H.B. No. 1823
AN ACT
relating to the rights of a purchaser under an executory contract
for conveyance of real property.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 212.0115(c), Local Government Code, is
amended to read as follows:
(c) On the written request of an owner of land, a purchaser
of real property under a contract for deed, executory contract, or
other executory conveyance, an entity that provides utility
service, or the governing body of the municipality, the municipal
authority responsible for approving plats shall make the following
determinations regarding the owner's land or the land in which the
entity or governing body is interested that is located within the
jurisdiction of the municipality:
(1) whether a plat is required under this subchapter
for the land; and
(2) if a plat is required, whether it has been prepared
and whether it has been reviewed and approved by the authority.
SECTION 2. Section 5.062, Property Code, is amended by
amending Subsections (a) and (b) and adding Subsections (e), (f),
and (g) to read as follows:
(a) This subchapter applies only to a transaction involving
an executory contract for conveyance of real property used or to be
used as the purchaser's residence or as the residence of a person
related to the purchaser within the second degree by consanguinity
or affinity, as determined under Chapter 573, Government Code. For
purposes of this subchapter, and only for the purposes of this
subchapter:
(1) [,] a lot measuring one acre or less is presumed to
be residential property; and
(2) an option to purchase real property that includes
or is combined or executed concurrently with a residential lease
agreement, together with the lease, is considered an executory
contract for conveyance of real property.
(b) This subchapter does not apply to the following
transactions under an executory contract:
(1) [a transaction involving] the sale of state land;
or
(2) a sale of land by:
(A) the Veterans' Land Board;
(B) this state or a political subdivision of this
state; or
(C) an instrumentality, public corporation, or
other entity created to act on behalf of this state or a political
subdivision of this state, including an entity created under
Chapter 303, 392, or 394, Local Government Code [under an executory
contract].
(e) Sections 5.066, 5.067, 5.071, 5.075, 5.081, and 5.082 do
not apply to an executory contract described by Subsection (a)(2).
(f) Notwithstanding any other provision of this subchapter,
only the following sections apply to an executory contract
described by Subsection (a)(2) if the term of the contract is three
years or less and the purchaser and seller, or the purchaser's or
seller's assignee, agent, or affiliate, have not been parties to an
executory contract to purchase the property covered by the
executory contract for longer than three years:
(1) Sections 5.063-5.065;
(2) Section 5.073, except for Section 5.073(a)(2); and
(3) Sections 5.083 and 5.085.
(g) Except as provided by Subsection (b), if Subsection (f)
conflicts with another provision of this subchapter, Subsection (f)
prevails.
SECTION 3. Subchapter D, Chapter 5, Property Code, is
amended by adding Section 5.0621 to read as follows:
Sec. 5.0621. CONSTRUCTION WITH OTHER LAW. (a) Except as
provided by Subsection (b), the provisions of this subchapter and
Chapter 92 apply to the portion of an executory contract described
by Section 5.062(a)(2) that is a residential lease agreement.
(b) After a tenant exercises an option to purchase leased
property under a residential lease described by Subsection (a),
Chapter 92 no longer applies to the lease.
SECTION 4. Section 5.073, Property Code, is amended to read
as follows:
Sec. 5.073. CONTRACT TERMS, CERTAIN WAIVERS PROHIBITED.
(a) A seller may not include as a term of the executory contract a
provision that:
(1) imposes an additional late-payment fee that
exceeds the lesser of:
(A) eight percent of the monthly payment under
the contract; or
(B) the actual administrative cost of processing
the late payment;
(2) prohibits the purchaser from pledging the
purchaser's interest in the property as security to obtain a loan to
place improvements, including utility improvements or fire
protection improvements, on the property; [or]
(3) imposes a prepayment penalty or any similar fee if
the purchaser elects to pay the entire amount due under the contract
before the scheduled payment date under the contract;
(4) forfeits an option fee or other option payment
paid under the contract for a late payment; or
(5) increases the purchase price, imposes a fee or
charge of any type, or otherwise penalizes a purchaser leasing
property with an option to buy the property for requesting repairs
or exercising any other right under Chapter 92.
(b) A provision of the executory contract that purports to
waive a right or exempt a party from a liability or duty under this
subchapter is void.
SECTION 5. Section 5.077, Property Code, is amended by
amending Subsection (c) and adding Subsection (d) to read as
follows:
(c) A seller who conducts less than two transactions in a
12-month period under this section who fails to comply with
Subsection (a) is liable to the purchaser for:
(1) liquidated damages in the amount of $100 for each
annual statement the seller fails to provide to the purchaser
within the time required by Subsection (a); and
(2) reasonable attorney's fees.
(d) A seller who conducts two or more transactions in a
12-month period under this section who fails to comply with
Subsection (a) is liable to the purchaser for:
(1) liquidated damages in the amount of $250 a day for
each day after January 31 that the seller fails to provide the
purchaser with the statement, but not to exceed the fair market
value of the property; and
(2) reasonable attorney's fees.
SECTION 6. Subchapter D, Chapter 5, Property Code, is
amended by adding Sections 5.081 through 5.085 to read as follows:
Sec. 5.081. RIGHT TO CONVERT CONTRACT. (a) A purchaser,
at any time and without paying penalties or charges of any kind, is
entitled to convert the purchaser's interest in property under an
executory contract into recorded, legal title in accordance with
this section.
(b) If the purchaser tenders to the seller an amount of
money equal to the balance of the total amount owed by the purchaser
to the seller under the executory contract, the seller shall
transfer to the purchaser recorded, legal title of the property
covered by the contract.
(c) Subject to Subsection (d), if the purchaser delivers to
the seller of property covered by an executory contract a
promissory note that is equal in amount to the balance of the total
amount owed by the purchaser to the seller under the contract and
that contains the same interest rate, due dates, and late fees as
the contract:
(1) the seller shall execute a deed containing any
warranties required by the contract and conveying to the purchaser
recorded, legal title of the property; and
(2) the purchaser shall simultaneously execute a deed
of trust that:
(A) contains the same terms as the contract
regarding the purchaser's and seller's duties concerning the
property;
(B) secures the purchaser's payment and
performance under the promissory note and deed of trust; and
(C) conveys the property to the trustee, in
trust, and confers on the trustee the power to sell the property if
the purchaser defaults on the promissory note or the terms of the
deed of trust.
(d) On or before the 10th day after the date the seller
receives a promissory note under Subsection (c) that substantially
complies with that subsection, the seller shall:
(1) deliver to the purchaser a written explanation
that legally justifies why the seller refuses to convert the
purchaser's interest into recorded, legal title under Subsection
(c); or
(2) communicate with the purchaser to schedule a
mutually agreeable day and time to execute the deed and deed of
trust under Subsection (c).
(e) A seller who violates this section is liable to the
purchaser in the same manner and amount as a seller who violates
Section 5.079 is liable to a purchaser. This subsection does not
limit or affect any other rights or remedies a purchaser has under
other law.
(f) On the last date that all of the conveyances described
by Subsections (b) and (c) are executed, the executory contract:
(1) is considered completed; and
(2) has no further effect.
(g) The appropriate use of forms published by the Texas Real
Estate Commission for transactions described by this section
constitutes compliance with this section.
Sec. 5.082. REQUEST FOR BALANCE AND TRUSTEE. (a) A
purchaser under an executory contract, on written request, is
entitled to receive the following information from the seller:
(1) as of the date of the request or another date
specified by the purchaser, the amount owed by the purchaser under
the contract; and
(2) if applicable, the name and address of the seller's
desired trustee for a deed of trust to be executed under Section
5.081.
(b) On or before the 10th day after the date the seller
receives from the purchaser a written request for information
described by Subsection (a), the seller shall provide to the
purchaser a written statement of the requested information.
(c) If the seller does not timely respond to a request made
under this section, the purchaser may:
(1) determine or pay the amount owed under the
contract, including determining the amount necessary for a
promissory note under Section 5.081; and
(2) if applicable, select a trustee for a deed of trust
under Section 5.081.
(d) For purposes of Subsection (c)(2), a purchaser must
select a trustee that lives or has a place of business in the same
county where the property covered by the executory contract is
located.
(e) Not later than the 20th day after the date a seller
receives notice of an amount determined by a purchaser under
Subsection (c)(1), the seller may contest that amount by sending a
written objection to the purchaser. An objection under this
subsection must:
(1) be sent to the purchaser by regular and certified
mail;
(2) include the amount the seller claims is the amount
owed under the contract; and
(3) be based on written records kept by the seller or
the seller's agent that were maintained and regularly updated for
the entire term of the executory contract.
Sec. 5.083. RIGHT TO CANCEL CONTRACT FOR IMPROPER PLATTING.
(a) Except as provided by Subsection (c), in addition to other
rights or remedies provided by law, the purchaser may cancel and
rescind an executory contract at any time if the purchaser learns
that the seller has not properly subdivided or platted the property
that is covered by the contract in accordance with state and local
law. A purchaser canceling and rescinding a contract under this
subsection must:
(1) deliver a signed, written notice of the
cancellation and rescission to the seller in person; or
(2) send a signed, written notice of the cancellation
and rescission to the seller by telegram or certified or registered
mail, return receipt requested.
(b) If the purchaser cancels the contract as provided under
Subsection (a), the seller, not later than the 10th day after the
date the seller receives the notice of cancellation and rescission,
shall:
(1) deliver in person or send by telegram or certified
or registered mail, return receipt requested, to the purchaser a
signed, written notice that the seller intends to subdivide or plat
the property properly; or
(2) return to the purchaser all payments of any kind
made to the seller under the contract and reimburse the purchaser
for:
(A) any payments the purchaser made to a taxing
authority for the property; and
(B) the value of any improvements made to the
property by the purchaser.
(c) A purchaser may not exercise the purchaser's right to
cancel and rescind an executory contract under this section if, on
or before the 90th day after the date the purchaser receives the
seller's notice under Subsection (b)(1), the seller:
(1) properly subdivides or plats the property; and
(2) delivers in person or sends by telegram or
certified or registered mail, return receipt requested, to the
purchaser a signed, written notice evidencing that the property has
been subdivided or platted in accordance with state and local law.
(d) The seller may not terminate the purchaser's possession
of the property covered by the contract being canceled and
rescinded before the seller pays the purchaser any money to which
the purchaser is entitled under Subsection (b).
Sec. 5.084. RIGHT TO DEDUCT. If a seller is liable to a
purchaser under this subchapter, the purchaser, without taking
judicial action, may deduct the amount owed to the purchaser by the
seller from any amounts owed to the seller by the purchaser under
the terms of an executory contract.
Sec. 5.085. FEE SIMPLE TITLE REQUIRED; MAINTENANCE OF FEE
SIMPLE TITLE. (a) A potential seller may not execute an executory
contract with a potential purchaser if the seller does not own the
property in fee simple free from any liens or other encumbrances.
(b) Except as provided by this subsection, a seller, or the
seller's heirs or assigns, must maintain fee simple title free from
any liens or other encumbrances to property covered by an executory
contract for the entire duration of the contract. This subsection
does not apply to a lien or encumbrance placed on the property that
is:
(1) placed on the property because of the conduct of
the purchaser;
(2) agreed to by the purchaser as a condition of a loan
obtained to place improvements on the property, including utility
or fire protection improvements; or
(3) placed on the property by the seller prior to the
execution of the contract in exchange for a loan used only to
purchase the property if:
(A) the seller, not later than the third day
before the date the contract is executed, notifies the purchaser in
a separate written disclosure:
(i) of the name, address, and phone number
of the lienholder or, if applicable, servicer of the loan;
(ii) of the loan number and outstanding
balance of the loan;
(iii) of the monthly payments due on the
loan and the due date of those payments; and
(iv) in 14-point type that, if the seller
fails to make timely payments to the lienholder, the lienholder may
attempt to collect the debt by foreclosing on the lien and selling
the property at a foreclosure sale;
(B) the lien:
(i) is attached only to the property sold to
the purchaser under the contract; and
(ii) secures indebtedness that, at no time,
is or will be greater in amount than the amount of the total
outstanding balance owed by the purchaser under the executory
contract;
(C) the lienholder:
(i) does not prohibit the property from
being encumbered by an executory contract; and
(ii) consents to verify the status of the
loan on request of the purchaser and to accept payments directly
from the purchaser if the seller defaults on the loan; and
(D) the following covenants are placed in the
executory contract:
(i) a covenant that obligates the seller to
make timely payments on the loan and to give monthly statements to
the purchaser reflecting the amount paid to the lienholder, the
date the lienholder receives the payment, and the information
described by Paragraph (A);
(ii) a covenant that obligates the seller,
not later than the third day the seller receives or has actual
knowledge of a document or an event described by this subparagraph,
to notify the purchaser in writing in 14-point type that the seller
has been sent a notice of default, notice of acceleration, or notice
of foreclosure or has been sued in connection with a lien on the
property and to attach a copy of all related documents received to
the written notice; and
(iii) a covenant that warrants that if the
seller does not make timely payments on the loan or any other
indebtedness secured by the property, the purchaser may, without
notice, cure any deficiency with a lienholder directly and deduct
from the total outstanding balance owed by the purchaser under the
executory contract, without the necessity of judicial action, 150
percent of any amount paid to the lienholder.
(c) A violation of this section:
(1) is a false, misleading, or deceptive act or
practice within the meaning of Section 17.46, Business & Commerce
Code, and is actionable in a public or private suit brought under
Subchapter E, Chapter 17, Business & Commerce Code; and
(2) in addition to other rights or remedies provided
by law, entitles the purchaser to cancel and rescind the executory
contract and receive from the seller:
(A) the return of all payments of any kind made to
the seller under the contract; and
(B) reimbursement for:
(i) any payments the purchaser made to a
taxing authority for the property; and
(ii) the value of any improvements made to
the property by the purchaser.
(d) A seller is not liable under this section if:
(1) a lien is placed on the property by a person other
than the seller; and
(2) not later than the 30th day after the date the
seller receives notice of the lien, the seller takes all steps
necessary to remove the lien and has the lien removed from the
property.
SECTION 7. (a) Section 5.062, Property Code, as amended by
this Act, and Section 5.0621, Property Code, as added by this Act,
apply to an executory contract for conveyance entered into on or
after January 1, 2006.
(b) Section 5.073, Property Code, as amended by this Act,
applies only to an executory contract for conveyance that was
entered into on or after the effective date of this Act. An
executory contract that was entered into before the effective date
of this Act is governed by the law in effect immediately before the
effective date of this Act, and the former law is continued in
effect for that purpose.
(c) Sections 5.081 and 5.082, Property Code, as added by
this Act, apply to a conversion of title initiated or a request for
information made on or after the effective date of this Act,
regardless of the date on which the purchaser and seller entered
into the executory contract that is the subject of the conversion or
request.
(d) Section 5.083, Property Code, as added by this Act,
applies only to a seller's failure or refusal to subdivide or plat
real property on or after the effective date of this Act, regardless
of the date on which the purchaser and seller entered into the
executory contract covering the property that is improperly
subdivided or platted.
(e) Section 5.084, Property Code, as added by this Act,
applies to the computation of any amount owed to the seller by the
purchaser under the terms of an executory contract on or after the
effective date of this Act, regardless of the date on which the
purchaser and seller entered into the executory contract.
(f) Section 5.085, Property Code, as added by this Act,
applies only to an executory contract for conveyance that is
entered into on or after the effective date of this Act. An
executory contract for conveyance that is entered into before the
effective date of this Act is covered by the law in effect at the
time the contract was entered into, and that law is continued in
effect for that purpose.
SECTION 8. This Act takes effect September 1, 2005.
______________________________ ______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 1823 was passed by the House on May
12, 2005, by a non-record vote; and that the House concurred in
Senate amendments to H.B. No. 1823 on May 26, 2005, by a non-record
vote.
______________________________
Chief Clerk of the House
I certify that H.B. No. 1823 was passed by the Senate, with
amendments, on May 24, 2005, by the following vote: Yeas 30, Nays
1.
______________________________
Secretary of the Senate
APPROVED: __________________
Date
__________________
Governor