USA – TEXAS Law and Practice Contributed by: Taylor Cooksey, David Brooks, Serena Kramer and Philip Kinkaid, Cokinos | Young
not include representations and warranties regarding the property’s physical and environmental condition. Typical buyer remedies include termination and a return of the earnest money deposit, specific per - formance (provided that suit is filed within a limited period), and the recovery of certain types of actual out-of-pocket due diligence costs. After closing, a buyer may also recover actual damages (sometimes capped) incurred due to the seller’s breach of repre - sentations and warranties. False representations can also result in fraud liability under Section 27.01 of the Texas Business and Commerce Code. The seller’s remedy is typically limited to termination of the agreement and recovery of the earnest money deposit as liquidated damages. Sellers often negotiate a limitation on the survival of representations and warranties to an agreed period after closing, typically between six and 18 months, and require the buyer to notify the seller of a breach during that period. Section 16.070 (a) of the Texas Civil Practice and Remedies Code, however, provides that a contract may not limit the time for bringing suit on the contract to less than two years. It is unclear how this statutory provision applies to the common practice of requiring a notice of breach in less than two years. Representations and warranties insurance is not com - monly used in Texas real estate transactions. 2.6 Important Areas of Law for Investors The most important areas of Texas law for an investor to consider when purchasing real estate will depend in part on the nature of the investment itself – eg, is the property producing income, is the plan to develop a residential or multifamily community, retail, office or industrial project, and does the plan involve operat - ing, leasing, holding or selling and over what period of time? Depending on the nature of the investment and the plan itself, prioritising the areas of law in terms of importance will vary, but all areas of real property law are important, including:
• title, zoning, land use, regulations, leasing and landlord/tenant issues; • environmental laws – conducting needed assess - ments for liability protection and identifying poten - tial contamination and development restrictions, including wetlands and endangered species; • business organisations law – entity selection for acquisition and operations; • tax law, for capital gains and margin tax issues; • oil and gas law, regarding surface use protection from mineral owners; and • contract law. 2.7 Soil Pollution or Environmental Contamination Owners and operators of contaminated real property can be held liable to remediate hazardous substances under existing federal and state law. To be protected as an innocent landowner, a Phase I environmental assessment must be conducted before a purchaser acquires real property. Depending on what is dis - closed in that assessment, it may also be necessary to have a Phase II environmental assessment performed. State protections that may be available to some pur - chasers include those under two programmes admin - istered by the Texas Commission on Environmental Quality: • the Innocent Owner/Operator Program; and • the Voluntary Cleanup Program. 2.8 Permitted Uses of Real Estate Under
Zoning or Planning Law See 4. Planning and Zoning . 2.9 Condemnation, Expropriation or Compulsory Purchase
Private land may be taken in Texas by eminent domain through condemnation proceedings instituted by authorised governmental entities, quasi-governmental entities such as municipal utility districts, and public utilities, provided the taking is for a public use, and just compensation is paid for the taking. Texas law prohibits takings to enhance tax revenues or foster economic development.
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