USA – TEXAS Law and Practice Contributed by: Taylor Cooksey, David Brooks, Serena Kramer and Philip Kinkaid, Cokinos | Young
7.6 Liens or Encumbrances in the Event of Non-Payment In Texas, architects, engineers and contractors (and subcontractors and suppliers) are permitted to file mechanic’s and materialmen’s liens for non-payment, provided that statutory requirements are followed. Owners can remove filed liens by paying the amount due and recording a release, through waivers, a bond - ing off procedure, lawsuits or summary motions. 7.7 Requirements Before Use or Inhabitation Some counties have no certificate of occupancy requirements, and certain non-residential farm build - ings may be exempt from such certificates. However, certificates of occupancy are required in most cities before a project may be used for its intended purpose. The certificates ensure fire, health and environmental safety and code compliance for specific uses. There are inspection requirements prior to issuance, and penalties for non-compliance. No VAT or equivalent tax is payable in Texas on the purchase or sale of commercial real estate. Real estate in Texas is subject to annual property taxes that are assessed by local taxing jurisdictions and vary from location to location. Taxes are assessed annually based on the property’s appraised value. Commercial real estate is not subject to Texas state sales and use tax. 8.2 Mitigation of Tax Liability 8. Tax 8.1 VAT and Sales Tax There are no transfer, stamp or similar tax liabilities in Texas on acquisitions or sales of real estate, includ - ing large real estate portfolios. Standard tax mitiga - tion strategies apply with respect to the acquisition and disposition of real estate, including, when avail - able or appropriate, utilising Section 1031 “like-kind” exchanges to defer capital gains tax, structuring acquisitions as equity rather than asset transactions, instalment sale financing, and the use of REITs.
• Construction Manager as Agent: the construction manager acts as the owner’s agent. The project is managed without the construction manager taking on construction risk, as all trades are contracted directly by the project owner. The architect/engi - neer is responsible for design, and the contractor is responsible for construction. 7.3 Management of Construction Risk Indemnity provisions are commonly used in construc - tion contracts to allocate the risk of third-party claims, primarily arising from bodily injury, death or damage to property. Texas has an anti-indemnity statute that pro - hibits broad-form indemnity (ie, a promise to indem - nify a person or entity against their own fault or negli - gence) in most construction contracts, although there are exceptions for certain types of projects or claims. Other types of construction risk on a project are man - aged by warranties, damage waivers (eg, waivers of consequential damages), limitations of liability, retain - age, insurance and bonds. Legal limitations include the aforementioned anti-indemnity statute and those imposed by contract and public policy constraints. 7.4 Management of Schedule-Related Risk Schedule-related risk of construction projects is man - aged by contract. The parties may agree that an own - er is entitled to compensation if agreed milestone and completion dates are not achieved. In such event, the contract may include a reasonable liquidated dam - ages provision, perhaps allowing extra time for events such as force majeure and weather delays, and may also include detailed scheduling, performance bonds, contingency time, acceleration agreements and notice requirements. 7.5 Additional Forms of Security to Guarantee a Contractor’s Performance It is typical in Texas for a performance and payment bond to be required in a public project. Performance bonds are also common in private commercial pro - jects. Parent guarantees and letters of credit are less common, but they are used. The use of escrow accounts and standalone third-party sureties is more rare. Unless proper bonding is in place, the Texas Property Code requires 10% retainage for private projects, mitigating the need for additional security in some cases.
938 CHAMBERS.COM
Powered by FlippingBook