Commitments and Contingencies

Legal Matters

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, employee matters, 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 Annual Report for the year ended December 31, 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 alleging premises liability and negligent maintenance. In April 2017, a jury trial commenced and ultimately resulted in a verdict against the Company’s subsidiary and the other named defendants in favor of the plaintiff. In July 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 $553 legal expense to other expenses on the consolidated statements of operations and comprehensive income related to its 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 adjust 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 ongoing assessment of the UHC claims, in 2017 the Company accrued a potential loss contingency representing their best estimate of the potential loss related to these claims. However, due to the uncertain nature of this matter, the ultimate resolution could result in a loss of up to $5,000 in excess of the amount accrued. As of December 31, 2018, no material additional information has come to the attention of management that would change their best estimate of the potential loss related to these claims. These claims and any resulting damages are not expected to be covered by the Company's insurance policies.

Operating and Capital Lease Commitments

The Company has non-cancelable operating leases for office space used in its business. During the years ended December 31, 2018, 2017 and 2016, the Company recognized rent expense associated with these leases of $1,114, $1,411, and $1,415, respectively, as a part of general and administrative expenses on the consolidated statements of operations and comprehensive income.

The Company has non-cancelable contracts for property improvements which have been deemed to contain capital leases. At December 31, 2018, the Company has recognized total capital lease assets of $2,097 and accumulated amortization of $104 as a part of building and other improvements and accumulated depreciation, respectively, on the consolidated balance sheet. During the year ended December 31, 2018, the Company recognized interest expense associated with these leases of $104 as a part of interest expense, net on the consolidated statement of operations and comprehensive income.

Future minimum lease obligations under these leases as of December 31, 2018, were as follows:



	Future Minimum Base Rent Payments
	Operating Leases		Capital Leases
2019	$	717	$	532
2020	611		532
2021	494		519
2022	466		317
2023	479		40
Thereafter	1,041		—
Total expected minimum lease obligations	$	3,808	1,940
Less: Amount representing interest (a)			(151		)
Present value of net minimum lease payments (b)			$	1,789


(a)	Interest includes the amount necessary to reduce the total expected minimum lease obligations to present value calculated at the Company's incremental borrowing rate.


(b)	The present value of net minimum lease payments are presented in other liabilities in the accompanying consolidated balance sheets.