Archives for category: Real Estate

Denton ETJNew home construction is on the rise in North Texas. When an owner or builder seeks to construct a new home within a town or city in Texas, they are required to first obtain certain permits from the municipality before construction can begin. If the home is to be constructed in an unincorporated area of a county, then any required permits will be obtained from the county instead of a municipality.

In Texas, there are areas beyond a city’s limits which may be regulated by a municipality. These areas are called “extraterritorial jurisdiction” or “ETJ”. The size of the ETJ depends on the type of municipality. The types of municipal governments are divided into two basic categories, general-law municipalities and home-rule municipalities. A Municipality with a population of more than 5,000 may choose to become a home-rule municipality.

The general rule is that a municipality cannot enforce its building codes and permitting requirements within its ETJ. However, a home-rule municipality may enforce its building codes and permitting rules within its ETJ if an ordinance authorizes it to do so. General-law municipalities on the other hand are limited to those powers that have been conferred by the Texas Constitution or state law and may not adopt ordinances which extend beyond such authorizations.

Recently, some general law municipalities have taken the stance that certain state laws and cases have provided the requisite authority of a general-law municipality to enforce their building codes and permitting rules within their ETJ. One of the significant reasons these small towns want to enforce their building codes and permitting rules within their ETJ is to obtain large permitting fees for the administration of the permitting process. The administration of the permitting process includes conducting periodic inspections and approvals at certain stages of the construction. The process typically ends in a final inspection and approval which allows the home to be occupied. However, it is not unusual for these smaller municipalities to not have the necessary manpower to properly administer the permitting process.

Lakewood Village, Texas, is one general-law municipality that has attempted to enforce its building codes and permitting rules within its ETJ. Lakewood Village is inhabited by approximately 620 people. The town is located southeast of Denton on the shores of Lake Lewisville. Lakewood Village can be accessed from FM 720 and El Dorado Parkway by way of East US 380 or by the Lewisville Lake toll bridge accessed from Swisher Road via I-35E.

Enter Harry Bizios.[1] Mr. Bizios wanted to construct a $1.2 million home in Lakewood Village’s ETJ. He obtained all of the necessary permits from Denton County to construct his home. Before Mr. Bizios could construct the home, Lakewood Village applied for and obtained a temporary injunction stopping Mr. Bizios’ construction. The Town contended that Mr. Bizios had violated Lakewood Village ordinance 11-16 which authorized Lakewood Village to enforce its building codes and permitting rules within its ETJ. According to Town’s secretary who testified in the injunction proceeding, Lakewood Village sought to charge Mr. Bizios almost $15,000.00 for the issuance of a building permit. Mr. Bizios appealed the issuance of the temporary injunction to the 2nd Court of Appeals (Fort Worth), and the court issued its opinion resolving the issue on New Year’s Eve of 2014. The full decision can be found at 2014 Tex. App. LEXIS 13939.

Essentially, the Fort Worth court decided in favor of Mr. Bizios. The court found that the Town’s ordinance went beyond the authority afforded to general-law municipalities by the legislature. In agreeing with Mr. Bizios, the court stated, “Because none of the statutes referenced by the Town expressly grant a general-law municipality the authority to extend its building code in its ETJ, and because we have otherwise found none that does so, the trial court abused its discretion by granting the injunction.” The court then reversed the trial court’s order and remanded the case back to the trial court for further proceedings. Lakewood Village has filed a petition requesting that the Texas Supreme Court review the Court of Appeals’ decision.

While the issue is not yet finally settled, the Fort Worth Court of Appeals has upheld the prohibition of a general-law municipality to regulate building codes and permitting rules within its ETJ. Once the Texas Supreme Court decides if it will review the decision, and if it does issue a final determination of this issue, we will let you know what happens. Until then, the general rules referenced herein will continue to apply where building within the ETJ of a general-law municipality.

Scott Alagood is Board Certified by the Texas Board of Legal Specialization in both Commercial and Residential Real Estate Law and may be reached at alagood@dentonlaw.com and www.dentonlaw.com.

[1] For the record, neither the author nor his law firm represented any party to the legal proceeding nor played a part in the legal proceeding referenced in the article

commercial-leaseThe terms of the commercial lease will govern the financial relationship between the business and the landlord. The lease will determine the tenant’s occupancy rights. The lease will establish how the parties deal with default and termination. The lease will supply the base upon which the business operates for years to come. It is important that the tenant understand the terms contained within the lease and how the lease will impact its business.

Tenant’s Construction

Tenants typically construct improvements to the leased premises to make it suitable for their specific purpose. Unless limited by the terms of the lease, such improvements may be performed without the landlord’s consent. Any improvements to the leased premises which cannot be removed without damaging the property must remain with the premises at the conclusion of the lease. Tenants must consider the length of time it will take to improve and fixture the leased premises, when the landlord will turn over possession of the leased premises, and when rent starts to accrue during the lease negotiations.

Repairs and Maintenance

In a commercial setting, the parties may allocate the repair and maintenance responsibilities for the leased premises. Typically, the landlord will retain the responsibility over the structural portions of the leased premises, while the tenant will accept the duty for the remainder of the structure and its systems. It should be noted that the landlord’s failure to repair or maintain does not relieve the tenant of paying rent unless otherwise allowed by statute, the lease, or otherwise arises to the level of a constructive eviction.

Default, Remedies, and Mitigation

A lease typically defines specific acts and omissions which will constitute “defaults” thereunder. Clearly the failure to pay rent is a default. Tenants may want to require the landlord to provide some type of notice to the tenant and allow an opportunity to cure before being held in default. Once a default occurs, the landlord has several options available. The landlord may terminate the lease and demand that the tenant vacate the leased premises. Alternatively, the landlord may retake possession of the leased premises without accepting surrender of the lease, and relet to another tenant. The landlord may allow the lease to continue and sue for rents as they become due. If the landlord chooses to accelerate the rentals under the lease, it must reduce the future rentals by the fair market rental value of the leased premises and discount the remainder of the rentals due under the lease to present value. If the landlord relets the leased premises at a rental rate which is less than the rental rate in the defaulting lease, then the landlord may also sue the defaulting tenant for the difference. In most default situations, the landlord should also attempt to mitigate its damages upon a tenant’s default where it can do so. A landlord may also recover its reasonable and necessary attorney’s fees in a suit against a defaulting tenant where allowed by the terms of the lease or otherwise by statute.

Implied Covenants

Unless the lease expressly provides otherwise, a commercial lease typically contains certain promises which are implied. These include the landlord’s promise that the tenant will enjoy the premises without interference, the tenant’s promise not to cause waste, and the landlords “warranty” that the premises is suitable for the tenant’s intended use. The implied covenant that the tenant continuously operate its business on the leased premises exists where the lease provides that the rental is paid only as a percentage of the tenant’s gross sales.

Waiver of Jury Trial

It is very common for a commercial lease to contain a waiver of jury trial provision. Such a provision is valid under Texas law. If a tenant wishes to retain the right to a trial by jury, then such will have to be negotiated prior to the execution of the lease.

Non-waiver

Most commercial leases also contain “non-waiver” provisions. A non-waiver provision allows a landlord not to be bound by a prior failure to enforce a lease right or to declare a later occurring default which the landlord may have delayed enforcing or outright waived its rights in a prior default situation. Non-waiver provisions are generally considered valid and enforceable.

Restrictions on Assignment

Unless otherwise allowed by the terms of the lease or the landlord’s consent, Texas law does not allow a tenant to assign or sublet its leasehold interest. Any attempt to assign or sublet by a tenant without lease authorization or the landlord’s consent is void.

Condemnation

Unless otherwise contracted between the parties to the lease, a tenant is entitled to share in any condemnation award where any portion of the leased premises is lost through the eminent domain process. However, most commercial landlords typically want to alter this situation so that they remain in control of the condemnation process and the proceeds.

Casualty

Damage to the leased premises caused by fire, earthquake, flood, or other casualty which renders the property unsuitable for continued occupancy terminates the leasehold estate. Any prepaid rental on the date of casualty is not refundable unless allowed by the lease. Typically, the parties will negotiate the specific events which will render the leased premises so untenable that the lease will terminate. In the event of a casualty which only affects a portion of the leased premises, the parties will also normally negotiate how the tenancy will continue and how rent may be abated.

R. Scott Alagood is board certified in Commercial and Residential Real Estate Law and can be reached at alagood@dentonlaw.com and http://www.dentonlaw.com.

Commercial LeaseThe holidays and new year are busy times for businesses which may be locating or moving into leased retail, office, or industrial space. These businesses spend extensive time and resources choosing the right broker, location, and tenant mix. Finding the right location is not the end of the endeavor. Before occupying the leased space, a commercial lease will have to be negotiated.

The terms of the commercial lease will govern the financial relationship between the business and the landlord. The lease will determine the tenant’s occupancy rights. The lease will establish how the parties deal with default and termination. The lease will supply the base upon which the business operates for years to come. It is important that the tenant understand the terms contained within the lease and how the lease will impact its business.

Commercial leasing is a complicated process which involves hundreds of business, practical, and legal considerations. This article will address just a few of the legal issues which are typically found in a commercial lease and shed some light on how they may apply to a tenant.

Parties, Legal Description, and Term

Most commercial leases will be for a term in excess of a period of one year. As such, the statute of frauds requires that the lease be in writing, signed by the party who is to be bound, contain an identifiable legal description of the property being leased, and contain all material terms between the parties. Absent these requirements being met or an exception, the lease will be unenforceable.

The tenancy may be for a fixed term or periodic. For reasons of certainty, most commercial leases are for a fixed term. Periodic tenancies may arise where the lease does not provide for a fixed term, but is for a period to period at the will of the parties. A month to month lease is an example of a periodic tenancy. Where a lease allows either party to have a right of termination, a periodic tenancy is not created so long as the lease is otherwise specifies a definite term.

Execution, Delivery, and Recordation

For a lease term in excess of one year, it must be signed by the parties to be enforceable. The person signing the lease must have authority to do so. Representatives of a business entity should have a resolution or minutes from the governing authority. A common mistake is made where an individual signs a lease on behalf of a business being conducted under an assumed name or “DBA” (doing business as). An individual cannot bind a DBA entity because a DBA is no more than an assumed or trade name of that individual and has no separate legal existence. Also, where an individual signs a lease on behalf of a business entity that is not in existence or fails to indicate the capacity or position in which the individual is signing, the individual may become personal liable for the lease obligations.

Delivery is an essential element to bind the parties to the lease. No particular act or words are necessary. Typically, delivery will be shown by the parties’ actions in conformity with the lease regardless of whether physical delivery has occurred.

Recordation is not a necessary element of an enforceable lease. Recordation is simply a method of providing actual or constructive notice to third parties of the tenant’s leasehold interest. So long as there is physical evidence of the tenant’s occupancy, recordation is unnecessary. If the lease will be effective prior to the tenant’s physical possession, it may be advisable to file a memorandum of lease in the county real property records.

Rent

Rent appears self-evident. It is the compensation received by the landlord for allowing the tenant to use and occupy the leased premises. In a commercial lease the tenant typically has other financial obligations such as paying the taxes, insurance, and maintenance costs. The term “rent” does not necessarily include these other financial obligations unless those payments are determined to be part of the rent.

Permitted and Exclusive Use

The landlord will control the use of the leased premises. This is particularly important where the leased premises is a part of a larger commercial development. The landlord will control the “tenant mix” through the use restrictions contained in each lease. The landlord may also create restrictive covenants applicable to the entire commercial development. Tenants must ensure that its intended business operations do not violate the lease or covenants.

Tenants may want to ensure that other tenants within the commercial development are not allowed to operate similar businesses. This is done through exclusive use provisions. Care should be taken that appropriate remedies are provided for a breach of an exclusive use clause. Otherwise, a tenant may find themselves in litigation over the tenant’s intended and specified use.

R. Scott Alagood is board certified in Commercial and Residential Real Estate Law and can be reached at alagood@dentonlaw.com and http://www.dentonlaw.com.

 

……THIS ARTICLE WILL CONTINUE IN NEXT MONTH’S EDITION

R. Scott Alagood is board certified in Commercial and Residential Real Estate Law and can be reached at alagood@dentonlaw.com and http://www.dentonlaw.com.

Receiverships PicturesA receivership is an equitable and legal remedy that may be used to acquire possession of property by a court appointed party known as a receiver. A receiver’s powers are derived directly from the appointing court. The receiver is a disinterested party who represents and protects the interests of all other persons for the receivership property.

A court appointed receiver is an extremely harsh remedy. The remedy allows the State to take possession and control of private property and place it in the hands of a third party. A court will appoint a receiver only if there are no other less harsh remedies available.

Basis for Receivership.

A receivership in Texas may be installed under rules of equity (“fairness”) or pursuant to a specific statute. Under equity, a receivership must be “ancillary” to an otherwise apparently valid claim or remedy and to protect or preserve property during the pendency of a lawsuit. Where the receivership arises out of a statute, it doesn’t matter if ancillary claims exist.

Types of Receiverships.

Equitable Receiverships. A court may appoint a receiver in any case in which a receiver may be appointed under the rules of equity.

General Receivership Statute. Chapter 64 of the Texas Civil Practice & Remedies Code allows a court to appoint a receiver under any of the following circumstances:

  • Action by vendor to vacate a fraudulent purchase of property;
  • Action by creditor to subject any property or fund to his claim;
  • Action between partners or other jointly owning or interested in any property or fund;
  • Action by a mortgagee for foreclosure and sale of mortgaged property; or
  • Corporation that is insolvent, or is in imminent danger of insolvency, has been dissolved, or has forfeited its corporate rights.

Family Law Receiverships. In conjunction with a divorce proceeding, a court may appoint a receiver as a temporary order for the preservation and protection of spousal property.

Post Judgment Receiverships. Judgment creditors may seek the appointment of a receiver to assist in the satisfaction of a judgment in certain circumstances.

Business Entity Receiverships. A receiver may be appointed for a corporation that is insolvent, is in imminent danger of insolvency, has been dissolved, or has forfeited its corporate rights. The Texas Business Organizations Code deals with the appointment or a receiver for any domestic entity (including corporations, partnerships, limited liability companies, and associations) or its property.

Mineral Receiverships. A receiver may be appointed where a mineral interest or mineral leasehold interest is owned by a nonresident or absent defendant, and upon the application of a person who has a vested, contingent, or possible interest in land or an estate subject to a contingent future interest in order to lease the land for development pending the vesting of the contingent interest.

Congregational Receiverships. A receiver may be appointed for a religious congregation which had maintained regular forms of work and worship in a community at regular intervals, but ceased to function in such capacities for at least one year.

Receiver Qualifications.

To qualify as a receiver a candidate must be a citizen and qualified voter of Texas at the time of the appointment. A candidate must not be a party, attorney, or other person interested in the action in which the receiver is sought.

Appointment Procedures.

Absent the appointment of a receiver upon the court’s own motion, a party seeking such appointment must file an application with a court having proper jurisdiction over the subject matter of the suit. Except in certain extreme circumstances, notice and opportunity to be heard must be provided to all adverse parties prior to the appointment. An ex parte appointment should rarely be sought, and very well may constitute an unlawful taking of property the Texas and U.S. Constitution.

The receiver must take an oath to faithfully perform all duties of the receivership and execute a good and sufficient bond.  The applicant must file a bond approved by the clerk payable to the defendant in an amount determined by the court. A court may dispense with the issuance of the applicant’s bond in a divorce.

Receivership Powers and Duties.

A receiver may take charge and keep possession of receivership property, receive rents, collect and compromise demands, make transfers, and perform other acts as authorized by the court. The act of the receiver does not bind the receivership property unless first authorized and subsequently approved by the court.

Following the appointment, a receiver must take an inventory of the property received and report it to the court. Where a party or other person subject to the receivership fails to release possession of receivership property, the receiver may bring an action to obtain possession.

A receiver may only sell the interest that it has in the receivership property at the time the receiver was appointed. Any receiver sale is a judicial sale and must be authorized and confirmed by the court before title will transfer.

Once all property has been disposed of and all proceeds distributed, then the receiver should be discharged. The final discharge order should include the final accounting of the receivership, a determination of the receiver’s fees, the restoration of any remaining property to the rightful owners, and a final discharge the receiver.

Scott Alagood is board certified in Commercial and Residential Real Estate Law by the Texas Board of Legal Specialization and can be reached at alagood@dentonlaw.com and http://www.dentonlaw.com.

foreclosure3Many residential properties are subject to mandatory property owners associations which may have the power to impose regular and special assessments against owners and properties within the subdivision. In response to some real or perceived injustices on the part of property owners associations, the Texas legislature enacted the Texas Residential Property Owners Protection Act (the “Act”) in 2001. The Act became effective on January 1, 2002. The Act may be found in Chapter 209 of the Texas Property Code.

The purpose of the Act is to provide guidelines for the operation of property owners associations and specific protections for the homeowners residing in these communities. The Act only applies to mandatory membership in a property owners association in a residential subdivision that is subject to restrictions or other provisions authorizing the collection of regular or special assessments on all or a majority of the subdivision property.

While the Act contains important protections for property owners, it also mandates certain restrictions and procedural requirements for the foreclosure of a property association‘s lien for assessments. For example, foreclosure is not available for a lien solely comprised of fines, attorney’s fees, or amounts added for costs of producing association records. Foreclosure of an assessment lien may only be obtained by court order through an expedited process. Notice of the date and time of a conducted foreclosure sale must be sent to the owner and each lienholder of record within 30 days following the sale. The notice must be sent by certified mail and must inform the owner and record lienholder of their right to redeem the property. Within 30 days after the association sends the prior notice, it must record an affidavit in the county real property records stating the date on which the notice was sent and a legal description of the property which was foreclosed.

The owner or any record lienholder may redeem the foreclosed property from a purchaser at the sale within 180 days after the date the association mails written notice of the sale to the owner and record lienholder. An owner or lienholder may extend the redemption period by sending by certified mail a written request to redeem the property to the purchaser on or before the last day of the redemption period. The extended period lasts for 10 days after the purchaser provides the owner or lienholder written notice of the redemption amounts. A record lienholder may not redeem the property prior to 90 days after the date the association mailed the notice, and only if the owner has not redeemed the property. The purchaser of the property at a foreclosure sale may not transfer the property to anyone other than the lot owner during the redemption period.

To redeem the property, the owner or lienholder must first pay to the purchaser applicable items required by statute, including all amounts due the association through and after the date of sale, interest, costs, attorney’s fees, mortgage payments, maintenance and leasing costs, ad valorem taxes, recording fees, costs of eviction, and the acquisition price of the property (less any applicable credits). If the owner timely redeems the property, the purchaser must execute and deliver to the owner or lienholder a deed transferring the property. If the purchaser refuses to execute or deliver the deed after a proper redemption, the owner or lienholder may bring an action against the purchaser and may recover its reasonable attorney’s fees for the successful prosecution of such action. Property that is redeemed continues to be subject to all liens and encumbrances which existed prior to the foreclosure.

Where an owner or lienholder fails to timely redeem the property by filing the deed or recording an affidavit stating that the property has been redeemed, the right of redemption against a bona fide purchaser for value expires after the redemption period. Where an owner makes partial payment of the redemption amount to the association, but fails to pay all other amounts before the expiration of the redemption period, the association must refund the partial payments within 30 days thereafter.

It is not uncommon for the costs, expenses, interest, and attorney’s fees portions of the redemption amounts to far exceed the original assessments upon which payment is sought. As an owner, immediate action should be taken to address any claims for past due assessments. Certified mail should be accepted, opened, read, and immediately addressed. Service of process of any lawsuit should always be immediately reviewed and appropriately handled by qualified legal counsel.

R. Scott Alagood is board certified by the Texas Board of Legal Specialization in Commercial and Residential Real Estate Law. Scott can be reached at alagood@dentonlaw.com and http://www.dentonlaw.com.<

As social media expands at an exponential rate and communication to the masses is made as easy as a click of a button, the world is spewing their thoughts, views, and opinions for everyone to see.  Can such statements come back to haunt the party making them.  Certainly, in many different ways.  Just ask Donald Sterling.

However, when do statements rise to conduct which may place the party making the statements in jeopardy of being sued for fraud.  Fraud or misrepresentation claims must be based on false statements.  So long as a statement consists of “pure” opinion, it cannot constitute a false representation.  Purity in anything is hard to find.  Purity is not so much a condition fixed in time and space, but an ideal or a standard that may be sought after.  Like perfection, it is a pursuit and not something that is necessarily attainable.

It is also difficult to determine whether a statement is one of “opinion” or “fact”.  Webster’s definition of opinion is “a belief stronger than an impression and less strong than positive knowledge.”  Courts seem to follow this definition in most instances.  Courts group “opinions” along with “judgments”, “probabilities”, and “expectations”.  Therefore, statements made about matters that fall short of positive knowledge should not be actionable as an “opinion”.

 There are a few exceptions to the general rule that “opinions” are not actionable fraud or misrepresentations.  These exceptions are: 1) opinions the speaker knows to be false; 2) opinions mixed with false statements of fact; 3) and opinions based on special knowledge.

 The first exception is creates a situation that is difficult to prove in court.  The party accused of making an actionable misrepresentation is put in the position having to prove that although their opinion was wrong, they didn’t know it at the time.  This situation requires the party asserting the exception to prove a negative, which is difficult if not impossible.  So at best, the party ends up testifying that they didn’t know their opinion was untruthful, hopefully backed up by some sensible rationale, and hope that there isn’t any direct or circumstantial evidence to the contrary.  Otherwise, the simple fact of making an incorrect opinion may be enough to allow the fact finder to imply knowledge of the untruthful nature of the statement.

 The second exception is fairly self-explanatory.  Where a party expresses an opinion mixed with statements of fact that are false, the opinion portion of the statement will not clothe the false facts with any protection.  Reliance upon the false facts by the other party will support an action for fraud.  Further, where facts are included with “opinion”, such “opinion” cannot be considered “pure”.

 The final exception relates to opinions based on special knowledge.  Special knowledge means knowledge of specific facts that underlie the false opinion.  However, many courts appear to often confuse special knowledge with special expertise held by persons such as doctors, lawyers, or engineers.  In practice, this exception often makes it difficult for the accused to use the “opinion” defense where the accused party is significantly more sophisticated than the other party to whom the statement was made.  When correctly applied, this exception will negate the “opinion” defense if the party making the statement has actual knowledge of or special access to particular facts underlying the false statement and the party relying upon such statement does not have such knowledge or access.

 Making false statements of opinion can place a party in potentially hot water.   To reduce the chances of being sued for fraud for incorrect statements, consider the following suggestions.  Make it clear when you are expressing an opinion that you are only expressing “your opinion”.  Phrases such as “in my opinion”, “I believe”, “speaking for myself”, or “I think”, will help bolster an argument that the statement was not a statement of fact, but instead an “opinion”.  Be certain that any factual statements are correct and you have the ability to justify their accuracy.  Indicate that you are not sure if that is the case.  In real estate or stock transactions, false statements of fact can create liability even if you honestly believed them at the time.  Give the other party access to the same information you have utilized in forming your opinion or statement of fact.  Give them the opportunity to review it for themselves.  Do what you can to encourage them to look into the subject for themselves.

 Finally, be careful who you talk to and how you disseminate information.  Know your intended audience, and realize that in today’s world, everyone is listening.

 R. Scott Alagood is board certified in Commercial and Residential Real Estate Law by the Texas Board of Legal Specialization.  Scott can be reached at alagood@dentonlaw.com and http://www.dentonlaw.com.

 

Land usePrivate land use restrictions are frequently found in planned community developments. Such restrictions may regulate the land use, as well as the size, location, quality, cost, and composition of the improvements constructed on the land. They may exist on both residential and commercial real property. So long as the restrictions are not against public policy and are imposed in an otherwise legal manner, an owner may restrict its property as it desires.

However, restrictions may not limit the use or prevent the assignability of the property to any person on the basis of race, color, religion, or national origin. Additionally, state and federal law prohibits the use of restrictions to discriminate against persons with handicaps or disabilities. Any restriction which prohibits the use of the land is not enforceable. Restrictions may not require the use of wood shingles on residential properties.

Restrictions are typically imposed on land by the owner through the use of signed and filed documents which may be referred to as deed restrictions; restrictive covenants, conditions and restrictions; easements; and servitudes. Instruments creating restrictions typically are for a limited duration and may provide for a mechanism to renew or extend them beyond the initial period. A restriction must contain an exact description of the land upon which the restriction is being imposed.

Restrictions may terminate automatically or through a process set forth in the instrument. Courts have refused to enforce restrictions where substantial violations exist and such amount to an abandonment or waiver of the right to enforce them. However, the violations must be so great as to place the average person on notice of such abandonment or waiver. For example, where a subdivision may be restricted to only allow metal ornate fencing, but 75% of the lot owners have built wooden privacy fencing, and an abandonment or waiver of that particular restriction. The number, nature, and severity of the violation, prior acts of enforcement, and whether it is still reasonably possible to utilize the benefits intended by the restriction are factors which will be considered.

Courts may not enforce restrictions where there has been a substantial change in the restricted property or the area surrounding the property such that enforcement of the restriction is no longer possible. Such change must be so drastic that the purpose of the restriction may no longer be achieved. Typically, this situation occurs when a long time residential neighborhood or area over the years becomes commercial in nature. However, the single factor that a lot may be more valuable as commercial does not necessarily entitle the owner to avoid residential use restrictions placed on the property.

Additionally, an action for breach of a restrictive covenant may be barred by the four-year statute of limitations. The statute begins to run on the beach of the covenant. However, if the initial breach is so insubstantial or inconsequential that the purpose of the covenant may still be realized, the statute does not begin to run until the violation becomes significant.

Government and other entities with the power of eminent domain may acquire property free of restrictive covenants through the eminent domain process. In utilizing such rights, the condemning authority may be required to pay compensation to other affected land owners for the removal of the restrictions. Sale of property for delinquent ad valorem taxes does not invalidate any restrictions on the land sold.

Municipalities may enact zoning ordinances for the general welfare of the community. Such ordinances may not destroy or impair otherwise valid restrictive covenants. Where the restrictive covenant is less restrictive that the zoning ordinance, the zoning ordinance will govern the particular land use. Where the restrictive is more stringent than the zoning ordinance, the use must comply with restrictive covenant. For example, where an otherwise valid private restriction limits the use of property for residential purposes, but the property is thereafter zoned commercial, the restriction will be enforced limiting the use of the property for residential purposes. Zoning ordinances may not enlarge private restrictions.

For residential restrictions, there may be state statutes which govern the applicability, enforceability, and extension of the restrictions based upon the population of the County and/or the municipality in which the land is located. In the situations, care should be taken that the appropriate statutes are reviewed. Chapter 202 of the Texas Property Code governs the construction and enforcement of restrictive covenants. Chapter 209 of the Texas Property Code deals with residential restrictions which authorize a property owner’s association to collect assessments and impose liens against property within a subdivision. Section 5.006(a) of the Texas Property Code requires a court to award reasonable attorney’s fees to a prevailing Plaintiff for a breach of a restrictive covenant.

R. Scott Alagood is board certified in Commercial and Residential Real Estate Law by the Texas Board of Specialization and can be reached at alagood@dentonlaw.com or http://www.dentonlaw.com.

Image With the economy beginning to pick up, new housing starts and sales of existing homes seem to be on the upswing as well.  It is important to know what duties the seller has in disclosing the physical condition of a home, and to what extent a buyer may rely upon such disclosures in purchasing real property.  Depending on the type of property being sold, commercial, residential, farm & ranch, unimproved, etc…., the required disclosures vary to some extent.  This article will solely focus on the required disclosures involved in the sale of residential real estate.

“Residential real estate” is defined as a single dwelling unit of residential real property located in Texas.  Section 5.008 of the Texas Property Code governs a seller’s duty to disclose the condition of residential real estate.  You may review the promulgated disclosure form on the Contract Forms tab of the Texas Real Estate Commissioner’s website found at http://www.trec.state.tx.us.

The disclosures required by Section 5.008, include (1) the presence and condition of equipment, fixtures and improvements; (2) the presence or absence of working smoke detectors; (3) defects in walls, foundations, plumbing, electrical, or other major components of the property, including “structural” components; (4) potential problems with termite damage, flooding, aluminum wiring, asbestos, or lead-based paint; (5) whether any item, equipment, or system is in need of repair; and (6) other items affecting the property such as alterations or repairs made without permits or non-compliance with codes, deed restrictions, common areas, and lawsuits.

For “lawsuits”, Section 5.008 only requires the disclosure of “pending” lawsuits at the time the disclosure is made, and does not require disclosure of previous suits which have been dismissed, settled, or completed through final judgment.

Disclosure of “structural” repairs includes any repairs performed to the load-bearing portion of a residence, and includes the foundation, walls, and roof. Repairs to cabinets, sinks, bathroom fixtures, and drywall not caused by a failure in the structural portion of the residence are not required to be disclosed as “structural” repairs.  Other areas of Section 5.008 may require the disclosure of repairs for those items.

A seller is not required to disclose to a potential buyer any deaths on the property that are unrelated to a physical condition associated with the property, or AIDS or HIV-related health problems of previous occupants.

The seller’s disclosure notice must be completed to the best of the seller’s knowledge and belief as of the date of completion and signature.  If there are items, components, or repairs which are not known by the seller on that date and time, the seller must indicate that fact.  There is no legal obligation of a seller to conduct an investigation into matters of which the seller has no knowledge nor any continuing obligation to disclose matters that are later discovered.  Also, a seller’s disclosure notice is not a warranty or guarantee by the seller of the physical condition of the property or dwelling.

However, particular attention should be paid to the form of the disclosure notice being used.  Some residential real estate sales contracts promulgated by real estate trade associations may include disclosures which go beyond those required by Section 5.008.  It is important to read each form of disclosure closely and make sure that each response is true and correct at the time and date such is being made.  Although not required by law, supporting documentation of any disclosed defect or repair may assist the seller in later defending against allegations of misrepresentation or deceptive trade practices.

Also, unless the real estate agent or broker has actual knowledge of a misrepresentation contained in the seller’s disclosure notice and fails to bring such to the attention of the buyer or the buyer’s agent, a seller’s real estate agent or broker is not legally responsible for any misrepresentations made by the seller in its disclosure notice.

Certain types of residential real estate sales transactions are exempted from providing a disclosure notice.  These include (1) court ordered sales; (2) transfers by a bankruptcy trustee; (3) deeds in lieu of foreclosure; (4) judicial and non-judicial foreclosure sales; (5) sales by a fiduciary or administrator of a decedent’s estate, guardianship, conservatorship, or trust; (6) transfers between co-owners; (7) transfers to a spouse or heir; (8) transfers incident to a divorce; (9) transfers to or from a governmental entity; (10) new residences which have not been previously occupied; and (11) where the value of the dwelling does not exceed five percent of the value of the property.

Finally, where a seller fails to provide a disclosure notice to a buyer, the buyer’s sole remedy is to terminate the contract for any reason within seven days from buyer’s receipt of the notice.

R. Scott Alagood is board certified by the Texas Board of Legal Specialization in both Commercial and Residential Real Estate Law and may be reached at alagood@dentonlaw.com or www.dentonlaw.com.

<a href=”https://plus.google.com/+RScottAlagood?rel=author”>Google</a&gt;

reversemortgage7_zps4a2074baTexas allows lenders to make “reverse mortgages” which are secured by a borrower’s homestead.  A reverse mortgage is an instrument that allows a borrower to borrow money against the equity in his or her home in a single installment, in annuity-like installments, or a line-of-credit available on demand.  Like home equity loans, reverse mortgages are subject to a litany of state constitutional restrictions.

A reverse mortgage may only be created voluntarily by the borrower through a written contract.  Each owner and each owner’s spouse must join and consent to the reverse mortgage.  A reverse mortgage may not be made unless the borrower or borrower’s spouse is at least 62 years of age at the time the loan is made.

If the reverse mortgage provides for the annuity-like string of payments, those payments must be made at regularly scheduled intervals.  However, the lender may also make advances on the borrower’s behalf where the borrower fails to pay taxes and assessments, insurance, repairs to the secured dwelling, or any lien with priority over the reverse mortgage.  The proceeds received from a reverse mortgage may be used for anything.  A reverse mortgage will accrue interest at either a fixed or variable rate of interest which may be compounded during the term of the loan.  Most reverse mortgages will accrue interest at a variable rate.  Interest on interest is permitted, and will typically compound monthly.  However, during the term of the loan, there are no monthly repayment requirements.  The principal balance and accrued interest do not become due and payable until one of the following occur:

  • All borrowers have died;
  • The property securing the loan is sold or transferred;
  • All borrowers cease occupying the secured property for longer than 12 consecutive months without prior written approval of the lender;
  • The borrower defaults on an obligation specified in the loan documents to repair and maintain the secured property, pay taxes and assessments, or insure the secured property;
  • The borrower commits actual fraud in connection with the loan; or
  • The borrower fails to maintain the priority of the reverse mortgage after receiving notice from the lender and an opportunity to cure.

Unless voluntarily repaid, when the note becomes due the lender may only satisfy the outstanding balance of principal and accrued interest from foreclosure of the secured property.  Reverse mortgages may only be foreclosed through a lawsuit for judicial foreclosure or an expedited legal proceeding allowing foreclosure under the deed of trust.  Neither the note nor any deficiency occurring from the foreclosure sale may be satisfied from the borrower’s estate.  Said another way, the borrower is not personally liable for the repayment of the loan.

A reverse mortgage may not be made unless the borrower and each owner receive counseling regarding the advisability and availability of reverse mortgages and other financial alternatives.  The borrower and each owner must attest in writing that they each received the required counseling.  If the lender fails to make any required loan advances after receiving notice from the borrower, then the lender forfeits all principal and interest on the reverse mortgage.

Reverse mortgages are not for everyone.  Since the loan will not be typically repaid until after the death of the borrower or the sale of the home, family and heirs should be consulted before entering into the loan.  Life insurance may be an available option to use to pay off the reverse mortgage upon the borrower’s death.  Reverse mortgages may include high closing costs.  Because of a life expectancy factor in the loan repayment formula, less money will be available from the loan for younger borrowers.  Also, if a reverse mortgage is obtained, seniors may be prohibited from receiving available deferrals of ad valorem taxes.

Available alternative options to a reverse mortgage may include:

  • Cashing out whole or variable life insurance policies on the borrower;
  • Obtaining a home equity loan;
  • Selling or leasing the property; or
  • Applying for tax credits and tax abatements for seniors.

While no one plans to run out of money during retirement, the longer folks live, the harder it becomes to sustain the necessary income to provide for living expenses.  A reverse mortgage is one option that may be considered for seniors needing addition income.  However, care should be taken to make sure that all of the resulting consequences have been considered before entering into a reverse mortgage.

Amendments to the Texas Constitution concerning reverse mortgages are currently scheduled for approval during the November 5, 2013, general election.  If approval, these amendments will become effective upon proclamation by Governor Perry.

R. Scott Alagood is board certified in Residential and Commercial Real Estate Law by the Texas Board of Legal Specialization.  Scott may be contacted at alagood@dentonlaw.com and http://www.dentonlaw.com.

<a href=”https://plus.google.com/+RScottAlagood?rel=author”>Google</a&gt;

Servicemember's Civil Relief Act     According to the U.S. Department of Defense records, through the end of 2012 there were approximately 1.4 million active duty U.S. military servicemembers deployed throughout the world and the U.S.  When you include the almost 2 million persons classified as dependents of such military personnel, there are approximately 3.4 million Americans who are directly affected by the military engagements in which the United States is and will be involved.  Additionally, civilian contractors play major roles in conflicts involving the U.S. military.

Beginning with the first Soldier’s and Sailor’s Civil Relief Act of 1918, the United States has attempted to address certain hardships imposed on persons who are suddenly drafted or deployed into military conflicts.  the most recent version of this attempt was codified at 50 U.S.C. App. Section 501-596 in 2003 (with changes effective in 2004), and also known as the Servicemember’s Civil Relief Act (the “Act”).  The Act specifically states that its purpose “is to provide for, strengthen, and expedite the national defense through protection … to servicemembers of the United States to enable such persons to devote their entire energy to the defense needs of the Nation, … and to provide for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect the civil rights of servicemembers during their military service.

The underpinnings of the Act try to balance the rights of the creditor and the servicemember by granting judicial discretion to delay the enforcement of remedies available to creditors or to allow the service member additional time to meet financial obligations.  Members of the Army, Navy, Air Force, Marine Corps, Coast Guard, and Reserves (who are ordered to report for military service) are covered by the Act.  Additionally, any U.S. citizen that serves with the armed forces of a nation that is allied with the U.S. in prosecuting a war or military action against a common enemy is also covered by the Act.  Dependents (servicemember’s spouse, child, or a person for whom the servicemember provides more than one-half of the person’s support for 180 days) may apply for the protections of the Act in situations involving evictions, installment sales and lease contracts, mortgages, and residential and motor vehicle leases.

As a general rule, the Act affords its protections when the servicemember enters active military service and ends once that service is over or the service member dies during active military service.  While an exhaustive list of the protection afforded by the Act cannot be set forth in this limited space, the following list represents the significant provisions of the Act which frequently come into play.

  • Default Judgments – Section 521
  • Prohibition of Fines and Penalties – Section 523
  • Stay of Execution of Judgments, Attachments and Garnishments – Section 524
  • Tolling of Statute of Limitations – Section 526
  • Maximum Rate of Interest Limited to 6% – Section 527
  • Evictions – Section 531
  • Installment Sales and Lease Contracts – Section 532
  • Mortgages and Deeds of Trust – Section 533
  • Termination of Residential or Motor Vehicle Leases – Section 535
  • Termination of Telephone Service Contracts – Section 535a
  • Enforcement of Storage Liens – Section 537
  • Taxes on Personal Property or Real Estate – Section 561
  • Deferral of Income Taxes – Section 570

The Act requires the Secretary of each armed service branch to ensure that all service members are aware of their rights under the Act.  Any questions about the Act can be directed to the appropriate Judge Advocate, Legal, or Family Member office associated with the particular branch of service.  The appropriate office may be located by googling U.S. Armed Forces Legal Assistance Legal Services Locator or http://legalassistance.law.af.mil./content/locator.php.  Interested parties may also want to check out the Military Sentinel website established by the Department of Defense and the Federal Trade Commission at http://www.ftc.gov/sentinel/military/  which advises service members and their families on consumer protections afforded military personnel.

Creditors may check the status of a debtor’s military status through the official SCRA website at https://www.dmdc.osd.mil/appi/scra/.  However, to receiver accurate military status, the creditor will need to enter the debtor’s birth date and last four digits of the debtor’s social security number.  If there is any questions whether or not a party  to any of the proceedings listed above may be in active military service or has only been recently discharged from such service (in some instances up to one year after discharge), it is extremely important that the provisions of the Act be reviewed prior to bringing an action for enforcement of the creditor’s rights.  In certain instances, fines or imprisonment can be imposed against a creditor who knowingly takes action against a protected service member in a manner not prescribed by the Act.

Scott Alagood is Board Certified in Commercial and Residential Real Estate Law and may be reached at alagood@dentonlaw.com and www.dentonlaw.com.

 

<a href=”https://plus.google.com/+RScottAlagood?rel=author”>Google</a&gt;