All Forum Posts by: Bret Allen

@Robert Melcher I agree with your statement here.  Very good practical points (and strong defense to any claim the tenant may make against you during the lease). 

@Robert Melcher You bring up a couple good discussion points here.  

I am not your attorney and I am not giving anyone legal advice in this forum.  Many successful people run their businesses by weighing the risks and rewards.  It sounds like you have made a business decision that you are comfortable with after consulting with your attorney.  That is how it should be.   This rest of this post is not to second guess you and your attorney's decision as we probably don't have all the facts! 

However, my general thought on this issue (for everyone else looking in and trying to decide their risk tolerance) hasn't changed.  Everyone else should read the Code and find a local attorney to help you evaluate the law correctly so you can understand your risks in putting a clause in your lease that changes the burden of repair/maintenance from the landlord to the tenant. . . 

Here are a couple excerpts from the Code (TPC 92.06) that everyone else may want to consider . . . 

"(c) A landlord's duties and the tenant's remedies under Subchapter B, which covers conditions materially affecting the physical health or safety of the ordinary tenant, may not be waived except as provided in Subsections (d), (e), and (f) of this section.

(d) A landlord and a tenant may agree for the tenant to repair or remedy, at the landlord's expense, any condition covered by Subchapter B. 

(e) A landlord and a tenant may agree for the tenant to repair or remedy, at the tenant's expense, any condition covered by Subchapter B if all of the following conditions are met:

• (1) at the beginning of the lease term the landlord owns only one rental dwelling;
• (2) at the beginning of the lease term the dwelling is free from any condition which would materially affect the physical health or safety of an ordinary tenant;
• (3) at the beginning of the lease term the landlord has no reason to believe that any condition described in Subdivision (2) of this subsection is likely to occur or recur during the tenant's lease term or during a renewal or extension; and
  
• (4)
  • (A) the lease is in writing;
    
  • (B) the agreement for repairs by the tenant is either underlined or printed in boldface in the lease or in a separate written addendum;
    
  • (C) the agreement is specific and clear; and
    
  • (D) the agreement is made knowingly, voluntarily, and for consideration.
    

FYI -- TREC contracts and TREC addendums are not required unless you are using licensed real estate agent.  Even then, an agent can use a non-TREC form or clause if the client insists or if it is drafted by an attorney.  Title companies like the TREC contracts because they cover the basics needed to close the transaction i.e., sales price, responsibility for certain fees, timelines to cancel, responsibility for default, earnest money/option disputes, etc.  

The real problem with a 1 page contract is that many of these items are left out. That leaves the title company guessing on how to close the transaction.

I think the TREC contracts are a good start -- but that should not stop you from being creative or adding investor friendly clauses/addendum to the contract.  Again, unless you are a real estate agent, you can use any form you like to make an offer.

@Matthew Kreitzer gives a solid warning here. . . 

Texas Property Code 92.006 sets forth landlord/tenant rules regarding the duties and obligations that a landlord can waive.  A landlord can only put the burden on the tenant for a condition that materially effects the health and safety of a tenant in very limited circumstances (pests and rodents probably are likely a health and safety risk). Trying to put the onus on the tenant for pest control is opening yourself up for a lawsuit, offset in your rent collection by a tenant that pays for the pest control, or other tenant remedies.  

The only real exception is if you own only one rental property and meet a handful of other criteria listed out in the code.  Anyone renting in Texas should get very familiar with Texas Property Code 92 before trying to add terms to TAR or other lease.

@Matthew Kreitzer

The appeal is simple for the tenant to request. It is not like the traditional "appeal" in regular civil litigation case. The appeal in a Texas eviction is de novo, meaning that your basically redo what you already have done, but now you have to follow evidentiary rules. The evidence portion is why many people hire an attorney. Also, if you own the property in an LLC then you can't represent the LLC without an attorney.

Until the appeal date has passed your JP court judgment is not worth much.  Working with the tenant gives an investor additional assurance that there will be an end.  It is a business choice that you will need to make.   To me, it sounds like your agent has been burned by an appeal and understands the process.  However, 30 days is a long time for any extension.  I often see agreements to not execute a writ for 10 days or so.  

Also, keep in mind that an eviction judgment may become stale.  I would think twice about giving long extensions.

Good luck.  Congrats on the JP Court Judgment.  That is definetly the first step!

Bret

DISCLOSOURE: Bret is an attorney licensed in CA and TX, but he is not your attorney. Information posted in this forum is for information purposes only and does not form an attorney-client privilege. You should seek counsel from your own attorney in your own jurisdiction as each fact scenario is unique.  

In Texas there are many ways to put the paperwork together so that you can effectively close with an heir or the administrator.  Affidavits of heirship, small estates affidavits, temporary administrations, independant administrations, dependant administrations, muniments etc. may be necessary or useful.  The key is properly identifying who you are working with (who answers your letters) and what rights they have to transfer.  From there you can structure the deal, identify other heirs that may need to sign off, or take affirmative action to solidify a binding contract.  A good, investor friendly, attorney that understands your business model can help you walk through the specific facts quickly so you can cut through the red tape and focus on your business.  

Some of these deals are very simple and others can get quite complicated to close. 

Bret

DISCLOSOURE: Bret is an attorney licensed in CA and TX, but he is not your attorney. Information posted in this forum is for information purposes only and does not form an attorney-client privilege. You should seek counsel from your own attorney in your own jurisdiction as each fact scenario is unique.  

Generally speaking, a suit for specific performance and a lis pendens will tie up the property and force a seller with cold feet to the negotiating table.  The lis pendens can be a very useful negotiating tool.  In Texas, you need an "action" or lawsuit that involves title to real property, an interest in real property, or an encumbrance.  See Texas Property Code 12.007.  You also need to be a party in the suit seeking affirmative relief (i.e., specific performance).

I wouldn't recommend this tactic unless you have clean hands.  But if you have worked to find a deal, been honest with the seller, and completed your part as promissed in the contract --  and a seller is trying to back out -- then you might want to consider pursuing your legal rights.  

Find yourself a good attorney that understands investing, time value of money, and your business objectives.  

Good luck!

Bret

DISCLOSOURE:  Bret is an attorney licensed in CA and TX, but he is not your attorney.  Information posted in this forum is for information purposes only and does not form an attorney-client privilege.  You should seek counsel from your own attorney in your own jurisdiction as each fact scenario is unique.  

@Miles Stanley

Many of your basic contracts in Texas can be found at https://www.trec.state.tx.us/formslawscontracts/fo....

These have been drafted by attorneys and most buyers/sellers/agents are comfortable with using the TREC forms.  You should get familiar with each section of the 1-4 family contract and possibly the seller finance sections.  

If your deal doesn't fit into one of these "contract boxes" and/or includes some creative terms that don't quite fit then you should consider calling an attorney.  

Bret

LLC, S Corp, C Corp, LLP, LP, Family Limited Partnership, Partnership, Land Trust, Irrevocable Grantor Trust, or simply insurance??? There are a lot of questions when it comes to setting up the proper structure and there is no silver bullet. Your business structure needs to take into consideration tax consequences, risk tolerance, total assets, type of investing, short term goals, long term goals, anonymity, partners, raising money now or in the future, borrowing money, etc.

You also need to consider maintenance of your business, think corporate governance, adequate funding of the business, tax returns, operating agreements, resolutions, authority, etc. 

Also, don't overlook the fact that those starting out with a low net worth may be fine holding investments in their own name, or a d/b/a, and simply buying extra insurance (think an inexpensive umbrella policy) to cover potential liability risks.  The cost of setting up and maintaining a new entity may not be worth the trouble for a property or two (assuming you have no other money in your name).  

Many states, including Texas, allows slightly more complicated structures such as Series LLC. These can be great tools if you understand how to use them. One downside to Series LLC is that not all other states will recognize the series structure. So if you invest in another state with a "series" from your Delaware of Texas Series LLC then you might lose some of the protections that you thought you had. Also, an accountant should be consulted regarding whether you need to seek separate EIN numbers and/or file tax returns for each series -- you will get different opinions on this point depending on who you ask.

LLC, S Corps, C Corps are all treated slightly different under the tax code. The IRS is one creditor that you don't want to mess with. My suggestion here is to pay your taxes and to pay them correctly. There are many tax benefits that come along with real estate investing, but there are some pitfalls. Be smart and consult with an expert.

More complicated structures will include asset protection and anonymity features.  These structures are essential for active and successful investors, but might not be worth the hype for those just starting out.  Shielding and separating your assets from the risks of a deal can be valuable.

In summary -- you can make your business as simple (dba and insurance) or complicated (Family limited partnership with LLC general partner owned by a irrevocable family trust for you children) as you like or need. There is no easy answer for what you might need. A good attorney and CPA that will educate you on your options and not pressure you to use something you don't need is valuable member of your team.

My suggestion is that what ever you use/create, you need to understand how it works and how to maintain it.  If you don't understand it, don't use it.  Or hire someone to explain it to you or to help you maintain it.  

Good luck and good investing!

As stated above (by several people) piercing the corporate veil is tough in Texas.  This is a good example of why having a solid corporate structure is important.  It is also a good example of why it is important to get guarantees and use solid contracts when putting together your real estate deals -- especially the larger deals. The corporate protection laws, along with strong homestead and collection laws, makes collecting a judgment difficult in Texas.  It can be done, but you need to have a good attorney and good facts.  The information shared here just isn't enough to week through the facts.  

@Wendy Smith, for what it is worth,  I would be cautious of placing this type of detailed information on the forum.  Yes, it is great for discussion purposes, and I love the discussion.  But most litigation attorneys would cringe, as this stuff is likely discoverable if you continue the fight.