renters for nonpayment of rent through June 30, 2021.

However, it is subject to a few exceptions, including any renter default that occurred prior to March 1, 2020.

Under SB 91, properties can’t evict a renter due to nonpayment of rent if:

1. The Renter provides a declaration of COVID-19 financial impact; and
2. The Renter pays at least 25% of rent by June 30th, 2021 (for rent amounts due between September 2020 and June 2021)

$1.4 Billion Rental Assistance Program

SB 91 also allocated $1.4 billion in emergency rental assistance, which provides up to 80% of rental assistance to eligible households. It’s important to note that:

• Operators must waive the full balance due
• Operators will have to forfeit the 20% of rent

Eligible households must qualify — if they fail to meet eligibility requirements, then the renter must pay 25% of rent by June 30, 2021 in order to avoid eviction. Either the property or renter may apply.

Household Eligibility Requirements

To receive up to 80% of assistance for rent amounts due, a household must qualify, meaning they must meet all 3 of the following criteria:

1. At least one person in the household must qualify for unemployment or must experience financial hardship, reduced income, or increased costs;
2. At least one person in the household must show risk of homelessness or instability; This would include past due utility bill, rent demand notice, etc.; and
3. Household income must be at or below 80% of area median household income (AMI) in the area the property is located.

Operator Participation Requirements

What are operators required to do in order to participate in the California rental assistance program?

1. Properties have a duty to participate, meaning operators must:

• Make a good faith effort to investigate
• Provide assistance to renters who may qualify
• Cooperate with renter’s efforts to obtain rental assistance under SB 91

2. Properties must provide documentation showing compliance with SB 91 when making a debt collection complaint.

3. If a renter owes COVID-related rent debt as of February 1, 2021, an operator must provide a Notice of Tenant Rights no later than February 28, 2021, even if the operator has no intention of pursuing an eviction case at this time.

How Does SB 91 Impact Statewide Rent Control?

SB 91 extends AB 1482 (statewide rent control) by expanding the just-cause eviction requirements and temporarily extending to all types of rental properties. All renters are also covered from their first day of tenancy. Renters who don’t comply with tenant requirements under SB 91 can still be evicted, but operators must adhere to any local government ordinance in place.

The California Tenant Protection Act (AB 1482) went into effect on Jan 1, 2020, putting an annual rent increase cap at 5% plus inflation per year or 10% without inflation, whichever is less — making it one of the strongest rent control statutes in the US.

More recently, California Proposition 21 was defeated during the 2020 November election, thus prohibiting rent control on housing that was first occupied after Feb 1, 1995, and housing units with distinct titles.

In Los Angeles County, the Rent Stabilization Ordinance went into effect on April 1, 2020, which limits rent increases above the allowable limit (3%) within a 12 month period, and provides just cause eviction protections for most residential rental units.

California is one of 5 states that has cities with some form of residential rent control law. Many Southern California communities already have rent control laws in place, including Santa Monica, West Hollywood, Beverly Hills, Glendale, Culver City, Inglewood, Los Angeles, and unincorporated neighborhoods of LA County.

Rent control is top of mind in California, and there are also new laws cropping up that further restrict use of security deposits — SB 91 is an example.

Deposit Laws Are Accelerating Nationwide

Deposit restriction laws regulate the maximum deposit amount and the number of days to return a deposit — something the multifamily industry is no stranger to. In the last year, the industry has begun to shift away from deposits.

About one-third of US states have passed, proposed, or pledged support for deposit replacement laws including California, Delaware, Florida, Michigan, North Carolina, Ohio, Pennsylvania, and Virginia. Cities including Atlanta, Cincinnati, Columbus, Philadelphia, New York City, and Santa Cruz have also taken action.

Deposit replacement laws take deposit legislation a bit farther by giving apartment operators true deposit replacement solutions, as opposed to implementing more restrictive deposit regulations.

View a full list of state and city deposit restrictions and deposit replacement laws here.

3 Challenges Created by Deposit Laws

Multifamily operators and owners have dealt with an array of different challenges over the years, and changing deposit legislation is only one of them. But in the last year, a growing number of operators are seeking deposit solutions in light of these deposit laws. Some of the key concerns operators are looking to address include:

1. Leasing Delays – Operators must inform residents of the deposit alternatives options, and renters can shop these options before getting the property’s approval. This can slow down leasing activity significantly.
2. More Work for Onsite Teams – Properties must review and approve multiple insurance policies while still managing security deposit accounting. Onsite teams will also have to track deposit installment payments for renters who choose to go that route.
3. Increased Risk – Deposit installment plans increase operators’ exposure to financial risk if the renter defaults prior to having paid the full deposit amount.

Operators Seek Deposit Solutions

As the industry shifts toward total deposit replacement, it’s important that the market understand deposit solutions come in the form of deposit replacements and deposit alternatives.

Security Deposit Alternatives

Deposit alternatives — like surety bonds — can address the legal requirements of new deposit laws, but they also create operational complexity. Deposit alternatives typically require onsite training, third-party applications, background checks and/or FICO scores, and out-of-workflow management. In other words, traditional security deposits are still in place, and therefore still subject to the legal restrictions.

Security Deposit Replacements

Deposit replacements — like lease insurance — replace deposits completely. Lease insurance leverages deep property management system integrations which streamlines back-office workflows and provides increased protection for rent and damages. Operators who replace deposits entirely are therefore not subject to the legal requirement.

What Top Operators Are Saying About Deposit Laws

Several leading operators recognize the need to move away from surety bonds, including Kelli Jo Norris – President of Goodman Real Estate, Michael Roos – Managing Director of Asset Management at ColRich, and Kevin Huss – Vice President of Revenue Management at Harbor Group.

Navigating the Deposit Legislation Landscape

When operators rely on security deposits and deposit alternatives, they’re subject to the inherent variability of deposit legislation. But when they implement lease insurance software that automatically ejects deposits from enterprise operating infrastructure, they can avoid the legal requirements of the various deposit laws, both passed and pending.

California Rental Laws Webinar for Apartment Operators

LeaseLock recently held an educational webinar on California rental laws, led by our very own Reichen Kuhl – President & Chief of Legal, Ed Wolff – Chief Revenue Officer, and Carl Stockholm – VP of Enterprise Sales for the West Region.

Fill out the form below to get view a recording of the webinar: