80R4210 JPL-D

By: Wentworth S.B. No. 1520

A BILL TO BE ENTITLED

AN ACT

relating to ad valorem tax lien transfers.

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

SECTION 1. Section 32.06, Tax Code, is amended by amending Subsections (a-1), (a-2), (b), (c), (d), (f), (i), and (k) and adding Subsections (c-1) and (k-1) to read as follows:

(a-1) A person may authorize another person to pay the [delinquent] taxes imposed by a taxing unit on the person's real property by filing with the collector for the unit a sworn document stating:

(1) the authorization;

(2) the name and street address of the transferee authorized to pay the taxes of the property owner; and

(3) a description of the property by street address, if applicable, and legal description.

(a-2) A [After a] tax lien may be [is] transferred to the person who pays the taxes on behalf of the property owner under the authorization for:

(1) taxes that are delinquent at the time of payment; or

(2) taxes that are not delinquent at the time of payment if:

(A) the property is not subject to a recorded mortgage lien; or

(B) a tax lien transfer to the same person for one or more prior years on the same property has been executed and recorded [, taxes on the property that become due in subsequent tax years may be transferred before the delinquency date in the manner provided by Subsection (a-1)].

(b) If a transferee authorized to pay a property owner's taxes pursuant to Subsection (a-1) pays the taxes and any penalties and interest imposed, the collector shall issue a tax receipt to that transferee. In addition, the collector or a person designated by the collector shall certify [on the sworn document] that [payment of] the taxes and any penalties and interest on the subject [described] property and collection costs have [has] been paid [made] by the transferee on behalf of the property owner [liable for the taxes when imposed] and that the taxing unit's tax lien is transferred to that transferee. The collector shall attach to the certified statement [sworn document] the collector's seal of office or sign the statement [document] before a notary public and deliver [the sworn document,] a tax receipt[,] and the statement [affidavit] attesting to the transfer of the tax lien to the transferee within 30 days. The [sworn document,] tax receipt[,] and statement [affidavit attesting to the transfer of the tax lien] may be combined into one document. The collector shall [conspicuously] identify in a discrete field in the applicable property owner's [taxpayer's] account the date of the transfer of a tax lien transferred under this section. When a tax lien is released, the transferee shall file a release with the collector for recordation by the collector. The transferee may charge the property owner a reasonable fee for filing the release.

(c) Except as otherwise provided by this section, the transferee of a tax lien and any successor in interest is entitled to foreclose the lien:

(1) in the manner provided by law for foreclosure of tax liens; or

(2) in the manner specified in Rule 736, Texas Rules of Civil Procedure, except as provided by Subsection (c-1) of this section [Section 51.002, Property Code,] and Section 32.065 [of this code], if the property owner and the transferee enter into a contract that is secured by a lien on the property.

(c-1) If a transferee seeks to foreclose a tax lien on the property under Subsection (c)(2):

(1) the application for the foreclosure must:

(A) allege that the lien is an ad valorem tax lien instead of a lien created under Section 50, Article XVI, Texas Constitution; and

(B) state that the applicant does not seek a court order required by Section 50, Article XVI, Texas Constitution; and

(2) the holder of a preexisting lien must be provided at least 60 days' notice before the date of the proposed transfer.

(d) A transferee shall record [To be enforceable,] a tax lien transferred as provided by this section [must be recorded] with the [sworn] statement [and affidavit] attesting to the transfer of the tax lien as described by [in] Subsection (b) in the deed records of each county in which the property encumbered by the lien is located.

(f) When a loan secured by a transferred tax lien is 120 days delinquent, a notice of the delinquency must be sent by certified mail by the holder of the loan on the 120th day of delinquency or, if that day is not a working day, on the next working day to any holder of a preexisting lien on the property. The mortgage servicer of a preexisting lien on property encumbered by a tax lien transferred as provided by Subsection (b) is entitled, within six months after the date on which the notice is sent [tax lien is recorded in all counties in which the property is located], to obtain a release of the transferred tax lien by paying the transferee of the tax lien the amount owed under the contract between the property owner and the transferee. This right of redemption does not affect a right of redemption in a foreclosure proceeding described by Subsection (k) or (k-1). A transferee may charge a reasonable fee for a payoff statement that is requested after an initial payoff statement is provided. To be valid, the payoff statement must meet the requirements of a payoff statement defined by Section 12.017, Property Code.

(i) A foreclosure of a tax lien transferred as provided by this section may not be instituted within one year from the date on which the lien is recorded in all counties in which the property is located, unless the contract between the owner of the property and the transferee provides otherwise. [The transferee of a tax lien or any successor in interest must notify the holders of all recorded liens on the property before foreclosure in the same manner and within the same time frame as the transferee must notify the owner of the property under Section 51.002, Property Code.]

(k) Beginning on the date the foreclosure deed is recorded, the person whose property is sold as provided by Subsection (c) or the mortgage servicer of a prior recorded lien against the property is entitled to redeem the foreclosed property from the purchaser or the purchaser's successor by paying the purchaser or successor:

(1) 125 percent of the purchase price during the first year of the redemption period or 150 percent of the purchase price during the second year of the redemption period with cash or cash equivalent funds; and

(2) the amount reasonably spent by the purchaser in connection with the property as costs within the meaning of Section 34.21(g) and the legal judgment rate of return on that amount.

(k-1) The right of redemption provided by Subsection (k) may be exercised on or before the second anniversary of the date on which the purchaser's deed is filed of record if the property sold was the residence homestead of the owner, was land designated for agricultural use, or was a mineral interest. For any other property, the right of redemption must be exercised not later than the 180th day after the date on which the purchaser's deed is filed of record. If a person redeems the property as provided by Subsection (k) and this subsection, the purchaser at the tax sale or the purchaser's successor shall deliver a deed without warranty to the property to the person redeeming the property. If the person who owned the property at the time of foreclosure redeems the property, all liens existing on the property at the time of the tax sale remain in effect to the extent not paid from the sale proceeds.

SECTION 2. Sections 32.065(b) and (d), Tax Code, are amended to read as follows:

(b) Notwithstanding any agreement to the contrary, a contract entered into under Subsection (a) between a transferee and the property owner under Section 32.06 that is secured by a priority lien on the property shall provide for a power of sale and foreclosure in the manner provided by Section 32.06(c)(2) [under Chapter 51, Property Code,] and:

(1) an event of default;

(2) notice of acceleration;

(3) recording of the deed of trust or other instrument securing the contract entered into under Subsection (a) in each county in which the property is located;

(4) recording of the sworn document and affidavit attesting to the transfer of the tax lien;

(5) requiring the transferee to serve foreclosure notices on the property owner at the property owner's last known address in the manner required by Section 32.06(c)(2) [Sections 51.002(b), (d), and (e), Property Code,] or by a commercially reasonable delivery service that maintains verifiable records of deliveries for at least five years from the date of delivery; [and]

(6) requiring, at the time the foreclosure notices required by Subdivision (5) are served on the property owner, the transferee to serve a copy of the notice of sale in the same manner on the mortgage servicer or the holder of all recorded real property liens encumbering the property that includes on the first page, in 14-point boldfaced type or 14-point uppercase typewritten letters, a statement that reads substantially as follows: "PURSUANT TO TEXAS TAX CODE SECTION 32.06, THE FORECLOSURE SALE REFERRED TO IN THIS DOCUMENT IS A SUPERIOR TRANSFER TAX LIEN SUBJECT TO RIGHT OF REDEMPTION UNDER CERTAIN CONDITIONS. THE FORECLOSURE IS SCHEDULED TO OCCUR ON THE (DATE)."; and

(7) requiring that a contract entered into under Subsection (a) between a transferee and the property owner under Section 32.06 include, in 14-point boldfaced type or 14-point uppercase typewritten letters, a statement that reads substantially as follows: "IF YOU HAVE A FIRST LIEN MORTGAGE PREVIOUSLY RECORDED ON THE PROPERTY SUBJECT TO THIS CONTRACT, FAILURE TO PAY YOUR TAXES ON THE PROPERTY AND ENTERING INTO THIS CONTRACT MAY CONSTITUTE A DEFAULT UNDER THE TERMS OF YOUR MORTGAGE."

(d) Chapters 342, 343, and 346, Finance Code, do not apply to a transaction covered by this section. The transferee of a tax lien under this section is not required to obtain a license under Title 4, Finance Code.

SECTION 3. The following statutes are repealed:

(1) Section 32.06(a-3), Tax Code; and

(2) Section 32.065(g), Tax Code, as added by Chapter 406, Acts of the 79th Legislature, Regular Session, 2005.

SECTION 4. (a) The change in law made by this Act applies only to the transfer of an ad valorem tax lien that occurs on or after the effective date of this Act. A transfer of an ad valorem tax lien that occurs before the effective date of this Act is covered by the law in effect at the time the transfer occurred, and the former law is continued in effect for that purpose.

(b) The change in law made by this Act to Sections 32.06 and 32.065, Tax Code, applies to all foreclosures under those sections that occur on or after the effective date of this Act, other than a foreclosure under a transferred ad valorem tax lien that was transferred before the effective date of this Act pursuant to a contract that provided for specific foreclosure procedures under the law in effect at the time the contract was executed. A foreclosure under a transferred ad valorem tax lien that was transferred before the effective date of this Act pursuant to a contract that provided for specific foreclosure procedures under the law in effect at the time the contract was executed is governed by the law in effect at the time the contract was executed, and the former law is continued in effect for that purpose.

SECTION 5. This Act takes effect September 1, 2007.