September 2023

Death Star Bill Could Impact Texas Commercial Real Estate

Leave a Comment / Central Texas Political Issues / By Sean Bukowski

The Texas legislature passed the “Death Star Bill” which does not allow local municipalities to preempt state law where the state already has a statute.
This bill could have a big effect on real estate development and landlord-tenant relationships in big Texas cities.
There have been legal challenges to the bill. So we will have to wait to see what the final result is.

Two weeks ago, I wrote in this blog about one of the new, potentially exciting laws that passed the Texas legislature this year. As you undoubtedly recall, the legislature set up a system of business courts – which have the potential to streamline business disputes and litigation.

As I wrote in that blog entry, September 1 was an important date because a lot of the new laws go into effect on that date. Well today, we are going to talk about another one of those laws. And its one that its critics have given an awesome nickname to – the Death Star Bill. Pretty cool. So lets talk about it.

What is the Death Star Law?

Texas House Bill 2127, also known as the “Death Star” bill, was signed into law by Governor Greg Abbott on June 16, 2023. The bill gives the Texas state government more power to preempt local ordinances that go further than state law allows. This could – obviously – have a profound effect on many industries. But for our purposes in what is nominally a commercial real estate blog, we will focus on the potential significant impact on local landlord-tenant and real estate development laws.

How the Death Star Bill Will Affect Local Ordinances

The Death Star Bill prohibits local governments from adopting or enforcing ordinances that regulate certain areas of commerce and trade, including:

Landlord-tenant relations. This includes ordinances that regulate rent control, security deposits, and tenant rights.
Real estate development. This includes ordinances that regulate zoning, permitting, and development fees.
Environmental protection. This includes ordinances that regulate air quality, water quality, and waste disposal.

The Death Star Bill also allows the state government to challenge local ordinances in court if it believes that they are preempted by state law. This means that local governments could face legal challenges if they adopt or enforce ordinances that the state government believes are too restrictive.

This, of course, could potentially be very good for real estate landlords and developers in Austin, Dallas, Houston, etc. As we have written about previously, for example, during COVID, those cities enacted very onerous landlord-tenant laws that made it extremely difficult for landlords to operate. And many have taken the opportunity to keep these laws in place after COVID.

Legal Challenges to the Death Star Bill

The Death Star Bill has been met with legal challenges from a number of cities and counties. These challenges argue that the bill violates the Texas Constitution, which gives local governments the right to adopt ordinances that are in the best interests of their residents.

One of the most significant legal challenges to the Death Star Bill is being brought by the City of Austin. Austin has a number of ordinances that regulate landlord-tenant relations, including an ordinance that requires landlords to provide tenants with at least 120 days’ notice of a rent increase of more than 10%. The Death Star Bill would preempt this ordinance, which Austin argues would violate the Texas Constitution.

At least one local judge has found the Death Star Bill to be unconstitutional. Its not clear, of course, where this ultimately ends up.

If this bill does survive legal challenges, however, it could have a very positive effect on the real estate industry. Overly burdensome local zoning and/or permitting laws and processes could be dialed back. And onerous and expensive landlord-tenant overreach would be eliminated. At this point, therefore, we will have to wait and see how this goes.

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More Corporate Relocations Coming

Leave a Comment / Texas Commercial Markets / By Sean Bukowski

Frontier Communications announced that it will be moving its headquarters from Connecticut to Dallas.
There have been quite a lot of companies that have moved its headquarters and/or operations to Texas in the last few years.
This influx is a boon for Texas but also brings with it some demands.

I write about Austin a fair amount in this blog. And I reckon that’s natural – I do live here. But I also travel to Dallas every month and, at Bukowski Law Firm we practice all over the state. So while I live in Austin, Texas is my home.

And this week there was some good news up in Dallas. Another large corporation announced it is moving its headquarters to Dallas. And if it seems like this is a common theme for not just Dallas but all of Texas, well, it is. Texas has been very fortunate to be the destination of many corporate relocations in the past few years. And that is, obviously, great for our State. So that’s what we are going to talk about this week.

Frontier is Moving its Headquarters to Dallas

Frontier Communications announced that is moving its headquarters from Norwalk, Connecticut to Dallas. In doing so, it hopes to secure at least 3,000 jobs in the area in the next ten years. Frontier’s CEO Nick Jeffery said that the reasons for the move were that there are lots of good, talented employees in the DFW area, DFW has a fast growing and diverse economy, and its an important fiber market for the company.

Obviously this is excellent news for Dallas. Frontier will provide good paying jobs and will help boost the local economy.

And, of course, Frontier is not the only company that has made this move in recent years. DFW and Texas as a whole have been the preferred location for many companies who have recently moved. Indeed, in recent years, among others, Thermonix, Landsea Homes Corp, Caterpillar, Comerica, and Fluor have all moved to DFW. And of course, Google, Apple, Tesla, and Oracle (among others) have made big shifts to the Austin area.

In general, it appears that companies are moving to Texas for multiple reasons. But the one that cannot be overlooked is that Texas has a very business friendly environment. While it may not always feel this way in Austin, there are a lot fewer restrictions and red tape that companies need to wade through than there are in other states. And, of course, Texas generally has fairly low taxes – not only for companies but also the people who run the companies.

And finally, Texas has a robust and educated workforce. There are a lot of universities in Texas. And that leads to a large skilled workforce that can help employers who are based here.

What Does this Growth Mean for the Future?

As I wrote above, all this movement to Texas is undoubtedly good news. Having new people and jobs is a great boost to the economy. So what does all of that mean for commercial real estate?

As I have discussed in this blog previously, there is a danger looming on the commercial real estate horizon. Especially in the office space industry. But maybe, as more people and companies move to our State, we can grow out of the danger. While occupancy for individual companies may be declining, if there are more companies here, then the demand could increase.

This growth also means, of course, that there is an ever-increasing demand for housing. Its no secret that Texas – especially Austin – has an affordability problem. And if we do not continue to build more housing, the influx of new people is just going to make housing even more unaffordable.

And finally, we must keep up with the infrastructure. More people means more demand for public transportation, roads, energy, and airports. Our communities must be very aware of these needs and continue to make advancements to meet the needs of the new citizens.

Ultimately, we want all of the companies. Bring your jobs and your people to Texas. But just know that this will require us to meet the increasing demand those new people bring with them.

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Texas Legislature Set Up New Business Courts

Leave a Comment / Legal Awareness / By Sean Bukowski

In the last legislative session, the Texas legislature set up a new business court infrastructure.
The courts have jurisdiction to hear business disputes where the amount in controversy is greater than $10 million.
These new courts could potentially be a benefit to Texas businesses by streamlining the court system for its disputes.

The idea for this blog article came to me on Friday, September 1. I mention that specifically because that’s the date when all of the new laws from this year’s legislative session go into effect. And there are quite a few of them.

I don’t have time to review all of the new laws. If you want to meet for a beer, though, I’m happy to give you my opinion on some of the more well-known ones. But there is one that I think is particularly interesting. The legislature set up new business courts. So that’s what we are going to talk about this week.

What are Texas Business Courts

In this year’s legislative session, the House introduced a bill that sets up specific business courts in Texas. This bill was passed by the Senate and signed by Governor Abbott. Apparently there are some other states around the country who have something similar and that’s what these courts are modeled on.

The new business judicial district courts have specific civil jurisdiction that includes the following:

A derivative action on behalf of a corporation;
An action arising out of or relating to a qualified transaction (discussed below) where the amount in controversy exceeds $10 million;
An action regarding the governance or internal affairs of an organization; and
An action in which the amount in controversy exceeds $10 million, and that arises against, between, or among organizations.

There are a number of other scenarios where a business court could hear a claim, but these are probably the most common. A qualified transaction is defined under the business and commerce code as one involving a business and, in this case, the amount in controversy is greater than $10 million.

Specifically, however, the new business courts DO NOT have jurisdiction for claims seeking damages based on personal injury or death. Those would still have to be brought in civil district court as they do now.

Finally, while the courts are to be established starting now and this law is going into effect, it will not apply to any claims that happen prior to September 1, 2024. So basically the State has a year to set up these new courts.

What Do These New Courts Mean for Texas Businesses?

Its not totally clear yet what these new courts will mean for Texas businesses. Obviously, they have not been set up yet and there is no history or precedent. So we will know a lot more about how they will operate in a few years.

But there are at least two possibilities that could be beneficial for Texas business owners. The first is that its possible matters could be expedited and not take as long as they do know. If the only docket a court has is a bunch of business matters, you would think the court’s docket would be less busy and more streamlined. And thus litigation could be resolved quicker than in district court.

The other possible benefit is that the judges may be more knowledgeable of the issues facing businesses. If all the court sees are business-related matters then presumably the judges would have more knowledge of those matters. And – hopefully – the judges would have a business background.

Assuming these possibilities are resolved positively, then the new business courts could be a great benefit to the Texas business community. But it is way too early to know yet if the courts will actually work like that. So in the meantime, we will just have to wait and see.

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Dancin’ on the Ceiling

Leave a Comment / Uncategorized / By Sean Bukowski

The (relatively) new Moody Center is a terrific venue for sports and concerts.
It has a unique public/private operating and revenue structure.
And by making the Frank Irwin Center obsolete, the University of Texas can now use that space for the hospital expansion.

I wrote last week about the abomination that is the Frank Irwin Center and how excited Austinites should be that it will be torn down in favor of a new hospital. Its great news for Austinites and our skyline.

But one of the reasons that the Frank Irwin Center is expendable is because of the venue I was fortunate enough to visit this week – the new Moody Center in Austin. It is a great venue that hosts a mix of different events. And that’s what we are going to talk about this week.

The Moody Center Has Been a Welcome Addition

In April of 2022, the Moody Center officially opened. It hosts a wide variety of events – including University of Texas basketball, rodeo, monster trucks, and lots of concerts. It’s a great venue right in the heart of Austin and it seats about 15,000 – with just over 10,000 for basketball.

I am very lucky. I have a very good friend who has season tickets to the Moody Center. As a result, I have been fortunate to see several concerts there. For example, just this week I saw Earth, Wind, and Fire along with Lionel Richie. It was, unsurprisingly, a terrific concert.

One of the reasons that concerts are so great there are that Moody was designed with concerts in mind. The goal was to give a feel of being at a concert hall. And I can say, as a frequent concert goer there, the sound is very good.

Moody Center has Helped Transform the Area

As I wrote last week, UT is tearing down the Frank Irwin Center to build a new hospital. That spot, though, makes a lot of sense as an expansion of the hospital because it is right next to the existing Dell Hospital. UT officials, therefore, have been eyeing the Irwin Center location for a few years now. Indeed, UT first started talking about a new arena (at least publicly) in the mid 2010s. By building the Moody Center, therefore, UT opened up more land for the expansion of the hospital.

The Moody Center has a unique owner and operating structure. UT entered into a private-public partnership with OVG to build and operate the arena. UT owns it but OVG has a 35 year management agreement to operate it. Longhorn Athletics takes all concessions, parking, and ticket revenue from UT basketball games. OVG gets 100% of the revenue from all other non-UT events.

I didn’t write this blog entry to be an advertisement to the Moody Center. Its just a very good venue and I’ve enjoyed being there when I have gone. And it shows how much can be done when we upgrade commercial buildings and create better product. Here, we were able to replace an eyesore with a beautiful and modern arena. And on the old spot, we will get an expansion of UT hospital. It’s a great benefit to our City and I encourage you to check it out if you have not yet.

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