Commitments and Contingencies

Legal Proceedings

We are involved in various claims and litigation arising principally in the ordinary course of business. We believe that adequate provision for resolution of all current claims and pending litigation has been made and that the disposition of these matters will not have a material adverse effect on our results of operations and liquidity or on our financial condition.

In April 2017, the SEC informed the Company that it was conducting an investigation and requested that we voluntarily produce documents and information relating to our estimated repair costs for stucco and other water intrusion claims in fiscal 2016. The Company produced detailed information and documents in response to this request and, in the fourth quarter of fiscal 2018, the SEC notified the Company that it had concluded its investigation without action. See Note 7 – “Accrued Expenses” for additional information regarding these warranty charges.

In March 2018, the Pennsylvania Attorney General informed the Company that it was conducting a review of our construction of stucco homes in Pennsylvania after January 1, 2005 and requested that we voluntarily produce documents and information. The Company is producing documents and information in response to this request. Management cannot at this time predict the eventual scope or outcome of this matter.

Land Purchase Commitments

Generally, our purchase agreements to acquire land parcels do not require us to purchase those land parcels, although we, in some cases, forfeit any deposit balance outstanding if and when we terminate a purchase agreement. If market conditions are weak, approvals needed to develop the land are uncertain, or other factors exist that make the purchase undesirable, we may choose not to acquire the land. Whether a purchase agreement is legally terminated or not, we review the amount recorded for the land parcel subject to the purchase agreement to determine whether the amount is recoverable. While we may not have formally terminated the purchase agreements for those land parcels that we do not expect to acquire, we write off any nonrefundable deposits and costs previously capitalized to such land parcels in the periods that we determine such costs are not recoverable.

Information regarding our land purchase commitments at October 31, 2018 and 2017, is provided in the table below (amounts in thousands):



	2018		2017
Aggregate purchase commitments:
Unrelated parties	$	2,404,660	$	1,986,276
Unconsolidated entities that the Company has investments in	128,235		248,801
Total	$	2,532,895	$	2,235,077
Deposits against aggregate purchase commitments	$	168,421	$	97,706
Credits to be received from unconsolidated entities	79,168		134,630
Additional cash required to acquire land	2,285,306		2,002,741
Total	$	2,532,895	$	2,235,077
Amount of additional cash required to acquire land included in accrued expenses	$	40,103	$	4,329

In addition, we expect to purchase approximately 2,700 additional home sites over a number of years from several joint ventures in which we have investments; the purchase prices of these home sites will be determined at a future date.

At October 31, 2018, we also had purchase commitments to acquire land for apartment developments of approximately $272.6 million, of which we had outstanding deposits in the amount of $13.2 million.

We have additional land parcels under option that have been excluded from the aforementioned aggregate purchase amounts since we do not believe that we will complete the purchase of these land parcels and no additional funds will be required from us to terminate these contracts.

Investments in Unconsolidated Entities

At October 31, 2018, we had investments in a number of unconsolidated entities, were committed to invest or advance additional funds, and had guaranteed a portion of the indebtedness and/or loan commitments of these entities. See Note 4, “Investments in Unconsolidated Entities,” for more information regarding our commitments to these entities.

Surety Bonds and Letters of Credit

At October 31, 2018, we had outstanding surety bonds amounting to $692.9 million, primarily related to our obligations to governmental entities to construct improvements in our communities. We estimate that $342.2 million of work remains on these improvements. We have an additional $160.2 million of surety bonds outstanding that guarantee other obligations. We do not believe it is probable that any outstanding bonds will be drawn upon.

At October 31, 2018, we had outstanding letters of credit of $165.4 million under our Revolving Credit Facility. These letters of credit were issued to secure our various financial obligations, including insurance policy deductibles and other claims, land deposits, and security to complete improvements in communities in which we are operating. We do not believe that it is probable that any outstanding letters of credit will be drawn upon.

Backlog

At October 31, 2018, we had agreements of sale outstanding to deliver 6,105 homes with an aggregate sales value of $5.52 billion.

Mortgage Commitments

Our mortgage subsidiary provides mortgage financing for a portion of our home closings. For those home buyers to whom our mortgage subsidiary provides mortgages, we determine whether the home buyer qualifies for the mortgage based upon information provided by the home buyer and other sources. For those home buyers who qualify, our mortgage subsidiary provides the home buyer with a mortgage commitment that specifies the terms and conditions of a proposed mortgage loan based upon then-current market conditions. Prior to the actual closing of the home and funding of the mortgage, the home buyer will lock in an interest rate based upon the terms of the commitment. At the time of rate lock, our mortgage subsidiary agrees to sell the proposed mortgage loan to one of several outside recognized mortgage financing institutions (“investors”) that is willing to honor the terms and conditions, including interest rate, committed to the home buyer. We believe that these investors have adequate financial resources to honor their commitments to our mortgage subsidiary.

Information regarding our mortgage commitments at October 31, 2018 and 2017, is provided in the table below (amounts in thousands):



	2018		2017
Aggregate mortgage loan commitments:
IRLCs	$	614,255	$	350,740
Non-IRLCs	1,329,674		1,146,872
Total	$	1,943,929	$	1,497,612
Investor commitments to purchase:
IRLCs	$	614,255	$	350,740
Mortgage loans receivable	163,208		125,710
Total	$	777,463	$	476,450

Lease Commitments

We lease certain facilities and equipment under non-cancelable operating leases. Rental expenses incurred by us under these operating leases were (amounts in thousands):



Year ending October 31,	Amount
2018	$	15,783
2017	$	14,505
2016	$	12,584

At October 31, 2018, future minimum rent payments under our operating leases were (amounts in thousands):



Year ending October 31,	Amount
2019	$	12,712
2020	7,727
2021	5,843
2022	3,883
2023	1,824
Thereafter	1,682
	$	33,671

Subsequent event

In December 2018, we signed a 16-year lease agreement to lease approximately 163,000 square feet of office space in Fort Washington, Pennsylvania for our new corporate headquarters. The terms of the lease require annual minimum lease payments starting at $2.8 million which escalate throughout the lease term. The lease for our current headquarters expires in October 2019. The new headquarters is located approximately four miles from our current headquarters.