Archives for posts with tag: texas

It should be noted that Texas history is filled with citizens from other states and countries moving to Texas to escape debt and not so friendly debt collection laws, including in some instances, debtor’s prison.  For example, William B. Travis avoided arrest in Alabama for unpaid debts by moving to Texas.

As a result, the early Texans were not so fond of government interference in their private matters, including debt-collection.  That legacy still exists in Texas today.  Obtaining a judgment against a citizen of Texas may be one thing.  But collecting it is certainly another.

Chapters 41 and 42 of the Texas Property Code set forth certain property classifications which are “exempt” from execution by a judgment creditor.  Execution is the process of forcefully taking the property of a debtor, selling it, and paying the proceeds to a judgment creditor.  If the property is exempt, it may not be taken to satisfy a judgment debt.

Chapter 41 of the Texas Property Code deals with exempt real property.  Real property includes any permanent improvements and fixtures located on land.  Except for certain permitted types of liens and removables, a “homestead” and one or more lots used for a place of burial are exempt from seizure for the claims of a judgment creditor.

In order to qualify as a homestead, the real property (and improvements) must be categorized as either “urban” or “rural”.  If a property is “urban”, then the homestead exemption is limited to 10 acres.  If a property is “rural”, then for a single adult person the  homestead exemption is limited to 100 acres, and for a family the exemption is  limited to 200 acres.

A property is considered “rural” if it is not “urban”.  A property is considered “urban” if the property is located within the limits of a municipality or the extraterritorial jurisdiction of a municipality or a platted subdivision; and is served by policy protection, paid or volunteer fire protection, and at least 3 of the following services provided by a municipality or under contract to a municipality: (a) electric, (b) natural gas, (c) sewer, (d) storm sewer, and (e) water.

The proceeds from the sale of a homestead continue to be exempt for a period of 6 months following the date of sale.

Chapter 42 of the Texas Property Code addresses exempt personal property.  Personal property includes moveable property which is not real property.  Certain amounts and types of personal property are exempt from garnishment, attachment, execution, or other seizure.  The amount is limited to $100,000.00 of the combined fair market value of the personal property of a family.  For a single adult, the exemption amount is limited to $50,000.00.

The following are types of personal property that are exempt so long as the combined value does not exceed the limitations set forth above:

  1.  home furnishings, including family heirlooms;
  2.  provisions for consumption;
  3. farming or ranching vehicles and implements;
  4. tools, equipment, books, and apparatus, including boats and motor           vehicles  used in a trade or profession;
  5. wearing apparel;
  6. jewelry not exceeding 25% of the aggregate limits set forth above;
  7. two firearms;
  8. athletic and sporting equipment, including bicycles;
  9. a two-wheeled, three-wheeled, or four-wheeled motor vehicle for each     member of a family or single adult who holds a driver’s license or who     does not hold a driver’s license but who relies on another person to           operate the vehicle for the benefit of the nonlicensed person;
  10. the following animals and forage on hand for their consumption:
    1.  horses, mules, or donkeys and a saddle, blanket, and bridle for                  each;
    2. 12 head of cattle;
    3. 60 head of other types of livestock; and
    4. 120 fowl; and

k. household pets.

Unpaid commission for personal services not exceeding 25% of the limitations set forth above are also exempt from seizure.

The following are the types of personal property that are exempt and their combined value is not included in the limitations discussed above:

  1. current wages for personal services (except for court-ordered child support payments);
  2. professionally  prescribed health aids of a debtor or a dependent of a debtor.
  3. alimony, support, or separate maintenance received or to be received by the debtor for the support of the debtor or a dependent of a debtor; and
  4. bible or other religious book containing sacred writings (excludes a landlord exercising a contractual or statutory right to seize property after a tenant’s breach of a lease or abandonment of the leased premises).

Additionally, certain savings and retirement plans and college savings plans are also exempted from seizure.

There are two types of protests normally available to a homestead exempted property owner: (1) determination of the appraised value of the property; and (2) unequaTexas Property TAZl appraisal of the owner’s property. The first protest type is what is says it is, that the property owner simply disagrees with the value of the property provided in the notice of appraised value. The second type deals with taking a reasonable number of comparable properties within the taxing district, appropriately adjusted based on the factors above, and showing that the appraised value of the subject property in the notice of appraised value is above the median of those property values. Disparities in the timing of the reappraisal of properties within the district may lend certain properties to be at lower values. Due to advancements in technology and the growing need for governmental funding, larger taxing districts have significantly cut down on this time lag.

The property owner will be notified of the hearing time, date, and place at least 15 days prior to the date of the hearing. The chief appraiser is required to provide notice of the rights of the taxpayer, notice of the right to inspect and copy the district’s evidence, and a copy of the hearing procedures. The property owner may appear at the hearing in person, through an agent, or by affidavit. If the property owner fails to appear in some form, they will be precluded from appealing the appraisal review board’s decision. The hearing procedures are very informal. All parties are allowed to offer evidence, examine and cross examine witnesses, and present argument to the board. The property owner is permitted to testify to the value of their property, and may offer an opinion of market value or the inequality of the appraisal by the district.

So long as all of the administrative procedures have been followed to completion, a property owner may further appeal the appraisal review board’s decision to a district court or may elect to engage in non-binding arbitration. Under either avenue, the property owner is required to pay the taxes determined to be due before their delinquency as a precondition of further review. The taxpayer’s petition for review must be filed with the district court within 60 days of the receipt of the appraisal review board’s notice of determination of protest. The review by the district court or arbitrator will be “de novo” or new, so neither the taxing authority nor the property owner is bound by the prior rendition of value. Thus, it is possible for the appraisal district to seek a higher value than it sought in the protest hearing or that set by the appraiser.
A taxpayer may pursue non-binding arbitration by moving the district court to refer the case. However, if the taxpayer wants to engage in non-binding arbitration, the appraisal district must give its consent.

A taxpayer who prevails in a judicial review proceeding may be awarded reasonable attorney’s fees. Those fees may not exceed the greater of $15,000.00 or 20% of the total amount by which the property owner’s tax liability is reduced by the appeal. Further, the fees may not exceed $100,000.00 or the total amount by which the property owner’s tax liability is reduced by the appeal, whichever is less. These fee caps prevent property owners from receiving reimbursement for attorney’s fees where the reduction being sought is only a relatively small amount. The award of fees is, however, mandatory when the taxpayer prevails on a judicial review.

R. 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 http://www.dentonlaw.com.

 

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.

MediationIn 1987, Texas passed the Alternative Dispute Resolution Act which is now found in Chapter 154 of the Texas Civil Practices and Remedies Code. This Act introduced formal mediation to the State of Texas. Since that date, mediation has been used to resolve countless disputes between citizens, businesses, and governmental subdivisions of the State of Texas.

What is mediation? Mediation is a forum and process in which an impartial person, called the mediator, encourages and assists parties to a dispute to reach a settlement or resolution of that dispute between themselves. The mediation may be ordered by the court or through voluntarily participation by the parties to the dispute. Where the parties have retained attorneys to assist with the dispute, the attorneys participate in the mediation with their respective clients.

The mediation process in Texas is strictly confidential. Unless the parties agree, the statements of the parties, their conduct, demeanor, and their legal and factual positions may not be disclosed to anyone by the mediator. This rule encourages the parties to be entirely forthcoming with the mediator during the course of the mediation.

The mediator is not there to impose a decision on the parties. Even if the mediator is a licensed attorney, the mediator should not provide the parties with any legal advice or make ultimate judgments on the potential outcome of the dispute if it were to go to trial or arbitration.

Mediations are usually held in private and without any public fanfare. Most court cases are public record, and typically hearings or trials will be open to the public. Mediation allows the parties to settle their disputes quietly.

Mediation allows the parties, instead of a judge, jury or arbitrator, to reach a resolution of their dispute on terms that are acceptable to them. Note the term, “acceptable”, as many mediations actually result in outcomes in which one or more of the parties reach settlement terms that are not necessarily a “win”, or what they would want if the case had to be litigated. Mediation involves the parties negotiating to reach an acceptable outcome rather than fighting one another in an expensive and time-consuming forum to potentially achieve a win-lose or sometimes lose-lose outcome.

The mediator tries to use specific methods and techniques to assist the parties in reaching a settlement. For example in resolving a business dispute, it may seem necessary for one partner to end up with the business while the other ends up with the monetary value of his interest in the partnership. Looking at the dispute in that fashion is an example of an evaluative method of resolving disputes. “Horse-trading” is another example of an evaluative method of resolving disputes, and focuses on reaching an outcome in the most direct manner. Much of the time this technique works well to resolve simple disputes where the sum of the whole is equal to its parts, and those parts must be divided up to settle the case.

However, if the mediator delves deeper into the backgrounds of the parties, the origin of the disputes, and the motivations of each party to become involved in the dispute, many times it becomes clear that the mediator has more to deal with than simply dividing up ownership and money. A facilitative method can be best described as an attempt to find a resolution which has mutual benefits for all parties. Under the facilitative method the mediator looks for subtle undertones of the dispute. Those subtleties usually require the mediator to delve into areas that on the surface may not seem to have any direct relevance to the dispute.

In our example, the mediator may find out that one of the partners is a really good business person, while the other may be really good with the manufacturing of the good or the generation of the service which makes up the business. The mediator may find out that the two partners were once best friends, who but for the dispute (which may or may not have anything to do with the business), no longer can operate all parts of the business together. Under the facilitative approach, the mediator will attempt to repair the relationship, and try to find a resolution which may allow the parties to stop fighting each other and go back to work in their respective areas of strength for the benefit of the business and themselves as its owners.

Clearly, these are extremely simple examples. But a good mediator will always look at several methods and techniques of dispute resolution in order to determine which methods or combinations will achieve a positive result.

Since its inception, mediation has been a positive process for litigants in Texas. It has helped reduce the case load of our courts and saved millions of dollars for the participants involved. Just about any type of dispute can be mediated. From disputes between countries, NFL quarterbacks and commissioners, divorces, collection suits, and just about any other type of disagreement, mediation can be a tool to save money, time, and public scrutiny.

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

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.

Foreclosure Rates

Buying Property at Foreclosure Sales: a Deal or a Dud?

If you ever watch late night television, then you have seen those infomercials touting the ability to make you an overnight millionaire by purchasing financially distressed real estate.  There are many individuals and companies who have built successful lives and businesses through the acquisition of financially distressed real estate.  However, unless the process is fully understood and the risks are knowingly accepted, the purchase of financially distressed property at a foreclosure sale is not necessarily for the cash rich novice.  The following legal and practical issues should be considered prior to acquiring property at a non-judicial foreclosure sale held under a Texas deed of trust.[1]

A deed of trust is the document that a borrower gives to a lender to secure the repayment of a loan with real estate.  In a typical Texas mortgage, the parties involved are the borrower, the lender, the trustee, and the owner of the real estate pledged as collateral (“mortgagor”).  The borrower is the party responsible for the repayment of the loan.  The lender is the party who funded the loan and is the beneficiary of the pledged real estate.  In Texas, a trustee performs the duties and responsibilities contained in the deed of trust when the borrower defaults on the loan.  The mortgagor is the party pledging the property as collateral for the loan.[2]

It should be noted that non-judicial foreclosures in Texas are generally governed by (i) Chapter 51 of the Texas Property Code, and (ii) the documented agreements between the lender and borrower [3] contained within the loan documents.  Certain publicly filed documents which should be reviewed are the deed of trust, renewals/ extensions of the deed of trust, Notice of Trustee’s/Substitute Trustee’s Sale, and any other document affecting title to a mortgaged property (such as easements, leases, liens, restrictions, covenants, estates, and mineral interests, just to mention a few).  Unless a purchaser is adept at researching property titles, it is advisable to purchase an abstractor’s certificate from a title company.

There may be other issues which will affect title to the property being foreclosed which do not appear in the public real property records.  Some of these issues include encroachments, protrusions, overlapping improvements, set-backs, zoning, platting, building ordinances, flood zones, drainage, utilities, bankruptcy filings, lawsuits, and probate records.  Issues which are located on the ground can be addressed by ordering a current survey of the property.  However, permission from the current owner must be obtained before legally entering the property to conduct a survey.  This can be very difficult, if not impossible.  Other issues may be addressed through inquiries of public officials and employees.   While information obtained through governmental offices can be valuable, such information may not be completely reliable, and the persons supplying it are typically not liable for inaccuracies.

Except for warranties of title contained in the foreclosure Deed (from the mortgagor not the Trustee/Substitute Trustee), property purchased at a foreclosure sale is sold “AS IS” without any other warranties and at the purchaser’s own risk.  The purchaser will acquire the property subject to all physical and title conditions which exist on the date of the foreclosure.  Any tenants or occupants of the property on the date of the foreclosure sale may also have rights as parties in possession of the property.  Even if the purchaser acquires a meaningful warranty in the foreclosure Deed, enforcing such warranty may be impractical since the mortgagor is usually in dire financial straits.

A foreclosure sale may be set aside for various reasons within four years of the date of the sale under state law and within two years under federal bankruptcy law.  Any title insurance policy acquired by the purchaser will usually exclude any defects associated with the foreclosure process and any liens or encumbrances which were not removed by the foreclosure sale.  A purchaser at a foreclosure sale is also not a “consumer” relating to the protections afforded by the Texas Deceptive Trade Practices – Consumer Protection Act.

A purchaser should identify these issues, determine acceptability or cost to resolve, and calculate a  purchase price accordingly.  Resolving an unidentified issue post-purchase may cost tens of thousands of dollars.[4]

Purchasing distressed property at foreclosure typically requires a high degree of risk tolerance.  Anyone willing to accept those risks may also want to consider going to Vegas.  At least in Vegas, the drinks are free.


[1] As opposed to foreclosure sales by Court order or for unpaid ad valorem taxes which may have different considerations.

[2] While the borrower and the mortgagor are typically the same party, it is not necessary that they are the same.

[3] The third-party mortgagor’s agreements should also be considered, where the borrower and mortgagor are not the same.

[4] Legal fees necessary to clear up a contested title matter can sometimes exceed $100,000.00.

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

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photoOwner financing in Texas has historically been a valued tool to sell real estate to parties who for various reasons couldn’t qualify to borrow from institutional lenders.  However, in 2008 and 2009, owner financing was directly affected by federal and state regulatory changes.  In 2009, Texas was directed by federal law to adopt Chapter 180 of the Texas Finance Code, now better known as the Texas SAFE Act.  The acronym “SAFE” stems from the Secure and Fair Enforcement for Mortgage Licensing Act which was part of the federal Wall Street Reform Act of 2008.  These Acts were spurred by the belief that the liquidity crisis in the financial markets was caused in part by mortgage fraud and subprime mortgage loans.

One of the objectives of the federal SAFE Act was to provide uninform requirements for State licensed loan originators, or what we in Texas formerly referred to as mortgage brokers.  The Texas SAFE Act renamed the mortgage broker as a “residential mortgage loan originator” or “RMLO” and broadened the State licensing requirements necessary to perform certain functions associated with the issuance of a residential mortgage loan.  This is where the problem arose for Owner financed transactions.

The Texas SAFE Act defines a RMLO as any individual who for compensation or gain, or the expectation thereof, either takes a residential mortgage loan application or offers or negotiates the terms of a residential mortgage.  Certain exclusions and exemptions from licensing are provided in the statute, including licensed real estate brokers and salespersons, licensed manufactured housing brokers, no interest/fee loans, loans to an immediate family member, and loans involving the sale of the Owner’s homestead.  Even licensed attorneys may be subject to further licensure where the negotiation of a mortgage loan is not an ancillary matter to the attorney’s representation or the attorney takes an application and offers or negotiates the mortgage terms.  Any Owner financing transaction which does not otherwise fall under one of the exempted categories will clearly meet the definition of an RMLO and require licensure by the party offering or negotiating the mortgage loan.

The Texas agency responsible for enforcing the SAFE Act is the Texas Department of Savings and Mortgage Lending.  Violations of the SAFE Act include license suspension, a fine of up to $25,000.00, and restitution to the Buyer.  At this point, it is unclear what “restitution” means.

Fortunately, the Commissioner of the Department of Savings and Mortgage Lending issued a notice in August of 2010, setting forth a seller financing “de minimus” exception to the Texas SAFE Act.  Before the federal and Texas SAFE Acts, Section 156.202(a)(3) of the Texas Finance Code exempted from licensing “an owner of real property who in any 12 consecutive month period makes not more than five mortgage loans to purchasers of property for all or part of the purchase price of the real estate against which the mortgage is secured. “  The Commissioner pointed out that in adopting Chapter 180 of the Texas Finance Code, the legislature had amended Section 156.202, but left Section 156.202(a)(3) intact.  Since the amendments to Section 156.202 were passed after Chapter 180, the Commissioner determined that the legislature intended that the de minimus exception remain.  Unless there is a subsequent statutory amendment  or rule, or the U.S. Department of Housing and Urban Development issues a conflicting ruling, the Commissioner has stated that the de minimus exception will continue to be allowed by the Department of Savings and Mortgage Lending.

In considering whether or not a transaction falls within the de minimus exemption, the 12 month period is a rolling period, and not determined on the basis of a calendar year.  Also, for business organizations, the term “owner” will in all probability be viewed at the ultimate ownership or control level.  This means that a person will not be allowed to transfer ownership into separate business entities (i.e. corporation, partnership, LP, LLC, etc….) for purposes of eluding the 5 transaction limit in any 12 month period.

Clearly, financing the sale of your own property is now more tricky than it used to be.  For situations where a transaction clearly falls within the licensing requirements of the SAFE Act, you are advised to seek the services of a licensed RMLO and/or an experienced attorney.  With some careful planning and consideration of the transaction, the regulatory pitfalls of the SAFE Act may be avoided.

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.
 

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As stated previously, the law of adverse possession is founded on notice.  Thus, a claimant must make an actual, visible, appropriation of the land in dispute.  Tex. Civ. Prac. & Rem. Code Section 16.021(1).  The requirement of an open, notorious, and visible claim is based on the policy that existing rights in land should not be lost without giving the owner an opportunity to take preventive action by taking prompt action to dispute the claim.

The notice provided to the record owner need not be actual, express notice.  Instead, constructive notice may be presumed from the nature and extent of the acts of adverse possession.  However, if no expressed claim is presented to the record owner, the adverse possession must be so open and notorious, and manifested by such open or visible acts, that knowledge on the part of the title holder may be presumed.  Visible appropriation is typically a fact issue.

The claimant’s appropriation of the land must wholly exclude the record owner.  Mowing the grass, planting flowers, or maintaining the hedge does not constitute a type of appropriation sufficient to give notice of exclusive and adverse possession by the claimant.  However, planting a hedge to establish a boundary line and barrier between the property claimed and the adjacent property may constitute a type of action which will support the basis for adverse possession.

Allowing cattle to graze on another’s land is insufficient, by itself, to establish title by adverse possession.  However, grazing combined with the construction of sturdy enclosures, such as a boundary line fence, may rise to such level.

Fencing of land is one form of visible appropriation.  However, a fence which exists before the claimant takes possession of the land is considered a casual fence that does not support a claim for adverse possession unless the claimant can show the purpose why the fence was erected.  Maintaining or repairing a casual fence generally does not transform a casual fence into a designed enclosure.  Where a casual fence is substantially modified to give the record owner notice that it’s character has changed (such as removing a barbed wire fence and constructing a chain link fence), such may constitute a basis for adverse possession.

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

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To establish a claim by adverse possession, a claimant must enter the land with a claim of right inconsistent and hostile with that of another person.  Tex. Civ. Prac. & Rem. Code Section 16.021(1).  A “claim of right” is defined as the claimant’s intention to appropriate or claim the land as his or her own.  Such claim of right may be established by a public declaration of the claim or by visible and apparent acts.  The verbal assertion of a claim is not necessary.

The claimant need not understand or maintain that the claim of right he or she is relying upon is actually adverse to that of the record title holder.  However, a mistake as to whom actually holds record title is not sufficient to establish adverse possession where the land is shared.

If the appropriation and possession of the land was done through permission or with the consent of the record title holder, then such will not suffice to establish adverse possession.

Adverse possession cannot be established where the claimant recognizes that another person holds title to the land or has offered to purchase the land from the title holder in such a way that would show that the claimant admitted that the title holder is the real owner.

In certain instances (as will be discussed in Part III), visible appropriation may be taken as evidence of a claim of right when the claim of right is not otherwise expressed.

As you can see the law of adverse possession is founded on notice.  Existing rights in land should not be lost without giving the owner an opportunity to take preventative action by taking prompt action to dispute the claim.

R. Scott Alagood is a board certified attorney in both Commercial and Residential Real Estate Law by the Texas Board of Legal Specialization.
 

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To establish a claim by adverse possession, a claimant must enter the land with a claim of right inconsistent and hostile with that of another person.  Tex. Civ. Prac. & Rem. Code Section 16.021(1).  A “claim of right” is defined as the claimant’s intention to appropriate or claim the land as his or her own.  Such claim of right may be established by a public declaration of the claim or by visible and apparent acts.  The verbal assertion of a claim is not necessary.

The claimant need not understand or maintain that the claim of right he or she is relying upon is actually adverse to that of the record title holder.  However, a mistake as to whom actually holds record title is not sufficient to establish adverse possession where the land is shared.

If the appropriation  and possession of the land was done through permission or with the consent of the record title holder, then such will not suffice to establish adverse possession.

Adverse possession cannot be established where the claimant recognizes that another person holds title to the land or has offered to purchase the land from the title holder in such a way that would show that the claimant is admitted that the title holder is the real owner.

In certain instances (as will be discussed in Part III), visible appropriation may be taken as evidence of a claim of right when the claim of right is not otherwise expressed.

As you can see, the law of adverse possession is founded on notice.  Existing rights in land should not be lost without giving the owner an opportunity to take preventative action by taking prompt action to dispute the claim.

R. Scott Alagood is a licensed Texas attorney and Board Certified by the Texas Board of Legal Specialization in both Residential and Commercial Real Estate Law and may be contacted by email at Alagood@dentonlaw.com or www.dentonlaw.com.