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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.

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.

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The elements of an adverse possession claim or “title by limitations” claim depend on which particular statute of the Texas Civil Practice & Remedies Code applies.  The remainder of this series shall discuss each separate statute in more detail.  For now, start with the proposition that there are statutes which contain limitations periods of 3, 5, and 10 years, an also three (3) statutes which have 25 year limitations periods.  Each statute has certain elements which are common with the other statutes and its own particular set of elements which must be proven to establish title by “limitations” or “adverse possession”.

The common elements which must be proven in order to establish such a claim are as follows:  (1) visible appropriation and possession of the land, sufficient to give notice to the record title holder, that it (2) peaceable, (3) under claim of right hostile to the title holder’s claim, and (4) that continues for the duration specified in the applicable statute.*

Each particular statute will require additional elements beyond those described herein.  Those elements will be discussed in the future parts of this series.  However, neither knowledge of the rights of the record holder nor any intent to dispossess the record owner of the real property is a required element of an adverse possession claim.  An adverse possession claim must be established by the strength of the claimant’s title (veracity and accuracy of the proof of each element of the applicable limitations statute) and not on the weakness of the record owner’s title (or lack of evidence thereof).  There are no presumptions favoring an adverse possession claimant’s claim.  The burden of proof solely rests on the adverse possession claimant.  An adverse possession claim is typically a question of fact not law.

*Each of these elements als have sub-parts or sub-factors which need to be considered, and which will also comprise a future Part in the remainder of this series.

Please contact R. Scott Alagood at Alagood@dentonlaw.com or www.dentonlaw.com.
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