When a property is located in a PUD, MUD or PID there are disclosures that are required of the transaction and failure to obtain that disclosure can result in termination of the contract or even a monetary penalty.
MUD: Municipal Utility District
A MUD is a district created under the Texas Water Code or by an act of the legislature to provide certain utilities such as water, sanitary sewer, drainage and flood control, and any of these services or facilities have been financed with bonds that are payable by the persons who live in the district.
Chapter 49 of the Texas Water Code requires a person selling a property that is in a MUD to give notice to the buyer of those potential fees for owning this property. This same law states that the notice must be given to the buyer prior to the buyer entering into the contract OR as an addendum to the contract at the time the contract is negotiated. If the notice is not timely provided, the buyer can terminate the contract at any time.
MUDs are often collected through a homeowner’s property tax bill.
PUD: Public Utility District
A PUD is created by the community and generally operates under a board, similar to how a homeowner’s association works. This PUD is created for the sole purpose of providing electricity, water, sewer and telecommunications to a subdivision.
PID: Public Improvement District
A PID is similar to a MUD in that it can be used for subdivision infrastructure items, but it can also be used for additional items like landscaping, parks, sidewalks, roadways and public safety items. These districts are provided for in Chapter 372 and 382 of the Local Government Code.
Where a PID differs from a MUD is that the PID is not a political entity. A PID is funded through bonds
secured by liens against the property and once issued, the bonds are paid back by way of a special assessment. These assessments are typically levied for a set number of years.
Tips for Realtors
It is important to keep in mind that a disclosure for each of these matters is required to be signed before the contract is executed. The TREC contracts have been modified (effective now, mandatory for use 2/1/2023) to provide a space to list all disclosures previously provided:
Failure to have these provided prior to closing can result in a painful outcome, so real estate agents should always make sure the appropriate forms are getting filled out.
Not sure what form you need? Your closing team at Texas National Title can help you determine which forms are required.