Toll Brothers, Inc.TOL
Toll Brothers, Inc. Commitments Disclosure
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.
Land Purchase Contracts
Generally, our 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 an 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 contracts at October 31, 2025 and 2024, is provided in the table below (amounts in thousands):
| 2025 | 2024 | ||||||||||
| Aggregate purchase price: | |||||||||||
| Unrelated parties | $ | 7,433,042 | $ | 6,073,847 | |||||||
| Unconsolidated entities that the Company has investments in | 111,295 | 26,783 | |||||||||
| Total | $ | 7,544,337 | $ | 6,100,630 | |||||||
| Deposits against aggregate purchase price | $ | 744,500 | $ | 549,195 | |||||||
| Additional cash required to acquire land | 6,799,837 | 5,551,435 | |||||||||
| Total | $ | 7,544,337 | $ | 6,100,630 | |||||||
| Amount of additional cash required to acquire land included in accrued expenses | $ | 749,974 | $ | 382,277 | |||||||
In addition, we expect to purchase approximately 8,800 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, 2025, we also had similar purchase contracts to acquire land for apartment developments of approximately $326.2 million, of which we had outstanding deposits in the amount of $14.7 million. As previously discussed, in September 2025, we entered into an agreement with Kennedy Wilson to sell our interests in approximately half of our Apartment Living portfolio, which includes substantially all of these purchase contracts.
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, 2025, 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 3, “Investments in Unconsolidated Entities,” for more information regarding our commitments to these entities.
Surety Bonds and Letters of Credit
At October 31, 2025, we had outstanding surety bonds amounting to $770.1 million, primarily related to our obligations to governmental entities to construct improvements in our communities. We have an additional $366.7 million of surety bonds outstanding that guarantee other obligations. Although significant construction and development activities have been completed related to these improvements, the bonds are generally not released until all construction and development activities are completed and acceptance by the counterparty is received. The aggregate amount of surety bonds outstanding is in excess of the estimated cost of the remaining work to be performed. We do not believe that it is probable that any outstanding bonds will be drawn upon.
At October 31, 2025, we had outstanding letters of credit of $155.9 million under our Revolving Credit Facility and $36.7 million under other letter of credit facilities. 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.
At October 31, 2025, we had provided financial guarantees of $57.0 million related to fronted letters of credit to secure obligations related to certain of our insurance policy deductibles and other claims.
Backlog
Backlog consists of homes under contract but not yet delivered to our home buyers (“backlog”). At October 31, 2025, we had agreements of sale outstanding to deliver 4,647 homes with an aggregate sales value of $5.49 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.
Mortgage loans are sold to investors with limited recourse provisions derived from industry-standard representations and warranties in the relevant agreements. These representations and warranties primarily involve the absence of misrepresentations by the borrower or other parties, the appropriate underwriting of the loan and in some cases, a required minimum number of payments to be made by the borrower. The Company generally does not retain any other continuing interest related to mortgage loans sold in the secondary market.
Information regarding our mortgage commitments at October 31, 2025 and 2024, is provided in the table below (amounts in thousands):
| 2025 | 2024 | ||||||||||
| Aggregate mortgage loan commitments: | |||||||||||
| IRLCs | $ | 188,031 | $ | 168,829 | |||||||
| Non-IRLCs | 1,447,468 | 1,668,455 | |||||||||
| Total | $ | 1,635,499 | $ | 1,837,284 | |||||||
| Investor commitments to purchase: | |||||||||||
| IRLCs | $ | 188,031 | $ | 168,829 | |||||||
| Mortgage loans receivable | 194,076 | 182,834 | |||||||||
| Total | $ | 382,107 | $ | 351,663 | |||||||
Lease Commitments
We lease certain facilities, equipment, and properties held for rental apartment operation or development under non-cancelable operating leases which, in the case of certain rental properties, have an initial term of 99 years. We recognize lease expense for these leases on a straight-line basis over the lease term. Right-of-use (“ROU”) assets and lease liabilities are recorded on the balance sheet for all leases with an expected term over one year. A majority of our facility lease agreements include rental payments based on a pro-rata share of the lessor’s operating costs which are variable in nature. Our lease agreements do not contain any residual value guarantees or material restrictive covenants.
ROU assets are classified within “Receivables, prepaid expenses, and other assets” and the corresponding lease liability is included in “Accrued expenses” in our Consolidated Balance Sheets. We elected the short-term lease recognition exemption for all leases that, at the commencement date, have a lease term of 12 months or less and do not include an option to purchase the underlying asset that we are reasonably certain to exercise. For such leases, we do not recognize ROU assets or lease liabilities and instead recognize lease payments in our Consolidated Statements of Operations and Comprehensive Income on a straight-line basis. At October 31, 2025, ROU assets and lease liabilities were $109.0 million and $128.3 million, respectively. At October 31, 2024, ROU assets and lease liabilities were $108.3 million and $128.6 million, respectively. Payments on lease liabilities totaled $25.6 million, $22.5 million, and $20.2 million for the years ending October 31, 2025, 2024, and 2023 respectively.
Lease expense includes costs for leases with terms in excess of one year as well as short-term leases with terms of one year or less. For the fiscal years ending October 31, 2025, 2024, and 2023, our total lease expense was $26.4 million, $24.3 million, and $27.1 million, respectively, inclusive of variable lease costs of approximately $4.2 million, $4.1 million, and $4.2 million, respectively. Short-term lease costs and sublease income was de minimis.
Information regarding our remaining lease payments as of October 31, 2025 is provided in the table below (amounts in thousands):
| Year ended October 31, | ||||||||
| 2026 | $ | 25,400 | ||||||
| 2027 | 22,000 | |||||||
| 2028 | 19,000 | |||||||
| 2029 | 16,800 | |||||||
| 2030 | 11,200 | |||||||
| Thereafter | 137,800 | |||||||
Total lease payments (1) | 232,200 | |||||||
Less: Interest (2) | 103,900 | |||||||
Present value of lease liabilities (3) | $ | 128,300 | ||||||
(1) Lease payments include options to extend lease terms that, at inception, are reasonably certain of being exercised.
(2) Our leases do not provide a readily determinable implicit rate. Therefore, we estimate our discount rate for such leases to determine the present value of lease payments at the lease commencement date.
(3) Excludes $46.6 million of lease liabilities that have been classified within “Liabilities related to assets held for sale” on our Consolidated Balance Sheet as of October 31, 2025 that mature as follows: $1.0 million in 2026, $1.7 million in 2027, $1.6 million in 2028, $1.8 million in 2029, $2.1 million in 2030, and $831.3 million thereafter for total future lease liabilities of $839.5 million and $792.9 million of discounted interest.
The majority of our facility leases give us the option to extend the lease term. The exercise of lease renewal options is at our discretion. For several of our facility leases we are reasonably certain at inception the option will be exercised and thus the renewal term has been included in our calculation of the ROU asset and lease liability. The weighted average remaining lease term and weighted average discount rate used in calculating these facility lease liabilities, excluding our land leases, were 6.6 years and 5.4%, respectively, at October 31, 2025 and 7.2 years and 5.9%, respectively, at October 31, 2024.
We have a small number of land leases with initial terms of 99 years. We are not reasonably certain that, if given the option, we would extend these leases. We have therefore excluded the renewal terms from our ROU asset and lease liability for these leases. The weighted average remaining lease term and weighted average discount rate used in calculating these land lease liabilities were 92.4 years and 4.5%, respectively, at October 31, 2025 and 93.4 years and 4.5%, respectively, at October 31, 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 19, 2025 | Showing above |
| 2024 | Dec 20, 2024 | |
| 2023 | Dec 21, 2023 | |
| 2022 | Dec 19, 2022 | |
| 2021 | Dec 17, 2021 | |
| 2020 | Dec 22, 2020 | |
| 2019 | Dec 26, 2019 | |
| 2018 | Dec 20, 2018 | |
| 2017 | Dec 21, 2017 | |
| 2016 | Dec 23, 2016 | |
| 2015 | Dec 21, 2015 | |
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.