April 2024

Navigating the Fence Line

Leave a Comment / Property Purchase Process / By Sean Bukowski

Boundary disputes can be a huge headache for a developer and cause significant delays in construction.
But there are ways to avoid them ahead of time or resolve them amicably to keep your projecting moving.
Having said that, if you have a significant border dispute, it is important to hire a good real estate attorney.

Things are getting testy out there. Unfortunately, we are starting to see more litigation in the commercial real estate space* than we have in a while. I reckon that is not surprising.

One area we see a lot of litigation over is boundary disputes. These can be particularly thorny for developers, where precise property lines are crucial for project planning and construction. A seemingly minor encroachment can snowball into delays, permit issues, and even lawsuits. So let’s talk about how they arise and what you can do if you have a boundary dispute.

Common Causes of Boundary Disputes

Before diving into solutions, it makes sense to figure out why border disputes happen. Maybe then we can avoid them. There are generally a few reasons for them:

Surveying Errors: Mistakes happen, and even a slight miscalculation during a land survey can lead to significant discrepancies.
Missing or Ambiguous Deeds: Older deeds might lack clear descriptions or rely on landmarks that have vanished over time.
Encroachments: Over time, fences, sheds, or even landscaping features can unintentionally stray onto neighboring property.
Adverse Possession: If a neighbor openly and continuously uses a disputed area for a certain period (typically ten years in Texas), they might establish ownership rights.

Obviously there are more possibilities but these are some of the more common reasons for disputes. Thankfully, there are some steps you can take to avoid some of these reasons for boundary disputes. They include:

Conduct a Thorough Title Search: A meticulous title search helps identify any potential boundary issues before you even purchase the land.
Order a New Survey: Don’t rely on old surveys. Commission a new survey by a reputable land surveyor before finalizing your development plans.
Clearly Mark Boundaries: Once the survey is complete, consider erecting visible markers or even a temporary fence to delineate the property line.
Communicate with Neighbors: Keep your neighbors informed about the development project and potential boundary concerns. Open communication fosters goodwill and can help nip potential disputes in the bud.

Resolving Disputes Amicably – The Power of Communication

The best outcome for any dispute is an amicable resolution. Here are some steps you can take to try to resolve your boundary dispute before the need for prolonged litigation:

Contact your title company: You likely bought title insurance for a reason. And if there is a boundary dispute, let your title company know. Its possible they can resolve it or indemnify you for your loss.
Open Communication: Start by talking to your neighbor. Explain the potential issue and explore solutions together. A calm and respectful approach can go a long way.
Joint Survey: Commission a new survey with a licensed surveyor, ideally one agreed upon by both parties. This can often clear up minor discrepancies.
Boundary Line Agreement: If a new survey confirms a discrepancy, consider a formal agreement with your neighbor. This document clearly defines the actual property line and prevents future disputes. A lawyer can help draft this agreement to ensure it’s legally sound.

But obviously these methods do not always work. So sometimes you are forced into litigation.

Mediation: A neutral third party, a mediator, can facilitate communication and guide both parties towards a mutually agreeable solution. Mediation can sometimes be cheaper and quicker than litigation.
Arbitration: Similar to mediation, but with a binding decision. An arbitrator, typically a retired judge or lawyer, hears arguments from both sides and issues a final ruling. We do not generally recommend arbitration, though. Its just as expensive as litigation and often a judge is better for resolving technical disputes than an arbitrator.
Quiet Title Action: This lawsuit aims to establish your clear ownership of the disputed area. A successful outcome will result in a court order confirming your property boundaries.
Boundary Dispute Lawsuit: If all else fails, a lawsuit to determine the true boundary line might be necessary. This can be a lengthy and costly process, so consider it only as a last resort.

My next bit of advice is always self-serving. But it also happens to be true. If you are having a boundary dispute with your neighbor, get a lawyer. Its important. Your lawyer can:

Review Property Deeds and Surveys: A lawyer can analyze these documents to identify potential issues.
Navigate Negotiations and Mediation: Your lawyer can represent you effectively and ensure your interests are protected.
Prepare Legal Documents: Boundary line agreements, quiet title actions, and lawsuits all require meticulous legal documentation.
Provide Strategic Guidance: An experienced lawyer can assess the situation and recommend the best course of action, considering both legal and financial implications.

Boundary disputes can be a headache for developers, but with the right knowledge and strategies, you can navigate them effectively. And, of course, the right attorney.

*Unfortunately for our friends and clients. Obviously we have a litigation department at Bukowski Law Firm. I won’t pretend otherwise.

Navigating the Fence Line Read More »

Austin Gets Shot Down Again in District Court

In late 2022, the City of Austin approved a TIRZ for the redevelopment of the Austin American-Statesman site.
The City lost a lawsuit last week about that TIRZ and now the future of it is in jeopardy.
While there are a few paths forward, its not clear what the future of the redevelopment is.

The City of Austin seems to have a remarkable streak going in lawsuits brough by local neighborhood groups. It’s kind of the reverse of Cal Ripken and Joe Dimaggio. While those two had outstanding streaks of success, Austin has consistently come up on the losing end of lawsuits against neighborhood groups.

The latest was about a developer’s endeavor to revitalize the south shore of Lady Bird Lake with dense, mixed-use development. Funding for the project hinged on the creation of a Tax Increment Reinvestment Zone (TIRZ) – a mechanism that captures a portion of rising property taxes within the zone and redirects them towards infrastructure and public amenities. However, a recent lawsuit by the Save Our Springs Alliance (SOS) and others threw a wrench into the plan, leaving the future of the SCW and its funding uncertain.

The Envisioned Transformation of the Statesman Land

Back in late 2022, the Austin City Council approved Endeavor’s plans to redevelop the old Austin American-Statesman site just south of Lady Bird Lake. The vision was to create a vibrant, walkable district with high-rise buildings, shops, restaurants, and enhanced public spaces. Proponents argued this development would generate much-needed tax revenue, improve connectivity to the waterfront, and provide a wider range of housing options.

A key component of the Statesman redevelopment plan was the establishment of a TIRZ. Here’s how it would have worked:

The City designated the land in question as a “blighted” area.
As property values within the zone increased due to development, the City would capture the incremental tax revenue generated by that growth.
These captured funds, estimated at $354 million over 20 years, would then be used to finance essential infrastructure improvements, affordable housing initiatives, and public amenities like parks and trails within the redeveloped area.

The Neighborhood Groups Lawsuit

But some Austin neighborhood groups apparently did not like this plan. As a result, they – led by the Save Our Springs Alliance – filed a lawsuit challenging the TIRZ. Their primary arguments centered around the designation of the area as blighted. SOS contended that the City did not present evidence showing that the land was blighted. As a result the TIRZ, intended to incentivize development in struggling areas, wasn’t necessary for the area.

They made this argument despite the fact that in January 2022, the City Council did review the plan and made a finding that the area was blighted.

A Judge’s Ruling and the Road Ahead

Last week Judge Jessica Mangrum of the Travis County District Court sided with the Plaintiffs. The Court granted the Plaintiff’s motion for summary judgment. This decision effectively stops the City from funding the development through a TIRZ. Which, as Defendants’ lawyer stated previously, may prevent them from developing the area at all.

So, what are the City’s options moving forward? Here are some possibilities:

Appeal the Ruling: The City could appeal Judge Mangrum’s decision, potentially leading to a lengthy legal battle. This option carries the risk of further delays and uncertainty for the project.
Revisit the TIRZ Designation: The City could re-evaluate the Statesman development and potentially designate a smaller area or provide more detail and evidence on why the area is blighted. This approach might require revisiting the project’s overall plan and securing community buy-in.
Alternative Funding Mechanisms: The City could explore alternative funding sources for the project. This might involve public-private partnerships, federal grants, or other creative financing solutions.
Scaling Back the Project: If alternative funding proves insufficient, Endeavor and the City might need to scale back the envisioned development. This could involve reducing the density or scope of the project to align with more traditional development financing methods.

The future of the Statesman redevelopment project, therefore, remains unclear. The SOS lawsuit highlights the complex balancing act involved in large-scale development projects. While economic growth and infrastructure improvements are desirable, often there are neighborhood or tax groups who stand opposed to the development.

Endeavor and the City of Austin now faces a crucial decision. They will need to carefully evaluate its options and determine the best path forward for the project. I guess we will wait and see what is next.

Austin Gets Shot Down Again in District Court Read More »

T.C. Broadnax Takes the Reins as Austin’s City Manager

Leave a Comment / Uncategorized / By Sean Bukowski

Austin has hired a new City Manager – T.C. Broadnax.
Prior to this, Broadnax was the City Manager in Dallas. He was asked to resign earlier this year.
We hope that he will be able to improve broken City processes and make Austin a better place to live.

The City of Austin has a new sheriff in town. The City Council recently hired T.C. Broadnax as our new City Manager – tasked with overseeing the day-to-day operations of our ever-growing metropolis. But this appointment comes with a twist – Broadnax was recently asked to resign from his previous position as city manager in Dallas. What does this mean for Austin and its commercial real estate industry? Lets talk about it.

What does the City Manager do?

Before diving into the specifics of Broadnax’s appointment, it’s important to understand the crucial role a city manager plays. Often referred to as the “CEO” of a city, the city manager is responsible for a wide range of functions that keep the city running smoothly. This includes managing city departments, overseeing budgets, implementing council policies, and ensuring the delivery of essential services like public transportation, sanitation, and public safety.

For us in the commercial real estate world, he also oversees the city staff that runs zoning regulations, permitting processes, infrastructure development, etc. Thus how he runs these departments and what he requires from the city staff has a huge impact on the commercial real estate world. And the business environment in general. Basically, the city council makes the rules, but the City Manager is responsible for implementing those rules and running Austin.

A Controversial Appointment: Broadnax’s Resignation from Dallas

T.C. Broadnax’s arrival in Austin is not without controversy. In February 2024, he resigned as the Dallas City Manager after being pressured by the City Council to do so. He apparently had a very rocky relationship with the Mayor and Council. This is the result of apparent vacancies in Dallas’s 911 call center and considerable delays in its building permitting office. Obviously that does not inspire confidence for coming to Austin – a city where we desperately need improvements in our permitting office.

Broadnax also faced criticism for his response to a Dallas employee’s deletion of 8 million Police Department files. Apparently he knew about it in April but did not inform the City Council or Mayor. They only found out when the Dallas County District Attorney’s Office announced it in a memo to defense attorneys in August. Again, this kind of secrecy and attempts to hide the ball do not inspire confidence.

Potential Impact on Austin’s Commercial Real Estate

So, how might Broadnax’s appointment impact Austin’s commercial real estate market? The answer is multifaceted, with both potential benefits and drawbacks.

On the positive side, Broadnax brings a wealth of experience to the table. Having previously served as city manager in both Dallas and Tacoma, Washington, he should have a deep understanding of municipal governance. He’s also credited with spearheading economic development initiatives in Dallas, which could bode well for attracting businesses to Austin.

However, the shadow of his dismissal in Dallas looms large. I do not know all the details and have only read about it from three hours down the road. So has he learned from these mistakes? Is he going to be able to handle crisis situations, particularly those with a potential impact on infrastructure or public services? Austin has a lot of issues – and we are continuing to grow. As a result, those issues will continue to grow too.

For example, a recent McKinsey report found there were nearly 1,500 total steps from the beginning to the end of a site plan review process. And it involves dozens of employees putting in hundreds of hours of work. And this process slows up the necessary development we need to meet our growth.

He also will need to be open and transparent with the community – especially after allegedly not being so in Dallas. To build trust with the community, open communication will be paramount. He should actively engage with business leaders, addressing their concerns and outlining his vision for Austin’s future.

Has Broadnax learned from his past mistakes?
Will he be able to correct these and other issues and improve how the City runs? I certainly hope so. We need him to succeed. But obviously the issues in Dallas loom large. So I guess we will just have to wait and see.

T.C. Broadnax Takes the Reins as Austin’s City Manager Read More »

Texas Two-Step: Office Woes and Mechanic’s Lien Opportunities

Leave a Comment / Uncategorized / By Sean Bukowski

As we all know, the office market is struggling and will likely to continue to struggle in the near future.
There are likely to be more office buildings that have mechanics liens put on them by contractors who are not getting paid.
This could present an opportunity for a savvy investor to capitalize on a distressed asset.

Texas has always been a land of great opportunity, and commercial real estate has been a cornerstone of that growth – especially in the last 25 years. But lately, the office sector has hit a rough patch. We have talked about that a lot in this blog. And, of course, everyone in the industry is having those discussions around town.

The pandemic’s remote work revolution has left many buildings partially vacant, with vacancy rates in some major metros eclipsing 20%. This certainly leads to a buyer’s market, with landlords struggling to fill space and lenders getting nervous.

And its left a lot of office owners struggling to pay some vendors. Indeed, the tallest tower in Fort Worth has mechanics liens totaling $1.6 million recorded against it. So what does that mean for the industry? And does it present an opportunity for savvy investors? That’s what we talk about this week.

Mechanics Liens: A Contractor’s Weapon

Imagine a scenario: a developer bites off more than he or she can chew, hires a contractor to build a fancy new office complex, then can’t pay the bill. In Texas, that contractor has a powerful tool at their disposal – the mechanics lien.

A mechanics lien is a legal claim against a property that secures payment for labor or materials furnished for its improvement. It essentially says, “If you don’t pay me, I get a stake in your building.” This can be a real headache for a property owner, as it clouds the title and makes refinancing or selling the building difficult.

Notice Requirements for Mechanics Liens

Here in Texas, things get a little more complex. Unlike some states, filing a mechanics lien isn’t a slam dunk. Contractors (and subcontractors and suppliers) have to comply with strict notice requirements depending on their role in the project. Original contractors (those with a direct contract with the owner) generally don’t need prior notice. But everyone else – subcontractors, material suppliers – needs to send out pre-lien notices to preserve their lien rights.

It’s a bit of a bureaucratic dance, but get it right, and a mechanics lien can be a powerful tool to force payment.

Foreclosure and Judgment: Taking it to Court

Once a contractor places a mechanics lien on a property, the contractor can sue to foreclose on the lien. This means going to court and asking the judge to order the sale of the property to satisfy the debt. It’s a lengthy process, but if successful, the contractor gets paid from the proceeds of the sale. It is also, of course, a very powerful bargaining tool to use against the property owner.

This is where things get interesting for outside investors who could see this as an opportunity. Let’s say the office building is half-empty, struggling financially, and gets slapped with a hefty mechanics lien. The owner might be desperate to avoid foreclosure. This creates a prime opportunity for an investor to swoop in.

Distressed Deals and Deep Discounts

There are two main ways an investor can potentially capitalize on this situation:

Buying the Lien: Investors can buy the mechanics lien itself from the contractor at a discount. This essentially means they step into the contractor’s shoes and pursue foreclosure themselves. This can be a risky proposition, as the foreclosure process can be expensive and time-consuming. But if successful, the investor could end up owning the entire office building for a fraction of its original value.

Buying the Foreclosed Property: If the foreclosure goes through, the investor can bid on the property at auction. With a distressed market and a cloud hanging over the title, there’s a good chance of getting a deep discount. Now, the investor owns a potentially valuable asset at a fire-sale price.

Proceed with Caution

There are, of course, potential pitfalls with either of these two strategies that an investor should be leery of –

Legal Expertise is Key: This is complex legal territory. Don’t go it alone. Hire a lawyer experienced in Texas mechanics liens to navigate the process and ensure everything is done by the book.
Due Diligence is Mandatory: Do your research on the property, the lien itself, and the overall market conditions. Is the building structurally sound? Are there other liens? Is there potential for future vacancy?
Be Patient: Mechanics lien enforcement and foreclosure can take months, even years. Don’t expect a quick payday.

The Bottom Line: A High-Risk, High-Reward Proposition

The Texas commercial office market is in flux, and that creates opportunities for savvy investors. Mechanics liens can be a powerful tool for contractors to secure payment, but they also present a potential windfall for those willing to take a calculated risk. Do your homework, get good legal advice, and you may have a great investment opportunity.

Texas Two-Step: Office Woes and Mechanic’s Lien Opportunities Read More »