Contingencies and Commitments	6 Months Ended
Jun. 30, 2012
Contingencies and Commitments	16. Contingencies and Commitments Lawsuits, claims and proceedings have been or may be instituted or asserted against us in the normal course of business, including actions brought on behalf of various classes of claimants. We are also subject to local, state and federal laws and regulations related to land development activities, house construction standards, sales practices, employment practices and environmental protection. As a result, we are subject to periodic examinations or inquiry by agencies administering these laws and regulations. We record a reserve for potential legal claims and regulatory matters when they are probable of occurring and a potential loss is reasonably estimable, and are based on specific facts and circumstances, and we revise these estimates when necessary. At June 30, 2012 and December 31, 2011, we had reserves of $7.1 million and $5.8 million, respectively, net of expected recoveries, relating to these claims and matters, and while their outcome cannot be predicted with certainty, we believe we have appropriately reserved for them. However, if the liability arising from their resolution exceeds their recorded reserves, we could incur additional charges that could be significant. Due to the inherent difficulty of predicting outcomes of legal claims and related contingencies, we generally cannot predict their ultimate resolution, related timing or eventual loss. If our evaluations indicate loss contingencies that could be material are not probable, but are reasonably possible, we will disclose their nature with an estimate of possible range of losses or a statement that such loss is not reasonably estimable. At June 30, 2012, the range of reasonably possible losses in excess of amounts recorded was not material. At June 30, 2012 and December 31, 2011, in addition to guarantees on our joint venture’s outstanding borrowings, an unconditional loan-to-value maintenance guarantee was provided, on a joint and several basis, for a secured development loan for Baker Ranch, a related party in which we have no ownership interest (see Note 9). At June 30, 2012 and December 31, 2011, the loan had a $25.4 million outstanding principal balance. A liability was not recorded for this guarantee as the fair value of the secured real estate assets exceeded the outstanding notes payable. At December 31, 2011, joint and several non-recourse (“bad boy”) guarantees were provided for two secured permanent financing loans of related parties in which we have no ownership interest. The bad boy guarantee may become a liability for us upon a voluntary bankruptcy filing by the related party borrower or occurrence of other “bad” acts, including fraud or a material misrepresentation by the related party borrower. At December 31, 2011, these loans had a $34.1 million outstanding principal balance. In February 2012 and June 2012, these loans matured and we were released as a guarantor. On May 10, 2011, concurrent with issuance of the Secured Notes, we entered into a new $75.0 million letter of credit facility. At June 30, 2012 and December 31, 2011, outstanding letters of credit against the letter of credit facility were $4.2 million and $4.2 million, respectively. We are required to provide surety bonds that guarantee completion of certain infrastructure serving our homebuilding projects. At June 30, 2012, we had a $68.7 million exposure in connection with $169.0 million of surety bonds issued for our projects. At December 31, 2011, we had a $71.0 million exposure in connection with $178.4 million of surety bonds issued for our projects. We also provided indemnification for bonds issued by unconsolidated joint ventures and other related party projects in which we have no ownership interest. At June 30, 2012, we had a $29.3 million exposure in connection with $69.0 million of surety bonds issued for unconsolidated joint venture projects, and a $2.3 million exposure in connection with $6.2 million of surety bonds issued for related party projects. At December 31, 2011, we had a $29.3 million exposure in connection with $69.0 million of surety bonds issued for unconsolidated joint venture projects, and a $3.1 million exposure in connection with $6.9 million of surety bonds issued for related party projects. Certain of our consolidated and joint ventures’ homebuilding projects utilize, and may continue to utilize, community facility district, metro-district and other local government bond financing programs to fund construction or acquisition of infrastructure improvements. Interest and principal on these bonds are typically paid from taxes and assessments levied on homeowners following the sale of new homes within the project. We have also entered into credit support arrangements where we make interest and principal payments on these bonds if the taxes and assessments levied on homeowners are insufficient to cover such obligations. Furthermore, reimbursement of these payments to us is dependent on the district or local government’s ability to generate sufficient tax and assessment revenues from the sale of new homes. In December 2011, Vistancia, LLC, a consolidated joint venture, sold its remaining interest in an unconsolidated joint venture. As a condition of sale, the Company effectively remained an 8.33% guarantor on certain community facility district bond obligations to which the Company must meet a calculated tangible net worth; otherwise, the Company is required to fund collateral to the bond issuer. In May 2012, as a result of the Company purchasing the non-controlling interest’s remaining share in Vistancia, LLC, the Company is an effective 10% guarantor on these bond obligations. At June 30, 2012 and December 31, 2011, the Company exceeded the minimum tangible net worth requirement. In certain consolidated homebuilding projects, we have contractual obligations to purchase and receive water system connection rights which, at June 30, 2012 and December 31, 2011, were $36.7 million. These water system connection rights are held and then transferred to homebuyers upon closing of their home or transferred upon sale of land to the respective buyer. These water system connection rights can also be sold or leased but generally only within the local jurisdiction. As described in Note 14, in 2009, we filed a petition with the Tax Court regarding our position on the completed contract method for homebuilding activities. The Tax Court heard trial testimony in July 2012 and has ordered the Company and the IRS to exchange briefs. We expect the matter to be submitted for decision to the Tax Court by the end of November 2012. We expect our position to prevail, and accordingly, no liability for related taxes or interest has been recorded. However, if the Tax Court rules in favor of the IRS, SHI could be obligated to pay the IRS and applicable state taxing authorities up to $61 million and SHLP could be obligated to make a distribution to the Partners up to $104 million to fund their related payments to the IRS and the applicable state taxing authorities.

16. Contingencies and Commitments

Lawsuits, claims and proceedings have been or may be instituted or asserted against us in the normal course of business, including actions brought on behalf of various classes of claimants. We are also subject to local, state and federal laws and regulations related to land development activities, house construction standards, sales practices, employment practices and environmental protection. As a result, we are subject to periodic examinations or inquiry by agencies administering these laws and regulations.

We record a reserve for potential legal claims and regulatory matters when they are probable of occurring and a potential loss is reasonably estimable, and are based on specific facts and circumstances, and we revise these estimates when necessary. At June 30, 2012 and December 31, 2011, we had reserves of $7.1 million and $5.8 million, respectively, net of expected recoveries, relating to these claims and matters, and while their outcome cannot be predicted with certainty, we believe we have appropriately reserved for them. However, if the liability arising from their resolution exceeds their recorded reserves, we could incur additional charges that could be significant.

Due to the inherent difficulty of predicting outcomes of legal claims and related contingencies, we generally cannot predict their ultimate resolution, related timing or eventual loss. If our evaluations indicate loss contingencies that could be material are not probable, but are reasonably possible, we will disclose their nature with an estimate of possible range of losses or a statement that such loss is not reasonably estimable. At June 30, 2012, the range of reasonably possible losses in excess of amounts recorded was not material.

At June 30, 2012 and December 31, 2011, in addition to guarantees on our joint venture’s outstanding borrowings, an unconditional loan-to-value maintenance guarantee was provided, on a joint and several basis, for a secured development loan for Baker Ranch, a related party in which we have no ownership interest (see Note 9). At June 30, 2012 and December 31, 2011, the loan had a $25.4 million outstanding principal balance. A liability was not recorded for this guarantee as the fair value of the secured real estate assets exceeded the outstanding notes payable.

At December 31, 2011, joint and several non-recourse (“bad boy”) guarantees were provided for two secured permanent financing loans of related parties in which we have no ownership interest. The bad boy guarantee may become a liability for us upon a voluntary bankruptcy filing by the related party borrower or occurrence of other “bad” acts, including fraud or a material misrepresentation by the related party borrower. At December 31, 2011, these loans had a $34.1 million outstanding principal balance. In February 2012 and June 2012, these loans matured and we were released as a guarantor.

On May 10, 2011, concurrent with issuance of the Secured Notes, we entered into a new $75.0 million letter of credit facility. At June 30, 2012 and December 31, 2011, outstanding letters of credit against the letter of credit facility were $4.2 million and $4.2 million, respectively.

We are required to provide surety bonds that guarantee completion of certain infrastructure serving our homebuilding projects. At June 30, 2012, we had a $68.7 million exposure in connection with $169.0 million of surety bonds issued for our projects. At December 31, 2011, we had a $71.0 million exposure in connection with $178.4 million of surety bonds issued for our projects.

We also provided indemnification for bonds issued by unconsolidated joint ventures and other related party projects in which we have no ownership interest. At June 30, 2012, we had a $29.3 million exposure in connection with $69.0 million of surety bonds issued for unconsolidated joint venture projects, and a $2.3 million exposure in connection with $6.2 million of surety bonds issued for related party projects. At December 31, 2011, we had a $29.3 million exposure in connection with $69.0 million of surety bonds issued for unconsolidated joint venture projects, and a $3.1 million exposure in connection with $6.9 million of surety bonds issued for related party projects.

Certain of our consolidated and joint ventures’ homebuilding projects utilize, and may continue to utilize, community facility district, metro-district and other local government bond financing programs to fund construction or acquisition of infrastructure improvements. Interest and principal on these bonds are typically paid from taxes and assessments levied on homeowners following the sale of new homes within the project. We have also entered into credit support arrangements where we make interest and principal payments on these bonds if the taxes and assessments levied on homeowners are insufficient to cover such obligations. Furthermore, reimbursement of these payments to us is dependent on the district or local government’s ability to generate sufficient tax and assessment revenues from the sale of new homes.

In December 2011, Vistancia, LLC, a consolidated joint venture, sold its remaining interest in an unconsolidated joint venture. As a condition of sale, the Company effectively remained an 8.33% guarantor on certain community facility district bond obligations to which the Company must meet a calculated tangible net worth; otherwise, the Company is required to fund collateral to the bond issuer. In May 2012, as a result of the Company purchasing the non-controlling interest’s remaining share in Vistancia, LLC, the Company is an effective 10% guarantor on these bond obligations. At June 30, 2012 and December 31, 2011, the Company exceeded the minimum tangible net worth requirement.

In certain consolidated homebuilding projects, we have contractual obligations to purchase and receive water system connection rights which, at June 30, 2012 and December 31, 2011, were $36.7 million. These water system connection rights are held and then transferred to homebuyers upon closing of their home or transferred upon sale of land to the respective buyer. These water system connection rights can also be sold or leased but generally only within the local jurisdiction.

As described in Note 14, in 2009, we filed a petition with the Tax Court regarding our position on the completed contract method for homebuilding activities. The Tax Court heard trial testimony in July 2012 and has ordered the Company and the IRS to exchange briefs. We expect the matter to be submitted for decision to the Tax Court by the end of November 2012. We expect our position to prevail, and accordingly, no liability for related taxes or interest has been recorded. However, if the Tax Court rules in favor of the IRS, SHI could be obligated to pay the IRS and applicable state taxing authorities up to $61 million and SHLP could be obligated to make a distribution to the Partners up to $104 million to fund their related payments to the IRS and the applicable state taxing authorities.