Houston Builder Files for Chapter 11 Bankruptcy Protection

: Reese Baker & Associates

  Filed under: Chapter 11

 

A Houston-based construction company has filed for Chapter 11 bankruptcy protection in Houston in late August. The company, Urban Oaks Builders, which is an affiliate of Houston-based real estate developer Hine’s filed the Chapter 11 bankruptcy protection case in US Bankruptcy Court for the Southern District of Texas after a Florida real estate investment group filed a lawsuit against the builder.

Southstar Lawsuit

The company Urban Oaks Builders was a general contractor for Hines in the development of an apartment complex for Southstar Capital Group, a company based out of Florida. Southstar, which buys and operates apartment complexes claims that a recent Galleria-area apartment had many construction defects that Hine’s knew about, but failed to disclose to the buyer. The problems in construction didn’t become evident right away, but by August of 2017 cracks in breezeways, floors, and balconies began to show leading the Osceola County Building Department to deem the property uninhabitable until repairs were completed.

Chapter 11 Houston Bankruptcy

In papers filed in US Bankruptcy Court for the Southern District of Texas, the company Urban Oak Builders claimed liabilities ranging from $50 million to $100 million with $10 to $50 million in assets. The Chapter 11 protection filing is no doubt in response to the lawsuit over the $67 million dollar deal. The company stated that the builder’s insurance carrier is in dispute on whether it will cover the cost of the lawsuits’ claims.

Hines is known for the development of Houston, TX buildings and multi-family apartment complexes, including a 47-story office tower in downtown Houston that the company broke ground on just this year, and the La Colombe d’Orm, a 34-story multi-family residence.

Bankruptcy and Lawsuits

Because bankruptcies in Texas offer the company an automatic stay against lawsuits and other collection activities, Oak Builders will be able to pursue its bankruptcy case, while Southstar will be required to get permission from a Texas Bankruptcy Judge before the lawsuit can proceed. In some instances, the suing party may be able to successfully lift an automatic stay in order to get the repairs needed, should the claims be upheld in Texas Courts.