Commitments and Contingencies

The Company is subject, from time to time, to various types of third-party legal claims or litigation that arise in the ordinary course of business, including, but not limited to, property loss claims, personal injury or other damages resulting from contact with the Company’s properties. These claims and lawsuits and any resulting damages are generally covered by the Company's insurance policies. The Company accrues for legal costs associated with loss contingencies when these costs are probable and reasonably estimable. While the resolution of these matters cannot be predicted with certainty, management does not expect, based on currently available information, that the final outcome of any pending claims or legal proceedings will have a material adverse effect on the financial condition, results of operations or cash flows of the Company.

Legacy Corner Apartments

As previously disclosed in our Quarterly Report for the quarter ended June 30, 2017, on September 6, 2013, a former tenant at the Legacy Corner Apartments property in Midwest City, Oklahoma filed a complaint in the District Court of Oklahoma County against the Company and other named defendants, Case No. CJ-2013-5011, alleging premises liability and negligent maintenance. At December 31, 2016, based on the facts and circumstances of this case, the Company believed it had a viable defense and was prepared to defend the suit vigorously. Due to the pendency of the Company's defenses and insurance policies, together with the inherent difficulty and uncertainty of predicting the outcome of litigation generally, the Company did not believe a loss associated with compensatory damages was probable. Furthermore, the Company did not believe a risk of loss associated with punitive damages, which would be awarded due to gross negligence, was probable based on the information known, nor did the Company know an estimated range of uninsured punitive damages. Accordingly, at December 31, 2016, no loss contingency amounts related to this case had been accrued.

The jury trial commenced on April 3, 2017. On April 12, 2017, the jury entered a verdict against the Company’s subsidiary and the other named defendants in favor of the plaintiff of $6,000 in compensatory damages and $6,000 in punitive damages. The compensatory portion of the verdict is fully insured by the Company’s insurance policies. However, the Company's insurance carrier served the Company with a reservation of rights letter stating that insurance coverage may not be provided for punitive damages awarded in this case. As a result, the Company’s potential loss contingency exposure was $6,000. The Company had been advised by counsel that the Company had several potential mitigating factors available to it, which should have resulted in a reduced punitive award. Based on GAAP standards, the Company accrued for a potential loss contingency of $3,000 on the consolidated statement of operations and comprehensive (loss) income as part of other (expense) income for the three months ended March 31, 2017.

On July 27, 2017, the plaintiff asserted a demand against the Company’s subsidiary and the other named defendants to settle the lawsuit through arbitration in exchange for an amount less than the total damages awarded. Subsequent to negotiations with the Company's insurance carrier, the Company recorded a $2,447 credit to other expenses related to the partial reversal of its previously recorded loss contingency of $3,000 as of March 31, 2017, to reflect the $553 portion of the final settlement paid by the Company during the year ended December 31, 2017.

University House Communities Group, Inc., Indemnity Claims

The Company received an indemnity notice from UHC Acquisition Sub LLC ("UHC") regarding certain matters under the Stock Purchase Agreement, dated January 3, 2016, for University House Communities Group, Inc., which was sold in June 2016. The notice sets forth various items for which UHC believes they are entitled to indemnification from the Company. In the normal course of property dispositions, pursuant to the purchase and sale agreements, certain indemnification claims can be made against the Company by the purchaser, in which the Company will continue to make adjustments to the financial statements, as necessary, based on those claims. Based on the facts and circumstances of the indemnification claims made, guidance provided by third-party specialists and counsel, and management’s initial and ongoing assessment of the UHC claims, the Company accrued a potential loss contingency on the consolidated financial statements as of and for the year ended December 31, 2017; the impact of the accrual was not material to the overall consolidated financial statements. Management has accrued their best estimate of the potential loss related to these claims, but, due to the preliminary nature of this matter, the ultimate resolution could result in a loss of up to $5,000 in excess of the amount accrued.

Leasing commitments

One of the Company’s retail properties is subject to a ground lease. The Company records ground rent expense on a straight-line basis over the term of the lease. The lease requires rental payments based upon the appraised value of the property at specified dates, increases in pricing indexes, or certain financial calculations based on the operations of the property. Changes in the rental payments as a result of future adjustments are not included in the table below because they are not determinable. During the years ended December 31, 2017, 2016 and 2015, the Company recognized rent expense associated with this lease of $33, $40, and $23, respectively.

In addition, the Company has non-cancelable operating leases for office space used in its business. During the years ended December 31, 2017, 2016 and 2015, the Company recognized rent expense associated with these leases of $1,411, $1,415, and $1,385, respectively.

Future minimum lease obligations under these leases as of December 31, 2017, were as follows:



	For the year ended December 31,
	2018		2019		2020		2021		2022		Thereafter		Total
Ground lease, future minimum lease obligations	$	23	$	23	$	23	$	23	$	23	$	608	$	723
Office space	640		586		463		441		445		931		3,506
Total	$	663	$	609	$	486	$	464	$	468	$	1,539	$	4,229