Month: January 2014

Law 101: What Issues Comprise Real Estate Litigation?

Real estate litigation or, more broadly, real estate dispute resolution, concerns the determination of legal rights related to realty and buildings, articles, and other improvements to realty. It’s not a small practice area. For instance, many practitioners consider construction litigation to be a mere subset of real estate litigation. Here is a working list of issues that may be the subject of dispute that fall under the umbrella of real estate litigation:

We’ll explain many of the above-listed issues in future posts. And we’ll update this list periodically. So check back!

In our Law 101 posts, we define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more involved and complex discussions.

In the News: The “Liening” Museum Tower of Dallas

In the News

Extra! Extra!

In our In the News series, we’ll use an article or topic that has been featured recently in the news as a potential learning opportunity.

For some time now the Dallas Museum Tower and Nasher Sculpture Center have been reported to have a difference of opinion over an alleged problem with light that is reflected from the Museum Tower’s glass exterior into the sculpture center. D Magazine ran an article on it in May 2012. Bloomberg reported on it. The Huffington Post reported on it. The Dallas Morning News even wondered aloud who might be the first to sue. For this reason, a headline in the local news last week caught the attention of many, although not all, Dallasites: “$800,000 in unresolved claims filed against Museum Tower.”

It seems that the Museum Tower hired Austin Building Company (“Austin”) to serve as a General Contractor. Custom Components Company (“CCC”), in turn, was apparently tapped to furnish “exterior glass and metal railings” on the project to or through Austin. According to the news article, more than one mechanic’s lien has been filed against the Museum Tower, and CCC has filed suit to foreclose their lien in the amount of roughly $237,000. A spokesperson for Austin is quoted as saying, “A bond was filed to protect the owner of the project in the event of suit to foreclose the lien. Austin vigorously contests this claim, and is working to resolve this issue.”

CCC’s Original Petition, filed January 7, 2014, confirms that CCC filed a mechanic’s lien against the Museum Tower property in April 2013. CCC is now seeking an order from the 191st District Court of Texas foreclosing the property to satisfy its lien. CCC is also suing Austin for breach of contract and Austin and the Museum Tower for unjust enrichment. These claims are independent and separate from CCC’s mechanic’s lien claim. CCC did not name the surety as a party to the lawsuit.

lien is a “legal right or interest that a creditor has in another’s property, lasting usually until a debt or duty that it secures it is satisfied. Typically, the creditor does not take possession of the property on which the lien has been obtained.” Black’s Law Dictionary 933 (7th ed. 1999). A mechanic’s lien is a lien that “secures payment for labor or material supplied in improving, repairing, or maintaining real…property, such as a building…or the like.” Id. at 935. (Did you know that the word realty is short for real property?) In a future Law 101 post we’ll discuss the meaning and fundamentals of mechanic’s liens in greater detail. If the suspense is killing you, here’s an article on Five Frequently Asked Questions About Texas Mechanic’s Liens. In short, mechanic’s liens turn specific property into collateral that may be judicially foreclosed to satisfy a debt under certain circumstances.

So CCC has filed a mechanic’s lien and is asking the judge to foreclose the collateral to pay for labor/materials for which CCC claims it is still owed. We don’t know what the Nasher thinks about this. But Austin seems to think that a bond that was filed will protect the owner of the Museum Tower from the lien claim. Depending on what type of bond has been filed and when and how it was filed, Austin may be correct.

Chapter 53 of the Texas Property Code contains most of the information concerning Texas statutory mechanic’s liens. Subchapters H and I of Chapter 53 discuss bonds to indemnify against liens and bonds to pay liens, respectively. Think of bonds simply as insurance. Subchapter H allows a person — usually the General Contractor — to obtain and file a bond after a mechanic’s lien has been filed against property, the effect of which is to discharge the mechanic’s lien claim against the property. Subchapter I provides that a General Contractor may furnish a payment bond at any time, the effect of which is that a “claimant may not file suit against the owner or the owner’s property” if the bond meets other statutory requirements. See Tex. Prop. Code sec. 53.201(b). These requirements include, among other things, that the bond be in a certain amount and that it be recorded in the county clerk’s office. Project owners often ask General Contractors to furnish payment bonds before projects commence. If a payment bond has been obtained and recorded at the time an unpaid claimant files its mechanic’s lien, then the law creates a limited window of time in which the claimant may sue on the bond: no sooner than 60 days after the claimant perfects the lien and no later than one year after perfection of the lien claim.

Will Austin utilize Texas’s relatively new motion to dismiss procedure to challenge CCC’s mechanic’s lien foreclosure claim? Will CCC amend their petition to add the surety to the fray? Will the surety intervene into the action on its own volition? Any of these options will have to be pursued relatively soon. And either way, Austin and the Museum Tower will still have to contend with CCC’s breach of contract and unjust enrichment claims. At the end of the day, I’d be willing to wager that the Museum Tower, Austin and CCC all share at least one sentiment: they all want CCC to be paid a fair price for the labor/materials CCC furnished in light of all of the underlying circumstances, many of which we are probably not aware.

Takeaway: Most contractors want to get paid; they aren’t interested in foreclosing if it’s not necessary. Most construction project owners don’t want to lose materials and improvements furnished by contractors. Properly executed bonds are a good way to achieve both ends—they can protect a project owner from foreclosure and contractors from not getting paid.

Photo Credit: Pulpolux !!! via photopincc

Law 101: What is Construction Law – Part 2?

In What is Construction Law – Part 1 we defined construction law as a phrase that envelops many legal issues that arise in the design, engineering, financing, building, improving, renovating, finishing-out, and demolishing processes. This definition begs a few more questions: (1) how do legal obligations generally arise; (2) what are some of the typical legal obligations that surface in the construction processes; and (3) how are these obligations enforced? Roll up your sleeves; we’ll tackle question number one here.

How Do Legal Obligations Generally Arise?

What is Construction Law?

What is Construction Law?

Legal obligations generally arise by force of law or by agreement.

1. Force of Law (Texas-Specific)
Generally, the sources of legal obligations that arise by force of law include the constitution, statutes, regulations, ordinances, and court-made law a.k.a. common law.

The state constitution is the law of the land. It governs with the highest authority all legal matters. Among other things, it provides for the form of our government and establishes legislative, executive, and judicial branches. There are checks and balances between these three branches so that no one person or branch becomes too powerful.

Generally, the legislature—the duly elected representatives of the people of the state—makes the law (called statutes and organized into codes) and authorizes the executive in some instances, often through administrative agencies, to breathe life into some of the statutes by enacting regulations.

The judicial branch interprets the constitution as well as those statutes and regulations. However, unlike the legislative branch, judges only have authority to interpret and apply the law to specific controversies over which they have jurisdiction and preside. Courts are bound to follow legal precedent. Some of them must issue written opinions that then become part of the body of court-made law. The legislature can override court-made law, but only after the fact and in accordance with the law and proper procedure. The judiciary has the power to deem laws enacted by the legislature unconstitutional and invalid.

The governor is the chief executive officer of the state. The executive is arguably the strongest branch since the governor has veto power and is also commander-in-chief of the state’s military forces. (Yes, Texas does have its own military forces.) Still, the power of the executive is held in check by the legislature’s power of the purse—that is, the legislature’s ability to grant or refuse to fund initiatives and programs desired by the executive—and the judiciary’s ability to determine what is and what is not constitutional and, therefore, legal.

At a more local level, some Texas municipalities have been granted the authority to promulgate and enforce law. The laws enacted by these municipalities are often called ordinances, which are also sometimes organized into codes.

2. Agreement (Texas-Specific)
AgreementEven if we don’t have a legal obligation imposed upon us by force of law, we can nevertheless obligate ourselves to do or refrain from doing something by contract. For example, no law says I have to mow your lawn. But if you agree to pay me a fair sum, I may be willing to do it. Once we reach an agreement, I must mow your lawn and you must pay me the agreed price. If one of us does not fulfill our contractual obligation there may be a legal consequence. Before the agreement neither of us owed a legal obligation to the other. After the agreement we both owed one another obligations. These obligations weren’t imposed upon us by law; instead, they were directly self-imposed.

In the construction context as a whole, obligations arise both by force of law and by agreement. The constitution and sundry statutes, regulations, ordinances, court-made law, and contracts govern various aspects of the construction processes. In our next Law 101: What is Construction Law post, we’ll discuss some of the more typical legal issues that surface in these processes.

As an aside, Florida has in place a process whereby attorneys may become board certified in construction law. Texas doesn’t have an identical certification at this time. (Update: Texas does now offer board certification in this field. For more, see this post.) Florida has undertaken to define “construction law” in Rule 6-24.2(c) of the Amended Rules Regulating the Florida Bar (2004) as:

…the practice of law dealing with matters relating to the design and construction of improvements on private and public projects including, but not limited to, construction dispute resolution, contract negotiation, preparation, award and administration, lobbying in governmental hearings, oversight and document review, construction lending and insurance, construction licensing, and the analysis and litigation of problems arising out of the Florida Construction Lien Law, section 255.05, Florida Statutes, and the federal Miller Act, 40 U.S.C. § 270.

So, yeah, there’s that translucent definition, too.

Law 101: What is Construction Law – Part 1?

Law 101: What is Construction Law - Part 1?

Law 101: What is Construction Law – Part 1?

As Olympian Jesse Owens said, “It starts with complete command of the fundamentals.” With our “Law 101” posts, we’ll define terms, phrases, or concepts with the goal of conveying core information in order to set the stage for more involved and complex discussions.

So what is construction law? Merriam-Webster defines construction as the act or process of building something. There is beauty in the simplicity of this definition. But to say that construction law is the law that governs “building things” wouldn’t be very helpful. Wikipedia says:

Construction law is a branch of law that deals with matters relating to building construction and related fields. It is in essence an amalgam of contract law, commercial law, planning law, employment law and tort.

That clears things up, doesn’t it? To an experienced eye, this definition is better than our last one. But what about to inexperienced eyes? Well, let’s search it on Google. Hmm. About 210,000,000 results when one searches the phrase “what is construction law.” That’s a lot of good reading. But perhaps too much.

In a nutshell, “construction law” is a phrase used by lawyers to describe and compartmentalize the many legal issues that arise in the design, engineering, financing, building, improving, renovating, finishing-out, and demolishing processes. It is similar to the phrase “employment law,” which could describe anything from drafting employment contracts to litigating workplace harassment claims. So even this definition isn’t wholly explanatory. In order to better explain what “construction law” encompasses, we need to explore how various laws and obligations are generally created, applied, and enforced and how that translates specifically to the “construction” industry.

In our next post we’ll elaborate on this definition, discuss how legal obligations are generally created, applied, and enforced, and examine some of the legal issues that often emerge in the “construction” industry. We’ll also try to use fewer quotation marks.