79R9322 KCR-D
By: Lucio S.B. No. 1095
A BILL TO BE ENTITLED
AN ACT
relating to circumstances under which an executory contract for
conveyance is prohibited and to the rights of certain purchasers
under executory contracts for conveyance.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 5.062(a), Property Code, is amended to
read as follows:
(a) This subchapter applies only to a transaction involving
an executory contract for conveyance of more than one acre of real
property used or to be used as the purchaser's residence or as the
residence of a person related to the purchaser within the second
degree by consanguinity or affinity, as determined under Chapter
573, Government Code. [For purposes of this subchapter, a lot
measuring one acre or less is presumed to be residential property.]
SECTION 2. Chapter 5, Property Code, is amended by adding
Subchapter E to read as follows:
SUBCHAPTER E. EXECUTORY CONTRACT FOR CONVEYANCE
PROHIBITED FOR CERTAIN TRANSACTIONS
Sec. 5.101. APPLICABILITY OF SUBCHAPTER. This subchapter
applies only to the sale or purchase of one acre or less of real
property that is intended to be used as the purchaser's residence or
as the residence of a person related to the purchaser within the
second degree by consanguinity or affinity, as determined under
Chapter 573, Government Code.
Sec. 5.102. PROHIBITED USE OF EXECUTORY CONTRACT FOR
CONVEYANCE; LIQUIDATED DAMAGES. (a) Notwithstanding any other law
and except as provided by this subchapter, a person may not sell or
purchase real property described by Section 5.101 under an
executory contract for conveyance.
(b) A person that sells real property in violation of this
section is liable to a purchaser under an executory contract for
conveyance for:
(1) liquidated damages in the amount of $2,000; and
(2) reasonable attorney's fees.
Sec. 5.103. NOTICE OF RIGHT TO CONVERT CONTRACT. (a) Not
later than the first day after the date a seller and a purchaser
enter into an executory contract that is prohibited by Section
5.102, the seller shall notify the purchaser in writing of the
purchaser's right to convert the purchaser's interest in property
under the executory contract in accordance with Section 5.104.
(b) A notice sent under Subsection (a) must:
(1) be:
(A) in 14-point, or larger, font;
(B) in the same language as the language of the
negotiations that preceded the execution of the executory contract;
(C) hand delivered or sent by first class mail;
and
(D) sent by certified mail, return receipt
requested, in addition to any mailing made under Paragraph (C); and
(2) contain:
(A) an explanation that certain executory
contracts for conveyance, including the one executed by the
purchaser and the seller, are prohibited in certain circumstances;
(B) a disclosure that a person that sells real
property under an executory contract for conveyance in violation of
this subchapter is liable to the purchaser under the executory
contract for liquidated damages in the amount of $2,000; and
(C) a summary of the entire process through which
the purchaser may convert the purchaser's interest in property
under the executory contract in accordance with Section 5.104.
(c) A seller who violates this section is liable to the
purchaser for liquidated damages of:
(1) $10 a day for each day that the seller has not
provided the notice required by this section; and
(2) reasonable attorney's fees.
Sec. 5.104. RIGHT TO CONVERT CONTRACT. (a) In addition to
collecting liquidated damages under Section 5.102(b), a purchaser
under an executory contract prohibited by this subchapter is
entitled to convert the purchaser's interest in property under the
executory contract in accordance with this section.
(b) If the purchaser delivers to the seller of property
covered by an executory contract a promissory note that is equal in
amount to the balance of the total amount owed by the purchaser to
the seller under the contract and that contains the same interest
rate, due dates, and late fees as the contract:
(1) the seller shall execute a deed containing any
warranties required by the contract and conveying to the purchaser
recorded, legal title of the property; and
(2) the purchaser shall simultaneously execute a deed
of trust that:
(A) contains the same terms as the contract
regarding the purchaser's and seller's duties concerning the
property;
(B) secures the purchaser's payment and
performance under the promissory note and deed of trust; and
(C) conveys the property to the trustee, in
trust, and confers on the trustee the power to sell the property if
the purchaser defaults on the promissory note or the terms of the
deed of trust.
(c) On or before the 30th day after the date the seller
receives a promissory note under Subsection (b) that substantially
complies with that subsection, the seller shall deliver to the
purchaser a written report providing complete and accurate
information concerning the chain of title to the property covered
by the executory contract and any claims or liens that may exist
against the property and:
(1) deliver to the purchaser a written explanation
that legally justifies why the seller refuses to convert the
purchaser's interest into recorded, legal title under Subsection
(b); or
(2) communicate with the purchaser to schedule a
mutually agreeable day and time to execute the deed and deed of
trust under Subsection (b).
(d) A seller who violates this section is liable to the
purchaser in the same manner and for the same amount as a seller who
violates Section 5.079 is liable to a purchaser. This subsection
does not limit or affect any other rights or remedies a purchaser
has under other law.
(e) On the last date that all of the conveyances described
by Subsection (b) are executed, the executory contract:
(1) is considered completed; and
(2) has no further effect.
(f) The appropriate use of forms published by the Texas Real
Estate Commission for transactions described by this section
constitutes compliance with this section.
SECTION 3. The changes in law made by this Act apply only to
an executory contract for conveyance that is entered into on or
after the effective date of this Act. An executory contract for
conveyance that is entered into before the effective date of this
Act is governed by the law in effect immediately before the
effective date of this Act, and that law is continued in effect for
that purpose.
SECTION 4. This Act takes effect September 1, 2005.