Real Estate Law & Asset Protection for Texas Real Estate Investors (eBook)

David J. Willis (Autor)

eBook Download: EPUB

2014 | 1. Auflage
100 Seiten
First Edition Design Publishing (Verlag)
978-1-62287-418-7 (ISBN)

Infos

This book is a pragmatic and creative approach to legal and asset protection issues faced by investors in Texas real estate, particularly investors in residential and smaller commercial properties. It is not intended to be a textbook or comprehensive academic treatise. Rather, it contains practical perspectives and techniques developed over the years in the course of advising and representing investors. Since there are usually as many opinions as there are lawyers in a room, it should be no surprise if other lawyers disagree with at least some of my conclusions. In response, I would point out that there is nothing theoretical in this book. Every strategy I describe has been tried and has succeeded in the real world. Having said that, every reader should consult his or her attorney prior to implementing any of my suggestions in order to insure compatibility with individual circumstances. Business plans vary and so do investments and asset protection strategies. This book does not offer legal guidance to any particular person with regard to any particular case. Note also that the law changes and evolves, often rapidly. While cases and statutes are cited in this book, the reader should do independent research to ascertain the current status of the law before relying on any of these citations. If you are a real estate investor who owns (or aspires to own) 10, 20, or 50 or more properties, then you should consider reading this book. If you use creative methods such as wraparounds and subject to transactions then you may find this volume very useful indeed. However, if your goal is to assemble an international consortium to purchase Rockefeller Center or Trump Tower, then this is probably not the volume for you. All real estate investors should form the habit of doing thorough due diligence prior to investing in real estate. This includes consulting attorneys, accountants, insurance advisors, and other qualified professionals on overall methods and goals as well as specific transactions. Every investor should have a team of seasoned professionals available to answer questions, offer input, and provide customized services. A professional investor will also acquire a basic level of competence in searching and obtaining information and copies from real property and appraisal district records. On the subject of transactional documentation, I urge readers to avoid most standard forms, especially those obtained from the Internet, except for contracts and addenda promulgated by the Texas Real Estate Commission and the Texas Association of Realtors. Consider all others suspect. Lastly, it has been my experience that good ethics make for good business. Avoid any transaction that even hints of fraud or deception. If it appears too good to be true it probably is. I welcome comments and criticism. I can most easily be reached by email at [e-mail]. David J. Willis

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This book is a pragmatic and creative approach to legal and asset protection issues faced by investors in Texas real estate, particularly investors in residential and smaller commercial properties. It is not intended to be a textbook or comprehensive academic treatise. Rather, it contains practical perspectives and techniques developed over the years in the course of advising and representing investors. Since there are usually as many opinions as there are lawyers in a room, it should be no surprise if other lawyers disagree with at least some of my conclusions. In response, I would point out that there is nothing theoretical in this book. Every strategy I describe has been tried and has succeeded in the real world. Having said that, every reader should consult his or her attorney prior to implementing any of my suggestions in order to insure compatibility with individual circumstances. Business plans vary and so do investments and asset protection strategies. This book does not offer legal guidance to any particular person with regard to any particular case. Note also that the law changes and evolves, often rapidly. While cases and statutes are cited in this book, the reader should do independent research to ascertain the current status of the law before relying on any of these citations. If you are a real estate investor who owns (or aspires to own) 10, 20, or 50 or more properties, then you should consider reading this book. If you use creative methods such as wraparounds and "e;subject to"e; transactions then you may find this volume very useful indeed. However, if your goal is to assemble an international consortium to purchase Rockefeller Center or Trump Tower, then this is probably not the volume for you. All real estate investors should form the habit of doing thorough due diligence prior to investing in real estate. This includes consulting attorneys, accountants, insurance advisors, and other qualified professionals on overall methods and goals as well as specific transactions. Every investor should have a team of seasoned professionals available to answer questions, offer input, and provide customized services. A professional investor will also acquire a basic level of competence in searching and obtaining information and copies from real property and appraisal district records. On the subject of transactional documentation, I urge readers to avoid most standard forms, especially those obtained from the Internet, except for contracts and addenda promulgated by the Texas Real Estate Commission and the Texas Association of Realtors. Consider all others suspect. Lastly, it has been my experience that good ethics make for good business. Avoid any transaction that even hints of fraud or deception. If it appears too good to be true it probably is. I welcome comments and criticism. I can most easily be reached by email at [e-mail]. David J. Willis

Textauszug

Chapter 2

SELLER DISCLOSURE

Three Rules: Disclose, Disclose, Disclose

 

As the previous chapter made clear, sellers and buyers have different needs and motivations when it comes to the transfer of real estate. One area that is often an issue is property condition. Sellers typically want to make the transfer “as is” without warranties and with no obligation for repairs. Buyers, on the other hand, have an interest in acquiring property that is in the best condition for the price. They also want full disclosure of adverse conditions, defects, and needed repairs.

 

Residential Sales

 

TREC promulgates a Seller’s Disclosure of Property Condition for use in residential real estate transactions (www.trec.state.tx.us/forms). This form (TREC OP-H dated 10-23-13) is filled out by the seller and attached to the TREC 1-4 contract. The form tracks section 5.008 of the Property Code which states:

 

5.008(a) A seller of residential real property comprising not more than one dwelling unit located in this state shall give to the purchaser of the property a written notice as prescribed by this section or a written notice substantially similar to the notice prescribed the his section which contains, at a minimum, all of the items in the notice prescribed this section.

 

The purpose of the Seller’s Disclosure is to make it clear what appliances, equipment, and features exist on the property; whether or not these items are working; if the seller knows of any defects or malfunctions in critical systems; if certain red-flag events like termite treatment, previous fires, or flooding have occurred; the need for repairs; and the existence of unpermitted additions, unpaid HOA fees, violations of deed restrictions, lawsuits, or conditions that “materially affect the health or safety of an individual.”

 

Exceptions

Property Code section 5.008(e) provides that requirement that a Seller’s Disclosure be provided does not apply to a transfer:

 

1.      pursuant to a court order or foreclosure sale;

2.      by a trustee in bankruptcy;

3.      pursuant to a deed in lieu of foreclosure;

4.      by a lienholder who has either purchased at a foreclosure sale or a sale pursuant to a court order or accepted a deed in lieu of foreclosure;

5.      by a fiduciary in the course of an administration of a decedent’s estate, guardianship, conservatorship, or trust;

6.      from one co-owner to one or more other co-owners;

7.      made to a spouse or to a person or persons in the lineal line of consanguinity of one or more of the transferors;

8.      between spouses incident to divorce, legal separation or a property settlement agreement;

9.      to or from a governmental entity;

10.  a new residence of not more than one dwelling unit that has not been occupied for residential purposes;

11.  of real property where the value of any dwelling does not exceed 5% of the value of the property.

 

Penalty

If the seller does not give the Seller’s Disclosure as required, Property Code section 5.008(f) permits the buyer to “terminate the contract for any reason within seven days after receiving the notice.” However, if the failure to give the notice is coupled with fraud or failure to disclose defects, then other penalties may arise pursuant to the Deceptive Trade Practices Act and/or the Statutory Fraud Act.

 

Commercial Sales

For commercial transactions, the Texas Association of Realtors has a Commercial Property Condition Statement that is an optional attachment to its standard commercial contracts. Its scope is broader than TREC’s Seller’s Disclosure since it addresses additional issues such as wetlands, underground storage tanks, toxic waste, and the like. Although the form is optional in commercial transactions, a careful buyer should always require that the seller provide it. Note that this and other TAR forms are available only to realtors.

 

Purpose of Disclosure Forms

The intent and purpose of both the residential and commercial disclosure forms is the same: to induce the seller to disclose material conditions, circumstances, and defects. For some reason, however, the drafters of these forms saw fit to insert a statement at the top to the effect that the contents of the form do not constitute a warranty by the seller. The TREC Seller’s Disclosure states:

 

THIS NOTICE IS A DISCLOSURE OF SELLER’S KNOWLEDGE OF THE CONDITION OF THE PROPERTY AS OF THE DATE SIGNED BY SELLER AND IS NOT A SUBSTITUTE FOR ANY INSPECTIONS OR WARRANTIES THE PURCHASER MAY WISH TO OBTAIN. IT IS NOT A WARRANTY OF ANY KIND BY SELLER OR SELLER’S AGENTS.

 

The TAR Commercial Property Condition Statement reads:

 

THIS IS A DISCLOSURE OF THE SELLER’S KNOWLEDGE OF THE CONDITION OF THE PROPERTY AS OF THE DATE SIGNED. IT IS NOT A SUBSTITUTE FOR ANY INSPECTIONS OR WARRANTIES A BUYER OR TENANT MAY WISH TO OBTAIN. IT IS NOT A WARRANTY OF ANY KIND BY SELLER, SELLER’S AGENTS, OR ANY OTHER AGENT.

 

What is the point of these disclaimers? Is the seller making disclosures but then warning the buyer not to rely on them? Apparently so. At best, this is ambivalent legal drafting. It should be unsettling if not unsatisfactory from the buyer’s point of view. A careful buyer may consider negotiating inclusion of a clause which makes it clear that the seller is standing behind the truth of these disclosures. Buyers, commercial or residential, should seek to deny a seller any wiggle-room on the disclosure issue.

 

Ongoing Duty to Disclose

The Seller’s Disclosure does not in and of itself impose an ongoing duty to disclose matters that may come to the seller’s attention after the form has been signed and delivered to the buyer. Bynum v. Prudential Residential Servs., 129 S.W.3d 781,795 (Tex. App.—Houston [1st Dist.] 2004, pet. denied). Although this may be strictly true as it relates to the form, it would be unwise for a seller to withhold material adverse information that is subsequently discovered. There are too many statutory and common law avenues for an aggrieved buyer to pursue, most notably an action for deceptive trade practices (see chapter 41).

Note that Article 1 of the National Association of Realtors Code of Ethics makes it clear that information about defects is not confidential. Disclosure of defects is in fact a duty for all members of the NAR.

 

Broker Liability for Seller Disclosure

Accurately completing the Seller’s Disclosure is the responsibility of the seller, preferably in the seller’s own handwriting. The seller’s broker does not ordinarily become liable for the seller’s wrongdoing in this regard. A broker “would have a duty to come forward only if he had any reason to believe that the seller’s disclosures were false or inaccurate, and the only way he could be held liable for [the seller’s] statement in the notice is if it were shown to be untrue.” Sherman v. Elkowitz, 130 S.W.3d 316, 321 (Tex. App.—Houston [14th Dist.] 2004, no pet.).

 

The Deceptive Trade Practices-Consumer Protection Act (DTPA)

Have no doubt about it: the DTPA applies to real estate transactions. The cases consistently declare that real estate is a consumer good within the meaning of the statute. See Chastain v. Koonce, 700 S.W.2d 579, 582 (Tex. 1985).

Business & Commerce Code section 17.46 declares that “false, misleading, or deceptive acts or practices in the conduct of any trade or business are hereby declared unlawful. . . .” Also expressly stated to be unlawful are misrepresenting the characteristics and uses of a particular item; representing that goods or services are of a particular quality and standard when they are not; advertising with intent not to sell as advertised; and failing to disclose information in an attempt to induce the consumer into buying.

Bottom line: failure by a seller to disclose material adverse conditions and defects is a violation of the DTPA.

Does it sound as though any of these complaints might form the basis of a lawsuit...

Produkt-Details

• Erscheint lt. Verlag: 15.12.2014
• Sprache: englisch
• Themenwelt: Sachbuch/Ratgeber ► Beruf / Finanzen / Recht / Wirtschaft ► Geld / Bank / Börse
• Themenwelt: Schulbuch / Wörterbuch ► Lexikon / Chroniken
• Themenwelt: Recht / Steuern ► Allgemeines / Lexika
• Themenwelt: Recht / Steuern ► EU / Internationales Recht
• Themenwelt: Recht / Steuern ► Privatrecht / Bürgerliches Recht ► Sachenrecht
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• ISBN-10: 1-62287-418-8 / 1622874188
• ISBN-13: 978-1-62287-418-7 / 9781622874187