January 2023

partitioning commercial real estate assets

Who Gets What?

  • When partnerships split up, they often need to determine what to do with the real estate the partnership owns.
  • One potential solution is partition – to divide the property between the partners.
  • Partition can be an expensive and lengthy process. As a result, it is often best to resolve the issues outside of litigation.

Sometimes people split up. And partnerships dissolve. That’s an unfortunate consequence of dealing with human beings and their individual idiosyncrasies. Because we do a lot of real estate litigation, we see these disputes a lot.

The question we are dealing with this week, therefore, is what happens when things go bad and there is a split on the horizon? What are the parties supposed to do about the property they own together? One potential solution in Texas is partition. But it may not be the best solution. So what is it? And is it a good option for you and your partner? That’s what we are here for.

What is Partition?


Most people who enter a partnership – whether its personally or professionally – do so with the best of intentions. We want it to work out. But we know that many (most?) of them will eventually fail. And when that does happen, we need to know what to do with the assets. This is when you need a good law firm to step in and help with the allocation of assets among the partners.* And because this is nominally a commercial real estate blog, we will specifically focus on real estate.

First, we always suggest the partners try to come to an agreement among themselves to reach a settlement. This is going to be a much better option because it will save the time, headache, and expense of litigation. It is just a much cheaper and more effective route than litigation.

But if you cannot reach an agreement, one potential solution is partition. In law, a partition is when parties seek a court order to divide up a property into separate, concurrent tracts so that each party owns a separate piece of the initial, overall property. Often in real estate, especially when there is an improvement on the property, this ultimately leads to a forced sale of the property. Because it cannot be divided in a manner that is fair and reasonable to both parties. Thus the only way to split it is to force a sale and split the proceeds.

How Does Partition Work?


Parties generally resort to partition when they cannot agree on an equitable way to split the property. As a result, the process is usually contentious and leads to litigation. In general, a partition action follows the following steps:

  • First, one of the parties will file a petition to split the property;
  • The Court then determines if the property can be partitioned in kind or must be sold;
  • As we discussed above, often the property cannot be split reasonably, and therefore the court orders the property sold; and
  • The property will be sold at auction, with certain costs being deducted from the sales price (e.g. surveyor, appraiser, cost of auction, etc.).

For a real estate owner, there are some very real issues with this process. Specifically:

  • The process is very expensive. You will need a lawyer throughout it and, especially if the partition is contentious, that can be very expensive;
  • It can be a long process; and
  • Ultimately the property could be sold at auction. It may not be the best time to sell the property. And the price may be further depressed from selling at an auction as opposed to marketing it out.

As a result, going through a partition is likely to depress the total return the partners could get from resolving the issues themselves without resorting to partition. But if and when you find yourselves at an impasse, Bukowski Law Firm can help you find a reasonable solution.




*Also, its why having a law firm draft the initial partnership agreement is so important. Often, the parties can avoid the messiness, time, and expense of litigation on the back end if they only had a good partnership agreement on the front end.

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How will Austin Solve its Housing Problem

Back in the High Life Again

  • There are a number of reasons to be pro-urbanization. Including that it leads to more dense housing, providing more overall housing units.
  • At least two Texas cities – Dallas and Austin – are some of the best cities for urban living in the country.
  • As Texas becomes more urban, cities should make it more friendly for developers to meet the needs of its growing populace.

I write a lot about housing in this blog. Especially about density and urbanization. Because this is nominally a commercial real estate blog and there is a nationwide housing crisis. So it’s a pretty natural topic to write about.

If you read this regularly, you probably know that I am a big fan of urbanization. There are lots of reasons for this – greater density and urbanization provide a lot of benefits to a community. And it also just means there are more houses for people to live in. So as often as possible, I try to promote dense, urban spaces where people can live, work, and play.

Despite this, I never really considered Texas’s cities to be particularly friendly to urban living. They didn’t strike me as terrible, but certainly not an easy place to live. But a new study may get me to change my mind.

Texas Cities Are Great for Urban Living


I’m not totally sure who StorageCafe is but they put out a new study that listed the best places in the US for downtown living. And, much to my surprise, Dallas was number one. And if that is a surprise, wait until you see who was number two. Austin. Our Austin, Texas.

When I saw this study referenced in the Dallas Business Journal, I thought there must be some funky metrics StorageCafe is using to get to those rankings. According to its analysis, compared to other cities, Dallas has luxury apartments that are large in size and have great aceess to fitness centers. The article also noted that, while Dallas used to embrace sprawl, to meet the growing demand for housing recently, Dallas has embraced higher density and built a lot more urban housing options.

Similarly, Austin ranks high in green apartment buildings, apartment size, and having an educated population. Austin is also one of the liveliest areas of the country in the study with 14.6 restaurants and 2.8 theaters per 1000 locals downtown.

And this really is a trend throughout all of Texas. Since approximately 2011, rural areas in Texas have grown by about 1%. But urban areas have grown by about 18% during that same time. And now, about 90% of the new Texans are looking to live in urban, metropolitan areas.

So while Texas has a large rural population, it is also one of the most urban states in the country. As of 2010, 84.7 percent of Texans lived in urban areas. And it has undoubtedly grown since then. Indeed, Texas has six of the top twenty-five largest cities in the US.

Meeting the Demands of Urban Living


I do not know if Dallas and Austin should be ranked one/two in a study of best places to live in an urban setting. That’s not ultimately that important. The more important takeaway is that people keep moving to Texas. And increasingly those people want to live in an urban setting. And we need to continue to develop dense, urban housing to meet those needs.

To do that, we need Texas cities to work with developers to make it easier to build dense housing in urban areas. This includes all of the usual suspects:

  • Permitting – It just takes too long and is too difficult to get approved – especially in Austin.
  • Compatibility – This may be the number one hindrance to increased density. Its hard not to get frustrated driving up and down Lamar or East Seventh Street and seeing it lined with two story buildings.
  • Minimum sized lots – The minimum size should be decreased to allow denser housing.
  • Public transportation – Its important to have great public transportation to go with urban living.

These are, of course, just a few of the examples. But they are important to the future of Texas’s cities. And the more cities work with developers to make building urban housing more accessible, the more we will be able to meet the housing demand where it is – in the heart of the city.

Back in the High Life Again Read More »

e car

Charging Up Multifamily Development

  • Electric vehicle sales are increasing at a rapid pace.
  • This presents a unique new challenge to multifamily community owners and developers to meet the needs of their tenants.
  • There are potential tax credits that are available for installing electric vehicle charging stations.

I drive a Tesla. I’m not writing that to be cool (is it cool?) or out myself as an Elon Musk fanboy. Neither of those statements are accurate. I’m writing that up front because I want you to know that this week’s topic is near and dear to my heart. And I’m a little biased because I love my Tesla. It’s a great car.

Also I should admit up front that I am blatantly stealing the Austin Business Journal’s topic idea for this week. So you should definitely read this article. Because its really good and goes more in depth than I can in 700 (or so) words.

You likely do not need me to tell you this, but electric car sales are increasing. Significantly. And with that comes the need for charging stations. But what does that mean for multifamily owners, operators, and developers? Well that’s what we are going to talk about this week.

Electric Car Sales are Growing


All you have to do is drive around town and you can see that electric car sales are increasing significantly. For many reasons, they have become very popular. And surely their popularity will continue to grow.

In the third quarter of 2022, there were over 200,000 electric vehicles sold in the United States. For the year, they represent approximately a 6% market share of total cars sold in the US. Tesla still owns a large percentage of that market share. But almost all the auto companies – including BMW, GM, Ford, etc. – offer electric cars now and have plans to increase their sales.

Some estimates are that approximately 30% of all vehicles sold in 2030 will be electric. And it will continue to grow from there – up to potentially hitting the net zero gas emissions projections by 2050.

Electric Cars and Apartment Living


For us in the commercial real estate world, an obvious question presented by this growth is what to do with our multifamily projects. If residents are going to be driving electric cars, they are going to need some place to charge them. There is already a high demand for charging stations around the state. And its only going to increase as more electric cars are sold.

So what is an apartment community to do? There is little doubt that the owners, managers, and developers are going to have to install charging stations. As I was doing my research for this article, I found lots of websites that would tell a potential renter which apartment communities have charging stations. It is, therefore, already a marketing advantage for a community. And will obviously become moreso as sales increase.

What I cannot answer right now is how many charging stations does a community need? I guess that is mostly a business decision. But it makes a lot of sense to be planning for the future. While a community may only need one or two now, in the near future, it may need a lot more than that.

It also depends on what type of charging the community installs. I am not an expert in this area, but there are different types of charging stations:

  • Level 1 charging stations are the least powerful and generally take up to 43 hours to get a 249 mile charge.
  • Level 2 stations are more powerful and generally take up to 11 hours to get a full 249 mile charge.
  • Level 3 stations are the most powerful and generally take up to 1 hour for that full charge.

These charging stations undoubtedly can be expensive. But the Inflation Reduction Act includes a federal tax credit of up to 30% of the cost of installing commercial EV equipment for up to $100,000 per project. That can help defray the cost. And help install charging stations that will likely become necessary components – and marketing hooks –  of any new multifamily community.

Charging Up Multifamily Development Read More »


Settling the Statement

  • There are a lot of fast moving parts in a commercial real estate closing.
  • For example, its very important to have your own settlement statement to compare to the title company’s.
  • There are a lot of specific areas in the settlement statement to keep track of. And a good lawyer can help you do that.

I started last week’s blog article talking about how exciting a new year is. I’m coming back to that well again this week. I don’t know – I guess I’m just really looking forward to 2023 and all that it will bring. I know a lot of people are concerned about where the economy is headed. And that’s certainly legitimate. But I also see a lot of opportunity on the horizon. And that is exciting.

Specifically, I think there are going to be a lot of commercial real estate deals completed this year. Once everyone adjusts to the new normal – whatever that may be – I think we will see a lot more deals moving forward.

As you probably know, commercial real estate deals are complicated. There are a lot of moving parts – especially as you get close to the closing date. As a result, you really want to make sure you are on top of everything that is happening. And, of course, have a great lawyer to guide you through the process. And one area where this is especially important is in the closing statement. So that is what we are going to talk about this week.

Closing Process is Very Busy


Anyone who has closed a commercial real estate transaction already knows this, but there are a lot of moving parts during the closing process. And the days move by very quickly. As a result, you and your team need to be on top of everything that is going on.

For example, its extremely important to monitor the title search and title commitment. Of course this is where a great real estate lawyer should lead the review. But its very important to make sure there are no challenges to the title of the property. How that is done is a topic for another blog article in the future.

This week we are going to focus more on the settlement statement. It will generally come from the title company – but you should definitely make sure you have your own internal copy that you put together. Because as good as the title company may be, it may not know everything that goes into the closing.

As a result, every step of the way – with every version of the settlement statement that you get from the title company – you need to review it and make sure there are no errors.

What to Look for in the Settlement Statement


While the entire settlement statement is of course important, here are a few specific things that you should look for:

  • Title fees – These will be provided for by the title company. In general in Texas, the seller pays for the owner policy and the buyer has to pay for any endorsements and the simultaneous loan policy. If you have any question about any of the fees, check with the title company.
  • Lender fees – The lender will likely provide its own settlement statement to the title company to include in the overall one. Its important to go through the lender’s statement to make sure the fees are consistent with what was proposed in the original term sheet.
  • Credits – Either in the purchase agreement or just as an agreement between the parties, the buyer and seller may agree to some credits. Its important to check to make sure those are included in the settlement statement because the title company may not be aware.
  • Prorations – The purchase agreement should explain how the prorations are calculated. But its always important to have your own calculations to check to make sure they are correct.

This is, obviously, just a few of the important pieces of the settlement statement. You should always check and double check each version to make sure its correct. And having a good lawyer to also check and walk through it with you is always a great idea.

Settling the Statement Read More »

Econ 101 - A Shortage of Supply

New Year – Same Issues

  • As we have discussed previously, Texas cities have a huge need for affordable housing.
  • But it is very difficult for developers to cost effectively build affordable housing.
  • Local municipalities, therefore, need to use a variety of incentives to make it more achievable for developers.

Happy New Year. I hope everyone had a great new year and a fun time with friends and family. A new year is always somewhat exciting, regardless of how old you are. Its like the start of a new baseball season – it provides hope that this is the year we get everything we want. And that the Detroit Tigers are going to win the World Series.

I am, therefore, excited for 2023. And hope you are too. I’m excited to work on interesting and unique projects and to generally help build a better Texas.

When I was searching for article ideas this weekend, I read a great interview in the Dallas Business Journal about a roundtable discussion* that a Dallas company hosted. It was focused on affordable housing and talked about a lot of the difficulties developers face when trying to build it. And, of course, those issues are not just in Dallas – they are all over Texas. So that’s what we are going to talk about this week.

It is Difficult for Developers to Build Affordable Housing


As written above, the interview in the Dallas Business Journal that came after Innovan Neighborhoods hosted its roundtable is quite interesting. Innovan’s Managing Partner Maggie Parker said that there are a number of hurdles that developers face when trying to build affordable housing. Obviously the revenue from affordable housing is not as significant as market rate housing. So to make it realistic to build, the costs need to be lower.

But that is very difficult right now. Specifically, she said that affordable housing often requires different sources of funding – including from local municipalities. And being able to navigate those funding waters takes knowledge to understand the give and take.

And just getting the government funding often takes a long time. And, of course, the longer it takes the more the cost is driven up.

In addition, construction costs have increased tremendously the last couple of years. And, obviously, that directly increases the cost of building affordable housing. Which, in turn, increases the rental rates that need to be charged.

So while affordable housing is a huge need throughout Texas, its very difficult for developers to be able to afford to build some.

Texas Municipalities Need to Help Subsidize


Regardless of how difficult it is to get affordable housing built, there’s no doubt we need it in Texas. As we discussed in previous weeks, we just had an election here in Austin that turned over a lot of City Council seats. And the new councilmembers seem to be pro-housing. That gives me hope that we will see some positive movement in affordable housing the next two years.

We hope that Austin – and other municipalities – will work with developers to make it more palatable to build affordable housing. This includes the City potentially using a few different tools:

  • Low cost money – Through bond issuances or whatever means it has, make low-cost debt available to developers specifically to develop affordable housing.
  • Public-Private Partnerships – Work with big companies and developers to come up with novel solutions to build more housing.
  • Support groups like HACA – Make more money available to groups like HACA so they can build and renovate to provide more housing.
  • Streamline permitting processes – Work with the city manager to streamline the permitting process to drastically cut down the time it takes to get approval for developments.

These are just a few of the areas where the City can step up and work with developers to build more affordable housing. And with these initiatives, what is now a cost-prohibitive venture can become a risk that makes sense.




*I am putting together a roundtable luncheon with Central Texas thought leaders for the near future. If you would like to be included, please let me know.

New Year – Same Issues Read More »