September 2021

Endorse that Title Policy img

Endorse that Title Policy

  • Every property owner needs to buy title insurance when purchasing real estate.
  • But beware that a title policy has large exceptions that can severely limit the amount of coverage.
  • As a result, its very important for a property owner to understand which endorsements it should buy to add to the title policy.

When I was looking around for something to write about this week, I didn’t see too much breaking news. Other than, of course, another decision by the Austin Planning Commission to recommend limiting density when the exact opposite is what we need. But I figured y’all would be tired of hearing me howl at the moon about that again. So … maybe next week.

In the meantime, I figured it would be good to write about title policies. Like almost all insurance policies, title policies can be very confusing and difficult to understand. But they are absolutely necessary when buying real estate.

There is too much to talk about to cover all of your policy in one blog entry. So this week I am just going to talk about endorsements. What are they? And why do you need them? Well … keep reading and you will find out.

The Basics of Endorsements

Before we talk about the basics of endorsements, I’ll give just a brief overview of title policies in general. You may know this but title insurance protects property owners and lenders from a financial loss as a result of a defect in title. So if you purchase a property and, after closing, another person makes an ownership claim on all or part of the property, if you have title insurance, the title company will have to defend your claim and insure you against loss.

A title policy has limits, however, to how much coverage it provides. So, for example, if there are any known potential defects in title prior to the purchase of the property, those would not be covered. And that’s where endorsements may come in.

Title endorsements provide additional coverage to the property owner that is not originally included in the policy. So with each endorsement you purchase, you are literally buying more title protection.

Why Endorsements Are Important

It should be pretty clear, therefore, why endorsements are important. Because title policies – while good, are limited. If you are familiar with them, you know that (in Texas) there is a large Schedule B that excludes lots of provisions from the policy. Your insurance policy, therefore, may have significant gaps in it.

That’s why you want to buy endorsements. Because they help fill in some of those gaps. And provide you more complete coverage against title defects.

Texas Title Endorsements

The logical next question, therefore, is which endorsements should you buy? That’s a question I just cannot answer in a blog post. Texas has a lot of endorsements available. Which ones you should purchase are very specific to your particular commercial real estate purchase. You need to investigate the endorsements and see what fits your scenario. Or – better yet – hire Bukowski Law Firm to do that for you.

Having said that, there are a few that are very common and are often purchased by property owners. Some of those are:

  • T-19.1 – This is the “MER” endorsement. It provides coverage for minerals, encroachments, and restrictions. It covers damage from a future extraction of minerals by the mineral owner, and undisclosed encroachments or restrictions on the property.
  • T-23 – Access Endorsement. It provides coverage if the property does not have access to a specific street.
  • T-25 – Contiguity Endorsement. If the property you are buying has more than one parcel, this endorsement will insure against loss if the two parcels are not contiguous.
    Survey Amendment – By purchasing this amendment, you have more protection from any errors in the survey.

That is just a small sampling of the many, many title endorsements that are available. Whether they, or any other endorsements, are appropriate for your purchase is something you need to analyze on a case by case basis. But please make sure you do that analysis because the additional coverage is so very important.

The lawyers at Bukowski Law Firm are ready to help you determine which endorsements you need. So if you are buying a commercial property, give us a call at 512-614-0335 and we can work together to make sure your investment is protected.

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Let's Do what Dallas Did img

Let’s Do what Dallas Did

  • In the early 2010s, Dallas covered a major highway that ran through its downtown and created a park on top of it.
  • I-35 in Austin divides east and west Austin and is an eyesore.
  • Austin should follow Dallas’s lead and cap I-35 and create a park on top of it.

I can feel the native Austinites shaking with rage as they read the title to this blog article. Who would ever want to do anything that Dallas does? I do. And you should. Because a few years back, Dallas had a great idea and its worked out really well.

You may have read this week, but Austin city leaders are seeking input on a proposed plan to bury I-35 through town and cap it. This would be part of the TxDot I-35 expansion plans.

And that brings us back to Dallas. Dallas did something similar a few years back. And it looks great. So that’s what we are going to talk about in this week’s blog article – whether capping I-35 through Austin makes sense.

Klyde Warren Park

As I wrote above, Dallas decided it was going to bury and cap Woodall Rogers Freeway and started work on the project in 2009. They finished in 2012 and, on top of the highway, they built the very nice Klyde Warren Park. If you have not seen it, you should definitely check it out the next time you are in Dallas.

The park is 5 acres and is a feat of engineering and design. In addition to the green space, trees, plants, and flowers, it has a children’s area and some restaurants. It hosts concerts and movies and, overall, has been a huge success. Instead of having a big highway running right through the heart of the downtown, the road is buried and a large park is in the middle of the city.

I-35 Through Austin

Now compare that to I-35 in Austin. It is not pretty. I-35 runs right through the heart of downtown Austin. To the west was built the capital and the center of downtown. To the east of I-35 was traditionally the area where the city put the poor and minorities. There is no denying the racist history of I-35. It has separated and segregated the city.

In addition to the worrisome cultural issues, it is a traffic nightmare. Anyone who has driven through Austin knows that I-35 is bumper to bumper traffic almost 24/7/365. And its not just a problem on I-35. The service roads cause constant traffic. And that hurts some of the businesses around that area.

TxDot has announced it has budgeted $4.3 billion to expand I-35. Through September 8, it was seeking input from the public on two expansion proposals. Both proposals center around widening I-35 by adding lanes. This will directly affect 140 businesses along the corridor. These solutions seem to exacerbate many of the I-35 problems. But we can talk more about that more in the future.

Cap and Stitch Plan

And that is where the cap and stitch plan comes in. The basic plan is to bury I-35 and cap the road to create a large park – similar to Klyde Warren Park in Dallas.

For all the reasons mentioned above, this is a far preferable plan to just adding more lanes. It will create green space, provide more parkland for residents to enjoy, and add additional business space (and tax revenue). It will also stitch together the separated downtown from East Austin. Thus working to correct a racial injustice that started 100 years ago. And, frankly, it will just look a lot nicer.

Capping highways is a trend across the country. And its easy to see why. The benefits are immense. Obviously no plan is perfect. And we do not know all the details yet of a potential cap and stitch plan. But the basic premise is sound and it’s the route that Austin and TxDot should pursue.

We made a huge mistake 70 years ago when we built interstates right through the heart of downtowns. But by burying and capping those freeways, we can start to fix that mistake. Its what Austin should do.

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How to not Lose an Escrow Deposit in Ten Days

How to not Lose an Escrow Deposit in Ten Days

  • Almost every commercial real estate purchase agreement requires an escrow deposit.
  • Usually the contract has a provision that allows the buyer to terminate the agreement and receive a refund of the escrow deposit.
  • But with a hot seller’s market, its important to understand that certain seller demands can eliminate a buyer’s refund provisions.

We have talked a little bit about the commercial purchase and sale agreements the last few weeks. And today we are going to revisit that. Overall, there are basically two reasons I have written about purchase agreements lately –

1) Texas has some promulgated forms that people often use. This lulls buyers into thinking that they do not need a lawyer to review a purchase agreement before signing it. And as I have written previously – I disagree.

2) But if you are going to just rely on the broker to help you sign up the purchase agreement, hopefully with reading some of these tips, you will be in a better position if something goes wrong.

I am continuing this week, writing about commercial purchase agreements. And this week, specifically, I discuss the escrow deposit sections of an agreement.

Escrow Deposit Basics

Many of you reading this probably already know the basics of how the escrow deposit works. But it is always good to have a solid baseline of understanding.

Every commercial purchase agreement will have a provision for an escrow deposit. This is the initial deposit that the buyer must put down to show it is serious about purchasing the property. It is generally refundable (or mostly refundable) if the buyer terminates the agreement during the due diligence period. The title company for the acquisition holds the escrow deposit. And the amount of deposit can vary depending on what the parties agree to.

New Developments with Escrow Deposits

The above outlines the basics of escrow deposits in commercial purchase agreements. With minor changes, escrow deposits have been like that for a long time and most people understand that is generally how it works. But we have seen things change a little lately here in Texas.

As anyone who reads this blog probably knows, the Texas commercial real estate market (or residential, for that matter) is on fire. There are few better places to invest than in Texas. As a result, sellers have been getting more aggressive in what they are requiring in purchase agreements. Some sellers, therefore, are asking for the escrow deposit to be non-refundable right at the start of the deal. The buyer, therefore, has no opportunity to conduct due diligence for free.

As a lawyer for buyers, this is a very frustrating development. I am generally very much against a buyer putting hard escrow money up-front before diligence. But ultimately it comes down to a business decision. I certainly understand if this is what needs to be done to get deals under contract. Just make sure you do as much due diligence as you can prior to signing the purchase agreement.

A Deal Breaker Provision

But of a buyer can usually terminate a purchase agreement with a full refund for an additional reason. If there are any issues with title to the property that the seller does not or cannot correct, generally the buyer can get a full escrow deposit refund.

Which brings me to another seller requirement that I have heard about but not yet seen personally. I have been told that some buyers are requiring sellers to forfeit their right to terminate with refund for title defects also. I do not think a buyer should do this unless it is completely comfortable walking away from its escrow deposit.

Waiving due diligence is one thing – you can generally correct any problems with the property by just spending more money. Obviously that’s not ideal – but it may not be fatal to the investment.

But you can’t fix title defects with money. Well, I guess you can, but its likely to be A LOT more expensive and time consuming than a normal due diligence issue. Please, therefore, do not agree to a provision that would waive a refund of the escrow deposit for title defects unless you are completely comfortable walking away from that escrowed amount.

Escrow deposits have been around in commercial purchase contracts for a long time. But as the market changes, the provisions sometimes change – as they have recently. As a result, it is always best practice to have a lawyer review your purchase agreement before you sign it.

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