Bulletin: TX000021

Dear Associates:

The following are new Texas Laws that affect real property transactions.

If you wish more detailed written explanations of the 1993 Legislative Developments, please call our national legal department.

Real Estate Curative Legislation

Technical Title Defects. House Bill 1143. Effective 9-1-93.

This bill provides that certain technical title defects are cured after four years. Those defects include lack of record authority of a partner, company officer, manager or member to convey, and lack of a correct acknowledgment or jurat.

Release of Mortgage. House Bill 1144. Effective 8-30-93.

This bill allows title insurance company officers to execute affidavits that release mortgages on one-to-four family property. One-to-four family property includes residential condominium units. A title insurance agent may not execute this affidavit. The affidavit must state:

• the affiant is an officer of the title insurance company;
  
  
• the affidavit is made on behalf of the mortgagor or transferee;
  
  
• the mortgagee provided a payoff statement (a copy must be attached);
  
  
• the affiant determined the mortgagee received payment by documentary evidence such as a check negotiated by the mortgagee (a copy must be attached);
  
  
• more than 60 days have passed since payment was received by the mortgagee;
  
  
• the title insurance company or its agent gave the mortgagee at least 15 days notice in writing of intent to execute and record the affidavit, with a copy of the affidavit attached to the notice;
  
  
• the mortgagee has not responded to the notification;
  
  
• the affidavit must state the names of the mortgagor and the mortgagee, date of the mortgage, volume and page of clerk's number of the mortgage, and information regarding any recorded assignment.

The mortgagee includes a mortgage servicer. A mortgage servicer is the last person to whom the mortgagor has been instructed by the mortgagee to send payments. The person transmitting a payoff statement is considered the mortgage servicer.

Company Policy: You may rely upon an affidavit by a title insurance company officer as a release if (1) the land is one-to-four family residential property; (2) the affidavit complies with the above requirements and attaches the proof of payment (e.g., canceled checks) and the written payoff statement.

If you wish for Stewart Title Guaranty Company to execute the affidavit, please contact Richard Black, George Barnett, or Robert Doshier.

Failed Depository Institutions. House Bill 1149. Effective 8-30-93.

A person may record an affidavit or memorandum of the purchase and assumption or acquisition agreement between the receiver or conservator of a failed depository institution and another depository institution. The affidavit is notice of the transfer. This bill validates affidavits that were recorded in lieu of deeds from FSLIC, FDIC or RTC as receiver of a failed institution to a new institution. The affidavit or memorandum should attach the acquisition agreement. You should review the agreement to verify that all real property and other assets (except stated assets) were sold. The affidavit or memorandum does not have to recite special personal knowledge by the person or that the person was acting on behalf of FSLIC, FDIC or RTC.

Property Code Revisions. House Bill 1300. Effective 9-1-93.

A homestead designation must state the current record title holder. The notice of foreclosure sale must state the earliest time the sale will begin. The entire calendar date of the mailing of the notice of default is included in calculating the 20 day (residence) notice. The entire day of mailing of the notice of sale is included in calculating the 21 day notice of foreclosure.

Bankruptcy Discharge. House Bill 1876. Effective 9-1-93.

A bankruptcy discharge automatically releases a judgment lien provided:

• The debt is discharged in the bankruptcy. The creditor must be scheduled. The docket sheet must not reflect that the creditor successfully contested a discharge of that creditor's debt. Do not rely upon the discharge to extinguish the judgment lien if the judgment lien is to the government, or child support, for an award because of death or injury from a DWI, or in favor of a federal depository institution taken over by FDIC or RTC. Some of these debts are not dischargeable.
  
  
• The judgment lien does not attach to land acquired after the bankruptcy proceeding is filed if the debt is discharged.
  
  
• The judgment lien is extinguished as to land acquired before the bankruptcy if the debt is scheduled in the bankruptcy, and is exempt or is otherwise dealt with in the bankruptcy. The lien is not extinguished if the property is abandoned.

This law does not apply to judgment liens filed before September 1, 1993. For those liens you must require a bankruptcy court order under Section 522 (f) of the Bankruptcy Code (removing the judgment lien against homestead property) or a state court order under Section 52.024 of the Property Code removing the judgment lien.

Unlocated Plaintiff and Judgment Lien. House Bill 49. Effective 8-30-93.

The defendant in a judgment must properly notify the plaintiff's attorney if the plaintiff in a judgment cannot be located. After proper notice attempted on the plaintiff and plaintiff's attorney, the defendant can pay the judgment to the court. The clerk or the judge of the court may then execute a release. This bill applies the law to judgments rendered before, on ,or after September 1, 1991.

Escrow and Closing Matters

Money Laundering. House Bill 354. Effective 9-1-93.

A person required to report under the Currency and Foreign Transactions Reporting Act or to report receipt of more than $10,000 in cash must file a duplicate report with the Texas Attorney General if the Attorney General provides written request for copies. Until you receive written notice from the Attorney General, you do not need to file duplicates.

Durable Power of Attorney. Senate Bill 176. Effective 9-1-93.

This Act applies only to powers of attorney executed on or after September 1, 1993.

The power of attorney must state "this power of attorney is not affected by subsequent disability or incapacity of the principal" or "this power of attorney becomes effective on the disability or incapacity of the principal" or similar words.

The durable power of attorney must be acknowledged and recorded in the county where the land is located. The new durable power of attorney does not have to be recorded in the county of the principal's residence or have two witnesses.

The durable power of attorney is effective as to purchasers who in good faith rely on the power of attorney and an affidavit executed by the attorney-in-fact that the power has not terminated by revocation, principal's death, or guardianship.

The Act creates a new statutory durable power of attorney form. If the principal elects all powers or elects simply "real property transactions", the agent may sell and convey real estate. The selection of "banking and other financial institution transactions" authorizes the agent to borrow money and pledge real property.

The powers under a statutory power of attorney form may be exercised equally with respect to land owned at the date of the execution of the power of attorney or later acquired.

If you are furnished a new statutory durable power of attorney or a new durable power of attorney otherwise complying with the Act, you should verify within one week prior to the closing of the real estate transaction, by contacting the principal that the principal is alive, apparently competent and has not revoked the power. You should require an affidavit from the agent that the power of attorney remains in effect.

Real Estate Sales

Contract Forfeiture. House Bill 452. Effective 9-1-93.

The notice of forfeiture of a contract to convey real estate to be used as a residence of the purchaser must include the delinquent amount, itemized as principal and interest, additional charges, and the period to which the delinquency charges relate. A subsequent bona fide purchaser may rely upon the affidavit regarding forfeiture of the contract if the stated time to avoid the forfeiture has passed and the prior purchaser is not in possession.

Seller Disclosure. House Bill 1081. Effective 1-1-94.

A seller of a single family dwelling must give the buyer a "Seller's Disclosure Notice". This notice related to the condition of the property. If the seller does not deliver the notice on or before the effective date of the contract, the buyer may terminate the contract for any reason within seven days after receiving the notice. The bill does not apply to various transfers such as a foreclosure, sale by bankruptcy trustee, sale by mortgagee after foreclosure, sale by an estate fiduciary, or sale of new residence not previously occupied.

When the law requires this disclosure, you should verify that the disclosure was attached to the contract. If the disclosure was not attached to the contract, you should require the following in Schedule C of the commitment.

"Company requires that seller and buyer (1) acknowledge that the Seller's Disclosure Notice required by Section 5.008 of the Property Code has been given, and (2) furnish Company evidence that seven days have passed since the buyer has received the notice."

Do not explain or provide the notice form.

Continuing Care Contracts

Continuing Care Contracts. House Bill 2389. Effective 9-1-93.

This bill relates to continuing care contracts and continuing care retirement communities. A continuing care contract requires payment of an entrance fee in exchange for continuing care of a resident for life or for more than one year. A lien attaches to the real estate to secure the obligations of the provider under a contract from the date a resident first occupies the facility. The lien is subordinate to a lien to (1) construct, acquire, replace or improve the facility, or (2) refinance an earlier loan to construct, acquire, replace or improve the facility. The provider must record a written notice in each county where it has a facility.

If you insure any facility which may be a continuing care facility, add the following exception:

"Rights of resident, members or patients under applicable agreements, contracts or law, including any statutory lien or reimbursement rights of such residents, members or patients in connection with such agreements, contracts or applicable law."

For a list of licensed continuing care retirement communities, please call the National Legal Department in Houston.

Condominiums

Condominiums. House Bill 156. Effective 1-1-94.

This Act is the Uniform Condominium Act. It applies to condominiums for which a declaration is recorded on or after January 1, 1994 and prior condominiums electing to have it apply. Some provisions also apply to prior condominiums.

The condominium description must contain the name of the condominium, the recording data for the declaration including any amendments, plats and plans, the county where located, and the identifying number of the unit.

A declaration may allow relocation of boundaries of adjoining units. The declaration may expressly permit a unit to be subdivided. Taxes are separately assessed against each unit.

The declaration may describe development rights (for example, right to add land, to create units, to subdivide units, to convert units into common elements, or to withdraw land). The declaration may describe special declarant rights (for example, to complete improvements on the plat, to exercise development rights, to make a condominium part of a larger condominium, to appoint or remove officers or board members during declarant control) and a time limit for the rights.

The plat must label improvements as "must be built" or "need not be built" if not yet complete.

The association lien of new and old condominiums may include assessments, interest, late charges, and reasonable fines for violations. The association lien has priority over mortgages except a first vendor's lien or deed of trust or a construction loan on the unit recorded before the assessment is delinquent. The lien cannot be foreclosed solely for fines. Separate recordation of the association assessment lien is not required unless the declaration provides otherwise. The lien may be enforced pursuant to Section 51.002 of the Property Code. If the association buys at foreclosure, the owner of a unit used for residential purposes may redeem for 90 days after sale. The association shall notify a holder of a recorded lien of intent to foreclose or of default if the lienholder makes a written request.

Company Policy: When excepting to the assessment lien in favor of the association you may insure that the association's assessment lien is subordinate to the insured mortgage if; (1) the declaration provides that it is subordinate; and (2) the mortgage is a first lien on the unit. We prefer that you add the following language if you insure the assessment lien as subordinate: "As to assessments due and payable prior to the foreclosure of said mortgage, Company insures the insured against loss, if any, sustained by the insured under the terms of the policy if this item is not subordinate to the lien of the insured mortgage.

Do not insure a foreclosure of an association's assessment lien unless you secure underwriter approval.

Government Regulation

Unfit Buildings. House Bill 333. Effective 9-1-93.

This bill relates to municipal regulation of dangerous and abandoned buildings. A notice of proceeding before commission panels may be filed in the real property records. A municipality or commission panel conducting a hearing on an unfit building may file a notice in the real property records. You should except to the notice even if the proceeding is dismissed or completed.

Weed Cutting Lien. House Bill 825. Effective 8-30-93.

A municipality may assess expenses for sanitation violations against the owner of the land. The lien attaches upon filing. The lien has priority over previous mortgages.

Boll Weevil Lien. House Bill 1933. Effective 8-30-93.

The agriculture department may place a lien against property for destruction of boll weevils and pink boll worms. The lien is subordinate to rights of prior bona fide purchasers or lienholders.

Closed Municipal Solid Waste Facilities. House Bill 2537. Effective 9-1-93.

Local government officials, owners, and council of governments must file or initiate filing of a notice if land is located over a closed municipal solid waste facility. You should except to any notice that appears in your chain.

Well Plugging and Cleanup. House Bill 2705. Effective 1-1-94.

The commission must file a notice relating to the plugging of a well in the county clerk's office. You should except to any notice that may apply to your land.

Swimming Pool Enclosures. Senate Bill 170. Effective 9-1-93.

Municipalities may file a lien for repair of swimming pool enclosures. The lien is subordinate to previously recorded bona fide mortgage liens.

Coastal Land Notice and Land Lien. Senate Bill 964. Effective 9-1-93.

A person selling land adjoining tidally influenced water of the state must provide a new, additional notice with the contract. This is the "Notice regarding coastal area property". If there is no executory contract, the grantor must deliver the notice to the grantee before the conveyance is recorded. If the notice is not included with the contract, the purchaser may terminate the contract and receive the deposit. This notice does not replace the notice under Section 61.025 of the Natural Resources Code (for land seaward of Gulf Intercoastal Waterway and Brownsville Ship Channel).

If the commissioner elects to accept structure located on state land the state may file a notice in the real property records where the structure is located.

The commissioner may remove an encroaching structure and attach a lien to adjacent littoral property. The lien is subordinate to rights of prior bona fide purchasers or lienholders.

Waste Tire Lien. Senate Bill 1051. Effective 8-30-93.

The commission may file a lien against a site that contains scrap tires. The lien is subordinate to the rights of prior bona fide purchasers or lienholders.

County Records

Noncertified Copies. House Bill 2749. Effective 9-1-93.

A county clerk shall charge $1 for each page for noncertified pages.

Print Size. House Bill 2750. Effective 8-30-93.

An instrument must be printed in type no smaller than eight point type (example: this is 8 point type). Failure to comply does not result in a fee increase. Failure to comply does not invalidate an instrument and upon recordation the instrument is deemed as fully complying with the provisions of law dealing with the recordation of instruments of every type or character.

Certified Copies. House Bill 2751. Effective 9-1-93.

The fee for certified copies is $5.00 for the clerk's certificate placed on each page plus $1.00 fee for each page. The certificate must appear on each page.

Taxes and Charges

Habitat for Humanity. House Bill 1096. Effective 1-1-94.

Organizations such as Habitat for Humanity may receive real estate tax exemption. If the charitable organization built a house primarily with volunteer labor to sell without profit to low income individuals, the tax exemption may apply. The maximum exemption is three years. If the buyer is not low income, a penalty equal to the taxes plus 12% interest is imposed and a tax lien is imposed on the land. Taxes are prorated if only owned for a portion of the year.

Homestead Qualifying Trust. House Bill 2813. Effective 1-1-94.

The homestead tax exemption continues in a residence conveyed to a qualifying trust. The qualifying trust must provide that a trustor may use and occupy the residence free except for taxes and expenses for life, a term of years, or until revoked or terminated.

Tax Sale Redemption. Senate Bill 355. SJR 19. Effective 1-1-94 if approved by vote 11-2-93.

The rights of redemption from a tax sale remains 2 years for the residence homestead or land designated for agricultural use. The right of redemption for other land is reduced to six months after the purchaser's deed is filed. The cost of redemption on other land is the amount of taxes, penalty, interest, costs, and 25% of the aggregate total. The bill applies only to a tax deed recorded on or after January 1, 1994.

Probates

Small Estates. House Bill 245. Effective 9-1-93.

This bill allows the small estates affidavit to evidence transfer of title to a homestead. The distributee must file the affidavit sworn by two disinterested persons and by the distributees that have legal capacity. The court may approve the affidavit if it complies with the law. The affidavit may not be filed until 30 days after the death of the decedent and unless the value of the entire estate, exclusive of exempt property, does not exceed $50,000. The affidavit must be recorded in the deed records. A bona fide purchaser takes free of an undisclosed heir's rights.

Decedent's Estates. House Bill 1200. Effective 9-1-93.

Community property passes on intestacy to the surviving spouse if all surviving children and descendants of the deceased spouse also are children of the surviving spouse.

Informal Probate. Senate Bill 479. Effective 9-1-93.

The Act authorizes "informal probate" of a will. The application must show that (1) 30 days have elapsed after death of the testator; (2) all debts are satisfied, properly secured or all creditors have received notice of the filing; (3) the total gross fair market value not including exempt property does not exceed $50,000; (4) the court has venue; (5) the will has not been revoked; (6) no person named in the will has objected to informal probate. Limited letters testamentary may be issued to transfer title to assets of the estate described in the inventory. The letters must identify the assets subject to transfer. Letters are effective for 1 year.