WHAT’S IN A NAME?

Do you know how to comply with the Assumed Business or Professional Name Act?

By Howard Bookstaff, Hoover Slovacek LLP, HAA General Counsel

PICTURE THIS: You are the manager of Sunnyside Court Apartments in Houston. You have a resident that hasn’t paid rent for the last 10 months. You have tried everything to work with this resident. You have offered a payment plan, offered to waive the delinquency and even offer to pay the resident to leave!

Nothing has worked. To make matters worse, the resident has recently “ghosted” you by being unresponsive to text messages, emails and phone calls.

You don’t like to evict anyone, but you have no choice.

So, you prepare a notice to vacate and deliver the notice by taping it to the inside of the resident’s front door. To bolster your case, you even take a picture of the notice attached to the door.

After the notice period has expired, you check to see if the resident has left. Nothing has changed. The resident is still there!

You then go to the court and file an eviction against the resident. The court date is scheduled for 21 days after the petition was filed.

At trial, you are introduced to a legal aid attorney who says that, although she has just met the resident, she will be representing the resident in this case.

The judge asks you to present your case. You explain to the judge that the resident has not paid rent for 10 months and you gave the resident a notice to vacate. You explain to the judge that you affixed the notice to the inside of the main entry door of the resident’s unit.

The resident says that they don’t remember getting a notice to vacate. You then show the judge a picture of the notice posted to the inside of the door.

All is good, the judge is about to rule in your favor.

Wait … the legal aid attorney asks the judge to pause for a second. The attorney explains to the judge that the lease identifies the owner as “Sunnyside Woods Apartments.” You are wondering “what’s the problem?” That’s the name of your property. The attorney then asks the judge for you to produce the assumed name certificate. You don’t know what that is, but you remind the judge that the resident has not paid rent for 10 months!

The judge dismisses your case.

You wonder what in the world just happened!

You need help!

This is an all too familiar scene in the courtroom. One of the issues that the tenant’s lawyer will look at is whether you have complied with the Assumed Business or Professional Name Act (the “Act”) codified in Chapter 71 of the Texas Business and Commerce Code. Let’s take a look at what the Act is and how it can affect an eviction proceeding.

What is the Assumed Business or Professional Name Act?

The Act requires individuals or entities that use an assumed name to provide some record of the individual entity to which the assumed name is related. Since most apartment properties are owned by an entity (typically a single asset entity, such as a limited liability company or a corporation), I will focus the answers to the questions below regarding the Act assuming that your property is owned by an entity. If your property is owned individually, the answers may be different, and the Act should be reviewed.

What is an “Assumed name”?

The Act defines an “Assumed name” (for the specified type of entity) as:

• for a partnership, a name that does not include the surname or other legal name of each joint venturer or general partner;

• for a limited partnership, a name other than the name stated in its certificate of formation;

• for a company, a name used by the company;

• for a corporation, a name other than the name stated in its certificate of formation or a comparable document;

• for a limited liability company, a name other than the name stated in its certificate of formation or a comparable document.

Generally, an assumed name is any name used by a business that is not the official entity name as stated in its formation documents.

What are the requirements applicable to an incorporated business or limited liability company?

A corporation or limited liability company must file an assumed name certificate under the Act if the entity regularly conducts business in Texas under an assumed name.

As a practical matter, most entities that own apartment communities and use a different name (even if it is only slightly different) should be filing an assumed name certificate with the Secretary of State’s office.

What are the contents of an assumed name certificate?

An assumed name certificate must state:

• the assumed name under which the business is or is to be conducted;

• the registrant’s name as stated in the reg- istrant’s certificate of formation or application filed with the office of the Secretary of State or other comparable document;

• the state, county, or other jurisdiction under the laws of which the registrant was formed, incorporated or organized;

• the period, not to exceed 10 years, during which the registrant will use the assumed name;

• statement specifying the entity for which the registration applies;

• the street or mailing address of the registrant’s principal office; and

• the county or counties in Texas where the registrant is or will be conducting business.

These requirements are designed to give the public notice of who to contact if all communications the business has used to communicate with the public is the assumed name.

When does the certificate have to be renewed?

A certificate is effective for a term not to exceed 10 years from the date the certificate is filed. A certificate is void at the end of the certificate’s stated term, unless within six months preceding the expiration date, the registrant files a renewal certificate. A registrant may renew a certificate for any number of successive terms, but each term may not exceed 10 years.

The certificate should be filed as required by the Act and renewed at least every 10 years while the apartment community is still using that assumed name.

What if I have not complied with the Act?

A person’s failure to comply with the Act does not impair the validity of any contract or act by the person or prevent a person from defending any action or proceeding in any Texas court. However, the person may not maintain an action or proceeding arising out of a contract or act in which the assumed name was used until an original, new or renewed certificate has been filed as required by the Act.

In an action or proceeding brought against a person who has not complied with the Act, the court may award the plaintiff or other party bringing the action or proceeding expenses incurred, including attorney’s fees, in locating and effecting service on the other party.

A person also commits an offense under the Act if the person conducts business under an assumed name and intentionally violates the Act. An offense under the Act is a Class A misdemeanor.

Although intentionally violating the Act is a crime in the state of Texas, the most likely effect of failing to comply with the Act will be in the context of an eviction proceeding. As stated above, a person’s failure to comply with the Act does not impair the validity of a contract. Consequently, if your lease is in the name of Sunnyside Woods Apartments, but the property is owned by Sunnyside Woods LLC, the lease will still be in effect even if Sunnyside Woods did not properly comply with the Act by filing an assumed name certificate.

However, since the Act provides that a person may not maintain an action or proceeding arising out of a contract until the assumed name certificate has been filed, if Sunnyside Woods did not comply with the Act, the judge would be correct in ruling that the eviction cannot go forward until a certificate is filed. This does not necessarily mean that the judge should dismiss the case, but the judge could abate the case until a proper certificate has been filed.

In light in today’s environment regarding evictions, it is not unusual for a judge to grant legal aid’s motion to dismiss the case if the assumed name certificate was not filed. Consequently, if your lease is in the name of the assumed name (such as “Sunnyside Woods Apartments”) or you have used the assumed name as the owner’s name in the notice to vacate or petition for eviction, you should be prepared to show your assumed name certificate to the judge.

Evictions have been increasingly confusing and complicated with various technical defenses regularly asserted by, or on behalf of, residents. Don’t be caught off guard! Be sure that the entity that owns your apartment community has properly filed an assumed name certificate.

Want more Howard? He’s online! Go to http://issuu.com/haa_abode for past columns.