FORT COLLINS, CO, USA, JULY 24, 2014:  Airborne radio controlled DJI Phantom quadcopter drone with GoPro Hero 3  camera  on a gimbal mount.

Last month Tilting discussed whether Daisy Duke and her Uncle Jesse faced civil or criminal liability for shooting down Boss Hogg’s drone trespassing over their property. To recap: Daisy Duke was sunbathing by her Uncle Jesse’s pool when a drone owned by Boss Hogg began hovering over the pool area. Daisy freaked out, and Uncle Jesse shot the drone out of the sky. Later he learned that Boss Hogg took photos of Daisy. This month Tilting considers whether Boss Hogg is liable to the Dukes for trespassing and invasion of privacy.

Does flying a drone over someone’s property constitute trespassing?

Yes. Trespassing can occur in two ways: (1) a person physically enters another person’s land without permission; or (2) a person causes an object to enter another person’s land without permission. The fact that the drone is in the airspace above the property, and not on the ground, does not matter because the property owner owns a reasonable amount of airspace above the property. Drone operators are likely adhering to FAA guidelines that recommend flying a drone less than 400 feet off the ground. In effect, the FAA claims the airspace over 400 feet. Understandably the property owner claims the airspace under 400 feet. Thus, flying a drone invades that airspace, and constitutes a trespass.

What about Invasion of Privacy?

A party may have an invasion of privacy claim for “nonphysical invasions” such as spying or wiretapping. For example, setting up a video camera in someone’s bedroom is an invasion of privacy. The plaintiff must prove that the invasion of privacy was something that would severely offend, humiliate or outrage the ordinary person. Using a drone to photograph or videotape someone in their backyard will likely meet this standard.

Does a drone owner face civil liability?

Yes in two ways. Boss Hogg may be liable for trespass or invasion of privacy under common law. If the drone typically flies over the property for a short period of time, and the property owner does not usually incur any costs to remove the drone, damages are likely limited to mental anguish.

The Dukes also have a claim under a new statute passed by the Texas Legislature two years ago. The law creates a private cause of action against the drone owner or user for using a drone to capture an image of the property owner (or tenant) or their property and allows the property owner to recover $5,000 for all of the images captured during each trespass, or $10,000 if the drone owner/operator discloses, displays or distributes the images. Another benefit to property owners is that they can recover court costs and attorney’s fees, which would not otherwise be recoverable. Boss Hogg will find himself in big trouble for violating this new law.

There is potential criminal liability as well. The new Texas law adds misdemeanor offenses for the drone owner/operator who uses a drone to photograph or video another person or privately owned property.

Tilting the Scales in Your Favor

If you operate your drone responsibly you should avoid any potential legal crashes. It is best to make sure that if you fly your drone off your property, you fly it over public property or have the other property owner’s permission to fly on their land. Similarly, you should not take any photographs or video on private property without a person’s or property owner’s permission.

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Texan ranch owner Hugh Steerman (fondly known as “Gramps”) just received notice that his family’s fourth-generation, 2,000-acre, Rambling Steer Ranch is a possible pathway for the West Texas Rail from Fort Worth to El Paso. Gramps is concerned that the planned route will split the Rambling Steer, prohibiting cattle from being moved across the tracks to grass and water, and pressuring his wildlife harvest by introducing strange sound and light to the quiet. Can Gramps stop the train? If not, what can he expect?

Probably not. The best solution is to make the Rambling Steer Ranch appear less desirable than the other rail options or, and, failing that, to cut the best deal he can with West Texas Rail. A last resort is a lawsuit challenging the authority of West Texas Rail to condemn the property, and then challenging any damages awarded as being too little. A bare-bones overview of the condemnation process follows.

Adequate Compensation for Public Use

The Texas Constitution requires that adequate compensation be paid to landowners for property taken for public use through the exercise of the authority of Texas eminent domain. If acting under state eminent domain authority, constitutional amendments, effective January 2010, require a two-thirds supermajority of both houses of the Texas Legislature before eminent domain power can be delegated. If acting under the Federal Railroad Administration, federal eminent domain authority is slightly different, but the process is much the same. Assuming that West Texas Rail complied with the requirements for finding appropriate public use and public necessity under either Texas or federal eminent domain requirements for taking part of the Rambling Steer, and also gave timely notice of the required statement of landowner’s bill of rights, then what?

Negotiations with Condemnor

Now’s the time for Gramps to make his best pitch to West Texas Rail either to go around or to re-route to the outside boundary of the Rambling Steer to avoid depriving Gramps’ usage of the remaining property for grazing and water access, and for hunting. If West Texas Rail has the opportunity to re-align its rail along the Rambling Steer’s boundary, it will likely do so to avoid paying for additional damages to the remaining property and for the obvious public relations value of working with the existing landowners. If a mutual agreement cannot be reached, however, West Texas Rail will send to Gramps a final offer, with copies of a written appraisal, draft deed or easement, and the Texas Landowner’s Bill of Rights.

Special Commissioner’s Hearing

If the final offer is not accepted within fourteen days, West Texas Rail may initiate, but is not likely to act that quickly to file, a condemnation proceeding to exercise the power of eminent domain to transfer title to the property from Gramps to an entity duly empowered by the government. The condemnation lawsuit will be filed with the county court at law in the county where the Rambling Steer is located. A judge will appoint three disinterested real property owners in the county as special commissioners to assess damages only. The judge may accept special commissioners recommended by the litigating parties and may give each party an opportunity to challenge one of the court-appointed commissioners. The special commissioners must promptly schedule a hearing at the earliest practical time, but no earlier than the twentieth day after their appointment. Although not obligated to attend, Gramps (and any expert he may elect to use) may attend and testify as to the market value of the portion of the ranch being condemned, as well as to the damage that the rail project would cause to the remainder of the Rambling Steer. After the special commissioners render their decision, Gramps must file a written statement of objections in a timely manner if he disagrees with the decision.

Condemnor’s Right to Possession

After the conclusion of the special commissioners proceeding, West Texas Rail has the statutory right to obtain but, again, may choose to delay and to continue negotiating before taking possession of the property pending further litigation if: (a) it pays the money awarded either to Gramps or to the court, and (b) complies with related deposit and bonding requirements. If the court later rules that condemnation was wrongful, the temporarily displaced Gramps may recover damages if there was no right to condemn the Rambling Steer. If Gramps withdraws the deposited compensation, he waives all objections to the legality of the taking and may only contest the adequacy of the amount paid. If Gramps challenges the adequacy, and the county court at law judge later determines that the compensation paid was too high, Gramps must pay West Texas Rail back.

Tilting the Scales in Your Favor

If you receive notice of a condemnation proceeding possibly affecting your property, don’t ignore it. Instead, learn as much about the routes and the condemning authority as you can, possibly also investigating the condemnor’s eminent domain authority. Gather information identifying all the properties identified as likely candidates for the rail route and condemnation, particularly yours. Identify arguments that make your property less desirable than someone else’s and meet with an authorized condemnor representative on your property to point out the negative impacts of the proposed taking. Know that, for example, West Texas Rail will want to foster good will among those affected – they may be customers someday. If negotiations are unsuccessful, and you get to the special commissioners’ hearing, consider retaining counsel who will likely recommend hiring an expert witness. Even if you don’t get the damages award you seek from the special commissioners, you will probably want to have expert testimony before the county court judge.

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Drone with CameraTrying to avoid the sweltering heat, “Uncle Jesse” Duke was in the garage working on his moonshine operation when he heard a loud shriek in the backyard. He ran to the back to find his niece, Daisy, sunbathing by the pool. Daisy shouted, “That drone keeps hovering over the pool area looking toward me. Do something about it Uncle Jesse!” Uncle Jesse quickly ran back to the garage, grabbed his trusty shotgun, and blew the drone out of the sky. An hour later Sheriff Coltrane showed up at Jesse’s house and asked, “Jesse, did you shoot a drone?” Jesse responded, “You’re durn right I did.” Sheriff Coltrane replied, “Well Jesse, that was Boss Hogg’s $2,000 drone you destroyed. I’m sorry, but I’m gonna have to arrest you.” Jesse said, “I didn’t commit no crime Sheriff. It’s my American right to defend my property.” Is Jesse right?

Can You Lawfully Shoot Down a Drone over Your Property?

Two reported cases in New Jersey and Kentucky deal with shooting drones flying over private property. Both times the shooters were charged with criminal mischief and related misdemeanors. As a starting point, your homeowner’s property is both the dirt and your improvements, and also a reasonable amount of airspace necessary to utilize your property. While you can’t complain that the American Airlines flight at 30,000 feet is trespassing on your property, a drone that’s only 200 feet off the ground…? Well, that’s probably a different story…

Earlier Tilting articles mentioned that each state has a “castle doctrine.” Although it varies by state, the “Castle Doctrine” generally allows homeowners to protect themselves, and in some cases their property, with force.   Beyond the “Castle Doctrine” Texas has another law that permits a property owner to use “force” when the property owner reasonably believes it is necessary to prevent a trespass on their land.   Using that Texas statute, the conduct may be justified and criminal liability may be avoided where the homeowner used “deadly force” (i.e., a gun) to shoot down the drone.

What about civil liability?

The homeowner’s action may also be justified against civil liability if the homeowner can prove: (1) the trespassing Drone was not privileged to be above the homeowner’s property (such as to avoid an emergency); (2) the homeowner reasonably believed the trespass by the Drone can only be prevented or terminated by the force used; and (3) the homeowner either requested the trespass cease, or reasonably believed that request would be useless or that substantial harm would be done before the request can be made. But there is no clear cut answer at this time, and these defenses would be decided by a court or jury.

Tilting the Scales in Your Favor

While no one wants their privacy intruded upon, we do not recommend shooting a drone out of the sky. While you might have good legal arguments to justify your actions – and probably have a jury’s sympathy – it will still be a costly process, particularly when you may be one of the first cases of this kind in the state. Obviously, your liability exposure is compounded if you happen to miss the drone and hit another person or their property.

Having said that the drone owner does not necessarily get away scot-free. In 2013 the Texas Legislature passed a law that creates a private cause of action against the drone owner or user for using a drone to capture an image of the property owner (or tenant) or their property and allows the property owner to recover $5,000 for all of the images captured during each trespass, as well as court costs and attorney’s fees. The drone owner or user may also be liable to the homeowner for trespassing and for one of the torts of invasion of privacy (check out our other article this month “Can You Videotape Someone Else’s Conversation”). Next month we’ll explore this issue from the drone owner’s perspective, including federal regulations and recommendations for flying unmanned drones.

CHL in TexasPolice Chief Steroid McMuscles reported that Colt Glockenhand who entered Wally-Mart with a shotgun was not charged with “engaging in the lawful open carry of a pump-action shotgun” – a violation of the Cut and Shoot town ordinance. However, when Colt entered Kreamy Kreme, loaded his shotgun and pumped it in front of witnesses, Chief McMuscles arrested him for breach of the peace. Wally-Mart did not have a posted sign prohibiting the open carry of guns; Kreamy Kreme did. Was Chief McMuscles on target?

Texas state law now pre-empts existing city ordinances in Dallas, Houston, San Antonio and Austin, despite a last minute effort by larger cities to opt-out of the “open carry” law. And, Yes, Chief McMuscles is right for two reasons: (1) ignoring a properly posted prohibition of either “open carry” or “concealed carry” is a Class A misdemeanor, (2) displaying a firearm or other deadly weapon in a public place in a manner calculated to alarm is a breach of the peace and a Class B misdemeanor.

Introducing the “open carry” bill, Wichita Falls Senator Craig Estes noted that Texas was one of only six states that did not permit its citizens to openly carry handguns under any circumstances. The other states are California, Florida, Illinois, New York, and South Carolina. To ban the open carrying of firearms, business must post a specifically worded sign at its entrance(s).

Tilting the Scales in Your Favor

Gray Reed attorney and Texas State Representative Jeff Leach tells us: “The ‘open carry’ bill was signed in to law by Governor Greg Abbott on June 13, 2015, and becomes effective (with a few minor exceptions) on January 1, 2016, making Texas the 45th state to allow some form of ‘open carry’ of handguns. Business and property owners who wish to prohibit open and concealed carry must closely observe the signage requirements.” Special thanks for his assistance in helping preparing this article, based on this legal update he recently drafted.

Signage Requirements:

  • To prohibit the “concealed” carry of handguns by licensed CHL (LTC) holders, the sign should include the following language (pursuant to Texas Penal Code Section 30.06):
    • “Pursuant to Section 30.06, Penal Code (trespass by license holder with a concealed handgun), a person licensed under Subchapter H, Chapter 411, Government Code (handgun licensing la), may not enter this property with a concealed handgun.”
  • To prohibit the “open” carry of handguns by LTC holders, the sign should include the following language (pursuant to Texas Penal Code Section 30.07):
    • “Pursuant to Section 30.07, Penal Code (Trespass by license holder with an openly carried handgun), a person licensed under Subchapter H, Chapter 411, Government Code (handgun licensing law), may not enter this property with a handgun that is carried openly.”
  • To prohibit BOTH concealed and open carry of handguns, both signs should be posted.

General Information:

  • HB 910 authorizes individuals (with some exceptions) to obtain a license to openly carry a handgun where licensed carrying of a concealed handgun is permitted.
  • Openly carried handgun must be in a shoulder or belt holster, whether loaded or not.
  • Licensing of both concealed (CHL) or openly carrying a handgun (LTC) will not change. Both will be called LTC.
  • CHL holders may continue to carry handguns both concealed and open carry at no additional fee, nor will they be required to attend additional training.
  • New LTC applicants will be required to complete training updated to reflect new requirements addressing restraint holders for secure carry of handguns.

Even with a CHL (LTC), these weapons may not be carried concealed or “open carry” regardless of whether the handgun is holstered pursuant to Texas Penal Code §46.03 & §46.035:

A concealed handgun cannot be carried while the person is intoxicated.

  • In the premises of an establishment licensed to dispense alcoholic beverages for consumption on the premises, which derives 51% or more of its income from the sale of alcoholic beverages and has a conspicuous warning prohibiting firearms, if posted.
  • On the premises of a public higher education institution or private or independent institution of higher education, including any public or private driveway, street, sidewalk or walkway, parking lot, parking garage or other parking area
  • Inside the secured area of any airport, however a person may carry any legal firearm into the terminal that is encased for shipment purposes and checked as baggage to be lawfully transported on an aircraft pursuant to airline and TSA regulations.
  • In a place of religious worship if a proper TPC §30.06 warning is given.
  • In a hospital or nursing home if a proper TPC §30.06 warning is given.
  • In any court or offices used by a court unless pursuant to written regulations or written authorization from the court.
  • At any polling place on Election Day.
  • At any meeting of any governmental body if proper notice is posted pursuant to Texas Penal Code §30.06.

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Texas Concealed Handgun Laws

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WARNING to Liquor License Holders – “Open Carriers” Can Cost you your Liquor License

LEGISLATIVE UPDATE: HB 700 Seeks to Allow Handguns to be Carried Openly

Lisa Frick, our fictional Denton resident, who collected anti-fracing ordinance signatures to put on the Denton City Ballot now complains that fracing near old Texas Stadium caused earthquakes that harmed her twin sister Linda. Linda wants to sue our November fictional friend Frac Petroleum Company, contending that her Irving home was damaged by the January series of earthquakes caused by Frac’s hydraulic fracing that “felt like a semi hit the side of our house,” causing it to shake so badly it left structure cracks at least a half-inch wide. Can Lisa Frick’s sister Linda sue Frac Petroleum Company?

Answer

As the saying goes, anybody can file a lawsuit, but given the current status of Texas case law Linda probably won’t win. Scientific testimony relating earthquakes to hydraulic fracing is not widely accepted. Expert trial testimony requires reasoning or methodology that is scientifically valid and can properly be applied to the facts at issue – it must have attracted widespread acceptance within a relevant scientific community, the Daubert standard.

The Claim

It’s not the fracing, but rather the disposal of the leftover briny water known as “flowback” that is at the center of the hubbub. Typically, millions of gallons of wastewater are trucked from the fracing site to a second well site and injected thousands of feet underground into porous rock layers. Some seismologists say the flowback injection can cause tiny “micro earthquakes” rarely felt on the surface. While recognizing that the disposal process can trigger slightly larger quakes when water is pumped near an already stressed fault, the U.S. Geological Survey reports that only a handful of the 30,000 injection wells across the country have been suspected of causing earthquakes. While research doesn’t prove all fracing causes earthquakes, it does suggest that fracing occurring near fault lines has the potential to cause them.

Possible Lawsuit Claims

Even assuming unlikely supporting scientific Daubert evidence, a party claiming property damages in Texas could not prove that it was damaged under its most probable claim – trespass. The Texas Supreme Court held that damages for drainage by hydraulic fracturing are precluded by the rule of capture – a rule that gives a mineral rights owner title to the oil and gas produced from a lawful well bottomed on the property, even if the oil and gas flowed to the well from beneath another owner’s tract. No earthquake lawsuits have been successful in Texas, only lawsuits claiming damages from exposure to the compounds in the “flowback” – benzene, toluene, ethylbenzene, xylene, and other compounds – that allegedly contaminated adjacent property.

My esteemed Gray Reed partner Charlie Sartain and expert Oil and Gas attorney regularly blogs at Energy and The Law and has several compelling and humorous entries worth your read:

What’s Going On in Denton, Texas?
Truth and Illusion in the Fracking Debate
Frac(k)ing, Parr v. Aruba, and Minority Oppression
In Wyoming, a Higher Burden for Chemical Disclosure Exemption?
Barnett Shale Drilling Increased North Texas Ozone – Fact or Fiction?
Hydrocarbon Exposure Reconsidered

Previous Tilting Articles: No Fracing Way!- Differences Between Surface & Mineral Estate Ownership and Come and Take It! – Denton Ordinance Prohibits Fracing

 

Broken windows, looting and fires were some of the lasting images from the Ferguson, Missouri riots.  And if you looked at those pictures closely, you may have noticed that a substantial number of the damaged businesses were locally-owned, “mom and pop” shops.   And if you are a business owner, you couldn’t help but ask yourself how would you pay for the damage if there was a riot in your community.   Fortunately, most commercial property and business owner insurance policies include coverage for property damage due to riots.  Some policies also include “business interruption” coverage for lost income when damage is so substantial that the business has to shut down until repairs are completed.  Again, coverage depends on the specific policy.  So, a business owner would be advised, as part of their year-end evaluation of their business, to review their policy with their insurance agent to ensure their business is covered for such an event.

Pizza the Action is a major distributor of pizza dough and toppings and provides these products to many large national pizza chains.  Pizza the Action’s top sales person, Eaton Wright, just announced that he was resigning and that he had accepted a position with The Pie’s the Limit, an upstart competitor in the very same industry.  Wright did not have an employment or non-competition agreement with Pizza the Action.  While Wright has ostensibly done nothing yet, Pizza the Action is concerned about Wright providing his new employer with Pizza the Actions’ customer lists, customer data and financial pricing information.  Is there anything that can be done to stop him?

Yes.  During this past legislative session, Texas became the 48th state to enact (its version of) the Uniform Trade Secrets Act (“TUTSA”). TUTSA, which goes into effect September 1, 2013, will provide companies with greater protection of their trade secret information across Texas.  Previously, Pizza the Action may have found it difficult to obtain a temporary restraining order or injunctive relief against Wright without some proof of actual misappropriation of trade secrets.  TUTSA, however, now authorizes injunctive relief for actual and threatened misappropriation.  Pizza the Action could now arguably seek injunctive relief based on the “inevitable disclosure doctrine” where circumstances suggest that Wright would inevitably make use of their trade secret information as part of his new position.  Other significant changes include:

  1. an expanded definition of trade secret (includes lists of actual and potential customers or suppliers as well as financial information);
  2. safeguards to protect allegedly trade secret information during the pendency of the litigation (e.g. through protective and sealing orders);
  3. provisions for the award of attorneys’ fees to both the plaintiff and defendant; and
  4. the availability of exemplary damages (act to exceed twice the economic damages) where the plaintiff establishes willful or malicious misappropriation by clear and convincing evidence.

 Tilting the Scales in Your Favor

The TUTSA seeks to put Texas in step with other states and provide increased predictability for those seeking to assert claims in Texas courts for trade secret misappropriation.  Companies will now have a statute in their arsenal as opposed to merely relying upon employment agreements and case precedent.  Given the increased certainty in the law, businesses should consider choosing Texas as the governing law for their agreements as well as modifying their agreements to reflect the recent changes.  As the ultimate determination of whether information constitutes a trade secret will be case specific, businesses should be able to demonstrate measures taken to safeguard trade secret information and should clearly identify such information as “confidential.”

Winn Blohn knew the storm was coming before it lifted the roof and parts of the second floor from his home. Hiding behind the kitchen counters during the fifteen seconds of swirling glass and falling debris, Winn knew the roof was gone. Now, it’s too early to tell if the next call should be for a builder or a bulldozer. When Hugh Peigh, Winn’s landlord, stopped by to express his sympathy and to offer his pickup truck for cleanup, Hugh asked if Winn’s monthly rent payment was in the mail. Who is responsible, Winn Blohn or Hugh Peigh? Who pays, how much and by when?

Assuming that Hugh insured his rent house, he is responsible for damage to the house and should get his insurance company to adjust the claim. Asfor repairs, Hugh’s obligations do not begin until he receives the insurance proceeds. Either Hugh or Winn Blohn may terminate the lease by giving written notice to the other any time before repairs are completed. With the roof gone, it is likely that the premises are at least partially, if not wholly, unusable. Winn is entitled to reduce the rent he pays to Hugh to in an amount proportionate to the extent the premises are unusable because of the tornado.

Suitable Premises

At common law (before the Texas Property Code), a landlord could demand rent even if the premises became unsuitable because of a sudden act of God, such as a tornado. Even without a roof, Winn would have to pay rent for the duration of the lease. Most states like Texas statutorily abolished rent payment obligations if a non-man-made force renders the premises unsuitable. However, the landlord is likewise, not accountable for natural disasters such as a flood, fire, or tornado. Nor is the landlord responsible for providing alternate shelter and housing. The landlord is only responsible to fix the property and make it habitable as soon as possible.

Personal Property Losses

Renters sometimes assume that the landlord’s property insurance protects them in the case of a theft or fire. However, most landlord and owner’s policies cover only the structure of the building and grounds — not the tenants’ possessions. Renters can purchase rental insurance that provides temporary housing and provisions in a natural disaster. Unless the catastrophe was something other than a natural disaster and caused by the landlord’s negligence, the landlord cannot be held accountable for the loss of an occupant’s personal items.

Tilting the Scales in Your Favor

If you are the tenant and the landlord won’t make repairs to protect your health, safety, or security, and you follow the procedures required by law, you may be entitled to:

  • end the lease;
  • have the problem repaired and deduct the cost of the repair from the rent; or
  • file suit to force the landlord to make the repairs.

To do so, you MUST:

  • send the landlord a dated letter by certified mail, return receipt requested, or by registered mail, outlining the needed repairs, or deliver the letter in person;
  • keep a copy of the letter; and
  • be sure your rent is current when the notice is received. If the landlord does not make diligent efforts to repair, you may be entitled to terminate the lease, repair the problem and deduct the cost from your rent, or get a court to order that the repairs be made. You should consult with an attorney before taking any of these actions. In Texas, a landlord cannot retaliate for complaining about necessary repairs for six months after the complaint is made.

Disaster Relief Resources

The Hood County Bar Association is offering Hood County tornado victims free information and consultation on legal issues related to the recent disaster on May 23 from 9:00 a.m. to 11:00 a.m. at the Hood County Annex (1 – 1410 W. Pearl St.) The State Bar of Texas provides a toll-free disaster legal hotline at (800) 504-7030 for those impacted by the tornadoes in North Texas, as does Legal Aid of NorthWest Texas at (855) 548-8457.

Days after closing on their dream home – a brick colonial near the historic Texas Capitol – Hino and Mino Schute learned of their property’s ghastly past. Eleven months earlier, an intruder entered the house, shot and killed a 9-year-old girl and her father. Horrified, the Schutes unsuccessfully demanded their money back. When that failed, Hino and Mino tried to paint over the grim history, refinishing the woodwork and refurbishing the kitchen. After a couple of months Mino gets transferred by his company to another state and they have to sell the house.  Since the murders were not disclosed when Hino and Mino bought the house, do they have the obligation to disclose the house as a “stigmatized property” to the future buyers?

Probably, yes. The Texas Property Code expressly provides that a realtor is not required to disclose or release information related to whether a death by natural causes, suicide or accident unrelated to the condition of the property occurred on the property. Murder is not covered by this “no duty” rule. Since a murder on the property might be considered a material fact that a buyer would want to know in deciding whether to purchase, it’s probably prudent for sellers to disclose this fact.

What Not To Disclose?

It is a discriminatory practice in violation of the Texas Real Estate Commission’s Canons of Professional Ethics and Conduct for a real estate licensee to inquire about, respond to or facilitate inquiries about race, color religion, sex, national origin, ancestry, familial status or handicap. You can’t talk about AIDS, HIV-related illnesses or HIV infection related to the property, any occupant or owner, either.

What MUST Be Disclosed?

Physical stigmas arise when some negative or detrimental physical or environmental condition exists that may affect the health or safety of the occupants or the value of the property, whether direct or indirect. An obvious property condition would be houses in an area subject to sinkholes, like central Florida where an occupant was killed when his house collapsed. More indirectly, health-related problems whether real or imagined, can impact property marketability or value, like the asbestos scare or perhaps if the house is Haunted! The Seller’s knowledge of active termites and damage, flooding, toxic wastes, previous fires, landfill, settling, soil movement, fault lines and manufacture or sale of methamphetamine, must all be revealed in a Seller’s Disclosure of Property Condition. If the seller fails to provide the notice required by the statute, the purchaser may terminate the contract for any reason within seven days after receiving the notice.

Tilting the Scales in Your Favor.

If you own or intend to purchase real property, consider the following:

  • GOOGLE the property address and ask questions about prior usages and property circumstances, and know that your buyer or seller is likely to do the same;
  • In Texas carefully review and complete the Seller’s Disclosure of Property Condition for residential sales, knowing that if you are the buyer there may be more to the disclosure list than meets the eye, and if a commercial transaction, consider the same questions and responses;
  • Even if there are no disclosed property conditions or physical stigmas, separately investigate if there may be and, if so, try to determine whether the stigma is based on rumor or fact;
  • If it’s a fact, consider how material it is to the transaction—how sensational was the event, how long ago did the event occur, would it likely impact the purchase price or resale value;
  • Discuss the physical stigma, its accuracy, perceived impact and likely consequences with your broker to evaluate the impact upon the value of the property and / or the risk of legal liability and responsibility;
  • Generally speaking, more informative disclosures are better. Doing so, in writing, reduces the likelihood that a subsequent lawsuit will be successful and, therefore reduces the risk that a contingency fee lawyer will be interested in taking the case.

Lawsuits stemming from nondisclosure of a property’s problems were ranked by real estate brokers in the National Association of Realtors 2011 Legal Scan as among their “top three current and future issues.” It is almost certain that neighbors will later inform buyers about deaths and other physical stigmas related to the property. Whether the physical stigma may be a death involving or any other stigma not specifically covered by a duty to disclose, sellers may choose to voluntarily disclose information about all stigmas to avoid contract termination or worse yet, subsequent litigation.

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Assult RifleAttendees at the midnight showing of the remake of the movie “Paladin – the Gentleman Black Knight” were ambushed at the Orpheum Theater. According to news reports the accused bought a ticket and sat in the audience. He waited until after the movie started and then stepped out where he donned riot gear and re-entered the theater, tossed two gas canisters and began shooting into the crowd.  Subsequent investigation suggested insufficient security for anticipated crowds and a lack of alarm system controls on the emergency exit. Is the business owner liable to its customers who were injured in the shooting?

Owner Liability Issues to Customers

Probably not the customers (employees – a different story – will be addressed next month). While a business owners must take reasonable steps to protect visitors coming onto the property or people coming to do business in their store, for victims successfully to recover compensation they must show that past violent incidents reasonably caused the mass shooting at that particular theatre to be foreseeable. The Orpheum responded to its patrons’ lawsuits seeking a dismissal and argued, “It would be patently unfair, and legally unsound, to impose on the Orpheum… the duty and burden to have foreseen and prevented the criminal equivalent of a meteor falling from the sky.” There was no history of similar events to argue a pattern. There was no communication of a threat. The theater would likely be successful in arguing it could not have reasonably foreseen that a deranged gunman would shoot up the theater because it is no more at risk for a mass shooting than any other venue hosting a large crowd of people. Hiring armed security guards over and above the presence of routine local law enforcement patrols is not an ordinary and customary procedure for suburban movie theaters in relatively low-risk areas.

A pattern of criminal problems, such as repeated robberies at the business or assaults in the parking lot, are generally required for courts to hold businesses liable for a crime on their premises.

Tilting the Scales in Your Favor

Insurance. Up to forty percent of businesses affected by a natural or human-caused disaster never reopen. If this happened at your business, could your business survive? Evaluate your commercial property and business interruption policies as well as reputational and crisis management coverage. For most businesses, the brunt of the insurance response will likely fall under commercial general liability coverage because there is no exclusion for random acts of violence or mass events. You may wish, however, to consider public liability insurance. Because of their high-severity and low-frequency nature, insurance for public liability occurrences is designed to protect from incidents on the premises those public venues and other businesses that frequently bring large crowds – a shooting, a structure collapse, an explosion, a terrorist act. Talk to your insurance agent, and review your existing general liability insurance policies.

Reasonable Precautions. The Department of Homeland Security created a checklist of measures recommended to create a business preparedness program. Generally, those measures are summarized as organize, develop and administer a preparedness program, identify the hazards and assess the risks. Then, implement the plan and address the emergency response, crisis communications, employee assistance and training. Annually test and evaluate the plan using a variety of exercises and scenarios.

SEE ALSO: