Lease renewals in Texas, particularly under the Texas Association of Realtors (TAR) lease, follow a specific process that is important for both landlords and tenants to understand. These renewals function under an “evergreen” clause, meaning they renew automatically under certain conditions. Here’s a closer look at how lease renewals work in Texas.
Understanding the TAR Lease Renewal Clause
The TAR lease, which is the most commonly used lease agreement for residential properties in Texas, addresses renewals in Paragraph 4. This section outlines several renewal options, but they all fall under the category of automatic renewals, also known as evergreen provisions. An evergreen contract automatically extends once the initial term ends, preventing an abrupt lease termination unless action is taken by either party.
How Automatic Renewals Function
Under the TAR residential lease, the standard renewal process shifts the lease into a month-to-month arrangement. This means that once the lease reaches the end of its term, it does not require the landlord or tenant to sign a new lease immediately. Instead, the tenant continues occupying the property on a month-to-month basis unless either party provides proper notice to terminate or renegotiate the lease terms.
Differences Between Residential and Commercial Leases
Residential lease renewals operate differently from commercial lease renewals. In commercial leases, agreements typically have a firm expiration date with no automatic renewal. If a tenant remains in the property beyond the expiration date, they could face holdover rent or penalties. While residential leases can also have holdover provisions and associated fees, their automatic month-to-month renewal structure generally provides greater flexibility for tenants and landlords.
Understanding the renewal process in Texas leases is crucial for making informed decisions about leasing agreements. The TAR lease’s automatic renewal clause ensures continuity while allowing both landlords and tenants the flexibility to adjust or terminate their agreements with proper notice.