Why Smart Sellers Hire Real Estate Agents

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

As a real estate lawyer in San Antonio -- and one who frequently deals with real estate brokers and agents -- friends and clients frequently ask me about the cost versus benefits of hiring a real estate professional when selling property.  Suffice it to say that I believe that the benefits of professional representation are numerous, and I never recommend that a friend, client or family member sells real estate without the assistance of a licensed professional.

The counter-arguments I receive from Sellers are: 1) that the San Antonio Real Estate market is "hot"and should result in a quick/easy sale;   2) that in the modern era of social media, Trulia, and Zillow, marketing real estate is "easy;" and 3) that not paying a real estate agent a commission helps the seller "save money." 

I don't find ANY of these arguments compelling.  Rather, I think that the following five (5) reasons, alone, justify using a real estate broker as a Seller's agent in every transaction:

1)  Real estate agents help establish a market-supported, realistic listing price.  It's no secret, most FSBOs are overpriced.  Virtually every Seller thinks that their home is WORTH the amount that they WISH TO RECEIVE. You know --  worth enough to satisfy the existing mortgage, pay closing costs, and still have enough for a tidy down-payment on a new property. The truth, however, is that the Seller's perceived value of the property is rarely the fair market value (what a willing buyer would pay).    

By contrast, a licensed real estate agent can establish a realistic asking price formulated by data produced from performing a market analysis of comparable listings and recent sales. Further, the agent doesn't assign an "emotional premium" on the property. Thus, a real estate broker's involvement may help the Seller avoid the common pitfall of overpricing their home.

2)  Real estate agents are not emotionally attached to your property.  In addition to helping you avoid a hefty, unsupportable price tag based on an "emotional premium" (which has no value to anyone except you -- the Seller), a broker will  not be offended by a low offer, a less than perfect inspection report, or critical statements from prospective buyers.  This helps the process become more of a business transaction, and less akin to parting with a beloved family heirloom.

3) Real estate agents understand the law.  There can be dire consequences to failing to make certain disclosures, not meeting deadlines and discrimination against certain categories of buyers.  Chances are, you don't know the real estate laws that apply to and bind you. A licensed broker does. This can save you lots of money and grief later -- especially if you avoid a lawsuit.  Further,  selling a property implicates lots of paperwork.  Having a broker explain the significance of each document is invaluable.

4)  Selling a property creates an adversary relationship with prospective buyers.  While there is no need to be nasty, it is axiomatic that the objectives of the Seller (get as much $ as possible) are naturally and necessarily adverse to the objectives of the Buyer (pay as little $ as possible).  To achieve their objectives, Buyers usually "focus on" imperfections in the property to argue that a lower price should be acceptable. Sellers don't like hearing how their most valuable possession has "fleas"  -- even when these statements are made in the course of price negotiations Having a real estate broker to "run interference" can remove some of the tension from this relationship.  

5)  Real estate agents achieve higher sales prices.  The statistics don't lie. The average Realtor-assisted sales price is significantly higher than the average sale by owner.  This difference usually more-than compensates the fees charged by the agent.

For all of these reasons, unless you want to enlist the services of a Texas real estate lawyer, a prudent Seller should engage a licensed and reputable real estate broker when it comes time to sell.

Property Managers: Protect your Commission When a Tenant Becomes a Buyer

San Antonio, Texas Real Estate Attorney Trey Wilson wrote:

Many times, a residential or commercial tenant decides that they really benefit from or simply enjoy  living or operating their business in their rented premises. Often, this decision to "stay put" results in the purchase by the tenant of the property being leased.  When this happens, the Landlord/Lessor becomes the Seller, and the Tenant/Lessee the Buyer. 

But what happens to the Broker / Property Manager who, on behalf of the Landlord/Owner, located the Tenant, and managed the property during the lease term?  

Since rents will no longer be paid following the sale, the Property Manager's revenue stream from the lease payments necessarily dries up.  This is the case because the once-Tenant is now the Owner, and the Tenant's rental payments are likely replaced by mortgage payments.  The previous Owner (who was the Broker/Property manager's client) no longer maintains an interest in the property.

In recognition of the fact that the Broker / Property Manager brought the Tenant/Buyer and Landlord/Seller together (i.e. was the "procuring cause" of the lease that matured into a sale) the  written Property Management Agreement should be drafted in a manner that provides for a Broker's commission in the event of a sale to the Tenant.  

The Texas Association of Realtors (TAR) recognized the frequency of tenants becoming buyers, and has included a provision in its promulgated management agreement forms granting the Broker a commission in the event of sale. Both the TAR 2202 (Commercial Property Management Agreement) and TAR 2201 (Residential Property Management Agreement) provide for Broker's fees / commissions in the event of sale, whether to a Tenant of the Property, or otherwise.  

It's no secret, however, that many Brokers/Property Managers in Texas do not use the TAR forms (perhaps because they are expensive).  However, even when using non-standard forms, it is prudent from Brokers/ Property Managers to include a section in the written management agreement that provides for a commission in the event of a sale of managed property.  This clause should clearly reflect the value brought by the Broker when that sale is to a tenant secured by the Broker.  

Commissions provided-for in written Management Agreements are enforceable, and can provide a Manager/Broker with a nice parting-gift when a managed property goes out of management.

NEW COURT OPINION -- REAL ESTATE COMMISSIONS CAN BE RECOVERED FROM UNLICENSED "BROKERS" BUT ONLY BY THOSE WHO PAID THEM

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

In Texas, persons engaging on certain real estate activities for a commission or other consideration are generally required to hold a license or certificate of registration issued by the Texas Real Estate Commission (TREC). TEX. OCC. CODE ANN. § 1101.351(a). In particular, broker functions, including negotiating or attempting to negotiate the listing, sale, exchange, purchase or lease of real estate, usually require a TREC license. TEX. OCC. CODE ANN. § 1101.002(1)(A)(iii). NOTE: There are notable exceptions to the rule including attorneys (See TRELA §1101.005(1), and persons selling their own property (regulated real estate brokerage activities must be "for another" person or entity. This means that persons who are buying, selling or leasing their own property do not need a license; they are acting for themselves and not for another person).

In fact, Section 1101.758 of the Real Estate License Act (RELA) establishes that it is a crime for an unlicensed person to engage in activity for which a real estate license is required.  

Further there exists a statute expressly creating a PRIVATE CAUSE OF ACTION, and right to file suit, against persons who receive a commission or other consideration as a result of acting as a broker or salesperson without holding a license or certificate of registration issued by TREC. TEX. OCC. CODE ANN. § 1101.754.  Under that statute, an unlicensed person is  liable to an "aggrieved person" for a penalty of not less than the amount of money received or more than three times the amount of money received. Id. The statute, however, does not define the term "aggrieved person."

In an opinion issued earlier this week (May 14, 2013) the Houston Court of Appeals (1st District) interpreted TEX. OCC. CODE ANN. § 1101.754 to mean "that the aggrieved person must have paid that commission to have standing to pursue a private cause of action under RELA." See Shanklin vs. Bassoe Offshore USA, Inc. Tex. App. 1st Dist [Houston] 2013.  Thus, the Court reasoned, a person does not have standing under the statute unless the payed  a commission "because a claimant is aggrieved by the specific conduct of the person receiving a commission without having a license." See Id.

If you have paid a real estate commission to an unlicensed person (including a TREC licensee whose license is suspended), you should contact an experienced real estate litigation attorney to evaluate whether you might recover that commission under Section 1101.754 or another provision of law.  NOTE: Conducting real estate brokerage activity with an inactive license is considered a violation subject to sanctions. [TRELA §1101.351(c)]

Chief Justice of Texas Supreme Court transmits "Call to Arms" to Legislature

On March 6, 2013, Chief Justice Wallace Jefferson addressed the Texas Legislature in the annual "State of the Judiciary" presentation.  Although traditionally considered a "health and funding" check on our state's courts, Justice Wallace characterized his speech this year as a "Call to Arms."

In his heartfelt address, which can definitely be considered as a departure from tradition, Justice Jefferson focused on a few universally important questions:

Is our system of justice is working for the people it has promised to serve? 

Do we have liberty and justice for all? 

Or have we come to accept liberty and justice only for some? 

With brutal honesty, Jefferson admitted that in many areas, the Texas judiciary falls far short of the standards set by a justice and equality-loving populace:

For those who can afford legal services, we have a top-notch judicial system. Highly qualified lawyers help courts dispense justice fairly and efficiently. But that kind of representation is expensive. A larger swath of litigation exists in which the contestants lack wealth, insurance is absent, and public funding is not available. Some of our most essential rights – those involving families, homes, and livelihoods – are the least protected. Veterans languish for months before their disability, pension, and educational benefits arrive. As a result of the recent financial crisis, lower- and middle-income homeowners and tenants face foreclosure and eviction. Ever-increasing numbers of consumers and small businesses have filed for bankruptcy. And few can afford a lawyer to guide them through these crises. 

The full transcript of the speech can be found HERE. It is most definitely worth a read.

The (Not So) Long Arm of the Law -- Geographic Limitation of Civil Subpoenas in Texas

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

On more than a few occasions over the years, a client has contacted me after reciving a subpoena to appear or produce documents in a distant texas county they have never heard of.  With 254 counties and 254 corresponding courthouses, chances are that there's more than a few that virtually none of us have heard of.

The question is always the same -- do I really have to spend the time and money to travel from South Texas to Amarillo or Orange?  Fortunately, the Answer is frequently "Probably Not."

This because the Texas Rules of Civil Procedure contain an express geographic / distance limitation on civil subpoenas.  Specifically, Texas Rule of Civil Procedure 176.3(a) provides that subpoenas are not effective if they require the witness to appear or produce documents in a county that is more than 150 miles from where the person resides or is served.  

As with any Rule of Court, however, there are important exceptions to the Rule:

1.  Rule 176 applies only to discovery sought from non-parties. See TEX. R. CIV. P. 199.2(b)(5); see also Tex. R. Civ. P. 199.3. If you are a party to a lawsuit, you can be compelled (even without a subpoena) to appear in the county of suit or a variety of other counties.

2.  Rule 176 does not apply to Criminal subpoenas.  Under the Code of Criminal Procedure Procedure, a defendant charged with a felony or a misdemeanor punishable by confinement is entitled to subpoena out-of- county witnesses. See Tex.Code Crim. Proc. Ann. art. 24.16

3.  Rule 176 may or may not apply to administrative or other qausi-judicial tribunals, such as those before the Texas State Office of Administrative Hearings (SOAH).

Further, no subpoena should ever be ignored.  Even if you believe that you have been served with an ineffective subpoena, it is still imperative that you contact the Court or attorney who issued it to explain why you don't believe you should appear.

After all, lawyers -- and especially judges -- don't handle being ignored very well.

We've Re-Located Our Offices -- Stop by and say hello!

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Trey Wilson has moved his law practice to 111 W. Olmos Dr., San Antonio, Texas 78212.  Phone, fax and email will remain the same.

Even Missing Documents Forming a Title Chain Can Have Serious Implications on Real Property Use

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

When considering the purchase of residential or commercial real estate in Texas, it is of the utmost importance for the Buyer to obtain a full abstract of title, and to obtain copies of all documents comprising a particular property's chain-of-title.

So important is having this information, that the laws pertaining to real estate agents in Texas mandates that real estate licensees include in all purchase offers a written notice to each buyer that he or she should (among other things) “have the abstract covering the real estate that is the subject of the contract examined by an attorney chosen by the buyer.” See Texas Occupations Code § 1101.555. 

A cursory examination of the law pertaining to the effect of chain of title documents reveals part of the reason having this information is essential to a Buyer and his plans for the property.

First, the Texas Property Code Section 13.002(1) expressly provides that “an instrument that is properly recorded in the proper county is notice to all persons of the existence of the instrument.” This means that failure to obtain a copy of the instrument, or to discover its contents has no bearing on the validity and enforcement of the instrument. Put simply: if a document is on file, you have imputed knowledge of its existence. 

However, proper recordation of an instrument is not the SINE QUA NON of its validity and enforceability. The Texas Supreme Court has recognized two rules relating to the purchase of real property, the second of which can produce harsh results:

1.      "A purchaser is charged with knowledge of the provisions and contents of recorded instruments;”  and

2.     “Purchasers are also charged with notice of the terms of deeds which form an essential link in their chain of ownership."  

See Cooksey v. Sinder,682 S.W.2d 252 (Tex.1984) (per curiam) see also Peters v. Clements,46 Tex. 114, 123 (1876).  

The second of these rules ("subsequent purchasers are bound by the recitals in the deeds through which they claim") applies regardless of whether the purchaser read the prior deeds or had any actual knowledge of their contents.

In some situations, a restriction prohibiting the use of a property for a particular purpose or in a particular manner (mobile home, retail gas business, sexually-oriented business, for multi-family residence, etc.) may not appear in the most recent deed by which the property was conveyed to (or “vested in”) a Seller.  However, if that restriction appears in an earlier deed affecting the property, the restriction will likely apply – sometimes even if that earlier deed is not recorded.  See generally City of Dallas v. Rutledge, 258 S.W. 534, 539 (Tex.Civ.App.-Dallas 1924, no writ)("The law of notice is that a purchaser of land must take notice of all instruments recorded or unrecorded in his chain of title or affecting title, and is bound by all recitals therein, although in fact ignorant of the contents."); Matthews v. Rains County, 206 S.W.2d 852, 854 (Tex.Civ.App.-Amarillo 1947, writ ref'd n.r.e.) ("[The purchaser] is bound by every matter contained in or fairly disclosed by any instrument which forms an essential link in the chain of title under which he claims ... even though he had never read these instruments or had any actual knowledge of their contents, and this would be true regardless of whether the instruments were recorded.").

In addition to restrictions, easements and other encumbrances (roadways and access licenses) upon real property are implicated by title chains, even if not readily apparent from the immediate transaction.  See Adams v. Rowles,228 S.W.2d 849, 853 (Tex. 1950) (respondent's chain of title showed dedication of roadway, and respondent was charged with knowledge of its existence and "took his land burdened with the roadway"); McDaniel v. Calvert,875 S.W.2d 482, 484 (Tex. App.-Fort Worth 1994, no writ) (transfer of dominant estate "automatically includes the [appurtenant] easement across the servient tenement's land" regardless of whether easements are referenced in deed or not).

The foregoing demonstrates the serious implications of documents comprising a property’s chain-of-title.   Obtaining copies and qualified review of those documents is an essential component of a Buyer’s due diligence analysis of the feasibility of purchasing real estate in Texas.  Failure to learn and understand all instruments forming the chain of title can be costly and disasterous.

Limitations of the Quitclaim Deed in Texas

With surprising frequency, Texans seeking to transfer title to real estate without the assistance of an experienced real estate lawyer utilize Quitclaim Deeds. Perhpas this is because of the wide availability of these forms on the internet, and in free databases. However, there are many pitfalls associated with using the Quitclaim Deed, and its limitations are plenty. For these reasons, quitclaim deeds are viewed with disfavor in Texas.

The essence of a quitclaim deed is an effort to pass any title, interest or claim of the grantor, but not professing that such title is valid, nor containing any warranty or covenants for title. See Porter v. Wilson, 389 S.W.2d 650, 655-56 (Tex.1965). A quitclaim deed is not a conveyance or a muniment of title. Adamson v. Doornbos, 587 S.W.2d 445, 447-48 (Tex.Civ.App.—Beaumont 1979, no writ).

By itself, a Quitclaim Deed does not establish any title in those holding the deed, but merely passes the interest of the grantor (if any) in the property. Stated simply, a Quitclaim Deed suffices only to give the grantee whatever title that grantor has. If the Grantor has no title to the property interest in question, then none passes.

More importantly, a subsequent purchaser is not a bona fide purchaser if the conveyance is made by quitclaim (conveyanvce without warranty). See Woodward v. Ortiz, 150 Tex. 75, 237 S.W.2d 286, 291-92 (1951) (purchaser of a quitclaim deed takes with notice of all defects in the title and equities of third persons); Kidwell v. Black, 104 S.W.3d 686, 691 (Tex.App.-Fort Worth 2003, pet. denied); Hall v. Tucker, 414 S.W.2d 766, 769 (Tex.Civ.App.-Eastland 1967, writ ref'd n.r.e.).

Although there is an appropriate application for quitclaim deeds in Texas, these circumstances are rare, and a General Warranty Deed or Special Warranty Deed is the preferential instrument for conveyance.

New Changes to TREC Contract Forms

The Texas Real Estate Commission took emergency action at the February 14, 2011 commission meeting to adopt revisions to standard contract forms including the Unimproved Property Contract, the One to Four Family Residential Contract (Resale), the New Home Contract (Incomplete Construction); the New Home Contract (Completed Construction); the Farm and Ranch Contract; and the Residential Condominium Contract. The effective date for the emergency action is March 1, 2011.

This action was taken based on a recommendation from the Broker Lawyer Committee. The Broker Lawyer Committee is a committee appointed by the Commission to draft and revise contract forms that are capable of being standardized to expedite real estate transactions and minimize controversy.

With this action the forms were amended to remove new sub-paragraph 15B, which was recently added to the contract forms to require a seller or buyer to file an action for specific performance within 45 days of the Closing Date of the contract. The Commission took emergency action to remove sub-paragraph 15B with an effective date of March 1, 2011. The updated contract forms are available for immediate use on the TREC website with a date of February 14, 2011 on the right-hand corner.

Texas Contracts for Deed MUST Be Recorded

Many times, Sellers of real property under Texas Contracts for Deed hold those contracts "in pocket." The logic for this is that the Seller might default, in which instance no conveyance will take place. Thus, the thought goes, "why complicate the title chain by recording documents, when no conveyance has occurred?" In all honesty, this logic makes sense. Unfortunately, however, it flies in the face of the Recording Requirements prescribed by the Texas Property Code.

Section 5.076 requires that the Seller records the Contract for Deed (and the attached disclosure statement) with the County Clerk of the County in which the property is located WITHIN 30 DAYS AFTER THE CONTRACT IS EXECUTED.

Although the statute does not expressly provide a remedy for failure to record the Contract for Deed, it is likely that a recovery might be had under Texas law if the Buyer can demonstrate that he has been damaged as the result of the Seller's failure.

Spanish Land Grant Heirs -- Jousting at Windmills?

A recent article in the San Antonio Express News about a gathering of alleged heirs of the grantees of land grants made by the Spanish crown and Mexican government hundreds of years ago really piqued my interest. My fascinations with Texas history, real estate law, and landowner rights prompted me to examine the claims of this group of descendants of families in South Texas, who assert that their long-dead ancestors never received royalty payments from oil producers operating on family property.

According to the group -- which appears to be largely represented by a single, very determined lawyer -- their ancestors died without leaving proper wills or other payment instructions for the oil companies. Thus, hundreds of millions of dollars in royalties are either unpaid by the oil producers, or have been paid, but are unclaimed and being held by the State of Texas (Comptroller) under the Texas Unclaimed Property Act. This mountain of money will remain "unclaimed," until its rightful owners can be validly identified and their entitlements to the funds proven in accordance with the Act. In order to establish their claims to the millions held by Texas, the heirs seek to have the Texas Legislature amend the Unclaimed Property Act in a way that eases a claimant's burden of proof.

My research reveals that a bill outlining the specific types of information that holders of unclaimed property must disclose was passed last Session (SB 1589), and has now been incoprorated into the Act. According to the Express News article, the families are proposing a new bill that "would set up a method by which the state can identify and qualify descendants of the original grantees using legal and historical documents as well as family genealogical research." I was unable to locate a filed bill as of this writing, but the 82nd Legislative Session is still in its early stages.

At first glance, these folks' chances of getting their hands on hundreds of millions of dollars being held by the State of Texas (who gets to keep all of the interest) seems like jousting at windmills, a la another Spaniard -- Don Quixote. I am quickly reminded of those dreamers who talk about suing Swiss banks to recover unclaimed funds, undoubtedly stolen, that Nazis deposited there and never retrieved.

But, this case might be very different. The families are represented by the same "land grant attorney" who represented some of the descendants of Padre Nicholas Balli -- a priest who held the original Spanish Land Grant to Padre island. The heirs of the good father -- who sold the island to a New York lawyer in 1938 -- won mineral rights to the island after a lengthy jury trial in 2005. The jury's verdict was upheld on appeal, but reversed by the Texas Supreme Court in 2008.

Thus, the stage is set for a very exciting effort that involves real estate, and lots of money derived from it. In the words of Quixote, "Paciencia y barajar" (Patience, and shuffle the cards). We'll be watching this one from the front row.

Recovery of Attorney's Fees in Adverse Possession Cases

There is little doubt that adverse possession lawsuits can be costly. Litigants to these title disputes -- where the key evidence is necessarily historical and often pre-dates current ownership of a given property -- frequently incur substantial expense in surveys, document searches, depositions of prior owners, expert witnesses and title searches. Naturally, a real estate lawyer's time associated with weaving or undermining a credible claim for ownership which is contrary to "legal title" as it appears in the deed records can also translate into significant attorneys' fees. Thus, property owners with boundary disputes often inquire about the possibility of recovering their costs and attorneys' fees in the event that the prevail in an adverse possession case.

For all its criticism, the Texas Legislature has generally been sensitive to the sanctity of land ownership in Texas. For that reason, it enacted Section 16.034(a) of the Texas Civil Practice and Remedies Code to allow the Court (in its discretion) to award costs and reasonable attorneys' fees to the prevailing party in a suit for the possession of real property where one party is "claiming under record title to the property and one claiming by adverse possession." TEX. CIV. PRAC. & REM. CODE ANN. § 16.034(a). However, this grant of discretionary authority for trial courts to award fees didn't have much of an impact on the number of adverse possession suits, including those where claims of ownership by adverse possession were simply frivolous.

To address this concern, statutory revisions were made in 2009, and Section 16.034(a) now requires the trial court to award attorney’s fees “if the court finds that the person unlawfully in actual possession made a claim of adverse possession that was groundless and made in bad faith, . . . .” TEX. CIV. PRAC. & REM. CODE ANN. § 16.034(a) (Vernon Supp. 2009).

The issue of unlawful possession is still part and parcel of the availability of attorney’s fees under section 16.034(a). TEX. CIV. PRAC. & REM. CODE ANN. § 16.034(a). However, under the statutory revisions, the presence of these elements, together with a finding of bad faith, frivolity and/or groundlessness will necessarily result in the shifting of costs and attorneys' fees.

When considering whether to litigate a trespass, title dispute or adverse possession claim, a landowner shouldn't count on having the opposing party pay his or her attorneys' fees. However, given the 2009 revisions to Section 16.034(a), the frequency of such recovery in those cases involving groundless claims of adverse possession seem much better.

Judgment for Plaintiffs Entered in Suit Against Property Management Company

On June 2, 2010, the Honorable Janet Littlejohn entered Final Judgment in a Bexar County lawsuit filed by Trey Wilson against a San Antonio real estate firm in October 2008. Wilson filed the suit on behalf of a Los Angeles, California real estate investor who, in 2006, purchased six homes in San Antonio, Texas. The homes were to be used as rental properties, and to eventually fund the Plaintiff's retirement.

After purchasing the homes, the Plaintiff -- a California nurse and home health care/hospice operator -- contracted with the real estate agent who represented her in the purchases to manage the properties. Under the terms of the written Property Management Agreement, the Texas realtors were required to collect rents from tenants, maintain the properties, file appropriate tax documents, and remit rental proceeds to the owner.

In early 2008, the Owner received an IRS form 1099 indicating that the rents collected by her San Antonio real estate management firm were almost double the amount remitted to her. Upon performing an audit of rents received versus those collected, the Owner demanded a complete accounting from the Texas realtors. The property managers were unable to account for the missing funds, including security deposits paid by various tenants of the rental properties.

The owner hired San Antonio real estate litigation attorney Trey Wilson in April 2008. After multiple meetings with the real estate agent and broker, and their attorneys, it became apparent that the missing funds could not be accounted for.

Wilson then filed the lawsuit, alleging that the Defendants breached the Property Mangement Agreement, breached their fiduciary duty to the Plaintiff (including the Texas Real Estate Commission Rules applicable to brokers and the Cannons of Ethics), committed common law fraud, and committed conversion of the missing funds.

The case went to jury trial on May 18, 2010 in the 150th District Court of Bexar County, Texas. On May 21, 2010, the jury returned a unanimous verdict in favor of the Plaintiff on her claims for breach of contract, breach of fiduciary duty, common law fraud, and conversion. In addition, the jury awarded Plaintiff attorneys' fees in the amount of $29,000.00.

Following the jury's finding that the Realtor and Broker had breached their fiduciary duty to Plaintiff, Wilson moved for equitable forfeiture of all commissions and fees paid to the real estate firm. Judge Littlejohn granted the request, and ordered fee forfeiture in the amount of $6,8880.00 -- representing all management fees and leasing commissions paid to the realtors.

The Judgment entered by the Court was for $67,336.75 (not including costs or pre-judgment interest), and contains an affirmative finding of knowing and intentional breach of the real estate professionals' fiduciary obligations to the property Owner.

When Is the Seller of Real Estate Liable for Misrepresentations Regarding Restrictions on Use?

As a San Antonio lawyer with an active real estate litigation practice, I'm often confronted with scenarios under which a Seller has assured a Buyer of real property that the property is acceptable for the Buyer's intended use.

There are all kinds of scenarios under which these types of representations are made. Some memorable situations I've encountered relate to use of residential property for commercial purposes, construction of certain facilities on the property, the right of the owner to maintain various animals (pit bulls and horses come to mind), and the existence or non-existence of restrictive covenants.

In some situations the Sellers are clearly misinformed or ignorant about whether the Buyer's proposed activities are permissible -- "Sure , you can use the property for anything you want!" These representations are often made without much thought or consideration of the consequences. Other times, Sellers or their agents knowingly make false representations for the purpose of inducing the Buyer to purchase the property. In both situations, Buyers frequently rely on these pre-sale representations to their own detriment.

I'm frequently asked to explain when the Seller liable for these types of misrepresentations about real estate, and when a Buyer be responsible for his own decision to rely on the Seller's representations.

The Answer to this question is not a simple one, and can differ significantly based upon the facts and circumstances surrounding the transaction and the property in question.

Under Texas caselaw, a very simplistic distinction and determination of liability is often tied to the following:

1. Whether the Seller knew facts that were unknown to the Buyer.
2. Whether the Buyer actually relied on the Seller's representations.
3. Whether the Buyer undertook an independent investigation (through inspection, examination, attorney review or even the purchase of a title policy) of facts that may have been covered by the Seller's representation.

The 3rd of these factors -- independent investigation -- is somewhat important. In the context of real estate sales in Texas when a seller makes an affirmative representation, the law imposes a duty upon the seller to know whether such a statement is true. First Title Co. of Waco v. Garrett, 860 S.W.2d 74, 76 (Tex.1993). However, when a Buyer undertakes his own investigation -- regardless of the result --the buyer's decision to undertake such an investigation indicates that he or she is not relying on the seller's representations about the property.

Even in these instances, however, Sellers can be liable for intentionally fraudulent representations, or for facts that could not have been discovered by the Buyer through his own investigation.

Another avenue of potential recovery for a duped Buyer lies with the persons or entities who participated in the Buyer's investigation -- title examiners, attorneys, real estate agents and others who should have but did not discover restrictions on the property's use. Reliance on a title committment issued by a title insurance company and/or on an opinion by an attorney are sometimes easier to prove than reliance on a Seller's representations about the property.

If you are the Buyer or Seller of real estate, you should be careful to fully examine all facts surrounding the property, to conduct a reasonable and diligent investigation, and to limit your affirmative representations to the opposing party. Both Buyers and Sellers of real property are encouraged to involve a licensed Texas attorney experienced in real estate transactions and disputes.

When Is the Seller of Real Estate Liable for Misrepresentations Regarding Restrictions on Use?

As a San Antonio lawyer with an active real estate litigation practice, I'm often confronted with scenarios under which a Seller has assured a Buyer of real property that the property is acceptable for the Buyer's intended use.

There are all kinds of scenarios under which these types of representations are made. Some memorable situations I've encountered relate to use of residential property for commercial purposes, construction of certain facilities on the property, the right of the owner to maintain various animals (pit bulls and horses come to mind), and the existence or non-existence of restrictive covenants.

In some situations the Sellers are clearly misinformed or ignorant about whether the Buyer's proposed activities are permissible -- "Sure , you can use the property for anything you want!" These representations are often made without much thought or consideration of the consequences. Other times, Sellers or their agents knowingly make false representations for the purpose of inducing the Buyer to purchase the property. In both situations, Buyers frequently rely on these pre-sale representations to their own detriment.

I'm frequently asked to explain when the Seller liable for these types of misrepresentations about real estate, and when a Buyer be responsible for his own decision to rely on the Seller's representations.

The Answer to this question is not a simple one, and can differ significantly based upon the facts and circumstances surrounding the transaction and the property in question.

Under Texas caselaw, a very simplistic distinction and determination of liability is often tied to the following:

1. Whether the Seller knew facts that were unknown to the Buyer.
2. Whether the Buyer actually relied on the Seller's representations.
3. Whether the Buyer undertook an independent investigation (through inspection, examination, attorney review or even the purchase of a title policy) of facts that may have been covered by the Seller's representation.

The 3rd of these factors -- independent investigation -- is somewhat important. In the context of real estate sales in Texas when a seller makes an affirmative representation, the law imposes a duty upon the seller to know whether such a statement is true. First Title Co. of Waco v. Garrett, 860 S.W.2d 74, 76 (Tex.1993). However, when a Buyer undertakes his own investigation -- regardless of the result --the buyer's decision to undertake such an investigation indicates that he or she is not relying on the seller's representations about the property.

Even in these instances, however, Sellers can be liable for intentionally fraudulent representations, or for facts that could not have been discovered by the Buyer through his own investigation.

Another avenue of potential recovery for a duped Buyer lies with the persons or entities who participated in the Buyer's investigation -- title examiners, attorneys, real estate agents and others who should have but did not discover restrictions on the property's use. Reliance on a title committment issued by a title insurance company and/or on an opinion by an attorney are sometimes easier to prove than reliance on a Seller's representations about the property.

If you are the Buyer or Seller of real estate, you should be careful to fully examine all facts surrounding the property, to conduct a reasonable and diligent investigation, and to limit your affirmative representations to the opposing party. Both Buyers and Sellers of real property are encouraged to involve a licensed Texas attorney experienced in real estate transactions and disputes.

Texas House Speaker Releases Interim Charges Affecting Land and Real Estate

This week Texas House Speaker Joe Straus released the 81st Legislature's Interim Committee Charges pertaining to Texas House of Representatives Committees. The charges are varied, and few are unexpected. Interim charges represent the "task assignments" delegated by the Speaker to various House committees which are to be completed during the period between Legislative Sessions.

Of particular importance to real estate interests and real estate attorneys in Texas are the Charges made to the House Committee on Land and Resource Management. That Committee is chaired by Rep. Dennis Bonnen.

The folllowing assignments are contained within Speaker Straus' charges:

1. Evaluate the appropriateness of creating pedestrian-only areas on the public
beaches of the state.
2. Examine unresolved issues relating to eminent domain legislation introduced
during the 81st Legislative Session. Monitor any pending litigation.
3. Examine the granting of easements on state-owned lands, including lands
managed by institutions of higher education and the General Land Office.
4. Study the causes of coastal erosion along the Texas coast. Evaluate current and
alternate funding sources. Review federal programs and their relationship to the
state program.
5. Monitor the agencies and programs under the committee's jurisdiction.