| 2003 Final Legislative Update for Real Estate: the Top Ten Some of the most popular real estate-related topics addressed this session included concerns about the privacy of personal information in public records (to prevent identity theft), water rights generally, annexation and land use matters. While no water rights bills made my list, one of the privacy bill is tops, and more than one land use regulation bill made the list. And so the mound of real estate-related new laws boils down to these select Top 10. No.
1
Now, a number of us lawyer-types are wondering what the legal effect of the document will be when somebody actually strikes through some language in a deed after it is signed. But we’ll just leave those issues to the trial lawyers. At least from the planning side of things, it’s easy enough to add the notice to our forms and make sure we never include social security numbers or drivers license numbers in them in the first place. No.
2 Funding comes from two primary sources: Builders must pay a $500 fee to register with the TRCC, and new houses built must be also registered, with a $30 fee paid at closing for each registered home. It covers home improvements as well as original homes built. I presume this would include swimming pool builders as well. The TRCC has six primary responsibilities: (1) register homebuilders in order to keep track of and discipline builders, (2) oversee a state-sponsored home defect inspection process, (3) prepare and adopt building performance standards, (4) oversee three task forces–on mold, arbitration and rain harvesting, (5) provide a voluntary certification program for arbitrators, and (6) provide for the filing of arbitration awards. But what makes this bill No. 2 is its dispute resolution process, and the changes it makes to certain warranties. First, the warranties. This act reverses the result in the Buecher v. Centex Homes case (see the article “If You're in Construction, You're Now in the Insurance Business Too” on our Commercial Real Estate Resource Center, posted 9-15-02). The “implied warranty of good and workmanlike construction” is replaced with a limited statutory warranty, and limited to these warranty periods:
The “implied warranty of habitability” is replaced with a statutory warranty of habitability, and a builder doesn’t breach this warranty unless the defect has a direct adverse effect on the habitable areas of the home, AND the alleged defect must not have been discoverable by a reasonable prudent inspection or examination of the home or home improvement within the applicable warranty periods. Now for the dispute resolution process. Either the builder or the homeowner may file a claim with the TRCC and any pending lawsuit will be immediately abated (that means stopped dead in its tracks). A TRCC inspector will come out and inspect the home or improvement at issue, and make a report. The report will basically state whether or not the construction complies with the TRCC’s building performance standards, and that’s all it should say. If the inspector finds for the builder, and the owner elects to continue with a lawsuit anyway, the owner must prove in court that the inspector’s determination was wrong. How you feel about this bill probably depends on your experience. I know some trial lawyers who hate this bill, who think it gives the builders the opportunity to rape the owners. There are no doubt disreputable builders out there who will do this, as they have in the past. We’ll see if the TRCC runs those outfits out of business. But from my perspective, I see owners complain about relatively small things, completely refuse to cooperate in repair efforts, and generally try to make mountains out of molehills (as their lawyers run up their fees, too), so I think it evens out the playing field a little more. But no matter how you slice it, the fact of the matter is that construction is a very complicated business, and a jury of inexperienced average citizens is very challenged to understand the issues and even the facts involved in any dispute. This statute leaves the jury option available, but simplifies things for them with the inspection report and clear burden of proof on the owner. Overall it adds certainty to my world of contracts and damages, so I’m all for it, at least until it proves me wrong in practice. No.
3 When it started its life as a bill, it simply provided that a county could sue and be sued. As passed, though, it was limited to this: a county that is a party to a written contract for engineering, architectural, or construction services or for goods related to engineering, architectural, or construction services may sue or be sued. All claimants against counties must first provide written notice to the commissioner’s court and allow it 60 days to pay the claim. Lawsuits are only authorized after such notice and expiration of this 60 day period if the commissioner’s court fails or refuses to pay the claim. The amount of damages available is limited to: (1) the balance due and owed by the county under the contract; (2) the amount owed for change orders or additional work required to carry out the contract; (3) reasonable and necessary attorney's fees that are equitable and just; and (4) interest as allowed by law. The following types of damages are specifically eliminated: (A) consequential damages in most instances; (B) exemplary damages; or (C) damages for unabsorbed home office overhead. This bill does not waive a defense to a party to a contract, other than a bar against suit based on sovereign immunity. It also provides a notice procedure which must be followed within 30 days after filing suit. No.
4 Ever have a deal get snakebit from the outset? It takes a lot of effort to get things back on track. Apparently this subpart of Murphy’s Law applies in Austin too. At the end of the 2001 legislative session, a bill passed that created a new Section 93.004 to the Texas Property Code. Problem was, there was already a Section 93.004, so we have TWO Property Code sections with the same section number. This law applies to commercial leases, and is remarkably short:
If the lease is not this specific on triple net charges, the landlord cannot collect any of those charges during the lease. The remedy is draconian, to say the least. I have discussed this law with a judge, and heard him basically say “It just can’t mean what it says.” This law applies to any lease entered into or renewed after September 1, 2001. Had HB 2180 passed, this section would have ceased to apply on September 1, 2003, so there would only be a two year window for this particular law. But now, more and more leases will expire (and be renewed or commenced) in the next two years and thus become subject to this restriction. If a court decides to read this statute narrowly, commercial landlords will not be able to collect triple net lease charges that fluctuate under most common lease forms currently in use. So, if you are a commercial landlord, you should definitely consider revising your leases to be much more specific as to what is included in triple net charges, and how you arrive at the specific numbers, because commercial tenants may use this as a defense to eviction, collection, and other efforts to enforce the lease. No.
5
The one part of this bill that puts it No. 5 is that, as I read it, this bill allows for developers and cities to agree on uses and development of the land before and after annexation. I interpret that to mean a city can now agree to apply a zoning category to tracts prior to annexation, something cities have steadfastly refused to do in the past. This allows for much greater certainty in the development planning process for the developer and keeps cities honest when negotiating to annex property voluntarily. Unfortunately, if the tract at issue is in the ETJ of a city with a population of 1.9 million or more (i.e. Houston), all bets are off, since this bill doesn’t apply in that instance. No.
6 Under that 2001 law, cities and counties were required to enter into written agreements regarding the regulation of subdivisions in the ETJ. Either the county or the city could be granted "exclusive jurisdiction" to approve ETJ subdivision plats, or the county could apportion geographical areas of the ETJ, or the city and county could establish "one office" for subdivision plat applications and adopt "a consolidated and consistent set of regulations" for subdivisions. Until these agreements were reached, if ever, approval of both the municipality and county were still required and the "more stringent regulation" applied in the event of conflict. Confused yet? Well, in 2003, the Legislature revisited this issue and instead of saying “Y’all get along or else,” they said “if you don’t get along you’re going to binding arbitration which will once and for all determine which of you will have exclusive control of development in ETJs.” In other words, if you don’t compromise a little, you may lose everything. This bill is important because it promotes certainty (as you can see, certainty is a big issue with me). Most important in the planning stages is knowing whose rules apply. Developers have to be able to determine the starting point, so they can chart the course from where they are, to where they want to be. One can only hope that this finally fixes what is often a very confusing area of the law. No.
7 Any leases which simply parrot the old law on this issue should be redrafted to give the landlords the full 60 days now available under this new law. There’s no reason for a commercial lease to be more onerous on the landlord than the law requires. No.
8 Nevertheless and in any event, it is much wiser to have a written lease with the recreational users that includes waiver and release of claims language. Not surprisingly, we do these sorts of leases for our landowner and hunting lease agent clients. No.
9 We like our frontage roads in Texas, particularly the cities through which major roadways run. They have a tendency to increase the value of the land on the access roads, and promote retail and office development, which generates sales tax revenue as well. So it was no surprise that, when the Texas Transportation Commission (TTC) announced recently that it would no longer include frontage roads in its future road development projects, that many Texas cities joined forces to force the continuation of “Frontage Road.” SB 361 is the successful result of their efforts, and it subordinates TTC orders on control of access to city ordinances, unless such an ordinance interferes with the ability of TxDOT or the state to receive federal highway funds. You can safely assume that most cities have or will have ordinances requiring frontage roads for major controlled-access roads. No.
10 ******** And there you have it, from the home office in Dallas, Texas, the Top 10 Real Estate Related Bills, 2003 edition. Please note that my decisions to include or omit various bills from this Top 10 list were heavily influenced by my real estate practice. To see a much more comprehensive list of real estate bills passed this session along with brief explanations of each, please see the Legislative Update–Significant Bills of the 78th Legislature Affecting Real Estate, Lending, and Other Commercial Matters, written by the Legislative Committee, Real Estate Division of the Real Estate, Probate & Trust Law Section of the State Bar of Texas which is posted on the McTexLaw Commercial Real Estate Resource Center. This document was just completed on July 1, 2003 so it is literally hot off the presses. Also, please be sure to browse our Top 10 Bills for Business Owners and watch for our “Top 10 Bills Interesting For All the Wrong Reasons” list coming in our next Alert. Close
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