James M. Wicks of Farrell Fritz writes about a recent breach of contract case in which a court found that an unsigned termination agreement between a real estate broker an another party was enforceable even though it never was signed.

He explains that the court focused its analysis on two questions: Is there evidence supporting a finding of an intent to be bound?, and if so, is there evidence that the parties “positive[ly] agree[d] that it should not be binding until so reduced to writing and formally executed”?

The ruling is a reminder that written agreements without the “not bound until signed or executed” clause is risky business, Wicks writes.

Read the article.

A court recently ordered the seller of a car wash property in New Jersey to fully remediate previously undiscovered environmental contamination at the property in accordance with its contractual obligations, according to a post in the Riker Danzig Environmental Law Blog.

Jaan M. Hause explains in the post that “the seller could have more carefully crafted the language of the rider to limit its remediation obligations. Unfortunately for seller, the language in the rider obligating seller to remediate was extremely broad, and thus exposed seller to additional, costly liabilities that it did not intend to assume.”

Read the article.

Every real estate and construction contract contains a list of insurance requirements identifying specific types and amounts of coverage for one or both parties, but too often these requirements are included in a form exhibit that is attached to contracts year after year, project after project, without careful review.

In a new website post, Lyndon Bittle of Carrington Coleman discusses  “traps for the unwary” lurking in construction contract insurance requirements, focusing on the ubiquitous commercial general liability policy.

Many of the traps pop up in connection with making one party an additional insured on the other party’s liability policies, Bittle writes. “One deceptively problematic provision is a requirement that the owner be ‘named an additional insured,’ without further details. That request conveys almost nothing.”

Read the article.

As the U.S. commercial real estate sector prepares in the downswing of an extended economic expansion, executives and investors continue to be highly optimistic about the market and the overall U.S. economy, according to an annual survey by U.S. law firm Akerman LLP. The tenth annual Akerman U.S. Real Estate Sector Report – completed by more than 200 C-suite and senior executives – shows that developments such as federal tax reform and evolving technology have taken root and spurred growth, even amid mounting uncertainty and the likelihood of a market correction.

Coming off a record-high outlook in the 2018 survey, when 68 percent of respondents expressed more optimism for the market in comparison to the prior year, 70 percent this year say they are more bullish about 2019 market activity than 2018. Nearly half (46 percent) say the continued improvement of the U.S. economy is the primary driver of this increased confidence.

In a release, the firm said the survey also shows sentiments of softening with a market slowdown looming. A third of respondents (33 percent) say interest rate uncertainty is their primary concern, followed by uncertainty in global economic conditions (23 percent) and uncertainty of federal government policy in the U.S. (22 percent). With the prospect of an interest rate reduction by the Federal Reserve, concerns about rising interest rates are abated for the time being and certain subsectors like industrial and multifamily are outperforming in major markets like Chicago, Houston, Los Angeles, Miami, and New York.

“While the U.S. real estate market has remained resilient since the economic downturn, the headwinds we expected coming into 2019 are starting to come to fruition,” said Eric Rapkin, chair of Akerman’s national Real Estate Practice Group. “Nonetheless, capital is still chasing deals, especially in gateway markets, and we’re beginning to see executives capitalize on tax advantages and deferral strategies such as Opportunity Zones.”

Additional trends identified in Akerman’s 2019 survey include:

• Tax Reform and Opportunity Zones Generate Activity: With the commercial real estate sector a key beneficiary of the Tax Cuts and Jobs Act passed in December 2017, it’s no surprise that 46 percent of respondents rank tax reform among the top three trends they expect to have a significant impact on real estate development over the next three years. On the heels of the release of the U.S. Treasury Department’s second round of proposed regulations, developers and investors are expressing more interest in Opportunity Zones – areas designated for federal tax breaks. As further clarity is being brought to the program, nearly a quarter of respondents place Opportunity Zones among the top three areas they believe will fund the most commercial real estate debt and/or equity in 2019.

• Digital Transformation and Disruption: Executives responding to the survey view technological advances as having the most influence on real estate development, with 48 percent selecting it among the top three trends that will have a significant impact over the next three years. Incorporating the latest technology and design attributes has become critical across all sectors of the real estate market, including luring and retaining tenants in office buildings, attracting millennials to residential properties and facilitating the use of automation and robotics for the industrial sector.

• Aging Population Drives New Areas of Growth: The graying of America closely follows technology and tax reform as the trend expected to most impact real estate development, with 45 percent of respondents designating it among their top three choices. As seniors account for more of the population, new types of healthcare facilities are experiencing growth, including microhospitals, ambulatory surgery centers and other medical uses within traditional retail locations.

• Housing Still Dominates: Survey respondents continue to express confidence in multifamily with 67 percent placing it among the top two sectors they expect to be the most active for real estate transactions in 2019, followed by single-family residential (50 percent). These results echo last year’s survey where 63 percent of respondents predicted the multifamily sector would be the first or second most active in 2018. Within multifamily, 2019 respondents rank apartment development as likely to be most active this year, followed by senior living facilities.

• China, Canada and Latin America Lead the Way: Uncertainties abound in an unbalanced global economy – driven by such developments as the trade war with China, ongoing Brexit gridlock and the upcoming U.S. presidential election. Nonetheless, respondents expect cross-border investment across a range of areas. Executives predict China to be the region that will invest most heavily in the U.S. hospitality, industrial, office and retail sectors. However, Canada is expected to contribute most to foreign investment in the predicted hot markets of multifamily and single family residential. Within Latin America, respondents expect the greatest increase in investment in U.S. real estate to come from Mexico (38 percent), followed by Brazil (30 percent).

• Private Equity and Banks Lead Among Funding Vehicles: For the fourth year in a row, real estate executives expect most funding to come from private equity funds and institutional lenders. In reflecting on the top three areas they expect to fund the most commercial real estate debt and/or equity in 2019, 53 percent chose private equity and 51 percent selected banks. Additional funding sources selected by respondents include foreign investors (45 percent), insurance companies (28 percent) and real estate investment trusts (24 percent).

Many leases contain renewal language, allowing the lessee to renew the lease term after the original lease term expires, points out James O. Birr III of Jimerson Birr in Florida.

“These provisions sometimes contain notice requirements and fulfillment of certain conditions precedent. In some instances, the leases may automatically renew. In any case, the terms of the lease renewal require certainty and specificity,” he advises.

He discusses a recent Florida appellate ruling that points out that parties must be specific in negotiating renewal terms and what the rent to be paid during the renewal period will be.

Read the article.

The Cook County Record is reporting that a county judge has ordered more than $1 million in sanctions and penalties against a lawyer and his client in connection with a litany of legal actions against a condo association.

The lawyer is John Xydakis, a Chicago real estate lawyer. He represented Marshall Spiegel, who sued the 1618 Sheridan Road Condominium Association. On Feb. 8, 2018, Judge Margaret Ann Brennan denied Spiegel’s request to file a 99-count, 223-page fifth amended complaint and later that year denied his motion to reconsider that ruling, writes Scott Holland.

The judge’s order noted “Xydakis filed claims against nearly every resident” of the condo and “without any factual basis … alleged serious offenses, including theft, slander, harassment and stalking.” She said the claims they brought “have no basis in law or fact.”

Read the Cook County Record article.

The Energy & the Law blog of Gray Reed & McGraw discusses a case that sums up what is required for an instrument to be a conveyance and what is required for a stipulation to be effective.

Ellison v. Three Rivers Acquisition involves land title issues that arose when a mineral development company discovered an apparent discrepancy in a land swap from almost 100 years ago. The developer asked the owner of a mineral lease on the land in question to sign a letter confirming acceptance of a boundary stipulation designed to resolve the discrepancy.

The article discusses the question of whether the boundary stipulation was a legal conveyance.

Read the article.

A bill filed in the Texas Senate would require home sellers to disclose if their property is in a flood-prone area or if it has already flooded, according to a post on the website of Androvett Legal Media & Marketing.

The legislation from Houston-area Sen. Joan Huffman is meant to prevent a repeat of some of the flooding damage from Hurricane Harvey, when many people learned too late that their homes were built in flood plains or in reservoir areas designed to catch floodwaters.

Dallas insurance attorney Stacy Thompson of Perry Law P.C. said she believes the measure, if adopted, could lead to better insurance coverage for consumers, but would also affect insurance companies.

“Knowledge is certainly power. However, the implications of this bill reach far beyond home ownership,” she said. “Undoubtedly disclosing this information would affect property values, increase insurance premiums and have a lasting effect on the housing market in the coastal counties of Texas. Moreover, the bill would allow insurance companies to gain a better understanding of the risk they are insuring and hopefully offer a better overall product to customers. That would result in better coverage and a better outcome when natural disasters inevitably strike.”

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Government lawyers have taken the first step in trying to seize private property using the power of eminent domain to build a border wall — a contentious step that could put a lengthy legal wrinkle into President Trump’s plans to build hundreds of miles of wall, reports The Washington Post.

Previous eminent domain attempts along the Texas border have led to more than a decade of court battles, some of which date to George W. Bush’s administration and have yet to be resolved, according to the Post‘s Katie Zezima and Mark Berman. Many landowners are vowing to fight anew.

The reporters quoted Gerald S. Dickinson, an assistant professor of law at the University of Pittsburgh, who said this newest fight will be different because the earlier effort mostly included federal government land.

“If it’s going to be a contiguous wall across the entire southwest border, you’re talking about a massive land seizure of private property,” he said.

Read the Post article.

If you don’t want your emails to be binding contracts, don’t sign them, or better yet, don’t write them in the first place, warns a post in the Ohio Real Estate Law Blog of Kohrman, Jackson & Krantz.

The case involved the attempted sale of a high-end residential property in Ohio. The buyers argued that the sellers had agreed by a series of email exchanges (electronically signed) to sell their home to the buyers and that the sellers breached that agreement.

An appellate court remanded the case, explaining: “Given the circumstances surrounding the parties’ email exchange and later discussions, including that other terms of the sale had yet to be agreed upon, an issue of fact exists as to whether the parties had a present intention to be bound at the time of the email exchange, or whether the parties did not intend to be bound until execution of the more formal contract.”

Read the article.

While a commitment letter in the real estate lending process fleshes out any issues or misunderstandings between the parties prior to the preparation of the ultimate loan documents, it is important to be aware of some potential pitfalls and issues that it can present, warns Benjamin Bruner in a Dickinson Mackaman Tyler & Hagen web post.

The post outlines some of the dangers that cause problems for parties to the contract and then discusses some fundamental terms  that a commitment letter should include for the protection of the bank.

Read the article.

The Fifth Circuit has affirmed an order compelling arbitration, despite the fact that the parties seeking to compel arbitration were not signatories to the relevant arbitration agreement, according to a post on Carlton Fields’ Reinsurance Post.

Jason Brost explained that the case involved a real estate sale contract that contained an arbitration agreement under which the parties agreed to arbitrate any disputes “in accordance with the Comprehensive Arbitration Rules and Procedures administered by J●A●M●S/Endispute.”

The plaintiff claimed that the defendants in the case induced the buyer to enter into the 1998 agreement based on the false premise that he would get a properly constructed home. The defendants, who were non-signatories to the agreement, moved that the arbitration clause be enforced.

The appellate court found for the defendants.

Read the article.

Locke Lord partner Martin Gibson (Austin) and associate Kerstie Moran (Houston) co-authored an article examining a decision by the San Antonio Fourth Court of Appeals in Webb et al. v. Martinez in a property dispute including reservations of a mineral estate.

The article was originally published by the National Association Of Division Order Analysts.

“This decision further emphasizes the importance of properly phrasing a reservation clause, as to avoid inadvertently granting an interest in a mineral estate. The Webb Court demonstrates the way in which courts consistently interpret grantor’s intent based on the plain language of the deed,” according to the authors.

The appellate court affirmed the trial court’s take-nothing summary judgment regarding a property dispute in favor of Martinez. Webb had owned the entire surface and 75% of the mineral estate. The remaining 25% of the mineral estate was owned by a third party. Webb agreed to sell the entire property to Martinez through a contract of sale. The 1998 deed included a reservation clause that was at the heart of the litigation.

Read the article.

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Buchalter announces the addition of new shareholder J. David Hitchcock to its Los Angeles office. Hitchcock joins Buchalter’s Real Estate practice from his previous role as partner at Kennerly Lamishaw & Rossi, LLP.

Hitchcock works in real estate acquisitions and dispositions, leasing, loan workouts and restructurings, loan sales, secured real estate finance, joint ventures, and general real estate matters. He has represented clients in cases involving private equity funds, real estate developers, core and value-add real estate owners/operators, public school districts, as well as publicly traded REITs.

Hitchcock received his B.A. with honors from the University of Chicago in 1993. He earned his J.D. from the University of Southern California Gould School of Law where he was Order of the Coif and Articles Editor for the University of Southern California Law Review.

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Akerman LLP announced the the addition of partners Allison Nelson and Lori Albert and associates William Garehime and Kelly Adams from Fennemore Craig to the firm’s Real Estate Practice Group.

In a release, the firm said:

“Growing client needs across the real estate and construction sector continue to drive the expansion of our practice,” said Richard Bezold, chair of Akerman’s Real Estate Practice Group, which is ranked sixth by Law360 among the largest teams of real estate lawyers in the United States. “Allison leads a highly skilled team who operate at the intersection of the real estate and healthcare economies. These lawyers add important depth to our national and local capabilities as shifting federal and state policy agendas produce new opportunities and challenges for our clients.”

“We are thrilled to welcome Allison and her team to the Denver office, where we have diverse practices in the financial services, real estate, healthcare and life sciences sectors,” said Justin Balser, Akerman’s Denver office managing partner. “Their deep experience in complex transactions and compliance investigations will provide immediate value to our clients in Denver and nationwide.”

Nelson focuses her national practice on the representation of public and private healthcare systems in complex real estate transactions and joint-ventures, and in mergers and acquisitions. She partners with clients to construct and improve legal, business, and compliance systems to manage their U.S. healthcare real estate portfolios and navigate through real estate compliance investigations by the U.S. Office of Inspector General. Nelson also regularly represents commercial developers in refinancing and acquisition of Colorado properties.

Prior to Fennemore Craig, Nelson was the chair of the real estate transactions practice group at Polsinelli where she served as lead real estate counsel in the $1.2 billion acquisition of a five-campus hospital system in Houston, Texas.

Albert represents national healthcare organizations, as well as Fortune 500 companies, developers, and investors in acquisition, disposition, and financing transactions involving all types of real estate. She has negotiated numerous leases, subleases, and other lease-related transactions for healthcare providers, and ensures such arrangements are compliant with the Stark Law, Anti-kickback Statute, and other federal and state healthcare regulations. In the community, Albert serves on the Denver Metro Chamber of Commerce Infrastructure Committee.

Real estate associates Garehime and Adams also principally focus their practice on healthcare real estate transactions. As a group, Nelson, Albert, Garehime and Adams are responsible for closing more than 500 healthcare leasing, development and acquisition projects annually across the United States.

Denver marks the latest growth for the firm’s Real Estate Practice Group. Akerman previously welcomed a real estate and land use team in Los Angeles led by partner Ellen Berkowitz from Gresham Savage; real estate litigation partner Michael Weiss from Lewis Brisbois in Los Angeles, hospitality litigation partner Joshua Bernstein from Pryor Cashman in New York and real estate transactional partner Thomas Diorio from Nixon Peabody in New York.

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A Travis County jury has returned a verdict against Chicago Title of Texas, LLC and other real estate-related businesses, finding they defrauded a young Danish woman of all proceeds from the sale of her $1.35 million condominium at the exclusive Residences at W Austin, according to a post on the website of Androvett Legal Media & Marketing.

The scheme involved a falsified power of attorney to execute contracts and closing documents in the sale of the condo, and a forgery in connection with a subsequent sale of a promissory note.

The Androvett post continues:

Mari-Louise Larsen, a Danish citizen, filed the breach of fiduciary duty and fraud claim in 2013 against her estranged husband, Andre Jones, an Austin-area resident, as well as Chicago Title and the other firms. Larsen, now 30, first met Jones in Austin’s Sixth Street entertainment district while visiting the area in 2007. After a long-distance courtship, the couple married in Denmark in 2009.

While in Denmark and waiting to move to Austin, Larsen testified she agreed to buy the luxury high-rise condo in Austin with funds from a family inheritance. However, Jones convinced her that Texas law required the names of both spouses to be on the title, despite the fact it was her separate property. Larsen and Jones later decided to divorce and sell the property. Jones then convinced Chicago Title’s contracted fee attorney, Wally Tingley, to use falsely notarized documents to close the sale without his wife’s knowledge. Jones pocketed all of the profits as the marriage deteriorated.

“This is a case of a con artist taking advantage of a wealthy young woman and actively working with others to violate the law and professional standards in the real estate industry,” said Larsen’s lawyer, Brian N. Hail of Gruber Elrod Johansen Hail Shank LLP in Dallas. “As acknowledged by Chicago Title and its fee attorney, this was one of the worst real estate transactions anyone has ever seen.”

Hail believes the jury’s finding that Chicago Title is responsible for the actions of its fee attorneys may have significant implications on future litigation involving the real estate industry.

“The jury finding that Chicago Title is vicariously liable for its fee attorney, due to the control it exerted throughout the entire transaction, may call into question the company’s entire business model of attempting to delegate closing and escrow responsibilities in the Texas market, and perhaps nationwide.”

In addition to Chicago Title and Jones, the Austin firm of Wally Tingley & Associates, P.C., and Austin-based JTREO, Inc. were found liable in the scheme.

Hail plans to file a proposed final judgment order of more than $3.7 million in Travis County’s 419th District Court. The order will be based on a request for all proceeds from the condo sale, in addition to pre-judgment interest and costs. Punitive damages were assessed against Jones in the amount of $2 million.

The case is Larsen v. Jones, et al., No. D-1-GN-13-004321. Ms. Larsen is represented by Brian N. Hail, Brian E. Mason, and Gaby Gutierrez Rawlings.

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While consumers may not have many choices when signing agreements that contain arbitration clauses, commercial parties often negotiate every last term of their agreements, according to a post on Shutts & Bowen LLP‘s website.

“This includes whether to require the parties to arbitrate their disputes or take them to court. There are advantages to each, so here are five things to consider when deciding whether to include an arbitration clause in a real estate contract, such as a purchase and sale agreement or lease,” write Al LaSorte, Matthew R. Chait and Matthew S. Sackel.

Those considerations include time, money, convenience, discovery and rules. The authors discuss the finer points of each one.

Read the Shutts & Bowen article.

Two new opinions, one from the San Antonio Court of Appeals and one from the El Paso Court of Appeals, again tackle the task of construing mineral and royalty conveyances and reservations, reports John McFarland in his Oil and Gas Lawyer Blog.

He explains that many such cases have arisen as a result of recent shale plays, where lands never before productive have suddenly become valuable, leaving courts have to clear up muddy deed language.

In his blog post, he discusses Laborde Properties, L.P. v. U.S. Shale Energy II, LLC and Greer v. Shook.

Read the article.

An office lease is a pivotal tool for small law firms to attract better clients and expand their practices. But it is also frequently a small firm’s largest fixed capital expense and longest commitment. Negotiating favorable lease terms is critical to ensure that a lease contributes to, and does not hamper, a firm’s success, writes Laura Drossman of Drossman Law in San Francisco.

Small firms may not be able to compete financially with their market competitors, who will pay higher rents and prepaid rent upon demand, according to her article, originally published by the Bar Association of San Francisco. Failure to maintain adequate financials brings creditworthiness into question and kills tenant’s leverage in lease negotiations.

While base rent and escalations seem like an obvious starting point, due to sky-high demand and flush competition, prospective tenants better serve their interests by focusing on other points.

Those points can include space improvements, commencement date, pass-through costs and tempering spikes, security deposits and letters of credit, subleasing and assignment, maintenance costs and HVAC, and relocation rights.

Read the article.

A Denver judge has fined one of the city’s prolific foreclosure attorneys $1.8 million for billing thousands of consumers facing the loss of their homes for title-insurance policies that did not exist, reports The Denver Post.

David Migoya writes that the Colorado Attorney General’s office argued in a seven-day trial in February had alleged in a February trial that Robert Hopp Jr., while working at his now-defunct law firm, billed customers fighting foreclosure for policies that were never issued. And Hopp inflated the cost of the few that were, the AG’s office claimed.

“The 37-page judgement handed down last week by Denver District Judge Shelley Gilman is the latest in a number of cases the state filed in 2013 against lawyers that specialized in foreclosures and allegedly padded their bills for costs that were ultimately borne by consumers losing their homes, the banks foreclosing on them and taxpayers whose federal insurance agencies covered the costs,” according to the report.

“Homeowners facing foreclosure had no choice but to pay the costs in order to stop the foreclosure process, and there was no process in place to challenge any of the fees lawyers said they were owed,” Migoya writes.

Read the article.