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AN ACT
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relating to assignment of rents to holders of certain security |
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interests in real property. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subsection (d), Section 9.109, Business & |
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Commerce Code, is amended to read as follows: |
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(d) This chapter does not apply to: |
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(1) a landlord's lien, other than an agricultural |
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lien; |
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(2) a lien, other than an agricultural lien, given by |
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statute or other rule of law for services or materials, but Section |
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9.333 applies with respect to priority of the lien; |
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(3) an assignment of a claim for wages, salary, or |
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other compensation of an employee; |
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(4) a sale of accounts, chattel paper, payment |
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intangibles, or promissory notes as part of a sale of the business |
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out of which they arose; |
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(5) an assignment of accounts, chattel paper, payment |
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intangibles, or promissory notes that is for the purpose of |
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collection only; |
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(6) an assignment of a right to payment under a |
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contract to an assignee that is also obligated to perform under the |
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contract; |
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(7) an assignment of a single account, payment |
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intangible, or promissory note to an assignee in full or partial |
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satisfaction of a preexisting indebtedness; |
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(8) a transfer of an interest in or an assignment of a |
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claim under a policy of insurance, other than an assignment by or to |
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a health care provider of a health-care-insurance receivable and |
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any subsequent assignment of the right to payment, but Sections |
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9.315 and 9.322 apply with respect to proceeds and priorities in |
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proceeds; |
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(9) an assignment of a right represented by a |
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judgment, other than a judgment taken on a right to payment that was |
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collateral; |
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(10) a right of recoupment or set-off, but: |
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(A) Section 9.340 applies with respect to the |
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effectiveness of rights of recoupment or set-off against deposit |
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accounts; and |
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(B) Section 9.404 applies with respect to |
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defenses or claims of an account debtor; |
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(11) the creation or transfer of an interest in or lien |
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on real property, including a lease or rents, as defined by Section |
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64.001, Property Code [thereunder], the interest of a vendor or |
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vendee in a contract for deed to purchase an interest in real |
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property, or the interest of an optionor or optionee in an option to |
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purchase an interest in real property, except to the extent that |
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provision is made for: |
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(A) liens on real property in Sections 9.203 and |
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9.308; |
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(B) fixtures in Section 9.334; |
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(C) fixture filings in Sections 9.501, 9.502, |
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9.512, 9.516, and 9.519; and |
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(D) security agreements covering personal and |
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real property in Section 9.604; |
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(12) an assignment of a claim arising in tort, other |
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than a commercial tort claim, but Sections 9.315 and 9.322 apply |
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with respect to proceeds and priorities in proceeds; or |
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(13) an assignment of a deposit account, other than a |
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nonnegotiable certificate of deposit, in a consumer transaction, |
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but Sections 9.315 and 9.322 apply with respect to proceeds and |
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priorities in proceeds. |
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SECTION 2. Subtitle B, Title 5, Property Code, is amended by |
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adding Chapter 64 to read as follows: |
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CHAPTER 64. ASSIGNMENT OF RENTS TO LIENHOLDER |
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SUBCHAPTER A. GENERAL PROVISIONS |
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Sec. 64.001. DEFINITIONS. In this chapter: |
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(1) "Assignee" means a person entitled to enforce an |
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assignment of rents. |
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(2) "Assignment of rents" means a transfer of an |
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interest in rents in connection with an obligation secured by real |
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property from which the rents arise. The term does not include a |
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contract for a charge authorized by Section 306.101, Finance Code, |
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or a true sale of rents. |
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(3) "Assignor" means an owner of real property who |
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makes an assignment of rents arising from the property or that |
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owner's successor in interest. |
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(4) "Cash proceeds" means proceeds that are money, |
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checks, deposit accounts, or similar legal tender. |
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(5) "Day" means a calendar day. |
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(6) "Deposit account" means a demand, time, savings, |
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passbook, escrow, or similar account maintained with a bank, |
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savings bank, savings and loan association, credit union, trust |
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company, or other person. |
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(7) "Document" means information that is inscribed on |
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a tangible medium or that is stored on an electronic or other medium |
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and is retrievable in perceivable form. |
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(8) "Proceeds" means personal property that is |
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received, collected, or distributed on account of an obligation to |
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pay rents. |
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(9) "Rents" means: |
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(A) consideration payable for the right to |
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possess or occupy, or for possessing or occupying, real property; |
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(B) consideration payable to an assignor under a |
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policy of rental interruption insurance covering real property; |
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(C) claims arising out of a default in the |
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payment of consideration payable for the right to possess or occupy |
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real property; |
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(D) consideration payable to terminate an |
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agreement to possess or occupy real property; |
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(E) consideration payable to an assignor for |
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payment or reimbursement of expenses incurred in owning, operating, |
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and maintaining, or constructing or installing improvements on, |
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real property; or |
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(F) any other consideration payable under an |
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agreement relating to the real property that constitutes rents |
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under a law of this state other than this chapter. |
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(10) "Secured obligation" means an obligation secured |
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by an assignment of rents. |
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(11) "Security instrument" means: |
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(A) a security instrument, as that term is |
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defined by Section 51.0001; or |
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(B) an agreement containing an assignment of |
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rents. |
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(12) "Security interest" means an interest in property |
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that arises by agreement and secures an obligation. |
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(13) "Sign" includes to sign by an electronic |
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signature, as defined by Section 15.002. |
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(14) "Tenant" means a person who has an obligation to |
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pay for the right to possess or occupy, or for possessing or |
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occupying, real property. |
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Sec. 64.002. MANNER OF PROVIDING NOTICE. (a) A person may |
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provide a notice under this chapter: |
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(1) by transmitting the notice in the manner described |
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by Section 51.002(e); |
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(2) by depositing the notice with the United States |
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Postal Service or a commercially reasonable delivery service, |
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properly addressed to the intended recipient's address in |
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accordance with this section, with first class postage or other |
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cost of delivery paid; or |
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(3) by transmitting the notice to the intended |
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recipient by any means agreed to by the intended recipient. |
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(b) Except as agreed under Subsection (a)(3), notice to an |
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assignee must be sent to the assignee's address as provided in the |
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relevant security instrument or another document entered into for |
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the purposes of this section by the assignee and the person sending |
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the notice, unless a more recent address for notice has been given |
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in a manner provided by Subsection (a) by the assignee to the person |
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sending the notice or in a security instrument or other document |
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signed by the assignee. |
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(c) Except as agreed under Subsection (a)(3), notice to an |
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assignor must be sent to the assignor's address as provided in the |
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relevant security instrument or another document entered into for |
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the purposes of this section by the assignor and the person sending |
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the notice or an address for the assignor to which a notice of |
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default under Section 51.002 is properly sent, unless a more recent |
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address for notice has been given in a manner provided by Subsection |
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(a) by the assignor to the person sending the notice or in a |
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security instrument or other document signed by the assignor. |
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(d) Except as agreed under Subsection (a)(3), notice to a |
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tenant must be sent to: |
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(1) an address for notice to the tenant provided in a |
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signed document entered into by the tenant and the person providing |
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the notice, unless a more recent address for notice has been given |
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by the tenant in accordance with that document; |
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(2) if an address for notice described by Subdivision |
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(1) does not exist, the address provided in a written agreement |
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between the tenant and the assignor for notices to the tenant if the |
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person sending the notice has received a copy of that agreement or |
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has actual knowledge of the address for notice specified in that |
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agreement; or |
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(3) if an address for notice described by Subdivision |
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(1) or (2) does not exist, the tenant's address at the real property |
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covered by the security instrument. |
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(e) Notice provided in accordance with this section is |
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considered received on the earliest of: |
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(1) the date the notice is received by the person to |
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whom the notice is provided; |
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(2) the fifth day after the date the notice is provided |
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in accordance with Subsection (a)(2); or |
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(3) the date on which notice is considered provided in |
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accordance with an agreement made by the person to whom the notice |
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is provided for the purposes of this section. |
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[Sections 64.003-64.050 reserved for expansion] |
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SUBCHAPTER B. ASSIGNMENT OF RENTS |
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Sec. 64.051. SECURITY INSTRUMENT CREATES ASSIGNMENT OF |
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RENTS; ASSIGNMENT OF RENTS CREATES SECURITY INTEREST. (a) An |
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enforceable security instrument creates an assignment of rents |
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arising from real property securing an obligation under the |
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security instrument, unless the security instrument provides |
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otherwise or the security instrument is governed by Section |
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50(a)(6), (7), or (8), Article XVI, Texas Constitution. |
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(b) An assignment of rents creates a presently effective |
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security interest in all accrued and unaccrued rents arising from |
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the real property described in the document creating the |
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assignment, regardless of whether the document is in the form of an |
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absolute assignment, an absolute assignment conditioned on default |
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or another event, an assignment as additional security, or any |
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other form. The security interest in rents is separate and distinct |
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from any security interest held by the assignee in the real property |
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from which the rents arise. |
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(c) An assignment of rents does not reduce the secured |
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obligation except to the extent the assignee collects rents and |
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applies, or is obligated to apply, the collected rents to payment of |
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the secured obligation. |
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Sec. 64.052. RECORDATION AND PERFECTION OF SECURITY |
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INTEREST IN RENTS; PRIORITY OF INTERESTS IN RENTS. (a) A document |
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creating an assignment of rents may be recorded in the county in |
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which any part of the real property is located. |
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(b) On recordation of a document creating an assignment of |
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rents, the security interest in the rents is perfected. This |
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subsection prevails over a conflicting provision in the document |
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creating the assignment of rents or a law of this state other than |
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this chapter that prohibits or defers enforcement of the security |
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interest until the occurrence of a subsequent event, such as a |
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subsequent default of the assignor, the assignee's obtaining |
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possession of the real property, or the appointment of a receiver. |
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(c) Except as provided by Subsection (d), a perfected |
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security interest in rents has priority over the rights of a person |
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who, after the security interest is perfected, acquires: |
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(1) a lien on or other security interest in the rents |
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or the real property from which the rents arise; or |
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(2) an interest in the rents or the real property from |
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which the rents arise. |
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(d) An assignee of a perfected security interest in rents |
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has the same priority over the rights of a person described by |
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Subsection (c) with respect to future advances as the assignee has |
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with respect to the assignee's security interest in the real |
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property from which the rents arise. |
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Sec. 64.053. ENFORCEMENT OF SECURITY INTEREST IN RENTS |
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GENERALLY. (a) An assignee may enforce an assignment of rents |
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using one or more of the methods provided by Section 64.054 or |
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64.055 or another method sufficient to enforce the assignment under |
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a law of this state other than this chapter. |
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(b) On and after the date on which an assignee begins to |
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enforce an assignment of rents, the assignee is entitled to collect |
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all rents that: |
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(1) accrued before but remain unpaid on that date; and |
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(2) accrue on or after that date. |
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Sec. 64.054. ENFORCEMENT BY NOTICE TO ASSIGNOR. (a) After |
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default, or as otherwise agreed by the assignor, the assignee may |
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provide the assignor a notice demanding that the assignor pay the |
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assignee the proceeds of any rents that the assignee is entitled to |
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collect under Section 64.053. |
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(b) For the purposes of Section 64.053, the assignee begins |
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enforcement under this section on the date on which the assignee |
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provides notice to the assignor in accordance with Section 64.002. |
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(c) An assignee may not enforce an assignment of rents under |
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this section if, on the date the security instrument was signed and |
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the date of prospective enforcement, the real property constitutes |
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the assignor's homestead on which is located a one-family to |
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four-family dwelling. |
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Sec. 64.055. ENFORCEMENT BY NOTICE TO TENANT. (a) After |
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default, or as otherwise agreed by the assignor, the assignee may |
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provide to a tenant of real property that is subject to an |
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assignment of rents a notice demanding that the tenant pay to the |
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assignee all unpaid accrued rents and all unaccrued rents as they |
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accrue. The assignee shall provide a copy of the notice to the |
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assignor in the manner provided by Section 64.002. The notice must |
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substantially comply with the form prescribed by Section 64.056 and |
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be signed by the assignee or the assignee's authorized agent or |
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representative. |
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(b) For the purposes of Section 64.053(b), the assignee |
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begins enforcement under this section on the date on which the |
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tenant receives a notice complying with Subsection (a). |
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(c) Subject to Subsection (d) and any other claim or defense |
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that a tenant has under a law of this state other than this chapter, |
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after a tenant receives a notice under Subsection (a): |
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(1) the tenant is obligated to pay to the assignee all |
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unpaid accrued rents and all unaccrued rents as they accrue, unless |
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the tenant has previously received a notice under this section from |
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another assignee of rents provided by that assignee in accordance |
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with this section and the other assignee has not canceled that |
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notice; |
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(2) except as otherwise provided by a document signed |
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by the tenant, the tenant is not obligated to pay to an assignee |
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rent that was prepaid to the assignor before the tenant received the |
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notice under Subsection (a); |
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(3) unless the tenant occupies the premises as the |
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tenant's primary residence, the tenant is not discharged from the |
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obligation to pay rents to the assignee if the tenant pays rents to |
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the assignor; |
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(4) the tenant's payment to the assignee of rents then |
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due satisfies the tenant's obligation under the tenant's agreement |
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with the assignor to the extent of the payment made; and |
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(5) the tenant's obligation to pay rents to the |
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assignee continues until the earliest date on which the tenant |
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receives: |
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(A) a court order directing the tenant to pay the |
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rents in a different manner; |
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(B) a signed notice that a perfected security |
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instrument that has priority over the assignee's security interest |
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has been foreclosed; or |
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(C) a signed document from the assignee canceling |
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the assignee's notice. |
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(d) Except as otherwise provided by a document signed by the |
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tenant, a tenant who has received a notice under Subsection (a) is |
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not in default for nonpayment of rents that accrue during the 30 |
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days after the date the tenant receives the notice until the earlier |
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of: |
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(1) the 10th day after the date the next regularly |
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scheduled rental payment would be due; or |
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(2) the 30th day after the date the tenant receives the |
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notice. |
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(e) On receiving a notice from another creditor who has |
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priority under Section 64.052(c) that the creditor with priority |
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has conducted a foreclosure sale of the real property from which the |
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rents arise or is enforcing the creditor's interest in rents by |
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notice to the tenant, an assignee that has provided a notice to a |
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tenant under Subsection (a) shall immediately provide another |
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notice to the tenant canceling the earlier notice. |
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Sec. 64.056. FORM OF NOTICE TO TENANT. The following form |
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of notice, when properly completed, satisfies the requirements of |
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Section 64.055(a): |
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NOTICE TO PAY RENTS TO PERSON OTHER THAN LANDLORD |
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Tenant: [Name of tenant] |
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Property Occupied by Tenant (the "Premises"): [Address] |
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Landlord: [Name of landlord] |
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Assignee: [Name of assignee] |
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Address of Assignee and Telephone Number of Contact Person: |
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[Address of assignee] [Telephone number of person to contact] |
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1. Assignee is entitled to collect rents on the Premises |
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under [Name of Document] (the "Assignment of Rents") dated [Date of |
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Assignment of Rents], and recorded at [Recording Data] of [Name of |
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County] County, Texas. You may obtain additional information about |
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the Assignment of Rents and the Assignee's right to enforce it at |
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the address of the Assignee. |
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2. A default exists under the Assignment of Rents or related |
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documents between the Landlord and the Assignee. The Assignee is |
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entitled to collect rents from the Premises. |
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3. This notice affects your rights and obligations under the |
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agreement under which you occupy the Premises (your "Lease |
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Agreement"). Unless you have otherwise agreed in a document signed |
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by you, if your next scheduled rental payment is due within 30 days |
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after you receive this notice, you will not be in default under your |
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Lease Agreement for nonpayment of that rental payment until the |
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10th day after the due date of that payment or the 30th day |
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following the date you receive this notice, whichever occurs first. |
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4. You may consult a lawyer at your expense concerning your |
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rights and obligations under your Lease Agreement and the effect of |
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this notice. |
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5. You must pay to the Assignee at the Address of the |
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Assignee all rents under your Lease Agreement that are due and |
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payable on the date you receive this notice and all rents accruing |
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under your Lease Agreement after you receive this notice. |
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6. If you pay rents to the Assignee after receiving this |
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notice, the payment will satisfy your rental obligation to the |
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extent of that payment. |
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7. If you pay any rents to the Landlord after receiving this |
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notice, your payment to the Landlord will not discharge your rental |
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obligation, and the Assignee may hold you liable for that rental |
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obligation notwithstanding your payment to the Landlord unless you |
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occupy the Premises as your primary residence. |
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8. If you have previously received a notice from another |
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person who also holds an assignment of the rents due under your |
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Lease Agreement, you should continue paying your rents to the |
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person that sent that notice until that person cancels that notice. |
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Once that notice is canceled, you must begin paying rents to the |
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Assignee in accordance with this notice. |
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Name of assignee: __________ |
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By: [Officer/authorized agent of assignee] |
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Sec. 64.057. EFFECT OF ENFORCEMENT. The enforcement of an |
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assignment of rents by a method provided by Section 64.054 or |
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64.055, the application of proceeds by the assignee under Section |
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64.059 after enforcement, the payment of expenses under Section |
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64.058, or an action under Section 64.060 does not: |
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(1) make the assignee a mortgagee in possession of the |
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real property from which the rents arise; |
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(2) make the assignee an agent of the assignor; |
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(3) constitute an election of remedies that precludes |
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a later action to enforce the secured obligation; |
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(4) make the secured obligation unenforceable; |
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(5) limit any right available to the assignee with |
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respect to the secured obligation; or |
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(6) bar a deficiency judgment under any law of this |
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state governing or relating to deficiency judgments following the |
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enforcement of any encumbrance, lien, or security interest. |
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Sec. 64.058. APPLICATION OF PROCEEDS GENERALLY. Unless |
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otherwise agreed by the assignor, an assignee who collects rents |
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under this chapter or collects on a judgment in an action under |
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Section 64.060 shall apply the sums collected in the following |
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order to: |
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(1) reimbursement of the assignee's expenses of |
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enforcing the assignee's assignment of rents, including, to the |
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extent provided for by agreement by the assignor and not prohibited |
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by a law of this state other than this chapter, reasonable |
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attorney's fees and costs incurred by the assignee; |
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(2) reimbursement of any expenses incurred by the |
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assignee to protect or maintain the real property that is subject to |
|
the assignment of rents if the assignee elects or is required to |
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apply the proceeds to those expenses under Section 64.059; |
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(3) payment of the secured obligation; |
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(4) payment of any obligation secured by a subordinate |
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security interest or other lien on the rents if, before |
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distribution of the proceeds, the assignee receives a signed notice |
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from the holder of the interest or lien demanding payment of the |
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proceeds; and |
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(5) payment of any excess proceeds to the assignor. |
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Sec. 64.059. APPLICATION OF PROCEEDS TO EXPENSES OF |
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PROTECTING REAL PROPERTY; CLAIMS AND DEFENSES OF TENANT. |
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(a) Unless otherwise agreed by the assignee, an assignee that |
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collects rents following enforcement under Section 64.054 or 64.055 |
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is not obligated to apply the collected rents to the payment of |
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expenses of protecting or maintaining the real property subject to |
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an assignment of rents. |
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(b) Unless otherwise agreed by a tenant, the right of the |
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assignee to collect rents from the tenant is subject to the terms of |
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any agreement between the assignor and tenant and any claim or |
|
defense of the tenant arising from the assignor's nonperformance of |
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that agreement. |
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Sec. 64.060. TURNOVER OF RENTS; LIABILITY OF ASSIGNOR. |
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(a) If an assignor collects rents that the assignee is entitled to |
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collect under this chapter, the assignor shall turn over the |
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proceeds to the assignee not later than the 30th day after the date |
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the assignor receives notice from the assignee under Section 64.054 |
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or within another period prescribed by a security instrument or |
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other document signed by the assignor and approved by the assignee, |
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less any amount representing payment of expenses authorized by a |
|
security instrument or other document signed by the assignee. |
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(b) In addition to any other remedy available to the |
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assignee under a law of this state other than this chapter, if an |
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assignor does not turn over proceeds to the assignee as required by |
|
Subsection (a), the assignee may recover from the assignor in a |
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civil action: |
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(1) the proceeds, or an amount equal to the proceeds, |
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that the assignor was obligated to turn over under Subsection (a); |
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and |
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(2) reasonable attorney's fees and costs incurred by |
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the assignee to the extent provided for by an agreement between the |
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assignor and assignee and not prohibited by a law of this state |
|
other than this chapter. |
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(c) The assignee may maintain an action under Subsection (b) |
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with or without taking action to foreclose any security interest |
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that the assignee has in the real property. |
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(d) Unless otherwise agreed by an assignee that has priority |
|
under Section 64.052, a subordinate creditor that has enforced the |
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subordinate creditor's interest under Section 64.054 or 64.055 |
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before the priority assignee enforces the priority assignee's |
|
interests in rents is not obligated to turn over any proceeds that |
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the subordinate creditor collects before the subordinate creditor |
|
receives a signed notice from the priority assignee informing the |
|
subordinate creditor that the priority assignee is enforcing the |
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priority assignee's interest in rents. The subordinate creditor |
|
shall turn over to a priority assignee any proceeds that the |
|
subordinate creditor collects after the subordinate creditor |
|
receives the notice from the priority assignee that the priority |
|
assignee is enforcing the priority assignee's interest in rents not |
|
later than the 30th day after the date the subordinate creditor |
|
receives the notice or as otherwise agreed between the priority |
|
assignee and the subordinate creditor. Any proceeds subsequently |
|
collected by the subordinate creditor shall be turned over to the |
|
priority assignee not later than the 10th day after the date the |
|
proceeds are collected or as otherwise agreed between the priority |
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assignee and the subordinate creditor. |
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Sec. 64.061. ATTACHMENT, PERFECTION, AND PRIORITY OF |
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ASSIGNEE'S SECURITY INTEREST IN PROCEEDS. (a) An assignee's |
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security interest in rents attaches to identifiable proceeds. |
|
(b) If an assignee's security interest in rents is |
|
perfected, the assignee's security interest in identifiable cash |
|
proceeds is perfected. |
|
(c) Except as provided by Subsection (b), the provisions of |
|
Chapter 9, Business & Commerce Code, or the comparable Uniform |
|
Commercial Code provisions of another applicable jurisdiction, |
|
determine: |
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(1) whether an assignee's security interest in |
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proceeds is perfected; |
|
(2) the effect of perfection or nonperfection; |
|
(3) the priority of an interest in proceeds; and |
|
(4) the law governing perfection, the effect of |
|
perfection or nonperfection, and the priority of an interest in |
|
proceeds. |
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(d) For purposes of this chapter, cash proceeds are |
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identifiable if they are maintained in a segregated deposit account |
|
or, if commingled with other funds, to the extent they can be |
|
identified by a method of tracing, including application of |
|
equitable principles, that is permitted under a law of this state |
|
other than this chapter with respect to commingled funds. |
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Sec. 64.062. PRIORITY SUBJECT TO SUBORDINATION. This |
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chapter does not preclude subordination by agreement by a person |
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entitled to priority. |
|
SECTION 3. (a) Except as otherwise provided by this |
|
section, Chapter 64, Property Code, as added by this Act, governs |
|
the enforcement of an assignment of rents, the perfection and |
|
priority of a security interest in rents, and the attachment and |
|
perfection of a security interest in proceeds regardless of whether |
|
the document creating the assignment of rents was signed and |
|
delivered before the effective date of this Act. |
|
(b) Chapter 64, Property Code, as added by this Act, does |
|
not affect an action or other proceeding commenced before the |
|
effective date of this Act. |
|
(c) Subsection (a), Section 64.051, Property Code, as added |
|
by this Act, applies only to a security instrument signed and |
|
delivered on or after the effective date of this Act. A security |
|
instrument signed and delivered before the effective date of this |
|
Act is governed by the law that applied to the instrument |
|
immediately before that date, and the former law is continued in |
|
effect for that purpose. |
|
(d) Chapter 64, Property Code, as added by this Act, does |
|
not affect: |
|
(1) the enforceability of an assignee's security |
|
interest in rents or proceeds if, immediately before the effective |
|
date of this Act, that security interest was enforceable; |
|
(2) the perfection of an assignee's security interest |
|
in rents or proceeds if, immediately before the effective date of |
|
this Act, that security interest was perfected; or |
|
(3) the priority of an assignee's security interest in |
|
rents or proceeds with respect to the interest of another person if, |
|
immediately before the effective date of this Act, the interest of |
|
the other person was enforceable and perfected and that priority |
|
was established. |
|
SECTION 4. 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, 2011. |
|
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______________________________ |
______________________________ |
|
President of the Senate |
Speaker of the House |
|
|
I hereby certify that S.B. No. 889 passed the Senate on |
|
March 24, 2011, by the following vote: Yeas 31, Nays 0. |
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______________________________ |
|
Secretary of the Senate |
|
|
I hereby certify that S.B. No. 889 passed the House on |
|
May 23, 2011, by the following vote: Yeas 146, Nays 0, two |
|
present not voting. |
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______________________________ |
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Chief Clerk of the House |
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|
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Approved: |
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______________________________ |
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Date |
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______________________________ |
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Governor |