I heard that this was in the works among several developers (led by Hillwood). It works as @BF says – the developer puts on a limited time period deed restriction (can’t be perpetual as it breaks some Texas(?) constitutionality laws) that requires each BUYER of that property each time the property sells to pay a transfer fee to the original developer. The time period in question is 99 years (or was when I was told about it).

The real kicker here is that the developer, after burdening all lots with that fee, is then going out to the secondary market and selling that income stream in return for its present value (insert fancy spreadsheets and probably unlikely growth assumptions). In some cases, your U.S. government is purchasing that income stream with TARP money. The theory there is that these developments are “troubled assets” and can apply for TARP funds. The developer, after getting his money, is then, in theory, supposed to put those funds back into the development as improvements.

The beauty of the deed restriction transfer fee(from a purely technical and legal standpoint) is that it is totally without risk. It has to be paid each and every time the asset sells and cannot be removed. Thus, when the developer sells the income stream in the secondary market, it is a guaranteed income stream (albeit subject to the growth of real estate prices and the number of times that property is expected to change hands in 99 years).

Interesting, huh?

If Ragland’s point was to give a thumb-nail sketch of Preston Hollow, then I suggest you find a copy of Eva Potter Morgan’s “Preston Hollow”. Preston Hollow was briefly incorporated as a town after an election on November 18, 1939, the voting taking place in the real estate office of Mr. Ira P. DeLoach, also the man who hired Ebby Halliday. Her name and company now occupy what was the town hall of Preston Hollow, the “little white house” at the corner of Northwest Highway and Preston Road. Initially the notion of incorporating PH into a town was controversial, the heart of the discussion being fiscal concerns and higher taxes with annexation. But it was one of humanity’s most basic dilemmas — sanitation — that united Preston Hollow with Dallas while the Park Cities would remain the Golden Bubble in-between:

“Proponents argued that “we need only the simplest, least expensive set-up” and went on to point out that the mayor and members of the town council were to serve without pay.”

For the first few years, writes Eva Morgan, no taxes were imposed on the residents of Preston Hollow. “Income was derived from building permits for new structures and septic tanks, fines imposed by the town traffic court, and from a remarkable “subscription” system for police protection. Under this system, payment of the fee for police service was voluntary.”

Then came World War II and a need for money to support services. In October of 1942, writes Mrs. Morgan, the town council imposed an ad valorem tax. The council and the Mayor, Joe Lawther, disagreed over it — Mr. Lawther resigned, Mart W. Reeves was elected mayor — the last mayor of Preston Hollow.
Two and a half years later a tax was imposed, and a spot designated for a fire station — fire protection had been outsourced to Dallas and University Park. Meantime, the city of Dallas was pushing to unify Preston Hollow, the Park Cities and Dallas all into a single city government. It almost happened, writes Mrs. Morgan.

“But it was sewage that sounded the death knell for this remarkable town government. All the homes had septic tanks. Under the existing drainage patterns, there was apparently no feasible way that the town could install a sewage system to replace the septic tanks… in parts of town, after each rain the problem became painfully obvious. Finally, on April 3, 1945, the voters approved consolidation with the City of Dallas.”

“Item 11 shall be deleted.”

Covenant 11: “Said property shall be used and occupied by white persons only except these covenants shall not prevent occupany by domestic servants of a different race or nationality in the employ of a tenant.”

Drafted in 1956 and totally offensive by today’s standards. But read covenant 13:

“Invalidation of any of these covenants by a judgement or court order shall in no wise affect any of the other provisions, which shall remAin in full force and affect.”

So federal anti-discrimination statutes trumps the noxious covenants. What I never understood is why you just couldn’t delete the clause outright, since it’s illegal and unenforceable, but attorneys tell me that’s not the way contracts work.