BILL ANALYSIS
S.B. 1387
By: Wentworth (Horn)
May 3, 1995
Committee Report (Unamended)
BACKGROUND
Currently, a property owner is authorized to allow another person
to pay the ad valorem taxes on the owner's property. The person
who pays the taxes is entitled to receive a lien on the property
for which the taxes were paid. Section 32.06, Tax Code, limits the
maximum rate of interest on such lien transfers to 10 percent.
PURPOSE
S.B. 1387 raises the maximum interest rate for tax lien transfers,
and clarifies language regarding tax lien transfers.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does not expressly
grant any additional rulemaking authority to a state officer,
department, agency, or institution.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Chapter 32, Tax Code, Section 32.06, and adds
Section 32.065 as follows:
Section 32.06. TRANSFER OF TAX LIEN. (a)-(b) Makes
nonsubstantive changes.
(c) Provides that the transferee of a tax lien and any
successor in interest is entitled to foreclose the lien in the
manner provided by law for foreclosure of tax liens, or in a
manner specified in Section 51.002, Property Code.
(e) Prohibits a person from charging a rate of interest
greater than 18 percent. The current limit is 10 percent a
year.
(f) Provides that the holder of a preexisting lien on
property encumbered by a tax lien is entitled to pay the
holder of the tax lien the amount paid for the lien, plus
interest accrued at the rate set forth in Subsection (e) and
recording expenses, and becomes subrogated to all rights in
the lien.
(g) Prohibits a suit to foreclose a tax lien transferred from
being instituted within one year from the date on which the
lien is recorded in all counties in which the property is
located, unless the contract between the owner of the property
and the transferee provides otherwise.
(i) Raises the limit on the amount of the judgement which can
be recovered by a person redeeming the property, from 110
percent of the judgement to 118 percent.
Section 32.065. CONTRACT FOR FORECLOSURE OF TAX LIEN. (a)
Sets forth the provisions to which this section does not
abridge the right of an owner of real property to agree in
such contract.
(b) Sets forth the authorized provisions of a contract
entered into under Subsection (a): (1) an event of default;
and (2) notice of acceleration.
(c) Provides that a transferee of a tax lien is subrogated to
and is entitled to exercise any rights and or remedy of the
transferring taxing unit, including or related to foreclosure
or judicial sale.
(d) Prohibits Chapters 5, and 15, and Sections 1.07(d)(1) and
(f), Title 79, Revised Statutes (Article 5069-1.01 et seq.,
V.T.C.S.) from applying to any transaction covered by this
section. Provides that the transferee of a tax lien under
this section is not required to obtain a license under Title
79, Revised Statutes.
(e) Provides that if in a contract under this section, a
person contracts for, charges, or receives a rate or amount of
interest that exceeds the rate allowed by this section, the
amount of the penalty for which the person is obligated is
determined in the manner provided by Chapter 8, Title 79,
Revised Statutes (Article 5069-8.01 et seq., V.T.C.S.).
(f) Requires the first written communication by the lender to
its prospective borrower to disclose the type of additional
charges or fees that may be incurred by the borrower in
connection with the loan or contract.
SECTION 2. Amends Section 34.02, Tax Code, by adding Subsection
(e), to define "taxes."
SECTION 3. Effective Date: September 1, 1995, and applies to
transfers of tax liens on or after that date.
SECTION 4. Emergency Clause.
SUMMARY OF COMMITTEE ACTION
Pursuant to an announcement on the House floor on May 3, 1995, the
committee met in a formal meeting, and S.B. 1387 was laid out
before the committee. By a record vote of 7 ayes, 0 nays, 0
present not voting and 4 absent, the committee voted to report S.B.
1387 to the House without amendment with the recommendation that it
be sent to the Local & Consent Calendar, and that it do pass.