Understanding Title to Real Estate

As a purchaser of real estate, commercial or residential, why should you be concerned about title?  In fact, what is “good title” and why is it important?

The importance of good title

“Title” is the legal ownership and right to use a piece of property.  It is established through searching the public deed records for the history of ownership and for items filed against the property, and also by physically examining the property for current occupancy and use.  “Good” or “marketable” title is one that a reasonable man (or woman), advised of the facts and legal significance, would willingly accept or purchase.  Title need not be absolutely free from every technical defect and encumbrance in order to be good.

Why is good title important? An owner of property must have good title in order to insure it, to pledge it as collateral, to develop it, to grant leasehold or easement rights to third parties and ultimately, to sell it.

Receiving good title

Evidence of title is found in the deed delivered from the seller. There are several ways to ensure you are receiving good title:

  • Purchasers should require a warranty in the deed from the seller indicating that the seller owns the property and has the right to convey it;
  • Purchasers may seek a legal opinion from counsel verifying the current status of title to property; and
  • Purchasers can obtain a title insurance policy that indemnifies the purchaser against risks of flawed title.

Title policies guarantee against forgeries in the chain of title, incapacity of parties, unrecorded interests that may affect the property, and virtually any other defect of which the owner has no actual knowledge or constructive notice. A title company is not required to defend any claims on items excluded from coverage or excepted to in the title policy.  Therefore, it’s important to understand the contents of a commitment for title insurance since it forms the basis for the title policy to be provided at closing.

Encumbrances and exceptions to title

Exceptions to the proposed title policy are found in Schedule B of the title commitment.  Texas has a list of standard exceptions that can’t be modified or removed and will be “excepted” from coverage in the policy.  Schedule B will also include any encumbrances found against the title.  Some examples of encumbrances are:

  • easements,
  • use restrictions,
  • recorded leases,
  • previously reserved mineral rights, or
  • items appearing on a survey of the property.

Each tract of land is unique, so each title commitment will contain a list of encumbrances specific to the property being purchased.

A thorough title review requires review and reading of the actual encumbrance documents, analysis and understanding their impact against the property, and a determination of whether they are acceptable to the purchaser or not.  Title to a property may not be defective, but can be encumbered by restrictions that limit use or development.  Most real estate purchase agreements allow a purchaser to terminate the contract if they determine that the property is burdened by unacceptable encumbrances that the seller is either unwilling or unable to cure or remove. Sometimes listed documents don’t affect the subject property, are expired, or no longer necessary.  The purchaser should object to these items and request that they be removed from the title commitment.  Failure to object, however, means that all listed items will be exceptions to the purchaser’s title insurance coverage.

As a general rule, the fewer the exceptions, the better.  As noted above, good title does not mean it’s completely clear of encumbrances, but title that a reasonable purchaser is willing to pay for.

An experienced real estate attorney can provide valuable services to purchasers by conducting the title review, understanding the significance of encumbrances, advising the purchaser concerning the encumbrances and making valid objections when necessary.


Paula Beasley practices in the areas of commercial real estate transactions; specifically, purchases and sales, leasing and lease enforcement, secured financing transactions, and affordable housing. Ms. Beasley is currently President of CREW Dallas and is an adjunct professor at SMU Cox School of Business. Her law degree is from the SMU Dedman School of Law.

CREW | CREW logo

Interview: What is CREW?

Last month, Farrow-Gillespie Heath Witter welcomed real estate attorney Paula Beasley to the firm. We value Ms. Beasley not only for her extensive experience with commercial real estate law, but also for her passion and dedication to her community. Currently, she is the president-elect of the CREW Dallas Chapter. The following is an interview with Ms. Beasley regarding her ongoing work with CREW.

CREW | CREW logo

What is CREW?

CREW Dallas – Commercial Real Estate Women – is a local business network that creates success for women in commercial real estate. CREW Dallas is the leading organization for decision-making executive women that provides opportunities for networking, education, leadership development, and civic/philanthropic involvement.

CREW Network is the industry’s premier business networking organization dedicated to advancing the achievements of women in commercial real estate.  CREW Network members comprise professionals globally and represent nearly all disciplines of commercial real estate. CREW Network currently has 74 chapters in the US and Canada and one affiliate in the UK.

When was the CREW Dallas Chapter and Crew Network founded?

The CREW Dallas Chapter began in 1980 with a small group of 12 “real estate girls” who wanted to bond together in the male-dominated industry of commercial real estate.  Today we have over 330 Dallas members.

CREW Network was founded in 1989 on the same principles of bringing together women in commercial real estate to exchange information, develop business contacts and help each other succeed professionally. Currently, we have 10,640 Network members in the US, Canada, and the UK.

What is your role, Ms. Beasley, as President-Elect of the CREW Dallas Chapter?

As President-Elect of the CREW Dallas Chapter, I began a 4-year executive service role with our chapter in January of 2017.  As of January 2018, I will be the CREW Dallas President.  The following year I will serve as Past-President and then as Chapter Advisor.

As President-Elect, I am a member of the CREW Dallas Board of Directors and the CREW Dallas Executive Committee. I also serve as a Board Member of our philanthropic organization, CREW in the Community. I am one of two CREW Dallas delegates to the Network and have attended three leadership summits this year at which delegates from all Network chapters attend leadership training, participate in educational seminars, and vote on any business of the organization.  This year I traveled to Los Angeles and Toronto for summit meetings and the third was recently held in Houston prior to the CREW Network Convention. I have a role on the CREW Dallas Nominating Committee which chooses award recipients throughout the year.  And finally, as President-Elect, I have a seat on the NTCAR Board of Directors.

What are the organization’s goals for the future?

CREW Dallas has a strategic plan which contains seven goals:

  1. Networking/Social – to make member to member interactions the primary focus of all activities. To promote member to member business or referrals along with business development opportunities.
  2. Professional Education – to produce timely, relevant programming that responds to member needs, advances their success, and develops leaders.
  3. Marketing / Communication – to create strong visibility for members and the organization through a robust, effective, and relevant marketing program.
  4. Membership Development – to have a growing, engaged, loyal and diverse membership that encompasses all commercial real estate disciplines and career stages.
  5. Revenue / Finance / Funding – to manage our finances in a prudent and strategic way and secure the necessary funding to support our mission and achieve its goals.
  6. CREW Network – to support the mission of CREW Network and encourage member involvement.
  7. Philanthropy – to provide networking and leadership opportunities for our members through CREW in the Community.

 

You attended the CREW Network Convention in Houston this past week. What is the convention’s purpose?

CREW Network hosts an annual convention in different locations each year.  Last year we met in New York City; this year was in Houston; next year we will meet in San Diego. The CREW Network Convention aims to bring women together from around the country where relationships are formed, developed, and strengthened.

The host city chapter works with the Network organization to arrange tours of the city, networking dinners, industry leader speakers and several break-out sessions on current topics. City excursions give the “inside scoop” on the local markets, buildings, and developments that are unique to that area. For example, when Dallas hosted the convention, we arranged tours of Cowboy Stadium, NorthPark Mall and our Arts District. This year’s convention featured terrific insights from Dr. Travis Bradberry on emotional intelligence, Spencer Levy on the CRE market, and the actress Geena Davis about building strong, confident young women through positive roles in film and media.

What are your favorite parts of the CREW Network Conventions?

 My favorite part is re-connecting with friends that I met at previous conventions and leadership summits. I also enjoy spending time with our Dallas Chapter friends. The convention provides a way to network and get to know people on a personal level outside of work that builds lasting relationships and friendships – which usually leads to doing business together at some point down the road.

What’s new in commercial real estate these days?

Autonomous cars and voice command are the new trends in commercial real estate. Autonomous cars are not too far in our future and they will affect the development of commercial parking, roadways, and infrastructure. Voice command technology is increasingly being built into commercial sites, such as hotels and other buildings of the hospitality industry. One hotel developer is planning to have an Amazon Alexa in every hotel room.

 

For more information, please visit:
CREW Dallas Chapter 
CREW Network 

Paula Beasley practices commercial real estate law, providing counsel and facilitating negotiations for clients involved in sales and acquisitions of real estate. Ms. Beasley provides legal services on a variety of issues including lease enforcement and defense of fair housing complaints.

Paula is an adjunct professor at SMU Cox School of Business, the 2017 President-Elect of the Dallas Chapter of Commercial Real Estate Women (“CREW”), and has been named to the lists of “Best Women Lawyers in Dallas” and “Best Lawyers in Dallas under 40” by D Magazine.

Public/Private Partnerships

by Angela Hunt
April 28, 2016

During my eight years on the Dallas City Council, I saw many economic development projects make their way through City Hall’s complex approval process. There is a myriad of economic development tools used by the City of Dallas to incentivize redevelopment and encourage improvements to the public realm. Based on my experience, the most successful mechanism is the public-private partnership.

Generally speaking, public-private partnership is a legal contract between a public sector entity and a private company, with the partners sharing both the risks and rewards of a given project. For example, if both parties decided to put shares on the stock market using a company like Stocktrades, then it is deemed both of their responsibility and they must both acknowledge the risks of this type of investment, as well as the benefits. Public-private partnerships can be used to encourage real estate development and revitalization in underserved areas, to significantly improve public infrastructure through cost sharing with developer or community organization, or to create affordable housing opportunities in targeted areas. Importantly, public-private partnerships require an entity other than the city to take on financial risk, which tends to weed out boondoggles and projects that are less likely to succeed.

There are two public-private partnership types that have proven to be particularly effective in revitalizing Dallas: Public improvement districts and tax increment financing districts.

PUBLIC IMPROVEMENT DISTRICTS

Public improvement districts, or “PIDs,” allow property owners in a particular geographic area to place an additional property tax on all of the real estate in their area for exclusive use within their boundaries. PID funding can be used for additional security, street lighting, beautification efforts, marketing, and other public improvements. Property owners seeking to create a PID must get approval from property owners representing 60% of the land value AND from either 60% of all record owners OR 60% of the land area. PIDs are governed by property owner-elected boards and managed by a specifically formed non-profit organization or homeowners’ association. We currently have a dozen PIDs in Dallas, including the Downtown PID, Uptown PID, and Deep Ellum PID.

TAX INCREMENT FINANCING DISTRICTS

Tax increments financing districts, or “TIFs,” are very different animals. Like PIDs, they affect particular geographic areas and they involve redirecting property taxes back to the area. But they’re a bit more complicated. Initiated by the city, but typically in partnership with one or more real estate developers, TIFs are premised on the idea that the target area is going to experience significant redevelopment that will increase property values and therefore increase the amount of property taxes received by the city. A fund reflecting this incremental increase in property taxes is used to provide financial incentives to developers to redevelop in the area.

TIFs have a life cycle, and in Dallas, it’s generally twenty years. In year one, property values are frozen in the area. The city continues to receive property taxes based on that base value for the life of the TIF. But as the area redevelops, property values increase. Property taxes from this “incremental” increase don’t go to the city, but instead go to a special fund that the city doles out to real estate developers seeking TIF funding for their project.

TIF funding is not just a general grant to the developer to help fund the project. TIF funding must be used for particular kinds of improvements that have some public benefit:

  • “Public” improvements such as new streets, alleys, sidewalks, street lighting, pedestrian lighting, water main lines, waste water main lines, and storm water improvements
  • Utility relocation/burial
  • Demolition of existing buildings, structures, and fixtures
  • Restoration of historic building facades
  • Acquisition, clearing, and grading of land for public improvements
  • Fees paid for architectural, planning, and engineering work related to eligible TIF funded pubic improvements
  • Environmental impact studies/environmental remediation
  • Additional costs incurred for high density projects

TIF funding is a competitive and complex process. Developers must file an application with the City of Dallas and work with the Economic Development Department in determining the amount of funds that a project may qualify for (based on its estimated value at completion). Developers are encouraged to meet the community and obtain their support.

Once the application is complete and the developer has engaged the community, the application is presented to the board that oversees that particular TIF (a volunteer board appointed by the City Council). The project is next briefed to the Council’s Economic Development Committee, which will make a recommendation for approval or denial to the full Council. Finally, the Dallas City Council votes on whether to grant the project the requested funding.

Importantly, TIF funding recipients do not receive a big check all at once. First, they have to complete their project as presented to the city, then they will begin receiving the increment TIF funds for their project on an annual basis over several years. Funds are dispersed annually after all the property owners in the TIF pay their property taxes. In the early years, projects generally just get to “keep what they kill,” receiving back the incremental property taxes that they paid on their own property above the base amount. But as the area improves, the TIF funding pot increases and TIF projects receive more and more increment.

Creating PIDs and obtaining TIF funding from the City of Dallas are complicated Processes. My experience on the Dallas City Council representing more TIFs and PIDs than any other part of town helped me understand these economic incentive tools work from the inside. I welcome the opportunity to help my clients navigate City Hall bureaucracy and secure public-private partnerships in support of their projects.

Zoning Law | Farrow-Gillespie & Heath LLP | Dallas, TX

Dallas Zoning 101

What is zoning?  Zoning is the division of land into districts. These districts have zoning regulations and limitations on land use, building height, setbacks, lot size, population density, coverage, and floor-area ratio.  The purpose of zoning is to facilitate the organization of the city and its neighborhoods, and to promote good urban planning.

Before a person or company may build on land, the intended use must not contradict the zoning that land currently has.  If the lot is not properly zoned for the type of proposed development, the builder must obtain the proper zoning by filing an application for a zoning change. The process takes approximately 12 weeks and includes two public hearings.  If the re-zoning is opposed, the process may take longer, or the re-zoning may be denied.

There are three types of zoning changes: a general zoning change, a planned development district (PDD), and a specific use permit (SUP). Each has a different process and requirements.