October 2021

Commercial Real Estate Attorney | Bukowski Law Firm | Austin, TX

The Importance of Being Covered

  • When getting title insurance with a real estate purchase, its very important to read the Schedule B exceptions to that coverage.

  • We always recommend our clients purchase the T-19.1 endorsement to expand the coverage provided in the policy.

  • T-19.1 provides REM coverage – restrictions, encroachments, and minerals.

Its been a crazy couple of weeks in the blog here. The last few weeks have been all about who is moving to Texas and Detroit, and how the Austin City Council is trying to screw all of that up. So much drama and excitement.

Well this week we are going to get back to learnin’. That does not mean it will not be as exciting. Title insurance talk is ALWAYS super exciting. But truly, it is an important issue for property owners to know about.

So we are going to talk about Texas title insurance – specifically the T-19.1 title endorsement.* We always recommend our clients buy this endorsement. But what is it? And why is it so important? Well for that … you need to read below.

Title Insurance Recap

Before we talk about the T-19.1 endorsement, its important to do a quick recap of title insurance generally. Many property owners probably know this already, but title insurance insures the property buyer from a loss sustained from a defect in title to a property. So if a claim on title does arise after the buyer purchases the property, the title company will defend against that claim and cover a loss to the property owner if one does result.

It is important to note, however, there can be significant exceptions to that title coverage. In a Texas title policy, Schedule B lists out all of the specific exceptions from the coverage. It is extremely important, therefore, that you or your lawyer pay close attention to those exceptions.

And, like any insurance policy, you can purchase endorsements to the policy. There are several that we recommend (and have briefly discussed previously). But perhaps none is more important for a buyer than T-19.1.

What is T-19.1

T.19.1 is the REM endorsement. While it will not be the end of the world as you know it if you do not buy it, you will feel fine if you do. It expands coverage in three specific areas –

  • R – Restrictions. The endorsement generally provides coverage for enforcement of the existing covenants (restrictions) – unless there is a specific exception highlighted in Schedule B. In other words, it provides coverage for violations of any restrictions that were unknown at the time of the policy.

  • E – Encroachments. The endorsement expands coverage to insure against loss or damage sustained by reason of an encroachment of an improvement on the land onto adjoining land or an improvement on adjoining land encroaching on the buyer’s property. Again, this must not have been known at the time of the policy and, therefore, included in Schedule B.

  • M – Minerals. The endorsement also expands the policy to provide coverage for damage resulting from the future exercise of a right to use the surface of the property to extract or develop minerals from the land.

As you can see, this endorsement greatly expands the coverage you have from the initial policy. That is why it is such an important endorsement and why we recommend it to all of our clients.

But you can also see that the endorsement is limited by what is known as of the date of the policy. That is why it is SO important to review all of the exceptions listed in Schedule B. And that means going through all of the documents listed there and reading them to make sure they do not hinder your coverage.

And that is what we do for our clients at Bukowski Law Firm. We take the time to thoroughly review those documents and make sure your real estate investment is protected.

*T-19.1 is specifically for the property owner. For the lenders reading this blog entry, T-19 provides similar coverage for your entities.

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Oops – Austin Did it Again

  • The City of Austin once again extended its eviction moratorium.
  • This extension has a monthly step down in requirements that will expire entirely on December 31, 2021.
  • But given the behavior of the City Council thus far, it would not surprise at all if the Council tries to make some aspects permanent.

I cannot believe I have to keep writing this same blog article. But maybe I should just get used to it at this point. Its just very frustrating.

You may have missed the news, but last Thursday, the Austin City Council once again voted to extend its eviction moratorium rules. This despite the fact that most other local areas in Texas have ended their COVID eviction rules.

So why does Austin think it still needs these rules? And what does it mean for property owners? That’s what we are talking about this week.

What Does it Mean For Now?

As I wrote above, the Austin City Council extended its moratorium on evictions for non-payment of rent through the end of this year. The current rules are that a landlord may not evict a tenant for non-payment of rent unless:

  • The rent is for more than $2,475 per month or

  • The tenant is at least three months behind in rent. This requirement decreases to more than one month in November and is entirely removed in December.

There are many other technical rules in the moratorium that a landlord must follow before issuing a notice to vacate. This blog entry is not meant to be an extensive look at all of the requirements. For that, please give us a call and we can discuss.

This all remains in effect despite Governor Abbott’s declaration he made a couple of months ago that seemed to nullify all COVID restrictions and rules. As you may recall, in his order, Governor Abbott rescinded all local COVID rules that were put into place during the last year. It seemed like this order would nullify all of the local Austin and Travis County eviction rules. But despite that, the JP Courts have so far treated the local orders as still in existence. So … I don’t know.

What Does it Mean for the Future?

I don’t know about this, either. Austin’s economy is doing very well overall. Unemployment rate is down to about 3.8% as of August. Restaurants and bars are at full capacity. If anything, businesses are having trouble finding people to work.

In addition to its extension last Thursday, the Council also set up another $6.6 million for residential rent assistance for people have difficulty paying their rent. As a result, if you are a tenant who has difficulty paying rent because of COVID, you and your landlord can apply to the City for assistance. Indeed, under these rules, the landlord is required to apply.

Because if this, it sure seems like the justification for the moratorium is no longer valid. The City Council first enacted the justification because people were out of work and could not afford to pay their rent. We, of course, did not want lots of people to be evicted during a global pandemic so the moratorium made some sense.

But that time has passed. If you want a job that will help you pay your rent – there are plenty of jobs available in Austin. Unemployment is low and the economy is booming. And, if you need rental assistance, the City has made it available. So why are we still forcing property owners to continue to house people who do not pay rent?

My only conclusion is that this is what the City Council wants going forward. From the way the restrictions are reduced each month, it does appear that this may be the last formal extension. But I would not be surprised if the Council tries to make some of the restrictions permanent. And, as you can imagine, that may have a tremendously negative effect on the housing market. But I do not know how else you can read the council’s continued extensions of the moratorium any other way.

Assuming that they do try to make some aspects permanent, what is the solution? I guess there are three:

  • Voting the current councilmembers off the dais;

  • Hoping the state steps in again to knock this down; and/or

  • Sue the City.

If the Council continues to act this way, I do not know what other choices property owners in the area will have.

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Another Win for Central Texas

Another Win for Central Texas

  • Last Thursday, Elon Musk announced that Tesla was moving its headquarters from California to Austin.
  • While we do not know many details yet, this is undoubtedly good news for Central Texas.
  • But it further highlights that our city council needs to support building more dense housing.

Last Thursday was RECA’s Knockout Night in Austin. If you are not familiar, Knockout Night is one of the biggest events of the year for the Austin real estate industry. If you have never been, I recommend trying to go next year. It’s a fun night and there is a lot of great networking done. And you get to see some real estate industry professionals punch each other in the face.

So why am I talking about Knockout Night? Am I going to go into details about the networking and socializing that happens there? I am not.

I bring it up to explain why it took me until Friday to catch the really big news that happened on Thursday. And that’s what I really want to talk about in this week’s blog.

On Thursday, as I was finishing work and finding my cufflinks and tuxedo shirt, Elon Musk announced that Tesla was moving its headquarters to Austin. This is, obviously, very big news. But what does it mean for Austin? And when will it happen? That’s what I write about below.

Who? What? Where? When?

There is certainly a lot of buzz in Central Texas about Musk’s announcement. But while he dropped this news bomb last Thursday, he really did not go into many details. So many of the questions that we have are not answered yet. For example –

  • When will Tesla move its headquarters to Central Texas? We do not know.

  • Where will Tesla build its headquarters? We do not know. But it is building the large Gigafactory out east along 130. So it is reasonable to wonder if Tesla’s headquarters would be in the same area.

  • How many employees will be at the headquarters? Again, we do not know. But Tesla’s California headquarters currently has about 650 employees.

I know we are all excited about the news, but I reckon we will just have to wait a little longer to get the details.

What Does it Mean for Central Texas?

Even without knowing all the details, though, this is unquestionably great news for Central Texas. Whenever a Fortune 500 company moves its headquarters to the state, it is good news. It brings people and jobs. Not only will Tesla (presumably) bring its employees and/or hire new ones here. But also the vendors and support companies that work with a huge company like Tesla will also employee people and bring more money to the region. And frankly, when a company like Tesla wants to be in Austin, it continues to raise Austin’s profile. Which may help convince other companies to move here – bringing even more jobs and money into the region.

As a result, I do not think this can be seen as anything other than a huge win for Central Texas. But that does not mean there are not also potential pitfalls.

I have written about this so many times before, but Austin has an affordable housing problem. Tesla bringing its headquarters to Austin is almost certainly going to increase the population of the area. We need more housing. That’s the bottom line. And we need it in close in urban areas.

That means we have to have higher density. Unfortunately, developers who try to build dense housing far too often run into obstacles form our city council and neighborhood groups. This has to change. This city is going to continue to grow. For Austin to have any chance of having even somewhat reasonably priced housing, we have to increase density. And our elected officials have to support this plan. And stop being an obstacle in the way.

Tesla’s move to Central Texas is going to continue to grow Austin’s population and status. But we need to meet that growth with continued expansion of dense housing. And for that, we need to have the support of Austin officials.

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oming Home to Detroit

Coming Home to Detroit

  • The Detroit Homecoming is a great annual event that recruits former residents to come back and see the exciting, new growth.
  • There are a lot of cool new real estate developments being built in the City.
  • Detroit’s growth presents a cool, interesting opportunity for real estate developers and investors.

First let me start by saying I am sorry for missing last week’s blog entry. I know there must have been tens of people disappointed. But we are back this week.

Last year around this time, I wrote an article about the return of Detroit. I had been there to visit and toured a lot of the new developments being built. As someone who grew up in the Metro Detroit area, it was exciting to see.

About a week and a half ago, I returned for my second trip to the Detroit Homecoming. I again got to meet with people doing exciting projects, see some cool developments, and get excited all over again for my hometown. So I figured I would give a little update in this space about what is going on there.

What is the Detroit Homecoming?

About a year and a half ago, a fellow Detroit expat here in Austin told me about the Detroit Homecoming. He had been there previously and really enjoyed it and learned a lot about what was going on in the city. It is sponsored by Crain’s Detroit Business and is really a celebration of the revitalization of Detroit.

The goal is to get folks who grew up in the Metro Detroit area but then left to come back and visit. And see all that is going on with Detroit’s rebirth. The Homecoming attempts to leverage the financial, social, and human capital of the former Detroit area residents to stimulate the economic and social progress of the City. The Homecoming team has tallied more than $606 million in economic impact from local initiatives and projects led by or invested into by expats after attending the event.

The Homecoming truly is a great event. It consists of:

Panel discussions that have fantastic guest speakers including the Mayor of Detroit, the CEO of Ford Motor Company, Meg Whitman, etc.The panel topics are wide ranging, including development, social improvement of the city, entrepreneurial activity in the City, etc.
The panel discussions are held at the new Mike Illitch School of Business at Wayne State University.

Tours of the new developments throughout the City.
A happy hour at a very cool restaurant overlooking Beacon Park.

Real Estate Focus

While there are many topics discussed during the Homecoming, being a real estate lawyer and investor, I am obviously most drawn to the real estate discussions. As a result, I was extremely interested to see some of the new developments going on in Detroit. A few of the exciting ones are:

Michigan Central Station – Its hard to start anywhere else but the old central train station in Detroit. It had been vacant and abandoned since 1988. And then Ford bought it to turn into an innovation hub. It plans to have employees in it by the end of 2022.
Hudson’s site – Back in the Detroit heyday, the Hudson’s building was the premiere retailer in downtown Detroit. Hudson abandoned the site in 1983. But it is currently being developed into a mixed-use retail/office/hotel/residential space.
Godfrey Hotel – A new boutique hotel with a rooftop lounge being developed in Corktown.
Meijer Rivertown Market – A desperately needed neighborhood grocery store has recently opened in what was a food desert area.

The Future of Detroit

Detroit has been on the rebound for the last few years. It’s a hot market. Having said that, there is no doubt that COVID hurt its progress. But as we emerge from COVID, the Detroit rebirth has rebounded. When I was there recently, the amount of development and growth was very exciting. I think it’s a great investment opportunity for real estate developers. (Full disclosure – my investment company owns 20 multifamily units near Wayne State University).

I know I sound like a cheerleader in this article, but I’m proud of Detroit. The Homecoming is a terrific event. Its so fun to go back there and see all the exciting developments and progress. And maybe next year when I go, I’ll get to tour Mom’s Spaghetti.

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