October 2022


Which First – The Good News or the Bad?

  • Last Thursday was an important Austin City Council meeting for commercial real estate owners.
  • The City Council passed two ordinances that will restrict the operations of residential landlords.
  • It also relaxed some height restrictions in the North Burnett area to allow for greater development.

Its not often I write recapping what happened at an Austin City Council meeting. I usually write about it before the meeting and let you know if there is something important that will be discussed. But then the Austin Monitor or Jack Craver are much, much better at recapping things once they have happened.

But the Austin City Council meeting on October 27 was pretty important for commercial real estate owners. So I am making an exception this time to highlight some of the actions the Council took that will impapct commercial property owners. Of course, you should still read the Monitor and/or Jack’s email. But I reckon my take will be a little different than their’s.

First the Bad – Could have been Worse, I Guess


The first issue I want to talk about is something I wrote about in this blog two weeks ago. And posted about on Linkedin last week. The City Council took up two proposed ordinances that directly affect Austin residential landlords.

The first is the proposed ordinance to make it a crime to retaliate against residents who engage in “organizing” activities with other residents. This is, of course, already outlawed by the Texas Property Code. But Austin decided the state law did not go far enough. And, as I wrote about two weeks ago – there are potentially a lot of pitfalls in this ordinance. Its likely to be very bad for landlords and almost impossible to comply with. But, in its wisdom, the City Council approved this proposal with a 9-1-1 vote.

The second proposed ordinance that the City Council approved was to make the required Notice of Proposed Eviction a permanent facet of Austin landlord/tenant law. Again, this is in direct contradiction of state law. The one good thing to come from this vote – the City Council trimmed the time from 21 days to 7. So now, before landlords can issue a notice to vacate, they must first issue a 7 day notice of proposed eviction.

Obviously neither of these are good for property owners. I do hope, therefore, that the state legislature will outlaw these types of changes to the state property code during the legislative session starting in January.

Now the Good – More Density Coming Up North


It was not all bad news for the commercial real estate industry, though. I have dedicated a lot of words in this blog to the need for increased density in Austin. But there are a lot of different rules and ordinances that limit that density. And probably none of them is more culpable than compatibility requirements – which severely limit how high developers can build. And give us major transportation corridors like Lamar and South First that are lined with only one and two story buildings.

Well there was at least some good news that came out of the City Council meeting on this front. The council approved a change to the North Burnett/Gateway Zone that will allow developers to increase the height of the buildings they can develop. The limit in the area was 308 feet – meaning buildings could not go above that height. With what the Council approved on Thursday, developers will now be able to build up to 420 feet.

This is, obviously, great news for the North Burnett area. And for Austin as a whole. But we need much, much more relaxing of similar height restrictions all around the city. Which is why its so important to make sure we get City Council members who understand the need for development and density. So if you have not already done it, please get out and vote. Because the future of our great City depends on it.

Which First – The Good News or the Bad? Read More »

new business

Being in Good Standing is Great

  • When forming an entity in Texas, its necessary to file a certificate of formation and then annually file public information and tax reports.
  • If an entity does not file those reports, it can fall out of good standing. And that can create potentially liability for the principals of that entity.
  • At Bukowski Law Firm, we can help you get your entity back into good standing.

A lot of weeks, the ideas on what to write about in the blog come from something we have recently worked on at our firm. That’s where I am getting this week’s article. I will talk about it more below, but one of our attorneys had success in a matter because the opposing party missed something important.

Most of you reading this are probably involved in the real estate business. And you know, therefore, that most investors will set up a single purpose entity to own the real estate that they have invested in. Its what we recommend for all of our clients. And usually your lender requires it.

And while that is great, for a big investor, that can mean he or she has a lot of entities to account for. And to keep in good standing. Because letting your entity fall out of good standing is not great.

What Texas Requires from Entities


As you probably know, when setting up an entity in Texas, the first thing you have to do is file a Certificate of Formation with the Secretary of State. That ensures that you can receive the legal benefits that an entity provides.

Texas also requires some minimal filings every year to keep the entity in good standing. The first is a Public Information Report. This report makes public the address of the entity and its officers, partners, and/or members.

In addition to that, entities must file a franchise tax report. This report explains how much revenue the entity made and whether it owes franchise taxes.

If the entity does not file these two reports, it will fall out of good standing with the State. And as explained below, that is not a good thing.

The Pitfalls of not Being in Good Standing


Once an entity fails to file the above reports and falls out of good standing, it has no official status in Texas anymore. As a result, it does not provide the protection that it was intended to provide.

This means that the entity cannot:

  • Sign agreements – If you sign an agreement for an entity that is not in good standing, the opposing party may be able to claim that the agreement was never valid. Or that you committed fraud by signing on behalf of an entity that does not exist.
  • Sue anyone in court – The entity has no official standing in Texas anymore. As a result, it cannot avail itself of the courts and sue someone else to right a wrong.
  • Take any other action as an entity.

Because its not an entity in the State’s eyes, the principals of the entity have lost the very thing the entity was set up for. They have lost the protection that the entity provides. As a result, if an entity is not in good standing and there is a potential liability event, the principals of the entity can individually be found liable. And that, obviously, is not good at all.

Its Possible to Get an Entity Back into Good standing


So that information above is not very fun to hear. But don’t panic. Just because an entity falls out of good standing does not mean that it cannot get back into good standing. Usually this requires filing the missing forms and paying unpaid taxes or penalties. It is not incredibly difficult – even if it is incredibly important. Its also something we regularly do for our clients.

So if you are facing this issue of entities falling out of good standing, please give us a call. We can usually get them back into good standing without too much difficulty. And that is not only good – its GREAT!

Being in Good Standing is Great Read More »

City Hall

Does this Mean Property Owners May Go to Jail?

  • The Austin City Council is going to vote on major changes to the tenant organization and retaliation laws.
  • If passed, many unintended consequences will make it extremely difficult for landlords to navigate this without potential criminal liability.
  • Please call your city council member and ask them to vote no.

I don’t always love doing shock and awe headlines. It seems kind of cheap. But sometimes I need to get your attention. And this is one of those times. Its important.

The Austin City Council is proposing another ordinance that is going to drastically affect property owners in the city. I wrote a few weeks ago about how the City has proposed a 21 day Notice of Proposed Eviction on top of the state mandated eviction process.  This is still on the agenda for the Council to discuss. It has been moved to the October 27 meeting.

But that is not the only big ordinance that will be discussed at that meeting. The City Council is now also planning to discuss adopting another ordinance that will greatly change things for landlords. And that’s what we are talking about this week.

What is the New Proposed Ordinance?


The Austin City Council has proposed an ordinance that would instill penalties against any landlord that retaliates against a tenant who organizes with other tenants to secure more advantageous living conditions. At first glance, that seems reasonable, right? Nobody wants retaliation against tenants. But believe me – the devil is in the details.

First, this is already covered by the Texas Property Code. Under the Code, a landlord is not permitted to retaliate against a tenant who establishes, attempts to establish, or participates in a tenant organization. Tex. Prop. Code 92.331. If the landlord does retaliate against the tenant, the tenant may recover damages in the amount of one month’s rent plus $500, actual damages, court costs, and reasonable attorney’s fees. Tex. Prop. Code 92.333.

So why does the City Council feel the need to enact another ordinance in addition to the State law? It’s a good question. For one, tenants rights groups are very vocal. They make a lot of noise and the City Council hears them. In contrast, landlords do not speak up very often. That’s one of the reasons I am writing this article. We need you to voice your opinion – to call your City Council member. Its really important.

Because this ordinance, as you will see below, goes far beyond what the Property Code does.

What are the Unintended Consequences of this Ordinance?


If this ordinance passes, a property owner can be found criminally liable if he or she retaliates against a tenant. Specifically, the City Council wants to make it a misdemeanor to do so.

And a huge part of the problem with that is – the way the ordinance is written provides a ton of unintended consequences. To the point where it will almost be impossible for a property owner NOT to violate it.

For example, under the proposed language of the bill, any tenant that talks to the landlord about rent, changes in services, maintenance requests, or unsafe or unsanitary conditions at the property is considered to have participated in a tenant organization. REGARDLESS of whether that tenant actually talked to any other tenant about the issue. That means every tenant will be considered to have participated in a tenant organization.

And then once they are considered a part of a tenant organization, so many landlord actions can be considered retaliation. This potentially trying to evict a holdover tenant that the landlord has chosen not to renew.

This is Important


I think this is the third or fourth time I this blog article I have written that this is important. But it is.  This – together with the 21 day Notice of Proposed Eviction – are major changes to the landlord/tenant relationship that go far beyond what the people of this state want done. And we cannot stand by and let this take shape without voicing our objections. So I am pleading with you – please call your City Council member asap. Tell them to vote no on both of these ordinances. Also, please come to the meeting on October 27 and voice your opposition in person. It’s the only chance we have to stop these.

Does this Mean Property Owners May Go to Jail? Read More »

construction site

How to Save Some Money on Your Title Insurance Policy

  • The Texas Department of Insurance sets up the cost of title insurance and any reductions that may apply.
  • Texas Rate Rule 5 and 3 can combine to provide a commercial real estate investor a significant discount when it improves a property.
  • Because there are so many of these potential reductions available, its important to have a title fee attorney who understands your business and which reductions may apply.

If you are reading this blog, I probably do not have to tell you that commercial real estate is booming in Texas. Obviously the recent uncertainty and rise in interest rates have caused some to be a little apprehensive. But for the most part, the market is very good.

As a result, we have been doing a lot of closings lately – both as a title fee attorney and representing the buyer. And while doing it, an issue came up that I think makes a good topic for this blog. I wrote a few weeks ago about how title insurance is both necessary and expensive. Well there are ways to reduce the cost if certain factors are met.

This week, I am writing about one of those potential discounts that you should definitely be aware of if you are renovating or developing on your property. It can be a great benefit to keeping costs down.

Rate Rule 5 can Limit Construction Costs


I have mentioned this before, but Texas title insurance costs are set by the Texas Department of Insurance. The costs and discounts are all explained in the rate rules that TDI sets up. Part of one of those – Rate Rule 5 – is pretty well known.

The part you likely know of Rate Rule 5 (“R-5”) is the simultaneous issue. It means that if you are purchasing an owner policy and a lender policy on the same property at the same time, you can get the lender policy priced as a simultaneous issue. And this only costs an additional $100 over the cost of the owner policy. Any endorsements to the lender policy are, of course, an additional cost.

But there is another part of R-5 that you may not be familiar with. If you have an Owner policy and are now planning to improve the property and, thus, increase the amount of the title policy, then:

  • The premium for the new Owner’s Policy must be reduced by a credit as provided in Rate Rule 3, if the new policy:
    • Covers the identical property covered by the existing policy;
    • Is dated within four years of the existing policy; and
    • Includes some exception and liability language prescribed by TDI.

Rate Rule 3 states that when an improvement is added to the property, the cost of the title policy will be the total base rate with the improvement less the cost of the surrendered policy.

So What does this all mean?


Sometimes the easiest way to see what the words mean is to see them in action. Lets assume that, in 2020, you bought a property for $10 million and the title policy base rate for that was $40,750. And then, you make improvements to the property worth an additional $30 million so that you now need a title policy worth $40 million total.

The cost of that new policy would be $106,795. But if the improvements are done within four years of the purchase of the original policy, then you are credited the amount of the original policy. So your total cost would be $106,795 less $40,750, or $66,045.

I have written now about a few of these title policy refunds. Its important because there are a lot of them. TDI sets out thirty-six different rate rules that can potentially reduce the cost of your policy. Its so important, therefore, to have a title fee attorney that understands your business and what exceptions may apply. At Bukowski Law Firm, that’s what we strive to do for our clients.

How to Save Some Money on Your Title Insurance Policy Read More »


Johnny Cab Comes to Austin

  • Lyft has introduced autonomous ride share to Austin.
  • It will start with two chaperones in the cars but they will be removed in the near future.
  • Overall, this technological advance should be good for Texas.

I read an article in the ABJ this morning that inspired this blog post. And while it is not exactly about commercial real estate, it was too interesting to just ignore.

According to the article, Lyft has introduced autonomous ride sharing cars to Austin. The future is here – and on earth. Obviously this is big news and has a lot of ramifications for the future of how our society will behave. But what does it mean now for Austin? And what could those changes be? That’s what we are talking about this week.

Autonomous Ride Share Options


As I wrote above, according to the ABJ, Lyft has introduced autonomous driving ride share cars to Central Texas. Currently, the cars will apparently have two chaperones that will ride in the cars. Eventually, however, those chaperones will stop riding and you and the car will be on your own. This is, apparently, already happening in San Francisco.

After I read this article this morning, I went to my Lyft app to see if I could order an autonomous ride. I could not. It is not clear to me, therefore, how you order one. I hope to figure that out by the time you are reading this article. I look forward to taking my first ride.

A little over a year ago, Lyft announced a partnership with Ford and Argo AI to build autonomous cars for ride sharing. The goal of the partnership is to commercialize ride sharing on a large scale. And this is clearly the next big step in that process. Besides Austin, this is happening in San Francisco and Miami also.

Future of Texas Travel


There is little doubt that autonomous car travel is going to grow. And it is definitely the future of ride sharing. But what are the ramifications of that?

First, I do not want to ignore a potential short term negative consequence. Uber and Lyft employee a lot of people in the US. And they provide flexible work schedules. Obviously this will eventually eliminate a lot of those jobs. Though that will clearly take a while to happen.

This is, unfortunately, a real and legitimate concern with all technological innovation. It often eliminates jobs in the short term. And people can get left behind. We need to be aware of that and ready to support where needed. Because overall, technological advances are great for society and create far more jobs than they eliminate. But short term, it can be an issue.

Second, on the other hand, autonomous car travel should be safer than travel with human drivers. Basically the autonomous cars can eliminate human error. As a result, most – if not all – of the car accidents that are caused by human error will be eliminated. The flip side of that is, apparently, sometimes humans can adjust and avoid accidents or make them not as harmful. The AI may not be able to do that as well as human drivers.

Finally, autonomous cars should improve traffic. Similar to the cars being safer, autonomous cars can eliminate human irrational decisions. And, of course, eliminate some accidents. As a result, traffic should flow better when there are a lot of autonomous cars on the road. It should eliminate a lot of traffic jams. And in a city like Austin – where traffic is one of the biggest issues we face – that could be a huge benefit.

Obviously there are a lot of issues that come with autonomous cars. For example, as a lawyer, I’m really curious about liability when there is an accident. But this is not a technology blog. It’s a commercial real estate blog. So I am not going to get into all of the details. But the future is autonomous cars. And the future is here.

Johnny Cab Comes to Austin Read More »