Articles Posted in Real Estate Leases

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As a Texas real estate attorney representing buyers, sellers, lenders, developers, and occasionally brokers, in Texas, I have sometimes been accused of sounding like a broken record in advising my clients. My oft-repeated mantra is: “Read the document thoroughly, and then read it again”. Even if the document is one I have prepared for my client, it is essential that the client review the document to make sure it expresses their intentions. After everything is signed, it is often too late to ask questions. A recent Texas Court of Appeals case illustrates the perils of signing a contract without reviewing it thoroughly beforehand.In the case of ERA Realty Group, Inc. v. Advocates for Children and Families, Inc., the Texas Thirteenth Court of Appeals considered a commission agreement between ERA and a local advocacy group. The agreement was a preprinted form, with blanks filled in by typewriter by an ERA employee. As the Court explains: “The (agreement) contains a commission calculation if Advocates purchases property and also a commission calculation if Advocates leases property. No lease calculation is selected, although the number “6” is typed before the phrase, ‘% of all rents to be paid over the term of the lease.’ Clearly, the instruction to ‘check only one box’ was not followed because no box is checked. The agreement, therefore, can be read in one of two ways: (1) as providing for a lease commission because the number “6” is typed, or (2) as making no provision for a lease commission because no box is checked.” Because ERA had prepared the agreement, the Court construed the commission agreement against ERA and held that the agreement did not provide for a commission for leases.

As a result, ERA was not only denied it’s request for a commission, it was also ordered to pay $15,000.00 in attorney’s fees to the Defendant advocacy group. Actually, it’s hard to understand why ERA would bring a lawsuit based on this agreement, rather than simply admitting a mistake had been made and resolving to read those form commission agreements more thoroughly next time. The publicity from this suit probably hurt ERA much more than the commission would have benefited them had they won!

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A substantial part of my Texas real estate law practice over the past thirty years has involved Texas commercial real estate leases, representing both landlords and tenants (often representing either landlords or tenants who are based outside of Texas). An issue that frankly does not come up often is the timing of notices by one party or the other, or the timing of payments by the tenant to the landlord, in part because commercial lease language regarding the timing of notices or payments is generally clearly written. A recent Texas case by the Texas Eleventh Court of Appeals reiterates that the lease means what it says.

In the case of John B. Meadows, et al. v. Midland Super Block Joint Venture, the 11th Texas Court of Appeals held that when the lease in question required that a payment or a notice had to be delivered to the landlord by the first of the month, a payment or notice that was only mailed by the first of the month, and was received several days after the first, was insufficient, and the landlord’s termination of the lease was proper.The tenant argued that the “mailbox rule” applied, that is, that payments or notices deposited in the mail by the first of the month are timely. The Court of Appeals said not so, because the express language of the lease stated that the payment or notice had to be delivered by the first. In the Court’s view, “delivered” clearly means “received by”.

This lease was unusual, in that it was a month to month lease, and each additional month was considered an option, which the tenant could exercise only by notice or payment each month on or before the first. In Texas, as the Court notes, “(e)xercise of an option, unless excused in rare cases of equity, must be unqualified, unambiguous, and strictly in accordance with the terms of the agreement.” Would the Court have decided differently if this had been a lease for a stated term and one of the monthly rent payments within the term was late? Very possibly so.