This blog entry is the third of a series related to adverse possession. Adverse possession is a legal principle under which someone can acquire ownership of real property that belongs to someone else. It is a form of “involuntary conveyance.”
The second shortest period for a claimant to assert adverse possession over real property under Texas law is five (5) years. In order to qualify for adverse possession under Section 16.025 of the Texas Civil Practice and Remedies Code, the claimant must:
* actually and visibly appropriate the property (in other words, take possession of the property in such a way that it is open and obvious);
* possess the property in a manner that consistently and unmistakably indicates the claimant asserts exclusive ownership to the property; and
* use or possess the property peacefully, but without the owner’s permission (in other words, scaring the owner off with a shotgun is not allowed), including:
(1) cultivating, using, or enjoying the property;
(2) paying applicable taxes on the property (before they become delinquent); and
(3) claim the property under a duly registered deed.
This statute does not apply in cases where a deed is forged or was executed under a forged power of attorney. It also does not apply to a “quitclaim” deed, a deed that is void on its face (because it fails to meet the legal requirements for a deed), or one obtained through fraudulent or dishonest practices. Interestingly, though, if the claimant obtained a deed that appears valid on its face and that was properly recorded, he could claim adverse possession even if the deed was executed by someone who had no actual title to or right to claim ownership to the property. For example, if you received a deed from Tom Jones which appeared to be valid, and you recorded that deed in the county’s real property records, you could assert adverse possession after five years (provided you met all of the other factors) even though Bob Smith was the real owner of the property.
There are several other statutes in the State of Texas which describe what factors must occur before a claimant can obtain title through adverse possession. As a result, adverse possession is a complex legal issue, and we strongly suggest that you seek the advice of an attorney (preferably someone versed in the litigation process, as well as real estate law) if you are confronted with either the need to assert or defend against a claim of adverse possession.
Tuesday, December 22, 2009
Friday, August 21, 2009
Adverse Possession under the Three-Year Statute
This blog entry is the second of a series related to adverse possession. Adverse possession is a legal principle under which someone can acquire ownership of real property that belongs to someone else. It is a form of “involuntary conveyance.”
The shortest period for a claimant to assert adverse possession over real property under Texas law is three (3) years. In order to qualify for adverse possession under Section 16.024 of the Texas Civil Practice and Remedies Code, the claimant must:
* actually and visibly appropriate the property (in other words, take possession of the property in such a way that it is open and obvious);
* possess the property in a manner that consistently and unmistakably indicates the claimant asserts exclusive ownership to the property;
* use or possess the property peacefully, but without the owner’s permission (in other words, scaring the owner off with a shotgun is not allowed); and
* hold the property under title or “color of title.”
The key to the three year statute for adverse possession is the final factor listed above. In other words, the claimant must have received (1) a deed or other document reflecting title to the property, but his title is considered “irregular” because there is a document that is missing or has not been properly recorded, or (2) an unusual document, such as a certificate of headright, land warrant, or land scrip.
If all of these three things occur, the statute requires that the true owner to the property take action by bringing a lawsuit to recover the property within three years from the date that the claimant first enters the property, or else he will lose his ownership rights. In actuality, however, a title insurance company or buyer will likely request that the claimant sue the rightful owner or presumed owners and obtain a judgment reflecting title through adverse possession before they will agree to purchase the property from the adverse claimant.
There are several other statutes in the State of Texas which describe what factors must occur before a claimant can obtain title through adverse possession. As a result, adverse possession is a complex legal issue, and we strongly suggest that you seek the advice of an attorney (preferably someone versed in the litigation process, as well as real estate law) if you are confronted with either the need to assert or defend against a claim of adverse possession.
The shortest period for a claimant to assert adverse possession over real property under Texas law is three (3) years. In order to qualify for adverse possession under Section 16.024 of the Texas Civil Practice and Remedies Code, the claimant must:
* actually and visibly appropriate the property (in other words, take possession of the property in such a way that it is open and obvious);
* possess the property in a manner that consistently and unmistakably indicates the claimant asserts exclusive ownership to the property;
* use or possess the property peacefully, but without the owner’s permission (in other words, scaring the owner off with a shotgun is not allowed); and
* hold the property under title or “color of title.”
The key to the three year statute for adverse possession is the final factor listed above. In other words, the claimant must have received (1) a deed or other document reflecting title to the property, but his title is considered “irregular” because there is a document that is missing or has not been properly recorded, or (2) an unusual document, such as a certificate of headright, land warrant, or land scrip.
If all of these three things occur, the statute requires that the true owner to the property take action by bringing a lawsuit to recover the property within three years from the date that the claimant first enters the property, or else he will lose his ownership rights. In actuality, however, a title insurance company or buyer will likely request that the claimant sue the rightful owner or presumed owners and obtain a judgment reflecting title through adverse possession before they will agree to purchase the property from the adverse claimant.
There are several other statutes in the State of Texas which describe what factors must occur before a claimant can obtain title through adverse possession. As a result, adverse possession is a complex legal issue, and we strongly suggest that you seek the advice of an attorney (preferably someone versed in the litigation process, as well as real estate law) if you are confronted with either the need to assert or defend against a claim of adverse possession.
Wednesday, July 22, 2009
What is Adverse Possession and When Can It Help Me?
This blog entry is the first of a series related to adverse possession. Adverse possession is a legal principle under which someone can acquire ownership of real property that belongs to someone else. It is a form of “involuntary conveyance.”
Adverse possession is defined by statute in Texas as “an actual and visible appropriation of real property, commenced and continued under a claim of right that is inconsistent with and is hostile to the claim of another person.” In other words, a person who does not hold title to real property can peaceably enter upon property owned by someone else and undertake actions (such as use of the property) that are inconsistent with and adverse to the rights of the property’s true owner. If the property’s rightful owner does not diligently attempt to stop the adverse claimant, he may find it difficult to transfer title to his property or even find that he has lost his ownership rights.
Adverse possession can be useful in a variety of situations which are more common than one might expect. For example, if land is occupied or operated by descendants even though title to the property was not transferred through probate from a deceased relative and probate is no longer an option, it may be possible to “clear title” through adverse possession. Adverse possession may be one way to obtain clear title in boundary disputes, such as when a surveyor has discovered that a fence or other structure has not been properly placed along the dividing line between two neighboring properties.
There are several statutes in the State of Texas which describe what factors must exist (and for how long) before a claimant can obtain title through adverse possession. As a result, adverse possession is a complex legal issue, and we strongly suggest that you seek the advice of an attorney (preferably someone versed in the litigation process, as well as real estate law) if you are confronted with either the need to assert or defend against a claim of adverse possession.
Adverse possession is defined by statute in Texas as “an actual and visible appropriation of real property, commenced and continued under a claim of right that is inconsistent with and is hostile to the claim of another person.” In other words, a person who does not hold title to real property can peaceably enter upon property owned by someone else and undertake actions (such as use of the property) that are inconsistent with and adverse to the rights of the property’s true owner. If the property’s rightful owner does not diligently attempt to stop the adverse claimant, he may find it difficult to transfer title to his property or even find that he has lost his ownership rights.
Adverse possession can be useful in a variety of situations which are more common than one might expect. For example, if land is occupied or operated by descendants even though title to the property was not transferred through probate from a deceased relative and probate is no longer an option, it may be possible to “clear title” through adverse possession. Adverse possession may be one way to obtain clear title in boundary disputes, such as when a surveyor has discovered that a fence or other structure has not been properly placed along the dividing line between two neighboring properties.
There are several statutes in the State of Texas which describe what factors must exist (and for how long) before a claimant can obtain title through adverse possession. As a result, adverse possession is a complex legal issue, and we strongly suggest that you seek the advice of an attorney (preferably someone versed in the litigation process, as well as real estate law) if you are confronted with either the need to assert or defend against a claim of adverse possession.
Friday, July 10, 2009
Austin Lawyer Tip: Five Problems with Form LLC Formation
Many have asked the question, "why go to a lawyer when there is LegalZoom.com?" Well, for some sophisticated business persons with experience in corporate formation, it may be OK. But I have to say, having litigated a lot of disputes between co-owners of a business, LegalZoom.com is NOT a substitute for a lawyer (LegalZoom even admits this openly), and it is very often a pennywise and a pound foolish, emphasis on the foolish.
Now, I know many of you reading this may say, "of course, this is coming from a lawyer". True, I admit to some level of bias on this issue, but being biased doesn't mean I'm wrong.
Five Issues not typically dealt with in Form LLC Agreements
1. The problem of "OK, it's formed, I'm done"
There are many issues not usually dealt with in typical "form" LLC Agreements, but the worst thing is that most signers of LLC formation documents think that when the LLC is formed, everything is done. This is not true. There are so many other issues that need to be dealt with, including election of officers, delegation of duties, initial organization meeting, and many other discussions that need to take place. Now, the reality is that in single member LLC's, the member can do roughly whatever they please with the operation agreement at almost any time, but in two or multi-member LLC's, this is not the case. Think about how much easier it is to deal with issues such as one owner's death, divorce or bankruptcy than before said death, divorce or bankruptcy. Most form LLC agreements, particularly if only the certificate of formation is filed, do not adequately deal with these contingencies, or are not even reviewed by the members before signing the LLC agreement. Wouldn't you want to know whether you're going to be future business partners/co-owners with your business partner's husband or wife if they die? Wouldn't it be nice to know that a bankruptcy trustee will not hold the keys to whether your business can raise future capital? Yeah, I thought so.
2. The problem with the 50-50 ownership LLC
Split ownership sounds good..."hey we'll be partners!"...but in reality, what it means is that no one is really in control and it is management by committee. A properly drafted LLC agreement is a negotiation, and requires that the parties have dispute resolution built into their agreement, either through some sort of buy-sell agreement or arbitration/tie breakers. Nothing worse than a thriving business that is deadlocked on raising capital or operation directives. But Form LLC's are FILLED with them. And I don't get angry when I see them after disputes, I charge hourly to fight over them. But it is sad that this is almost always entirely avoidable with some element of design in the formation documents.
3. The problem with the money in the future
This is a constant problem in litigation with the "form LLC filers". At the beginning, everyone's happy. "Hey, Jimmie Joe, let's open a restaurant called JJSeras! It will be kicks!" "Sure thing, Sera Jean! Let's go halfsies!" All is fine and good. Until one of two things happens...(1)the restaurant does really well and there are disputes over speed of expansion and distribution (when one party stops working at the store), or (2) it totally does horribly and creditors are knocking on the LLC door. Well, if it goes bad, JJ and Sera are covered, right? Yeah, well, not if they had to personally guarantee the lease or credit facilities. And if JJ paid it all, but only owns 50% of the business still, how good does that make JJ feel? A properly done agreement deals with these issues before the dispute arises.
4. The problem with no exit strategy
Most people enter into LLC's with others without really thinking about how they will extricate themselves from it. How will one party buy out the other? How will it be valued? Very frequently form LLC agreements just don't deal with these issues, or are so basic that they really aren't designed for the parties involved and end up being useless. How about deciding on a person to do the valuation? How about agreeing to a system of valuators if there's no agreement? How about a buy-sell agreement?
5. The problem with majority rule
Many people who put investment money into an endeavor are not the ones running the show. Typically, those "money only" guys are doing this as an investment and gambling that JJ and Sera discussed above are going to give them a return on that investment, and are thus willing to be passive investors in the endeavor at a smaller percentage of interest. This makes the problem of the minority interest holder. I'm constantly amazed at people who put in thousands of dollars, get a minority stake, and when you look at the operating agreement, their interests are almost totally worthless because they can be practically eliminated by "majority rule". It sounds great on paper...but if you are a 10% holder, and the other guy owns 90%, and he can decide to dilute shares by "majority rule", well you're in for a heap of hurt.
It just makes sense to have attorneys review these documents. Typically it is not that expensive, and it just makes sense to have someone with experience reviewing those documents. Obviously, if you need assistance in a review, feel free to contact me at (512) 472-2300.
Marc Lippincott
Now, I know many of you reading this may say, "of course, this is coming from a lawyer". True, I admit to some level of bias on this issue, but being biased doesn't mean I'm wrong.
Five Issues not typically dealt with in Form LLC Agreements
1. The problem of "OK, it's formed, I'm done"
There are many issues not usually dealt with in typical "form" LLC Agreements, but the worst thing is that most signers of LLC formation documents think that when the LLC is formed, everything is done. This is not true. There are so many other issues that need to be dealt with, including election of officers, delegation of duties, initial organization meeting, and many other discussions that need to take place. Now, the reality is that in single member LLC's, the member can do roughly whatever they please with the operation agreement at almost any time, but in two or multi-member LLC's, this is not the case. Think about how much easier it is to deal with issues such as one owner's death, divorce or bankruptcy than before said death, divorce or bankruptcy. Most form LLC agreements, particularly if only the certificate of formation is filed, do not adequately deal with these contingencies, or are not even reviewed by the members before signing the LLC agreement. Wouldn't you want to know whether you're going to be future business partners/co-owners with your business partner's husband or wife if they die? Wouldn't it be nice to know that a bankruptcy trustee will not hold the keys to whether your business can raise future capital? Yeah, I thought so.
2. The problem with the 50-50 ownership LLC
Split ownership sounds good..."hey we'll be partners!"...but in reality, what it means is that no one is really in control and it is management by committee. A properly drafted LLC agreement is a negotiation, and requires that the parties have dispute resolution built into their agreement, either through some sort of buy-sell agreement or arbitration/tie breakers. Nothing worse than a thriving business that is deadlocked on raising capital or operation directives. But Form LLC's are FILLED with them. And I don't get angry when I see them after disputes, I charge hourly to fight over them. But it is sad that this is almost always entirely avoidable with some element of design in the formation documents.
3. The problem with the money in the future
This is a constant problem in litigation with the "form LLC filers". At the beginning, everyone's happy. "Hey, Jimmie Joe, let's open a restaurant called JJSeras! It will be kicks!" "Sure thing, Sera Jean! Let's go halfsies!" All is fine and good. Until one of two things happens...(1)the restaurant does really well and there are disputes over speed of expansion and distribution (when one party stops working at the store), or (2) it totally does horribly and creditors are knocking on the LLC door. Well, if it goes bad, JJ and Sera are covered, right? Yeah, well, not if they had to personally guarantee the lease or credit facilities. And if JJ paid it all, but only owns 50% of the business still, how good does that make JJ feel? A properly done agreement deals with these issues before the dispute arises.
4. The problem with no exit strategy
Most people enter into LLC's with others without really thinking about how they will extricate themselves from it. How will one party buy out the other? How will it be valued? Very frequently form LLC agreements just don't deal with these issues, or are so basic that they really aren't designed for the parties involved and end up being useless. How about deciding on a person to do the valuation? How about agreeing to a system of valuators if there's no agreement? How about a buy-sell agreement?
5. The problem with majority rule
Many people who put investment money into an endeavor are not the ones running the show. Typically, those "money only" guys are doing this as an investment and gambling that JJ and Sera discussed above are going to give them a return on that investment, and are thus willing to be passive investors in the endeavor at a smaller percentage of interest. This makes the problem of the minority interest holder. I'm constantly amazed at people who put in thousands of dollars, get a minority stake, and when you look at the operating agreement, their interests are almost totally worthless because they can be practically eliminated by "majority rule". It sounds great on paper...but if you are a 10% holder, and the other guy owns 90%, and he can decide to dilute shares by "majority rule", well you're in for a heap of hurt.
It just makes sense to have attorneys review these documents. Typically it is not that expensive, and it just makes sense to have someone with experience reviewing those documents. Obviously, if you need assistance in a review, feel free to contact me at (512) 472-2300.
Marc Lippincott
Tuesday, June 2, 2009
Part 4: Public Works Contracts & Subcontractors: Prime Contracts Over $25,000.00 & Retainage
Like in private construction projects, in public works projects, general contractors hold back part of the contract price until the subcontractor fulfills the contract as “retainage.” The amount withheld is a percentage of the total contract price, often around 10%. The retained money is supposed to be paid to the subcontractor after the public works contract (the contract between the governmental entity and the general contractor) is completed. If the general contractor does not pay the retained money, the subcontractor can file a lawsuit to collect on the payment bond; however, the subcontractor must first meet the notice requirements.
The subcontractor must give notice to the general contractor and surety on or before 90 days after final completion of the public works contract. The notice must include the amount of the contract, any amount paid, and the outstanding balance. Tex. Gov’t Code § 2253.046. The notices must be mailed by the proper method and to the proper addresses.
Once again, sending the notices timely, to the correct people, and with the correct content is crucial to perfect a claim retainage.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Please visit our blog again in a few days for Part 5: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Rights to Information.
Posted by Sarah F. Berry.
The subcontractor must give notice to the general contractor and surety on or before 90 days after final completion of the public works contract. The notice must include the amount of the contract, any amount paid, and the outstanding balance. Tex. Gov’t Code § 2253.046. The notices must be mailed by the proper method and to the proper addresses.
Once again, sending the notices timely, to the correct people, and with the correct content is crucial to perfect a claim retainage.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Please visit our blog again in a few days for Part 5: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Rights to Information.
Posted by Sarah F. Berry.
Friday, May 15, 2009
Part 3: Public Works Contracts & Subcontractors: Prime Contracts Over $25,000
In reality, most public works projects are over $25,000.00 in value. When projects exceed $25,000.00 in value, the general contractor must post a payment bond in the amount of the prime contract for the protection of subcontractors and sub-subcontractors. Tex. Gov’t Code § 2253.021. If subcontractors are not paid by the general contractor, they can file a lawsuit to collect on the payment bond; however, before they can file suit, subcontractors must ensure that they have complied with strict notice requirements. If the notice requirements, including deadlines and content, are not properly met, the subcontractor will not be able to successfully sue to collect on the payment bond.
Subcontractors (those having a contract directly with the general contractor) must give written notice to the prime contractor and surety not later than the fifteenth day of the third month following each month in which the labor or material was provided for which the claimant has not been paid (often called the “Third Month Notice”). Tex. Gov’t Code § 2253.041(b). If this deadline is not properly met, the subcontractor will have lost its ability to prevail in a lawsuit. Furthermore, the notice must identify specific details such as: the labor or materials provided; who they were provided to; and when they were provided; in addition to other required information. Additionally, a sworn statement must be included verifying the amount due. Tex. Gov’t Code § 2253.041(c). The notices must be mailed by the proper method and to the proper addresses. Tex. Gov’t Code § 2253.044.
Sending the required notices on time is crucial for subcontractors but is often overlooked until it is too late or sent incorrectly due to a misunderstanding of the applicable laws. Subcontractors often wait too long believing that they will work something out with the general contractor. When they eventually do seek help from an attorney, the deadline has already passed. Subcontractors should pay careful attention to their past due invoices and ensure they seek an attorney’s advice far enough in advance so that all deadlines can be met and the subcontractor’s rights protected.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Please visit our blog again in a few days for Part 4: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Retainage.
Posted by Sarah F. Berry.
Subcontractors (those having a contract directly with the general contractor) must give written notice to the prime contractor and surety not later than the fifteenth day of the third month following each month in which the labor or material was provided for which the claimant has not been paid (often called the “Third Month Notice”). Tex. Gov’t Code § 2253.041(b). If this deadline is not properly met, the subcontractor will have lost its ability to prevail in a lawsuit. Furthermore, the notice must identify specific details such as: the labor or materials provided; who they were provided to; and when they were provided; in addition to other required information. Additionally, a sworn statement must be included verifying the amount due. Tex. Gov’t Code § 2253.041(c). The notices must be mailed by the proper method and to the proper addresses. Tex. Gov’t Code § 2253.044.
Sending the required notices on time is crucial for subcontractors but is often overlooked until it is too late or sent incorrectly due to a misunderstanding of the applicable laws. Subcontractors often wait too long believing that they will work something out with the general contractor. When they eventually do seek help from an attorney, the deadline has already passed. Subcontractors should pay careful attention to their past due invoices and ensure they seek an attorney’s advice far enough in advance so that all deadlines can be met and the subcontractor’s rights protected.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Please visit our blog again in a few days for Part 4: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Retainage.
Posted by Sarah F. Berry.
Friday, May 1, 2009
Part 2: Public Works Projects & Subcontractors ("First Tier Claimants"): Prime Contracts Less Than $25,000.00
As noted in Part 1 of the series, in most cases, subcontractors ("First Tier Claimants") on public projects who have not been paid by the general contractor may make a claim on the payment bond posted by the general contractor. However, when the general contractor’s contract with the public entity is less than $25,000.00, the general contractor is not required to post a payment bond. Consequently, when the contract is less than $25,000.00, subcontractors have limited lien rights. The lien attaches to money due to the general contractor. (Tex. Prop. Code § 53.231).
To assert a lien, the subcontractor must give notice to both the general contractor and the appropriate public official. (Tex. Prop. Code § 53.232). Subcontractors must ensure that they strictly comply with notice deadlines and content requirements or they risk not perfecting their lien. The subcontractor must give the notice before any payment is made to the general contractor and not later than the 15th day of the 2nd month following the month in which the work was performed or the material furnished. (Tex. Prop. Code § 53.234). The notice must contain specific information relating to the labor performed or materials delivered. The notice must include (1) the amount claimed; (2) the name of the party to whom the materials were delivered or for whom the labor was performed; (3) the dates and place of delivery or performance; (4) a description reasonably sufficient to identify the materials delivered or labor performed and the amount due; (5) a description reasonably sufficient to identify the project for which the material was delivered or the labor performed; and (6) the claimant's business address. (Tex. Prop. Code § 53.233). The notice must also be accompanied by a sworn statement that the amount claimed is just and correct and that all payments, lawful offsets, and credits known to the affiant have been allowed. (Tex. Prop. Code § 53.233). Failure to comply with any of the notice requirements may result in loss of the lien.
When the public official receives notice, he should retain from the money due to the general contractor enough to pay the claim for which the notice was given. (Tex. Prop. Code § 53.233).
A general contractor may file a bond with the public entity to release the lien and obtain the money withheld. (Tex. Prop. Code § 53.236). The subcontractor must sue on the bond within 6 months after the bond is filed. (Tex. Prop. Code § 53.239).
Please visit our blog again in a few days for Part 3: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Posted by Sarah F. Berry.
To assert a lien, the subcontractor must give notice to both the general contractor and the appropriate public official. (Tex. Prop. Code § 53.232). Subcontractors must ensure that they strictly comply with notice deadlines and content requirements or they risk not perfecting their lien. The subcontractor must give the notice before any payment is made to the general contractor and not later than the 15th day of the 2nd month following the month in which the work was performed or the material furnished. (Tex. Prop. Code § 53.234). The notice must contain specific information relating to the labor performed or materials delivered. The notice must include (1) the amount claimed; (2) the name of the party to whom the materials were delivered or for whom the labor was performed; (3) the dates and place of delivery or performance; (4) a description reasonably sufficient to identify the materials delivered or labor performed and the amount due; (5) a description reasonably sufficient to identify the project for which the material was delivered or the labor performed; and (6) the claimant's business address. (Tex. Prop. Code § 53.233). The notice must also be accompanied by a sworn statement that the amount claimed is just and correct and that all payments, lawful offsets, and credits known to the affiant have been allowed. (Tex. Prop. Code § 53.233). Failure to comply with any of the notice requirements may result in loss of the lien.
When the public official receives notice, he should retain from the money due to the general contractor enough to pay the claim for which the notice was given. (Tex. Prop. Code § 53.233).
A general contractor may file a bond with the public entity to release the lien and obtain the money withheld. (Tex. Prop. Code § 53.236). The subcontractor must sue on the bond within 6 months after the bond is filed. (Tex. Prop. Code § 53.239).
Please visit our blog again in a few days for Part 3: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Posted by Sarah F. Berry.
Monday, April 20, 2009
Part 1: Public Works Projects & Subcontractors ("First Tier Claimants")
For the next couple of weeks we will be posting a series of blogs relating to Public Works Construction Projects & Subcontractors ("First Tier Claimants"). Construction or improvements to public property are commonly referred to as public construction, public works contracts, or public projects. Some examples of public property are schools, courthouses, hospitals, highways, and bridges. On public projects, a subcontractor provides materials or labor to a general contractor whose contract is with a public entity. Unlike private property projects, a subcontractor cannot place a lien against public property due to nonpayment. Consequently, in order to protect their interests and increase their odds of receiving payment in full, subcontractors must be aware of the process and deadlines specific to public projects. In most cases, subcontractors on public projects who have not been paid by the general contractor may make a claim on the payment bond posted by the general contractor. A payment bond is a bond posted by the general contractor for the protection of subcontractors and sub-subcontractors. In more limited circumstances, subcontractors may have limited lien rights in money owed to the general contractor.
Please visit our blog again in a few days for Part 2: Public Works Construction Projects & Subcontractors: Prime Contracts Less Than $25,000.00.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Posted by Sarah F. Berry.
Please visit our blog again in a few days for Part 2: Public Works Construction Projects & Subcontractors: Prime Contracts Less Than $25,000.00.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Posted by Sarah F. Berry.
Wednesday, March 4, 2009
New Texas Court Dockets, CAD and Clerks Web sites
We sponsor these sites developed by a developer friend of ours, but we thought other lawyers that may peruse our blog may also find these tools useful.
TexasDockets.com - When there are court dockets online, or searchable judicial records, this site links to those search pages.
TexasCAD.com - Now improved, and with many more counties added, this site allows people to search Texas County Appraisal Districts for information like property ownership, property values, etc. A great collection tool or real estate market tool.
TexasClerks.com - This is a brand new site, it basically provides links to hundreds of Texas County Clerks, District Clerks and Federal Clerks within the state of Texas.
TexasLocalRules.com - This is a site that links to the local rules of courts in Texas.
Pretty helpful stuff, and obviously many man hours went into the searching for these resources.
TexasDockets.com - When there are court dockets online, or searchable judicial records, this site links to those search pages.
TexasCAD.com - Now improved, and with many more counties added, this site allows people to search Texas County Appraisal Districts for information like property ownership, property values, etc. A great collection tool or real estate market tool.
TexasClerks.com - This is a brand new site, it basically provides links to hundreds of Texas County Clerks, District Clerks and Federal Clerks within the state of Texas.
TexasLocalRules.com - This is a site that links to the local rules of courts in Texas.
Pretty helpful stuff, and obviously many man hours went into the searching for these resources.
Monday, February 16, 2009
Texas Court: Deed of Trust Extinguished Upon Payment and Did Not Secure Additional Non Recourse Note
Generally, a deed of trust is extinguished upon payment of the indebtedness which it was created to secure even without a written release. However, if the deed of trust contains a dragnet clause, in some circumstances, the deed of trust may be found secure future indebtedness created after the original indebtedness was paid. A Texas Court recently analyzed these issues in Craig v. Ponderosa Development, LP.
A debtor executed a promissory note (“Note”) in favor of creditor. The Note was secured by a Deed of Trust against property owned by the debtor. The Deed of Trust contained both a dragnet clause and a release provision. A “dragnet” clause is a future advance clause. In other words, the dragnet clause in the Deed of Trust provided that the property secured both the Note and the payment of future indebtedness. The release in the Deed of Trust stated that “upon payment of all sums accrued by this Instrument, Lender shall release this Instrument.”
The debtor paid the full amount of the Note to creditor; however, creditor never released the Note or Deed of Trust. After debtor paid the Note in full, debtor executed a Non-Recourse Promissory Note in favor of creditor. Debtor defaulted on the Non-Recourse Promissory Note and creditor attempted to foreclose on the Deed of Trust. The creditor argued that the dragnet clause of the Deed of Trust covered the Non-Recourse Promissory Note.
A deed of trust has no legal effect apart from the debt it is intended to secure. A deed of trust is usually extinguished upon payment of the indebtedness which it was created to secure. Extinguishment is complete even without a written release. However, there may be an exception to extinguishment when the deed of trust contains a dragnet clause.
Texas courts do not recognize the enforceability of dragnet clauses unless the subsequent debt to be secured was reasonably within the contemplation of the parties to the deed of trust at the time it was executed. If the requisite intent is found, however, courts have indicated that dragnet clauses will be given effect even as to indebtedness created after the debt originally underlying a deed of trust has been paid in full.
In this case, the Court found that when read in conjunction with other provisions in the Deed of Trust, it was clear that the dragnet clause was not intended to secure future indebtedness created after the Note was paid in full. Any other interpretation would render the release in the Deed of Trust meaningless. The court concluded that the application of the dragnet clause to the Non-Recourse Note was not within the parties' contemplation at the time they signed the Deed of Trust.
A debtor executed a promissory note (“Note”) in favor of creditor. The Note was secured by a Deed of Trust against property owned by the debtor. The Deed of Trust contained both a dragnet clause and a release provision. A “dragnet” clause is a future advance clause. In other words, the dragnet clause in the Deed of Trust provided that the property secured both the Note and the payment of future indebtedness. The release in the Deed of Trust stated that “upon payment of all sums accrued by this Instrument, Lender shall release this Instrument.”
The debtor paid the full amount of the Note to creditor; however, creditor never released the Note or Deed of Trust. After debtor paid the Note in full, debtor executed a Non-Recourse Promissory Note in favor of creditor. Debtor defaulted on the Non-Recourse Promissory Note and creditor attempted to foreclose on the Deed of Trust. The creditor argued that the dragnet clause of the Deed of Trust covered the Non-Recourse Promissory Note.
A deed of trust has no legal effect apart from the debt it is intended to secure. A deed of trust is usually extinguished upon payment of the indebtedness which it was created to secure. Extinguishment is complete even without a written release. However, there may be an exception to extinguishment when the deed of trust contains a dragnet clause.
Texas courts do not recognize the enforceability of dragnet clauses unless the subsequent debt to be secured was reasonably within the contemplation of the parties to the deed of trust at the time it was executed. If the requisite intent is found, however, courts have indicated that dragnet clauses will be given effect even as to indebtedness created after the debt originally underlying a deed of trust has been paid in full.
In this case, the Court found that when read in conjunction with other provisions in the Deed of Trust, it was clear that the dragnet clause was not intended to secure future indebtedness created after the Note was paid in full. Any other interpretation would render the release in the Deed of Trust meaningless. The court concluded that the application of the dragnet clause to the Non-Recourse Note was not within the parties' contemplation at the time they signed the Deed of Trust.
Tuesday, February 10, 2009
Austin Lawyer Tip: Texas Foreclosure Procedures in Real Estate
In order to set up a non-judicial foreclosure, the lender must do several things in order to have the ability to foreclosure their security interest, or what we call a Deed of Trust. First, the loan papers (or "documentation") must include an obligation to pay (usually called a Note, Real Estate Lien Note, Promissory Note, or Note with Vendor's Lien) and should also include the security agreement (usually referred to as a Deed of Trust). The Deed of Trust gives the lender the right to "foreclose" its security interest if the Obligor fails to pay. The Deed of Trust should appoint a "trustee" and must contain a "power of sale." The Deed of Trust should also give the lender the right to designate "Substitute Trustee." In Texas, the foreclosure is usually by way of a "non-judicial" foreclosure, or by way of the posting of the property for sale on the first Tuesday of the month.
The following steps contain the basic procedures that the lender must go through in order to get to the point where they may foreclose the lien:
1) Demand for Payment - once the Obligor defaults in the making of one or more payments, the lender must give notice of the default and demand the overdue payment or payments.
2) Notice of Intention to Accelerate - prior to being able to foreclose its lien, the lender must give notice of intention to accelerate. The Notice of Intention to Accelerate is usually combined with a demand for payment. The notice should give at least ten (10) days within which the Obligor can cure the default. If the property is the Obligor's "residence," then the Notice of Intention to Accelerate should give the Obligor at least twenty (20) days notice. After the appropriate time period has expired, then the lender is free to "post" the property for a non-judicial foreclosure.
3) Notice of Foreclosure - assuming that the Lender has a valid Deed of Trust and that the lender has appropriately moved to foreclose through the designated trustee or its "substitute" trustee, then after the expiration of time on the Notice of Intention to Accelerate, the lender can "post" the property for foreclosure. This is done with the giving of Notice of Foreclosure. The Notice must be posted at the Courthouse and must be send via Certified Mail, Return Receipt Requested to the last known address of the debtor. Because only the sending of the certified mail is usually required, it does no good for the debtor to attempt to refuse delivery, as the debtor would only denying themselves the information contained in the Foreclosure Notice. The Notice must give the debtor at least 21 days notice of the foreclosure, and must inform the debtor of the time, date, and place of the foreclosure sale. Foreclosure sales take place at the location designated by the Commissioner's Court for each County in which the property (or any part of the property if the property is located in more than one County) is located.
4) Posting of the Property - the Notice of Foreclosure should then be "posted" at the designated location where notices are given at the County Courthouse (or other designated location). The Notice should be posted for the full twenty one (21) days prior to the sale and must be filed with the County Clerk's office.
5) Foreclosure Sale - The foreclosure sale should take place on the designated date between the hours of 10:00 a.m. and 4:00 p.m., that date being the first Tuesday of the month of the foreclosure sale. The sale must begin within three (3) hours of the time stated in the notice of foreclosure. At the foreclosure sale, the trustee or substitute trustee must "strike off" or sell the property to the highest bidder. The trustee is not required to sell the property for any particular price. For this reason, debtors are usually advised to attend the sale if they have some ability to redeem.
6) Substitute Trustees / Trustee's Deed - the final step in the process is for the Trustee (or Substitute Trustee if one was appointed) to prepare and file a Trustee's or Substitute Trustee's Deed to reflect that the property was sold. The Deed will then transfer title of the property to the purchaser or back to the lender, as the case may be. The lender should check the Deed to be sure that it accurately reflects what happened at the foreclosure sale.
Due to the complexity of these proceedings and the possibility of many pitfalls (or loopholes as many call them), if you have questions about the validity of any foreclosure sale, you should seek the advice of an attorney who is experienced in foreclosure litigation and foreclosure sales.
The following steps contain the basic procedures that the lender must go through in order to get to the point where they may foreclose the lien:
1) Demand for Payment - once the Obligor defaults in the making of one or more payments, the lender must give notice of the default and demand the overdue payment or payments.
2) Notice of Intention to Accelerate - prior to being able to foreclose its lien, the lender must give notice of intention to accelerate. The Notice of Intention to Accelerate is usually combined with a demand for payment. The notice should give at least ten (10) days within which the Obligor can cure the default. If the property is the Obligor's "residence," then the Notice of Intention to Accelerate should give the Obligor at least twenty (20) days notice. After the appropriate time period has expired, then the lender is free to "post" the property for a non-judicial foreclosure.
3) Notice of Foreclosure - assuming that the Lender has a valid Deed of Trust and that the lender has appropriately moved to foreclose through the designated trustee or its "substitute" trustee, then after the expiration of time on the Notice of Intention to Accelerate, the lender can "post" the property for foreclosure. This is done with the giving of Notice of Foreclosure. The Notice must be posted at the Courthouse and must be send via Certified Mail, Return Receipt Requested to the last known address of the debtor. Because only the sending of the certified mail is usually required, it does no good for the debtor to attempt to refuse delivery, as the debtor would only denying themselves the information contained in the Foreclosure Notice. The Notice must give the debtor at least 21 days notice of the foreclosure, and must inform the debtor of the time, date, and place of the foreclosure sale. Foreclosure sales take place at the location designated by the Commissioner's Court for each County in which the property (or any part of the property if the property is located in more than one County) is located.
4) Posting of the Property - the Notice of Foreclosure should then be "posted" at the designated location where notices are given at the County Courthouse (or other designated location). The Notice should be posted for the full twenty one (21) days prior to the sale and must be filed with the County Clerk's office.
5) Foreclosure Sale - The foreclosure sale should take place on the designated date between the hours of 10:00 a.m. and 4:00 p.m., that date being the first Tuesday of the month of the foreclosure sale. The sale must begin within three (3) hours of the time stated in the notice of foreclosure. At the foreclosure sale, the trustee or substitute trustee must "strike off" or sell the property to the highest bidder. The trustee is not required to sell the property for any particular price. For this reason, debtors are usually advised to attend the sale if they have some ability to redeem.
6) Substitute Trustees / Trustee's Deed - the final step in the process is for the Trustee (or Substitute Trustee if one was appointed) to prepare and file a Trustee's or Substitute Trustee's Deed to reflect that the property was sold. The Deed will then transfer title of the property to the purchaser or back to the lender, as the case may be. The lender should check the Deed to be sure that it accurately reflects what happened at the foreclosure sale.
Due to the complexity of these proceedings and the possibility of many pitfalls (or loopholes as many call them), if you have questions about the validity of any foreclosure sale, you should seek the advice of an attorney who is experienced in foreclosure litigation and foreclosure sales.
Monday, February 9, 2009
Austin Lawyer Tip: Texas Real Estate Foreclosure Litigation
There has been a tremendous amount of litigation relating to foreclosures. On each side of the fence there are competing interests. On the one side there are real estate companies, banks, lenders, and mortgage servicers. On the other side, are homeowners, families, and even children. There are very important issues on each side of the fence.
If you are looking at having your property foreclosed upon, you should first attempt to work out an agreement with your lender after falling behind in payments. Many mortgage lenders have various programs to get you current. Sometimes they are willing to move a delinquent payment to the end of the mortgage, or they may simply add the accrued interest to the loan balance and give you a new amortization schedule. If you have fallen behind, you should pursue all of your remedies with the lender prior to proceeding with any legal options. If the lender is unwilling or unable to help you get current, and they are not willing to grant you an extension or renewal, then another option is to seek to have the loan refinanced.
If the foreclosure is imminent and you are sure that you do not want to keep the home, you should first attempt to give the lender a "Deed in Lieu of Foreclosure." By doing this, you may be able to negotiate a release by the lender and avoid a costly deficiency lawsuit, whereby the lender could go after you for any losses they incur in taking back the property (in other words you could be liable for any resulting "deficiency" between the sales price at the foreclosure and the total amount of the debt).
Anther option if you are sure that you do not want to keep the home is to sell it prior to the foreclosure. By doing this, you may also avoid the possibility of a deficiency lawsuit by the lender against you. In this marketplace, this might be easier said than done.
If none of these options are available, and it looks like the lender is going to foreclose, then you may want to seek the advice of a bankruptcy attorney. With the bankruptcy, your prior payments may be able to be treated as an "arrearage" so that you can make payments on the old debt while staying current on the new or "post-petition" indebtedness.
However, what do you do if bankruptcy is not available to you for some reason? What if you believe that your lender has taken advantage of you? Are their any other options? The answer to these questions are "maybe." A commercial litigation attorney may be able to help. However, oftentimes, these options are very expensive. If you had this kind of money, you probably should have simply paid down the mortgage. Nevertheless, litigation attorneys will review all of the documentation and the foreclosure documents to ensure that the lender has met all of the requirements for a valid non-judicial foreclosure. Strict compliance is usually required.
If you are looking at having your property foreclosed upon, you should first attempt to work out an agreement with your lender after falling behind in payments. Many mortgage lenders have various programs to get you current. Sometimes they are willing to move a delinquent payment to the end of the mortgage, or they may simply add the accrued interest to the loan balance and give you a new amortization schedule. If you have fallen behind, you should pursue all of your remedies with the lender prior to proceeding with any legal options. If the lender is unwilling or unable to help you get current, and they are not willing to grant you an extension or renewal, then another option is to seek to have the loan refinanced.
If the foreclosure is imminent and you are sure that you do not want to keep the home, you should first attempt to give the lender a "Deed in Lieu of Foreclosure." By doing this, you may be able to negotiate a release by the lender and avoid a costly deficiency lawsuit, whereby the lender could go after you for any losses they incur in taking back the property (in other words you could be liable for any resulting "deficiency" between the sales price at the foreclosure and the total amount of the debt).
Anther option if you are sure that you do not want to keep the home is to sell it prior to the foreclosure. By doing this, you may also avoid the possibility of a deficiency lawsuit by the lender against you. In this marketplace, this might be easier said than done.
If none of these options are available, and it looks like the lender is going to foreclose, then you may want to seek the advice of a bankruptcy attorney. With the bankruptcy, your prior payments may be able to be treated as an "arrearage" so that you can make payments on the old debt while staying current on the new or "post-petition" indebtedness.
However, what do you do if bankruptcy is not available to you for some reason? What if you believe that your lender has taken advantage of you? Are their any other options? The answer to these questions are "maybe." A commercial litigation attorney may be able to help. However, oftentimes, these options are very expensive. If you had this kind of money, you probably should have simply paid down the mortgage. Nevertheless, litigation attorneys will review all of the documentation and the foreclosure documents to ensure that the lender has met all of the requirements for a valid non-judicial foreclosure. Strict compliance is usually required.
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