Author Archives: Brett Wyatt

Ethics in Property Tax Administration

Each person registering with the state must sign a pledge to uphold a Code of
Ethics. The following are specific ethics requirements found in the Texas Administrative
Code (TAC).
Improper Influences (Sec. 628.3)
This section bars any person registered with TDLR from accepting any benefit in
return for favorable treatment. The section applies to decisions regarding property
valuation, an exemption from taxation, or property tax collection. Further, a registrant
cannot accept any benefit with the understanding that he or she will testify
falsely or withhold information in an adjudication proceeding, or promise a benefit
to another to do so.
Conflicts of Interest (Sec. 628.4)
This section prohibits a registrant from engaging in activities that could result in
a conflict of interest. Specifically, a registrant cannot engage in any activity outside
of the appraisal or tax office that adversely affects the person’s impartiality in officially
assigned duties. For example, a registrant must disclose any financial interest
he or she possesses in any firm operating in the real estate industry. In addition,
a registrant may not invest in a property within the jurisdiction if it creates a conflict
of interest. Finally, a registrant may not serve as a tax agent, unless such service
focuses on properties not in the appraisal district or tax office that employs the
registrant.

Unfair Treatment and Discrimination (Sec. 628.5)
This section details when registrants provide unfair advantages to other persons.
For example, a registrant cannot provide information to any private party when the
information is not provided to everyone. In addition, a registrant cannot use different
appraisal techniques for similar properties to arbitrarily raise or lower appraised
values of particular properties. Further, a registrant may not use collection procedures
that discriminate to the advantage or disadvantage of any taxpayer. A registrant
also must not provide information on the delinquent tax status of any property
for a fee, except under a limited number of circumstances. Finally, a registrant may
not predetermine the value or value range of a property and then manipulate the
data to arrive at the predetermined value.
Abuse of Powers (Sec. 628.6)
This section prohibits acts where a registrant uses his or her power in an unethical
manner. For example, a registrant cannot use agency resources for personal
benefit. Further, in his or her capacity as a property tax professional, a registrant
may not endorse any services. Also, unless otherwise permitted by law, a registrant
cannot collect money from a private person or firm under the guise of official
action.
Use of Titles (Sec. 628.7)
This section bars the use of the titles Registered Professional Appraiser (RPA),
Registered Texas Collector/Assessor (RTA), or Registered Texas Collector (RTC)
unless the individual is an active, certified registrant with TDLR. Further, registrants
may only use the above titles in connection with official duties.

 

Legislative Updates Regarding Property Taxes

House Bill 394
Amends Tax Code Section 25.027
Effective September 1, 2015
Relating to the information in ad valorem tax appraisal records that may not be
posted on the Internet by an appraisal district.
Prohibits appraisal districts from posting information on the Internet that would
indicate a property owner’s age, including information that a property owner is 65
or older.
House Bill 992
Amends Tax Code Section 11.131
Effective January 1, 2016, but only if the applicable constitutional amendment
passes in November elections.
Relating to the exemption from ad valorem taxation of the total appraised value
of the residence homestead of the surviving spouse of a 100 percent or totally disabled
veteran.
A disabled veteran’s surviving spouse is entitled to continue to benefit from the
special disabled veterans’ ad valorem homestead exemption after the disabled
veteran dies if the spouse has not remarried, the property was the surviving spouse’s
homestead when the disabled veteran died, and the property remains the surviving
spouse’s homestead. This bill extends this benefit to surviving spouses of disabled
veterans who died before the disabled veterans’ special exemption was created.
House Bill 1022
Amends Tax Code Section 11.13 Effective January 1, 2016
Relating to the eligibility for an exemption from ad valorem taxation of the residence
homestead of certain persons with a life estate in the homestead property.
Extends the standard homestead exemption to an owner’s surviving spouse if he
or she has a life estate in the property.
House Bill 1463
Amends Tax Code Sections 1.07 and 11.43
Effective September 1, 2015
Relating to the procedure for canceling an exemption from ad valorem taxation
of the residence homestead of an individual who is 65 years of age or older.
Requires that before an appraisal district cancels a residence homestead exemption
for someone 65 or older, the appraiser must first give written notice to the
owner with a form on which the owner may verify his or her qualification for the exemption (with a postage prepaid return envelope). If no response is received in 60 days, the appraiser may cancel the exemption after another 30-day waiting period but only after making reasonable effort to locate the owner and determine his or her qualification for the exemption. A second notice with a bold font notice of the potential cancellation (meeting requirements set forth in the bill) constitutes reasonable efforts.

House Bill 1464
Adds Tax Code Section 23.551; Amends Tax Code Sections 1.07, 23.43, 23.46,
23.54, and 23.55; Amends Transportation Code Section 521.049
Effective September 1, 2015
Relating to the procedure for determining that certain land is no longer eligible
for appraisal for ad valorem tax purposes as agricultural or open-space land.
Requires that before an appraisal district cancels an agricultural or open-space
exemption for land owned by someone 65 or older, the appraiser must follow procedures
substantially similar to those required under House Bill 1463 with respect
to homestead exemptions for persons 65 or older.
House Bill 3951
Adds Tax Code Section 34.011; Amends Tax Code Section 34.015; Amends Civil
Practice and Remedies Code Section 34.0445
Effective January 1, 2016
Relating to the eligibility of persons to participate in an ad valorem tax sale of real
property; creating a criminal offense.
Allows a county commissioners court to require that, for a person to be eligible
to bid at a tax foreclosure sale of real property the person must be registered as a
bidder with the county assessor-collector before the sale begins. The county assessor-collector
is empowered to adopt rules governing such registration, requiring a
registrant to
* designate the person’s name and address;
* provide valid ID;
* provide written proof of authority to bid on another person’s behalf, if
applicable;
* provide any additional information the assessor-collector reasonably requires;
and
* execute, at least annually, a statement on a form provided by the assessor-collector
that there are no delinquent ad valorem taxes owed by the registrant to
the county or any taxing unit in the county.
If the county commissioners court adopts this requirement, then a person may
not bid at a tax foreclosure sale unless the assessor-collector has issued the person
a registration statement.

House Joint Resolution 75
Amends Section 1-b of Article VIII of the Texas Constitution.
Effective January 1, 2016, if passed by Texas voters in November 3, 2015,
election.
Proposing a constitutional amendment authorizing the legislature to provide for
an exemption from ad valorem taxation of all or part of the market value of the
residence homestead of the surviving spouse of a 100 percent or totally disabled
veteran who died before the law authorizing a residence homestead exemption for
such a veteran took effect. Would amend the Texas Constitution to enable the extension of homestead exemption rights to spouses of disabled veterans as contemplated in House Bill
992

Senate Bill 46
Amends Government Code Sections 552.155 and 552.222
Effective September 1, 2015
Relating to the confidentiality of certain property tax appraisal photographs.
Exempts photographs of the interior of real property improvements from disclosure
under public information laws and makes the same confidential. (One fear
being that thieves may use public information requests to scope buildings.) The government
must still disclose the photograph, however, to a person who had an ownership
interest in the improvement at the time the photograph was taken and to the
parties to a tax appraisal protest (though the photograph remains confidential in the
parties’ possession and may not be disclosed or used for any other purpose).

Senate Bill 833
Amends Tax Code Section 11.13
Effective June 19, 2015
Relating to the continuation of a residence homestead exemption from ad
valorem taxation while the owner is temporarily absent because of military service.
Texas law protects a person from losing a residence homestead exemption due to
temporary absence for less than two years if the person does not establish another
homestead and is absent due to military service in the U.S. armed forces. Prior to
this bill the military service causing the absence had to be outside the U.S. This bill
extends this military service protection to absences for service within the U.S.
Senate Bill 1420
Amends Tax Code Section 25.19
Effective January 1, 2016
Relating to notices of appraised value sent to property owners by the chief
appraisers of appraisal districts.
Requires an appraisal district to give notice to a homeowner if “an exemption or
partial exemption approved for the property for the preceding year is canceled or
reduced for the current year.”

 

New TREC rules effective February 1, 2016

§531.18, Consumer Information (Brokers and Agents), §535.220, Professional
Conduct and Ethics (Inspectors), and §535.401, Required Notices (ERW). A new
mandatory Consumer Protection Notice was adopted and must be displayed by
each TREC license holder in their offices and through a link on the homepage of
each license holder’s website.
§531.20, Information About Brokerage Services. A new mandatory Information
About Brokerage Services form was adopted. It updates and clarifies the information
provided to the public and requires that brokerage and agent contact information
be provided. The IABS must still be given to a customer at the first substantive
dialogue. Additionally, the license holder’s website must have a link to the IABS on
the homepage.

New TREC rules effective January 1, 2016

§535.32, Attorneys in Fact. Use of power of attorney to represent another in a
real estate transaction without being licensed was limited to 3 transactions per calendar
year.

§535.146, Maintaining Trust Money. A broker must provide an accounting to
each beneficiary of trust money at least monthly, if there has been any activity in
the account for that beneficiary.

Highlights to changes in the TREC Forms

The noted changes apply to all contract forms unless specified otherwise. Paragraph
numbers referenced are from the One to Four Family Residential Contract
(Resale). The One to Four Family Residential Contract (Resale) and the new Third
Party Financing Addendum will be reviewed in detail later in this chapter.
* Paragraph 3, Sales Price, now references all of the financing addenda previously
contained in paragraph 4 of the old versions.
* The Third Party Financing Addendum is completely rewritten and addresses
both credit approval and property approval by the lender. Reverse mortgage
loans are also addressed in this addendum, so form OP-N, Reverse Mortgage
Financing Addendum is repealed.
* Credit Approval was renamed Buyer Approval.
* The Authorization to Release Information was expanded to include title companies
and escrow agents for closing disclosure.
* A new paragraph 4 is added regarding license holder disclosure. This paragraph
is where a license holder will disclose that he or she is a party to the
transaction or related to a party that requires disclosure under the law.
* A new paragraph 6E(10), Title Notices, Notice of Water Fluctuations, is added
to add new statutory notice requirement regarding the fluctuation of the level
of certain impoundments of water that adjoin a property.
* Paragraph 7A, Property Condition, Access, Inspections and Utilities, is
amended to add a provision that hydrostatic testing must be authorized in
writing by the seller.
* Paragraph 9B(5), Closing, is amended to conform the language with a statutory
change to the property code, noting that the buyer has to acknowledge
to a tenant that the buyer has acquired the property and is responsible for the
return of the security deposit.
* Paragraph 14, Casualty Loss, is amended to make it clear that an insurance
company must permit insurance proceeds to be assigned to the buyer before
the buyer can use this option after a casualty.
* Paragraph 18D, Escrow Damages, is amended to take out the treble damages
provision based on recent case law.
* Paragraph 23, Termination Option is amended to require a 5 p.m. local time
deadline for delivery of all notices under the paragraph.
* License numbers are added to the Broker Information Section to facilitate
compliance with the TILA-RESPA Integrated Disclosure Rule, and the order of
the Associate and the Associate’s Supervisor were reversed.
* Paragraph 13, Prorations and Rollback Taxes, in the Farm and Ranch and
Unimproved Property Contract forms, is amended to provide that assessments
imposed due to the seller’s use or change in use of the property are the seller’s
responsibility.
* A new Paragraph 2D to the Condominium Contract Form is added to address
situations where the condominium documents reveal the existence of a right
of first refusal after the parties enter into a contract.
* The Condominium Resale Certificate is amended to conform to new statutory
disclosure requirements.
* The Seller’s Disclosure of Property Condition (OP-H) is amended to conform to
a new statutory requirement.
* The Amendment form and Seller Financing Addendum were revised to be
consistent with changes to the contract forms and Thirty Party Financing
Addendum.

Your Seller has a Duty to Update the Seller’s Disclosure

In Domel v. Birdwell, 2014 WL 4347815 (Tex. App. –Eastland 2014), Birdwell
sued Domel for negligent misrepresentation and other claims that arose out of Birdwell’s
purchase of Angel Fire Ranch. Waite was Domel’s listing agent. The Domels
had lived there for several years, but wanted to move closer to Austin because of
their business interests. Waite had the Domels fill out of Seller’s Disclosure, sign it
and then return it to him. The notice indicated that the seller agreed to amend any
applicable notices in disclosures during the listing period. The notice also contained
the statement that there had been no prior flooding, no prior insurance settlements,
and no prior damage to the roof.
Birdwell had the property inspected again after the closing and discovered that
the entire roof needed to be replaced. Upon being contacted by the real estate
broker, Waite, the Domels did not deny that they had filed an insurance claim
and lied on the Seller’s Disclosure when they checked “no” on the insurance
settlements disclosure. In fact, they had received a check for $114,650.04 in a
settlement.
Later, Birdwell discovered that there was also prior flooding on the property that
also was not disclosed. The Domels admitted that they never amended the notice
and didn’t think they had a duty to amend the notice even though the notice was
over a year old.
One of the key issues discussed by the appellate court was whether or not the
Domels had a duty to update the Seller’s Disclosure form. The court noted that
Section 5.008 of the Property Code does not, in itself, create a continuing duty or
obligation to update matters on the form. The court did hold, however, that there is
such a duty to disclose in four situations:
1. where there is a confidential or fiduciary relationship;
2. when one voluntarily discloses information, the whole truth must be
disclosed;
3. when one makes a representation, new information must be disclosed when
that new information makes the earlier representation misleading or untrue;
and
4. when one makes a partial disclosure and conveys a false impression.
The court also cited a corollary principle: when there is a duty to speak, silence
may be as misleading as a positive misrepresentation of existing facts. The appellate
court then affirmed $264,926 in damages, $67,000 in attorney’s fees, and
$19,161.77 in prejudgment interest.

Legislative Updates

House Bill 311
Amends Property Code Sections 5.062, 5.064, 5.066, 5.070, 5.076, 5.077, 5.079,
and 5.081
Effective September 1, 2015
Relating to an executory contract for the conveyance of real property; providing a
civil penalty.
This bill amends provisions of the Property Code relating to executory contracts for
conveyance of real property (also known as “contracts for deed”) to make contracts
for deed more akin to transactions employing traditional seller-financing using a
deed and lien (such as a vendor’s lien or deed of trust). In fact, the bill specifies that
a recorded executory contract is the same as a deed with a vendor’s lien (in other
words, on recording, an executory contract conveys legal title to the purchaser
subject to a lien retained by the seller for the amount of the unpaid contract price
less any lawful deductions). A seller must record the contract within 30 days after
its execution. The bill denies sellers the remedies of rescission and forfeiture and
acceleration if the contract has been recorded. A seller who violates the recording
requirement is liable to the purchaser in the same manner and for the same amount
as a seller who violates statutory requirements for the transfer of recorded, legal title
to the property, except that damages are limited to $500 per year of noncompliance
(but without prejudice to other remedies a purchaser may have under other law).

Senate Bill 478
Adds Government Code Section 22.019
Effective September 1, 2015
Relating to the promulgation of certain forms for use in landlord-tenant matters.
This bill requires the Supreme Court of Texas to promulgate standardized forms
to be used by individuals representing themselves in residential landlord-tenant
matters and to provide instructions for the proper use of each form. The bill requires
the forms and instructions to be written in plain language easy for the general
public to understand, to clearly and conspicuously state that the form is not a substitute
for an attorney’s advice, to be made readily available in the manner prescribed
by the Supreme Court, and to be translated into Spanish (though the
Spanish forms are for information only and may not be used in court). The bill
requires the clerk of a court to inform members of the public of the availability of
the forms and to make the forms available free of charge. A court must accept use
of a form unless the form has been completed in a manner that causes an uncurable
substantive defect.

House Bill 1510
Adds Property Code Section 92.025
Effective January 1, 2016
Relating to liability of persons who lease dwellings to persons with criminal records.
Establishes that no cause of action accrues against a landlord or its manager
or agent solely for leasing a dwelling to a tenant who has been convicted of, or
arrested or placed on deferred adjudication for, an offense. (The intent of this bill
being to make available more housing opportunities for formerly incarcerated individuals,
thereby decreasing homelessness and recidivism.) Causes of action for negligence,
however, are not precluded if the tenant was convicted of (or has a reportable
offense for) one of a list of crimes involving murder, burglary, sexual assault,
indecency with a child, prostitution, human trafficking, elder or child abuse, sex
offenses, and similar offenses and the landlord, manager, or agent knew or should
have known of the conviction or adjudication.

Senate Bill 1626
Amends Property Code Section 202.010
Effective Date: September 1, 2015
Relating to the regulation by a developer of the installation of solar energy devices
in a residential subdivision.
Chapter 202 of the Property Code limits restrictions that may be imposed against
installation of solar energy devices in a residential subdivision. Prior to this bill,
however, Chapter 202 allowed developers to limit or restrict property owners from
installing solar energy devices during the development period. This bill limits this
right to developers of developments of 50 units or less.

House Bill 2066
Adds Property Code Section 51.016
Effective September 1, 2015
Relating to the rescission of non-judicial foreclosure sales.
This bill applies only to non-judicial foreclosure sales of residential property and
permits a mortgagee, trustee, or substitute trustee to rescind a sale within 15 days
after the foreclosure if
* statutory requirements for the sale were not met,
* the underlying default was cured before the sale,
* a receivership or dependent probate administration involving the property was
pending at the time of sale,
* a sale condition specified by the trustee or substitute trustee before the sale
was not met,
* the mortgagee or mortgage servicer and the debtor agreed to cancel the sale
beforehand based on the debtor’s agreement to cure, or
* a bankruptcy stay was in effect at the time of sale.
The sales price must be returned to the purchaser and the debtor must return excess
proceeds if the sale is rescinded. Challenges to the rescission must be brought
within 30 days after the date required notices of the rescission are recorded. A purchaser
who effectively challenges a rescission is entitled to damages only in the
amount of the portion (if any) of the purchase price not returned to the purchaser
plus interest (unless the rescission is due to bankruptcy, in which case no interest is
payable).

House Bill 2207
Adds Property Code Chapter 66
Effective September 1, 2015
Relating to the foreclosure sale of property subject to an oil or gas lease.
Makes clear that a foreclosure sale does not cut off an oil and gas lease if the
lease is recorded prior to the sale. (An oil and gas lease is not a “lease” in the traditional
sense; rather it is a determinable conveyance of an interest in the mineral
estate.) Notwithstanding the preceding, if the foreclosed property includes an interest
in hydrocarbons as well as the surface, the foreclosure sale terminates the oil or
gas lessee’s surface rights to the extent the foreclosed mortgage had priority over the
lease.

 

A Rose is a Rose is a Rose

Bryant v. Cady, 445 S.W.3d 815 (Tex.App.-Texarkana 2014, no pet.).  Certain executory contracts for conveyance of Texas real estate that is used or is to be used as the purchaser’s residence or the residence of certain relatives of the purchaser are statutorily regulated.  Sellers under covered contracts must, among other things, provide to the purchaser, during January of each year during the contract’s term, an annual accounting statement with specified contents or pay liquidated damages and reasonable attorney fees. 

Bryant, Barfield and Everett sued Cady claiming to be purchasers under covered executory contracts and alleging that Cady failed to give them the required annual accounting statement regarding their respective transactions with him. In none of these three transactions was any annual statement furnished; in each case, the dispute is whether the contract is an executory contract under the statute.   The transactions in question involved three documents, a lease, a sale agreement, and a receipt.  The three transactions were structured essentially the same way, each involving a ten-year term lease of residential real estate followed by a discounted sale of the respective property to the lessee.

The three plaintiffs filed a joint declaratory judgment action, alleging that the documents signed by the parties amounted to executory contracts and that Cady had failed to provide them with the required annual accounting statements.

Seller argued that the documents were not executory contracts because the agreements to sell were not options to purchase.  For purposes of the annual accounting requirement, the Texas Property Code provides that an option to purchase real property that includes or is combined or executed concurrently with a residential lease agreement, together with the lease is considered an executory contract for conveyance of real property.  Property Code § 5.062(a)(2).    It is undisputed that the leases, being signed on the same day, were executed concurrently with the agreements to sell.  An option contract has two components, (1) an underlying contract that is not binding until accepted and (2) a covenant to hold open to the optionee the opportunity to accept.

The court held that the agreements are, in effect, options to purchase, and given that they were executed concurrently with residential leases, are executory contracts within the meaning of the statute.  Bad news for the Seller.