By: Nixon S.J.R. No. 14
SENATE JOINT RESOLUTION
1-1 proposing a constitutional amendment authorizing a voluntary,
1-2 consensual encumbrance on a business homestead for the purpose of
1-3 an equity loan.
1-4 BE IT RESOLVED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 50, Article XVI, Texas Constitution, is
1-6 amended to read as follows:
1-7 Sec. 50. (a) The homestead of a family, or of a single
1-8 adult person, shall be, and is hereby protected from forced sale,
1-9 for the payment of all debts except for:
1-10 (1) the purchase money thereof, or a part of such
1-11 purchase money;
1-12 (2)[,] the taxes due thereon;
1-13 (3)[,] an owelty of partition imposed against the
1-14 entirety of the property by a court order or by a written agreement
1-15 of the parties to the partition, including a debt of one spouse in
1-16 favor of the other spouse resulting from a division or an award of
1-17 a family homestead in a divorce proceeding;
1-18 (4)[,] the refinance of a lien against a homestead,
1-19 including a federal tax lien resulting from the tax debt of both
1-20 spouses, if the homestead is a family homestead, or from the tax
1-21 debt of the owner;
1-22 (5)[, or for] work and material used in constructing
1-23 improvements thereon, if [and in this last case only when] the work
2-1 and material are contracted for in writing, with the consent of
2-2 both spouses, in the case of a family homestead, given in the same
2-3 manner as is required in making a sale and conveyance of the
2-4 homestead; or
2-5 (6) an equity loan on a business homestead as provided
2-6 by Section 50a of this article.
2-7 (b) The [nor may the] owner or claimant of the property
2-8 claimed as homestead, if married, may not sell or abandon the
2-9 homestead without the consent of the other spouse, given in such
2-10 manner as may be prescribed by law.
2-11 (c) No mortgage, trust deed, or other lien on the homestead
2-12 shall ever be valid, except for a debt described by this section,
2-13 whether such mortgage, or trust deed, or other lien, shall have
2-14 been created by the owner alone, or together with his or her
2-15 spouse, in case the owner is married. All pretended sales of the
2-16 homestead involving any condition of defeasance shall be void. A
2-17 purchaser or lender for value without actual knowledge may
2-18 conclusively rely on an affidavit that designates other property as
2-19 the homestead of the affiant and that states that the property to
2-20 be conveyed or encumbered is not the homestead of the affiant.
2-21 SECTION 2. Article XVI, Texas Constitution, is amended by
2-22 adding Section 50a to read as follows:
2-23 Sec. 50a. (a) An equity loan may be secured by a business
2-24 homestead. A lender may not require or accept a borrower's
2-25 homestead, regardless of whether the homestead was previously
3-1 encumbered by an existing equity loan, as collateral on a debt not
3-2 described by Section 50(a) of this article.
3-3 (b) A lender may not accelerate the remaining payments of an
3-4 equity loan or demand payment of the loan in full because of a
3-5 decrease in the market value of the business homestead securing the
3-6 equity loan, unless the decrease in the market value is caused by
3-7 substantial damage or destruction to the homestead, a condemnation
3-8 or other taking of the homestead, the discovery of an environmental
3-9 hazard on the homestead, or the use of the homestead in a manner
3-10 that constitutes waste on the homestead or a nuisance. This
3-11 section does not prohibit a lender, if permitted by the loan
3-12 documents, from refusing to make additional advances under an
3-13 equity loan if the value of the homestead decreases, regardless of
3-14 the cause of the decrease.
3-15 (c) A lender may not accelerate the remaining payments of an
3-16 equity loan or demand payment of the loan in full because of the
3-17 borrower's default under any other indebtedness not secured by a
3-18 prior valid encumbrance on the business homestead, regardless of
3-19 whether the indebtedness is owed to the lender. This section does
3-20 not prohibit a lender, if permitted by the loan documents, from
3-21 refusing to make additional advances under an equity loan if the
3-22 borrower has defaulted in the performance or payment of another
3-23 indebtedness owed to the lender or another creditor.
3-24 (d) The principal amount of an equity loan plus the
3-25 aggregate total of the outstanding balances of other indebtedness
4-1 secured by valid encumbrances of record against the business
4-2 homestead may not exceed 90 percent of the fair market value of the
4-3 homestead on the date the equity loan is made.
4-4 (e) In this section:
4-5 (1) "Business homestead" means a homestead used
4-6 exclusively for business purposes. This term does not include
4-7 homestead property designated for agricultural use as provided by
4-8 Subchapter C, Chapter 23, Tax Code.
4-9 (2) "Equity loan" means a loan made for a purpose
4-10 other than a purpose listed in Section 50(a)(1)-(5) of this
4-11 article.
4-12 SECTION 3. The following temporary provision is added to the
4-13 Texas Constitution:
4-14 TEMPORARY PROVISION. (a) This temporary provision applies
4-15 to the constitutional amendment proposed by the 75th Legislature,
4-16 Regular Session, 1997, authorizing a voluntary, consensual
4-17 encumbrance on a business homestead.
4-18 (b) The constitutional amendment takes effect May 1, 1998.
4-19 (c) This temporary provision takes effect on the adoption of
4-20 the amendment by the voters and expires May 2, 1998.
4-21 SECTION 4. This proposed constitutional amendment shall be
4-22 submitted to the voters at an election to be held November 4, 1997.
4-23 The ballot shall be printed to permit voting for or against the
4-24 proposition: "The constitutional amendment extending homeowners'
4-25 rights to borrow voluntarily against the equity in and establish a
5-1 valid lien on their business homesteads."