Dual Agency

In Texas, a Real Estate Broker who is handling a real estate sales transaction may represent (1) the Seller only, (2) the Buyer only, (3) both Seller and Buyer, or (4) neither Seller nor Buyer.

In the discussion that follows, the term “Broker” means a real estate brokerage or “sponsoring” Broker, while the term “Sales Agent” or simply “Agent” refers to licensees who work for a brokerage or sponsoring Broker, even though such Sales Agents may, themselves, be licensed as “brokers.”

Sales Agents are subject to the control and supervision of their Broker; the acts of a Sales Agent are considered to be the acts of their Broker.

Additionally, in the eyes of the law, both Brokers and their Sales Agents are considered to be “agents” of the party whom they represent.  For example, both the Seller’s Broker, and the Sales Agents who work for that Broker, are considered to be “agents” of the Seller.  As such, they each owe the Seller certain legal duties.

The “default” rule in Texas is that a Broker represents the Seller, unless there is an express agreement to the contrary between Broker and Buyer.  This makes sense in that it is the Seller who decides whether to list a property for sale, it is the Seller who will pay the sales commission for brokering the transaction, and it is the Seller’s Broker (and/or that Broker’s Sales Agent) who will pay to advertise the property for sale.

Thus, when a Buyer calls a Seller’s Broker in response to an advertisement for a property, the Seller’s Broker is representing the Seller, not the Buyer.  In this situation, the Buyer is unrepresented.

A Buyer, in order to have independent Broker representation, would need to enter into an agreement with a Buyer’s Broker, that is, with a Broker other than the Seller’s Broker.  When this occurs, the Seller’s Broker and the Buyer’s Broker typically share the 6% sales commission (paid by the Seller), with each Broker receiving 3%.  Each Broker’s 50% share of the 6% sales commission (3%) is then divided between Broker and Sales Agent.

Texas, like many other states, allows a Seller’s Broker, with certain restrictions, to “represent” both Seller and Buyer.  When a Seller’s Broker “represents” both Seller and Buyer, the Seller’s Broker is not required to give 50% of the commission (that is, 3% of the 6% sales commission) to a Buyer’s Broker.

In Texas, this dual “representation” (sometimes also referred to as “dual agency”) can take one of two forms.

The first of these two forms of dual “representation” involves the Seller’s Broker acting as a mere “intermediary” (Texas Real Estate Commission’s term) between Seller and Buyer, without providing any real representation to either.  When this occurs, the Seller is not getting the Broker representation that is usually thought by sellers to be included in the 6% commission they are paying to sell their property, and the Buyer, as with the “default rule” described above, still gets no representation at all.

In the second of these two forms of Texas dual “representation” the Seller’s Broker appoints one of that Broker’s Sales Agents to “represent” the Seller and another of that Broker’s Sales Agents to “represent” the Buyer.  This arrangement, although on its face may appear to be legitimate, is rife with pitfalls.

As an initial matter, this second form of dual “representation” asks us to naively believe that the two Sales Agents, both of whom work for the same Broker, and who perhaps have offices or desks in close proximity to each other, who may attend Realtor training sessions together, and who might even socialize with each other outside of work, will not put their best interests of closing the deal — and getting paid — above the respective interests of the Seller and Buyer whom they supposedly represent.  This is not an indictment of Sales Agents; rather, it is simply an acknowledgment of human nature.

More importantly, however, each of these Sales Agents is, in the eyes of the law, merely an extension of the Broker.  Thus, although this arrangement may provide the appearance of separate or independent representation, such an appearance is a mere illusion.  One Broker is still representing both sides of the transaction.

Because a real estate purchase-sale transaction, like any other contract negotiation, is, at its core, a transaction with (at least) two mutually-exclusive interests — the Seller trying to sell on terms most favorable to the Seller and the Buyer trying to buy on terms most favorable to the Buyer — it simply is not possible for one Broker to represent the best interests of both Seller and Buyer.

Compare Broker dual “representation” to the representation a Seller or Buyer receives from an attorney or law firm.

Although it is technically possible for an attorney to act as an “intermediary” between Seller and Buyer, and not forming an attorney-client relationship or providing legal advice to either, most competent attorneys would never accept employment on these terms.  The major exception, of course, are attorneys who are employed by title companies.  The difference here, of course, is that these attorneys do provide representation to a client: the title company.

But back to our hypothetical Seller and Buyer.  When was the last time you heard about a law firm representing both sides in a transaction, with one of the firm’s attorneys representing the seller and another of the firm’s attorneys representing the buyer?  Probably never, because such arrangements are prohibited.

One last thought as we conclude this article and bring this subject “in for a landing.”  When litigation results from a real estate transaction, as it sometimes inevitably does, the Brokers and Sales Agents who were involved in the transaction are almost always subpoenaed to provide testimony about what happened.  Such testimony is likely to focus on statements made during conversations by and between Brokers/Sales Agents, on the one hand, and the party they “represented” in the transaction, on the other hand.

Attorney-Client communications, however, are protected from compelled disclosure by the Attorney-Client Privilege.  It is extremely rare for an attorney’s client to be compelled to testify about what the client said to the attorney, or for an attorney to be compelled to testify about what the attorney told the client.

Conclusion

Prudent Sellers and Buyers should seriously consider using a Real Estate Broker for the purpose of finding each other, that is, for what we refer to as the matchmaking function of “bring buyer and seller together.”

Once the match has been made, so to speak, Seller and Buyer should each retain their own attorney to provide legal advice and handle the purchase contract and other legal documents.

The article was excerpted from:
Real Estate Broker or Attorney: Who Should Represent You in Your next Real Estate Transaction?

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

Asset protection clients are often sold elaborate – and expensive – trusts and other legal planning devices, often by slick lawyers or seminar presenters who promise, or who at least strongly imply, that their particular planning device (which no one else has managed to replicate) will provide all the asset protection the client could ever need.

Sometimes elaborate and expensive asset protection plans are warranted; more often, however, they are not.  But even when they are warranted, a lack of attention to basics can defeat the most sophisticated of asset protection plans.

Those who start or run their own businesses are usually at least somewhat familiar with the asset protection (e.g., pre-litigation risk management) strategy of using some type of statutory business entity (e.g., corporation, limited liability company, etc.) to protect their personal assets from their business creditors.  As we – and the Texas courts – all know, the ability to avoid personal liability “is an essential reason that entrepreneurs” shoulder the risks of starting and running their businesses.  Willis v. Donnelly, 199 S.W.2d 262, 271 (Tex. 2006).

Most asset protection clients have also heard of the tactic of “piercing the corporate veil,” which is used by plaintiff lawyers who would like to be able to satisfy a judgment against a business by going after the personal assets of the business owner(s).  Commonly recommended precautions to prevent a “corporate veil piercing” include such common-sense practices of keeping good corporate records, maintaining separate personal and corporate bank accounts, and not co-mingling business and personal funds and expenses.

However, many Texas business owners may not realize that the asset protection qualities provided by their business entity (e.g., corporation, LLC, etc.), can be forfeited – automatically and without any effort whatsoever by a plaintiff’s lawyer – simply by the business owner’s failure to timely file an Annual Franchise Tax Report and pay any tax that may be due.  See, Tex. Tax Code § 171.251.

When “the corporate privileges of a corporation are forfeited,” officers and directors are liable for the corporation’s debt.  Tex. Tax Code § 171.255.  When “corporate privileges of a corporation are forfeited . . . each director or officer of the corporation is liable for each debt of the corporation that is created or incurred in this state after the date on which the report, tax, or penalty is due and before the corporate privileges are revived.”  Id.  The period of liability thus begins “when the report, tax or penalty is due,” and not when the corporate charter is eventually forfeited.

Furthermore, “liability . . . is not affected by the revival of the charter or . . . corporate privileges.”  Id.  Thus, revival of the corporate charter will not protect the business owner from personal liability for a corporate debt that arose during the period between the tax or report being due and the revival of the corporate charter.

Although section 171 refers to “corporations,” these forfeiture provisions apply to all “taxable entities” in Texas.

Texas entrepreneurs have two (2) options when choosing a form of Limited Liability Company (LLC).  The first option is a “traditional” LLC; the other option is a Series LLC.

A traditional LLC is composed of a single business entity, for example, Acme, LLC.  It would be possible for Acme, LLC to obtain, and do business under, various assumed names (e.g., “doing business as” or simply “dba”).  Thus, for example, Acme, LLC might do business under one or more assumed names, such as: The Acme Widget Company, LLC; or in the case of an LLC that is used to hold title to real property, The 1234 Main Street, LLC; and the like.

With the traditional LLC structure, Acme, LLC and each “sub-business” — Acme Widget Company, LLC, The 1234 Main Street, LLC, and so forth, would be treated for purposes of civil liability as a single unit.  In other words, Acme, LLC would be liable for the debts and other legal obligations of both The Acme Widget Company, LLC and The 1234 Main Street, LLC.  Furthermore, The Acme Widget Company, LLC and The 1234 Main Street, LLC would both be liable for the debts and other legal obligations of each other, as well as for the debts and other obligations of Acme, LLC.

A Texas Series LLC, on the other hand, although at first glance appears to be structured in much the same way as a traditional LLC, creates a legal separation between the “parent” LLC, Acme, LLC in our example, and each of the “sub-businesses,” The Acme Widget Company and The 1234 Main Street, LLC, in our example.

Thus, with a Texas Series LLC, neither the “parent” LLC, nor any of the “sub-businesses” are liable for the debts or other legal obligations of each other.

As with all legal matters, there is no “one-size-fits all.”  Thus, although a Texas Series LLC is not the appropriate choice for all situations, Texas “serial” entrepreneurs might at least want to consider the option prior to organizing their next new business entity.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and, shall not constitute legal advice or create an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

There are many immigration visa options available to non-U.S. citizens who want to visit, work, or immigrate to the United States.  This article provides an overview of some of the most utilized avenues to obtaining a U.S. Visa or becoming a Lawful Permanent U.S. Resident.

Immigrant Visas

Immigrant visas and permanent resident (Green) cards are available to non-U.S. citizens who want to relocate to the United States on a permanent basis.  In order to become a U.S. citizen, an immigrant must first obtain a non-immigrant visa and then become a Lawful Permanent U.S. Resident.  Immigrant visa options include:

1.  Family-based immigrant visas are available to the spouse or other close family member of a United States citizen or permanent resident.

Immediate-Relative visas are unlimited in number and, thus, may be obtained without a waiting-period.  A United States citizen may apply for a immigrant visa for the U.S. citizen’s spouse, unmarried children under 21 years of age, parents, and adopted orphans.

Family-preference visas are available for relatives of a United States citizen and for relatives of a Lawful Permanent U.S. Resident (a non-U.S. citizen who has been issued a “Green Card”).  Family-preference visas, unlike Immediate-Relative visas, are available only on a limited basis and, thus, are subject to waiting periods.

The preference classes are:

2.  Employment-based immigrant visas are available to skilled workers, persons with extraordinary ability, outstanding professors or researchers, multi-national managers and executives, investors, and others.

3.  Asylum is also available to persons who had fled from persecution in their home country or who are likely to suffer persecution if they return to their home country.

An immigrant must first obtain an immigrant visa, in order to be eligible for permanent residence (Green Card) in the United States.

Citizenship

Permanent residents may, but are not required to, become United States citizens. 

For more information on becoming a United States citizen, CLICK HERE

Non-Immigrant Visas

Non-immigrant visas are available to non-U.S. citizens who want to visit the United States on a temporary basis, either for work or for pleasure.  Non-immigrant visa options include:

1.  Business or Tourist visa (B-series visa)

2.  Treaty Trader or Investor visa (E-series visa)

3.  Student visa (F-series visa)

4.  Temporary Worker visa (H-series visa)

5.  Exchange Visitor visa (J-series visa)

6.  Executive/Manager visa (L-series visa)

7.  Extraordinary Ability/Achievement visa (O-series)

8.  Religious Worker visa (R-series)

Potential Consequences of Unlawful Presence

The consequences of unlawful presence in the United States can be quite severe.  First, and perhaps most importantly to most non-U.S. citizens who are in the United States, is removal (deportation).  Being deported can tear families apart and result in a myriad of other life-changing hardships.

Second, depending on the length of time a person is unlawfully present in the United States, that person may be barred from reentering the United States if they are deported or otherwise leave the country.

Complexity of U.S. Immigration Law

United States immigration law is extremely complex, always changing, and often not entirely logical or consistent.  Although there is no legal requirement that visitors or immigrants to the United States use the services of an American immigration law attorney, doing so is highly recommended.

How to Obtain More Information

Lapin Law Offices provides immigration law services nationwide.
For more information, please call (972) 292-7425 today, orCLICK HERE

Learn how you can have a Lawyer Available Whenever to review your legal documents and answer your legal questions. Watch our popular video below.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

The Miriam-Webster Dictionary defines “irreverent” as “having or showing a lack of respect for someone or something that is usually treated with respect [or] treating someone or something in a way that is not serious or respectful.”

We concede that the title of this article leans toward the irreverent.  However, the irreverence reflected in the title of this article merely reflects the apparent irreverence with which many divorce litigants handle the issue of Dividing the House When Divorcing the Spouse.

On a fairly regular basis, we are contacted by potential clients who relate the following scenario: Harry Husband and Wilma Wife divorced several years ago.  At the conclusion of the divorce proceedings, Wilma, who had been a stay-at-home mom, received title to the family residence.  Harry, as part of the divorce decree, received the right to receive a sum of money that reflected his marital property interest in the family residence.

The divorce decree also contains a provision that purports to require Wilma to refinance the debt which is secured by the family residence — “within a reasonable period of time” — or some such similarly vague language, so that Harry will no longer be contractually obligated to pay the loan.

When Harry or Wilma calls our law office some years after the divorce (our office didn’t represent either party in the underlying divorce proceeding), either Harry complains that Wilma never refinanced the residence as is “required” by the divorce decree, or Wilma complains that Harry is “harassing” her to refinance the house even though she lacks the financial ability to do so.

As with most problems, it is easier and less expensive to do something correctly the first time, rather than to try and remedy a problem at some future point in time.  Harry and Wilma, by the time their problem is resolved, will likely be acutely aware of this truism.

While it is understandable why Harry and Wilma (and their attorneys, if they were represented by counsel) took the “easy way out” at the time of their divorce — the easy way being “just get the divorce over with and we’ll worry about the refinance later — the reality is that taking “the easy way out” only makes the problem more difficult (and expensive) to resolve at some future point in time.

Regardless of whether you’re about to get married, already married, or facing divorce, don’t be a “Harry” or a “Wilma.”  Obtain the assistance of an attorney who is familiar with asset protection, real property, and marital property law, and implement appropriate legal strategies that, in the event of legal troubles “down the road,” will help negate, or at least minimize, the negative impact and expense of those legal troubles.

As the old saying goes, “Those who fail to plan, plan to fail.”

For more information on Divorce and Family Law services that are available through Lapin Law Offices, watch our popular videos below.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and, shall not constitute legal advice or create an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction, or since this publication may have changed statutorily or have been affected by judicial decision.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

The Texas court system can be confusing.  Texas has 254 counties, which is more than any other U.S. state, and every Texas county has its own set of courts.  At a minimum, each county has a District Court, a County Court at Law, and Justice of the Peace courts.  Each court, in turn, typically has multiple judges, who are assigned to various different courtrooms.  For example, each District Court is likely to have multiple courtrooms, likewise with each County Court at Law and each county’s Justice of the Peace Courts.

Texas, like other states, has various intermediate courts of appeal, which typically hear appeals from the lower (trial) courts.

Finally, Texas has a State Supreme Court.  However, unlike the overwhelming majority of other states, the Texas Supreme Court does not hear appeals from criminal cases; Texas has a separate “Supreme” court for criminal cases.

Want to Know How Much Time You Have to Respond to a Texas Lawsuit?
One of the most pressing questions a defendant has after being served with a Texas lawsuit is: “How much time do I have to respond, so that I don’t lost the case by default?”

CLICK HERE to learn more about time limits for responding to Texas lawsuits.

Still Need More Information?
Contact us today by calling (877) 570-2200, or simply CLICK HERE to send us an email.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

In legal jargon, a person who dies without a Will (or other appropriate estate planning device) is known as an “intestate,” or is said to have died “intestate.”

Under Texas law, the property of an unmarried person who dies intestate passes to certain descendants, in an order of priority which is set by statute.

The relevant statute refers to property passing “in parcenary to the person’s kindred . . . [, and states that, in certain circumstances] the moiety passing to the decedent’s paternal kindred passes to the descendants of the person’s paternal grandfather and grandmother, and so on without end, passing in like manner to the nearest lineal ancestors and their descendants. . . .”  Texas Estates Code § 201.001.

In similar fashion, the separate property and community property of a married person who dies intestate passes to certain descendants, in an order of priority set forth other statutes. 
See, Texas Estates Code §§ 201.002, 201.003.

Ultimately, if there are no statutory descendants, the property of an intestate goes to the State of Texas.

“(a)  If an individual dies intestate and without heirs, the real and personal property of that individual is subject to escheat.

(b) ‘Escheat’ means the vesting of title to property in the state. . . .” 
Texas Property Code § 71.001.

“Okay, no problem,” one might say.  “I’ll simply buy and download an inexpensive form from the Internet, fill-in the blanks, and be done.  Problem solved; time to move on to something more important.”

But before heading off to that next, more important task, this person might want to consider the case of Ms. Aldrich.

Ms. Aldrich, a resident of Florida, created a Will by downloading a presumably inexpensive form from E-Z Legal Forms, an Internet legal forms provider.

Long story short, the E-Z Legal Form that Ms. Aldrich purchased did not contain all of the legal provisions that Ms. Aldrich needed.

After her death, the effect of the needed, but absent, provision of Ms. Aldrich's Will was litigated all the way to the Florida Supreme Court, which ultimately said:

An attorney undoubtedly would have charged Ms. Aldrich more for a Will than the amount she paid for the fill-in-the-blanks Will form that she purchased on the Internet from E-Z Legal Form.

Ms. Aldrich’s “savings,” however, came at a very high price: When an Executor of a Will is forced to litigate in a trial court (and in Ms. Aldrich’s case, multiple appellate courts, as well) the validity or effect of a Will, the attorney fees that are incurred in representing the Executor are paid out of the assets of the decedent’s estate.  Those payments of attorney fees, in turn, reduce the amount of the inheritances which ultimately are distributed to the decedent’s heirs.

The bottom line: Even though it may be tempting to purchase inexpensive legal forms on the Internet, doing so is not worth the gamble.  Don’t be a “Ms. Aldrich.”  Obtain the assistance of a trained, experienced, and competent attorney.

Learn how you can have a Lawyer Available Whenever to review your legal documents and answer your legal questions. Watch our popular video below.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

Even if a default judgment has been entered against you in a Texas lawsuit, it may still be possible to “have your day in court” and prove your case.  But you must act quickly, as you only have thirty calendar days from the date of the judgment to take corrective action.

A default judgment can be entered against a defendant in a lawsuit after the defendant: (a) fails to timely file with the court papers that are legally sufficient to constitute an answer to the lawsuit or (b) fails to appear in court for trial or an important hearing.

In order to persuade the judge to give you a second chance to prove your case, you must demonstrate that: (a) your default was not intentional or the result of conscious indifference to the lawsuit, (b) you have a meritorious defense which, if proved at trial, would alter the outcome of the case, and (c) giving you a second chance to prove your case would not unduly prejudice the plaintiff.

The type of evidence needed to prove that your default was not intentional or the result of conscious indifference to the lawsuit will, of course, depend on the specific facts of your case.

If, however, you were self-represented (did not have an attorney) when the default judgment was entered, you will want to hire an attorney.  Your request for a second chance to prove your case will be much better received if the judge knows that you’ve hired a professional and are no longer trying to “go it alone.”

Likewise, if you were represented by an attorney when the default judgment was entered, you will want to discharge your current attorney and hire a new attorney.  After all, a request that you be given a second chance will have much more credibility coming from an attorney who is new to the case, as the judge who signed the default judgment may not be too pleased with the performance of your current attorney and may be skeptical of any representations your current attorney may make regarding the reason for the events that led to the default.

In any event, hiring an attorney, or hiring a new attorney, as the case may be, will suggest that you are taking the lawsuit seriously and, by implication, hopefully suggest that whatever led to the default judgment was not caused by your intentional conduct or conscious indifference to the lawsuit.

Assuming that you have a meritorious defense to the lawsuit, proving the existence of that meritorious defense should not be too difficult for your (new) attorney.  Remember, however, that in court, there is a huge difference between the existence of a “fact,” on the one hand, and, on the other hand, introducing admissible evidence of that fact.

You should expect that your opponent, the plaintiff, will attempt to challenge the admissibility of your meritorious defense evidence.  Thus it is important that your intended evidence is able to withstand all of the objections a determined plaintiff’s lawyer can find in the Evidence Code.

Lastly, you will be required to prove that giving you a second chance will not unduly prejudice the plaintiff.  Because giving you a second chance is — by definition — prejudicial to the plaintiff, your (new) attorney will need to use the facts of your case to convince the judge that any prejudice to the plaintiff is not “undue,” that is, excessive in the context of your case.

Can we help you with your Texas default judgment or Texas lawsuit?

Call us today at (972) 292-7425, or simply CLICK HERE to send us an email.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

Do you need legal advice, but don't want to pay high hourly fees for a formal consultation with a lawyer?  If so, listen to the following recording of a telephone call to Lapin Law Offices.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

QUESTION

I own a residential property with two other individuals; however, I am the sole borrower on the loan which is secured by the property.  We – the three co-owners – want to begin renting the property to tenants.  What should we do before renting the property to protect ourselves from legal liability.

ATTORNEY ANSWER

Before acquiring title to real property with any person other than one’s spouse, it is always advisable to have in place some type of “co-ownership agreement.”  (Spouses should consider using a marital property agreement, which is a special-purpose form of co-ownership agreement.  Such agreements may be used as “stand-alone” agreements, or in conjunction with other asset-protection strategies.)  The appropriate type, or form, of such agreement will depend on the objectives of the co-owners and the intended use of the property.

Often (but certainly not always), a Limited Liability Company (LLC) will provide co-owners of real property with an appropriate legal framework to effectively manage their asset, while also providing an acceptable level of asset-protection.  Depending on your specific circumstances, a Series LLC might be a good choice.

A properly-drafted LLC Operating Agreement should address issues such how much capital each Member must contribute to the LLC, as well as each Member’s obligations and details concerning each Member’s ownership interest.  For example, if a mortgage loan is to be obtained in the name of one or more, but not all, of the Members of the LLC, the issues relating to that loan should be addressed in the Operating Agreement.  The Operating Agreement should also contain provisions for day-to-day operations and, in the event of disagreement or dispute, provisions for resolving conflict.

When an LLC or other form of business entity is set-up after an asset is acquired by one (or more) of the owners, title to the asset typically must be transferred to the entity.  Issues raised in such circumstances may include selection of the jurisdiction where the entity will be formed or organized; the avoidance (if possible) of transfer and related taxes (depending on the state in which the real property which will be owned by the entity is located); and often in the case of real estate loans, avoidance of due-on-sale clauses.

For purposes of asset-protection, an LLC is often a very good choice of entity, as the only remedy that is usually available to judgment creditors of a Member is a Charging Order against that Member’s interest in the LLC.  A Charging Order will allow a judgment creditor to “intercept” or receive any distributions from the LLC to the Debtor-Member, but will not allow a judgment creditor to obtain an ownership interest in the LLC itself (or in the assets of the LLC) or to otherwise interfere with the operation of an LLC.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and, shall not constitute legal advice or create an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

Businesses, like everything else, change over time.  The successful business must, therefore, constantly evaluate its operations and, in order to remain competitive, make any changes that may be necessary.

One area that every business should constantly evaluate is whether it is not only complying with the law, but also whether it is using the law to its maximum advantage.  The following are five, non-exclusive, areas that every business should review with its attorney, at least on an annual basis.

1.  Compliance with New Laws and Court Decisions

The federal government and state legislatures are constantly passing new laws that affect businesses.  Additionally, federal and state courts are constantly interpreting laws, as they apply to specific businesses and circumstances.  Business lawyers work hard to keep abreast of these changes so that their business clients can focus on their businesses, and not on the law.

2.  Changes in the Structure of Your Business

Businesses sometimes start out as sole proprietorships or partnerships.  Often, however, once a business grows, it is best to transition to a business entity.  There are a number of entity options from which a business client can choose.  A business attorney can assist not only by helping a business client select an appropriate entity type, but also by drafting the legal documents needed to take maximum advantage of the benefits that are available with a particular type of business entity.

The avoidance of legal disputes and limiting legal liability are the primary considerations in business entity formation.  Tax planning is important; however, business entity selection and formation should not be based solely on tax considerations.

A word of caution:  Certified Public Accountants (CPAs), because they assist businesses with tax issues, are authorized by law to form business entities for their clients.  Most CPAs, however, are not attorneys and, thus most CPAs may not lawfully give legal advice.

A business attorney, unlike a CPA, is able to provide business clients with Attorney-Client Privileged legal advice on all aspects of business entity formation and operation, including tax planning.

3.  Legal Liability/Risk Management

There are certain legal risks that are inherent in every type of business.  For example, grocery stores historically have experienced greater legal risk from “slip-and-fall” lawsuits than most other businesses.  Likewise, delivery and courier services usually experience greater legal risk from motor vehicle accidents than most other businesses.

Regardless of the nature of your business, there likely is one or more areas of your business operations that expose your business to heightened levels of legal risk.  Regular, at least annual, review of these areas of your business operations is crucial to effective legal risk management.

4.  Business Contracts

Many businesses find, as they grow and gain more experience, that the contracts they use with their customers either don’t adequately address certain situations, or perhaps don’t address those situations at all.  A business attorney can draft or revise a business entity’s contracts so that those contracts provide the business client with legal protection that are designed to maximize the business client’s revenues and minimize its legal troubles.

5.  Employee/Independent Contractor Issues

Every business needs personnel in order to serve its customers.  Employee and independent contractor issues, in turn, can be as varied as workers themselves.  It follows, then, that every business should constantly be aware of employment law issues that may affect its continued and future operations.  Although more frequent attention to personnel issues is often required, an annual legal review of these issues, including personnel status, employee handbooks, and personnel policies, should be considered the absolute minimum.

Are you ready to schedule your business’s annual legal checkup?

Contact us today by calling (972) 292-7425, or simply CLICK HERE to send us an email.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

Texas title companies often authorize one or more Texas lawyers or law firms to act as their agent, for the purpose of issuing policies of title insurance and closing real estate transactions.  These “fee attorneys,” as they are known, act as escrow agents and issue title polices when closing real estate transactions in their law office.

While it may be convenient, and even seemingly cost effective, to use a Texas fee attorney to close your Texas real estate transaction, doing so may, in the long-run, cost you much more than the amount you likely thought you were saving by not hiring your own attorney.

The key to understanding the role of a Texas fee attorney is to know who the Texas fee attorney actually represents.  The key to knowing who the Texas fee attorney represents, in turn, requires knowledge of the source of the Texas fee attorney’s compensation, which is not an insignificant amount in most transactions.

In Texas, title insurance premiums are set by law.  This is an extremely bad idea, but that’s a discussion for another time.

Fee attorneys are often paid a whopping 40% of the premium for a title insurance policy.  But since title insurance premiums are not negotiable, it is not possible for a buyer or seller to find a better deal by shopping around.

Texas fee attorneys typically make it quite clear (at least in the fine print) that their only client is the title insurance company who is paying them 40% of the title insurance premium.

Sometimes, however, a Texas fee attorney will, for a small fee, to be paid by a buyer or seller, provide “neutral” legal services to a buyer or seller, such as the preparation of legal documents related to the transaction (e.g., contracts, deeds, etc.).

It is well-known that an attorney may not represent multiple clients who have conflicting interests.  For example, in a lawsuit, an attorney may not simultaneously represent both the plaintiff and defendant.

This conflict-of-interest rule applies with equal force both inside and outside the courtroom.

Thus, an attorney may not simultaneously represent both the buyer and seller in a real estate transaction.

Just as legal “representation” is not confined to the courtroom, so too, it is not confined to the negotiation aspects of a real estate transaction.

Drafting the legal documents for a real estate transaction can often be just as consequential, if not more so, than the verbal negotiations that led to a written contract.  For example, just look at a written lease agreement that is used by a property management company that leases large numbers of apartments to residential clients.  This type of lease is likely to be many pages in length, in small print, and with terms that clearly favor the landlord over the tenant.

Because a Texas fee attorney works for the title company that is paying the attorney a significant portion of the title insurance premium as a legal fee, the Texas fee attorney is not capable of providing either the buyer or seller with adequate or effective legal representation.

Lapin Law Offices represents both buyers and seller of real estate, but not at the same time, in the same transaction.

Can we help you with your Texas real estate transaction?

Call us today at (972) 292-7425, or simply CLICK HERE to send us an email

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

Texas has affixed the label of “community property” to its statutory scheme which addresses marital property.

Texas statutes, rather than providing a definition of what constitutes community property, defines the term in the negative, by stating what is not community property.

Texas defines separate property as:

Texas divorce courts have been given extremely broad discretion when dividing community property during a divorce.  All that is required is that the court do what is “just and right.”

Of course, what is “just and right” in one Texas divorce court may not necessarily be “just and right” in a divorce court in another Texas county, or even in a Texas divorce court that is located next door or across the hall.

With such a subjective and arbitrary standard, how could it be otherwise?

Appeals are extremely expensive.  Furthermore, an appellate court will presume that the divorce court’s order dividing property is just and right.

In other words, in most cases, it probably will not be worth the time and expense to appeal an “unjust or wrong” divorce court property division order.

But there is good news: Texas couples — who plan ahead — can prevent Texas divorce courts from ever dividing their marital property and — at the same time — each spouse can protect their property from the claims any future creditors might acquire against their spouse’s property.

Asset protection planning of this sort is not a “one-size-fits-all” type of proposition, nor is it obtainable by downloading a “fill-in-the-blanks” legal form from the Internet.

Rather, legitimate asset protection planning involves an individualized evaluation of a couple’s situation, followed by the creation and implementation of an appropriate — customized — asset protection plan that is best-suited to the couple’s specific situation.

“Sounds expensive,” you might say.  Perhaps.  Until you consider the cost of litigating a case from filing, through pre-trial discovery, through settlement negotiations, and then through trial.

Oh, and don’t forget all those attorney fees you’ll need to pay your lawyer, regardless of whether you win or lose.

And even if you win in the trial court, the other side can still appeal.

Considering the high cost of litigation — both in dollars and in emotional well-being — a little asset protection planning probably isn’t so expensive after all.

Learn how you can have a Lawyer Available Whenever to review your legal documents and answer your legal questions. Watch our popular video below.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

The overwhelming majority of us want to live and work in a safe and orderly society where people are free to go about their legitimate business without being victimized by criminals.  Thus, we see that “law and order” (not just the television show, but also the enforcement of laws and punishment of crime) is a good thing.

We also want a government that administers the laws, not just in a fair and impartial manner, but also in a manner that strikes an appropriate balance between what is in the best interest of society and what is in the best interest of the criminal defendant.  That is why we call it the criminal “justice” system, not the criminal “vengeance” system.

It is not uncommon, nor has it been uncommon throughout the generations, for a young person to run afoul of the law on a single occasion, only to turn his life around and become an “upstanding” and productive member of society.  This is the type of person for whom “deferred adjudication” was intended.

The concept of deferred adjudication, as it is practiced throughout the United States, generally works as follows:

An adult, but youthful, first-offender, who typically committed a crime that is not too serious (perhaps surprisingly, many crimes that are classified as “felonies” fall into this category) is arrested.

The prosecutor realizes that the defendant is probably not a “bad kid” who is just beginning a life of crime, but rather, is a kid who probably just made a one-time, big mistake.

The prosecutor decides to give the youthful defendant an opportunity to accept responsibility for this big mistake, while at the same time, allowing the defendant to avoid the lifelong consequences of a criminal conviction.

The consequences of an adult criminal conviction can include an inability to obtain professional licenses, many positions of employment, and the loss of civil rights such as voting of firearms rights.

The agreement between the prosecution and the defense goes something like this:

Because the ultimate outcome of the case — dismissal or conviction — will not be decided until the defendant has had an opportunity to successfully complete a period of probation (and pay any related fine), adjudication of the case is deferred until it can be determined whether, in fact, the defendant did successfully completed probation.  Hence the name “deferred adjudication.”

In Texas, however, it works a little, or perhaps a lot, differently.

Historically, most Texas cases where defendants have agreed to deferred adjudication have resulted in a conviction — not a dismissal of the criminal charges — after successful completion of probation (known in Texas as “community supervision”).

The only thing a Texas defendant typically receives after successfully completing probation is a “release” from probation and a criminal conviction.  Not a very good deal, at all.

Not surprisingly, many Texas defendants who agreed to deferred adjudication reasonably, even if erroneously, thought that the criminal charges against them would be dismissed if they successfully completed the period of community supervision (probation).

If you are a Texas defendant who agreed to deferred adjudication and you are still in the deferral period, that is, you are still on community supervision (probation), it may still be possible to have your case dismissed.  But it probably won’t happen automatically.

If you were a Texas defendant who has already been “discharged” from community supervision, a thorough examination of your court file will be needed to determine whether your case resulted in a conviction and, if so, what options might still be available to you.

To request assistance with your case, please CLICK HERE

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

The business of wholesaling real estate is often conducted by persons who are not licensed as a real estate broker or as a real estate sales agent.  Real estate wholesalers typically seek to find properties that are not suitable, in their present condition, for listing on a multiple listing service (MLS) and which are not suitable for sale at a retail price.

Once a real estate wholesaler locates a distressed property, the wholesaler, who deals directly with the property owner, attempts to negotiate the terms of a purchase contract or an option contract.

After entering into a real estate purchase contract or a real estate option contract with the property owner, the real estate wholesaler will then “sell” the contract to someone else.  The person who buys the wholesaler’s contract may be a “rehabber,” someone who fixes-up dilapidated properties and then resells them, either to consumers or to other investors.

Historically, Texans (as well as other Americans) could freely buy and sell rights in real estate purchase contracts and real estate option contracts.  That is, they could freely engage — without a real estate license — in the business of real estate wholesaling.

On September 1, 2017, however, the right to freely engage in the business of real estate wholesaling — in Texas — was diminished.  As explained below, the extent to which that right was diminished in Texas is yet to be determined.

Senate Bill 2212 (SB 2212) amended the Texas Occupations Code, by adding section 1101.0045, effective September 1, 2017, which, in relevant part, states:

Section 1101.0045 can reasonably be interpreted in at least two very different — and opposite — ways.

First, section 1101.0045 can be interpreted to mean that a real estate wholesaler’s failure to disclose the equitable nature of the rights being sold will, henceforth, be deemed to be the brokerage of real estate (for which a real estate license is required) and that disclosure alone is all that a real estate wholesaler must do to avoid violating this law.

In other words, according to this interpretation, a real estate wholesaler need only disclose and, after disclosure, may conduct “business as usual.”  This is the simple reading of the law and, indeed, is the explanation of the law which was given by the author of this legislation.  The courts, however, are free to disregard the author’s explanation.  

Alternatively, section 1101.0045 can be interpreted to mean that although a failure to disclose will certainly constitute the brokerage of real estate, and thereby bring an unlicensed real estate wholesaler within the reach of the statute, disclosure alone is not sufficient to protect the unlicensed wholesaler.

However, if disclosure alone is not enough to protect the unlicensed wholesaler, what else is required?  Answer: to “not use the option or contract to purchase to engage in real estate brokerage,” which is the first prong of the two-prong test of section 1101.0045(a)(1).

But that, you may say, just delays the question.  What does it mean to “engage in real estate brokerage”?

The statutory definition of what constitutes “real estate brokerage” is a bit lengthy, but the short answer is that brokering real estate means selling property: (a) that one does not own, (b) for a fee or other thing of value.

There is absolutely no dispute that real estate wholesalers expect to be paid for their efforts, which, of course, is a completely legitimate expectation.

Thus, the only question that remains is whether a real estate wholesaler “owns” the property being sold.  The short, but not necessarily easy, answer is that the wholesaler “owns” an “equitable” property right in the real estate contract that is being sold, but clearly does not own the legal rights associated with the property.  

Whether the Texas courts will decide that a real estate wholesaler sells “property” that the wholesaler “owns” or does not “own” is, currently, an open question.  As courts and judges have often said about various legal issues, this is “a question on which reasonable minds could differ.”  Translated, there are plenty of employment opportunities in this statute for Texas lawyers.

Perhaps one clue to answering the question of how the Texas courts, in a quest to reconcile the different parts of this statute, might answer the question of whether a real estate wholesaler “owns” what is being sold, is to look at the penalties for violation of section 1101.0045.

The most frequently seen penalty throughout this statutory scheme is monetary: no less than, but up to 3 times the profit realized by the wholesaler.

If we assume, for the sake of discussion, that the Texas courts will rule that disclosure alone is insufficient to bring a non-licensed real estate wholesaler into compliance with the statute, and that wholesalers do not own what they are selling, then it would not be surprising if the Texas courts were to hold that an unlicensed real estate wholesaler violates the statute only if the wholesaler is paid a fee.  In other words, “No Fee = No Brokerage.”  And, of course, 3 times $0.00 is $0.00.

Section 1101.0045 does not apply to licensed real estate brokers (sales agents may not lawfully work independently from their sponsoring broker), nor does it apply to attorneys (who are statutorily exempt from the real estate licensing statute).

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and, shall not constitute legal advice or create an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

Hiring a lawyer — as almost everyone knows — is expensive.  Furthermore, most people would prefer to spend their hard-earned money on just about anything other than legal services.  Thus, when hiring a lawyer, clients demand — and deserve — as much value as possible for the legal fees they pay.

Take, for example, one of our longtime clients, Penny Wise.*  Ms. Wise is a smart, hardworking, and entrepreneurial woman for whom our law firm has done legal work for many years.

We first met Ms. Wise shortly before she started her first business.  At the time, Ms. Wise had just inherited a handsome “nest egg” from a recently deceased relative and wanted to use a small amount of the inheritance to launch her first business.

We suggested to Ms. Wise that she consider subscribing to the LAW Plan, which is our firm’s version of a legal services plan.  Since Ms. Wise was about to start a business, we suggested the Small Business LAW Plan, rather than the Personal LAW Plan.

As we explained to Ms. Wise, each LAW Plan option would provide her with priority access to a Texas attorney, who would answer her questions and counsel her on the multitude of legal issues that come up when starting a business.

We also explained to Ms. Wise that Small Business LAW Plan subscriptions include Registered Agent Service, as well as Demand Letters, written on a law firm letterhead, which we would be glad to send to any of Ms. Wise’s customers who neglected to pay her on time, or who paid her with “bad” checks.

Lastly, we explained that, as a LAW Plan subscriber, Ms. Wise would receive a 10% discount on legal fees for any matter that we might handle for her which is NOT covered by the LAW Plan, including fees for forming the business entity for her new business.

Penny Wise decided to save some money by using an Internet-based, non-attorney, to help her with the formation of business entity and to forgo subscribing to the LAW Plan.

Some time later, Ms. Wise contacted our law firm and requested representation in a lawsuit that had been filed against both her and her new business.

Unfortunately, because the Internet-based company from whom Ms. Wise had purchased her business entity formation documents is not a law firm, it was not able to provide Ms. Wise with the legal advice that she needed to make the best decisions.  As a consequence, Ms. Wise did not have the lawsuit protections that she thought she had purchased.

The good news is that our law firm was able to help her with the lawsuit, although Ms. Penny Wise did, after all was said and done, spend more on legal fees than she otherwise would have spent, had she obtained legal advice before legal troubles arose.

As the saying goes, “All’s well that ends well.”

Ms. Wise moved on from the lawsuit against her business, while still in possession of a good, albeit smaller, portion of her inheritance.

Romance struck soon thereafter, and Ms. Wise was engaged to be married.  When Ms. Wise called our law firm to share the good news, we suggested that she consider some premarital Asset Protection planning.  Not entirely unexpected, Ms. Wise dismissed the idea and, in a good-natured way, suggested that such concerns explain the plethora of “lawyer jokes.”

The next time we heard from Ms. Wise, several years later, was when she called us to request representation in her divorce case.  It seems her husband, Deadbeat Dan, wanted not only his rightful share of their marital property, but also a sizable portion of both the value of Ms. Wise’s business and of what remained of Ms. Wise’s inheritance.

Although our law firm was able to resolve Ms. Wise’s divorce case, there is little doubt that the divorce cost Penny Wise much more than it otherwise would have, if only Ms. Wise had done some effective premarital Asset Protection planning.

Moving on after divorce, Ms. Wise continued with her business, but also became interested in real estate investing.

Ms. Wise became quite successful as a real estate investor.  Unfortunately, however, Penny Wise again tried to save money on legal fees by not doing preventative legal work.  As of this writing, our law firm has resolved several legal matters relating to various real estate investments in which Ms. Wise has been involved.

But please do not misunderstand.  We are not complaining.  Penny Wise has been a very good client of our law firm for many years.  We just hope that you won’t be penny-wise and pound-foolish.



*Penny Wise is a fictional character.  The legal matters described in this article are also fictional, and are intended only to illustrate the perils of not obtaining legal assistance which is appropriate to one’s situation.

CLICK HERE for more information, and to subscribe to the LAW Plan.


Need help with your legal matter?
Call us today at (972) 292-7425, or simply CLICK HERE to send us an email.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

QUESTION

Considering the high cost of litigation and the potential for a financially devastating outcome, I, like many others, have a generalized concerned about the possibility of being involved a lawsuit.  I do not, however, have any reason to believe that I will be involved in any particular lawsuit. 

What are the greatest legal risks to my financial bottom line? 

What can I do to protect against that risk?

ATTORNEY ANSWER

Clients often seek to manage and reduce legal risk, and rightly so.  The cost of litigation – whether in the form of adverse judgments or simply the expenses that must be incurred to litigate a case –  can bankrupt or severely impair the financial well-being of most individuals and businesses.

When discussing legal risk, clients often express concern about liability resulting from personal injuries others might sustain on the client’s real property, liability from automobile or other accidents, or liability from contractual or related business dealings that somehow went wrong.  These concerns are legitimate.  A large amount of money is lost to adverse judgments in these types of cases, as well as from litigating these types of cases.

The enormity of such losses might explain why many people seek to manage risk through use of various complicated and fancy (not to mention, expensive) asset protection strategies.  However, the truth of the matter is that the vast majority of people will never be involved in such high-stakes litigation and, therefore, do not need the (sometimes questionable) protection that might be provided by such strategies.

Simple (and usually less expensive) is often better than complex (and expensive).  Such is the case here.

Statistically, most Texans are more likely to find themselves in divorce court, fighting over the division of marital assets, than in a civil court fighting over personal injury or contract damages.  Thus, for most Texans it makes sense to focus, at least in the first instance, on the management of marital property.

A brief look at American marital property systems is necessary to better understand why Texas Divorce Courts pose such a great financial risk.

The marital property laws of all American states derive from two basic systems: the Common Law (aka: equitable distribution) system and the Community Property system.  Generally speaking, in Common Law states, married couples decide whether – and which – assets that are acquired during marriage will be considered “marital property” or part of the “marital estate.”  Upon divorce, courts in Common Law states divide the marital estate in a manner determined by the court to be “equitable.”  Most states can be classified as Common Law marital property states.

The Community Property system, on the other hand, presumes that all property acquired during marriage (with certain limited exceptions) is marital property.  Upon divorce, the marital estate – that is, all community property owned by the couple – is divided equally.  The community property form of marital property, having been derived from Spanish law, is found mostly in states located in the southwest and western areas of the country.

Texas statutes classify the Texas system of marital property as being of the community property variety.  Consistent with such a classification, all property acquired by Texans during marriage (again, with limited exceptions) is considered to be community property.

However, in sharp contrast to the “classic” or “textbook” definition of Community Property, Texas law provides that: “In a decree of divorce or annulment, the court shall order a division of the estate of the parties in a manner that the court deems just and right, having due regard for the rights of each party and any children of the marriage.”  Texas Family Code § 7.001.

Neither Texas statutes nor Texas judicial opinions articulate any objective or other meaningful standard by which to determine whether the division of marital property in any particular case is “just and right,” unjust and wrong, or somewhere in between.  Apparently, “just and right” is, as the statute itself states, whatever “the court [that is, the trial judge] deems” it to be.

Thus, the statutory mandate that Texas marital property be divided in “a manner that the court deems “just and right” is, for all intents and purposes, an almost unrestrained legislative invitation for the trial judge to do whatever he or she wants to do.  Indeed, what two or more judges consider “just and right” in a given situation might be vastly different.  There is absolutely no legislative (or judicial) attempt to ensure, or even promote, the uniformity of Texas divisions of marital property, whether from Texas county to Texas county, or even between different courtrooms within any given Texas county.

Furthermore, it is important to note that judicial discretion to divide Texas marital property in “a manner that the court deems just and right” is not limited to divorce cases that allege “fault.”  So-called “no-fault” cases are equally susceptible to the whims of the trial judge.  Thus, to the extent that a divorce litigant (or that litigant’s attorney) can cast the other party in a “bad light” before the trial judge, or where the other litigant brings judicial disfavor upon himself or herself for whatever reason, a divorce case that ostensibly is a “no-fault” case can, as a practical matter, yield a property division that is based on considerations of fault or other wrongdoing.

In all fairness to Texas judges, most probably hold a sincere belief that their “just and right” property divisions are, well, just and right.  The problem here is not most Texas judges; the problem is the Texas legislature.

The Texas legislature has failed to give Texas trial court judges any objective or otherwise meaningful guidance on how to properly divide marital property.  The result has been that each Texas trial judge that is tasked with making a “just and right” decision regarding the division of marital property has no choice but to apply his or her own values and ideas about how marital property should be divided in a given case.  The result is – literally – “Legislating from the Bench” – not because all or any particular judge has decided to be a “judicial activist,” but rather, because the Texas Legislature has failed to legislate.

Now for the good news.  The Texas Legislature has allowed you to do what it has failed to do.  Texas statutes affirmatively authorize and allow married couples to contract with each other on issues such as: specifying what property will (and will not) be considered marital property; whether and how marital property is to be divided; whether, in the event of divorce, one spouse may be made to pay the other spouse’s attorney fees (in whole or in part), whether one spouse may be made to pay alimony to the other spouse (and if so, how much), and other important issues.

More good news.  Marital property contracts are not just risk management tools that can be used in case of divorce.  Such contracts are also extremely valuable asset protection tools for couples where, for example, one spouse is self-employed or who engages in a profession or occupation that exposes that spouse to significant levels of litigation risk from dealings with third parties.

For more information on affordable divorce and family law services offered by Lapin Law Offices, watch our popular videos below.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and, shall not constitute legal advice or create an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction, or since this publication may have changed statutorily or have been affected by judicial decision.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

The reasons why lawful permanent residents (persons who have been issued a “Green Card”) (hereinafter “LPR”) become U.S. citizen are many and varied.  The following are the most common reasons.

1.  The Right to Have Rights: Chief Justice Earl Warren wrote that “Citizenship is [a] man’s basic right, for it is nothing less than the right to have rights.”  Perez v. Brownell, 356 U.S. 44 (1958).  Becoming a U.S. citizen will entitle a LPR to all the rights that are secured for citizens by the U.S. Constitution.

2.  Deportation: Consistent with the idea that citizenship is “nothing less than the right to have rights,” perhaps the most important reason a LPR might want to become a U.S. citizen is that citizens may not be deported (removed).  This is especially important because, although LPRs are, as a group, law-abiding people, none of us can predict the future with certainty.  It is not uncommon for a LPR to be placed in deportation proceedings as the result of some relatively minor offense.  Being deported can, of course, tear families apart or, at the very least, cause unnecessary — and avoidable — hardship.  Further, even if a LPR who is placed in deportation proceedings is ultimately successful in avoiding deportation, the legal fees associated with deportation defense can be staggering.

3.  Foreign Travel: Many LPRs travel abroad on a regular basis, either for business or pleasure, or to visit family and friends in their country of origin.  It is no secret to experienced international travelers that those traveling on an American passport experience less inconvenience from foreign border and other officials, as compared to their fellow travelers from other countries.  Also, many countries will allow a U.S. citizen to enter and visit their country for a short period of time, without requiring the U.S. citizen to obtain a visa.  Furthermore, U.S. Customs and Border Protection (CBP) officials can refuse a LPR reentry to the United States for a variety of reasons, some of which may be trivial or, worse yet, erroneous.  American citizens, on the other hand, have an absolute right to enter and remain in the United States.

4.  Living Abroad: U.S. citizens may live outside of the United States for an indefinite period of time.  LPRs, on the other hand, risk losing the privilege of reentering and living in the United States if they are outside of the United States for more than 6 months.

5.  Family Reunification: It is much easier — and quicker — for a U.S. citizen, as compared to a LPR, to bring their family members to the United States.  A U.S. citizen may sponsor their parents, spouse, and minor children, all without any limits, quotas, or priority dates.

6.  Federal Employment: Most positions of federal employment require U.S. citizenship.  Becoming a U.S. citizen thus provides a LPR with many more job opportunities.

7. Voting: LPRs live — and pay taxes — in the United States, but only U.S. citizens have the right to vote in U.S. elections.  “Taxation without representation” was one of the major reasons the American colonists declared their independence from Britain.  Becoming a U.S. citizen gives a LPR the right to vote and, by extension, to be truly represented in the political process.

8.  Become an Elected Official: Most U.S. elected positions require U.S. citizenship.  Once a LPR becomes a U.S. citizen, that person may run for, and hold, elective office at the federal, state, and local levels of government.

9.  Government Benefits: U.S. citizens are eligible for certain government benefits and other forms of financial aid, including college scholarships, that are unavailable to LPRs.

10.  Cost of Citizenship: Most “Green Cards” are valid for, and must be renewed every, 10 years.  Lost “Green Cards” must be replaced.  The United States Citizenship and Immigration Service (USCIS) fee to renew or replace a Green Card was $540.00, at the time this article was written.  The citizenship process, by comparison, is a “one-time” expense.  While it is true that the USCIS fee to renew or replace a lost “Green Card” is slightly higher than the fee to become a U.S. citizen, once a person becomes a citizen, that person will never again be required to pay the USCIS a fee — for anything.

Lapin Law Offices provides citizenship and other immigration law services nationwide. 

For more information, please call (972) 292-7425, or CLICK HERE.

Learn how you can have a Lawyer Available Whenever to review your legal documents and answer your legal questions. Watch our popular video below.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

For lawsuits filed in a Texas District or County court, a defendant usually must file an answer with the court no later than twenty (20) days after being served with a lawsuit.

For lawsuits filed in a Texas Justice court, a defendant usually must file an answer with the court no later than ten (10) days after being served with the lawsuit.

What, you might ask, is an “answer” that must be filed with the court?

The answer that must be filed with the court is nothing more than a properly-formatted legal document that tells the court that you do not agree with some or all of the statements contained in the petition that was filed by the plaintiff and with which you were served.

Filing a legally-sufficient answer — in a timely manner — is necessary to protect your right to tell your side of the story in court.

A word of caution: Although timely filing an answer will usually protect your legal rights, there are circumstances where filing an answer may actually WAIVE certain rights or defenses that you may have to a lawsuit.

The best course of action, of course, is to always obtain competent legal advice and representation as soon as possible, which often may be prior to the filing or service of a lawsuit.

But at a minimum, you should contact an attorney as soon as possible after being served with a lawsuit.  Any delay beyond this point in time may make it difficult — or possibly even impossible — to find an attorney who will have the time to help you.

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and shall not constitute legal advice or serve as the basis for the creation of an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

QUESTION

I am the owner of a small business and a real estate investor.  Although my businesses are profitable, I simply cannot risk a frivolous — and potentially ruinous — lawsuit. 

What steps can my businesses take that will keep them from being dragged through the court system?

ATTORNEY ANSWER

As the saying goes, “anyone can sue anyone else, at anytime, for anything.”  It is often little comfort for the owners of a business to have their lawyer tell them that frivolous lawsuits can usually be resolved relatively quickly and with relatively little expense.  So here are the top 10 tips for keeping small (and not-so-small) businesses and real estate investors out of court:

1. Use the Proper Legal Entity for Your Business and Make Sure it is Set-up Properly.

Not all business entities are created equal.  Furthermore, the structures within each type of business entity are also not created equal.  So regardless of whether your business would be best-served through use of a corporation, limited liability company (LLC), or some form of partnership, be sure you obtain competent legal advice in selecting and setting-up the legal entity through which your business will operate.

2. Keep Proper Records

Everyone knows (or should know) that it is extremely important to keep records for business tax purposes.  It is also important to keep records in the ordinary course of business that are unrelated to taxes.  Although the type and nature of such records will depend on the type and nature of the business, suffice it to say that there are few (very few) businesses that cannot manage or reduce its exposure litigation risk by keeping proper records.

3. Implement and Maintain Appropriate Data Security Procedures

We live in a digital and data-driven world.  Digital evidence is an ever-present and ever-growing component of business-related litigation, both for plaintiff and defense.  Don’t lose the litigation battle over data by default.

4. Use Independent Contractors Appropriately

Savvy business owners have long understood that one way to increase profits is to decrease expenses, and that one very profitable way to decrease expenses is to use independent contractors instead of employees.  While there are many advantages to using independent contractors, there are many more disadvantages if it is not done correctly.  Make sure you use independent contractors properly.

5. Implement and Administer Appropriate Employee Policies and Procedures

If your business does require employees, make sure appropriate employee policies and procedures are in place to facilitate a good employer-employee experience for all involved.  Not only is it the right thing to do, it also makes good business sense to do so.

6. Adopt and Maintain Appropriate Customer/Client Controls

Just as a business should properly manage its independent contractors and employees, it should also properly maintain proper customer/client controls.  Proper customer/client controls include such matters as ensuring reasonable expectations, such as through the use of written contracts, policies and other business and industry-specific controls.

7. Adopt and Maintain Appropriate Vendor Controls

Vendors must also be managed.  Just as appropriate controls should be implemented to prevent or reduce the magnitude of legal disputes between workers and customers, so too should appropriate controls be used to reduce the likelihood and magnitude of disputes with vendors.  This, too, is a business/industry-specific analysis.

8. Use Business Experiences to Continually “Fine-Tune” Your Business Practices

Simply put: learn from your mistakes.  After your business experiences and works through a problem, make appropriate changes to your business controls so that the likelihood of that same problem being repeated is reduced, if not eliminated altogether.

9. Purchase and Maintain Appropriate Types and Amounts of Insurance

Insurance is cheap, compared to most risks.  Lawsuits can often be settled before trial for an amount equal to or less than the “policy limits” of the defendant’s insurance policy.  However, if the defendant is uninsured — or under insured — well, enough said about that.

10. Engage in Appropriate Asset Protection Planning Before a Lawsuit Is on the Horizon

Lastly, there are many legal strategies that can be implemented prior to the threat of a lawsuit that will either discourage the plaintiff from suing in the first place or, if the plaintiff does sue, provide the defendant with legal tools to terminate the lawsuit, before the lawsuit gets too out-of-control.  Many of these asset protection planning tools, however, are either unavailable after a claim arises, or will be of reduced effectiveness after a claim has arisen.

For more information on this topic, click here to: Contact Lapin Law Offices

Disclaimer

The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and, shall not constitute legal advice or create an attorney-client relationship.  The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction.  Do not rely on the information contained in this publication for any purpose.  If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.

Creative real estate investors have used various forms of seller-financing — with much success — for many years.  Two of the most favored forms of seller-financing, in turn, have been the Residential Lease-Option and the Land Contract (also known as a “Contract for Deed”).

By way of review, a residential lease-option is simply a “regular” residential lease coupled with an option to purchase the leased property at some future time.  Typically, a portion of the rental/lease payments are credited toward the Tenant/Buyer’s down payment at purchase.

A Land Contract (aka: Contract for Deed) operates in somewhat similar fashion, except that the Buyer/Tenant has an actual ownership interest in the subject property.  But, unlike the usual real estate transaction, where title is conveyed to the Buyer at or near the time of purchase and the Buyer then makes loan payments to a Lender, title is not transferred to the Buyer under a Land Contract until after all the payments have been made under the contract.  Hence the name: Contract for Deed.

In many (perhaps most) states, Residential Lease-Options and Land Contracts are alive and well; but not in Texas, the execution capital of the United States.

Please don’t misunderstand.  We fully support capital punishment in appropriate cases.  But here, in the case of State of Texas v. Residential Lease-Option, we believe the defendant was wrongfully convicted.  The following is a brief summary of the case for the defense:

A few years ago, before 2005, a few Texas real estate investors were, shall we say, not displaying the best judgment and good manners, and used the Residential Lease-Options and Land Contracts in a manner that was perhaps technically legal, but shall we say, somewhat less than honorable.

In response, the Texas legislature passed the functional equivalent of a capital punishment statute for Texas Residential Lease-Options by imposing draconian requirements and restrictions on so-called “executory contracts.”

In order to accomplish its desired result, the Texas Legislature had to redefine the term “executory contract” as: “An option to purchase real property that includes or is combined or executed concurrently with a residential lease agreement, together with the lease, [of more than 180 days] is considered an executory contract for the conveyance of real property.”  Texas Property Code § 5.062(a)(2).  For the sake of some semblance of brevity, we’ll forgo a discussion of the poor drafting of the statute and move right along to a discussion of the substance of the statute.

Perhaps hinting that it knew it was playing “fast-and-loose” with the term “executory contract,” the Texas legislature said only that Residential Lease-Options — but not non-residential lease options or commercial lease options — will henceforth be “considered” to be “executory contracts.”

In other words, what the Texas legislature said is that: (1) residential leases ARE executory contracts, but they’re okay; (2) purchase options that do not include a residential lease ARE NOT executory contracts, and thus are okay; and that (3) purchase options which are combined with a residential lease ARE, henceforth, to be “considered” executory contracts, and thus NOT okay.

To better understand what’s going on here, we need to define the term “executory contract.”  According to Black’s Law Dictionary, an “executory contract” is “[a] contract that has not as yet been fully performed or completed. . . .  In the context of the Bankruptcy Code [issues regarding executory contracts historically have arisen more frequently in bankruptcy cases than in general civil litigation] an executory contract is a contract under which obligation of both [the] bankrupt and [the] other party to the contract are so far unperformed that failure of either to complete performance would constitute material breach. . . .”

The important piece of our “executory contract” puzzle is that for a contract to be “executory,” both parties must still have contractual obligations which have not yet been performed.  For example, in the case of a contract for the sale of a widget, if the seller gives the widget to the buyer, but the buyer doesn’t pay, the seller sues for breach of contract.  In the widget case, the contract has been fully performed by one party and breached by the other; it is no longer a contract that requires both to perform, in other words, it is no longer executory.

Now let’s define an “option.”

Black’s Law Dictionary defines an “option” as a: “Right of election to exercise a privilege. . . .  An option is an agreement which gives the optionee the power to accept an offer for a limited time.”

Because an optionee has “only” a contractual right under an option contract — and does not have any obligation or duty to perform — it simply is not possible for an optionee to breach an option contract by failing to exercise the option.

Because each party to a contract must be capable of breaching the contract in order for the contract to be executory, and because it is not possible for an optionee to breach an option contract, it must logically follow that option contracts are not — indeed, by definition cannot be — executory contracts.

Except in Texas, where option contracts that are combined with residential leases are now somehow magically transformed into executory contracts, simply because the Texas legislature, by creating a legal fiction, "considers" them to be executory.

The 2005 Texas “executory” contracts law did not, however, make residential lease options illegal, but it did impose so many requirements on those real estate contracts that are considered under the law to be “executory” that no prudent or reasonably cautious investor is likely to use (or continue using) such contracts.

Thus, Texas did not “execute” the Residential Lease Option or other residential real estate contracts that it considers to be “executory.”  But it did wrongfully “convict” these types of contracts based solely on the misdeeds of a very small minority of users.  An analogy many Texans are likely to understand would be for the government to restrict a certain type or class of firearm so severely that the practical effect of the restrictions would be to ban the particular type or class of firearm altogether, based solely on the misuse of it by a small number of miscreants.

We submit that legally-competent adult Texans, whether they be real estate investors or home buyers, should be free to enter into the real estate contracts of their choice and that restrictions to prevent abuse or over-reaching should be narrowly tailored so as not to unreasonably dissuade honest adults from entering into legitimate real estate contracts.

The defense in the case of State of Texas v. The Residential Lease-Option rests.

In most states, attorneys are not required to hold a real estate license in order to represent a client in a real estate transaction.  Real estate brokers and sales agents in general, and Multiple Listing Services (MLS) in particular, are typically not too pleased with this fact, for obvious reasons.

Texas takes the general rule of allowing attorneys to act as real estate brokers for their clients a step further: In Texas, an attorney may lawfully broker a real estate transaction for a non-client.  See, Texas Occupations Code § 1101.005(1) (Texas Real Estate License Act (RELA) does not apply to licensed attorneys); Banowsky v. Schultz, 05-14-01624 (Tex. App., 2016) (licensed attorney, being statutorily exempt from RELA, may collect a commission for brokering real estate transaction, even in the absence of an attorney-client relationship with party for whom the transaction was brokered).

Given that a person who is seeking professional assistance when buying or selling Texas real estate can choose between a Broker and an Attorney, let us take a look at what each of these professionals does best.

The primary function of a Broker (including Sales Agents who work under a Broker) is to bring real estate buyers and sellers together.  One need look no further than a Broker’s listing agreement to see that it is this “matchmaking” function that earns the Broker a commission.

The single most powerful tool that Brokers have to assist them in bringing buyers and sellers together is the local MLS.  Every MLS spends large amounts of money to collect real estate market data and make it available to MLS members.  Generically speaking, “the MLS” is the benchmark for real estate market data; all other sources of such data are measured against the MLS.  

Furthermore, every MLS jealously restricts data access to its member Brokers and Sales Agents, and usually charges its members hefty fees for the privilege of MLS access.

In order to get paid, after a Broker(s) brings a buyer and seller together, the Broker(s) has to close the deal.  To do this, Brokers handling residential transactions typically fill out standard real estate contract forms, get the needed signatures, and coordinate matters with the closing agent, usually a title company.

For residential transactions in Texas, Brokers are required to use a standard form of contract that is furnished by the Texas Real Estate Commission (TREC).

According to the TREC website, the educational requirements to become licensed as a Texas real estate sales agent (and work under a Broker), and thus to authorize one to use the TREC form when brokering residential real estate transactions for others, includes instruction in:

1.  Principles of Real Estate I (30 classroom hours);

2.  Principles of Real Estate II (30 classroom hours);

3.  Law of Agency (30 classroom hours);

4.  Law of Contracts (30 classroom hours);

5.  Promulgated Contracts Forms (30 classroom hours); and

6.  Real Estate Finance (30 classroom hours).

That works out to be about four and one-half weeks of full-time instruction.

According to the TREC website, in order to become licensed as a Texas real estate broker, an applicant must complete the classes required for a sales agent license and take a 30 hour Real Estate Brokerage class.  Additionally, an applicant for a broker’s license must have “four years’ of active experience” as a real estate broker or sales agent.  Although no college degree is required, Broker applicants who do not possess a bachelor’s degree must complete an additional 630 hours of acceptable real estate-related course work.

Attorneys, by comparison, almost always have a bachelor’s degree in addition to a law school degree.

A portion of the typical three-year curriculum at an American Bar Association (ABA) law school (all good law schools in the United States, and even most mediocre ones, are ABA accredited) will almost always include:

1.  Property Law (two semesters);

2.  Law of Agency (one semester);

3.  Contract Law (two semesters);

4.  Business Organizations (one semester);

5.  Marital Property Law (one semester); and

6.  Wills and Trusts (one semester).

That’s eight semesters of law school course work, not counting the rest of the three-year law school curriculum.

Returning now to our discussion of whether to hire a Broker or Attorney to handle your next real estate transaction, recall that we mentioned earlier that a Broker’s commission is earned — as we see through a review of the typical listing agreement — by bringing buyer and seller together.

If you have ever asked a Broker a question about a real estate contract, there’s a good chance that the Broker responded by suggesting you consult with your attorney.  At least that’s what the answer probably should have been, as Brokers are not permitted to give legal advice.

Texas Brokers are required to use the TREC form for residential transactions; they don’t have a choice.  Ask a Texas Broker to do anything other than fill-in the blanks or check-the-boxes on a TREC form, and wait for the response.  For example, ask a Broker to cross out certain wording and add another line which states “such-and-such.”  You will likely be told that is not allowed.

It is true that Texas Brokers are not allowed to add, delete, or change language on the TREC residential contract.  However, since attorneys are not even required to use the TREC form, there is certainly no impediment to an attorney adding, deleting, or changing language on a TREC form.

A Broker also may not give you advice on whether you should, for example, take title to property in the name of your limited liability company or other business entity, advise you on marital property issues relating to the transaction, or draft a deed for you that will adequately address your estate planning needs.  An attorney may provide all of these services, and more.

In the discussion that follows, the term “Broker” means a real estate brokerage or “sponsoring” Broker, while the term “Sales Agent” or simply “Agent” refers to licensees who work for a brokerage or sponsoring Broker, even though such Sales Agents may, themselves, be licensed as “brokers.”

Sales Agents are subject to the control and supervision of their Broker; the acts of a Sales Agent are considered to be the acts of their Broker.

Additionally, in the eyes of the law, both Brokers and their Sales Agents are considered to be “agents” of the party whom they represent.  For example, both the Seller’s Broker, and the Sales Agents who work for that Broker, are considered to be “agents” of the Seller.  As such, they each owe the Seller certain legal duties.

The “default” rule in Texas is that a Broker represents the Seller, unless there is an express agreement to the contrary between Broker and Buyer.  This makes sense in that it is the Seller who decides whether to list a property for sale, it is the Seller who will pay the sales commission for brokering the transaction, and it is the Seller’s Broker (and/or that Broker’s Sales Agent) who will pay to advertise the property for sale.

Thus, when a Buyer calls a Seller’s Broker in response to an advertisement for a property, the Seller’s Broker is representing the Seller, not the Buyer.  In this situation, the Buyer is unrepresented.

A Buyer, in order to have independent Broker representation, would need to enter into an agreement with a Buyer’s Broker, that is, with a Broker other than the Seller’s Broker.  When this occurs, the Seller’s Broker and the Buyer’s Broker typically share the 6% sales commission (paid by the Seller), with each Broker receiving 3%.  Each Broker’s 50% share of the 6% sales commission (3%) is then divided between Broker and Sales Agent.

Texas, like many other states, allows a Seller’s Broker, with certain restrictions, to “represent” both Seller and Buyer.  When a Seller’s Broker “represents” both Seller and Buyer, the Seller’s Broker is not required to give 50% of the commission (that is, 3% of the 6% sales commission) to a Buyer’s Broker.

In Texas, this dual “representation” (sometimes also referred to as “dual agency”) can take one of two forms.

The first of these two forms of dual “representation” involves the Seller’s Broker acting as a mere “intermediary” (TREC’s term) between Seller and Buyer, without providing any real representation to either.  When this occurs, the Seller is not getting the Broker representation that is usually thought by sellers to be included in the 6% commission they are paying to sell their property, and the Buyer, as with the “default rule” described above, still gets no representation at all.

In the second of these two forms of Texas dual “representation” the Seller’s Broker appoints one of that Broker’s Sales Agents to “represent” the Seller and another of that Broker’s Sales Agents to “represent” the Buyer.  This arrangement, although on its face may appear to be legitimate, is rife with pitfalls.

As an initial matter, this second form of dual “representation” asks us to naively believe that the two Sales Agents, both of whom work for the same Broker, and who perhaps have offices or desks in close proximity to each other, who may attend Realtor training sessions together, and who might even socialize with each other outside of work, will not put their best interests of closing the deal — and getting paid — above the respective interests of the Seller and Buyer whom they supposedly represent.  This is not an indictment of Sales Agents; rather, it is simply an acknowledgment of human nature.

More importantly, however, each of these Sales Agents is, in the eyes of the law, merely an extension of the Broker.  Thus, although this arrangement may provide the appearance of separate or independent representation, such an appearance is a mere illusion.  One Broker is still representing both sides of the transaction.

Because a real estate purchase-sale transaction, like any other contract negotiation, is, at its core, a transaction with (at least) two mutually-exclusive interests — the Seller trying to sell on terms most favorable to the Seller and the Buyer trying to buy on terms most favorable to the Buyer — it simply is not possible for one Broker to represent the best interests of both Seller and Buyer.

Compare Broker dual “representation” to the representation a Seller or Buyer receives from an attorney or law firm.

Although it is technically possible for an attorney to act as an “intermediary” between Seller and Buyer, and not forming an attorney-client relationship or providing legal advice to either, most competent attorneys would never accept employment on these terms.  The major exception, of course, are attorneys who are employed by title companies.  The difference here, of course, is that these attorneys do provide representation to a client: the title company.

But back to our hypothetical Seller and Buyer.  When was the last time you heard about a law firm representing both sides in a transaction, with one of the firm’s attorneys representing the seller and another of the firm’s attorneys representing the buyer?  Probably never, because such arrangements are prohibited.

One last thought as we conclude this article and bring this subject “in for a landing.”  When litigation results from a real estate transaction, as it sometimes inevitably does, the Brokers and Sales Agents who were involved in the transaction are almost always subpoenaed to provide testimony about what happened.  Such testimony is likely to focus on statements made during conversations by and between Brokers/Sales Agents, on the one hand, and the party they “represented” in the transaction, on the other hand.

Attorney-Client communications, however, are protected from compelled disclosure by the Attorney-Client Privilege.  It is extremely rare for an attorney’s client to be compelled to testify about what the client said to the attorney, or for an attorney to be compelled to testify about what the attorney told the client.

It is always a good idea to use the right tool for the job.  Likewise, when professional assistance is needed, the best practice is to hire the right professional for the job.  In the case of buying and selling real estate, that means working with a Broker to “bring buyer and seller together.”  But it also means that a Seller and Buyer should each retain their own attorney to provide legal advice and handle the purchase contract and other legal documents.

As the old saying goes, “An ounce of prevention is worth a pound of cure.”

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Question:
In this Legal Update, we address the issue of handling small claims matters as they relate to real estate investors and general contractors.  Our question will illustrate both sides of a typical dispute:

A real estate investor hired a general contractor to make needed repairs on a single family residence that the investor had just purchased at a foreclosure sale.  After the agreed-upon repairs had been completed, it was discovered that some additional repair work was needed.  The general contractor offered to perform the additional work — for an additional fee.  The investor, believing that the additional work was needed solely as a result of the contractor’s negligence in performing the initial repairs, contends that the contractor should perform the additional work at no charge.

Answer:
Small claims matters in Texas are handled in the state Justice Courts.  A “claim” in Justice Court may be for “no more than $10,000, excluding statutory interest and court costs but including attorney fees, if any. . . .”  Texas Rule of Civil Procedure (TxRCP) 500.3(a).

Thus, assuming that an award of attorney fees is an available remedy in our hypothetical case, we see that a plaintiff’s decision to retain counsel may affect the Justice Court’s jurisdiction to decide the case.

As surprising as it is, we have actually seen suggestions by other attorneys that small claims litigants simply “take their chances” in small claims court by representing themselves and, if they lose, to then retain counsel and file an appeal in order to obtain a trial de novo in a County Court.

An “appeal” may be taken from a judgment issued by a Justice Court.  TxRCP 506.1(a).  In the context of our hypothetical case, a trial “de novo” means: “a new trial in which the entire case is presented as if there had been no previous trial.”  TxRCP 506.3.

Before we address the merits of the “take your chances” legal strategy, let us try to bring some precision to some imprecise word usage.  The term “appeal” is generally understood to be a review by a higher court of a lower decision.  However, appellate review is almost always limited to the issue of whether the lower court (e.g., the trial court) committed reversible error.  Examples of reversible error include erroneous decisions to admit or exclude evidence, whether sufficient admissible evidence was admitted at trial to support the verdict, whether the trial court applied the correct law, whether the trial court applied the correct law correctly, and so on.  Furthermore, not all error is considered “reversible.”  An appellate court will not reverse the decision of a lower court unless any actual error that was committed by the trial court materially affected the outcome of the case.

Thus we see that a trial de novo of a small claims case is not an “appeal” in the true sense of the word.  A trial de novo is merely a re-litigation of the case, that is, a “do-over.”

But what’s wrong with a “do-over?”  We “took our chances” and lost; now we get a second “bite at the apple.”

To answer this question, let us look at what the proceedings in Justice Court might have looked like.

1.  The Plaintiff filed and served a Petition.

2.  The Defendant filed an Answer, and perhaps (probably) filed a Counterclaim against the Plaintiff.

3.  In our hypothetical case, perhaps our “primary” Defendant contends that the only reason he is liable to the Plaintiff is because of the conduct of some third party, for example, a subcontractor.  Our Defendant might then bring the third party into the case by filing and serving a Third Party Claim against this person or entity.  TxRCP 502.6(c).  If the Plaintiff had already named this other person or entity as a party defendant, our “primary” Defendant would simply file a Cross-Claim.  TxTCP 502.6(b).

4.  All parties have the right to conduct pre-trial discovery; however, discovery requests must be pre-approved by the Court.  TxRCP 500.9.

5.  After discovery has been completed, one or more of our hypothetical Parties might move for summary judgment, that is, “[a] party may file a sworn motion for summary disposition of all or part of a claim or defense without a trial. . . .”  TxRCP 503.2.

6.  If a motion for summary judgment — or cross motions for summary judgment — do not completely resolve the case, the case can be set for trial.  TxRCP 503.3.

7.  Following the trial setting, the Court might then order a pretrial conference, in order to attempt a settlement.  TxRCP 503.4.

8.  If the pretrial conference does not bring about settlement, the Court “may order any case to mediation or another appropriate and generally accepted alternative dispute resolution process.”  TxRCP 503.5.

9.  If mediation fails, the parties then proceed to trial.

10.  If one or more of the parties had properly and timely requested a jury trial, then we begin the process of selecting a jury, that is, questioning potential jurors, challenging potential jurors, etc.  TxRCP 504.1; 504.2.

11.  Once a jury is empaneled, we try our case: call and examine our witnesses, introduce documentary and other physical evidence, cross-examine the other parties’ witnesses and challenge their physical evidence, etc.

12.  After the jury returns a verdict, an unhappy party may file a motion for a new trial.  TxRCP 505.3(c).

13.  After the motion for a new trial is denied, the unhappy party can now “perfect” an “appeal,” which means, in the case of a plaintiff, posting cash or bond in the amount of $500 and, in the case of a defendant, posting cash or a bond in an amount equal to twice the amount of the judgment.  TxRCP 506.1 (b); 506.1(c).

Now, our hypothetical real estate investor and general contractor litigants can take advantage of the trial de novo — the do-over — that was the focus of their “take your chances” litigation strategy.

The “take your chances” litigation strategy is, it seems to us, a very poor strategy; it is a litigation strategy we would not recommend.

There are many things an attorney can do to assist a client in resolving a small claims case while simultaneously not “breaking the bank.”  One tactic we have employed in small claims cases is to work “behind the scenes” with our client, advising the client on the merits and demerits of the case, drafting court documents for the client to file with the court, and educating the client on how to best present the case in court.

One very valuable tool that is available to our clients is the Lawyer Available Whenever (LAW) Plan.  Subscribers to the LAW Plan enjoy priority access to a Texas attorney who will consult with them, review their documents, and provide timely, insightful, and practical legal advice.  If the matter needs more than a short telephone consultation or document review, LAW Plan subscribers receive a 10% discount on all additional legal work that we perform for them.

The LAW Plan — unlike similar legal service plans from some of our competitors — gives you a direct relationship with a law firm, without any third party, non-attorney sales force intermediaries.

LAW Plan subscriptions are available for both individuals and small businesses.  For more information — and to subscribe — please visit: http://www.lapinlawtx.com/law-plan.html

Lapin Law Offices assists clients with asset protection, business law, family law, real estate law, trust and estate law, and other legal matters.

Prior to getting divorced, my now former spouse and I purchased a home.  We both signed the promissory note for the loan which is secured by the house.  During our divorce, my spouse was awarded the house.  I subsequently executed a deed which transferred my ownership interest in the property to my former spouse; however, my former spouse has never refinanced the loan which is secured by the property.  I do not want to be responsible for paying a loan which is secured by an asset that I neither own or have the legal right to control.  Nor do I want such a loan to impact my ability to purchase a replacement residence.  What can I do?

The situation you describe is, unfortunately, not uncommon in Texas.  We see it all the time.  The best solution, albeit one which is no longer available in most cases we encounter, is to not allow this problem to occur in the first place.  Where a litigant is represented by counsel during divorce proceedings, counsel should — at a minimum — advise the client to not agree to a settlement of the case on terms which would allow this situation to occur.

In cases where prevention is no longer an option, the best course of action can be determined only after a close and careful reading of the divorce decree.  The remedy (or remedies) which might (or might not) be available will depend in large part on the precise language and provisions in a divorce decree.

Litigants in this situation often (mistakenly) assume that all that is needed is to go back to court and either ask the court to enforce a provision in the divorce decree that purports to require a refinance of the property or to obtain a new, supplemental order which contains such a provision.  The problem with this strategy is that the spouse who was awarded the home will often claim (usually truthfully) that they do not have the financial ability to comply with such an order.

Thus, a more creative solution which takes into consideration all of the facts of a specific case is typically required.

Lapin Law Offices assists clients with asset protection, business law, family law, real estate law, trust and estate law, and other legal matters.