This past legislative session saw the enactment of a few bills that can affect the real estate transaction. Below is a brief summary of each one.
Senate Bill 1588: Resale Certificate Fees
This bill does many things for HOA Resale Certificate Reform:
- Places a cap of $375 on what a homeowner's association can charge for a Resale Certificate;
- Limits the fee for an update to $75;
- Shortens the turn around time for a resale certificate from 7 days to 5 days;
- Increases the damages for failure to timely deliver from $500 to $5,000;
- Requires any subdivision of 60 lots or more to publish their subdivision information online (including fees) in a publicly accessible database;
- Requires the management certificates to be recorded starting December 1, 2021.
We do anticipate that we may continue to see fees that are in excess of the permitted amount until all HOAs catch up to speed on this issue. Please keep in mind that a title company is required to collect the fees as shown on the resale certificate. We will not be in a position to require that the resale certificate be updated to comply with the law. The seller of the property is the correct party to push back on these fees with their homeowner's association if the issue arises before closing.
Also, we have already seen many notices from management companies that fee structures are being adjusted. Some are lowering the resale certificate fee but increasing other fees or adding fees that have not previously been charged. Some management companies are discontinuing rush or expedited turn times. Please keep these limitations on mind when drafting your contracts and the delivery obligations in the HOA addendum.
House Bill 1543: Public Improvement Districts
A Public Improvement District (PID) is a designated area where property owners pay a special assessment for improvements and services within that area. The services must benefit the PID area, and are supplemental to services already provided by the city. PIDs are often used for temporary infrastructure improvements such as landscaping, utility relocation, roadway improvement, improving parks, and similar items.
This recent law places the same statutory obligations on sellers of real property in a Public Improvement District as those that are selling property in a Municipal Utility District. This disclosure must be signed by sellers and buyers and it must be signed at or before contract execution. If a seller does not provide this notice the buyer has the right to terminate the contract and they can also seek monetary damages through litigation.
The notice requires the seller to provide specific information about the district to the buyer like:
- Property Address;
- Name of the Public Improvement District;
- Name of the municipality (and city council) or county (and commissioners court) that approves and levies assessments; and
- The statute the PID was created under, which will be either Subchapter A, Chapter 372
of the Local Government Code or Chapter 382 of that same code.
To help you with this TREC has created the Addendum Containing Notice of Obligation to Pay Improvement District Assessment that you can attach to your contracts. Title will also be obtaining a signed version at closing and as long as one is signed at closing the buyer's ability to seek monetary damages is extinguished. That file can be found here: https://www.trec.texas.gov/sites/default/files/pdf-forms/53-0.pdf
House Bill 3115: Release of Abstract of Judgment from Homestead
An Abstract of Judgment is a court issued document that may allow a claimant (creditor) to place a lien on Real Property owned by someone (debtor). In Texas, homesteads are considered favorites of the law though and the Texas Constitution provides that a homestead is exempt from seizure for the claims of most creditors.
Historically a title company has not had a way to address these homestead properties with Abstracts of Judgment because we were unable to make the legal determination as to whether or not the property was in fact the seller’s homestead.
This bill sets forth a period in which all parties can rely on a recorded homestead affidavit to determine whether or not a specific piece of property is the seller’s homestead. This law allows title to rely on the affidavit – assuming it is properly filed – for a 90 day window as long as the creditor is properly noticed and they do not file an objecting affidavit.
NOTE: This process has specific steps that are required and not all judgments qualify so please check with your Texas National Title escrow team before having your seller start this process.
Senate Bill 885: Quitclaim Bill
A Texas quitclaim deed form is a specific type of deed that releases whatever interest is owned by the person signing the deed. The person that signs the deed does not guarantee that he or she owns or has clear title to the real estate described in the deed.
When a title company sees a quitclaim deed has been filed in the chain of title we are infrequently able to rely on that deed and we have to require that a new general warranty deed be signed to replace that deed. Oftentimes the parties that signed the quitclaim deed are now deceased or unable to be reached. With the help of this new bill a title company will be able to rely on a quitclaim deed in the chain of title once it has been on record for four years. Please note that it is only applicable to deeds filed after September 1, 2021. This means we will be able to rely on this law four years from now to help clear up the chain of title.