Gibson HomeBuilders

Today’s topics are:
Recent changes / requirements of the TRCC
Mechanic’s Liens
Oil and Gas Developments
Asset protection / entity selection
My guest’s today are Kelly M. Davis, With Kelly M. Davis & Associates, Attorneys At Law and Jean Gibson, Vice President of Gibson Home Builders, Inc.
TRCC
1) Registration of Builders - A builder or remodeler may not construct new homes or engage in remodeling projects that change the living area of the home or that cost more than $10,000 for interior renovations in Texas without first registering with the commission.
2) Registration of Homes - builder or remodeler shall register with the commission all new home construction governed by the Act.
3) What or who has to be registered?
Remodeler?
4) Yes, if over 10k of work.
Exclusion: The definition specifically excludes improvements designed primarily to replace a single component part, such as the replacement of one type of floor covering with another, or to make similar cosmetic changes to interior surfaces, such as replacing laminate countertops with tile. Landscaper? No
Pool Company? No
Roofers? No
5) Contracts
Required language
Notice – must be registered
Notice – where to look in property code to determine law that is over this construction project Cert. of registration no.
Penalties - According to TX Property § 420.001 any contract entered into after September 1, 2007 that does not contain the correct notices will be unenforceable against the homeowner (but not against the builder)

6) SIRP Process
What is it? The state’s inspection process, formally referred to as the State-sponsored Inspection and Dispute Resolution Process (SIRP for short), allows a homeowner or builder to obtain a neutral, professional review of alleged post-construction defects. The SIRP complaint must be filed and heard before a homeowner initiates legal action on an alleged post-construction defect
7) Process steps
Provide 30 day written notice to builder
Submit SIRP form and inspection fee
Third party inspector is appointed
Inspection of complaint occurs
Inspector renders a report with findings and recommendations
Either party may appeal findings
Commission Appeals Panel conducts a review of the third-party inspector’s initial findings and issues its written findings.
45 days after case has been closed Builder is required to send in a 45-day report of the status of the repairs (if any) or other resolutions
8)Outcome
After final, unappealable report has been issued, a builder may make a written offer of settlement to the homeowner to repair the construction defect(s).
A builder's repeated failure to make an offer to repair based on the recommendation of a third-party inspector or the final and unappealable holding of an appeal panel decision may result in disciplinary action by the commission.
Homeowner may accept or if the homeowner considers the builder's offer to be unreasonable, the homeowner shall notify the builder and shall provide, in detail, any reason(s) the homeowner finds the offer to be unreasonable.
Not later than the tenth day after the date the builder receives a written response from the homeowner, the builder may make a supplemental written offer of settlement.
If a homeowner accepts a builder's offer to repair, the builder, upon completion of the repairs, shall engage, at the builder's expense, the original third-party inspector to re-inspect the repairs and to determine whether the home, as repaired, complies with the applicable statutory warranty and building and performance standards.
Builder shall have a reasonable time to address any minor cosmetic deficiencies necessary to fully complete the repairs.
So what happens if the parties just don’t agree to a settlement / repair? Inspector can be called as a witness at trial and the report / findings issued by the TRCC will be a rebut table presumption that the other side must overcome.

Mechanic’s Liens
What are they? Lien against the title to real property (land and improvements) created by law to secure persons who have either labored, or who have provided labor, materials, machinery, fixtures, or tools to erect or repair (or remodel) improvements to land.
2 Types – Constitutional and Statutory Mechanic’s Lien:
Constitutional lien - the person must have provided labor or material under a contract directly between the contractor and the owner, or the owner's agent.
Statutory lien – would be generally referred to as 2nd and 3rd tier claimants – subcontractors, vendors, etc.
Why do it? Protects your claim / money owed.
Timing of residential vs. commercial
Residential – notice letter – 15th day of the 2nd month after the work was performed; mechanic’s lien – 15th day of the 3rd month after the work was performed
Commercial – notice letter – 15th day of the 3rd month after the work was performed; mechanic’s lien – 15th day of the 4th month after the work was performed
Requirements:
Notice Letter
A statutory mechanic’s lien exists in favor of those persons who are qualified to have one, and they must be properly and timely “perfected” in order to have legal effect as an encumbrance against the owner’s title. The “perfection” process, which involves both written notice and public recording, is exact and must be strictly followed.
The constitutional lien, however, is self-executing and does not require either the notice or public recording procedures of the statutory lien. It is somewhat more restricted than its statutory cousin.
Mechanic’s Lien – again certain language required depending on residential, homestead, or commercial. Very specific requirements for filing and giving notice of the Mechanic’s Lien.
What happens next? Usually, if you get to it early enough in the process, you will wait for someone to negotiate the lien out in order to be able to close. Sometimes, file the lien too late in the process and then must wait until they decide to pay you, refinance or sell their house. Caveat: most mortgage companies consider this to be an act of default.
Oil and Gas
Barnette Shale – One of the largest oil and gas finds in recent history, right near our back door.
How does this affect the mortgage industry?
Mortgage companies not wanting to give mortgages to people who own their own mineral rights (especially larger tracks of land) for fear that they will abandon houses in favor or mineral rights (i.e. minerals are worth more than the houses).
Mortgage companies are taking any proceeds from leases and taking them to pay for the mortgages.
Who is this land man at my door? A land manhandles mineral-rights leases, usually on behalf of an oil and gas company that will actually do the drilling and development. Some research land and mineral-rights ownership. Others mostly collect leases by contacting property owners, answering questions about drilling and development, holding informational meetings and negotiating terms.
Seller wants to reserve – how do they do it?
Need specific language in the sale disclosure that the sale of land does not include the oil, gas or mineral rights.
Also need specific language that seller is retaining the mineral rights for themselves.
Need a mineral deed to be signed and filed in order to properly effectuate the transfer (having it in the contract is not enough).
The mineral deed must have specific contents and language in order to be sufficient.
Mineral deed (especially one prepared by a title company) should be reviewed independently to determine sufficiency.
Buyer wants to buy – how do they do it? If the seller actually has the mineral rights, then the mineral rights will automatically transfer unless the steps are performed above.
What if no one knows who owns the mineral rights? Usually, will have to hire a land man or an attorney to research it for you. Very complicated process that can be costly.
Asset Protection
What’s the affect of not having an entity? There is no shield from you personally and your business. Therefore any claim against your business is effectively against you.
Most common entities with asset protection?
limited partnership
limited liability company (LLC)
corporation (for-profit)
nonprofit corporation (not-for-profit)
What’s the difference?
Limited partnerships are costly and complicated to set up and run, and are not recommended for the average small business owner. Limited partnerships are usually created by one person or company (the "general partner"), who will solicit investments from others (the "limited partners").
Corporations - What sets the corporation apart from all other types of businesses is that a corporation is an independent legal and tax entity, separate from the people who own, control and manage it. Because of this separate status, the owners of a corporation don't use their personal tax returns to pay tax on corporate profits -- the corporation itself pays these taxes. Owners pay personal income tax only on money they draw from the corporation in the form of salaries, bonuses, and the like.
LLC’s - LLCs provide limited personal liability for business debts and claims. But when it comes to taxes, LLCs are more like partnerships: the owners of an LLC pay taxes on their shares of the business income on their personal tax returns.
Which one is right for me? Which of these structures is right for your business depends on the type of business you run, how many owners it has, and its financial situation. No one choice suits every business: Business owners have to pick the structure that best meets their needs. Corporations and LLCs make sense for business owners who either 1) run a risk of being sued by customers or of piling up a lot of business debts, or 2) have substantial personal assets they want to protect from business creditors.
Who should have it? Any business with potential liability
Builders
Subcontractors
Vendors
Other people
Other tips for protecting assets –
Have a will or estate plan
Have yearly meetings and follow corporate formalities
Be careful what capacity you are signing your contracts
Have written contracts (not just oral)
Make sure you are insured
Document all disputes
Do not commingle companies
Develop relationships from people you trust