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


Senate Research Center   S.B. 198
77R2934 PAM-DBy: Moncrief
Intergovernmental Relations
1/29/2001
As Filed


DIGEST AND PURPOSE 

Currently, parts 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.  As proposed, 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. 

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. SELLER'S REMEDIES ON
DEFAULT. Deletes text regarding purchaser payment in certain situations.
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 used or to be used as the purchaser's
residence only if the purchaser fails to cure the default within the 60-day
period described by Subdivision (1). Provides that Section 5.066 does not
apply. 

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 used or to be used as the purchaser's
residence to avoid the enforcement of a remedy described by that section by
complying with the terms of the contract on or before the 60th day after
the date notice is given under Section 5.064, rather than up to the date of
compliance. Deletes text regarding expiration of the applicable period
provided by Section 5.061. 

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 and nonsubstantive changes. 

Redesignates existing Section 5.094 as Section 5.069. SELLER'S DISCLOSURE
OF PROPERTY CONDITION. Deletes text regarding back taxes owed on the
property. 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; 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 public or private suit brought under
Subchapter E (Deceptive Trade Practices and Consumer Protection), Chapter
17, Business & Commerce Code; and 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 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 other prior oral agreements
between the parties are superseded by and merged into 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.  

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. PURCHASER'S RIGHT TO
PLEDGE INTEREST IN PROPERTY ON CONTRACTS ENTERED INTO BEFORE SEPTEMBER 1,
1995. 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 60th 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. Deletes text
regarding 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 used
or to be used as the purchaser's residence 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 or remedy the condition on the
property for which the proceeds were disbursed if proceeds under an
insurance policy, binder, or other coverage are disbursed.  Provides that
the seller's failure to comply with Subsection (c) entitles the purchaser
to cancel and rescind the executory contract and receive a full refund of
all payments made to the seller. Provides that Subsections (d) and (e) do
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. Makes conforming changes. 

Redesignates existing Section 5.102 as Section 5.079. TITLE TRANSFER.
Provides that a seller who violates Subsection (a) is liable to the
purchaser, rather than subject to a penalty, for liquidated damages in
certain amounts, and reasonable attorney's fees. 

 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.