Alerts
Foreclosures by Property Owner Associations Now Subject to Judicial Approval
by Tim Heinrich
January 10, 2012
The 2011 Texas Legislature enacted several statutes related to the operation and administration of property owner associations in Texas. One significant legislative change is the requirement that, beginning as of Jan. 1, 2012, a property owner association may not foreclose on an assessment lien unless the association first obtains a court order authorizing the foreclosure.
A property owner association generally makes assessments on property in a subdivision so that it is able to pay for and maintain the common amenities in the subdivision. Assessment liens are often imposed on the real property at the time of its initial development in order to secure payment of these assessments. Homeowners purchase their property subject to these assessment liens.
Prior to this recent change in the law, when a property owner failed to pay his assessment, an association could foreclose its lien by non-judicial foreclosure. This foreclosure could occur without the requirement for court approval, in the same manner as a mortgage or deed of trust. The Texas Legislature imposed the requirement of judicial foreclosure for assessment liens in order to protect homeowners from perceived injustices occurring under the non-judicial foreclosure system.
As required by the statute, the Texas Supreme Court has adopted special rules for courts to expedite handling of foreclosure proceedings brought by property owner associations. However, it will now be more time consuming and costly for an association to enforce its rights to collect assessments.
2011 Houston Office Market Real Estate Forecast
by Tim Heinrich
January 25, 2011
In a recent forecast for Houston's 2011 office real estate market, Jay Nowlin, President and Founder of Nowlin Interests, expressed "cautious optimism" during a luncheon hosted by O'Connor & Associates on Jan. 12. The following are highlights from the forecast:
- Although Houston experienced significant job losses in 2009, job loss and job creation in 2010 were about break-even. Positive job creation is anticipated for 2011, especially among larger companies. Also, there was a near-doubling in 2010 of the active rig count in the United States, as horizontal drilling activities continued to increase. This significant increase in drilling activity should generate additional business for oil service companies, which are a significant part of the Houston economy.
- The Class A office market will perform better in 2011 than the Class B and Class C markets. Large corporations, which are active users of Class A space, are sitting on large reserves of cash, waiting for the opportunity to expand. Also, a limited construction of new Class A space means there is not a great need for absorption. As such, occupancy levels are expected to increase in the future. However, small businesses are still struggling to meet their capital needs. Although lenders are starting to make more loans, lending is still selective and tight. Vacancy rates in Class B and Class C buildings are expected to continue at current levels.
- Active investors appear to be interested principally in acquiring core assets, even though these assets generally produce lower returns. There is a perception of certainty with these assets, which makes acquisition loans more readily available. Value-added assets, however, are still slow to move on the market because of a disparity between the pricing by sellers and buyers. Sellers are asking prices that they hope will recover some of their investment, while buyers are offering much lower prices because the limited availability of ready, attractive financing makes it more difficult to achieve adequate returns. Transactions involving "distressed" assets will eventually resume as sellers, buyers and lenders begin to acknowledge that we have reached the bottom of the downturn in the commercial real estate market.
Although the Houston office is not expected to return to the robust times occurring 5 years ago, it does appear that 2011 will be stronger than 2010, at least for properties that are well positioned in the market.
Federal Regulators Release New Policy Statement on Commercial Real Estate Loan Work-Outs
by Bill Boyar & Tim Heinrich
November 6, 2009
On October 30, 2009, the Federal Reserve adopted a new policy statement on commercial real estate loan work-outs, replacing a prior policy statement from 1991. This new statement supports prudent commercial real estate loan work-outs. One of the most significant provisions of this statement is "renewed or restructured loans to borrowers who have the ability to repay their debts according to reasonable modified terms will not be subject to adverse classification solely because the value of the underlying collateral has declined to an amount that is less than the loan balance."
The primary focus of an examiner's review of a commercial loan is directed towards the borrower's ability and willingness to repay the loan, including any support by willing and able guarantors. As such, loans to sound borrowers that are renewed or restructured in accordance with prudent underwriting standards should not be adversely classified or criticized unless well-defined weaknesses exist that jeopardize repayment of the loan.
The policy statement includes a number of examples of commercial real estate loan work-outs, providing illustrations of prudent loan work-outs that would not be subject to adverse loan classification.
Click here for a full copy of the policy statement.
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