Articles Posted in Real Estate Law

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The Texas Court of Appeals in Houston recently decided a case, UNION PACIFIC RAILROAD COMPANY v. AMERITON PROPERTIES INCORPORATED, that contains an important caveat for anyone preparing or interpreting a deed.

Background

Galveston, Harrisburg & San Antonio Railway Company (GHSR), the predecessor to Union Pacific Railroad Company, acquired title to certain Texas land in 1879 after commencing a condemnation proceeding against the owner, Mary Lawrence. GHSR and Mrs. Lawrence agreed to settle the condemnation proceeding, and Mrs. Lawrence gave GHSR a deed in return for GHSR’s payment of $437 for a portionthe land.

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In Caffe Ribs, Inc. v. State of Texas, the State of Texas filed an eminent domain suit to obtain property from Caffe Ribs to use for a storm water detention pond as part of an expansion of Interstate 10. The property is near the intersection of Beltway 8 and Interstate 10.

Prior to ownership by Caffe Ribs, the property was used to store and manufacture oil field equipment, which resulted in environmental contamination on the property. Weatherford owned the property from 1977 to 1988, until the property was foreclosed on by Paul Revere Variable Annuity Insurance Company. Weatherford continued operations on the property as a lessee into the 1990s.

In February 1995, Paul Revere sold the property “as is” to Caffe Ribs for $487,000.  Ribs expressly agreed “to accept the conveyance of the Property subject to any presently known or subsequently discovered Hazardous Materials or Hazardous Materials Contamination.” Paul Revere retained the exclusive right to evaluate and analyze the environmental condition of the property and take any actions that Paul Revere determined to be necessary regarding environmental conditions. Subsequently, Weatherford and Paul Revere  began remediation of the property. They were well into that process when their efforts were interrupted by the condemnation lawsuit.

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The  Texas Court of Appeals in Texarkana published an interesting decision in the case of  In re Estate of Hardesty, in which they discussed who had standing in Texas to challenge a foreclosure sale of real estate.

Background

Carolyn Hardesty obtained a home equity loan for $500,000.00 from PrimeLending in 2004. The loan was secured by a lien classified as an extension of credit under Article XVI, Section 50(a)(6)(A) of the Texas Constitution. Carolyn signed a sworn fair market value agreement at closing stating that the value of the property was $625,000.00. Kenneth Hardesty, Carolyn’s son, assisted Carolyn in the loan process but was not a party to the transaction with PrimeLending. In October 2005, CitiMortgage began servicing the loan. The lien was assigned to CitiMortgage in April 2010.

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The case was appealed to the Texas Supreme Court. The Court’s opinion states that a taking for inverse condemnation purposes occurs when the government “intentionally took or damaged property for public use, or was substantially certain that would be the result” citing City of Keller v. Wilson, 168 S.W.3d 802, 808 (Tex. 2005). Sovereign immunity does not shield the government from liability.

To prove inverse condemnation, a plaintiff is required to show three elements:

1. Intent

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The Texas Supreme Court’s opinion in Harris County Flood Control District v. Kerr et al. ruled on a Texas homeowner’s claim of inverse condemnation by Harris County, Texas and the Harris County Flood Control District.  As many of you know, many government agencies have the power of eminent domain, or condemnation, in which the government directly takes private property for a public purpose. However, sometimes the actions of a government agency can damage property without actually condemning the property itself. For example,  a city widens a street and takes the entire parking lot of a local grocery store. The city offers to pay for the lot, but the grocery store has lost all its business since no one can park. The owner of the grocery store can claim that they want reimbursement for the value of their entire business, which was destroyed by the city’s widening of its street. This is an example of inverse condemnation.

Background of the Case:

The plaintiffs were residents and homeowners in the upper White Oak Bayou watershed located in Harris County, Texas. The majority of the homes in the area were built in the late 1970s and early 1980s in an area with a history of flooding. However, for the first 20-25 years after construction, the homes suffered little to no flood damage. Starting in 1998, homes in the area began experiencing flood damage from storms, and continued to experience repeated flood damage ever since.

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In September 2015, the Texas Governor signed into law Texas Senate Bill 478 , which adds  Section 22.019 to Chapter 22, Subchapter A, of the Government Code. The new law reads as follows:

Sec. 22.019. PROMULGATION OF CERTAIN LANDLORD-TENANT FORMS. (a) The supreme court shall, as the court finds appropriate, promulgate forms for use by individuals representing themselves in residential landlord-tenant matters and instructions for the proper use of each form or set of forms.

(b) The forms and instructions must:

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It is not uncommon in Texas for a landowner, for example, someone who has inherited property, to find that the property is landlocked and without access to a public road. Sometimes access to the landlocked property is offered by a friendly neighbor. However, in the absence of an adjoining property owner who will allow or sell an easement from the landlocked property to a public road, the owner of the landlocked property is forced to go to court to obtain what is called an “easement of necessity”. The Texas Fifth Circuit Court of Appeals recently discussed the criteria for an easement of necessity in the case of The Staley Family Partnership, Ltd. v. David Stiles, et al.

Background

The Staley Family Partnership owns a 10 acre tract of land (“the Staley Tract”) bordered by Honey Creek or its tributaries on the west, south and east located in Collin County, Texas. The Staley Tract was initially part of larger tract (the “Helms Tract”) conveyed to Thompson Helms by the State of Texas in 1853. In 1855, a portion of the Helms Tract was transferred to Robert Skaggs and the remaining 404 acres of the Helms Tract was divided by the probate court in 1866. The probate court awarded Axia Helms a 152 acre tract, James Helms a 142 acre tract and Frances Helms a 110 acre tract (the “Frances Tract”).

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In a case that many Texas landowners have been following closely through the courts, the Texas Supreme Court recently published a decision concerning whether a county can be held liable for an impermissible taking of property when the county allows for land development that the county knows will cause substantial flooding to nearby properties and fails to take steps to mitigate or control that flooding.

The Texas Supreme Court Opinion


Harris County Flood District and Harris County v. Kerr et al.   involved nearly four hundred homes in the upper White Oak Bayou watershed in Harris County, Texas that were flooded when severe storms passed through the area. The homeowners sued the county and the Harris County Flood Control District based on an inverse condemnation claim. The homeowners asserted that the county and the district did not take steps to control flooding as new developments were created in the White Oak Bayou. A flood control plan was actually developed in the 1980’s, but was never fully implemented by the county, and this plan acknowledged that the unmitigated development of the land in the Bayou would produce serious flooding problems in the area. As a result of a boom in development in the White Oak Bayou, and because of the the county’s failure to adequately control flooding, many homes were flooded. The Plaintiff homeowners claimed that the flooding was a unconstitutional taking of their property that is prohibited by Article I, Section 17 of the Texas Constitution. The evidence showed that the county never intended to cause flood damage to the homeowner’s properties, but that the county knoew that flooding could result.

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The Texas Supreme Court recently decided an important eminent domain case in In Re Lazy W District No. 1, Relator. Specifically, the Court decided that the trial court must consider whether the court has jurisdiction over a proceeding as quickly as possible in a case, and need not wait on the outcome of a special commissioners proceeding before hearing the jurisdictional issues.

The Mechanics of Eminent Domain

When a government entity such as a city, municipality or water district is interested in exercising its power of eminent domain over a parcel of land, the Texas eminent domain statutes require they follow several steps:

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Most Texas landlords realize that when they rent to a tenant with a criminal history, the landlord may be held liable for criminal acts committed by that tenant. Texas Property Code Section 92.025 provides that a tenant cannot sue a landlord solely for leasing to a tenant convicted of, arrested for or placed on deferred adjudication for an offense. However, this law goes on to say that it does not preclude a suit for negligence against the landlord if: 1) the landlord leases to a tenant who has been convicted of murder, capital murder, indecency with a child, aggravated sexual assault and certain other listed offenses; and 2) the landlord knew or should have known of the conviction.

That’s pretty clear. However, now the federal government steps in. Even though a criminal record is not a protected status (like race, gender, religion, etc.) under the U.S. Department of Housing and Urban Development’s (HUD) Fair Housing Act, that has not prevented the Office of General Counsel for HUD from issuing “Guidance” on the application of the Fair Housing Act to prospective tenants with criminal records. The Guidance (what a misnomer) indicates that a landlord who conducts a background check of a prospective tenant and refuses to lease to that tenant on the basis of the prospective tenant’s criminal record may leave that landlord open to complaints of discrimination by prospective tenants with criminal records. Remember, HUD can institute enforcement proceedings on these complaints as well.

HUD’s position is a catch-22 for Texas landlords. On the one hand, if the landlord refuses to rent based on a prospective tenant’s criminal record, the landlord is open to complaints and possible enforcement proceedings by HUD. On the other hand, if the landlord rents to a tenant with a criminal record, the landlord can be liable to other tenants for the actions of the tenant with the criminal history. HUD recommends that landlords evaluate prospective tenants, including any criminal records, on a case-by-case basis. Now, what was a simple leasing decision, becomes a legal issue that should probably be reviewed by the landlord’s attorney. This increases the landlord’s costs, which will probably result in higher rents. Higher rents will push some of the poorest renters out of the price range for certain apartments.