SRC-JEC S.B. 198 77(R)BILL ANALYSIS


Senate Research CenterS.B. 198
By: Moncrief
Intergovernmental Relations
6/28/2001
Enrolled


DIGEST AND PURPOSE 

Portions of the Property Code, relating to executory contracts for the
conveyance of real property, need to be restructured to make a number of
changes, including making contracts for deed protections apply statewide
and requiring disclosure of tax payment and insurance coverage information
by sellers. S.B. 198 makes these and other changes, consolidating and
restructuring Chapter 5D and E of the Property Code. 

RULEMAKING AUTHORITY

This bill does not expressly grant any additional rulemaking authority to a
state officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Subchapters D and E, Chapter 5, Property Code, as follows:

 Redesignates existing Section 5.065 as Section 5.061. New heading:
DEFINITION.  

Redesignates existing Section 5.091 as Section 5.062. APPLICABILITY.
Deletes text regarding an executory contract that covers real property, per
capita income, and location within 200 miles of an international border.
Provides that this subchapter applies to a transaction involving an
executory contract for conveyance of real property used or to be used as
the residence of a person related to the purchaser within the second degree
by consanguinity or affinity, as determined under Chapter 573 (Degrees of
Relationship; Nepotism Prohibitions), Government Code.  Provides that this
subchapter does not apply to a transaction involving the sale of state
land.  Provides that Sections 5.066 and 5.068-5.080 do not apply to a
transaction involving an executory contract for conveyance if the purchaser
of the property is related to the seller within the second degree and has
waived the applicability of those sections in a written agreement. 

Redesignates existing Section 5.062 as Section 5.063. NOTICE. Requires
notice under this section to be in writing and delivered by registered or
certificate mail, return receipt requested. Deletes text regarding notice
by other writing. 

Redesignates existing Section 5.061 as Section 5.064. New heading:
SELLER'S REMEDIES ON DEFAULT. Authorizes a seller to enforce the remedy of
rescission or of forfeiture and acceleration against a purchaser in default
under an executory contract for conveyance of real property if:  the seller
notifies the purchaser of the purchaser's right to cure the default within
the 60-day period described by Section 5.065; the purchaser fails to cure
the default within the 60day period; and Section 5.066 does not apply.
Deletes language regarding property used or to be used as the purchaser's
residence and payment of the purchase price by certain times. 

Redesignates existing Section 5.063 as Section 5.065. RIGHT TO CURE
DEFAULT. Authorizes a purchaser in default under an executory contract for
the conveyance of real  property to avoid the enforcement of a remedy
described by Section 5.064, rather than that section, by complying with the
terms of the contract on or before the 60th day after the date notice is
given under that section, rather than up to the date of compliance. Deletes
text regarding expiration of the applicable period provided by Section
5.061.  Makes a conforming change. 

Redesignates existing Section 5.101 as Section 5.066. EQUITY PROTECTION;
SALE OF PROPERTY.  Requires the seller to warrant that the property is free
from any encumbrance. Deletes text regarding an action involving a bona
fide purchaser. Makes conforming changes. 

Redesignates existing Section 5.064 as Section 5.067. PLACEMENT OF LIEN FOR
UTILITY SERVICE. 

Redesignates existing Section 5.093 as Section 5.068. New heading: FOREIGN
LANGUAGE REQUIREMENT. Requires the seller, if the negotiations preceding
execution of an executory contract are primarily in a language other than
English, to provide a copy in that language of all written documents
relating to the transaction, including the contract, disclosure notices,
annual accounting statements, and a notice of default required by this
subchapter. Makes conforming changes. 

Redesignates existing Section 5.094 as Section 5.069. SELLER'S DISCLOSURE
OF PROPERTY CONDITION. Deletes text regarding back taxes owed on property
and substitutes "property" for "land" in a written notice required to be
attached to an executory contract. 

Sec. 5.070. SELLER'S DISCLOSURE OF TAX PAYMENTS AND INSURANCE COVERAGE.
Requires the seller, before an executory contract is signed by the
purchaser, to provide the purchaser with a tax certificate from the
collector for each taxing unit that collects taxes due on the property as
provided by Section 31.08 (Tax Certificate), Tax Code; and a legible copy
of any insurance policy, binder, or other evidence relating to the property
that indicates the name of the insurer and the insured; a description of
the property insured; and the amount for which the property is insured.
Provides that the seller's failure to provide information required by this
section is a false, misleading, or deceptive act or practice within the
meaning of Section 17.46 (Deceptive Trade Practices Unlawful), Business &
Commerce Code, and is actionable in a suit brought under Chapter 17E
(Deceptive Trade Practices and Consumer Protection), Business & Commerce
Code; and that failure entitles the purchaser to cancel and rescind the
executory contract and receive a full refund of all payments made to the
seller. Provides that Subsection (b) does not limit the purchaser's remedy
against the seller for other false, misleading, or deceptive acts or
practices actionable in a suit brought under Chapter 17E, Business &
Commerce Code. 

Redesignates existing Section 5.095 as Section 5.071. SELLER'S DISCLOSURE
OF FINANCING TERMS. Requires the seller, before an executory contract is
signed by the purchaser,  to provide to the purchaser a written statement
that specifies the fact that the seller is prohibited from charging 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. 

Sec. 5.072. ORAL AGREEMENTS PROHIBITED. Provides that an executory contract
is not enforceable unless the contract is in writing and signed by the
party to be bound or by the party's authorized representative. Provides
that the rights and obligations of the parties to a contract are determined
solely from the written contract, and any prior oral agreements between the
parties are superseded by and merged into the contract. Prohibits an
executory contract from being varied by any oral agreements or discussions
that occur before or contemporaneously with the execution of the contract.
Requires the seller to include in a  separate document or in a provision of
the contract a certain statement printed in certain type or certain
typewritten letters. Provides that the seller's failure to provide the
notice required by this section 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 Chapter 17E,
Business and Commerce Code.  Provides that the failure also entitles the
purchaser to cancel and rescind the executory contract and receive a full
refund of payments made to the seller.  Provides that Subsection (e) does
not limit the purchaser's remedy against the seller for other false,
misleading, or deceptive acts or practices actionable in a suit brought
under Chapter 17E, Business & Commerce Code.  

Redesignates existing Section 5.096 as Section 5.073. CONTRACT TERMS
PROHIBITED. Makes a conforming change. 

Redesignates existing Section 5.097 as Section 5.074. PURCHASER'S RIGHT TO
CANCEL CONTRACT WITHOUT CAUSE. 

Redesignates existing Section 5.098 as Section 5.075. New heading:
PURCHASER'S RIGHT TO PLEDGE INTEREST IN PROPERTY ON CONTRACTS ENTERED INTO
BEFORE SEPTEMBER 1, 2001. Authorizes a purchaser, on an executory contract
entered into before September 1, 2001, rather than 1995, to pledge the
interest in the property, which accrues pursuant to Section 5.066, only to
obtain a loan for improving the property.  Makes a conforming change. 

Redesignates existing Section 5.099 as Section 5.076. RECORDING
REQUIREMENTS. Requires the seller, except as provided by Subsection (b), to
record the executory contract, including the attached disclosure statement
required on or before the 30th day after the date the contract is executed.
Makes a conforming change. 

Redesignates existing Section 5.100 as Section 5.077. ANNUAL ACCOUNTING
STATEMENT. Requires the statement to include the amounts paid to insure the
property on the purchaser's behalf if collected by the seller; if the
property has been damaged and the seller has received insurance proceeds,
an accounting of the proceeds applied to the property; and if the seller
has changed insurance coverage, a legible copy of the current policy,
binder, or other evidence that satisfies the requirements of Section
5.070(a)(2). Provides that a seller who fails to comply with Subsection (a)
is liable to the purchaser for 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 and reasonable attorney's fees. Deletes text
regarding deducting 15 percent of each monthly payment and reimbursement to
the seller for the amount deducted. Makes conforming and nonsubstantive
changes. 

Sec. 5.078. DISPOSITION OF INSURANCE PROCEEDS. Requires the named insured
under an insurance policy, binder, or other coverage relating to property
subject to an executory contract for the conveyance of real property to
inform the insurer, not later than the 10th day after the date the coverage
is obtained or the contract executed, whichever is later, of the executory
contract for conveyance and the term of the contract; and the name and
address of the other party to the contract. Requires an insurer who
disburses proceeds under an insurance policy, binder, or other coverage
relating to property that has been damaged to issue the proceeds jointly to
the purchaser and the seller designated in the contract. Requires the
purchaser and seller to ensure that the proceeds are used to repair,
remedy, or improve the condition on the property.  Provides that the
seller's or the purchaser's failure to comply with Subsection (c)  is a
false, misleading or deceptive act or practice and is actionable in a suit
brought under Chapter 17E, Business & Commerce Code.  Provides that
Subsection (d) does not limit either party's remedy for other false,
misleading, or deceptive acts or practices actionable in a suit brought
under Chapter 17E, Business & Commerce Code. 

 Redesignates existing Section 5.102 as Section 5.079. TITLE TRANSFER.
Provides that a seller who violates Subsection (a) is liable to the
purchaser for, rather than subject to a penalty of, liquidated damages in
certain amounts, and reasonable attorney's fees.  Provides that if a person
to whom a seller's property interest passes by will or intestate succession
is required to obtain a court order to clarify the person's status as an
heir or to clarify the status of the seller or the property before the
person may convey good and indefeasible title to the property, the court in
which the action is pending is authorized to waive payment of the
liquidated damages and attorney's fees under Subsection (b) if the court
finds that the person is pursuing the action to establish good and
indefeasible title with reasonable diligence. 

 Redesignates existing Section 5.103 as Section 5.080. LIABILITY FOR
DISCLOSURES. 

SECTION 2. Repealer: the heading to Subchapter E (Requirements for
Executory Contract for Conveyance Applicable to Certain Counties), Chapter
5, Property Code.  
Repealer: Section 5.092 (Determination and Notice of Applicability),
Property Code. 

SECTION 3. Effective date: September 1, 2001.
           Makes application of this Act prospective, with exceptions.