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.