By: Patterson H.B. No. 1684 73R3210 CAS-F A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to the farm and ranch finance program; granting the 1-3 authority to issue bonds; providing penalties. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Title 8, Agriculture Code, is amended by adding 1-6 Chapter 254 to read as follows: 1-7 CHAPTER 254. FARM AND RANCH FINANCE PROGRAM 1-8 SUBCHAPTER A. ADMINISTRATION 1-9 Sec. 254.001. DEFINITIONS. In this chapter: 1-10 (1) "Board" means the Veterans Land Board. 1-11 (2) "Commissioner" means the commissioner of 1-12 agriculture. 1-13 (3) "Department" means the Department of Agriculture. 1-14 (4) "Fund" means the farm and ranch finance program 1-15 fund. 1-16 (5) "Program" means the farm and ranch finance 1-17 program. 1-18 Sec. 254.002. ADMINISTRATION. (a) The commissioner shall 1-19 administer the program. 1-20 (b) The board shall administer the fund. At the request of 1-21 the department, the board shall make available to the department 1-22 money from the fund to pay debt service on the program's bonds and 1-23 to purchase land as provided by this chapter. 1-24 Sec. 254.003. LIMITED IMMUNITY FROM SUIT OR LIABILITY. The 2-1 commissioner or a member of the board may be sued and held 2-2 personally liable for damages that result from an official act or 2-3 omission only if the act or omission is corrupt or malicious. 2-4 (Sections 254.004-254.010 reserved for expansion 2-5 SUBCHAPTER B. BONDS 2-6 Sec. 254.011. BONDS. (a) The commissioner may provide by 2-7 order or resolution for the issuance and sale of negotiable bonds 2-8 authorized by Article III, Section 49-f, of the Texas Constitution. 2-9 The proceeds from the sale of the bonds constitute the fund. 2-10 (b) Except as provided by Subsection (c) of this section, 2-11 the commissioner shall issue and sell bonds to finance the program 2-12 in the same manner as is provided for the board to issue and sell 2-13 bonds to finance the veterans land fund under Subchapter D, Chapter 2-14 161, Natural Resources Code. 2-15 (c) If the aggregate principal amount of a series or issue 2-16 of bonds being issued and sold to finance the program is $20 2-17 million or less, in issuing the bonds, the commissioner may 2-18 exercise the powers granted to the governing body of an issuer 2-19 under Chapter 656, Acts of the 68th Legislature, Regular Session, 2-20 1983 (Article 717q, Vernon's Texas Civil Statutes). 2-21 Sec. 254.012. DISPOSITION OF BOND PROCEEDS. (a) Except as 2-22 provided by Subsections (b) and (c) of this section, proceeds from 2-23 the sale of the bonds, less the administrative costs of issuing the 2-24 bonds, shall be deposited in the state treasury to the credit of 2-25 the fund. 2-26 (b) The board may provide for transferring to the interest 2-27 and sinking fund from the fund an amount that, together with the 3-1 accrued interest received, is sufficient to pay interest coupons 3-2 becoming due during the fiscal year in which the bonds are sold and 3-3 to establish appropriate reserves. 3-4 (c) At the timely request of the commissioner, the board 3-5 shall provide for transferring from the proceeds of the sale of 3-6 bonds or directly from available money in the fund an amount 3-7 certified by the commissioner as reasonable and necessary to cover 3-8 the costs of administering the program. That amount shall be 3-9 deposited in the state treasury to the credit of a special fund to 3-10 be known as the farm and ranch administrative expense fund. 3-11 Sec. 254.013. PAYMENT OF PRINCIPAL AND INTEREST. The 3-12 commissioner shall arrange for payment of the principal on bonds as 3-13 they mature and the interest as it becomes payable. 3-14 Sec. 254.014. PURCHASE AND DESTRUCTION OF BONDS. (a) The 3-15 commissioner may use money in the fund to purchase on the open 3-16 market any bonds issued and sold under this chapter. The debt 3-17 represented by the bonds purchased is considered canceled. 3-18 (b) Bonds purchased by the commissioner under Subsection (a) 3-19 of this section shall be mutilated, burned, or otherwise destroyed 3-20 by the state treasurer. The state treasurer shall certify that the 3-21 bonds have been destroyed to the commissioner under the seal of the 3-22 state treasurer's office. 3-23 Sec. 254.015. USE OF FUND. (a) The commissioner may use 3-24 money in the fund attributable to the sale of bonds to pay the 3-25 following expenses related to the purchase or sale of land: 3-26 (1) the expense of surveying and monumenting the land; 3-27 (2) the cost of constructing roads on the land; 4-1 (3) legal fees, recordation fees, or advertising costs 4-2 arising from the purchase and sale or resale of the land; or 4-3 (4) similar costs necessary or incidental to the 4-4 purchase or sale of the land. 4-5 (b) The expenses under Subsection (a) of this section shall 4-6 be added to the price of the land if sold or resold by the 4-7 commissioner. 4-8 (c) The commissioner may use money in the fund attributable 4-9 to the sale of bonds to pay the following expenses related to 4-10 bonds: 4-11 (1) legal fees and fees for financial advice the 4-12 commissioner finds necessary for the sale of bonds; 4-13 (2) the expense of publishing notice of sale of an 4-14 installment of bonds; 4-15 (3) the expense of printing the bonds; 4-16 (4) the expense of issuing the bonds, including the 4-17 actual costs of travel, lodging, and meals of the commissioner, 4-18 members of the board, officers or employees of the department or 4-19 board, the comptroller, the state treasurer, and the attorney 4-20 general that the commissioner finds necessary to implement the 4-21 issuance, rating, or delivery of the bonds; 4-22 (5) the cost of manually signing the bonds; 4-23 (6) remuneration to any agent employed by the 4-24 commissioner to pay the principal of and interest on the bonds; 4-25 (7) any amount required to be paid to maintain the 4-26 federal tax exemption of interest on the bonds; or 4-27 (8) any other cost, fee, or expense relating to the 5-1 issuance of the bonds. 5-2 (d) Money in the fund that is not spent for the purposes 5-3 provided by this section remains in the fund until sufficient to 5-4 retire fully bonds issued and sold under this chapter. 5-5 (e) Money in the fund that is in addition to that necessary 5-6 to retire the bonds shall be deposited to the credit of the general 5-7 revenue fund to be appropriated as provided by law including money 5-8 that comes into the fund after there is sufficient money to retire 5-9 the bonds. 5-10 (f) If, during the existence of the fund or during the 5-11 period any bonds are payable from the fund, the commissioner 5-12 determines that there will not be sufficient money in the fund 5-13 during the following biennium to pay the principal of or interest 5-14 on the bonds that is to come due during the following biennium, the 5-15 comptroller shall transfer to the fund from the first money coming 5-16 into the state treasury not otherwise appropriated by the 5-17 constitution an amount sufficient to pay the obligations. The 5-18 money appropriated shall be used to pay the obligations only if at 5-19 the time the principal or interest become due there is not 5-20 sufficient money in the fund to pay the amount due. 5-21 Sec. 254.016. INVESTMENTS. (a) The commissioner shall give 5-22 timely instruction to the board of the dates on which principal on 5-23 bonds matures and interest becomes payable. The board shall 5-24 administer the fund accordingly. 5-25 (b) Except as provided by Subsection (c) of this section, 5-26 money in the fund that is not immediately committed to paying 5-27 principal of and interest on the bonds, to the purchase of land, or 6-1 to the payment of expenses as provided by Section 254.015 of this 6-2 code may be invested by the board in: 6-3 (1) a direct security repurchase agreement or reverse 6-4 security repurchase agreement made with a state or national bank 6-5 domiciled in this state or with a primary dealer approved by the 6-6 federal reserve system; 6-7 (2) a direct obligation of or obligation the principal 6-8 and interest of which are guaranteed by the United States 6-9 government; 6-10 (3) a direct obligation of or obligation guaranteed by 6-11 the Federal Home Loan Banks, the Federal National Mortgage 6-12 Association, the Federal Farm Credit System, the Student Loan 6-13 Marketing Association, the Federal Home Loan Mortgage Corporation, 6-14 or a successor to one of those organizations; 6-15 (4) a bankers' acceptance that: 6-16 (A) is eligible for purchase by a member of the 6-17 federal reserve system; 6-18 (B) matures in 270 days or less; and 6-19 (C) is issued by a bank that has received the 6-20 highest short-term credit rating by a nationally recognized 6-21 investment rating firm; 6-22 (5) commercial paper that: 6-23 (A) matures in 270 days or less; and 6-24 (B) has received the highest short-term credit 6-25 rating by a nationally recognized investment rating firm; 6-26 (6) a contract that is written by the board in which 6-27 the board grants the purchaser the right to purchase securities in 7-1 the board's marketable securities portfolio at a specified price 7-2 over a specified period and for which the board is paid a fee and 7-3 that specifically prohibits naked-option or uncovered option 7-4 trading; 7-5 (7) an obligation of a state or of an agency, county, 7-6 city, or other political subdivision of a state or a mutual fund 7-7 composed of those obligations; 7-8 (8) an investment instrument, obligation, or other 7-9 evidence of indebtedness the payment of which is directly or 7-10 indirectly guaranteed by the full faith and credit of the United 7-11 States government; 7-12 (9) an investment, account, depository receipt, or 7-13 deposit that is fully: 7-14 (A) insured by the Federal Deposit Insurance 7-15 Corporation or a successor to that organization; or 7-16 (B) secured by a security described by 7-17 Subdivision (2), (3), or (8) of this subsection; 7-18 (10) a collateralized mortgage obligation fully 7-19 secured by securities or mortgages issued or guaranteed by the 7-20 Government National Mortgage Association or any entity identified 7-21 by Subdivision (3) of this subsection; 7-22 (11) a security or evidence of indebtedness issued by 7-23 the Farm Credit System Financial Assistance Corporation, the 7-24 Private Export Funding Corporation, or the Export-Import Bank; and 7-25 (12) any other investment authorized for investment of 7-26 state funds by the state treasurer under Section 404.024, 7-27 Government Code. 8-1 (c) The board may not invest in or purchase obligations of a 8-2 private corporation or other private business entity doing business 8-3 in the Republic of South Africa unless the corporation or other 8-4 entity: 8-5 (1) has: 8-6 (A) adopted the Statement of Principles for 8-7 South Africa as they existed in 1987, as described in the Report on 8-8 the Signatory Companies to the Statement of Principles for South 8-9 Africa published by Arthur D. Little, Inc., Cambridge, 8-10 Massachusetts, and has obtained a performance rating in Category 1 8-11 or 2 of the Statement of Principles for South Africa rating system 8-12 as determined by Arthur D. Little, Inc.; or 8-13 (B) agreed to the Code of Conduct that is 8-14 enforced by the United States Department of State under Section 8-15 208, Comprehensive Anti-Apartheid Act of 1986 (Pub. L. No. 99-440) 8-16 and has received a rating of "Making Satisfactory Progress"; and 8-17 (2) does not supply strategic products or services for 8-18 use by the government, military, or police of the Republic of South 8-19 Africa. 8-20 (d) In this section: 8-21 (1) "Direct security repurchase agreement" means an 8-22 agreement under which the board buys, holds for a specified time, 8-23 and then sells back any of the following securities, obligations, 8-24 or participation certificates: 8-25 (A) a United States government security; 8-26 (B) a direct obligation of or an obligation the 8-27 principal and interest of which are guaranteed by the United States 9-1 government; 9-2 (C) a direct obligation of or an obligation 9-3 guaranteed by the Federal Home Loan Banks, the Federal National 9-4 Mortgage Association, the Federal Farm Credit System, the Student 9-5 Loan Marketing Association, the Federal Home Loan Mortgage 9-6 Corporation, or a successor to one of those organizations; or 9-7 (D) any other investment instrument, obligation, 9-8 or other evidence of indebtedness the payment of which is directly 9-9 or indirectly guaranteed by the full faith and credit of the United 9-10 States government. 9-11 (2) "Doing business in the Republic of South Africa" 9-12 means conducting or performing manufacturing, assembly, or 9-13 warehousing operations in the Republic of South Africa or, in the 9-14 case of a bank or other financial institution, lending money to the 9-15 government of the Republic of South Africa or any of its agencies 9-16 or instrumentalities. 9-17 (3) "Market value" means the fair and reasonable 9-18 prevailing price at which a security is being sold on the open 9-19 market at the time of the appraisement of the security by the 9-20 board. 9-21 (4) "Reverse security repurchase agreement" means an 9-22 agreement under which the board sells and after a specified time 9-23 buys back any of the securities, obligations, or participation 9-24 certificates listed by Subdivision (1) of this subsection. 9-25 (5) "Strategic products or services" means articles 9-26 designated as arms, ammunition, or implements of war as provided by 9-27 22 C.F.R. Part 121 or data processing equipment or computers sold 10-1 for military or police use or for use in connection with 10-2 restriction on travel in the Republic of South Africa by residents 10-3 of that country. 10-4 (Sections 254.017-254.020 reserved for expansion 10-5 SUBCHAPTER C. PURCHASE, SALE, AND OTHER DISTRIBUTION OF LAND 10-6 Sec. 254.021. ELIGIBILITY. To be eligible to purchase land 10-7 under this section, a person, at the time of application, must: 10-8 (1) be a United States citizen; 10-9 (2) have been a resident of this state for five or 10-10 more years immediately preceding the application; 10-11 (3) be a member of a household that has derived at 10-12 least 25 percent of its gross income from a farm or ranch for the 10-13 preceding three years; and 10-14 (4) have a net worth of less than $250,000. 10-15 Sec. 254.022. APPLICATION. (a) To purchase land under this 10-16 chapter, a person must apply to the commissioner. 10-17 (b) As soon as practicable after an application is received 10-18 by the commissioner under Subsection (a) of this section, the 10-19 commissioner shall approve or deny the application and shall notify 10-20 the applicant of the commissioner's decision. 10-21 Sec. 254.023. PURCHASE PAYMENTS. (a) A purchaser must make 10-22 a cash down payment as required by Section 254.024 of this code. 10-23 The balance of the purchase price shall be amortized over a period 10-24 determined by the commissioner not to exceed 30 years, at a rate of 10-25 interest set by the commissioner. The commissioner may set the 10-26 interest rate to provide a margin over the rate paid by the 10-27 commissioner on the department's bonds issued under this chapter. 11-1 The difference between the cost of the money to the commissioner 11-2 and the interest rate charged the purchaser may be used to defray 11-3 the expense of administering the program. 11-4 (b) The purchaser shall pay any installment remaining 11-5 unpaid, together with any premium that the commissioner requires in 11-6 connection with the early payment of an installment under this 11-7 section, on any date that the commissioner provides. 11-8 (c) The commissioner may postpone for good cause the payment 11-9 of an installment of the purchase price or interest on the purchase 11-10 price on terms the commissioner considers proper. 11-11 (d) A delinquent installment bears interest at a rate to be 11-12 determined by the commissioner from the date the installment 11-13 becomes delinquent until the date paid. 11-14 Sec. 254.024. DOWN PAYMENT. (a) A loan under this chapter 11-15 may not exceed $150,000, less the down payment required under this 11-16 subsection. If the purchase price is $150,000 or less, the minimum 11-17 down payment is equal to five percent of the purchase price. If 11-18 the purchase price exceeds $150,000, the minimum down payment is an 11-19 amount equal to the sum of five percent of the purchase price plus 11-20 the amount equal to the difference between the purchase price and 11-21 $150,000. 11-22 (b) The commissioner shall provide by rule for the period 11-23 during which and manner in which the down payment provided for 11-24 under Subsection (a) of this section shall be paid to the 11-25 commissioner. 11-26 (c) If the sale is not consummated, the commissioner shall 11-27 refund the down payment to the purchaser. 12-1 Sec. 254.0245. ESCROW ACCOUNTS. The commissioner may 12-2 require an applicant to make payments, in addition to the down 12-3 payment and principal and interest payments, to be held in trust to 12-4 pay hazard insurance premiums and property taxes that may become 12-5 due. The payments shall be deposited in a special trust fund with 12-6 the state treasurer and shall be used to make the insurance premium 12-7 and property tax payments. The unused balance of the applicant's 12-8 deposit shall be held by the commissioner until maintenance of the 12-9 account is unnecessary and shall then be refunded to the applicant. 12-10 Sec. 254.025. TRANSFER OF PURCHASER'S INTEREST. (a) The 12-11 purchase contract must provide that ownership of the land may not 12-12 be transferred before the entire principal and interest due have 12-13 been paid without the commissioner's express written permission. 12-14 (b) If the purchaser dies or becomes financially 12-15 incapacitated or if the purchaser's interest in land is 12-16 involuntarily transferred by court order or other proceedings, 12-17 including bankruptcy, sheriff or trustee sale, or divorce, the land 12-18 may be conveyed by the purchaser or the purchaser's heirs, 12-19 administrators, executors, or successors in interest by complying 12-20 with the rules adopted by the commissioner and obtaining the 12-21 commissioner's written permission. 12-22 Sec. 254.026. CHANGES IN USE. (a) Before a purchaser may 12-23 use land acquired under this chapter for a purpose other than 12-24 farming or ranching, the purchaser must submit to the commissioner 12-25 an application for approval of the change of use. 12-26 (b) As soon as practicable after an application for a change 12-27 of use is received, the commissioner shall approve or deny the 13-1 application and shall notify the borrower of the commissioner's 13-2 decision. 13-3 (c) The purchase contract must provide that land acquired 13-4 under this chapter may not be used for a purpose other than farming 13-5 or ranching without the approval of the commissioner. 13-6 Sec. 254.027. APPRAISAL. (a) Before the commissioner may 13-7 purchase land under this chapter, the commissioner must have an 13-8 appraisal of the property made to determine its value. 13-9 (b) An appraiser representing the commissioner must be 13-10 qualified to give competent appraisals of land. The commissioner 13-11 may contract with the board to use appraisers employed by the 13-12 board. 13-13 (c) The appraiser shall make a written report to the 13-14 commissioner, in affidavit form, duly sworn to before a notary 13-15 public or other official authorized to administer oaths. The 13-16 report must state: 13-17 (1) the appraised value of the land; 13-18 (2) the name and address of any person contacted 13-19 concerning the valuation of the land; 13-20 (3) that the appraiser has examined the records of the 13-21 county clerk's office concerning the amount paid by the vendor for 13-22 the land; 13-23 (4) that the appraiser has checked past sales of 13-24 adjacent land to aid in determining valuation; and 13-25 (5) that neither the appraiser nor a member of the 13-26 appraiser's family has received a personal benefit from the 13-27 transaction and does not expect to receive a future personal 14-1 benefit from the transaction. 14-2 Sec. 254.028. SWORN REPORT. Before the commissioner may 14-3 purchase land under this chapter, the commissioner must require the 14-4 seller to execute a sworn report to the commissioner that states: 14-5 (1) the date the seller purchased the land; 14-6 (2) the amount the seller paid for the land; 14-7 (3) from whom the seller purchased the land; and 14-8 (4) any improvement made on the land since the seller 14-9 purchased it and the cost of the improvement. 14-10 Sec. 254.029. PAYMENTS TO COMMISSIONER UNDER CERTAIN LEASES. 14-11 If, during a period a person is indebted to the commissioner for 14-12 land purchased under this chapter, the person executes or there 14-13 exists a lease or contract of sale of oil, gas, or other minerals, 14-14 chemicals, hard metals, timber, sand, gravel, or other material 14-15 that covers the land purchased from the commissioner that would 14-16 result in the depletion of the corpus of the land, not less than 14-17 one-half of all bonus money, delay rentals, or royalties received 14-18 as consideration for or payment under the oil, gas, or mineral 14-19 lease and not less than one-half of all money received under a 14-20 lease or contract of sale of other minerals, chemical, hard metals, 14-21 timber, sand, gravel, or other material shall be paid to the 14-22 commissioner by the owner of the lease or contract of sale. The 14-23 commissioner shall apply those payments to the satisfaction of the 14-24 indebtedness. 14-25 Sec. 254.030. DEEDS. (a) As soon as practicable after the 14-26 indebtedness due the state under the contract of sale is paid in 14-27 full, the commissioner or the commissioner's designee shall execute 15-1 a deed under seal to the purchaser of the land or to the last 15-2 assignee whose assignment has been approved by the commissioner. 15-3 (b) This chapter does not prohibit the commissioner from 15-4 accepting full payment for a portion of a tract of land and issuing 15-5 a deed to that portion of the land according to the rules of the 15-6 commissioner. 15-7 (c) A deed issued by the commissioner and executed as 15-8 provided by Subsection (a) of this section is valid whether the 15-9 deed conveys all or only a part of the land contracted to be sold 15-10 to the purchaser. 15-11 (d) If a deed is executed to a deceased grantee or to a 15-12 person other than the legal owner, the deed and the rights conveyed 15-13 inure to the benefit of the legal owner of the purchaser's interest 15-14 in the land. 15-15 Sec. 254.031. GENERAL REQUIREMENT FOR SALE OF LAND. Land 15-16 acquired and subdivided under this chapter shall be offered for 15-17 sale according to rules adopted by the commissioner and shall be 15-18 sold by the commissioner to any person qualified to participate in 15-19 the program under this chapter. 15-20 Sec. 254.032. RIGHTS OF SURVIVING SPOUSE. If an eligible 15-21 applicant dies after filing with the commissioner an application 15-22 and contract of sale to purchase land and before the purchase is 15-23 completed, the surviving spouse of the applicant may complete the 15-24 transaction, subject to the approval of the commissioner. 15-25 Sec. 254.033. NUMBER OF TRACTS PURCHASED. A person may not 15-26 purchase more than one tract of land under this chapter. 15-27 Sec. 254.034. PAYMENT OF BONDS. (a) A series of bonds 16-1 includes all bonds issued and sold in a single transaction as a 16-2 single installment of bonds. 16-3 (b) To the extent consistent with the constitution of this 16-4 state, money attributable to any series of bonds issued and sold by 16-5 the commissioner may be used for the purchase of land. The land 16-6 shall be sold as provided by this chapter for a period ending on 16-7 the date that is eight years after the date on which the series of 16-8 bonds was sold. 16-9 (c) An amount of money necessary to pay interest on the 16-10 bonds issued and sold shall be set aside for that purpose in 16-11 accordance with the resolution or order of the commissioner 16-12 authorizing the issuance and sale of the series of bonds. 16-13 (d) After the end of the eight-year period, until there is 16-14 sufficient money to retire all the bonds, the money shall be set 16-15 aside to retire the bonds issued and sold and to pay interest on 16-16 them, together with any expenses, in accordance with the resolution 16-17 or order authorizing the issuance and sale of the additional bonds. 16-18 Money coming into the fund not necessary to retire the bonds and 16-19 pay interest on them shall be governed as provided by this chapter. 16-20 Sec. 254.035. CONDITIONS OF PURCHASE AND SALE. (a) Before 16-21 making payment for a land purchase, the commissioner must have the 16-22 title to the land examined and obtain a title insurance policy for 16-23 the land. The commissioner may submit the title to the attorney 16-24 general for examination and opinion. 16-25 (b) The commissioner may purchase land that is subject to 16-26 outstanding mineral leases or that has mineral interests 16-27 outstanding, but the title must be otherwise marketable and good. 17-1 (c) Land purchased by the commissioner shall be acquired at 17-2 the lowest price that can be obtained in the opinion of the 17-3 commissioner, taking into consideration the quality, location, 17-4 natural advantages, and improvements of the land. The land shall 17-5 be paid for in cash and shall be clear of any liens. Any land 17-6 purchased becomes part of the fund. 17-7 (d) Except for forfeited land that may be resold by the 17-8 commissioner at less than the purchase price under Subchapter D of 17-9 this chapter, land may not be sold by the commissioner at less than 17-10 the purchase price. 17-11 (e) The commissioner shall sell land using a contract of 17-12 sale and purchase. The contract shall be recorded in the deed 17-13 records of the county in which the land is located. 17-14 (f) The commissioner may specify different terms, consistent 17-15 with this chapter, in each contract entered into with a purchaser. 17-16 (g) Property sold under this chapter may be transferred, 17-17 sold, or conveyed at any time after the entire indebtedness due to 17-18 the state has been paid. 17-19 Sec. 254.036. TERM OF LEASES. (a) A purchaser may not 17-20 lease land purchased under this chapter for a term longer than 10 17-21 years, except: 17-22 (1) a lease for oil, gas, or other minerals may be for 17-23 a term of not longer than 10 years, and as long thereafter as oil, 17-24 gas, or other minerals are produced from the land in commercial 17-25 quantities; and 17-26 (2) a lease for coal and lignite may be for a term of 17-27 not longer than 40 years, and as long thereafter as coal and 18-1 lignite are produced from the land in commercial quantities. 18-2 (b) A lease or a separate instrument to take effect in the 18-3 future may not contain a provision for option or renewal of the 18-4 lease or re-lease of the property for any term that would result in 18-5 a fixed term of the lease that exceeds the maximum fixed term 18-6 authorized under Subsection (a) of this section. A lease or 18-7 instrument that contains an option renewal or re-lease agreement in 18-8 violation of this section is void. 18-9 Sec. 254.037. DEATH OF A PURCHASER. (a) If the purchaser 18-10 of the land under this chapter dies while indebted to the state 18-11 under a contract, the purchaser's rights under this chapter and the 18-12 contract devolve on the purchaser's heirs, devisees, or personal 18-13 representatives under the laws of this state, subject to all 18-14 rights, claims, and charges of the commissioner. 18-15 (b) Default by an heir, devisee, or personal representative 18-16 with respect to a right, claim, or charge of the commissioner has 18-17 the same effect as default by the purchaser before the purchaser's 18-18 death. 18-19 Sec. 254.038. SUBDIVISION. Land acquired by the 18-20 commissioner may be subdivided for sale into tracts of the size the 18-21 commissioner considers advisable. 18-22 Sec. 254.039. UNENCUMBERED TITLE. The commissioner may 18-23 establish a procedure by which a borrower acquiring land with a 18-24 loan under this chapter may obtain title to a portion of the tract 18-25 clear of encumbrances. 18-26 Sec. 254.040. RULES; FEES. (a) The commissioner may adopt 18-27 rules the commissioner considers necessary to administer the 19-1 program or considers in the best interests of the program, 19-2 including rules on program requirements. The board may adopt rules 19-3 it considers necessary to administer the fund or considers in the 19-4 best interests of the fund, including rules on the investment of 19-5 the fund. 19-6 (b) The commissioner may set and collect fees the 19-7 commissioner considers reasonable and necessary to cover the 19-8 expenses of administering the program or considers in the best 19-9 interest of the program. Those fees shall be deposited in the 19-10 state treasury to the credit of a special fund to be known as the 19-11 farm and ranch fee fund. 19-12 (Sections 254.041-254.045 reserved for expansion 19-13 SUBCHAPTER D. FORFEITURE 19-14 Sec. 254.046. FORFEITURE. The commissioner may determine if 19-15 any purchase contract under this chapter is forfeited as provided 19-16 by this subchapter. 19-17 Sec. 254.047. GROUNDS FOR FORFEITURE; NOTICE; CURE. (a) If 19-18 a purchaser of land under this chapter fails to pay a portion of 19-19 the principal or interest due or fails to comply with this chapter, 19-20 a contract entered into under this chapter, or a rule of the 19-21 commissioner, the contract of sale and purchase is subject to 19-22 forfeiture not earlier than the 31st day after the date on which 19-23 written notice of the failure is mailed to the original purchaser 19-24 and the last of any assignees whose assignment has been approved by 19-25 the commissioner. The notice must state the reason the contract of 19-26 sale and purchase is subject to forfeiture and be sent by certified 19-27 mail to the last known address of the original purchaser and the 20-1 last of any approved assignees. 20-2 (b) If the reason for forfeiture is cured within the 30-day 20-3 notice period, the commissioner may not enter an order of 20-4 forfeiture. 20-5 Sec. 254.048. EFFECT OF FORFEITURE. (a) The forfeiture is 20-6 effective at the time the commissioner issues a resolution or order 20-7 declaring the contract of sale and purchase forfeited. At that 20-8 time, the land and all payments previously made are forfeited. 20-9 (b) On forfeiture, the full title to the land, including 20-10 both surface and mineral estates, revest in the fund. 20-11 (c) The commissioner shall recognize and continue in force 20-12 and effect any outstanding valid oil, gas, or mineral lease on 20-13 forfeited land and collect all rentals, royalties, or other amounts 20-14 payable under the lease. 20-15 Sec. 254.049. NOTICE TO PURCHASER AND COUNTY CLERK; VACATION 20-16 OF PREMISES. (a) The commissioner shall mail notice to the county 20-17 clerk of the county in which the land is located that the purchaser 20-18 has forfeited rights to specified land under a contract. The clerk 20-19 shall record the notice free of charge to the commissioner. 20-20 (b) The commissioner shall give notice of a forfeiture by 20-21 certified mail to the original purchaser and to the last of any 20-22 approved assignees. The land forfeited must be vacated not later 20-23 than the 45th day after the date on which the notice required by 20-24 this subsection is mailed. 20-25 Sec. 254.050. SUIT TO ENFORCE FORFEITURE, RECOVER AMOUNTS 20-26 DUE, OR PROTECT RIGHTS. The commissioner, through the attorney 20-27 general, may institute legal proceedings that are necessary to 21-1 enforce a forfeiture, to recover the full amount of any delinquent 21-2 installments, interest, or any penalties due at the time a 21-3 forfeiture occurred, or to protect any other right to the land, 21-4 including collection of deficiencies if the land is resold for less 21-5 than the amount due the state at the time of forfeiture. 21-6 Sec. 254.051. LIABILITY OF PURCHASER AND ASSIGNEE. The 21-7 original purchaser and any subsequent approved assignee are jointly 21-8 and severally liable, but the original purchaser is primarily 21-9 liable for payment of all money due under the original contract of 21-10 sale and purchase. 21-11 Sec. 254.052. REINSTATEMENT OF CONTRACT. (a) The original 21-12 purchaser or any approved assignee is entitled to reinstate a 21-13 contract of sale and purchase of forfeited land at any time before 21-14 the date on which the commissioner orders the land to be advertised 21-15 for resale or for lease for mineral development. After that date, 21-16 the commissioner may approve or deny any request for reinstatement 21-17 of the contract of sale and purchase. The commissioner by rule may 21-18 authorize a designee to approve or deny a request for 21-19 reinstatement. 21-20 (b) The commissioner by rule may establish priorities if 21-21 more than one person requests reinstatement of the same contract. 21-22 (c) Anyone permitted to reinstate a contract must make 21-23 arrangements acceptable to the commissioner for the payment of all 21-24 delinquent installments, penalties, fees, and other costs incident 21-25 to the reinstatement. 21-26 Sec. 254.053. RESALE AFTER FORFEITURE. The commissioner may 21-27 resell forfeited land under terms and conditions and at the time 22-1 and in the manner prescribed by the commissioner's rules. The 22-2 commissioner may reject any and all bids and offers. If a person 22-3 whose bid or offer is accepted by the commissioner subsequently 22-4 refuses to execute a contract of sale or comply with any other 22-5 condition of the sale, the money the person submitted with the bid 22-6 or offer is forfeited and shall be deposited in the state treasury 22-7 to the credit of the fund. 22-8 (Sections 254.054-254.060 reserved for expansion 22-9 SUBCHAPTER E. INSURANCE 22-10 Sec. 254.061. INSURANCE ON IMPROVEMENTS REQUIRED. (a) Each 22-11 purchaser shall carry insurance on the improvements on the property 22-12 under contract of purchase that the commissioner considers 22-13 necessary. A purchaser's failure to carry the required insurance 22-14 subjects the purchaser to forfeiture of rights under the contract 22-15 as provided by Subchapter D of this chapter. 22-16 (b) The commissioner shall adopt rules the commissioner 22-17 considers necessary to enforce this section. 22-18 Sec. 254.062. CREDIT LIFE AND DISABILITY INSURANCE. (a) 22-19 The commissioner may enter into a master contract with one or more 22-20 insurance companies authorized to do business in this state to 22-21 provide: 22-22 (1) group life insurance coverage paying the debt due 22-23 to the state on death of a person purchasing land under the 22-24 program; or 22-25 (2) group disability insurance to pay any loan 22-26 installments that become due and are unpaid because of illness or 22-27 unemployment of a person purchasing land under the program. 23-1 (b) In addition to provisions required by the Insurance Code 23-2 and other applicable law, the master contract must provide that: 23-3 (1) life or disability insurance coverage, as 23-4 applicable, will be offered by the insurer to any purchaser without 23-5 requiring a physical examination; and 23-6 (2) a purchaser may not be denied coverage because the 23-7 purchaser is disabled at the time of application for coverage. 23-8 (c) A policy contract must be approved by the Commissioner 23-9 of Insurance under the Insurance Code and shall express and control 23-10 the contractual relationship between the parties to the contract. 23-11 (d) A person purchasing land under the program may not be 23-12 required to accept an offer of life or disability insurance 23-13 coverage, and refusal by the person to accept an offer of coverage 23-14 is not a ground for the commissioner to refuse to enter into a 23-15 contract of sale and purchase with the person. 23-16 (e) The total insurance coverage under this subchapter for 23-17 any person in the group may not at any time exceed the person's 23-18 indebtedness under this chapter. The total insurance coverage may 23-19 not exceed the amount provided by the master contract. 23-20 (f) The commissioner may collect or provide for collection 23-21 of the premium for insurance coverage in a reasonable manner. 23-22 (g) If a person in the group dies during the term insurance 23-23 coverage is in force, the benefits of the coverage shall be paid to 23-24 the commissioner for credit to the fund, and the indebtedness due 23-25 under this chapter is canceled. 23-26 (h) The master contract may not prohibit cancellation by the 23-27 insurer of the entire contract on reasonable notice to the 24-1 commissioner but must prohibit cancellation of the individual 24-2 coverage except as provided in this section. 24-3 (i) The master contract may provide that coverage terminates 24-4 when a person purchasing land under the program reaches the age of 24-5 65 years. The insurance coverage shall be terminated for any 24-6 person in the group on: 24-7 (1) the satisfaction of the person's indebtedness to 24-8 the commissioner; 24-9 (2) the commissioner's approval of a transfer of 24-10 interest in the land being purchased; or 24-11 (3) failure to make timely payment of the premium to 24-12 be paid for the coverage. 24-13 (j) If coverage is terminated for a member of the group for 24-14 failure to make a timely premium payment, renewal coverage is 24-15 subject to evidence of insurability as required by the insurer and 24-16 to payment of the premiums due plus any penalty that may be 24-17 provided. 24-18 (Sections 254.063-254.070 reserved for expansion 24-19 SUBCHAPTER F. OFFENSES; PENALTIES 24-20 Sec. 254.071. FALSE OR FICTITIOUS WRITTEN STATEMENT. (a) A 24-21 person commits an offense if the person knowingly or intentionally 24-22 makes, publishes, passes, files, or uses any false, fictitious, or 24-23 forged paper, document, contract, affidavit, application, 24-24 assignment, or other written instrument relating to the purchase, 24-25 sale, or resale of land under this chapter or in connection with 24-26 any transaction under this chapter. 24-27 (b) An offense under this section is a felony of the third 25-1 degree. 25-2 Sec. 254.072. FRAUD. (a) A person commits an offense if 25-3 the person defrauds a purchaser of rights or benefits under this 25-4 chapter or uses this chapter to defraud the state by an act of 25-5 fraud, duress, deceit, coercion, or misrepresentation. 25-6 (b) An offense under this section is a felony of the third 25-7 degree. 25-8 SECTION 2. Chapter 163, Natural Resources Code, is repealed. 25-9 SECTION 3. Subchapter F, Chapter 254, Agriculture Code, as 25-10 added by this Act, applies only to an offense committed on or after 25-11 the effective date of this Act. For purposes of this section, an 25-12 offense is committed before the effective date of this Act if any 25-13 element of the offense occurs before the effective date. 25-14 SECTION 4. (a) On the effective date of this Act, the 25-15 powers, duties, and obligations of the Veterans Land Board relating 25-16 to the Farm and Ranch Finance Program, other than administration of 25-17 the farm and ranch program fund, are transferred to the Department 25-18 of Agriculture, and the Veterans Land Board shall transfer all 25-19 property and records relating to the program in its custody to the 25-20 Department of Agriculture. 25-21 (b) On the transfer of all property and records under 25-22 Subsection (a) of this section: 25-23 (1) a rule, form, or policy adopted by the Veterans 25-24 Land Board relating to the Farm and Ranch Finance Program becomes a 25-25 rule, form, or policy of the Department of Agriculture; and 25-26 (2) a contract of sale with the Veterans Land Board 25-27 becomes a contract with the Department of Agriculture. 26-1 SECTION 5. This Act takes effect September 1, 1993. 26-2 SECTION 6. The importance of this legislation and the 26-3 crowded condition of the calendars in both houses create an 26-4 emergency and an imperative public necessity that the 26-5 constitutional rule requiring bills to be read on three several 26-6 days in each house be suspended, and this rule is hereby suspended.