Tuesday, December 22, 2009
Texas Guarantor Not Liable Under Lease Renewal
The Texas Legislature made couple of revisions to the Texas Property Code during the 81st Legislative Session. They added Section 92.021 which addresses liability of guarantors under lease renewals. Under the new code section, for lease agreements executed on or after January 1, 2010, a guarantor is not liable under a lease renewal unless the guarantor expressly agreed to be liable under a lease renewal in the original lease. The original lease must contain specific information as set out in the new code section to bind a guarantor under a lease renewal. Landlords should review and revise their leases as necessary before January 1, 2010.
Friday, August 21, 2009
Texas Public Works Bond Claim Case
A recent case, brings good news for material suppliers and subcontractors. The Texas Supreme Court ruled in favor of an unpaid supplier regarding statutory and common law claims, even though the unpaid material supplier missed their bond claim deadlines. In Dealers Electrical Supply Co. v. Scoggins Construction Co. Inc., 2009 WL 1901638, Slip op No. 08-0272 (Tex. July 3, 2009), an electrical subcontractor on a bonded public-works project walked off the job and left his parts supplier, Dealers, unpaid. The supplier missed the McGregor Act deadline to pursue a claim on the bond, but filed suit against the prime or general contractor for violation of the Texas Construction Trust Fund Act and breach of a separate Joint Check Agreement.
Tuesday, June 2, 2009
Part 5: Texas Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Rights to Information from Prime Contractors and Gover
Subcontractors in Texas are entitled to certain information upon written request and public owners (governmental entities) and prime contractors are required to furnish the information.
Subcontractors can request the following information / documentation from prime contractors:
(1) the name and last known address of the governmental entity with whom the prime contractor has its contract;
(2) a copy of the payment and performance bond for the project; and
(3) the name of the surety issuing the payment bond and the toll-free telephone number maintained by the Texas Department for obtaining information concerning licensed insurance companies.
See Tex. Gov’t Code § 2253.024
If the prime contractor did not initially disclose the name of the surety, the best practice is to request this information as soon as possible as this information is necessary to send the “Third Month Notice” discussed in Part 3 of this blog series. If you do not obtain this information early enough but wait until payments are missed, you may not have the necessary information in time to mail the required “Third Month Notice” to the surety.
In addition to a written request, subcontractors must submit an affidavit when requesting information from a governmental entity. The affidavit must state that the person / subcontractor:
(1) has supplied public work or labor for which payment has not been made;
(2) has contracted for specially fabricated materials for which payment has not been made; or
(3) is being sued on a payment bond.
Subcontractors can request the following information / documentation from governmental entities:
(1) a certified copy of the bond;
(2) the public work contract for which the bond was given; and
(3) the toll-free telephone number maintained by the Texas Department for obtaining information concerning licensed insurance companies.
See Tex. Gov’t Code § 2253.026
Information requested must be provided within 10 days after the receipt of the written request for the information. A prime contractor or governmental entity from whom information is requested may require payment of the actual cost for providing the requested information.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Please visit our blog again in a few days for Part 6: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Rights to Information from Subcontractors & Payment Bond Claimants.
Subcontractors can request the following information / documentation from prime contractors:
(1) the name and last known address of the governmental entity with whom the prime contractor has its contract;
(2) a copy of the payment and performance bond for the project; and
(3) the name of the surety issuing the payment bond and the toll-free telephone number maintained by the Texas Department for obtaining information concerning licensed insurance companies.
See Tex. Gov’t Code § 2253.024
If the prime contractor did not initially disclose the name of the surety, the best practice is to request this information as soon as possible as this information is necessary to send the “Third Month Notice” discussed in Part 3 of this blog series. If you do not obtain this information early enough but wait until payments are missed, you may not have the necessary information in time to mail the required “Third Month Notice” to the surety.
In addition to a written request, subcontractors must submit an affidavit when requesting information from a governmental entity. The affidavit must state that the person / subcontractor:
(1) has supplied public work or labor for which payment has not been made;
(2) has contracted for specially fabricated materials for which payment has not been made; or
(3) is being sued on a payment bond.
Subcontractors can request the following information / documentation from governmental entities:
(1) a certified copy of the bond;
(2) the public work contract for which the bond was given; and
(3) the toll-free telephone number maintained by the Texas Department for obtaining information concerning licensed insurance companies.
See Tex. Gov’t Code § 2253.026
Information requested must be provided within 10 days after the receipt of the written request for the information. A prime contractor or governmental entity from whom information is requested may require payment of the actual cost for providing the requested information.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Please visit our blog again in a few days for Part 6: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Rights to Information from Subcontractors & Payment Bond Claimants.
Friday, May 15, 2009
Part 4: Texas Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Retainage
Like in private construction projects, in Texas public works projects, general contractors hold back part of the contract price until the subcontractor fulfills the contract as “retainage.” The amount withheld is a percentage of the total contract price, often around 10%. The retained money is supposed to be paid to the subcontractor after the public works contract (the contract between the governmental entity and the general contractor) is completed. If the general contractor does not pay the retained money, the subcontractor can file a lawsuit to collect on the payment bond; however, the subcontractor must first meet the notice requirements.
The subcontractor must give notice to the general contractor and surety on or before 90 days after final completion of the public works contract. The notice must include the amount of the contract, any amount paid, and the outstanding balance. Tex. Gov’t Code § 2253.046. The notices must be mailed by the proper method and to the proper addresses.
Once again, sending the notices timely, to the correct people, and with the correct content is crucial to perfect a claim retainage.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Please visit our blog again in a few days for Part 5: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Rights to Information.
The subcontractor must give notice to the general contractor and surety on or before 90 days after final completion of the public works contract. The notice must include the amount of the contract, any amount paid, and the outstanding balance. Tex. Gov’t Code § 2253.046. The notices must be mailed by the proper method and to the proper addresses.
Once again, sending the notices timely, to the correct people, and with the correct content is crucial to perfect a claim retainage.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Please visit our blog again in a few days for Part 5: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Rights to Information.
Friday, May 1, 2009
Part 3: Texas Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00.
In reality, most public works projects in Texas are over $25,000.00 in value. When projects exceed $25,000.00 in value, the general contractor must post a payment bond in the amount of the prime contract for the protection of subcontractors and sub-subcontractors. Tex. Gov’t Code § 2253.021. If subcontractors are not paid by the general contractor, they can file a lawsuit to collect on the payment bond; however, before they can file suit, subcontractors must ensure that they have complied with strict notice requirements. If the notice requirements, including deadlines and content, are not properly met, the subcontractor will not be able to successfully sue to collect on the payment bond.
Under Texas law, Subcontractors (those having a contract directly with the general contractor) must give written notice to the prime contractor and surety not later than the fifteenth day of the third month following each month in which the labor or material was provided for which the claimant has not been paid (often called the “Third Month Notice”). Tex. Gov’t Code § 2253.041(b). If this deadline is not properly met, the subcontractor will have lost its ability to prevail in a lawsuit. Furthermore, the notice must identify specific details such as: the labor or materials provided; who they were provided to; and when they were provided; in addition to other required information. Additionally, a sworn statement must be included verifying the amount due. Tex. Gov’t Code § 2253.041(c). The notices must be mailed by the proper method and to the proper addresses. Tex. Gov’t Code § 2253.044.
Sending the required notices on time is crucial for subcontractors but is often overlooked until it is too late or sent incorrectly due to a misunderstanding of the applicable laws. Subcontractors often wait too long believing that they will work something out with the general contractor. When they eventually do seek help from an attorney, the deadline has already passed. Subcontractors should pay careful attention to their past due invoices and ensure they seek an attorney’s advice far enough in advance so that all deadlines can be met and the subcontractor’s rights protected.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Please visit our blog again in a few days for Part 4: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Retainage.
Under Texas law, Subcontractors (those having a contract directly with the general contractor) must give written notice to the prime contractor and surety not later than the fifteenth day of the third month following each month in which the labor or material was provided for which the claimant has not been paid (often called the “Third Month Notice”). Tex. Gov’t Code § 2253.041(b). If this deadline is not properly met, the subcontractor will have lost its ability to prevail in a lawsuit. Furthermore, the notice must identify specific details such as: the labor or materials provided; who they were provided to; and when they were provided; in addition to other required information. Additionally, a sworn statement must be included verifying the amount due. Tex. Gov’t Code § 2253.041(c). The notices must be mailed by the proper method and to the proper addresses. Tex. Gov’t Code § 2253.044.
Sending the required notices on time is crucial for subcontractors but is often overlooked until it is too late or sent incorrectly due to a misunderstanding of the applicable laws. Subcontractors often wait too long believing that they will work something out with the general contractor. When they eventually do seek help from an attorney, the deadline has already passed. Subcontractors should pay careful attention to their past due invoices and ensure they seek an attorney’s advice far enough in advance so that all deadlines can be met and the subcontractor’s rights protected.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Please visit our blog again in a few days for Part 4: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00 & Retainage.
Monday, April 20, 2009
Part 2: Texas Public Works Construction Projects & Subcontractors: Prime Contracts Less Than $25,000.00
As noted in Part 1 of this series, in most cases, subcontractors on Texas public projects who have not been paid by the general contractor may make a claim under Texas law on the payment bond posted by the general contractor. However, when the general contractor’s contract with the public entity is less than $25,000.00, the general contractor is not required to post a payment bond. Consequently, when the contract is less than $25,000.00, subcontractors have limited lien rights. The lien in Texas attaches to money due to the general contractor. (Tex. Prop. Code § 53.231).
To assert a Texas lien, the subcontractor must give notice to both the general contractor and the appropriate public official. (Tex. Prop. Code § 53.232). Subcontractors must ensure that they strictly comply with notice deadlines and content requirements or they risk not perfecting their lien. The subcontractor must give the notice before any payment is made to the general contractor and not later than the 15th day of the 2nd month following the month in which the work was performed or the material furnished. (Tex. Prop. Code § 53.234). The notice must contain specific information relating to the labor performed or materials delivered. The notice must include (1) the amount claimed; (2) the name of the party to whom the materials were delivered or for whom the labor was performed; (3) the dates and place of delivery or performance; (4) a description reasonably sufficient to identify the materials delivered or labor performed and the amount due; (5) a description reasonably sufficient to identify the project for which the material was delivered or the labor performed; and (6) the claimant's business address. (Tex. Prop. Code § 53.233). The notice must also be accompanied by a sworn statement that the amount claimed is just and correct and that all payments, lawful offsets, and credits known to the affiant have been allowed. (Tex. Prop. Code § 53.233). Failure to comply with any of the notice requirements may result in loss of the lien.
When the Texas public official receives notice, he should retain from the money due to the general contractor enough to pay the claim for which the notice was given. (Tex. Prop. Code § 53.233).
A general contractor in Texas may file a bond with the public entity to release the lien and obtain the money withheld. (Tex. Prop. Code § 53.236). The subcontractor must sue on the bond within 6 months after the bond is filed. (Tex. Prop. Code § 53.239).
Please visit our blog again in a few days for Part 3: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
To assert a Texas lien, the subcontractor must give notice to both the general contractor and the appropriate public official. (Tex. Prop. Code § 53.232). Subcontractors must ensure that they strictly comply with notice deadlines and content requirements or they risk not perfecting their lien. The subcontractor must give the notice before any payment is made to the general contractor and not later than the 15th day of the 2nd month following the month in which the work was performed or the material furnished. (Tex. Prop. Code § 53.234). The notice must contain specific information relating to the labor performed or materials delivered. The notice must include (1) the amount claimed; (2) the name of the party to whom the materials were delivered or for whom the labor was performed; (3) the dates and place of delivery or performance; (4) a description reasonably sufficient to identify the materials delivered or labor performed and the amount due; (5) a description reasonably sufficient to identify the project for which the material was delivered or the labor performed; and (6) the claimant's business address. (Tex. Prop. Code § 53.233). The notice must also be accompanied by a sworn statement that the amount claimed is just and correct and that all payments, lawful offsets, and credits known to the affiant have been allowed. (Tex. Prop. Code § 53.233). Failure to comply with any of the notice requirements may result in loss of the lien.
When the Texas public official receives notice, he should retain from the money due to the general contractor enough to pay the claim for which the notice was given. (Tex. Prop. Code § 53.233).
A general contractor in Texas may file a bond with the public entity to release the lien and obtain the money withheld. (Tex. Prop. Code § 53.236). The subcontractor must sue on the bond within 6 months after the bond is filed. (Tex. Prop. Code § 53.239).
Please visit our blog again in a few days for Part 3: Public Works Construction Projects & Subcontractors: Prime Contracts Over $25,000.00.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Monday, April 13, 2009
Part 1: Texas Public Works Construction Projects & Subcontractors
For the next couple of weeks we will be posting a series of blogs relating to Texas Public Works Construction Projects & Subcontractors. Construction or improvements to public property in Texas are commonly referred to as public construction, public works contracts, or public projects. Some examples of public property are schools, courthouses, hospitals, highways, and bridges. On public projects, a subcontractor provides materials or labor to a general contractor whose contract is with a public entity. Unlike private property projects, a subcontractor in Texas cannot place a lien against public property due to nonpayment. Consequently, in order to protect their interests and increase their odds of receiving payment in full, subcontractors must be aware of the process and deadlines specific to public projects. In most cases, subcontractors on public projects who have not been paid by the general contractor may make a claim on the payment bond posted by the general contractor. A payment bond is a bond posted by the general contractor for the protection of subcontractors and sub-subcontractors. In more limited circumstances, subcontractors may have limited lien rights in money owed to the general contractor.
Please visit our blog again in a few days for Part 2: Texas Public Works Construction Projects & Subcontractors: Prime Contracts Less Than $25,000.00.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Please visit our blog again in a few days for Part 2: Texas Public Works Construction Projects & Subcontractors: Prime Contracts Less Than $25,000.00.
Texas law governing public projects can be found in Texas Government Code Chapter 2253 (formerly known as the McGregor Act) and Texas Property Code Chapter 53.
Thursday, February 26, 2009
Austin Lawyer: "Produce the Note" Claims in Foreclosure
There have been many news reports making the rounds about ways to avoid foreclosure, and many Texas residents are believing such news reports to be a "magic bullet" to stave off foreclosure. One needs to realize that different states have different laws related to foreclosure of real estate, particularly residential real estate foreclosures, and one should not get their legal advice from such news reports.
So, what is all of this "produce the note" craze? What does it mean?
The basics of the idea is, when a debtor is desperate and their house is ready to be foreclosed upon, some lawyers (usually in other states) tell homeowners to request that the bank "produce the promissory note" related to the transaction. As many real estate lenders have acquired the promissory notes through sometimes hundreds of large portfolio transfers, often these are done electronically and the original closing paperwork gets lost in the mix, or so the theory goes. So if you need an extra two or three months to get finances back in order, so sayeth the news reports, this will provide the debtor with the time to do just this while the lender "scrambles" to find the promissory note signed at closing.
Sounds great, right? We never have to pay our mortgages again! Hooray!
Well, in Texas, as you can well imagine, it is not nearly that simple. Under Texas law, lenders hardly ever file a lawsuit to foreclose on residential real estate, choosing instead to do what's called a "non-judicial foreclosure". This is a procedure whereby notices are mailed and posted and ultimately the lender holds an auction on the courthouse steps on the First Tuesday of a month to foreclose their interest in the real estate and filing what's called a "Trustee's deed" (often a Substitute Trustee's Deed). Which means, unless the DEBTOR files a lawsuit PRIOR to the foreclosure and auction sale, there is never a time to demand that a lender "produce the note". Which means it ain't no magic bullet without litigation.
The other problem with the buy time theory is that by the time the foreclosure sale is posted, usually a lender has "accelerated" the note. Meaning, the debtor does not just owe the lender the three missed $1200 house payments. Now the debtor actually owes the lender the ENTIRE balance of the promissory note. So if a debtor waits until the foreclosure sale to try to block all of these things, they are usually not in a position to come up with the, say, $187,000 owed on the Note in order to stop foreclosure. Three months delay asking the lender to produce the note may not even matter, even if the debtor could then make all of their payments current.
Now, this is not to say that there are no ways to delay even a proper lender from foreclosing on a property. Bankruptcy filings and litigation can be used to delay foreclosure proceedings, as every lender knows. In fact, if there are legitimate reasons to believe that the lender has misapplied or failed to apply payments, or if there are other reasons to challenge the acceleration of the note (due to waiver or unlawful behavior by the lender), it is a very effective tool necessary to sort through these issues.
In such situations, a lawyer representing a homeowner, or the homeowner pro se (although this is not advised, but may be a financial reality), can seek injunctions against acceleration and foreclosure, as well as seek discovery that can be very time consuming and costly for the lender which may lead to settlement by negotiation. But they will first need to get a judge to so order prior to foreclosure in order for the note production to be relevant in most circumstances.
If there is litigation, certainly part of this process will be to determine by what authority the lender seeks to foreclose its interest, and burdens will be on the lender to prove a contract exists and they are the lawful holder of said note contract and security interest in the form of a deed of trust. When there have been hundreds of transfers, this is certainly more time consuming and difficult for a lender. Unfortunately for the "magic bullet-ers" out there, often these deeds of trusts securing the note and transfers are done in the real property records and it is simply a matter of getting the documents from the county clerk's office as certified copies. Certified copies of public records are usually automatically considered authentic under Texas Rules of Evidence 901(7) and are exempt from hearsay typically under Texas Rules of Evidence 803(14).
Also, as far as the Note goes, the lender does not need to have the original signature in pen ink to foreclose or get summary judgment. To prevail on a motion for summary judgment to enforce a promissory note, a plaintiff/lender must only establish that (1) a note exists, (2) the plaintiff/lender is the legal owner and holder of the note, (3) the defendant is the maker of the note, and (4) a certain balance is due and owing on the note. Scott v. Commercial Servs. of Perry, Inc., 121 S.W.3d 26, 29 (Tex. App.—Tyler 2003, pet. denied). If no genuine issue of material fact exists as to any of these elements, the plaintiff is entitled to summary judgment as a matter of law. See Tex. R. Civ. P. 166a(c). The lender can establish existence of the notes by attaching true and correct copies of the notes as exhibits to its motion and filing a sworn affidavit in verification of the copies. A photocopy of a promissory note, attached to an affidavit in which the affiant swears that the photocopy is a true and correct copy of the original note, is proper summary judgment proof which establishes the existence of the note. Johnson, 610 S.W.2d 143; Town N. Nat'l Bank v. Broaddus, 569 S.W.2d 489, 490 (Tex. 1978); Blankenship v. Robins, 899 S.W.2d 236, 238 (Tex. App.—Houston [14th Dist.] 1994, no writ). If the documents show that the plaintiff is the legal owner of the note and that a balance is owed, then the debtor must raise a fact issue as to one of the elements, and must do so by sworn testimony (and verified pleadings).
It is our guess that the lawyers discussing the "produce the note" claims do not practice in Texas. If you are an Austin or Texas lender with a "produce the note" debtor, give us a call at 512-472-2300.
So, what is all of this "produce the note" craze? What does it mean?
The basics of the idea is, when a debtor is desperate and their house is ready to be foreclosed upon, some lawyers (usually in other states) tell homeowners to request that the bank "produce the promissory note" related to the transaction. As many real estate lenders have acquired the promissory notes through sometimes hundreds of large portfolio transfers, often these are done electronically and the original closing paperwork gets lost in the mix, or so the theory goes. So if you need an extra two or three months to get finances back in order, so sayeth the news reports, this will provide the debtor with the time to do just this while the lender "scrambles" to find the promissory note signed at closing.
Sounds great, right? We never have to pay our mortgages again! Hooray!
Well, in Texas, as you can well imagine, it is not nearly that simple. Under Texas law, lenders hardly ever file a lawsuit to foreclose on residential real estate, choosing instead to do what's called a "non-judicial foreclosure". This is a procedure whereby notices are mailed and posted and ultimately the lender holds an auction on the courthouse steps on the First Tuesday of a month to foreclose their interest in the real estate and filing what's called a "Trustee's deed" (often a Substitute Trustee's Deed). Which means, unless the DEBTOR files a lawsuit PRIOR to the foreclosure and auction sale, there is never a time to demand that a lender "produce the note". Which means it ain't no magic bullet without litigation.
The other problem with the buy time theory is that by the time the foreclosure sale is posted, usually a lender has "accelerated" the note. Meaning, the debtor does not just owe the lender the three missed $1200 house payments. Now the debtor actually owes the lender the ENTIRE balance of the promissory note. So if a debtor waits until the foreclosure sale to try to block all of these things, they are usually not in a position to come up with the, say, $187,000 owed on the Note in order to stop foreclosure. Three months delay asking the lender to produce the note may not even matter, even if the debtor could then make all of their payments current.
Now, this is not to say that there are no ways to delay even a proper lender from foreclosing on a property. Bankruptcy filings and litigation can be used to delay foreclosure proceedings, as every lender knows. In fact, if there are legitimate reasons to believe that the lender has misapplied or failed to apply payments, or if there are other reasons to challenge the acceleration of the note (due to waiver or unlawful behavior by the lender), it is a very effective tool necessary to sort through these issues.
In such situations, a lawyer representing a homeowner, or the homeowner pro se (although this is not advised, but may be a financial reality), can seek injunctions against acceleration and foreclosure, as well as seek discovery that can be very time consuming and costly for the lender which may lead to settlement by negotiation. But they will first need to get a judge to so order prior to foreclosure in order for the note production to be relevant in most circumstances.
If there is litigation, certainly part of this process will be to determine by what authority the lender seeks to foreclose its interest, and burdens will be on the lender to prove a contract exists and they are the lawful holder of said note contract and security interest in the form of a deed of trust. When there have been hundreds of transfers, this is certainly more time consuming and difficult for a lender. Unfortunately for the "magic bullet-ers" out there, often these deeds of trusts securing the note and transfers are done in the real property records and it is simply a matter of getting the documents from the county clerk's office as certified copies. Certified copies of public records are usually automatically considered authentic under Texas Rules of Evidence 901(7) and are exempt from hearsay typically under Texas Rules of Evidence 803(14).
Also, as far as the Note goes, the lender does not need to have the original signature in pen ink to foreclose or get summary judgment. To prevail on a motion for summary judgment to enforce a promissory note, a plaintiff/lender must only establish that (1) a note exists, (2) the plaintiff/lender is the legal owner and holder of the note, (3) the defendant is the maker of the note, and (4) a certain balance is due and owing on the note. Scott v. Commercial Servs. of Perry, Inc., 121 S.W.3d 26, 29 (Tex. App.—Tyler 2003, pet. denied). If no genuine issue of material fact exists as to any of these elements, the plaintiff is entitled to summary judgment as a matter of law. See Tex. R. Civ. P. 166a(c). The lender can establish existence of the notes by attaching true and correct copies of the notes as exhibits to its motion and filing a sworn affidavit in verification of the copies. A photocopy of a promissory note, attached to an affidavit in which the affiant swears that the photocopy is a true and correct copy of the original note, is proper summary judgment proof which establishes the existence of the note. Johnson, 610 S.W.2d 143; Town N. Nat'l Bank v. Broaddus, 569 S.W.2d 489, 490 (Tex. 1978); Blankenship v. Robins, 899 S.W.2d 236, 238 (Tex. App.—Houston [14th Dist.] 1994, no writ). If the documents show that the plaintiff is the legal owner of the note and that a balance is owed, then the debtor must raise a fact issue as to one of the elements, and must do so by sworn testimony (and verified pleadings).
It is our guess that the lawyers discussing the "produce the note" claims do not practice in Texas. If you are an Austin or Texas lender with a "produce the note" debtor, give us a call at 512-472-2300.
Monday, February 16, 2009
Credit Card Agreements May be Implied under Certain Circumstances
In a recent case out of a Dallas, the Court found that a credit card agreement may be implied under certain circumstances. In this case, Bank X issued a credit card to the debtor. Bank X then merged with another bank, Bank Y. Bank Y sued the debtor to collect the balance on the credit card. The debtor argued that Bank Y had not produced an agreement between the debtor and Bank Y, that the debtor had not made an agreement with Bank Y, and that the debtor was, therefore, not liable.
Even though there was no written agreement, the Court found that the debtor and Bank Y had an implied agreement. An “implied contract” can arise from the acts and conduct of the parties.
The Court noted conduct of the parties evidencing an implied agreement. The initial interest rate on the account was set forth on the first billing statement, and the financial terms in effect each time the card was issued were set out on each monthly statement. One of the monthly statements informed debtor of merger and stated that words “we, us and our” as used in cardmember agreement now referred to bank Y. Even after debtor was given notice of the merger, new charges were made on account almost every month and late fees and “over the limit” fees were periodically assessed which the debtor did not object to or dispute. The Court determined that based on the series of transactions reflected on the account statements, it was reasonable to infer that the debtor agreed to the full amount shown on the statements and impliedly promised to pay the indebtedness.
Even though there was no written agreement, the Court found that the debtor and Bank Y had an implied agreement. An “implied contract” can arise from the acts and conduct of the parties.
The Court noted conduct of the parties evidencing an implied agreement. The initial interest rate on the account was set forth on the first billing statement, and the financial terms in effect each time the card was issued were set out on each monthly statement. One of the monthly statements informed debtor of merger and stated that words “we, us and our” as used in cardmember agreement now referred to bank Y. Even after debtor was given notice of the merger, new charges were made on account almost every month and late fees and “over the limit” fees were periodically assessed which the debtor did not object to or dispute. The Court determined that based on the series of transactions reflected on the account statements, it was reasonable to infer that the debtor agreed to the full amount shown on the statements and impliedly promised to pay the indebtedness.
Tuesday, February 10, 2009
Texas Foreclosure Procedures
In order to set up a non-judicial foreclosure, the lender must do several things in order to have the ability to foreclosure their security interest, or what we call a Deed of Trust. First, the loan papers (or "documentation") must include an obligation to pay (usually called a Note, Real Estate Lien Note, Promissory Note, or Note with Vendor's Lien) and should also include the security agreement (usually referred to as a Deed of Trust). The Deed of Trust gives the lender the right to "foreclose" its security interest if the Obligor fails to pay. The Deed of Trust should appoint a "trustee" and must contain a "power of sale." The Deed of Trust should also give the lender the right to designate "Substitute Trustee." In Texas, the foreclosure is usually by way of a "non-judicial" foreclosure, or by way of the posting of the property for sale on the first Tuesday of the month.
The following steps contain the basic procedures that the lender must go through in order to get to the point where they may foreclose the lien:
1) Demand for Payment - once the Obligor defaults in the making of one or more payments, the lender must give notice of the default and demand the overdue payment or payments.
2) Notice of Intention to Accelerate - prior to being able to foreclose its lien, the lender must give notice of intention to accelerate. The Notice of Intention to Accelerate is usually combined with a demand for payment. The notice should give at least ten (10) days within which the Obligor can cure the default. If the property is the Obligor's "residence," then the Notice of Intention to Accelerate should give the Obligor at least twenty (20) days notice. After the appropriate time period has expired, then the lender is free to "post" the property for a non-judicial foreclosure.
3) Notice of Foreclosure - assuming that the Lender has a valid Deed of Trust and that the lender has appropriately moved to foreclose through the designated trustee or its "substitute" trustee, then after the expiration of time on the Notice of Intention to Accelerate, the lender can "post" the property for foreclosure. This is done with the giving of Notice of Foreclosure. The Notice must be posted at the Courthouse and must be send via Certified Mail, Return Receipt Requested to the last known address of the debtor. Because only the sending of the certified mail is required, it does no good to attempt to refuse delivery. You are only denying yourself the information contained in the Foreclosure Notice. The Notice must give the debtor at least 21 days notice of the foreclosure, and must inform the debtor of the time, date, and place of the foreclosure sale. Foreclosure sales take place at the location designated by the Commissioner's Court for each County in which the property (or any part of the property if the property is located in more than one County) is located.
4) Posting of the Property - the Notice of Foreclosure should then be "posted" at the designated location where notices are given at the County Courthouse (or other designated location). The Notice should be posted for the full twenty one (21) days prior to the sale and must be filed with the County Clerk's office.
5) Foreclosure Sale - The foreclosure sale should take place on the designated date between the hours of 10:00 a.m. and 4:00 p.m., that date being the first Tuesday of the month of the foreclosure sale. The sale must begin within three (3) hours of the time stated in the notice of foreclosure. At the foreclosure sale, the trustee or substitute trustee must "strike off" or sell the property to the highest bidder. The trustee is not required to sell the property for any particular price. For this reason, if your property is being foreclosed upon you should at least attend the sale.
6) Substitute Trustees / Trustee's Deed - the final step in the process is for the Trustee (or Substitute Trustee if one was appointed) to prepare and file a Trustee's or Substitute Trustee's Deed to reflect that the property was sold. The Deed will then transfer title of the property to the purchaser or back to the lender, as the case may be. You should check the Deed to be sure that it accurately reflects what happened at the foreclosure sale.
Due to the complexity of these proceedings and the possibility of many pitfalls (or loopholes as many call them), if you have questions about the validity of any foreclosure sale, you should seek the advice of an attorney who is experienced in foreclosure litigation and foreclosure sales.
The following steps contain the basic procedures that the lender must go through in order to get to the point where they may foreclose the lien:
1) Demand for Payment - once the Obligor defaults in the making of one or more payments, the lender must give notice of the default and demand the overdue payment or payments.
2) Notice of Intention to Accelerate - prior to being able to foreclose its lien, the lender must give notice of intention to accelerate. The Notice of Intention to Accelerate is usually combined with a demand for payment. The notice should give at least ten (10) days within which the Obligor can cure the default. If the property is the Obligor's "residence," then the Notice of Intention to Accelerate should give the Obligor at least twenty (20) days notice. After the appropriate time period has expired, then the lender is free to "post" the property for a non-judicial foreclosure.
3) Notice of Foreclosure - assuming that the Lender has a valid Deed of Trust and that the lender has appropriately moved to foreclose through the designated trustee or its "substitute" trustee, then after the expiration of time on the Notice of Intention to Accelerate, the lender can "post" the property for foreclosure. This is done with the giving of Notice of Foreclosure. The Notice must be posted at the Courthouse and must be send via Certified Mail, Return Receipt Requested to the last known address of the debtor. Because only the sending of the certified mail is required, it does no good to attempt to refuse delivery. You are only denying yourself the information contained in the Foreclosure Notice. The Notice must give the debtor at least 21 days notice of the foreclosure, and must inform the debtor of the time, date, and place of the foreclosure sale. Foreclosure sales take place at the location designated by the Commissioner's Court for each County in which the property (or any part of the property if the property is located in more than one County) is located.
4) Posting of the Property - the Notice of Foreclosure should then be "posted" at the designated location where notices are given at the County Courthouse (or other designated location). The Notice should be posted for the full twenty one (21) days prior to the sale and must be filed with the County Clerk's office.
5) Foreclosure Sale - The foreclosure sale should take place on the designated date between the hours of 10:00 a.m. and 4:00 p.m., that date being the first Tuesday of the month of the foreclosure sale. The sale must begin within three (3) hours of the time stated in the notice of foreclosure. At the foreclosure sale, the trustee or substitute trustee must "strike off" or sell the property to the highest bidder. The trustee is not required to sell the property for any particular price. For this reason, if your property is being foreclosed upon you should at least attend the sale.
6) Substitute Trustees / Trustee's Deed - the final step in the process is for the Trustee (or Substitute Trustee if one was appointed) to prepare and file a Trustee's or Substitute Trustee's Deed to reflect that the property was sold. The Deed will then transfer title of the property to the purchaser or back to the lender, as the case may be. You should check the Deed to be sure that it accurately reflects what happened at the foreclosure sale.
Due to the complexity of these proceedings and the possibility of many pitfalls (or loopholes as many call them), if you have questions about the validity of any foreclosure sale, you should seek the advice of an attorney who is experienced in foreclosure litigation and foreclosure sales.
Labels:
Austin,
deed of trust,
foreclosure,
lender,
non-judicial,
procedure,
substitute trustee,
texas,
vendors lien
Saturday, January 31, 2009
Texas Landlord Remedies for Commercial Rent and Anticipatory Breach and Abandonment
If you are a commercial property owner in Texas and the tenant tells you they are leaving mid lease term, what are the options for the landlord? The Texas Supreme Court set out a Texas landlord's options for abandonment and breach of the lease as follows:
Austin Hill Country, 948 SW2d at 299-300.
It should be remembered that under Texas Property Code Sec. 91.006, a Texas landlord has a duty to mitigate (in other words, try to relet the premises). However, the actual burden of proof is on the tenant to show that the landlord failed to mitigate and also show the amount that could have been saved but for the landlord's failure to mitigate. Id.
Recovery of past rent is a rental "arrearage" while recovery of future rent is considered "future damages". PRC Kentron, Inc. v. First City Center Associates, II, 762 SW2d 279, 281 and 288 (Tex.App.-Dallas 1988, writ denied). A prevaling landlord may also recover reasonable attorneys fees. West Anderson Plaza v. Exxon Mehdi Feyznia, 876 SW2d 528, 537 (Tex. App.-Austin 1994, no writ).
It should also be noted that a Texas statutory landlord's liens in the personal property may be affected by the abandonment of the property. A landlord may need to seek a distress warrant under Texas Property Code Sec. 54.025, since a statutory landlord's lien only lasts for one month after the day the tenant abandons the property under Texas Property Code Section 54.024.
The landlord needs to select a remedy, however, since choosing to terminate a lease may eliminate the ability to recover future damages. It is suggested that a Texas landlord consult with an attorney to evaluate these options.
The Landlord has four causes of action against a tenant for breach of the lease and abandonment. First, the landlord can maintain the lease, suing for rent as it becomes due. Second, the landlord can treat the breach as an anticipatory repudiation, repossess, and sue for the present value of future rentals reduced by the reasonable cash market value of the property for the remainder of the lease term. Third, the landlord can treat the breach as anticipatory, repossess, release the property, and sue the tenant for the difference between the contractual rent and teh amount recived from the new tenant. Fourth, the landlord can declare the lease forfeited (if the lease so provides) and relieve the tenant of liability for future rent.
Austin Hill Country, 948 SW2d at 299-300.
It should be remembered that under Texas Property Code Sec. 91.006, a Texas landlord has a duty to mitigate (in other words, try to relet the premises). However, the actual burden of proof is on the tenant to show that the landlord failed to mitigate and also show the amount that could have been saved but for the landlord's failure to mitigate. Id.
Recovery of past rent is a rental "arrearage" while recovery of future rent is considered "future damages". PRC Kentron, Inc. v. First City Center Associates, II, 762 SW2d 279, 281 and 288 (Tex.App.-Dallas 1988, writ denied). A prevaling landlord may also recover reasonable attorneys fees. West Anderson Plaza v. Exxon Mehdi Feyznia, 876 SW2d 528, 537 (Tex. App.-Austin 1994, no writ).
It should also be noted that a Texas statutory landlord's liens in the personal property may be affected by the abandonment of the property. A landlord may need to seek a distress warrant under Texas Property Code Sec. 54.025, since a statutory landlord's lien only lasts for one month after the day the tenant abandons the property under Texas Property Code Section 54.024.
The landlord needs to select a remedy, however, since choosing to terminate a lease may eliminate the ability to recover future damages. It is suggested that a Texas landlord consult with an attorney to evaluate these options.
Changing Locks on Residential Tenants in Texas: A Dangerous Business
Texas Property Code Section 92.0081 sets out the procedures for the removal of property and lockouts on residential property. Here are some practical tips:
1. A landlord may not remove a door, window, or attic hatchway cover unless it is done pursuant to a prompt repair of the premises. In other words, you can't just take a door off to "encourage" a tenant to leave. See Texas Property Code Sec. 92.0081(a).
2. If a landlord changes the door lock of a tenant that is delinquent in rent, it must be done according to the procedures set out in Texas Property Code Sec. 92.0081(c). Namely, the landlord must place a notice that (1) states an on site location where the tenant can go 24 hours a day to obtain the new key or a telephone number that is answered 24 hours a day that the tenant may call to have a key delivered within two hours after calling the number; (2) states the fact that the landlord must provide the new key to the tenant at any hour, regardless of whether the tenant pays any of the delinquent rent; and (3) the amount of rent and other charges for which the tenant is delinquent. The landlord must also, prior to changing the locks, send a warning, either mailed five days before the lock change, or hand delivered three days before the lock change, that states the date of the anticipated lock change, the amount of rent owed that must be paid to prevent the lock out, and the name and street address of the individual to whom, or the location of the onsite management office, at which the delinquent rent may be paid during the landlord's normal business hours. The lock change may not occur on a day or day before the landlord is not available or the onsite management office is not open for the tenant to pay the delinquency. The key must be provided to the tenant whether or not the tenant pays the rent. If the tenant doesn't show, the landlord must leave a notice of the day/time they showed up, along with the address for the location of the key during normal business hours. See Texas Property Code Sec. 91.0081(d)-(g).
3. If a residential landlord violates Texas Property Code Sec. 91.0081, the tenant may recover possession of the premises or terminate the lease, and a civil penalty of one month's rent plus $500, actual damages, court costs and reasonable attorney fees, less any delinquent rent or other sums owed to landlord. If the landlord does not allow tenant to use the key to enter the property regardless of paying the rent, the tenant is entitled to one month's rent as a civil penalty.
Thus, residential property lockouts are very risky endeavors and should be done with the consultation of an attorney after reviewing sections of the Texas Property Code.
1. A landlord may not remove a door, window, or attic hatchway cover unless it is done pursuant to a prompt repair of the premises. In other words, you can't just take a door off to "encourage" a tenant to leave. See Texas Property Code Sec. 92.0081(a).
2. If a landlord changes the door lock of a tenant that is delinquent in rent, it must be done according to the procedures set out in Texas Property Code Sec. 92.0081(c). Namely, the landlord must place a notice that (1) states an on site location where the tenant can go 24 hours a day to obtain the new key or a telephone number that is answered 24 hours a day that the tenant may call to have a key delivered within two hours after calling the number; (2) states the fact that the landlord must provide the new key to the tenant at any hour, regardless of whether the tenant pays any of the delinquent rent; and (3) the amount of rent and other charges for which the tenant is delinquent. The landlord must also, prior to changing the locks, send a warning, either mailed five days before the lock change, or hand delivered three days before the lock change, that states the date of the anticipated lock change, the amount of rent owed that must be paid to prevent the lock out, and the name and street address of the individual to whom, or the location of the onsite management office, at which the delinquent rent may be paid during the landlord's normal business hours. The lock change may not occur on a day or day before the landlord is not available or the onsite management office is not open for the tenant to pay the delinquency. The key must be provided to the tenant whether or not the tenant pays the rent. If the tenant doesn't show, the landlord must leave a notice of the day/time they showed up, along with the address for the location of the key during normal business hours. See Texas Property Code Sec. 91.0081(d)-(g).
3. If a residential landlord violates Texas Property Code Sec. 91.0081, the tenant may recover possession of the premises or terminate the lease, and a civil penalty of one month's rent plus $500, actual damages, court costs and reasonable attorney fees, less any delinquent rent or other sums owed to landlord. If the landlord does not allow tenant to use the key to enter the property regardless of paying the rent, the tenant is entitled to one month's rent as a civil penalty.
Thus, residential property lockouts are very risky endeavors and should be done with the consultation of an attorney after reviewing sections of the Texas Property Code.
Labels:
Austin,
delinquent rent,
key,
landlord,
lock out,
residential,
tenant,
Texas Eviction
Eviction Tips in Travis County
1. The landlord should review Texas Property Code Sec. 24.005 for the notice requirements before delivering the notice to vacate.
2. An eviction action should be filed in the justice precinct where the rental property is located.
3. The landlord generally will be required to wait three days after the eviction notice is delivered before filing the eviction action, unless the lease shortens the notice requirements.
4. The notice to vacate needs to be in writing and should be unconditional. It should tell the tenant to vacate unconditionally and by a date certain.
5. When filing, an attorney will need 1) a copy of the lease; 2) a copy of the notice to vacate; 3) filing fees; 4) service fees; 5) all contact information known for the tenant.
6. All parties to the lease, even those that are not currently residing in the property, should be named in the suit.
7. A suit for rent may be filed with the eviction suit if the amount due is within the jurisdiction of the justice court, which is currently $10,000. Charges for items other than rent cannot be joined with the suit for eviction.
8. Be prepared. The trial for the suit for eviction will be set on the day the case is filed.
2. An eviction action should be filed in the justice precinct where the rental property is located.
3. The landlord generally will be required to wait three days after the eviction notice is delivered before filing the eviction action, unless the lease shortens the notice requirements.
4. The notice to vacate needs to be in writing and should be unconditional. It should tell the tenant to vacate unconditionally and by a date certain.
5. When filing, an attorney will need 1) a copy of the lease; 2) a copy of the notice to vacate; 3) filing fees; 4) service fees; 5) all contact information known for the tenant.
6. All parties to the lease, even those that are not currently residing in the property, should be named in the suit.
7. A suit for rent may be filed with the eviction suit if the amount due is within the jurisdiction of the justice court, which is currently $10,000. Charges for items other than rent cannot be joined with the suit for eviction.
8. Be prepared. The trial for the suit for eviction will be set on the day the case is filed.
Labels:
Commercial Eviction,
Eviction,
Justice courts,
landlord,
tenant,
Texas law
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