By: Gallegos S.B. No. 1444

A BILL TO BE ENTITLED

AN ACT

relating to the receivership and rehabilitation of certain property.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subsections (a), (b), and (h) through (r), Section 214.003, Local Government Code, are amended to read as follows:

(a) A home-rule municipality may bring an action in district court against an owner of [residential] property that is not in substantial compliance with the municipal ordinances regarding:

(1) fire protection;

(2) structural integrity;

(3) zoning; or

(4) disposal of refuse.

(b) Except as provided by Subsection (c), the court may appoint as a receiver for the property a nonprofit organization with a demonstrated record of rehabilitating [residential] properties if the court finds that:

(1) the structures on the property are in violation of the standards set forth in Section 214.001(b) and an ordinance described by Subsection (a);

(2) notice of violation was given to the record owner of the property; and

(3) a public hearing as required by Section 214.001(d) has been conducted.

(h) On the completion of the restoration to the property of the minimum code standards of the municipality or guidelines for rehabilitating historic property or prior to petitioning the court for termination of the receivership under Subsection (m):

(1) the receiver shall file with the court a full accounting of all costs and expenses incurred in the repairs, including reasonable costs for labor and supervision, and all income received from the property;

(2) the receiver may claim as a part of the accounting filed under Subdivision (1) a receivership fee of 10 percent calculated from all costs and expenses incurred in the repairs, including reasonable costs for labor and supervision;

(3) if the income exceeds the total of the cost and expense of rehabilitation and the receivership fee, the rehabilitated property shall be restored to the owners and any net income shall be returned to the owners; and

(4) [(3)] if the total of the costs and expenses and the receivership fee exceeds [exceed] the income received during the receivership, the receiver may [shall] maintain control of the property until the time all rehabilitation and maintenance costs and the receivership fee are recovered or until the termination of the receivership under this section.

(i) The receiver shall have a lien on the property under receivership for all of the receiver's unreimbursed costs and expenses and the receivership fee.

(j) Any record lienholder may, after initiation of an action by a municipality:

(1) intervene in the action; and

(2) request appointment as a receiver:

(A) under the same conditions as the nonprofit organization; and

(B) on a demonstration to the court of an ability and willingness to rehabilitate the property.

(k) [(j)] For the purposes of this section, the interests and rights of an unrecorded lienholder or unrecorded property owner are, in all respects, inferior to the rights of a duly appointed receiver.

(l) [(k)] The court may not appoint a receiver for any property that[:]

[(1)] is an owner-occupied, single-family residence[; or

[(2) is zoned nonresidential and used in a nonresidential character].

(m) [(l)] A receiver appointed by a district court under this section, or the home-rule municipality that filed the action under which the receiver was appointed, may petition the court to terminate the receivership and order the sale of the property[:

[(1) if the receiver has been in control of the property for more than two years and no legal owner has been identified after a diligent search; or

[(2)] after the receiver has been in control of the property for more than one year [three years], if an owner has been [identified and] served with notice [notices] but has failed to assume control or repay all rehabilitation and maintenance costs and the receivership fee of the receiver.

(n) [(m)] In the action, the record owners and any lienholders of record of the property shall be served with personal notice of the proceedings or, if not found after due diligence, may be served by publication. Actual service or service by publication on all record owners and lienholders of record constitutes notice to all unrecorded owners and lienholders.

(o) [(n)] The court may order the sale of the property if the court finds that:

(1) notice was given to each record owner of the property and each lienholder of record;

(2) [the receiver has been in control of the property for more than two years and no legal owner has been identified after a diligent search, or] the receiver has been in control of the property for more than one year [three years] and an owner [has been identified but] has failed to repay all rehabilitation and maintenance costs and the receivership fee of the receiver; and

(3) no lienholder of record has intervened in the action and offered to repay the costs and receivership fee of the receiver and assume control of the property.

(p) [(o)] The court shall order the sale to be conducted by the petitioner in the same manner that a sale is conducted under Chapter 51, Property Code. If the record owners and lienholders are identified, notice of the date and time of the sale must be sent in the same manner as provided by Chapter 51, Property Code. If the owner cannot be located after due diligence, the owner may be served notice by publication. The receiver may bid on the property at the sale and may use a receiver's lien established under Subsection (i) as credit towards the purchase. The petitioner shall make a report of the sale to the court.

(q) [(p)] The court shall confirm the sale and order a distribution of the proceeds of the sale in the following order:

(1) court costs;

(2) costs and expenses of the receiver and any receiver's lien established under Subsection (i); and

(3) valid liens.

(r) [(q)] Any remaining sums must be paid to the owner. If the owner is not identified or cannot be located, the court shall order the remaining sums to be deposited in an interest-bearing account with the district clerk's office in the district in which the action is pending, and the clerk shall hold the funds as provided by other law.

(s) [(r)] After the proceeds are distributed, the court shall award fee title to the purchaser subject to any recorded bona fide liens that were not paid by the proceeds of the sale.

SECTION 2. The change in law made by this Act to Section 214.003, Local Government Code, applies to a receivership established on or after the effective date of this Act. A receivership established before the effective date of this Act is governed by the law in effect when the receivership was established, and the former law is continued in effect for that purpose.

SECTION 3. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2007.