This Blog now on the State Bar of Texas blogs page

Trey Wilson San Antonio Texas Real Estate Attorney, Trey Wilson Real Estate Lawyer in San Antonio wrote:

I'm very pleased to announce that this blog has been  added to the State Bar of Texas Law Blogs page and list of syndicated blogs for posts to be featured on Texas Bar Today.

Be sure to check out all of the Texas attorney blogs on the list! There's a great variety of blogs and writing styles that span the full spectrum of law and life as a lawyer.

Introduction to WHY WE CHARGE A “CONSULTATION FEE” WHEN OTHER LAWYERS MAY NOT

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Some prospective clients are surprised to hear that we charge a $350.00  “consultation fee” for a 1 hour in-person or telephonic discussion of whether we can and should undertake to represent them.  We know that many attorneys in San Antonio offer “free consultations.”  We do not – and for what we believe are very good reasons.

For the first several years of our firm's existence, we did not charge for consultations.  Resultantly, we gave away thousands of hours, and expended substantial resources visiting with hundreds of prospective clients who were “lawyer shopping,” “kicking tires,” or simply looking for free advice. 

We are blessed with dozens of potential new client calls each week, so consulting (for free) quickly became a full-time job. That business model was plainly unsustainable when we reached the point where we had to have non-lawyers conduct most of our initial consultations. I was never comfortable with this, especially since many of our real estate cases are highly complicated, involve challenging  factual scenarios, and have tremendous implications for the involved parties.

Just like any other business enterprise, a law firm’s clients are its lifeblood, and fresh blood is an essential component for sustaining. Nevertheless, we came to dread consulting with prospective clients because...well... there were just too many requests for our time.  We were so busy conducting free consultations that we fell behind in the work required to service our existing clients’ legal matters.  Even worse, it became obvious that lots of prospective clients had visited with us solely  to obtain free free advice, with no intention of ever retaining ANY lawyer's services.

So, in the year 2010, I decided to start charging a nominal consultation fee, and simultaneously enhanced the initial consultation/meeting with prospective clients into a valuable “strategy session,” as opposed to a generic interview.  This was a great business decision  – for us and for the people who  genuinely interested in obtaining the services of a serious, and hard-working real estate lawyer in San Antonio. 

There are 5 key reasons why we charge a $350.00 “consultation fee.”   In the coming days, we will list those reasons one-by-one.

TREC Names General Counsel and Deputy Administrator

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

AUSTIN, TX – The Texas Real Estate Commission announced on January 21, 2014 that it has hired Kerri Lewis as its new General Counsel and Deputy Administrator. 

According to a TREC Press Release: From April 2012 until November 2013, Ms. Lewis served as General Counsel and Deputy Commissioner for the Texas Appraiser Licensing & Certification Board (TALCB) and as Deputy General Counsel for the Texas Real Estate Commission. Ms. Lewis first joined the Texas Real Estate Commission as Director of Standards & Enforcement Services in November, 2009. Her prior State experience includes the State of Texas Credit Union Department, where she was the Assistant Commissioner and General Counsel, the University of Texas System, where she worked as a real estate attorney, and the Texas Finance Commission, where she worked with their Administrative Law Judge on licensing enforcement cases. 

Exceptions to Requirement of Signed, Written Real Estate Commission Agreement Are Extremely Narrow

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Back in October, I wrote a post on this blog discussing the requirement that commission agreements be in writing and signed before they may be enforced by Texas courts.  Since that time, I have received several inquires -- primarily from commercial real estate  brokers --  concerning whether there exist exceptions to this general proposition.  The short answer is:  "Not really, and where they do exist, the exceptions are extremely narrow."

THE LAW

As previously discussed, the Texas Real Estate Licensing Act ("RELA"), which is codified in the Texas Occupations Code mandates that a "person may not maintain an action in this state to recover a commission for the sale or purchase of real estate unless the promise or agreement on which the action is based, or a memorandum, is in writing and signed by the party against whom the action is brought or by a person authorized by that party to sign the document." Tex. Occ. Code Ann. § 1101.806(c). This requirement of a writing evidencing the commission agreement is often referred to as RELA's "statute of frauds."

Texas courts have routinely held that to comply with this provision, the memorandum or agreement must: 

"(1) be in writing and must be signed by the person to be charged with the commission; 

(2) promise that a definite commission will be paid, or must refer to a written commission schedule; 

(3) state the name of the broker to whom the commission is to be paid; and 

(4) either itself or by reference to some other existing writing, identify with reasonable certainty the land to be conveyed." 

See Lathem v. Kruse, 290 S.W.3d 922, 925 (Tex. App.-Dallas 2009, no pet.). Moreover, the Texas Supreme Court has cautioned that the statutory requirements are "clear and unequivocal," and that mandated that courts should construe them strictly. Trammel Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 636-37 (Tex. 1997) (construing predecessor statute that was nearly identically worded and warning that if broker proceeds without written agreements, he "does so at his or her own peril").

THE EXCEPTION(S)

There do exist a few Texas cases in which courts have applied an exception to the general rule, but in each of those cases, there existed some signed writing between the parties to evidence a commission agreement.  

Notably, an exception has not been employed to excuse the complete absence of a written commission agreement, or to establish the amount of a commission not memorialized in a commission agreement. See Parkinson, 944 S.W.2d at 635 (explaining that statute requires a written commission agreement because "[t]he obligation to pay and the amount of that commission are subject to misrepresentation"). Thus, the exceptions are very narrow in scope.

PARTIAL PERFORMANCE DOCTRINE

In Carmack v. Beltway Dev. Co., 701 S.W.2d 37, 41-42 (Tex. App.-Dallas 1985, no writ) the Dallas Court of Appeals applied the "partial performance doctrine"  in requiring a development company to pay a commission to a broker who located a commercial tenant for a developer-owned property. In that case, the developer had signed a written commission agreement that lacked only a precise identification of the property.  After reviewing the "well-recognized" partial performance exception to the general statute of frauds, the court observed, "When one party fully performs a contract, the Statute of Frauds may be unavailable to the other party if he knowingly accepts the benefits and partly performs." Id. at 40. 

The Carmack court expressly noted that "documentary evidence exists establishing the existence and terms of the agreement" between the broker and  developer, and that "the [written] commission agreement, itself, establishes: (1) that the broker fully performed its obligation by procuring a tenant for property, (2) the developer/property owner acknowledged his reciprocal obligation to pay the commission, and (3) the exact amount of commission is determined by reference to the rentals provided in the lease.

Thus, the Carmack court carefully limited its holding to provide only that under the "doctrine of partial performance," a written real estate commission agreement that fails to describe the property with precision may be enforced by the broker notwithstanding RELA's statute of frauds when: (1) the broker has fully performed; (2) the other party has knowingly accepted the broker's services by completing the transaction arranged by the broker and receiving benefits from that transaction; (3) the other party has acknowledged in writing his obligation for a commission; and (4) documentary evidence establishes the amount of the commission due. Id. at 41-42. 

Similarly, in Collins v. Beste, 840 S.W.2d 788, 792 (Tex. App.-Fort Worth 1992, writ denied), the Ft. Worth Court of Appeals was confronted with a commission dispute arising from a series of terminated written agreements, whereunder Beste was hired to provide leasing and marketing services for Collins' real estate properties. In that case, Collins contended that the employment/commission contracts violatde the statute of frauds because the commission amounts and the properties' legal descriptions were not contained in a single writing.

Relying on the doctrine of partial performance the Court ruled that Beste had established an exception to the statute of frauds, because: Beste fully performed; Collins accepted the sales and received benefits from them; Collins signed the commission agreement; and the employment agreement specified the commission amount. 

CONCLUSION

Ultimately, an exception to RELA's statute of frauds will only be recognized where there exists evidence establishing the existence of an agreement and its terms, and that the party acting in reliance on the contract would suffer a substantial detriment for which he has no adequate remedy, and the other party, if permitted to plead the statute of frauds, would reap an unearned benefit. An exception will not be recognized in circumstances where no written agreement exists (at all) and/or where an agreement fails to state with reasonable certainty the amount of the commission to be paid.

Brokers are well advised to obtain signed commission agreements with their clients at the outset of the relationship, and to keep those agreement current (through amendments, extensions and otherwise). 

RECOVERING UNDER THE TEXAS REAL ESTATE RECOVERY TRUST ACCOUNT

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

The statute allowing recovery under the Real Estate Recovery Trust Account is found in Chapter 1101 of the Occupations Code. See generally TEX. OCC. CODE ANN. ch. 1101, subch. M & N (West 2012). The statute states that the Trust Account is maintained "to reimburse aggrieved persons who suffer actual damages" at the hands of a license holder. TEX. OCC. CODE ANN. 1101.601(a) (West 2012).  

Texas appellate courts agree "[t]he purpose of the Account is to `guarantee the fidelity and honesty of the real estate salesman in his dealings with the public and to insure and indemnify any member of the public against damages or injury caused by a violation of the Act.'" Wilson v. Bloys, 169 S.W.3d 364, 366 (Tex. App.-Austin 2005, pet. denied) (quoting State v. Pace, 640 S.W.2d 432, 433 (Tex. App.-Beaumont 1982), aff'd, 650 S.W.2d 64 (Tex. 1983)). The statute requires the claimant to show "that the judgment is based on facts allowing recovery under this subchapter." Id. § 1101.607(1) (West 2012).

Simply put, a person who obtains a judgment for actual damages caused by the misconduct of real estate license holders can, when certain specified statutory conditions are met, obtain reimbursement from the Account if the license holder is unable to pay the judgment. Tex. Occ.Code Ann. § 1101.601.  

To recover under the Act, a person who has an uncollectable judgment against a real estate broker may file a verified claim in the court in which the judgment was rendered and, upon notice to the commission and the judgment debtor, apply for an order directing payment out of the fund. Id.  A hearing is then conducted on the application at which the commission is authorized to appear for the limited purpose of protecting "the fund from spurious or unjust claims...." Id.  At this hearing, the claimant must show, among other things, that its prior judgment is against a licensed real estate broker who caused the claimant's damages while acting as a broker. Id. § 8, part 1(a) and part 3(c). 

NOTE:  TEX. OCC. CODE ANN. § 1101.602 provides that when a license holder is selling property in his own name instead of as an agent for someone else, a claimant may not recover from the Trust Account unless the license holder engages in the following enumerated wrongful conduct:

1101.653(3):  acting in bad faith;

1101.652(a)(3): engaging in misrepresentation, dishonesty, or fraud when selling, buying, trading, or leasing real property in the name of himself, his spouse, or his relatives; 

1101.652(b): See list here;

1101.653(1): engaging in dishonest dealing, fraud, unlawful discrimination, or a deceptive act;

1101.653(2):  making a misrepresentation; or 

1101.653(4):  demonstrating untrustworthiness.

We've Re-Located Our Offices -- Stop by and say hello!

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Trey Wilson has moved his law practice to 111 W. Olmos Dr., San Antonio, Texas 78212.  Phone, fax and email will remain the same.