USA - TEXAS Law and Practice Contributed by: Brad Holdbrook, Mary Mendoza, Michael Coleman and James Barnett, Haynes and Boone, LLP
2.6 Important Areas of Law for Investors In Texas, key areas of law for a real estate inves - tor to consider include property law (covering aspects like title, ownership types, and prop - erty rights), contract law (for sale and lease agreements), zoning and land use regulations (determining how property can be developed or used), environmental laws (addressing poten - tial contamination and liability issues as well as conditions that could restrict development such as endangered species), and tax law (including property taxes and implications for investment structures). 2.7 Soil Pollution or Environmental Contamination In Texas, as in many jurisdictions, buyers can potentially be held responsible for existing envi - ronmental contamination on a property they pur - chase, even if they did not cause the pollution. This is due to laws that aim to ensure contami - nated sites are cleaned up, regardless of the cur - rent owner’s role in causing the contamination. While defences to this type of liability are limited and the state defences differ somewhat from the federal defences, many of the available defences turn on performing appropriate due diligence, such as a Phase I, prior to purchase (or in the case of a tenant, lease). Further, the Texas Com - mission on Environmental Quality administers the Voluntary Cleanup Program, which can pro - vide protection to a prospective purchaser who enters the programme prior to purchase, and the Innocent Landowner Program, which provides protection to owners of land contaminated by contamination migrating from an unaffiliated adjacent parcel of land. 2.8 Permitted Uses of Real Estate Under Zoning or Planning Law In Texas, buyers can ascertain the permitted uses of a parcel of real estate under applicable
income-producing properties. One example of routine environmental due diligence in Texas is that many purchasers will often conduct a Phase I environmental site assessment. 2.5 Typical Representations and Warranties In Texas, as in other jurisdictions, typical rep - resentations and warranties in a commercial real estate transaction might include the legal authority to sell, the absence of liens or encum - brances, compliance with laws (including zon - ing and environmental laws), and the condition of the property. A seller’s warranties provided under statutes may include disclosures about the property’s condition, but these vary. A buyer’s remedies for misrepresentation typi - cally include rescission of the sale, damages, or specific performance. Caps on liability vary and are subject to negotiation. Representation and warranty insurance is increasingly used to mitigate risks associated with potential breaches of representations and warranties. Pursuant to Section 16.070(a) of the Texas Civil Practice & Remedies Code, any representation or warranty made in an agreement must survive for a mini - mum period of two years. To satisfy statutory requirements, purchase agreements will com - monly state explicitly that all representations and warranties have a survival period of at least two years and a day. During the COVID-19 pandem - ic, there might have been new representations and warranties regarding the health and safety measures taken at the property or the impact of the pandemic on the property’s use and occu - pancy on case-by-case basis, but substantial shifts in the market arising from the pandemic have so far failed to materialise.
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