17.	Commitments and Contingencies

Surety Bonds and Letter

of Credit.

We are required to obtain surety bonds and letters of credit in support of our obligations for land development and subdivision improvements, homeowner association dues, warranty work, contractor license fees and earnest money deposits. At

December 31, 2018,

we had outstanding surety bonds and letters of credit totaling

$227.5

million

and

$90.5

million, respectively, including

$62.6

million in letters of credit issued by HomeAmerican. The estimated cost to complete obligations related to these bonds and letters of credit were approximately

$104.6

million and

$41.3

million, respectively. All letters of credit as of

December 31, 2018,

excluding those issued by HomeAmerican, were issued under our unsecured Revolving Credit Facility (see Note

for further discussion of the Revolving Credit Facility). We expect that the obligations secured by these performance bonds and letters of credit generally will be performed in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the obligations are performed, the related performance bonds and letters of credit should be released and we should

not

have any continuing obligations. However, in the event any such performance bonds or letters of credit are called, our indemnity obligations could require us to reimburse the issuer of the performance bond or letter of credit.

We have made

material guarantees with respect to

third

-party obligations.

Litigation Reserves

Because of the nature of the homebuilding business, we have been named as defendants in various claims, complaints and other legal actions arising in the ordinary course of business, including product liability claims and claims associated with the sale and financing of homes. In the opinion of management, the outcome of these ordinary course matters will

not

have a material adverse effect upon our financial condition, results of operations or cash flows. At

December 31, 2018

and

2017,

respectively, we had

$1.6

million and

$2.7

million of legal accruals.

Operating Leases.

We have non-cancellable operating leases primarily associated with our office facilities. Rent expense under cancellable and non-cancellable operating leases totaled

$7.4

million,

$7.1

million and

$5.4

million in

2018,

2017

and

2016,

respectively, and is included in either selling, general and administrative expenses in the homebuilding section or expenses in the financial services section of our consolidated statements of operations and comprehensive income. The table below shows the future minimum payments under non-cancellable operating leases at

December 31, 2018.

	Year Ended
	December 31,
	(Dollars in
	thousands)
2019	$	6,587
2020		5,757
2021		5,630
2022		5,580
2023		5,148
Thereafter		13,118
Total	$	41,820

Lot Option Contracts

. In the ordinary course of business, we enter into lot option purchase contracts (“Option Contracts”), generally through a deposit of cash or a letter of credit, for the right to purchase land or lots at a future point in time with predetermined terms. The use of such land option and other contracts generally allow us to reduce the risks associated with direct land ownership and development, reduces our capital and financial commitments, and minimizes the amount of land inventories on our consolidated balance sheets. In certain cases, these contracts will be settled shortly following the end of the period. Our obligation with respect to Option Contracts is generally limited to forfeiture of the related deposits. At

December 31, 2018,

we had cash deposits and letters of credit totaling

$21.9

million and

$7.0

million, respectively, at risk associated with options to purchase

6,890

lots.