Archives for posts with tag: Real Property

 

Texas Property TAZThe State of Texas’ power to tax does not come from the U.S. or Texas Constitution. It is an inherent power associated with the sovereignty of the state. On the other hand, the taxing power of Texas counties, cities, and school districts is solely derived from the Texas Constitution, statutes, and municipal charters. The Texas Tax Code grants these subdivisions of the state the authority to tax all real property located within the state. Real property includes land, improvements, mines, quarries, minerals in place, and standing timber.

Only real property located within the jurisdiction of a particular taxing unit as of January 1 is taxable by that unit for that tax year. The tax on real property is primarily based upon the market value of the property as of January 1 of a particular tax year. Market value is determined by using generally accepted appraisal methods and techniques which are supposed to be consistent in appraising the same or similar kinds of property. Each property must be appraised in light of the specific individual characteristics that affect market value, and appraisal process must consider all available evidence in determining a property’s market value.

Typically, sales of nearby residential property will be used to determine comparable property values in the appraisal process using the market data method. These sales, which may even include certain foreclosure sales and properties located in a declining market, must have occurred within 24 months, and should have similar locations, square footages, ages, conditions, access, amenities, views, occupancy, easements, deed restrictions, and other benefits and burdens which may affect marketability. In counties with a population of at least 150,000, sales must have occurred within 36 months and be adjusted to account for changed market conditions.

In most situations, the chief appraiser of the taxing district is required to send each property owner a notice of appraised value for homestead exempted property on or before April 1, and for other properties on or before May 1. This notice must accompany a copy of a notice of protest form and instructions on completing and mailing the form to the appraisal review board to request a hearing. If the taxing district fails to provide any required notice to the taxpayer, the taxpayer’s due process rights are violated, and any appraisal or tax assessed on the property is void. It should be noted that “failing to provide notice” doesn’t mean mailing the notice to the wrong address because the taxpayer failed to notify the taxing district of an address change. Failing to provide notice means that no notice was ever sent anywhere. It is the taxpayer’s duty to keep the appraisal district supplied with a current address.

If a property owner disagrees with a notice of appraised value, they are normally entitled to file a protest with the appraisal review board. The protest must be in writing and timely filed. Generally, the protest must be filed not later than the 30th day after the notice of appraised value was delivered to the property owner. For a homestead exempted property, the notice of protest must be filed before May 1 or not later than the 30th day after the notice of appraised value was delivered, whichever is later. Failing to comply with the administrative protest procedures will result in the preclusion of any further appeal of the appraisal review board’s ruling. Appraisal districts in counties with a population of 500,000 or more must allow a property owner with a homestead exemption to file a notice of protest electronically.

Scott Alagood is board certified in residential and commercial real estate law by the Texas Board of Specialization and can be reached at alagood@dentonlaw.com or www.dentonlaw.com.

OLYMPUS DIGITAL CAMERASince the early to mid-90’s the importance and value of minerals in North Texas has become clear. Where the surface of a property has been severed from the minerals underlying that property, serious problems can arise. The majority of purchasers of real estate want to utilize the surface of the property for a particular residential or commercial purpose. Because the minerals only have value when extracted from the land under which they sit, the rights of the mineral owner must supersede the rights of the surface owner. The mineral owner has a right to reasonably use the surface of land to develop its minerals. That right can easily interfere and come into conflict with the rights of the surface owner.

Owners and lenders must be aware of the potential interference of the surface by the mineral owner. State laws, local ordinances, specific mineral lease terms, and court rulings may provide some protection against interference with the use of the surface estate by the mineral owner. Recently, Texas title insurance has changed to also provide some protection in certain specific situations.

Where the surface use is paramount to the value of the land, such as an office building, retail center, single family residence, apartment complex, warehouse, manufacturing plant, or other surface intensive use, a prospective purchaser or lender may want to consider utilizing one of the T-19 endorsements to insure potential damage to the surface resulting from the development of the mineral estate. The T-19 endorsements consist of four separate endorsements.

The T-19 Restrictions, Encroachments, Minerals Endorsement may be utilized by a lender. The T-19 provides other coverages beyond interference by the mineral estate. With respect to the mineral estate, it insures the lender against loss sustained by reason of damage to an “Improvement” located on the property on the date of the policy or existing thereafter resulting from the exercise of a right to use the surface of the property for the extraction or development of minerals. The term “Improvement” is defined as an improvement that constitutes real property and includes landscaping, lawn, shrubbery, or trees which are affixed to the insured property. The T-19 endorsement cost is 5% of the basic premium for residential property and 10% for commercial property, but will not be less than $50.00.

The T-19.1 Restrictions, Encroachments, Minerals Endorsement may be obtained by an owner. As with the T-19 endorsement, it also protects against matters other than interference by the mineral estate. With respect to the mineral estate, it insures the owner against loss sustained by reason of damage to an “Improvement” located on the property on the date of the policy or existing thereafter resulting from the exercise of the mineral owner’s rights (same as the T-19). However, the definition of “Improvement” in the T-19.1 is different than that in the T-19. The T-19.1 provides coverage for buildings, structures, roads, walkways, driveways, or curbs which constitute real property, but excludes crops, landscaping, lawns, shrubbery or trees. The T-19.1 endorsement cost is 10% for a residential property or 5% if purchased along with the survey

exception amendment (which is 5% for a residential policy, and 15% for a commercial property or 10% if purchased along with the survey exception amendment (which is 15% for a commercial policy). As with the T-19, the minimum premium for the endorsement is $50.00.

If an owner or lender is not interested in the additional coverages provided by the T-19 and T- 19.1 endorsements (beyond that provided by the mineral estate) or if the price tag for those endorsements is too steep, then a T-19.2 or T-19.3 endorsement may be the way to go. These two endorsements both generally insure against damage resulting from the development of the mineral estate. However, they differ in a few ways.

The T-19.2 insures against damage to “permanent improvements (excluding laws, shrubbery, or trees)”, while the T-19.3 insures against damage to “permanent buildings”. In essence, the T- 19.2 will provide more coverage for damage to “improvements” which includes “permanent buildings” and other “improvements”, where the T-19.2 will only insure damage to “permanent buildings”.

Additionally, the T-19.2 may only be issued for real property of one acre or less improved or intended to be improved for one-to-four family residential use or for real property improved or intended to be improved for office, industrial, retail, mixed use, or multifamily purposes. Where the property is not of the type allowed under the T-19.2, the T-19.3 may provide mineral coverage for permanent buildings.

Both the T-19.2 and T-19.3 endorsements may be issued for either an owner’s or lender’s policy. For a residential or commercial owner’s policy, the endorsement cost is $50.00. There is no cost to include either endorsement in a lender’s policy.

While a title insurance underwriter is not legally required to issue these endorsements, in most situations they will. So don’t be afraid to ask for the additional coverages provided by these endorsements where it may be appropriate.

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 http://www.dentonlaw.com.

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