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Austin Eliminates Parking Minimums A Victory for Housing Affordability public Transportation, and th

The new Austin City Council has made some very encouraging decisions to address housing affordability lately.

Last week, Austin became the largest city in the country to eliminate parking minimums.

This should ...help affordability by decreasing the overall cost of new developments.

I have written a couple times in this blog that the last Austin City Council election was very encouraging for housing advocates. At least three new councilmembers who appear to be pro-housing were elected to the Council. When you combine them with the previous makeup of the Council, there was legitimate optimism that we could move in the right direction and properly address affordability.

Well the last couple of weeks have seen that optimism put into action with a couple of decisions that have the chance of having a huge positive impact on our City. The first was step one in some significant changes to the land use code. I will talk about that possibility in a later blog entry.

This week, I want to talk about Austin becoming the biggest city in the country to eliminate minimum parking requirements for new developments. So lets do it.

Austin Eliminates Minimum Parking Requirements
In a landmark decision, the Austin City Council recently voted to eliminate parking minimum requirements for all new developments in the city. Thus in new buildings, developers will not be required to put in any parking if they choose not to. This decision is a major victory for housing affordability, public transportation, and the environment.

Parking requirements are a major driver of housing costs. When developers are required to build a certain number of parking spaces, it adds to the cost of construction and development. This cost is ultimately passed on to homeowners and renters.

Some studies show that a surface parking spot can cost a developer between $5,000 – $10,000 in extra costs to the development. And a spot in a parking garage can cost between $25,000 – $65,000. Which can increase rent for by up to $200 per month for each apartment unit. This is a significant increase, especially in a city like Austin where housing prices are already high.

By eliminating parking minimums, the Austin City Council is taking a step to make housing more affordable for all residents. Developers will have more flexibility to build more housing units on the same piece of land, and they will not have to pass on the cost of parking to homeowners and renters.

This is especially important for low-income residents, who are often disproportionately burdened by the high cost of housing. Eliminating parking minimums will help to make housing more affordable for all Austinites.

Eliminating parking minimums will promote public transportation
In addition to running up the costs of development, parking minimums also discourage people from using public transportation. When people know that they will be able to find free and convenient parking at their destination, they are more likely to drive.

Eliminating parking minimums will make it easier for people to use public transportation, walk, or bike. This will reduce traffic congestion and make it easier for people to get around the city.

Thus by reducing the number of cars on the road, eliminating parking minimums will benefit the environment. This change has the possibility of making Austin a more walkable, livable city where you can live, work, and play.

Conclusion
The Austin City Council’s decision to eliminate parking minimum requirements is a major victory for housing affordability, public transportation, and the environment. This decision will help to make housing more affordable for all residents, reduce traffic congestion, and improve air quality.[+] Show More

Austin Eliminates Parking Minimums A Victory for Housing Affordability public Transportation, and th

The new Austin City Council has made some very encouraging decisions to address housing affordability lately. Last week, Austin became ...

Due Diligence is Key: Possible Pitfalls When Buying Commercial Real Estate w/Leases and Encumbrances

When a buyer acquires commercial real estate, he or she takes it subject to any leases or encumbrances on the property. It is very ...

When a buyer acquires commercial real estate, he or she takes it subject to any leases or encumbrances on the property.

It is very important, therefore, to have a title search ...done prior to acquisition to know what encumbrances are present.

And to have a plan to deal with the lienholders after the purchase.

During my work week, I sometimes get reminded of interesting issues that commercial real estate owners may face. And I think – this would make a good blog idea. This happened to me recently when I was reminded of the challenges that owners face when dealing with leases and other encumbrances on properties they are purchasing. Obviously these can significantly impact a project, and it is important for owners to understand their rights and obligations under these agreements.

So that’s what we are going to talk about this week.
Leases can be a Burden to an Acquisition Clouds on title can come in many forms. And one of those, of course, is a lease. A lease is a contract between a landlord and a tenant that gives the tenant the right to occupy and use the landlord’s property for a specified period in exchange for rent.

When a buyer purchases a property that is currently leased to tenants, the buyer is required to honor the terms of any existing leases. He or she takes the property subject to the leases. This means that the buyer cannot evict the tenants or change the terms of the leases without the tenant’s consent.

If the buyer wants to terminate a lease early, he or she will need to negotiate with the tenant to reach an agreement. This may involve paying the tenant a buyout fee or offering them a new lease on different terms. This can, therefore, increase the cost of the project for the buyer.

Buyers Should be Aware of Other Encumbrances Also
But leases are not the only type of encumbrance that can cloud title. There are also easements, liens, and restrictive covenants, etc. All of these will limit the owner’s rights in the property.

Easements are the right of one party to use another party’s property for a specific purpose. For example, a utility company may have an easement on a property to lay underground pipes.

Liens are claims against a property to secure a debt. For example, a construction company may have a lien on a property to secure payment for work that it has done.

Restrictive covenants are limitations on the use of a property. For example, a restrictive covenant may prohibit the construction of certain types of buildings on a property.

When a buyer purchases a property with encumbrances, it is also required to take the property subject to those encumbrances. So once again, to get title cleared, the buyer could have to negotiate with the lienholders.

Negotiating with Tenants and Encumbrance Holders
Negotiating with tenants and encumbrance holders can be a complex and challenging process. It is important for owners to have a clear understanding of their rights and obligations under the existing encumbrances.

This shows why title insurance is so important when acquiring commercial real estate. A title commitment will highlight any clouds on title and your lawyer can make sure they are dealt with before closing. And if the encumbrances do not show up, then the title company is responsible for it post-closing.

We recommend, therefore, that before purchasing a commercial real estate property, you:

Conduct a thorough title search to identify all of the leases and encumbrances on the property.

Have an experienced commercial real estate attorney review all of the leases and encumbrances identified.

Develop a plan for negotiating with tenants and encumbrance holders.
Be prepared to offer tenants and encumbrance holders fair compensation in exchange for their consent to terminate or modify the leases or encumbrances.

Be patient and persistent. Negotiating with tenants and encumbrance holders can take time and effort.

Leases and encumbrances can be a challenge for commercial real estate owners, but they can be overcome with careful planning and negotiation. By working with an experienced commercial real estate lawyer, developers can minimize the risks associated with leases and encumbrances and maximize their chances of success.[+] Show More

Like New York City, Austin has a lot of empty office space, with vacancy rates at record highs.

I was lucky enough to travel to New York City to spend last weekend with my family. New York is still a fantastic city, but it has some ...

I was lucky enough to travel to New York City to spend last weekend with my family.

New York is still a fantastic city, but it has some very difficult times ...in commercial real estate on the horizon.
]
With high vacancy and rising interest rates, office owners may need to come up with alternative solutions.

Last weekend was very fun for me. I was lucky enough to meet my family for a quick weekend getaway in New York City. And we got to celebrate my nephew’s 21st birthday. It was quite enjoyable. And while I mostly concentrated on spending time with the family, as we were walking around, I could not help but notice some things.

New York is a fantastic city – one of my favorites. But it has some challenges. And that includes in the commercial real estate world. So that’s what we are going to talk about this week – the greatness of New York and some challenges it is facing.

New York is Still as Great as I Remember
Rockefeller Center – soon to be a skating rink.
When I was a young lad – a younger lawyer – I lived in Manhattan. I was working for Vinson & Elkins at its New York office and having a fantastic time. But after a couple of years there, I was ready to leave. Not that I did not still love the City – I did. But it was just time. And I hate cold weather. So I moved back to Texas.

Sadly, I have only been back a few times since I left in 2006. And I often miss it. So this weekend we were able to take it all in – walked all over the City, saw a show on Broadway, ate at an Italian restaurant, went to a jazz club, and visited MoMA. It was a great weekend.

At the entrance to MoMA
And while I mostly concentrated on having a good time with the family, I couldn’t help but look around at all those buildings and wonder what was going on inside.

New York’s Coming Real Estate Issues
As everyone knows, New York has a lot of big, giant office towers. I worked in one at the corner of 52nd and 5th. So as we walked around Manhattan, I kept looking up and wondering what their vacancy rates are. I mean – I know what its like in Texas. I’ve written about it here. It has to be at least that bad with all of this office space, right?

Well, unsurprisingly, it turns out it is bad. Depending on who you read, as of the first quarter this year, vacancy rates were between 17% and 22%. That means there is more than 94 million square feet of vacant space. That’s a record – at least for now. Most people expect those vacancy rates to rise. Indeed, city officials expect vacancy rates to stay above 20% through at least the end of 2026.

We all know why this is happening – its been discussed everywhere, including in this blog. With COVID, a lot more people figured out that they could work remotely. And, as a result, companies are downsizing their office space.

But, of course, that’s not the only issue facing commercial real estates. Interest rates have also climbed significantly. And New York has $137 billion in commercial debt that expires in 2023. And almost $500 billion in the four years after that. With these skyrocketing interest rates, it is going to be very difficult for commercial owners and developers to sell or refinance. So what will everyone do?

One possibility that keeps being discussed is to convert some office space into residential. But its my understanding that is very difficult to do and extremely costly. And in New York, it would likely require a lot of rezoning. But that just may be one of the possibilities that commercial real estate owners are forced to explore. Because for at least the next few years, owning office space in New York is going to be extremely challenging.[+] Show More

TxDOT's proposed I-35 expansion plan is a major undertaking that could impact the city of Austin.

TxDot has revealed and improved its plans for I-35 expansion through the heart of downtown Austin. While I-35 does need fixing, TxDot’s ...

TxDot has revealed and improved its plans for I-35 expansion through the heart of downtown Austin.

While I-35 does need fixing, TxDot’s plans are not the best route for it to ...take.

By adopting TxDot’s plans, we would be forgoing a much prettier, more unified city.

I have written multiple times in this blog about the I-35 expansion. But I think that is important. For one, it’s a huge project that is going to have a gigantic effect on the future of our city. And for two, the current plans are not great. They just do not provide what Austin really needs. Nor do they add to the aesthetics, tax base, etc. It will be a real shame if the current plans are the final version of I-35. So lets talk about what is planned.

What is the Current Expansion Plan?
Driving on I-35 in Austin stinks. I think we can all agree on that. It rarely matters what day or what time of day you are on it – there is heavy traffic. To allegedly fix those problems, TxDot has come up with an expansion plan. The basic highlights of that plan are the following:

Two additional lanes in each direction that are reserved for vehicles with two or more passengers;
The current upper levels of the expressway will be torn down;
The main lanes will be lowered from Oltorf Street to Airport Boulevard;
An elevated bicycle and pedestrian bridge at 15th Street; and
“Boulevard-style segments” running through downtown with pedestrian and cyclist path improvements.

To do this, TxDot needs to acquire a significant amount of land along the expressway. As a result, many homes and businesses will be displaced by the expansion. TxDot has begun sending out eminent domain letters to property owners.*

The Problems with TxDot’s Expansion Plans
So why am I complaining about the current expansion plans? I already wrote that I-35 is a mess through Austin. And it clearly needs improvement. But even still, TxDot’s plan has a number of issues. This includes:

Lack of a cap on top of the new road: This is the biggest issue. It just makes no sense not to cap the highway through Austin – as we have discussed in this blog previously. A cap would help to reduce noise and pollution, and it would also create new public space and increase the property tax base. It is a no brainer.

Studies have shown that expanding roads does not actually lessen traffic. In fact, it often leads to more traffic. This is because when you build a new road, it induces more people to drive. If the point is to reduce the congestion on I-35, why are we following a plan that will not accomplish that goal?

The expansion of I-35 will displace hundreds of residents and businesses. This will have a devastating impact on the communities that are affected. For example, we know the expansion will force out a Spanish immersion day care.
It will not solve the divide between east and west Austin. The roots of I-35 and the division between east and west Austin are ugly and racist. Uniting our community by – at the minimum – capping the road and bringing the two sides together should be a focus of the expansion plans.
There are many (including Rethink35 – an advocacy group) that think all of this could be solved by moving I-35. Its plan would turn the current I-35 into a boulevard and move I-35 to SH-130. This would, obviously, solve the biggest issues that having I-35 cut through the heart of downtown causes. And it would send much of that traffic to SH-130. It is an ideal solution. I wish we all could get behind that ideal.

But that does not appear to be in the cards. As a result, it is essential to push back on the current plans put forward by TxDot. As it is currently envisioned, the expansion will likely increase traffic and displace lots of residents and businesses. While forgoing the unification of the City and increased the available space for housing and businesses. It just does not make sense.

* If you are a property owner and have received one of these eminent domain letters, you have rights. Please feel free to contact us to discuss what those rights are.[+] Show More

Choosing the Right Litigation Lawyer, Common Mistakes to Avoid in Commercial Real Estate Litigation.

These are difficult times in the world of commercial real estate. During difficult times, unfortunately its much more likely that a ...

These are difficult times in the world of commercial real estate.

During difficult times, unfortunately its much more likely that a commercial real estate owner will be drawn into litigation.

By preparing ...for litigation ahead of time, the owner can increase his or her chance of success.

It’s a crazy commercial real estate world out there right now. I am not telling you anything new when I say that these are complicated times. No need to rehash the particulars. But in times like these, we usually see a rise in litigation matters. Regardless of everyone’s best intention, litigation is likely to increase in difficult economic times. And while no one wants to be involved in a lawsuit, it is important to be prepared in case one does arise. So that’s what we are going to talk about this week.

The Importance of Gathering Evidence
A lifetime ago when I was just a lad, I participated in the Boy Scouts. And from that, I still remember our motto – Be Prepared. Well that is a good idea for commercial real estate owners also. Nobody wants to get into litigation but the better prepared you are, the better your chance of success. One of the most important things a commercial real estate owner can do to prepare for impending litigation is to gather evidence. Among other items, commercial real estate owners should gather -

Contracts: Contracts are essential pieces of evidence in any commercial real estate lawsuit. Contracts can establish the rights and obligations of the parties involved, as well as the facts of the case. This can include operating agreements, vendor agreements, etc.
Leases: Leases are another important type of evidence in commercial real estate lawsuits. Leases can establish the terms of the relationship between the landlord and tenant, as well as the facts of the case.

Appraisal reports: Appraisal reports can be used to establish the value of a commercial property. This can be important in lawsuits involving breach of contract, fraud, or negligence.
Environmental reports: Environmental reports can be used to establish the environmental condition of a commercial property.

Invoices: Invoices can be used to establish the cost of repairs, maintenance, or other services performed on a commercial property.

Photography: Photography can be used to document the condition of a commercial property.
Records of time spent: Records of time spent can be used to establish the damages incurred by a commercial real estate owner as a result of a lawsuit.

Expert testimony: Expert testimony can be used to explain complex technical or legal issues to the court.

How to Gather Evidence
So how does a real estate owner go about getting all of this evidence? The key is to start early and … Be Prepared. Once you become aware of a potential lawsuit, you should begin gathering all relevant documents. You should also start keeping detailed records of all communications with the other party and any expenses you incur as a result of the dispute.

If you are unsure what type of evidence is necessary, you should consult with an experienced commercial real estate lawyer. A lawyer can help you identify the relevant evidence and develop a plan for gathering it.

Also – if you are facing potential litigation, it is very important to preserve all the evidence. This includes not deleting emails, destroying paperwork, etc. That evidence will be essential in the coming litigation. Having a preservation policy, therefore, is important.

Additional Tips for Gathering Evidence and Keeping Good Records
Create a system for organizing and storing your records. This will make it easier to find the information you need if you are involved in a lawsuit.
Back up your records regularly. This will protect your records in case of a fire, flood, or other disaster.

Know what type of evidence is relevant to your case. This will help you to focus your efforts on gathering the most important evidence.

Be honest with your lawyer about your records. Even if you have some negative evidence, it is important to be honest with your lawyer so that they can develop a strong case for you.

By following these tips, you can increase your chances of success if you are involved in commercial real estate litigation.

Conclusion
Preparing for impending litigation is an essential step for any commercial real estate owner – especially in our current environment. By gathering evidence and keeping good records, you can increase your chances of success if you are involved in a lawsuit.

If you are facing impending litigation, it is important to consult with an experienced commercial real estate lawyer. A lawyer can help you to assess your case, develop a strategy, and gather the necessary evidence.[+] Show More

Texas HB 2127 - "Death Star Bill" could effect on CRE development and landlord-tenant relationships.

The Texas legislature passed the “Death Star Bill” which does not allow local municipalities to preempt state law where the state ...

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.[+] Show More

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Austin Eliminates Parking Minimums A Victory for Housing Affordability public Transportation, and th

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