This paper will review a number of statutes relating to real estate law legislation and some related legislation passed during the Regular Session of the 75th Legislature of the State of Texas.
Throughout this paper, various codes of Texas law are referred to in the nomenclature of such code, e.g., Property Code.
Special appreciation is expressed to the following attorneys who, as volunteers, tracked real estate law-related legislation during the Regular Session of the 75th Texas Legislature and who have written summaries of that legislation presented at seminars and distributed to lawyers throughout Texas: Michael A. Jacobs (Houston); David W. Tomek (Austin); Joe W. Christina, Jr. (Corpus Christi); Janna H. Melton (Austin); Robert D. Miller (Houston); Penny L. Parker (Dallas); and Mimi Walker (Houston).
In this paper, SB means Senate Bill and HB means House Bill. The bills identified in this manner may be accessed at the State Legislature website: http://www.capitol.state.tx.us.
SB221Background
Section 15(a) of the Real Estate License Act (Article 6573a, Vernons Texas Civil Statutes) provides that the Texas Real Estate Commission may suspend or revoke a license issued under the Act at any time when it has been determined that a real estate broker or real estate salesman has failed to specify in a listing contract or in another contract in which the licensee agrees to perform services for which a license is required under this Act a definite termination date which is not subject to prior notice.
Effect of SB221
SB221 amends Section 15(a)(6)(G) of the Real Estate License Act by exempting property management contracts from the requirement that a real estate agent must specify a definite termination date in a contract in which the agent agrees to perform services for which a real estate license is required. Effective Date: September 1, 1997
SB577Background
This Act amends Sections 2, 3, 4, 5, 6, 9, 10, 11, 12, 16 and 19 and adds a new Section 9A to the Real Estate License Act.
Effect of SB577
In defining a Person subject to the licensing and registration requirements of the Act, the existing list (which presently encompasses an individual, a limited liability company, or a corporation, foreign or domestic) is expanded to include limited liability partnerships and general partnerships. In this connection, it should be noted that it has been held that a partnership is not required to have a license if the individual partners of the partnership are licensed. Kaufhold v. Curtis & Ewing, 557 S.W.2d 334 (Tex. Civ. App. Houston [1st Dist.] 1977, no writ).
Section 9A is added to the Act and, in substance, provides that a person may not sell, buy, lease, or transfer an easement or right-of-way to another for compensation for use in connection with telecommunication, utility, railroad, or pipeline service unless the person is either licensed as a real estate broker (or real estate salesman) under the Act, or exempt from the Act or registered with the commission under new Section 9A of the Act.
Effective Date: September 1, 1997 (however, there are some penalty provisions which did not take effect until January 1, 1998)
HB243Background
HB243 relates to identification of individuals executing certain documents. It amends Sections 121.005 and 121.007 of the Civil Practice and Remedies Code.
Under current law relating to proof of identity of a person acknowledging a written instrument or certificate of acknowledgment, it is required that the officer taking the acknowledgment either personally know the person or verify the persons identity on the oath of a credible witness.
Effect of HB243
HB243 recognizes and validates the common current practice by authorizing a notary public to also establish identity with a federal or state issued identity card or document that contains the photograph and signature of the acknowledging person.
HB243 also revises the long form acknowledgment to incorporate a description of the identity card if one is used.
Effective Date: September 1, 1997
HB242Background
HB242 pertains to signature of a notary public on behalf of an individual with a disability. HB242 adds Section 406.0165 to the Government Code.
Effect of HB242
HB242 authorizes a notary public to sign the name of an individual who is physically unable to do so or to make a mark on behalf of the individual, if authorized to do so by the disabled person in the presence of a disinterested witness. The notary public must write the following under the signature: Signature affixed by notary in the presence of [Name of Witness], a disinterested witness, under Section 406.0165, Government Code. When signed in this manner, the signature is effective as the signature on whose behalf the signature is made for any purpose.
Effective Date: September 1, 1997
HB1665Background
Chapter 5 of the Property Code is entitled Conveyances; and Subchapter A (of Chapter 5) is entitled General Provisions. The legislature was concerned as to the hazardous effect of certain subsurface conditions in circumstances where unimproved real property was being sold for use for residential purposes.
Effect of HB1665
HB1665 relates to disclosure of the location of certain subsurface conditions by a person who is selling unimproved real property to be used for residential purposes. HB1665 amends Subchapter A of Chapter 5 of the Property Code, by adding Section 5.010 which, in substance, provides that a seller of unimproved real property to be used for residential purposes shall provide to the purchaser of the property a written notice disclosing the location of a transportation pipeline, including a pipeline for the transportation of natural gas, natural gas liquids, synthetic gas, liquefied petroleum gas, petroleum or a petroleum product, or a hazardous substance.
Additionally, HB1665 provides the following: (a) the notice must state the information to the best of the sellers belief and knowledge as of the date the notice is completed and signed by the seller (and if such information is not known to the seller, the seller shall indicate that fact in the notice); (b) the notice must be delivered by the seller on or before the effective date of an executory contract binding the purchaser to purchase the property; (c) if a contract is entered into without the seller providing the required notice, the purchaser may terminate the contract for any reason not later than the seventh day after the effective date of the contract; and (d) the section applies to any seller of unimproved real property, including a seller who is the developer of the property and who sells the property to others for resale. There is a question as to whether this quoted language appears to broaden those provisions of HB1665 seeming to limit its applicability to sales of unimproved real property to be used for residential purposes.
The phrase hazardous substance and the phrase hazardous waste are stated as having the meanings assigned by Section 361.003 of the Health and Safety Code.
A type of saving provision is present indicating, in substance, that a seller is not required to give the notice if: (a) the seller is obligated under an earnest money contract to furnish a title insurance commitment to the buyer prior to closing; and (b) the buyer is entitled to terminate the contract if the buyers objections to title as permitted by the contract are not cured by the seller prior to closing.
Effective Date: Property Code Section 5.010 applies only to a sale of property for which a contract is entered into on or after January 1, 1998.
HB384Background
HB384 relates to the disclosure in a contract for the transfer of vacant land of certain information, including information concerning the imposition of additional taxes on the land.
HB384 (like HB1665 previously discussed) also states that it is amending Subchapter A of Chapter 5 of the Property Code by adding new Section 5.010.
Effect of HB384
Under HB384, new Section 5.010 of the Property Code provides, in substance, that a person who is the owner of an interest in vacant land and who contracts for the transfer of that interest shall include in the contract certain prescribed bold-faced notice.
HB384 does not contain a definition of vacant land.
The substance of the required notice is that if, for the current ad valorem tax year, the taxable value of the land is determined by a special appraisal method which allows for appraisal of the land at less than its market value, it is possible that the person to whom the land is transferred may not be allowed to qualify the land for that special appraisal in a subsequent tax year when the land may then be appraised at its full market value. Further, the notice is required to indicate that the transfer of the land or a subsequent change in the use of the land may result in the imposition of an additional tax plus interest as a penalty for the transfer or the change in the use of the land.
The statutory wording of the required bold-faced notice is as follows:
NOTICE REGARDING POSSIBLE LIABILITY FOR ADDITIONAL TAXES
If for the current ad valorem tax year the taxable value of the land that is the subject of this contract is determined by a special appraisal method that allows for appraisal of the land at less than its market value, the person to whom the land is transferred may not be allowed to qualify the land for that special appraisal in a subsequent tax year and the land may then be appraised at its full market value. In addition, the transfer of the land or a subsequent change in the use of the land may result in the imposition of an additional tax plus interest as a penalty for the transfer or the change in the use of the land. The taxable value of the land and the applicable method of appraisal for the current tax year is public information and may be obtained from the tax appraisal district established for the county in which the land is located.
If the owner who contracts for the sale of vacant land fails to include in the contract the required notice, the person to whom the land is transferred is entitled to recover from the owner an amount equal to the amount of any additional taxes and interest that the person is required to pay as a penalty because of: (a) the transfer of the land; or (b) a subsequent change in the use of the land that occurs before the fifth anniversary of the date of the transfer.
HB384 states that new Section 5.010 of the Property Code does not apply to a contract for transfer in the following enumerated circumstances: (1) under a court order or foreclosure sale; (2) by a trustee in bankruptcy; (3) to a mortgagee by a mortgagor or successor in interest or to a beneficiary of a deed of trust by a trustor or successor in interest; (4) by a mortgagee or beneficiary under a deed of trust who has acquired the land at a sale conducted under a power of sale under a deed of trust or a sale under a court-ordered foreclosure or has acquired the land by a deed in lieu of foreclosure; or (5) by a fiduciary in the course of the administration of a decedents estate, guardianship, conservatorship, or trust; or (6) of only a mineral interest, leasehold interest, or security interest; or (7) to or from a governmental entity.
Effective Date: January 1, 1998 (applicable only to a contract that is executed on or after that date)
HB1507Background
HB1507 comes as welcome news to attorneys, accountants, consultants and their respective firms. By way of example, often with respect to the issuance of limited partnership interests or limited liability company interests in connection with a real estate venture of some type, these interests constitute a security, thereby involving circumstances in which the magnitude of the risk of liability may far exceed the fees for services received in the transaction.
Effect of HB1507
HB1507 adds Subsection N to Section 33 of the Securities Act (Article 581-33, Vernons Texas Civil Statutes).
New Subsection N (entitled Limitation of Liability in Small Business Issuances) limits the potential liability of a person who has been engaged to provide services relating to an offer of securities described in new Subsection N. by a small business issuer (e.g., attorneys, accountants, consultants and their respective firms) to three times the fee paid by the issuer or other seller to the person for the services, unless the trier of fact finds the person engaged in intentional wrongdoing in providing the services. Question: Does the limitation of liability apply if, as would be the usual case, the fee is paid to the firm of the person rendering the services? Note that the exculpatory language refers only to the fee paid by the issuer or other seller to the person for the services.
The term small business issuer means an issuer of securities that, at the time of an offer or sale of securities to which the section applies: (a) has annual gross revenues in an amount that does not exceed $25,000,000; and (b) does not have any of its securities registered (or required to be registered) with the Securities and Exchange Commission under Section 12 of the Securities and Exchange Act of 1934 (15 U.S.C. Section 781).
The stated limitation of liability applies only in connection with an offer or sale of securities (of a small business issuer) that does not exceed $5,000,000. The small business issuer must disclose this limitation of liability to prospective buyers and receive a signed acknowledgment that the disclosure was provided.
The stated limitation of liability applies only to an action filed on or after the effective date of the Act. An action filed before the effective date of the Act is governed by the law in effect at the time the action was filed, and that law is continued in effect for that purpose. Effective Date: September 1, 1997
Bernard O. Dow is a partner in the lawfirm of Dow, Cogburn &Friedman, P.C. in Houston, Texas