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As a Texas real estate attorney representing buyers, sellers, lenders, developers, and occasionally brokers, in Texas, I have sometimes been accused of sounding like a broken record in advising my clients. My oft-repeated mantra is: “Read the document thoroughly, and then read it again”. Even if the document is one I have prepared for my client, it is essential that the client review the document to make sure it expresses their intentions. After everything is signed, it is often too late to ask questions. A recent Texas Court of Appeals case illustrates the perils of signing a contract without reviewing it thoroughly beforehand.In the case of ERA Realty Group, Inc. v. Advocates for Children and Families, Inc., the Texas Thirteenth Court of Appeals considered a commission agreement between ERA and a local advocacy group. The agreement was a preprinted form, with blanks filled in by typewriter by an ERA employee. As the Court explains: “The (agreement) contains a commission calculation if Advocates purchases property and also a commission calculation if Advocates leases property. No lease calculation is selected, although the number “6” is typed before the phrase, ‘% of all rents to be paid over the term of the lease.’ Clearly, the instruction to ‘check only one box’ was not followed because no box is checked. The agreement, therefore, can be read in one of two ways: (1) as providing for a lease commission because the number “6” is typed, or (2) as making no provision for a lease commission because no box is checked.” Because ERA had prepared the agreement, the Court construed the commission agreement against ERA and held that the agreement did not provide for a commission for leases.

As a result, ERA was not only denied it’s request for a commission, it was also ordered to pay $15,000.00 in attorney’s fees to the Defendant advocacy group. Actually, it’s hard to understand why ERA would bring a lawsuit based on this agreement, rather than simply admitting a mistake had been made and resolving to read those form commission agreements more thoroughly next time. The publicity from this suit probably hurt ERA much more than the commission would have benefited them had they won!

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One of the things I love about being a Texas real estate and development lawyer is that Texans are so open to innovative real estate developments. Practicing real estate and development law in Texas is great fun and very satisfying for this reason. A recent real estate development in Texas illustrates the point: co-housing, while not invented in Texas, has come to Texas. As a recent article by Bob Moos in the Dallas Morning News online entitled “Co-Housing Catching On in U.S.” explains, the first elder co-housing development in Texas is being built in Duncanville, Texas, called Wildflower Village.The members of the Village have been meeting together over the past two years to get to know one another, and to design their community. Some arguments have occurred, but they also meet socially to have fun as well. They like to arrive at decisions by consensus, rather than a “majority rules” vote. The development is limited to adults over 50 years of age. They plan to individually own their own single-story home. However, they will collectively own a common building that will have a gourmet kitchen, dining room, living area, home theater, craft room and two guest bedrooms.

This is an incredible concept and I wish them all the best of luck. They have gotten to know each other before they even hired a builder or an architect, and so have created a community for themselves, meaning “community” in the sense of a village with neighbors and friends, not just buildings. For more information, visit their website.

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A substantial part of my Texas real estate law practice over the past thirty years has involved Texas commercial real estate leases, representing both landlords and tenants (often representing either landlords or tenants who are based outside of Texas). An issue that frankly does not come up often is the timing of notices by one party or the other, or the timing of payments by the tenant to the landlord, in part because commercial lease language regarding the timing of notices or payments is generally clearly written. A recent Texas case by the Texas Eleventh Court of Appeals reiterates that the lease means what it says.

In the case of John B. Meadows, et al. v. Midland Super Block Joint Venture, the 11th Texas Court of Appeals held that when the lease in question required that a payment or a notice had to be delivered to the landlord by the first of the month, a payment or notice that was only mailed by the first of the month, and was received several days after the first, was insufficient, and the landlord’s termination of the lease was proper.The tenant argued that the “mailbox rule” applied, that is, that payments or notices deposited in the mail by the first of the month are timely. The Court of Appeals said not so, because the express language of the lease stated that the payment or notice had to be delivered by the first. In the Court’s view, “delivered” clearly means “received by”.

This lease was unusual, in that it was a month to month lease, and each additional month was considered an option, which the tenant could exercise only by notice or payment each month on or before the first. In Texas, as the Court notes, “(e)xercise of an option, unless excused in rare cases of equity, must be unqualified, unambiguous, and strictly in accordance with the terms of the agreement.” Would the Court have decided differently if this had been a lease for a stated term and one of the monthly rent payments within the term was late? Very possibly so.

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As a Texas attorney representing Texas homeowner and property owner associations in residential and commercial developments, I find that very often the greatest service I can perform for my clients is education. I ran across a recent article by Richard Thompson with Regenesis in Realty Times, entitled the “HOA Health Survey”. The article sets out a questionnaire to determine just how healthy your association is. The questionnaire contains very specific and pointed questions, and the answers will indeed tell you just how “healthy” your association is. Very interesting and informative article.

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I have represented developers and investors in Texas real estate developments for over thirty years. I have been blessed with clients who are fabulous people to work with, and Texas development law is always challenging and interesting. There is one thing that is guaranteed to make both my clients and I tear our hair out however: arbitrary and capricious municipal governments and code enforcement personnel. They are not all that way, by any means: most Texas city government officials and personnel are highly professional. However, if you practice development law in Texas long enough, you will find that the few bad apples cause you more effort than all the others combined.

There is a game some municipal governments play called “Yes, that’s what we promised then, but it’s different now”. The case of Continental Homes of Texas, L.P. v. City of San Antonio, decided recently by the Texas Fourth Court of Civil Appeals in San Antonio, illustrates what I mean. In 2002, the owners of a ranch, (located outside the San Antonio city limits but within its extra-territorial jurisdiction), received a “Vested Rights Permit” in return for giving the City a parcel of land for a gas metering station. The Permit had an effective date of 1991 and basically said that the ranch would be subject only to City ordinances and rules as of 1991, and not any passed thereafter. Importantly, the Permit had no expiration date.In 2003, the City passed a Tree Preservation Ordinance, which required developers to, among other things, request a permit from the City Arborist before cutting trees, and to perform mitigation (i.e., plant new trees) if trees were going to be removed. In 2005, Continental bought part of the original ranch, and submitted a Master Development Plan to the City. The Plan was approved, but in a side letter, the City told Continental that Continental’s Master Tree Stand Delineation was rejected, and further noted that the project will be subject to the City’s Tree Preservation ordinance. In 2006, while Continental was clearing at the site, it was served with a temporary restraining order obtained by the City, stopping all work on the grounds that Continental was violating the Tree Preservation Ordinance.

The City argued that the Vested Rights Permit had become “dormant”! The trial court decided for the City. The Court of Appeals reversed the trial court decision, and quite rightly held that the Vested Rights Permit controlled, and since the City’s tree ordinance was passed after the date of the Vested Rights Permit, the tree ordinance did not apply to this property. Appropriately, the City had to pay Continental’s attorney’s fees. If I were a San Antonio taxpayer, I would be furious that my tax dollars financed a suit like this!

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As a Texas real estate lawyer representing developers, builders and investors in Texas, I have found that my clients benefit from the availability of “alternate dispute resolution” remedies in their contracts. These remedies, such as mediation and arbitration, can result in satisfactory outcomes to disputes, without the cost of extended litigation. A recent Texas Supreme Court case illustrates that the contract remedy of arbitration can be waived, however.

In the case of Perry Homes, Inc. v. Robert and Jane Cull, the Culls sued their homebuilder for structural and drainage defects in the home built by Perry Homes. Initially, Perry Homes requested that the dispute be submitted to arbitration, but the Culls resisted. A ruling was never obtained by either party from the trial court on whether the case must be submitted to arbitration. The Culls then engaged in a course of extended (and expensive) discovery for 14 months. Four days before trial, the Culls requested that arbitration be ordered. The trial court ordered arbitration, and the arbitration resulted in an $800,000.00 award to the Culls.The Texas Supreme Court states that: “(the Culls) got extensive discovery under one set of rules and then sought to arbitrate the case under another. They delayed disposition by switching to arbitration when trial was imminent and arbitration was not. They got the court to order discovery for them and then limited their opponents’ rights to appellate review. Such manipulation of litigation for one party’s advantage and another’s detriment is precisely the kind of inherent unfairness that constitutes prejudice under federal and state law.” As a result,the Texas Supreme Court set aside the award, and sent the case back to the trial court for a trial, on the grounds that the Culls had waived their right to arbitrate this dispute.

While arbitration is often less expensive than discovery and trial, it has some downside: discovery and the scope of appeal is substantially limited in an arbitration proceeding. That’s why it is faster and costs less. The moral here for clients and lawyers: the case should be analyzed in the beginning, to determine whether trial or arbitration is the best remedy. Once you embark down the path of discovery and trial, the arbitration door is going to swing shut!

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Texas rural water utilities and the attorneys representing Texas rural water companies are often faced with the challenge of making sense of the sometimes tangled layers of Texas statutes, Texas court decisions and the administrative rules of the Texas agency that regulates water utilities, the Texas Commission on Environmental Quality. As I indicated in a blog last week entitled “Texas Rural Water Utilities Faced With New Law: “Paint It Black!!”, House Bill 1717, effective June 15, 2007 (and now codified as Texas Health and Safety Code Section 341.0357), requires that a utility that provides fire hydrants paint black any “non functioning” hydrant. A hydrant is non functioning if “the device pumps less than 250 gallons of water per minute”. Because the statute does not specify over what period of time this standard must be met, it will almost certainly be interpreted by a Texas court to mean “at all times”. Many rural water companies simply cannot meet this standard 24/7, 365 days a year.A recent article by Michael Gresham in The Kaufman Herald illustrates that the controversy over this recent law is continuing. Rural water utilities are continuing to paint their hydrants black. Firefighters continue to disparage this practice on the basis that “this is not what the law intended”. As I have said before, water companies usually don’t get sued for acting contrary to what a law intended, but they regularly get sued if they do not follow what a law says. Instead of criticizing what the rural water companies are doing because they have no choice, hopefully the fire fighters will direct their concerns to the Texas Legislature!

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One of the challenges of serving as an attorney for rural water utilities in Texas is helping my clients navigate the increasing regulatory burden on Texas rural water utilities, an issue specifically addressed in a prior blog entitled Challenges Ahead for Texas Rural Water Companies in Texas. A recent law enacted by the Texas Legislature appears to add confusion to that burden.

House Bill 1717, effective on June 15, 2007 (and now codified as Texas Health and Safety Code Section 341.0357), requires that a utility that provides fire hydrants paint black any “non functioning” hydrant. “Non functioning” is defined by the law to mean any hydrant that cannot pump at least 250 gallons of water per minute, presumably at all times. Most rural water utilities I represent do not install fire hydrants, because they simply do not have the capacity to serve their customers and produce water for firefighting as well. Those rural water utilities that do install hydrants cannot always deliver 250 gallons per minute 100% of the time.

A recent article by Ron Maloney with the Seguin Gazette-Enterprise illustrates the confusion this new law can cause. The Green Valley Special Utility District, a water district that serves 25,000 customers in Guadalupe, Comal and Bexar Counties in Texas, painted all their fire hydrants black. The water district’s general manager is quoted in Mr. Maloney’s article as saying: “It’s different in a rural district from the type of system in a municipality and a lot of things can affect flow rate. I have the flow now. But I might not have it in an hour, and we can’t guarantee it.”This action has apparently angered fire departments and the emergency management coordinators of the involved counties. If I had represented the water district, I might have advised them to cover hydrants with a black tarp while the water district and the Texas Rural Water Association worked with state legislators to get an emergency bill passed to clarify the law, rather than go to the expense of painting. But tarps cost money too, the new law says you can only use tarps temporarily, and Green Valley SUD was painting the hydrants so as to leave them available for fire fighter use. The law, as currently worded, is quite clear that if the water district cannot supply 250 gallons per minute to the hydrant at all times, the hydrant must be painted black. If the water district did not paint these hydrants black, and a fire truck hooked up to the hydrant at a time when peak demand by the water district’s paying customers or a broken line caused the hydrant to deliver less than 250 gallons per minute, then you can bet that the water district will be sued by a homeowner whose house burned down. That kind of suit can result in higher insurance premiums for the water district, which translates into higher water bills for the water district’s customers. The best course of action for the rural water districts effected by this new law may be to remove all fire hydrants altogether, thus depriving the communities involved of helpful fire-fighting resources.

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As a Texas attorney representing both builders and construction companies in Texas on one hand, and Texas consumers of construction services on the other, I have had occasion to litigate a number of cases in which construction defects were the central issue in the case. I learned long ago (because I had some great mentors when I was a new lawyer), that when I represented a Plaintiff in a suit to recover damages for a construction defect, the claim should be characterized as both a breach of contract as well as breach of warranty. It always seemed redundant to me, but a recent case illustrates that it may not be. Consider the case of Medical City Dallas Ltd. v. Carlisle Corporation, decided recently by the Dallas Court of Appeals and subsequently heard by the Texas Supreme Court.

Medical City purchased a membrane type roofing system from Carlisle Corporation. Within a short time, the roof began to leak. Initially, Carlisle performed repairs. When the repairs appeared not to cure the leaks, Medical City obtained the advice of a roofing expert, who examined the membrane and determined that it was failing. Medical City requested that the roof be replaced, and when Carlisle failed to respond, this litigation ensued.The opinion of the Dallas Court of Appeals held that a breach of warranty was different than a breach of contract, and in particular, a breach of warranty did not support an award of attorneys fees to the damaged party, even though the Texas Civil Practices and Remedies Code Section 38.001 clearly allows the injured party in a breach of contract case to recover attorneys fees. Since Medical City’s pleadings contained only a claim for breach a warranty, the Dallas Court of Appeals held that it could not recover attorneys fees, only its damages.

The Texas Supreme Court opinion reversed this decision, and concluded that since a written warranty is a type of written contract, Texas Civil Practices and Remedies Code Section 38.001(8) supports an award of attorneys fees for breach of a written warranty.

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In the course of representing rural water companies in Texas, I am always on the lookout for new resources and educational materials to help me expand my understanding of the challenges that water companies, and especially rural water companies in Texas, face each day. The American Water Works Association has just published a new book that looks like a fascinating addition to the library of any lawyer representing water companies. It’s called “The Business of Water”, and it’s edited by Steve Maxwell, Managing Director of TechKNOWLEDGEy Strategic Group in Boulder, Colorado.The advance press on this book indicates that it deals with some of the paradoxes that water companies face. For example, water is essential to life and thus incredibly valuable, yet drinking water costs us a fraction of a cent out of our tap. Another paradox is that many of us purchase bottled water that costs thousands of times as much as tap water, yet almost everyone screams if our monthly water bill goes up. Finally, the book notes that water companies must sell water in order to stay in business, yet are often in the position of asking their customers to conserve and use less water!

The book deals with water costs, strategic planning for water companies, government regulation and many other timely topics. I have ordered my copy and will report back to you after I have read it. It certainly appears to be a valuable addition to any water lawyer’s library. The price is $45.00 for AWWA members and $68.00 for nonmembers.