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A BILL TO BE ENTITLED
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AN ACT
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relating to lease-option contracts. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 5.062(a), Property Code, is amended to |
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read as follows: |
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(a) This subchapter applies only to a transaction involving |
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an executory contract for conveyance of real property used or to be |
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used as the purchaser's residence or as the residence of a person |
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related to the purchaser within the second degree by consanguinity |
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or affinity, as determined under Chapter 573, Government Code. For |
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purposes of this subchapter, and only for the purposes of this |
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subchapter: |
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(1) a lot measuring one acre or less is presumed to be |
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residential property; and |
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(2) a lease-option contract, as defined by Section |
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5.201 [an option to purchase real property that includes or is
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combined or executed concurrently with a residential lease
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agreement, together with the lease], is considered an executory |
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contract for conveyance of real property if the contract is subject |
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to this subchapter under Section 5.202. |
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SECTION 2. Chapter 5, Property Code, is amended by adding |
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Subchapter G to read as follows: |
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SUBCHAPTER G. LEASE-OPTION CONTRACTS |
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Sec. 5.201. DEFINITIONS. In this subchapter: |
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(1) "Default" means: |
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(A) the failure to make a timely payment under a |
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lease-option contract; or |
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(B) a material breach of a term of the |
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lease-option contract. |
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(2) "Lease-option contract" means a contract to |
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purchase residential property that the purchaser or a person |
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related to the purchaser within the second degree by consanguinity |
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or affinity, as determined under Chapter 573, Government Code, |
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occupies under the terms of a written lease accompanied by a written |
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option to purchase the property during the lease term. |
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Sec. 5.202. APPLICABILITY. (a) This subchapter applies |
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only to a lease-option contract that is for a term of three years or |
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less. Subchapter D does not apply to a lease-option contract to |
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which this subchapter applies. If a lease-option contract |
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described by Subsection (c) is for a term longer than three years, |
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Subchapter D applies to the contract and this subchapter does not |
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apply to the contract. |
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(b) Unless otherwise excluded, this subchapter applies to a |
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lease-option contract for real property used or to be used as the |
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purchaser's principal residence or as the principal residence of a |
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person related to the purchaser within the second degree by |
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consanguinity or affinity, as determined under Chapter 573, |
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Government Code. |
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(c) This subchapter and Subchapter D do not apply to the |
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following transactions: |
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(1) contracts drafted by the Broker-Lawyer Committee |
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of the Texas Real Estate Commission and adopted by the commission |
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for use in effecting the purchase or sale of residential housing or |
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lots unless the contract specifically provides that the contract is |
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intended to be a lease-option contract subject to this subchapter; |
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(2) the sale of state land; |
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(3) a sale of land by: |
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(A) the Veterans' Land Board; |
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(B) this state or a political subdivision of this |
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state; or |
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(C) an instrumentality, public corporation, or |
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other entity created to act on behalf of this state or a political |
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subdivision of this state, including an entity created under |
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Chapter 303, 392, or 394, Local Government Code; |
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(4) a lease-option contract that provides for the |
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delivery of a deed from the seller to the purchaser on or before the |
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third anniversary of the date of the final execution of the |
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lease-option contract; or |
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(5) a transaction involving a lease-option contract if |
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the purchaser of the property: |
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(A) is related to the seller of the property |
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within the second degree by consanguinity or affinity, as |
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determined under Chapter 573, Government Code; and |
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(B) has waived the applicability of those |
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sections in a written agreement. |
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Sec. 5.203. CONSTRUCTION WITH OTHER LAW. (a) Except as |
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provided by Subsection (b), the provisions of this subchapter and |
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Chapter 92 apply to the portion of a lease-option contract |
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described by Sections 5.201 and 5.202 that is a residential lease |
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agreement. |
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(b) After a tenant exercises an option to purchase leased |
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property under a residential lease described by Subsection (a), |
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Chapter 92 no longer applies to the lease. |
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Sec. 5.204. NOTICE. (a) Notice under Section 5.205 must be |
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in writing and must be delivered by registered or certified mail, |
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return receipt requested. The notice must be conspicuous and |
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printed in 14-point boldfaced type or 14-point uppercase |
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typewritten letters, and must include on a separate page the |
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statement: |
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YOU ARE NOT COMPLYING WITH THE TERMS OF THE CONTRACT TO BUY YOUR |
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PROPERTY. UNLESS YOU TAKE THE ACTION SPECIFIED IN THIS NOTICE BY |
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(date) THE SELLER HAS THE RIGHT TO TAKE POSSESSION OF YOUR PROPERTY. |
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NOTICE |
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(b) The notice must also: |
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(1) identify and explain the remedy the seller intends |
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to enforce; |
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(2) if the purchaser has failed to make a timely |
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payment, specify: |
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(A) the delinquent amount, itemized into |
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principal and interest; |
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(B) any additional charges claimed, including |
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late charges or attorney's fees; and |
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(C) the period to which the delinquency and |
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additional charges relate; and |
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(3) if the purchaser has failed to comply with a term |
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of the contract, identify the term violated and the action required |
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to cure the violation. |
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(c) Notice by mail is given when it is mailed to the |
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purchaser's residence or place of business. The affidavit of a |
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person knowledgeable of the facts indicating that notice was given |
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is prima facie evidence of notice in an action involving a |
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subsequent bona fide purchaser for value if the purchaser is not in |
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possession of the real property and if the stated time to avoid the |
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forfeiture has expired. A bona fide subsequent purchaser for value |
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who relies on the affidavit under this subsection shall take title |
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free and clear of the contract. |
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Sec. 5.205. SELLER'S REMEDIES ON DEFAULT. A seller may |
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enforce the remedy of rescission or of forfeiture and acceleration |
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against a purchaser in default under a lease-option contract only |
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if: |
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(1) the seller notifies the purchaser of: |
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(A) the seller's intent to enforce a remedy under |
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this section; and |
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(B) the purchaser's right to cure the default |
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within the 30-day period described by Section 5.206; |
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(2) the purchaser fails to cure the default within the |
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30-day period described by Section 5.206; and |
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(3) Section 5.207 does not apply. |
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Sec. 5.206. RIGHT TO CURE DEFAULT. Notwithstanding an |
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agreement to the contrary, a purchaser in default under a |
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lease-option contract may avoid the enforcement of a remedy |
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described by Section 5.204(b) by complying with the terms of the |
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contract on or before the 30th day after the date notice is given |
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under that section. |
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Sec. 5.207. EQUITY PROTECTION; SALE OF PROPERTY. (a) If a |
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purchaser defaults after the purchaser has paid 40 percent or more |
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of the amount due under the lease-option contract, the seller is |
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granted the power to sell, through a trustee designated by the |
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seller, the purchaser's interest in the property as provided by |
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this section. The seller may not enforce the remedy of rescission |
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or of forfeiture and acceleration. |
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(b) The seller shall notify a purchaser of a default under |
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the contract and allow the purchaser at least 60 days after the date |
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notice is given to cure the default. The notice must be provided as |
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prescribed by Section 5.204 except that the notice must substitute |
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the following statement: |
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YOU ARE NOT COMPLYING WITH THE TERMS OF THE CONTRACT TO BUY YOUR |
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PROPERTY. UNLESS YOU TAKE THE ACTION SPECIFIED IN THIS NOTICE BY |
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(date) A TRUSTEE DESIGNATED BY THE SELLER HAS THE RIGHT TO SELL YOUR |
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PROPERTY AT A PUBLIC AUCTION. |
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NOTICE |
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(c) The trustee or a substitute trustee designated by the |
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seller must post, file, and serve a notice of sale and the county |
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clerk shall record and maintain the notice of sale as prescribed by |
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Section 51.002. A notice of sale is not valid unless it is provided |
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after the period to cure has expired. |
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(d) The trustee or a substitute trustee designated by the |
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seller must conduct the sale as prescribed by Section 51.002. The |
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seller must: |
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(1) convey to a purchaser at a sale conducted under |
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this section good and indefeasible title to the real property; and |
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(2) warrant that the property is free from any |
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encumbrance. |
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(e) The remaining balance of the amount due under the |
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lease-option contract is the debt for purposes of a sale under this |
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section. If the proceeds of the sale exceed the debt amount, the |
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seller shall disburse the excess funds to the purchaser under the |
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lease-option contract. If the proceeds of the sale are |
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insufficient to extinguish the debt amount, the seller's right to |
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recover the resulting deficiency is subject to Sections 51.003, |
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51.004, and 51.005 unless a provision of the lease-option contract |
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releases the purchaser under the contract from liability. |
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(f) The affidavit of a person knowledgeable of the facts |
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that states that the notice was given and the sale was conducted as |
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provided by this section is prima facie evidence of those facts. A |
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purchaser for value who relies on an affidavit under this |
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subsection acquires title to the property free and clear of the |
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lease-option contract. |
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(g) If a purchaser defaults before the purchaser has paid 40 |
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percent of the amount due, the seller may enforce the remedy of |
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rescission or of forfeiture and acceleration of the indebtedness if |
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the seller complies with the notice requirements of Section 5.204. |
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Sec. 5.208. PLACEMENT OF LIEN FOR UTILITY SERVICE. |
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Notwithstanding any terms of a contract to the contrary, the |
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placement of a lien for the reasonable value of improvements to |
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residential real estate for purposes of providing utility service |
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to the property shall not constitute a default under the terms of a |
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lease-option contract. |
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Sec. 5.209. FOREIGN LANGUAGE REQUIREMENT. If the |
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negotiations that precede the execution of a lease-option contract |
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are conducted primarily in a language other than English, the |
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seller shall provide a copy in that language of all written |
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documents relating to the transaction, including the contract, |
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disclosure notices, annual accounting statements, and a notice of |
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default required by this subchapter. |
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Sec. 5.210. SELLER'S DISCLOSURE OF PROPERTY |
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CONDITION. (a) Before a lease-option contract is signed by the |
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purchaser, the seller shall provide the purchaser with: |
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(1) a survey that was completed within the past year or |
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a plat of a current survey of the real property; |
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(2) a legible copy of any document, or a copy as it |
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appears in the official real property records, that describes an |
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encumbrance or other claim, including a restrictive covenant or |
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easement, that affects title to the real property; and |
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(3) a written notice attached to the contract |
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informing the purchaser of the condition of the property that must, |
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at a minimum, be executed by the seller and purchaser and read |
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substantially similar to the following: |
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WARNING |
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IF ANY OF THE ITEMS BELOW HAVE NOT BEEN CHECKED, YOU MAY NOT BE ABLE |
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TO LIVE ON THE PROPERTY. |
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SELLER'S DISCLOSURE NOTICE |
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CONCERNING THE PROPERTY AT (street address or legal description and |
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city) |
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THIS DOCUMENT STATES CERTAIN APPLICABLE FACTS ABOUT THE PROPERTY |
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YOU ARE CONSIDERING PURCHASING. |
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CHECK ALL THE ITEMS THAT ARE APPLICABLE OR TRUE: |
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_____ The property is in a recorded subdivision. |
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_____ The property has water service that provides potable water. |
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_____ The property has sewer service. |
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_____ The property has been approved by the appropriate municipal, |
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county, or state agency for installation of a septic system. |
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_____ The property has electric service. |
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_____ The property is not in a floodplain. |
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_____ The roads to the boundaries of the property are paved and |
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maintained by: |
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____ the seller; |
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____ the owner of the property on which the road exists; |
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____ the municipality; |
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____ the county; or |
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____ the state. |
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____ No individual or entity other than the seller: |
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(1) owns the property; |
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(2) has a claim of ownership to the property; or |
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(3) has an interest in the property. |
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____ No individual or entity has a lien filed against the property. |
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____ There are no restrictive covenants, easements, or other title |
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exceptions or encumbrances that prohibit construction of a house on |
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the property. |
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NOTICE: SELLER ADVISES PURCHASER TO: |
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(1) OBTAIN A TITLE ABSTRACT OR TITLE |
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COMMITMENT COVERING THE PROPERTY AND HAVE |
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THE ABSTRACT OR COMMITMENT REVIEWED BY AN |
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ATTORNEY BEFORE SIGNING A CONTRACT OF THIS |
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TYPE; AND |
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(2) PURCHASE AN OWNER'S POLICY OF TITLE |
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INSURANCE COVERING THE PROPERTY. |
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________________________________________________________________ |
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(Date) (Signature of Seller) |
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________________________________________________________________ |
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(Date) (Signature of Purchaser) |
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(b) If the property is not located in a recorded |
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subdivision, the seller shall provide the purchaser with a separate |
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disclosure form stating that utilities may not be available to the |
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property until the subdivision is recorded as required by law. |
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(c) If the seller advertises property for sale under a |
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lease-option contract, the advertisement must disclose information |
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regarding the availability of water, sewer, and electric service. |
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(d) The seller's failure to provide information required by |
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this section: |
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(1) is a false, misleading, or deceptive act or |
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practice within the meaning of Section 17.46, Business & Commerce |
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Code, and is actionable in a public or private suit brought under |
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Subchapter E, Chapter 17, Business & Commerce Code; and |
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(2) entitles the purchaser to cancel and rescind the |
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lease-option contract and receive a full refund of all payments |
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made to the seller. |
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(e) Subsection (d) does not limit the purchaser's remedy |
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against the seller for other false, misleading, or deceptive acts |
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or practices actionable in a suit brought under Subchapter E, |
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Chapter 17, Business & Commerce Code. |
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Sec. 5.211. SELLER'S DISCLOSURE OF TAX PAYMENTS AND |
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INSURANCE COVERAGE. (a) Before a lease-option contract is signed |
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by the purchaser, the seller shall provide the purchaser with: |
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(1) a tax certificate from the collector for each |
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taxing unit that collects taxes due on the property as provided by |
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Section 31.08, Tax Code; and |
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(2) a legible copy of any insurance policy, binder, or |
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other evidence of coverage relating to the property that indicates: |
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(A) the name of the insurer and the insured; |
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(B) a description of the property insured; and |
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(C) the amount for which the property is insured. |
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(b) The seller's failure to provide information required by |
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this section: |
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(1) is a false, misleading, or deceptive act or |
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practice within the meaning of Section 17.46, Business & Commerce |
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Code, and is actionable in a public or private suit brought under |
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Subchapter E, Chapter 17, Business & Commerce Code; and |
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(2) entitles the purchaser to cancel and rescind the |
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lease-option contract and receive a full refund of all payments |
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made to the seller. |
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(c) Subsection (b) does not limit the purchaser's remedy |
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against the seller for other false, misleading, or deceptive acts |
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or practices actionable in a suit brought under Subchapter E, |
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Chapter 17, Business & Commerce Code. |
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Sec. 5.212. SELLER'S DISCLOSURE OF FINANCING |
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TERMS. Before a lease-option contract is signed by the purchaser, |
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the seller shall provide to the purchaser a written statement that |
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specifies: |
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(1) the purchase price of the property; |
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(2) the interest rate charged under the contract; |
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(3) the dollar amount, or an estimate of the dollar |
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amount if the interest rate is variable, of the interest charged for |
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the term of the contract; |
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(4) the total amount of principal and interest to be |
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paid under the contract; |
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(5) the late charge, if any, that may be assessed under |
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the contract; and |
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(6) the fact that the seller may not charge a |
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prepayment penalty or any similar fee if the purchaser elects to pay |
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the entire amount due under the contract before the scheduled |
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payment date under the contract. |
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Sec. 5.213. ORAL AGREEMENTS PROHIBITED. (a) A |
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lease-option contract is not enforceable unless the contract is in |
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writing and signed by the party to be bound or by that party's |
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authorized representative. |
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(b) The rights and obligations of the parties to a contract |
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are determined solely from the written contract, and any prior oral |
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agreements between the parties are superseded by and merged into |
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the contract. |
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(c) A lease-option contract may not be varied by any oral |
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agreements or discussions that occur before or contemporaneously |
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with the execution of the contract. |
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(d) The seller shall include in a separate document or in a |
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provision of the contract a statement printed in 14-point boldfaced |
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type or 14-point uppercase typewritten letters that reads |
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substantially similar to the following: |
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THIS LEASE-OPTION CONTRACT REPRESENTS THE FINAL |
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AGREEMENT BETWEEN THE SELLER AND PURCHASER AND MAY NOT |
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BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, |
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OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE |
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ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. |
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________________________________________________________________ |
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(Date) (Signature of Seller) |
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________________________________________________________________ |
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(Date) (Signature of Purchaser) |
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(e) The seller's failure to provide the notice required by |
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this section: |
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(1) is a false, misleading, or deceptive act or |
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practice within the meaning of Section 17.46, Business & Commerce |
|
Code, and is actionable in a public or private suit brought under |
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Subchapter E, Chapter 17, Business & Commerce Code; and |
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(2) entitles the purchaser to cancel and rescind the |
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lease-option contract and receive a full refund of all payments |
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made to the seller. |
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(f) Subsection (e) does not limit the purchaser's remedy |
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against the seller for other false, misleading, or deceptive acts |
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or practices actionable in a suit brought under Subchapter E, |
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Chapter 17, Business & Commerce Code. |
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Sec. 5.214. CONTRACT TERMS, CERTAIN WAIVERS |
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PROHIBITED. (a) A seller may not include as a term of the |
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lease-option contract a provision that: |
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(1) imposes an additional late-payment fee that |
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exceeds eight percent of the monthly payment under the contract; |
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(2) prohibits the purchaser from pledging the |
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purchaser's interest in the property as security to obtain a loan to |
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place improvements, including utility improvements or fire |
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protection improvements, on the property; |
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(3) imposes a prepayment penalty or any similar fee if |
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the purchaser elects to pay the entire amount due under the contract |
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before the scheduled payment date under the contract; or |
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(4) increases the purchase price, imposes a fee or |
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charge of any type, or otherwise penalizes a purchaser leasing |
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property with an option to buy the property for requesting repairs |
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or exercising any other right under Chapter 92. |
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(b) A provision of the lease-option contract that purports |
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to waive a right or exempt a party from a liability or duty under |
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this subchapter is void. |
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Sec. 5.215. PURCHASER'S RIGHT TO CANCEL CONTRACT WITHOUT |
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CAUSE. (a) In addition to other rights or remedies provided by |
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law, the purchaser may cancel and rescind a lease-option contract |
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for any reason by sending by telegram or certified or registered |
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mail, return receipt requested, or by delivering in person a |
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signed, written notice of cancellation to the seller not later than |
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the 14th day after the date of the contract. |
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(b) If the purchaser cancels the contract as provided by |
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Subsection (a), the seller shall, not later than the 10th day after |
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the date the seller receives the purchaser's notice of |
|
cancellation: |
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(1) return to the purchaser the executed contract and |
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any property exchanged or payments made by the purchaser under the |
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contract; and |
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(2) cancel any security interest arising out of the |
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contract. |
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(c) The seller shall include in immediate proximity to the |
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space reserved in the lease-option contract for the purchaser's |
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signature a statement printed in 14-point boldfaced type or |
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14-point uppercase typewritten letters that reads substantially |
|
similar to the following: |
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YOU, THE PURCHASER, MAY CANCEL THIS CONTRACT AT ANY TIME DURING THE |
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NEXT TWO WEEKS. THE DEADLINE FOR CANCELING THE CONTRACT IS (date). |
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THE ATTACHED NOTICE OF CANCELLATION EXPLAINS THIS RIGHT. |
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(d) The seller shall provide a notice of cancellation form |
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to the purchaser at the time the purchaser signs the lease-option |
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contract that is printed in 14-point boldfaced type or 14-point |
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uppercase typewritten letters and that reads substantially similar |
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to the following: |
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(date of contract) |
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NOTICE OF CANCELLATION |
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YOU MAY CANCEL THE LEASE-OPTION CONTRACT FOR ANY REASON |
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WITHOUT ANY PENALTY OR OBLIGATION BY (date). |
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(1) YOU MUST SEND BY TELEGRAM OR CERTIFIED OR |
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REGISTERED MAIL, RETURN RECEIPT REQUESTED, OR DELIVER IN PERSON A |
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SIGNED AND DATED COPY OF THIS CANCELLATION NOTICE OR ANY OTHER |
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WRITTEN NOTICE TO (Name of Seller) AT (Seller's Address) BY (date). |
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(2) THE SELLER SHALL, NOT LATER THAN THE 10TH DAY AFTER |
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THE DATE THE SELLER RECEIVES YOUR CANCELLATION NOTICE: |
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(A) RETURN THE EXECUTED CONTRACT AND ANY PROPERTY |
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EXCHANGED OR PAYMENTS MADE BY YOU UNDER THE CONTRACT; AND |
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(B) CANCEL ANY SECURITY INTEREST ARISING OUT OF |
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THE CONTRACT. |
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I ACKNOWLEDGE RECEIPT OF THIS NOTICE OF CANCELLATION FORM. |
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________________________________________________________________ |
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(Date) (Purchaser's Signature) |
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I HEREBY CANCEL THIS CONTRACT. |
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________________________________________________________________ |
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(Date) (Purchaser's Signature) |
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(e) The seller may not request the purchaser to sign a |
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waiver of receipt of the notice of cancellation form required by |
|
this section. |
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Sec. 5.216. PURCHASER'S RIGHT TO PLEDGE INTEREST IN |
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PROPERTY ON CONTRACTS ENTERED INTO BEFORE SEPTEMBER 1, 2007. (a) |
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On a lease-option contract entered into before September 1, 2007, a |
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purchaser may pledge the interest in the property that accrues |
|
under Section 5.207 only to obtain a loan for improving the safety |
|
of the property or any improvements on the property. |
|
(b) Loans that improve the safety of the property and |
|
improvements on the property include loans for: |
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(1) improving or connecting a residence to water |
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service; |
|
(2) improving or connecting a residence to a |
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wastewater system; |
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(3) building or improving a septic system; |
|
(4) structural improvements in the residence; and |
|
(5) improved fire protection. |
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Sec. 5.217. RECORDING REQUIREMENTS. (a) Except as |
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provided by Subsection (b), the seller shall record the |
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lease-option contract, including the attached disclosure statement |
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required by Section 5.210, as prescribed by Title 3 on or before the |
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30th day after the date the contract is executed. |
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(b) Section 12.002(c) does not apply to a lease-option |
|
contract filed for record under this section. |
|
(c) If the lease-option contract is terminated for any |
|
reason, the seller shall record the instrument that terminates the |
|
contract. |
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(d) The county clerk shall collect the filing fee prescribed |
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by Section 118.011, Local Government Code. |
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Sec. 5.218. ANNUAL ACCOUNTING STATEMENT. (a) The seller |
|
shall provide the purchaser with an annual statement in January of |
|
each year for the term of the lease-option contract. If the seller |
|
mails the statement to the purchaser, the statement must be |
|
postmarked not later than January 31. |
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(b) The statement must include the following information: |
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(1) the amount paid under the contract; |
|
(2) the remaining amount owed under the contract; |
|
(3) the number of payments remaining under the |
|
contract; |
|
(4) the amounts paid to taxing authorities on the |
|
purchaser's behalf if collected by the seller; |
|
(5) the amounts paid to insure the property on the |
|
purchaser's behalf if collected by the seller; |
|
(6) if the property has been damaged and the seller has |
|
received insurance proceeds, an accounting of the proceeds applied |
|
to the property; and |
|
(7) if the seller has changed insurance coverage, a |
|
legible copy of the current policy, binder, or other evidence that |
|
satisfies the requirements of Section 5.211(a)(2). |
|
(c) A seller who conducts less than two transactions in a |
|
12-month period under this section and who fails to comply with |
|
Subsection (a) is liable to the purchaser for: |
|
(1) liquidated damages in the amount of $50 for each |
|
annual statement the seller fails to provide to the purchaser |
|
within the time required by Subsection (a); and |
|
(2) reasonable attorney's fees. |
|
(d) A seller who conducts two or more transactions in a |
|
12-month period under this section and who fails to comply with |
|
Subsection (a) is liable to the purchaser for: |
|
(1) liquidated damages in the amount of $100 a day for |
|
each day after January 31 that the seller fails to provide the |
|
purchaser with the statement, but not to exceed an amount equal to |
|
the fair market value of the property; and |
|
(2) reasonable attorney's fees. |
|
Sec. 5.219. DISPOSITION OF INSURANCE PROCEEDS. (a) The |
|
named insured under an insurance policy, binder, or other coverage |
|
relating to property subject to a lease-option contract shall |
|
inform the insurer, not later than the 10th day after the date the |
|
coverage is obtained or the contract executed, whichever is later, |
|
of: |
|
(1) the lease-option contract for conveyance and the |
|
term of the contract; and |
|
(2) the name and address of the other party to the |
|
contract. |
|
(b) An insurer who disburses proceeds under an insurance |
|
policy, binder, or other coverage relating to property that has |
|
been damaged shall issue the proceeds jointly to the purchaser and |
|
the seller designated in the contract. |
|
(c) If proceeds under an insurance policy, binder, or other |
|
coverage are disbursed, the purchaser and seller shall ensure that |
|
the proceeds are used to repair, remedy, or improve the condition on |
|
the property. |
|
(d) The failure of a seller or purchaser to comply with |
|
Subsection (c) 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 Subchapter |
|
E, Chapter 17, Business & Commerce Code. |
|
(e) Subsection (d) does not limit either party's remedy for |
|
other false, misleading, or deceptive acts or practices actionable |
|
in a suit brought under Subchapter E, Chapter 17, Business & |
|
Commerce Code. |
|
Sec. 5.220. TITLE TRANSFER. (a) The seller shall transfer |
|
recorded, legal title of the property covered by the lease-option |
|
contract to the purchaser not later than the 30th day after the date |
|
the seller receives the purchaser's final payment due under the |
|
contract. |
|
(b) A seller who violates Subsection (a) is liable to the |
|
purchaser for: |
|
(1) liquidated damages in the amount of: |
|
(A) $250 a day for each day the seller fails to |
|
transfer the title to the purchaser during the period that begins |
|
the 31st day and ends the 90th day after the date the seller |
|
receives the purchaser's final payment due under the contract; and |
|
(B) $500 a day for each day the seller fails to |
|
transfer title to the purchaser after the 90th day after the date |
|
the seller receives the purchaser's final payment due under the |
|
contract; and |
|
(2) reasonable attorney's fees. |
|
(c) 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 may 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. |
|
(d) In this section, "seller" includes a successor, |
|
assignee, personal representative, executor, or administrator of |
|
the seller. |
|
Sec. 5.221. LIABILITY FOR DISCLOSURES. For purposes of |
|
this subchapter, a disclosure required by this subchapter that is |
|
made by a seller's agent is a disclosure made by the seller. |
|
Sec. 5.222. RIGHT TO CONVERT CONTRACT. (a) A purchaser, at |
|
any time and without paying penalties or charges of any kind, is |
|
entitled to convert the purchaser's interest in property under a |
|
lease-option contract into recorded, legal title in accordance with |
|
this section. |
|
(b) If the purchaser tenders to the seller an amount of |
|
money equal to the balance of the total amount owed by the purchaser |
|
to the seller under the lease-option contract, the seller shall |
|
transfer to the purchaser recorded, legal title of the property |
|
covered by the contract. |
|
(c) Subject to Subsection (d), if the purchaser delivers to |
|
the seller of property covered by a lease-option 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 to 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. |
|
(d) On or before the 30th day after the date the seller |
|
receives a promissory note under Subsection (c) that substantially |
|
complies with that subsection, the seller shall: |
|
(1) deliver to the purchaser a written explanation |
|
that legally justifies the reason the seller refuses to convert the |
|
purchaser's interest into recorded, legal title under Subsection |
|
(c); or |
|
(2) communicate with the purchaser to schedule a |
|
mutually agreeable day and time to execute the deed and deed of |
|
trust under Subsection (c). |
|
(e) A seller who violates this section is liable to the |
|
purchaser in the same manner and amount as a seller who violates |
|
Section 5.220 is liable to a purchaser. This subsection does not |
|
limit or affect any other rights or remedies a purchaser has under |
|
other law. |
|
(f) On the last date that all conveyances described by |
|
Subsections (b) and (c) are executed, the lease-option contract: |
|
(1) is considered completed; and |
|
(2) has no further effect. |
|
(g) The appropriate use of forms published by the Texas Real |
|
Estate Commission for transactions described by this section |
|
constitutes compliance with this section. |
|
Sec. 5.223. REQUEST FOR BALANCE AND TRUSTEE. (a) A |
|
purchaser under a lease-option contract, on written request, is |
|
entitled to receive the following information from the seller: |
|
(1) as of the date of the request or another date |
|
specified by the purchaser, the amount owed by the purchaser under |
|
the contract; and |
|
(2) if applicable, the name and address of the seller's |
|
desired trustee for a deed of trust to be executed under Section |
|
5.222. |
|
(b) On or before the 30th day after the date the seller |
|
receives from the purchaser a written request for information |
|
described by Subsection (a), the seller shall provide to the |
|
purchaser a written statement of the requested information. |
|
(c) If the seller does not timely respond to a request made |
|
under this section, the purchaser may: |
|
(1) determine or pay the amount owed under the |
|
contract, including determining the amount necessary for a |
|
promissory note under Section 5.222; and |
|
(2) if applicable, select a trustee for a deed of trust |
|
under Section 5.222. |
|
(d) For purposes of Subsection (c)(2), a purchaser must |
|
select a trustee that has a residence or a place of business in the |
|
same county in which the property covered by the lease-option |
|
contract is located. |
|
(e) Not later than the 30th day after the date a seller |
|
receives notice of an amount determined by a purchaser under |
|
Subsection (c)(1), the seller may contest that amount by sending a |
|
written objection to the purchaser. An objection under this |
|
subsection must: |
|
(1) be sent to the purchaser by regular and certified |
|
mail; |
|
(2) include the amount the seller claims is the amount |
|
owed under the contract; and |
|
(3) be based on written records kept by the seller or |
|
the seller's agent that were maintained and regularly updated for |
|
the entire term of the lease-option contract. |
|
Sec. 5.224. RIGHT TO CANCEL CONTRACT FOR IMPROPER |
|
PLATTING. (a) Except as provided by Subsection (c), in addition to |
|
other rights or remedies provided by law, the purchaser may cancel |
|
and rescind a lease-option contract at any time if the purchaser |
|
learns that the seller has not properly subdivided or platted the |
|
property that is covered by the contract in accordance with state |
|
and local law. A purchaser canceling and rescinding a contract |
|
under this subsection must: |
|
(1) deliver a signed, written notice of the |
|
cancellation and rescission to the seller in person; or |
|
(2) send a signed, written notice of the cancellation |
|
and rescission to the seller by telegram or certified or registered |
|
mail, return receipt requested. |
|
(b) If the purchaser cancels the contract as provided under |
|
Subsection (a), the seller, not later than the 30th day after the |
|
date the seller receives the notice of cancellation and rescission, |
|
shall: |
|
(1) deliver in person or send by telegram or certified |
|
or registered mail, return receipt requested, to the purchaser a |
|
signed, written notice that the seller intends to properly |
|
subdivide or plat the property; or |
|
(2) return to the purchaser all payments of any kind |
|
made to the seller under the contract less the fair market rental |
|
value of the property during the term of the purchaser's occupancy |
|
and reimburse the purchaser for: |
|
(A) any payments the purchaser made to a taxing |
|
authority for the property; and |
|
(B) the value of any improvements made to the |
|
property by the purchaser. |
|
(c) A purchaser may not exercise the purchaser's right to |
|
cancel and rescind a lease-option contract under this section if, |
|
on or before the 90th day after the date the purchaser receives the |
|
seller's notice under Subsection (b)(1), the seller: |
|
(1) properly subdivides or plats the property; and |
|
(2) delivers in person or sends by telegram or |
|
certified or registered mail, return receipt requested, to the |
|
purchaser a signed, written notice providing evidence that the |
|
property has been subdivided or platted in accordance with state |
|
and local law. |
|
(d) The seller may not terminate the purchaser's possession |
|
of the property covered by the contract being canceled and |
|
rescinded before the seller pays the purchaser any money to which |
|
the purchaser is entitled under Subsection (b). |
|
Sec. 5.225. RIGHT TO DEDUCT. If a seller is liable to a |
|
purchaser under this subchapter, the purchaser, without taking |
|
judicial action, may deduct the amount owed to the purchaser by the |
|
seller from any amounts owed to the seller by the purchaser under |
|
the terms of a lease-option contract. The seller may recover from |
|
the purchaser any improper reduction plus court costs and |
|
attorney's fees by taking judicial action. |
|
SECTION 3. Sections 5.062(e), (f), and (g), Property Code, |
|
are repealed. |
|
SECTION 4. The change in law made by this Act applies only |
|
to a lease-option contract entered into on or after the effective |
|
date of this Act. A contract entered into before the effective date |
|
of this Act is governed by the law in effect immediately before that |
|
date, and that law is continued in effect for that purpose. |
|
SECTION 5. This Act takes effect September 1, 2007. |