Bulletin: TX2023002

Dear Associates:

HB 207 is effective as of September 1, 2023. It amends Subchapter A, Chapter 41, Property Code, by adding Section 41.0022. This amendment creates an exclusion of specific conveyances from a pretended sale classification of potentially homestead property when the conveyance involves a conveyance from an individual to their related entity as prescribed in the Property Code, Section 41.0022.

A summary of the Section 41.0022 amendment is below: 

A conveyance of a parcel that does not meet the definition of an urban homestead under Section 41.002(a) or (c) by an individual to an entity in which the individual or individual’s spouse has a direct or indirect ownership interest is not a sham or pretended sale, including a pretended sale under Section 50(c), Article XVI, Texas Constitution, if:

1. the deed conveying the parcel is recorded at least 30 days before the entity grants a mortgage, trust deed, or other lien on the parcel;
2. the individual does not reside on the parcel at the time of the conveyance;
3. the parcel is not contiguous to the parcel on which the individual resides;
4. the deed conveying the parcel does not contain a condition of defeasance; and
5. the individual recorded contemporaneously with the deed an affidavit substantially in the form prescribed by Subsection (d).

An individual executing a deed as outlined by the statute is estopped from claiming that the conveyance is a sham or pretended sale, including a pretended sale under Section 50(c), Article XVI, Texas Constitution; or the individual had not abandoned homestead rights, if any, in the parcel by executing the deed.

What you should know:

This amendment deals with the conveyances of real property from individuals to their related entities. If the individual complies with the statute and files the required affidavit with the deed at least 30 days prior to a mortgage, Deed of Trust, or other lien the sale will not be considered a pretended sale of homestead. An example of the affidavit required by the statute is attached to this bulletin is attached to this bulletin.

What you should do:

Be aware of the requirements of this statute. Generally, we will not insure a conveyance from the owner to the LLC as this conveyance may be affected by the definition of insured in an owner’s policy. The affidavit (attached) would be required if the transaction being insured is a deed of trust or mortgage after such conveyance is made. If the individuals did not comply with all of the requirements, you will need to include an exception as to a pretended sale of homestead on Schedule B. of the commitment or get Stewart Title Guaranty Company Texas Underwriter approval.

Loss, cost, damage, or expense arising out of any allegation that the sale from _______ to ________is an impermissible pretended sale under the Texas Constitution.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.