Sued by Buyer for Failure to Disclose Alleged Property Defect? Their Pre-Sale Inspection May Save You

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Sometimes buyers discover issues, problems or defects in real property after closing a purchase/sale. When these problems prove serious or costly to repair (or when good ole' Buyer's Remorse rears its head) buyers frequently file suit against the seller/former property owner.  

The usual allegations are that the Seller is liable for damages based on "failure to disclose," "misrepresentation by non-disclosure," fraud, breach of contract and/or violation of the Texas Deceptive Trade Practices Act ("DTPA").  Suits are most common when the Seller's written disclosure does not identify the alleged property defect.

However, in many instances, a Buyer's pre-closing inspection (preformed by a third-party inspector) may absolve the Seller from liability.  This is particularly true when the third party inspector is retained by the Seller, conducts a thorough inspection, and has a reasonable opportunity to discover the alleged defect.  Whether or not the defect is actually discovered is often immaterial.

The law requires a Buyer seeking to recover from a Seller's non-disclosure to prove that he or she relied on a misrepresentation (including by failure to disclose) of the Seller in consummating the purchase. Eagle Props., Ltd. v. Scharbauer, 807 S.W.2d 714, 723 (Tex. 1990).  However, a line of court cases establishes that, in the eyes of the law,  a buyer's inspection of a house's condition may constitute a new and independent basis for the purchase of the property, which intervened and superseded the seller's alleged misrepresentation. "The common thread of the decisions reaching this conclusion is that, regardless of the result of his investigation, 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." Bartlett v. Schmidt, 33 S.W.3d 35, 38 (Tex. App.-Corpus Christi 2000, pet. denied).

Texas courts have held that -- even when false and fraudulent representations are made concerning the subject matter of a contract -- when the person to whom they are made conducts an independent investigation into the matters covered by the representations before closing, it is presumed that reliance is placed on the information acquired by such investigation and not on the representations made to him.  Marcus v. Kinabrew, 438 S.W.2d 431, 432 (Tex. Civ. App.-Tyler 1969, no writ); see also Kolb v. Tex. Emprs' Ins. Ass'n, 585 S.W.2d 870, 872 (Tex. Civ. App.-Texarkana 1979, writ ref'd n.r.e.); Lone Star Mach. Corp. v. Frankel, 564 S.W.2d 135, 138 (Tex. Civ. App.-Beaumont 1978, no writ); M.L. Mayfield Petroleum Corp. v. Kelly, 450 S.W.2d 104, 109-10 (Tex. Civ. App.-Tyler 1970, writ ref'd n.r.e.).   

Thus, when faced with a claim for failure to disclose a condition of real property formerly owned by them, a prudent response is to seek out the Buyer's property inspection and call an experienced real estate lawyer.  With a little luck and a well-presented defense, many times a pre-sale inspection may save you from liability.

RECOVERING UNDER THE TEXAS REAL ESTATE RECOVERY TRUST ACCOUNT

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

The statute allowing recovery under the Real Estate Recovery Trust Account is found in Chapter 1101 of the Occupations Code. See generally TEX. OCC. CODE ANN. ch. 1101, subch. M & N (West 2012). The statute states that the Trust Account is maintained "to reimburse aggrieved persons who suffer actual damages" at the hands of a license holder. TEX. OCC. CODE ANN. 1101.601(a) (West 2012).  

Texas appellate courts agree "[t]he purpose of the Account is to `guarantee the fidelity and honesty of the real estate salesman in his dealings with the public and to insure and indemnify any member of the public against damages or injury caused by a violation of the Act.'" Wilson v. Bloys, 169 S.W.3d 364, 366 (Tex. App.-Austin 2005, pet. denied) (quoting State v. Pace, 640 S.W.2d 432, 433 (Tex. App.-Beaumont 1982), aff'd, 650 S.W.2d 64 (Tex. 1983)). The statute requires the claimant to show "that the judgment is based on facts allowing recovery under this subchapter." Id. § 1101.607(1) (West 2012).

Simply put, a person who obtains a judgment for actual damages caused by the misconduct of real estate license holders can, when certain specified statutory conditions are met, obtain reimbursement from the Account if the license holder is unable to pay the judgment. Tex. Occ.Code Ann. § 1101.601.  

To recover under the Act, a person who has an uncollectable judgment against a real estate broker may file a verified claim in the court in which the judgment was rendered and, upon notice to the commission and the judgment debtor, apply for an order directing payment out of the fund. Id.  A hearing is then conducted on the application at which the commission is authorized to appear for the limited purpose of protecting "the fund from spurious or unjust claims...." Id.  At this hearing, the claimant must show, among other things, that its prior judgment is against a licensed real estate broker who caused the claimant's damages while acting as a broker. Id. § 8, part 1(a) and part 3(c). 

NOTE:  TEX. OCC. CODE ANN. § 1101.602 provides that when a license holder is selling property in his own name instead of as an agent for someone else, a claimant may not recover from the Trust Account unless the license holder engages in the following enumerated wrongful conduct:

1101.653(3):  acting in bad faith;

1101.652(a)(3): engaging in misrepresentation, dishonesty, or fraud when selling, buying, trading, or leasing real property in the name of himself, his spouse, or his relatives; 

1101.652(b): See list here;

1101.653(1): engaging in dishonest dealing, fraud, unlawful discrimination, or a deceptive act;

1101.653(2):  making a misrepresentation; or 

1101.653(4):  demonstrating untrustworthiness.

Katy TX HOA Demands Church Sign be Removed from Front Yard

San Antonio HOA Lawyer Trey Wilson wrote:

Randy Wallace of the Fox 26 Station reported that Meagan Schmidt of Katy, TX was told she must remove a sign from her yard that advertises The Journey Church.  Schmidt, who said the church changed her life in a positive way, placed the sign in her yard to make others aware of the church and to show her support.  She said she loves what the church does for her community.  Her HOA, Highland Creek Village Homeowners Association, has threatened to have the court remove the sign.

Her HOA says commercial signs are prohibited in her community.  The say the sign violates a bylaw about displaying commercial signs in the community's yards. Schmidt feels her rights to free speech and religious expression have been violated.

Ms. Schmidt told Fox 26 that she attended an HOA meeting to have a discussion about the sign, but the HOA leaders argued and requested she communicate through their attorneys.

She intends to leave the sign in her yard, resisting the HOA and fighting for her right to free speech.  Although Ms. Schmidt is a renter in the community, the homeowner supports her right to keep the sign up.  It has been reported that the homeowner has even paid fines imposed by the HOA over the sign.

Ms. Schmidt says her daughters have even been affected by the conflict.  She said the HOA will not provide pool tags to use the community pool.

The HOA reported to Fox 26 that they have a history of issues with the homeowner renting to Ms. Schmidt, including failure to cut the grass, along with the current signage issue.

HOAs can & sometimes do have complete authority over what kinds of signs, if any, can legally be displayed in homeowner's yards.  They can and do ban displays without violating the First Amendment if there are no state and local laws that say differently.

New Judicial District in the Hill Country

A Bill signed into law on Friday will create a new judicial district in the Hill Country and two other districts will be realigned.  The new bill was created to accelerate dockets in the 9 affected counties and will be established on September 1st.  The new district will cover Mason, Menard, McCulloch, Kimble, and Edwards counties, which are currently in the 198th District, and also includes Kerr County.  

The new legislation has lawyers aiming for Gov. Perry's appointment as district attorney or judge in the new 452nd Judicial District by letting him know they're interested in the positions.  The legislation will have various effects on each of the respective county budgets.

The 198th District will be a two-county district by moving Bandera County from the 216th.  Kerr, Kendall, and Gillespie Counties will remain with the 216th.

Kerr County will remain in both the 216th and 198th under the provisions of the CSHB 3153.  CSHB 3153 also affects several other districts.

The change will positively affect the respective judges by reducing the backlogs, thus improving efficiency.

Condo Association President Gambles Away Association's Money

San Antonio HOA Lawyer Trey Wilson wrote:

The SunSentinel in Ft. Lauderdale, FL reported that the Association President for the French Villas Condo Association, Nancy Marquez, 58, was arrested and taken into police custody for stealing more than $148,000 from the condo association.  It was reported that Marquez took the money and gambled it away.  Marquez admitted that she commingled the association's money with her own and used it for gambling at the Seminole Hard Rock Hotel and Casino.

Condo board member, Paul Coffman, commented that it "made his day" when he heard about the arrest.

Mr. Coffman said that he and other board members discovered there were financial discrepancies in January 2011 when he took over as the association president of the 66 unit condo building.  Mr. Coffman said, "We got the invoices and everything for the two years that she was on the board and started going through them.  Some things caught our eye that just weren't right."

The board reported it to the police, who investigated the case for more than two years.  It later resulted in Ms. Marquez' arrest.  She was charged with grand theft and perpetrating a scheme to defraud.  Records show she was released from jail on $7500 bond.

Mr. Coffman and the other board members could not discuss the missing money, not even with concerned condo residents, because of the ongoing investigation.  Because of the missing money, the association's utility bills and other expenses were delinquent.

Mr. Coffman stated, "When people kept complaining, you had to bite your tongue."

The bills just kept piling up and the debt increasing.  The community was threatened by utility companies to disconnect service due to nonpayment.  In the midst of this, the community was ordered to do some costly updating of the building and grounds.

Marquez was the association secretary and association president for 2 years until 2010.  The arrest report indicated that during that time, she controlled the association's finances, which included a debit card, accounting records and bank statements.

Fort Lauderdale attorney, Blane Carneal, an attorney who represents unit owners disputing their associations, recommends that residents should form a group and hire a CPA to investigate if they have a suspicion that something might be wrong.  Mr. Carneal says that residents "need to be their own watchdog," and that they "need to know where their money is going."

Although the Pembroke Pines French Villas Association's financial debt problems are not fully resolved, they're catching up and the situation is improving.    

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.

From TMZ -- Justin Bieber's Antics Result in Withheld HOA Dues

JUSTIN BIEBER'S NEIGHBORS

PLANNING REVOLT 

EXCLUSIVE

Justin Bieber's neighbors are fed up with him and are banding together to force the homeowners association in their gated community to do something about the singer's reckless behavior ... by hitting them in the wallet ... TMZ has learned.

Neighborhood sources tell TMZ ... several of the residents of Bieber's Calabasas neighborhood are tired of waiting for their HOA to take action against Bieber ... so they are planning to withhold their monthly dues until something is done.

We're told about 500 residents pay $1,000/month, so it's a huge chunk o' change that could be withheld.

The goal, according to our sources, is to force the HOA to give Justin a stern reminder about the neighborhood rules he's allegedly broken repeatedly -- such as noise during parties (some while Justin was out of town), Justin's friends parking on the street overnight ... and, of course, the speeding.

Any HOA action would be a far cry from Bieber getting arrested or charged by the D.A. -- but we're told the protesting residents will take what they can get at this point.

We called ex-NFL star Keyshawn Johnson to see if he's joined the cause -- since he actually confronted Bieber last week about the speeding -- but haven't heard back yet.

Read more: http://www.tmz.com/2013/06/03/justin-bieber-neighbors-homeowners-association-fees/#ixzz2VDJwCX4m