Texas House Speaker Releases Interim Charges Affecting Land and Real Estate

This week Texas House Speaker Joe Straus released the 81st Legislature's Interim Committee Charges pertaining to Texas House of Representatives Committees. The charges are varied, and few are unexpected. Interim charges represent the "task assignments" delegated by the Speaker to various House committees which are to be completed during the period between Legislative Sessions.

Of particular importance to real estate interests and real estate attorneys in Texas are the Charges made to the House Committee on Land and Resource Management. That Committee is chaired by Rep. Dennis Bonnen.

The folllowing assignments are contained within Speaker Straus' charges:

1. Evaluate the appropriateness of creating pedestrian-only areas on the public
beaches of the state.
2. Examine unresolved issues relating to eminent domain legislation introduced
during the 81st Legislative Session. Monitor any pending litigation.
3. Examine the granting of easements on state-owned lands, including lands
managed by institutions of higher education and the General Land Office.
4. Study the causes of coastal erosion along the Texas coast. Evaluate current and
alternate funding sources. Review federal programs and their relationship to the
state program.
5. Monitor the agencies and programs under the committee's jurisdiction.

Tenants Enjoy Protections When Landlord/Homeowner Loses Property to Foreclosure

These days, foreclosures are commonplace. Our natinal economy is experiencing the hangover following years of a credit party reminiscient of a fraternity blow-out. A recent magazine article quoted the CEO of mega-homebuilder Toll Brothers spreading the blame:

“What cracked the market was not just our greed but the greed of our buyers.”

Irrespective of the cause, thousands of tenants have received a nasty and unexpected surprise -- news that the home they are occupying has been foreclosed. Even worse is that in most instances the new owner -- often the mortgage lender -- has plans for the property that don't include continuing the lease. Frequently, the tenant has been faithfully paying rent to the landlord, and wasn't even aware that the property was subject to foreclosure. Imagine the financial disaster that can accompany being suddenly and unexpectedly displaced from a comfortable rental home...

Fortunately, Texas law provides some relief for an unwitting tenant of a foreclosed property.

First, the notice period required before a landlord may file an eviction suit is extended from 72 hours to 30 days (provided the tenant was in compliance with the lease at or near the time of foreclosure). See Texas Proeprty Code Section 24.005.

Second, if the previous owner's interest in the premises is terminated by sale, assignment, death, appointment of a receiver, bankruptcy, or otherwise, the new owner (other than the foreclosing bank, itself) is liable for the return of security deposits. See Texas Property Code Section Sec. 92.105.

I have heard of instances where new owners of properties acquired through foreclosure or trustee's sale have actually offered to pay a pre-existing tenant to vacate the property promptly and peaceably. Such a payment can make sense for both the new and reluctant owner/landlord and the innocent tenant. The new owner obtains certainty and finality concerning possession of the property -- all without incurring attorneys' fees associated with an eviction proceeding. Meanwhile, the tenant receives a quick infusion of cash to help offset moving and related expenses.

If you are either the new owner of a tenant-occupied property, or a tenant in a rental property whose ownership has changed through foreclosure, you should consider consulting an experienced real estate attorney who can explain your rights and responsibilities.

In Texas, persons repairing vehicles and equipment may place workers' liens and even repossess

As a San Antonio lawyer with active real estate and construction law practices, liens are a daily part of my business. When representing landowners or buyers/sellers of real estate, ensuring clear title -- free of liens and encumberances -- is of the utmost concern. Likewise, my general contractor and sub-contractor clients regularly trust me to place or remove mechanics' liens to secure payment for work performed or materials supplied on contruction projects.

Every so often, hoewever, I get a call from an equipment repair facility, automotive mechanic or other service provider inquiring about their lien rights when customers refuse to pay for their services.

In Texas, liens are available to a variety of persons rendering goods and services, including those who perform repairs on vehicles, motorboats, vessels and/or outboard motors. Persons performing such repairs are referred to as "workers," and their lien rights are set-forth in Section 70.001 of the Texas Property Code.

That section not only entitles the repair person to place a lien on the article that was repaired, but also entitles such "worker" to retain POSSESSION of the article until payment is received. Here's the text of the statutue:

Sec. 70.001. WORKER'S LIEN. (a) A worker in this state who by labor repairs an article, including a vehicle, motorboat, vessel, or outboard motor, may retain possession of the article until:
(1) the amount due under the contract for the repairs is paid; or
(2) if no amount is specified by contract, the reasonable and usual compensation is paid.

Many times, people pay for repairs through check or credit card transactions. In these instances, the article that was repaired is released to the owner prior to the repair person actually receiving the funds associated with a purported payment. Nefarious customers might then stop payment, close their account, or simply have their check returned for NSF. In such instances, the statute, again, seeks to protect the rights of the repair person, and even authorizes repossession in certain circumstances:

(b) If a worker relinquishes possession of a motor vehicle, motorboat, vessel, or outboard motor in return for a check, money order, or a credit card transaction on which payment is stopped, has been dishonored because of insufficient funds, no funds or because the drawer or maker of the order or the credit card holder has no account or the account upon which it was drawn or the credit card account has been closed, the lien provided by this section continues to exist and the worker is entitled to possession of the vehicle, motorboat, vessel, or outboard motor until the amount due is paid, unless the vehicle, motorboat, vessel, or outboard motor is possessed by a person who became a bona fide purchaser of the vehicle after a stop payment order was made. A person entitled to possession of property under this subsection is entitled to take possession thereof in accordance with the provisions of Section 9.609, Business & Commerce Code.

But a repair person should be very careful before asserting any right of repossession. This is because repossession is only available under a limited set of circumstanes:

(c) A worker may take possession of an article under Subsection (b) only if the person obligated under the repair contract has signed a notice stating that the article may be subject to repossession under this section. A notice under this subsection must be:
(1) separate from the written repair contract; or
(2) printed on the written repair contract, credit agreement, or other document in type that is boldfaced, capitalized, underlined, or otherwise set out from surrounding written material so as to be conspicuous with a separate signature line.

A repair person who properly asserts a right to repossession may require the owner of the repossessed article to pay for repossession costs, including towing:

(d) A worker who takes possession of an article under Subsection (b) may require a person obligated under the repair contract to pay the costs of repossession as a condition of reclaiming the article only to the extent of the reasonable fair market value of the services required to take possession of the article. For the purpose of this subsection, charges represent the fair market value of the services required to take possession of an article if the charges represent the actual cost incurred by the worker in taking possession of the article.

Again, repossession is available only in limited circumstances. Under certain conditions -- such as when a worker transfers to the repo company a returned check -- the worker may find himself in trouble for attempting repossession.

For that reason, all repair facilities and persons should consult with an experienced attorney PRIOR TO attempting a repossession upon a workers' lien. In addition, the prudent garage or mechanic should have a lawyer who is familiar with liens review their service contract or agreement to ensure that the repair document properly provides notice and authorization for repossession of the article to be repaired.

New Constitutional Amendment Provides for Uniform Assessment of Property Texas Throughout Texas

Last Tuesday, November 3, 2009, Texas voters passed 11 constituional amendments, many of which serve to preserve private property rights, and to equalize the manner in which ad valorem taxes are assessed against real estate in Texas.

Of particular importance to Texans paying property taxes was proposition 3, whose purposes was to remove the constitutional requirement that administrative and judicial enforcement of uniform standards and procedures for property appraisal originate in the county where the tax is imposed. Instead, the amendment sought to remove the requirement of local procedures for tax appraisals, and to give the Texas Legislature full discretion to prescribe the manner of the enforcement of uniform appraisal standards and procedures throughout the State.

The exact language of the proposed amendment was somewhat benign:

Amendment No. 3 (H.J.R. 36, Article 3) The constitutional amendment providing for uniform standards and procedures for the appraisal of property for ad valorem tax purposes.

Prior to adoption of this Amendment,Section 23(b), Article VIII, Texas Constitution, required that administrative and judicial enforcement of uniform standards and procedures for the appraisal of property for property tax purposes, as prescribed by general law, originate in the county where the tax is imposed. This provision has been interpreted to mean that the state has little meaningful supervisory or administrative power over the standards and methods that local appraisal districts use to value property.

While the Texas property tax system has always been administered on the local level, it is undeniable that the state retains an interest in property tax appraisal professionalism and competence. The state also has an interest in the consistent determination of property tax appraised values from one locality to the next, through the application of uniform appraisal practices, because the state allocates funding to public schools based on the per-student aggregate taxable property value in each school district.

As do most things legal, property tax appraisal practices and procedures vary widely across Texas. A property located in one county is sometimes appraised much differently than a similar property located elsewhere in the state -- even in an adjoining County.

Prior to adoption of proposition 3, there was no legal basis for direct oversight of appraisal districts by the state. Thus, inequities in assessing and collecting taxes were local functions, and the state was powerless to directly require an appraisal district to follow state law or apply a standard appraisal method. This resulted in a hodge-podge of practices and non-standard procedures, which failed to ensure appropriate and accurate appraisals that determine the value of property for taxation purposes.

As a Texas attorney actively engaged in a real estate practice, I fervently believe that some degree of statewide uniformity and equity of appraisal processes is necessary. In my opinion, real property located in one Texas county should be appraised in the same manner and according to the same rules as similar property located in another Texas county. This is not to say that a "one size fits all" approach is best, but certainly amending the Texas Constitution to allow direct state enforcement authority and oversight of local appraisals was a positive step. With the recent passage of proposition 3, the state is allowed to oversee the appraisal system directly and take the necessary action to address inequities and inconsistencies in property appraisal.

Real Estate Commission Agreements MUST be in Writing to be Enforceable

Real Estate commissions paid to brokers and realtors are often the subject of legal disputes in Texas. Participants in real estate sales and purchases often squabble over who, if anybody, is entitled to a commission arising from that sale.

Disagreements frequently arise between brokers over who was the "procuring cause" of a certain sale. Likewise, sellers sometimes dispute that their listing agent or salesperson has adequately represented his or her interests. Real estate professionals, on the other hand, must be wary of clients who benefit from their services, but do not wish to compensate them.

No broker or agent should be required to freely provide services, advice or expertise. But -- at the same time -- brokers must disclose to their customers the method and amount of compensation they intend to realize from a given transaction.

This dilemna has a simple solution -- PUT IT IN WRITING!

The Texas Real Estate Commission, and local Boards of Realtors, frequently publish materials encouraging that commission and representation agreements be in writing so as to avoid disputes over commissions.

Texas law does NOT require that agreements for the engagement of Realtors as either "Listing Agents" (Seller's Representatives)or "Buyer's Representatives" be in writing. However, a broker/agent MAY NOT file a suit to enforce any commission claim, unless theagreement to pay a commission is in writing and signed by the customer.

Section 1101.806(c) of the Texas Occupations Code (the Texas Real Estate License Act) expressly provides as follows:

A person may not maintain an action in this state to recover a commission for the sale or purchase of real estate unless the promise or agreement on which the action is based, or a memorandum, is in writing and signed by the party against whom the action is brought or by a person authorized by that party to sign the document.

A prudent broker, seller and/or buyer will not enter into a real estate transaction without a written agreement concerning payment of commissions. This arrangement protects all participants in real estate purchases and sales.

Further, Buyers or Sellers from whom a broker/agent/salesperson seeks a commission, based upon anything other than a written agreement might be spared the expense of paying that commission.

Shedding the Homestead Designation and Family Transfers

Texas Homesteads -- Bars to Keep Strangers Out, or to Keep Owners In?

Many times, family members desire to sell properties to one-another. The reasons for these transfers are innumerable -- advance pre-death gifts, planning for the aging process, and maintaining the integrity of family properties are just a few. A common scenario is when a mother desires to sell her home to her son, but to remain living in the home until her death. This transaction -- simplistic as it seems -- could encounter difficulties and even be rejected by a title company because of the tremendous power of Texas homestead laws.

The homestead laws are contained in the Texas Constitution and in Chapter 41 of the Texas Property Code. Our courts have liberally construed the homestead protections, indulging every opportunity to exempt real property from forced sale by general creditors.

In Texas, exercising homestead rights in property does not require any formalized legal process, or the filing of a specific document. The general criteria for creating a homestead are (i) overt acts of usage, and (ii) an intent to claim the land as a permanent residence.

Every Texan family and every single adult person is entitled to a homestead exempt from seizure for claims of creditors Homestead exemptions in Texas were enacted to protect Texans' homes from creditors. However, once a homestead is designated, removing that designation will often require physical abandonment of the property. This can present problems under the scenario described above, since mom (the seller) will be required to abandon the homestead exemption before she can sell the property to her son (the buyer). This very likely could mean that mom won't be permitted to reside in the home for some period of time after the transfer.

Courts have been fairly consistent on this issue: Where a homestead claimant moves from property that has been previously impressed with homestead character, the question of whether such property continues as a homestead is dependent primarily upon the intention of the claimant. West v. Austin Nat’l Bank, 427 S.W.2d 906, 911-12 (Tex. Civ. App.–San Antonio 1968, writ ref’d n.r.e.) (citing McMillan v. Warner, 38 Tex. 410, 411 (1873)). “One does not necessarily abandon a homestead merely by changing residence.” Chesson, 149 S.W.3d at 808 (citing Rancho Oil Co. v. Powell, 142 Tex. 63, [69,] 175 S.W.2d 960, 963 (1943)). “To be an abandonment that would subject such property to seizure and sale, there must be a voluntary leaving or quitting of the residence with a then present intent to occupy it no more as a home . . . .” King v. Harter, 70 Tex. 579, 581, 8 S.W. 308, 309 (1888). “[O]ur courts have held that ‘it must be undeniably clear and beyond almost the shadow, at least [of] all reasonable ground of dispute, that there has been a total abandonment with an intention not to return and claim the exemption.’” Burkhardt v. Lieberman, 138 Tex. 409, 416, 159 S.W.2d 847, 852 (1942) (quoting Gouhenant v. Cockrell, 20 Tex. 96, 98 (1857))."

As with most legal problems, there are solutions to problems presented by the homestead exemption. Family transfers can be accomplished without changing mom's place of residence. One should seek experienced legal counsel when presnted with problems selling real estate that arise from the homestead exemption.