At one time, a property owner was under no obligation to repay another for making unauthorized improvements to property, even if the improvements were made in good faith. Over the decades, Texas courts have modified this rule to allow parties to seek equitable relief for improvements made to real property, as long as no express contract addresses those improvements already.
Under current Texas law, a party may recover under the equitable theory of unjust enrichment when one has obtained a benefit from another by fraud, duress, or the taking of an undue advantage. Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992).
Improvement By Mistake
A party may recover under the theory of unjust enrichment if improvements are made by mistake. For example, a contractor may mistakenly paint a house where the owner stands by with full knowledge of the mistake until the job is complete. The owner received the benefit of a freshly painted house despite there being no valid contract. The law of unjust enrichment does not permit the owner this advantage, and the painter may seek reparation. This is true provided that the painter exercised good faith in their actions and committed no wrong act afterwards (such as destroying the improvement). Producers Lumber & Supply Co. v. Olney Bldg. Co., 333 S.W.2d 619 (Tex. Civ. App. 1960), writ refused NRE (July 6, 1960). Note that the result would differ should the owner have lacked knowledge of painter’s work until after completion of the job.
Improvements Under Color of Title
Unjust enrichment can also be used to produce equity where ownership of the property itself was an issue. A person may be in the process of acquiring property and begin to make improvements before title is transferred. Should a transfer never occur, the party that made those investments under color of title may seek recovery. Elam v. Parkhill, 60 Tex. 581 (1884).
Tenant Improvements to Rental Properties
Absent an express agreement, usually in the form of a lease, a renter does not have the right to materially alter a rental property. As such, unjust enrichment does not typically allow for tenant recovery. Tenant alterations are normally covered in lease agreements that specify the tenant’s right of removal of items that have not become fixtures. Fixtures are permanent items that have become part of the property and would take extensive effort and time to remove. Ultimately, the general rule is that a tenant retains title to any structures or equipment on leased premises and has a right of removal. Fenlon v. Jaffee, 553 S.W.2d 422 (Tex. Civ. App. 1977), writ refused NRE (Nov. 30, 1977).
Improvements by Joint Owners of Properties
Any co-tenant may make improvements to jointly owned real estate. However, a non-consenting co-tenant has no obligation to reimburse the other for elective improvements to the property. However, joint owners may seek contribution among themselves for necessary repairs. Whitmire v. Powell, 103 Tex. 232, 125 S.W. 889 (1910). A separate body of Texas law, apart from unjust enrichment, governs reimbursement claims by joint owners of real property.
Unjust enrichment is often a viable theory of obtaining compensation when repairs and other types of improvements have been made to real estate in Texas. It provides equitable relief to parties that may otherwise get an unfair deal; however, unjust enrichment is not applicable in every case. It is important to speak to an attorney to see which legal remedy may be the best choice for your situation.