UPDATING YOUR FORMS UNDER RECENT LEGISLATION … · MEMBERSHIPS State Bar of Texas Travis County...

Updating Your Forms Under Recent Legislation P-1

UPDATING YOUR FORMS UNDER RECENT LEGISLATION

SIGNIFICANT BILLS OF THE 76 LEGISLATURE AFFECTINGTH

REAL ESTATE, LENDING AND OTHER COMMERCIALMATTERS

Presented By

Janna R. MeltonHaynes and Boone, L.L.P.

600 Congress Avenue, Suite 1600Austin, Texas 78701

and

Richard C. Reed, IIIHaynes and Boone, L.L.P.

600 Congress Avenue, Suite 1600Austin, Texas 78701

February 17, 2000

State Bar of TexasAdvanced Real Estate Drafting Course 2000

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Associate, Real EstateAustin Office512.867..8403 (direct phone)512.867.8626 (direct fax)[email protected] OF EXPERIENCEReal Estate Sales and Acquisitions,Leasing and Development, Real EstateLending, ConstructionEDUCATIONJ.D., cum laude, University of HoustonLaw Center Note and Comment Editor, Houston LawReviewOrder of the Barons, 1995Bachelor’s of Journalism, University ofTexas at Austin, 1990MEMBERSHIPSState Bar of TexasTravis County Bar AssociationReal Estate Council of Austin, Inc. Vice-Chairman, Subcommittee onLegislation for the Real Estate, Probateand Trust Law Section of the State BarPlanning Committee, 2000 AdvancedReal Estate Drafting Course

Janna R. MeltonMs. Melton focuses her practice in the areas of real estate, finance andconstruction transactions. She has served as counsel for real estate,finance and general business matters to financial institutions, real estateinvestors, brokers and developers, technology companies, constructioncontractors, health care providers and national retail and restaurantoperators.Her experience includes:_ Sales, acquisitions and development of property for existing andfuture end uses for retail, multi-tenant, office, condominium and corporatefacilities. _ Real estate lending transactions, including traditional real estateloans, portfolio loans, construction loans and equity financingarrangements._ Representation of owners and contractors in connection withdrafting and negotiating design and construction agreements for thedevelopment, expansion and renovation of industrial, office and corporatefacilities._ Leasing of retail, industrial, office and other commercialproperties._ Due diligence review, including, title, survey, zoning, licensingand leases. _ Consultation with respect to real estate aspects ofcorporate/partnership, health care, tax, environmental and bankruptcymatters._ Working with developers and end users in connection withzoning, subdivision and other land use matters.PUBLICATIONS“Legislative Update: Real Estate, Lending and Other Commercial Matters,” 1999 - TexasBar Journal; Travis County Bar Legislative Seminar; Houston Bar“Partnerships,” SMU Law Review , 1997“Structuring Documentation of Real Estate Loans,” CLE International’s Purchase and SaleConference,1997“Work Letters (Including As Is Considerations)”, SMU School of Law’s Real Estate Law, Leases In-Depth, 1999“Legislative Update: Significant Bills of the 76 Texas Legislature Affecting Real Estate,th

Lending and Other Commercial Matters,” 1999 Seminars - State Bar Telephone; Advanced

Real Estate Law Course; Mortgage Lending Institute; CLE On-Line; Travis CountyBar-Real Estate Section; South Texas’ Commercial Real Estate Course


Partner, Real EstateAustin Office512.867.8413 (direct phone)512.867.8633 (direct fax) [email protected] OF EXPERIENCEReal Estate Development, Sales andAcquisitions, Leasing and Lending,Partnerships, Limited Partnerships,Limited Liability Companies and OtherEquity Investment ArrangementsEDUCATIONJ.D. University of Texas School of Law,1982B.A. University of Texas at Austin,1979MEMBERSHIPSAmerican Bar Association (RealProperty, Probate and Trust Law andCorporation, Business and Banking LawSections)State Bar of Texas (Real Property,Probate and Trust Law, and theCorporation, Business and Banking LawSections) Travis County Bar Association,Real Estate Section, DirectorPUBLICATIONS“Construction Provisions in CommercialLeases,” South Texas College of Law12 Annual Real Estate Law Conference,th

The Basics, 1996; “The CompletelyNon-Exhaustive Guide to TaxAbatements and Some Other EconomicIncentive Strategies,” Travis County BarAssociation Land Development Seminar,1997

Richard C. Reed IIIMr. Reed is the head of the Real Estate Practice Group in Haynes andBoone's Austin office and has more than 15 years of experiencerepresenting a variety of clients with sophisticated real estate transactions. He has represented speculative developers and end users in campusheadquarters, office building developments, mixed use project developers,operating companies in buying, selling and leasing property in multi-statetransactions, institutional investors in equity investments, borrowers,financial institutions in loan transactions and workouts, individuals andinstitutional investors forming partnerships and other entities to own andoperate real estate, and landlords and tenants in office, retail and industrialspace leases.Mr. Reed has completed transactions including:_ Acquisitions and financing of multi-family and officeportfolios in numerous states for institutional investors_ Acquisition and rezoning of campus headquarters andassembly facility for a publicly traded software development company_ Lease of headquarters and manufacturing facilities for apublicly traded contract manufacturing company_ Acquisition and rezoning of campus headquarters for anentertainment software company_ Innovative leasehold improvement financing arrangement formajor computer manufacturer_ Acquisitions, dispositions and leases of hospitals,rehabilitation centers and residential treatment centers in numerous statesfor a healthcare management company


TABLE OË®å

I. INTRODUCTION 1

II. EFFECTIVE DATES 1

III. ACKNOWLEDGMENTS 1

IV. INTERNET ACCESS 1

V. BILL SUMMARIES AND FORM CHANGES 1HB 1052 Relating to creating a real estate broker’s lien on commercial real estate 1

Lending; Financial Institutions 6HB 744 Relating to revolving credit accounts 6HB 2781 Relating to the definition of a qualified commercial loan 7SB 172 Relating to the definition of a qualified commercial loan 7Commercial Laws 8SB 648 Relating to the specification of venue for actions arising from certain major

transactions 8SB 1058 Relating to the revision of the uniform law on secured transactions 9

HB 641 Relating to requiring a municipal utility district to disclose to the purchaser ofresidential real property whether the property is located in a municipality’sextraterritorial jurisdiction 12

HB 2224 Relating to requiring disclosure notices for the sale of real property governed by aproperty owners’ association and requiring the filing of dedicatory instrumentsgoverning property owners’ association 12

SB 167 Relating to requiring a seller of real property to deliver notice to the purchaserregarding the potential for annexation of the property 13

SB 434 Relating to the disclosure of certain information by a property owner’sassociation 14

Construction 14HB 2054 Relating to mechanic’s, contractors, and materialmen’s liens 14


HB 2135 Relating to establishing a mechanic’s lien for landscaping installations 16SB 506 Relating to suits to recover damages resulting from construction defects 17

Document Filing 17HB 1351 Relating to execution and filing of an assumed name certificate 17SB 478 Relating to filing of financing statements and certain other filings 18SB 479 Relating to the fee for the electronic filing of a financing statement with the

secretary of state 18SB 570 Relating to certain business documents filed and recorded with the secretary of

state 18SB 888 Relating to the electronic filing of records with a county clerk 19Landlord/Tenant 19HB 2408 Relating to notice to tenants of certain changes in policy by a landlord 19

HB 2769 Relating to the disposition of the personal property and security deposit of adeceased residential tenant 19

Manufactured Housing 20HB 1086 Relating to liens on manufactured homes 20Environmental 20HB 480 Relating to notice and hearings for an application for a permit for a land

treatment or other disposal facility 20HB 732 Relating to stormwater management and regulation by certain political

subdivisions 21HB 2815 Relating to the petroleum storage tank program; providing a penalty 22

HB 2816 Relating to the fee on delivery of certain petroleum products and the terminationof the petroleum storage tank program 23

SB 1238 Relating to accreditation of environmental testing laboratories 23Ad Valorem Taxation 24SB 977 Relating to exemptions from ad valorem and sales and use taxation of

certain timber and certain items used in timber operations and the valuation ofcertain timber land for ad valorem tax purposes 24

SB 1359 Relating to the rendition and appraisal of property for ad valorem tax purposes 25Title Insurance 26HB 1453 Relating to coverage under a title insurance policy issued with respect to

residential real property 26


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UPDATING FORMS UNDER RECENT LEGISLATION

I. INTRODUCTION set forth below, who have volunteered theirThis paper presents a summary of time and efforts to track and report on real

significant bills passed during the Regular estate, lending and other commercialSession of the 76th Legislature of the State of legislation during the 76th Regular Session.Texas that may impact forms used directly or Their efforts are greatly appreciated.indirectly in real estate, mortgage lending, andother business and commercial transactions.The 76 Legislature introduced more than 600th

bills during the Regular Session dealing withthese issues. This paper includes only thosethat passed, that the authors perceived to be ofgeneral interest to the audience and thatrequire new forms, changes to forms or someother action related to the execution and filingof documents.

II. EFFECTIVE DATES AustinIn general, the effective date of acts of the Mimi Walker, Exxon Company, U.S.A,

Legislature is 90 days after adjournment of the HoustonRegular Session (August 30, 1999 for the 76thRegular Session), unless a later effective dateis specified in the bill. If, however, a billincludes an emergency clause and is passed bya two-thirds majority in each house, such actbecomes law immediately on signing by theGovernor and filing with the Secretary ofState. Because of the possible confusion anduncertainty in this area, we have included afterthe Summary of each bill the earliest effectivedate for each bill shown by the TexasLegislative Service.

III. ACKNOWLEDGMENTSThis paper contains portions of a paper

written by the members of the Real Estate LawLegislative Subcommittee of the State Bar’sReal Estate, Probate and Trust Law Section

Michael A. Jacobs, Law Offices of MichaelJacobs, HoustonJanna R. Melton, Haynes and Boone, L.L.P.,AustinAlan McGraw, Law, Law Offices of AlanMcGraw, AustinWalter D. Miller, Haynes and Boone, L.L.P,DallasPenny L. Parker, Nokia Americas, IrvingDavid W. Tomek, Strasburger & Price, L.L.P.,

IV. INTERNET ACCESSThe text and analysis of the bills cited in this

paper can be accessed at the following StateL e g i s l a t u r e w e b s i t e :http://www.capitol.state.tx.us.

II.BILL SUMMARIES AND FORMCHANGES

Commercial Broker’s and Appraiser’sLien

HB 1052 Relating to creating a real estatebroker’s lien on commercial real estate

Author: Brimer Sponsor: Wentworth

Adds: Chapter 62, Property Code


Summary:This bill creates the Broker’s and

Appraiser’s Lien on Commercial Real EstateAct. The Texas Association of Realtorsheavily promoted HB 1052, which is modeledon similar legislation passed in recent years ina number of other states.

Commercial Real Estate Only. The lien applies only to commercial real

estate, which is defined to be all real estateother than:

(a) 1-4 family residences; (b) single-family residential units (including

condos and townhomes); (c) homestead property;(d) unimproved property zoned for single

family residential use or restricted tosingle family residential use underrestrictive covenants that will remain ineffect for at least the next two years; and

(e) farm and ranch land located more thanthree miles from a city’s corporateboundaries.

If real estate is zoned or restricted formore than one use, the broker’s lien attachesonly to the portions that constitute commercialreal estate

Minimum Commission Amounts. The Act does also does not apply to the

following transactions:

(a) transactions involving a claim for acommission of $2,500 or less; and (b)transactions involving a claim for acommission of $5,000 or less if the

commercial real estate (i) is the principal placeof business of the record title owner; (ii) isoccupied by more than one and fewer than fivetenants; and (c) is improved with 7,500 squarefeet or less of total gross building area.

Brokers Entitled To The Lien. Brokers entitled to the lien include those

representing sellers, lessors, buyers, andtenants. “Broker” means a licensed real estatebroker and a licensed or certified real estateappraiser.

Commissions -- Earned v. Payable. The bill draws an important distinction

between when a commission is earned andwhen it is payable. A commission is earned onthe earlier of: (a) an occurrence provided forin the commission agreement that defineswhen the commission is earned; and (b) thedate the commission obligor enters into apurchase contract or lease for all or a portionof the commercial real estate while thecommission agreement is in effect (includingany “tail” period. The contract or lease andthe parties to the contract or lease must becontemplated by the commission agreement.

The commission is payable at the time, andon any conditions, provided in the commissionagreement. In the context of a commissionagreement that provides for payment of anadditional commission on lease renewal orexpansion, the additional commission is earnedwhen (a) the broker performs all additionalservices relating to the lease renewal orexpansion expressly prescribed by thecommission agreement; or (b) the broker firstearned a commission, if the commissionagreement does not expressly require thebroker to perform additional services in either


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situation. A buyer or its broker and the closing escrow

Property Subject to the Lien. A broker has a lien on the commission

obligor’s interest in the commercial real estate(i.e., the fee interest, the leasehold interest)when the commission is earned and the noticeof lien is recorded.

Commission Agreement Disclosures; Waiversof Liens.

The commission agreement must disclosethe broker’s right to claim the lien. Generally,a purported waiver or release of the broker’slien rights before the commission is satisfied orforgiven is void; however, a broker’sentitlement to a lien is automatically waived if:(a) the commission is earned and payable inconnection with a lease transaction; and (b) thecommission agreement is included in the leaseagreement. Even if the lien is waived by virtueof inclusion of the commission agreement inthe lease agreement, then the broker mayrecover damages if the owner or tenantviolated the commission agreement. If theowner or tenant also acted with grossnegligence or bad faith, then damages includethree times the amount of the claimedcommission. A person who assumes anowner’s or tenant’s commercial real estateinterest is bound by a commission agreementincluded in a lease agreement, unless anescrow account is established or a bond isprovided in compliance with the Act. Amortgagee who forecloses is not bound if themortgagee does not assume the lease on whicha commission agreement is based.

Establishing the Lien.

agent may require from the seller beforeclosing an affidavit identifying each brokerwho claims or has earned a commission, butwho has not been paid. The bill sets forth therequirements for the contents and publicationof the broker’s lien affidavit. The inception ofthe lien is the date the notice of lien isrecorded and does not relate back to the dateof the commission agreement.

The lien is void if the broker who has earneda commission does not record a notice of lienby the following deadlines: (a) if representingthe seller, before the closing; (b) ifrepresenting the buyer, after closing and beforethe buyer sells the property; and (c) ifrepresenting the landlord or tenant, before theearlier of (i) 91 days after the commissionbecomes payable and (ii) the date thecommission obligor sells its interest in theproperty after the lease agreement is signed.

Priority of Liens; Obligor Protections. The broker’s lien is not a super-priority lien

(i.e., it is subordinate to prior recordedinstruments, to purchase money liens, and to amechanic’s lien with an inception before therecording of the broker’s lien). The broker’slien is also subordinated in cases where thecommission obligor sells, refinances or obtainsa loan for construction, repair orimprovements if the buyer or commissionobligor records a memorandumacknowledging the existence of the broker’slien and sends the broker a copy of therecorded memorandum, after which the brokermust execute the memorandum and return it tothe commission obligor within seven days.The broker’s lien may also be subordinated ifthe commission obligor provides to the broker


a subordination agreement for execution by the requirements for the escrow of disputedbroker, in which case the broker must execute amounts and bonding around the lien. Anand acknowledge the subordination agreement owner or tenant may have the lien dischargedand return it within seven days after the broker and recover damages if the broker fails toreceives it. comply with its obligations under the Act,Discharge of Lien. including three times the amount of the

Liens may be discharged by any of the claimed commission if the broker is found tofollowing methods: (a) a court order have acted with gross negligence or in baddischarging the lien; (b) payment of the faith in violation of The Real Estate Licensecommission to the broker named in the Act. commission agreement; or (c) establishing anescrow account in compliance with the Act.

Foreclosure of Lien. forms and provisions required after theA broker may not bring a suit to foreclose passage of HB 1052:

a lien unless the commission is earned andpayable. The contents of the complaint toforeclose are prescribed. Generally, the lienmay be foreclosed only by a court actionbrought within two years after the notice oflien is recorded; however, a suit to foreclose alien securing a deferred commission (i.e., thatwhich is earned but not yet payable) must bebrought by the earlier of: (a) two years afterthe commission is payable or (b) the 10thanniversary of the recordation of the lien orthe 10th anniversary of the date the brokerrecords a subsequent notice of the lien as arenewal of the broker’s right to the lien,whichever date is later. A broker may renewthe notice of lien by recording a renewal noticebetween the ninth and tenth anniversary of therecording of the original notice of lien or lastrenewal notice. A broker must bring suit toforeclose within 30 days after demand by theowner of the commercial real estate.

Release of Lien. in which case it would be advisable toThe bill simply requires the release of the include a requirement in the underlying

lien to be recordable, but sets forth the contract.

Drafting Suggestions: The following is a re-cap of the essential

b.Commission Agreement – The commissionagreement should include provisions clearlyestablishing when a commission is earnedand payable. In order for the broker to beentitled to the lien, the commissionagreement must disclose the broker’s right toclaim the lien. b.Lease Agreement – If a waiver of the lien isdesired, then inclusion of the commissionagreement in the lease agreementautomatically waives the lien.b.Seller’s Affidavit – A buyer or its brokerand the closing escrow agent may requirefrom the seller before closing an affidavitidentifying each broker who claims or hasearned a commission, but who has not beenpaid. See Exhibit A for a sample formSeller’s Affidavit, which could be revised forexecution by the broker as well. Althoughnot required by the Act, Seller may also wantto request a similar affidavit from Purchaser,


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b.Notice of Lien -- The bill sets forth the The broker’s lien is subordinated in casesrequirements for the contents and publication where the commission obligor sells,of the broker’s lien affidavit. The notice of refinances or obtains a loan for construction,lien must be signed by the broker or the repair or improvements if the buyer orbroker’s authorized agent and must commission obligor records a memorandumcontaining the following: acknowledging the existence of the broker’s

(i) a sworn statement of the nature and lien and sends the broker a copy of thethe amount of the claim, including recorded memorandum, after which the(A) the commission amount or the broker must execute the memorandum andformula used to determine the return it to the commission obligor withincommission, (B) the type of seven days.commission, including a deferred b.Complaint to Foreclose – The broker’scommission and (C) the month and complaint to foreclose must contain theyear in which the commission was following information:earned; (i) a brief description of the

(ii) the name and real estate license commission agreement that is thenumber of the broker; basis for the lien, including (A) a

(iii) the name reflected in the broker’s description of the disclosure of therecords of any person who the broker broker’s right to the lien contained inbelieves is obligated to pay the the commission agreement, (B) thecommission under the commission date on which the commissionagreement; agreement was executed, (C) the

(iv) the name as reflected in the broker’s event for which a commission isrecords of any person the broker considered to be earned and (D) thebelieves to be an owner of the event for which a commission iscommercial real estate interest on considered to be payable;which the lien is claimed; (ii) a description of the services

(v) a description legally sufficient for performed by the broker;identification of the commercial real (iii) the amount of the payableestate interest sought to be charged commission that is unpaid; with the lien; (iv) a description of the commercial real

(vi) the name of any cooperating broker estate to which the lien attaches; andor principal in the transaction with (v) other facts necessary for a fullwhom the broker intends to share the understanding of the rights of thecommission and the dollar or parties.percentage amount to be shared; and b.Release of Lien – See Exhibit B for a

(vii) a copy of the commission agreement sample form release of lien, which must be in on which the lien is based. recordable form. The sample would be used

b.Memorandum Acknowledging the Lien -- in connection with the sale of real property,


but could be revised to use in a lease in excess of $10 to be paid to the State totransaction or with an appraiser. subsidize finance education activities andb.Subordination Agreement – The broker’s counseling. Finance companies who re-locatelien may also be subordinated if the out-of-state in order to evade the mandatedcommission obligor provides to the broker a contribution to the State are subject tosubordination agreement for execution by the penalties.broker, in which case the broker mustexecute and acknowledge the subordinationagreement and return it within seven daysafter the broker receives it.

Effective: August 30, 1999 from the surrounding material and must read

Lending; Financial Institutions

HB 744 Relating to revolving creditaccounts

Author: Eiland Sponsor: Bernsen

Amends: Sections 346.101(a), 346.103,and 345.157(b); adds Subsections345.157(d)-(f); repeals Section303.009(e), Finance Code

Summary:This Bill effects certain changes to the

revolving credit accounts chapter of theFinance Code, including (a) providing for asingle maximum rate of interest of 18% perannum, (b) authorizing/amending certain fees Author: Pitts Sponsor: Ellis, Rodneyto be charged (i.e., annual fees that increase ascredit limits increase, late charges, cashadvance charges, returned check fees andexcess credit limit fee), and (c) requiring apromulgated late charge notice to beconspicuously included in customer’s monthlystatement. This bill also increases themaximum delinquency charge on a retailinstallment sales contract from $10 to $15, butrequires 50 cents of each delinquency charge

Drafting Suggestions: The form of late charge must be in at least

10-point type that is boldfaced, capitalized,underlined or otherwise conspicuously set out

as follows:

A LATE CHARGE OF FIVEPERCENT OF THE PAYMENTDUE OR A MAXIMUM OF $15WILL BE ASSESSED FOR APAYMENT MADE 10 DAYS ORMORE AFTER THE DATEPAYMENT OF THIS BILL ISDUE.

Effective: September 1, 1999


HB 2781 Relating to the definition of aqualified commercial loan

SB 172 Relating to the definition of aqualified commercial loan

Author: Harris Sponsor: Solomons

Amends: Section 306.001(9), Finance Code

Summary:Both HB 2781 and SB 172 provide that the

definition of a “qualified commercial loan”


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includes the renewal of such a loan regardless stated that the Commissioner might be willingof the principal amount of the loan at the time to rule on which bill is effective, but such aof the renewal. SB 172 also creates two tiers ruling has not occurred yet.in the origination of a qualified commercialloan: (i) a commercial loan of $3 million ormore if the loan is secured by real property;and (ii) a commercial loan of $250,000 ormore if the loan is not secured by realproperty; provided that, if the loan is less than$500,000, the loan documents contain awritten certification from the borrower that (a)the borrower has been advised by the lenderto seek the advice of an attorney and anaccountant in connection with the loan; and (b)the borrower has had the opportunity to seekthat advice from an attorney and an accountantof its choice.

As of the submission of this paper, thereis some concern that SB 172, which becameeffective on June 18, 1999, may have beensuperseded by HB 2781 on August 30, 1999.SB 172 passed May 24, 1999 and was signedby the Governor on June 18, 1999. House Bill2781 passed May 26, 1999 and was signed bythe Governor June 19, 1999. According toLegislative Council, the Code ConstructionAct provides that if two amendments to a laware passed in the same session, then an attemptto harmonize them should be made; however,if they are irreconcilable, then the latest date ofenactment prevails. Arguably, this wouldmean that, unless the two bills can beharmonized, SB 172 was effective for just afew weeks, but HB 2781 trumped it when itbecame effective August 30, 1999. If HB2781 superseded SB 172, then the two-tiereddefinition of qualified commercial loans wouldno longer be available. Representatives at theConsumer Credit Commissioner’s Office have

Drafting Suggestions:If SB 172 is still in effect, then the two-tiered

definition of qualified commercial loans isavailable to lenders. If that is the case, inconnection with commercial loans in theamount of $250,000 or more, but less than$500,000, lenders must include in the loandocuments a written certification from theborrower similar to the following:

Borrower certifies that (i) Lender hasadvised Borrower to seek the adviceof an attorney and an accountant inconnection with the Loan; and (ii)Borrower has had the opportunity toseek such advice from an attorneyand an accountant of its choice.

If the borrower, has been represented bycounsel or an accountant, then the lender maywant to add an additional certification that theborrower has received that advice from anamed attorney and the accountant.

Effective: HB 2781 – August 30, 1999; SB172 -- June 18, 1999

Commercial Laws

SB 648 Relating to the specification ofvenue for actions arising from certainmajor transactions

Author: Wentworth Sponsor: Dutton

Adds: Section 15.020, Civil Practice andRemedies Code


Summary:Unless another venue statute applies, this

bill enables parties to “major transactions”(i.e., those non-consumer transactionsevidenced by a written agreement under whicha person pays or receives, or is obligated topay or is entitled to receive, considerationequal to or greater than $1 million) to choosein their written agreement the venue for anaction arising from that major transaction.However, under Section 35.52 of the TexasBusiness & Commerce Code a provisionestablishing venue in a state other Texas is stillvoidable by a contractor or subcontractor inconnection with a contract for construction ofimprovements in Texas.

Drafting Suggestions:In order to specify venue in a major

transactions, include a provision similar to thefollowing:

This Contract shall be governed bythe laws of the State of Texas andvenue shall lie in Travis County,Texas.

Effective: August 30, 1999

SB 1058 Relating to the revision of theuniform law on secured transactions

Author: Carona Sponsor: Solomons

Amends and adds: Various Sections, Chapter 9,

Business and Commerce Code

Summary:This Bill substantially revises the Texas

law of secured transactions by adopting UCCrevisions proposed in 1998 by the nationaldrafting committee appointed by thePermanent Editorial Board of the UniformCommercial Code and approved by theAmerican Law Institute and the NationalConference of Commissioners on UniformState Laws. Generally, the revised Chapter 9will cover more transactions, but the basicconcepts relating to creation, perfection,priority and enforcement of security interestswill not change, although there are many newrules and changes to, as well as new, definedterms. Electronic Security Interests.

Under the revised Chapter 9, it will bepossible to create and perfect security interestselectronically because the debtor will no longerbe required to sign the financing statement,although the debtor must still have authorizedthe filing. Security agreements will beconsidered signed with a digital signature.

Additional Collateral Covered. In addition, Chapter 9 will now cover (a)

security interests in deposit accounts,software, electronic chattel paper, supportobligations for receivables (i.e., guaranties andletters of credit), commercial tort claims andhealth-care insurance receivables assigned to ahealth care provider; (b) the sale of promissorynotes and other personal property; (c) the saleof “payment intangibles” for money due or tobecome due, which will include loanparticipations; (d) true consignments (i.e.,bailments for the purpose of sale), with a fewexceptions; and (e) general intangibles,including contracts, permits, licenses andfranchises. The interest of the consignor will


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be defined as a purchase money security located, which is the current rule. This changeinterest in inventory. The revised Article 9 will simplify the rules on perfection by filing.also clarifies that a security interest in a note For example, for a corporate debtor, financingsecured by real estate is covered by Article 9 statements will be filed in the state ofand will automatically attach to the security incorporation, which will make it easier tointerest securing the note. verify the existence of financing statements

Description of Collateral. Descriptions of the collateral in the

security agreement must reasonably identifythe property (i.e., by specific listing, category,type, quantity, computation, allocation formulaor procedure, or any other method that allowsfor objective determination). Descriptions ofthe collateral in the financing statement mustalso meet that criteria; however, a description b.Name of the debtor.of collateral as “all assets” or “all personal b.Name of the secured party or aproperty” is now sufficient in the financing representative of the secured party.statement if the intention is to cover all of b.Indication of the collateral covered by thethose items. Modifications to that description, financing statement.such as “all of the debtor’s assets” are notsufficient in either the security agreement orthe financing statement.

Description of the Debtor. For a registered organization, the

financing statement must state the debtor’sname as indicated in the public records of thejurisdiction in which the debtor is organized.A trade name or any other name is notsufficient. With respect to generalpartnerships and unincorporated organizations,the financing statement must name the partnersor other persons comprising the debtor.

Location of Filing. As a general rule, financing statements

will be filed in the state where the debtor islocated, as opposed to where the collateral is

because they will all be located in onejurisdiction.

Financing Statement Contents and FixtureFilings.

The bill also modifies information required tobe provided in financing statements. Afinancing statement must contain the followinginformation:

A financing statement covering fixtures,timber to be cut or as-extracted collateral mustalso contain the following information:

b.Indication that the financing statementcovers that type of collateral.b.Indication that the financing statement is tobe filed in the real property records;b.A description of the real property to whichthe collateral is related that would also besufficient for the mortgage.b.Name of the record owner of the realproperty, if different from the debtor.

A recorded mortgage is effective from thedate of recording as a financing statementcovering fixtures, timber to be cut oras-extracted collateral if:


b.The mortgage indicates the goods oraccounts it covers.b.The goods are or are to become fixturesrelated to the real property described or thecollateral is related to the real propertydescribed and is as-extracted collateral ortimber to be cutb.The record satisfies all other financingstatement requirements, except for therequirement that it indicates that it is to befiled in the real property records.b.The mortgage has been recorded.

Foreclosure. With respect to foreclosure of security

interests, failure to follow commerciallyreasonable procedures in foreclosing a securityinterest will no longer bar recovery of adeficiency in a non-consumer case. Arebuttable presumption rule will apply toreduce any deficiency to the extent the failureto act in a commercially reasonable mannercauses a lower foreclosure sale price.

Other obligors have the same rights asdebtors in foreclosure; therefore, the securedparty must give all obligors notice offoreclosure, unless the secured party is notaware of a secondary obligor (i.e., guarantor).Prior to the occurrence of a default, theobligors cannot waive their rights underArticle 9. The bill promulgates specific noticeforms for disposition of collateral that must besent after default and ten days or more before Drafting Suggestions:the earliest time of the disposition in order to See Exhibits C, D and E attached for samplemeet the reasonable notice requirements of forms of financing statements and notificationsArticle 9. The notice must be sent to the of disposition of collateral. debtor and any secondary obligor. If thecollateral is other than consumer goods, thenthe notice must be sent to any other person

that notifies the secured party prior to thenotification date that it has an interest in thecollateral and to secured parties holding a lienon the collateral perfected by the filing offinancing statement meeting certainrequirements ten days before the notificationdate and certain other secured parties withperfected security interests by statute,regulation or treaty. The secured partycomplies with the notice requirement if notlater than twenty days or earlier than thirtydays before the notification date the securedparty requests information concerning thefinancing statements indexed under thedebtor’s name in the appropriate office.

In order for a secured party to transfer titleto the collateral following a dispositionpursuant to foreclosure it must file a transferstatement authenticated by the secured partystating the following:

b.That the debtor has defaulted in connectionwith an obligation secured by specifiedcollateral.b.That the secured party has exercised itspost-default remedies with respect to thecollateral.b.That, by reason of the exercise, a transfereehas acquired the rights of the debtor in thecollateral.b.The name and mailing address of thesecured party, debtor, and transferee.

Effective: Except for a couple of sectionsauthorizing digital signatures, which areeffective on August 30, 1999, the bill will


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not be effective until July 1, 2001. The district may be dissolved by municipalextended effective date is to allow ordinance without the consent of the districtpersons to become aware of the changes, or the voters.for more states to pass this revision, and b.For land not located in whole or in partfor the 2001 Legislature to make any within the corporate boundaries of anecessary changes before it becomes municipality or the extraterritorialeffective. jurisdiction of a home-rule municipality,

Sales Contracts; Annexation; Property OwnersAssociations

HB 641 Relating to requiring a municipalutility district to disclose to the purchaserof residential real property whether theproperty is located in a municipality’sextraterritorial jurisdiction

Author: Howard Sponsor: Lindsay

Amends: Section 49.452, Water Code

Summary:This bill provides for the following three

separate forms of statutory utility districtnotice, instead of the previous single form:

b.For land in districts located in whole or inpart in the extraterritorial jurisdiction of oneor more home-rule municipalities and notlocated within the corporate boundaries of amunicipality, to notify buyers, in addition topreviously-required information about thedistrict, that the land may be annexedwithout the consent of the district or thevoters.b.For land in districts located in whole or inpart within the corporate boundaries of amunicipality, to notify buyers, in addition topreviously required information, that the

information that was contained in theprevious notice form.

HB 641 also exempts transfers to agovernmental entity from the noticerequirements and adds brokers to the list ofthose who are protected when relying onincorrect information that has been providedby the district.

Drafting Suggestions: See Exhibit F for copies of the three

statutory form MUD notices.


HB 2224 Relating to requiring disclosurenotices for the sale of real propertygoverned by a property owners’association and requiring the filing ofdedicatory instruments governingproperty owners’ association

Author: Solomons Sponsor: Shapiro

Adds: Sections 5.012 and 202.006,Property Code

Summary:This bill requires notice by a seller to the

buyer of a single family residence that issubject to membership in a property owners’association (a) that the property is subject tomembership in a property owners’ association;


(b) that restrictive covenants have been or will included in the extraterritorial jurisdiction of abe recorded; and (c) that if assessments are not municipality and thereby subject to annexation.paid, the assessment lien could be foreclosed. The notice must be substantially similar to theThe text of the notice is set forth in the bill. language set forth in the bill and must beThe notice must be delivered to the purchaser delivered to the purchaser before the date thatbefore the purchaser is bound to the sales the purchaser is bound by the sales contractcontract. If notice is not given, then the buyer (even though the form notice appears tomay terminate the contract for any reason contemplate an executed contract). If thewithin the earlier of seven days after receiving notice is not delivered, the purchaser maythe notice or the date of transfer of title as terminate the contract for any reason withinprovided in the contract. There is no other the earlier of seven days after the date theremedy for the seller’s failure to deliver the purchaser receives the notice or the date thatnotice. The notice is not required for certain the transfer occurs. The bill does not apply totransfers, including those under a court order transfers under a court order or foreclosureor foreclosure sale, by a trustee in bankruptcy, sale, by a trustee in bankruptcy, to or from ato a mortgagee by a mortgagor, to or from a governmental entity, and other transactionsgovernmental entity, of a real property interest excluded under similar notice requirements.in a condominium, or of a mineral interest. In The notice requirements and sanctions of SBaddition, each property owners’ association is 167 should be compared to those of HB 2224,required to record dedicatory instruments that concerning notice that land is subject to ahave not already been recorded, no later than property owners’ association. SB 167 doesJanuary 1, 2000. not contain the exclusive remedy language;

Drafting Suggestions:See Exhibit G attached for the statutory

form notice.


SB 167 Relating to requiring a seller of realproperty to deliver notice to the purchaser Effective: January 1, 2000regarding the potential for annexation ofthe property

Author: Carona Sponsor: Goolsby association

Adds: Section 5.011, Property Code Author: Brown, Buster

Summary:This bill requires a seller to give written Adds: Section 207, Property Code

notice to a purchaser that the land may be

therefore, if is unclear whether a seller whofails to give the notice will have liability fordamages.

Drafting Suggestions:See Exhibit H for the statutory form notice.

SB 434 Relating to the disclosure of certaininformation by a property owner’s

Sponsor: Yarbrough


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Summary:This bill requires POAs to deliver, within

10 days of a request by an owner, its agent, ora title company, copies of restrictivecovenants, bylaws, rules, and a resalecertificate. The bill only applies to POAsentitled to levy regular or special assessmentsin subdivisions burdened by restrictionsrecorded in county real property/deed recordsthat limit a majority of the land (excludesstreets and public areas) to residential use.

The resale certificate must provide certainrelevant information applicable to the entiresubdivision (such as budgets and assessments),plus information applicable to the specificproperty (such as whether the property is inviolation of any covenants and amountsowed). If the POA fails to deliver the resalecertificate after two requests, then the ownercan seek court order and judgment againstPOA for up to $500, plus attorneys’ fees andcosts. An owner may provide a buyer undercontract an affidavit stating that two requestshave been made to no avail. In such cases, thebuyer, lender, and title company are not liableto the POA for any amounts due to the POAat the time the affidavit was prepared. A POAmay not deny any statement it makes in aresale certificate. A buyer, lender, owner, ortitle company is not liable for debts to thePOA not disclosed in the resale certificate, andany lien for same is terminated.

Drafting Suggestions:The Texas Real Estate Commission

promulgates a form resale certificate that maybe used as an addendum to an earnest moneycontract.


Construction

HB 2054 Relating to mechanic’s, contractors,and materialmen’s liens

Author: Solomons

Adds: Sections 53.001(15) and 53.256(d);amends Section 53.055(a), 53.057(a) and(e), 53.158, 53.205(a), 53.206(a) and (b),53.207, 53.255(b), 53.256(a) and (b),53.258(a), (b), and (e), 53.260; repealsSection 53.106(e), Property Code

Summary:This bill makes various changes to the

mechanic’s lien statutes, including thefollowing:

b.Adds a definition of “completion”. b.Extends from one business to five calendardays the period to provide an owner a copyof a filed affidavit.b.Adds a right of the owner to waive theright to receive the initial or updatedsubcontractor and supplier informationpursuant to a waiver in a promulgated formin the residential construction contract or ina separate statement signed by the owner andmakes conforming changes to the noticerequired to be provided in the initialsubcontractor and supplier information.b.Clarifies that there is not a prohibitionagainst conveyance of property to theoriginal contractor, but rather that aconveyance is not required.b.Provides that the disbursement of fundsstatement required to be furnished by thecontractor to the residential owner is due


only when the contractor requests payment T H I S L I S T O Ffrom the owner or the lender, may include SUBCONTRACTORS ANDany information agreed to by the owner and SUPPLIERS MAY NOT BE Acontractor (above the minimum information FINAL LISTING. UNLESS YOUrequired by the statute), and may be SIGN A WAIVER OF YOURprovided in any manner agreed to by the RIGHT TO RECEIVE UPDATEDowner and contractor. I N F O R M A T I O N , T H Eb.Conforms the time periods within which to CONTRACTOR IS REQUIRED BYfile suit to foreclose a lien against LAW TO SUPPLY UPDATEDnon-residential or residential projects, except INFORMATION, AS THEthat a suit to foreclose a lien against a INFORMATION BECOMESresidential project must be brought within AVAILABLE, FOR EACHone year after the last day a lien claimant SUBCONTRACTOR ORmay file a lien affidavit (as opposed to the SUPPLIER USED IN THE WORKactual date of lien filing) or within one year PERFORMED ON YOURafter completion, termination or RESIDENCE.abandonment of the work, instead of the twoyears allowed for non-residential project.b.Makes conforming changes to the statutorynotice contractors and lenders must give toresidential owners.

Drafting Suggestions:See Exhibit I for the revised statutory

disclosure statement that contractors andconstruction lenders must provide toresidential owners.

Unless the Owner waives the right to theinitial list of subcontractors and suppliersprovided by the residential constructioncontractor before commencement ofconstruction must, the initial list must stillcontain the name, address and telephonenumber of each subcontractor and supplier thecontractor intends to use in the work to beperformed; however, the notice in the initiallist regarding updated lists must beconspicuous and in at least 10-point boldfacetype read as follows:

The waiver of the right to receive the initialor updated list must also be in at least 10-pointbold-faced type and read substantially similarto the following:

WAIVER OF THE LIST OFSUBCONTRACTORS ANDSUPPLIERS. AN OWNER IS NOTREQUIRED TO WAIVE THERIGHT GRANTED BY SECTION53.256, PROPERTY CODE, TORECEIVE FROM THECONTRACTOR AN ORIGINALOR UPDATED LIST OFSUBCONTRACTORS ANDSUPPLIERS.

BY SIGNING THIS DOCUMENT,I AGREE TO WAIVE MY RIGHTTO RECEIVE FROM THECONTRACTOR AN ORIGINALOR UPDATED LIST OFSUBCONTRACTORS ANDSUPPLIERS.


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I UNDERSTAND ANDACKNOWLEDGE THAT, AFTERSIGNING THIS DOCUMENT,THIS WAIVER MAY NOT BECANCELED AT A LATER DATE.

I HAVE VOLUNTARILYCONSENTED TO THIS WAIVER.


HB 2135 Relating to establishing amechanic’s lien for landscapinginstallations

Author: Solomons Sponsor: Harris

Adds: Subsection 53.021(d); amendsSection 53.124(e), Property Code

Summary:Persons who provide landscaping services

(including the construction of retention ponds,retaining walls, and irrigation systems)pursuant to a written contract with the owneror its representatives now have a mechanic’slien on the property. The lien of a landscaperis put on par with those of architectsengineers, and surveyors by having itsinception relate back to the date of recordingthe lien affidavit (instead of back to thecommencement of construction).

Drafting Suggestions: Contracts for landscaping services will

need to be revised to include provisions similarto those typically used in constructioncontracts for retainage and payment andperformance bonds and to require down-date

lien waivers as a condition to progresspayments and final lien waivers as a conditionto final payment. Lenders may also want torequire subordination agreements inconnection with loans for landscaping services.Owners may also want to obtain lists ofsubcontractors and require that similarcontractual requirements be included insubcontracts.


SB 506 Relating to suits to recoverdamages resulting from constructiondefects

Author: Harris Sponsor: Goodman

Amendsand adds: Various Sections, Residential

Construction Liability Act (Chapter 27 ofthe Property Code)

Summary:This bill was supported by the Texas

Association of Builders and expands thedefinition of “contractor” to include an owner,officer, director, employee, shareholder orpartner of a contractor, so that suits againstthese people are also governed by theResidential Construction Liability Act(“RCLA”). RCLA now applies to subsequentowners of a residence and insurance subrogeesmust also comply with RCLA. The billprovides for attorneys’ fees and costs to beawarded for groundless suits. Thehomeowner/claimant must provide thecontractor any evidence of the defect, on thecontractor’s request, before the 60th day priorto filing a lawsuit against the contractor. The


bill provides for abatement of the lawsuit if theclaimant refuses the contractor notice and anopportunity to inspect the defect. In the eventthe claimant is found to have unreasonablyrejected the contractor’s settlement offer, theclaimant may not recover an amount in excessof the reasonable settlement offer.Contractors may obtain contribution fromsubcontractors if the contractor provides thesubcontractor with notice of the claim and theclaim is settled. The claim is automaticallyreferred to mediation if requested by either theowner or the contractor in a case involving aclaim of more than $7,500. The contractormust provide a disclosure statement to thehomeowner in a construction contracts subjectto the provisions of RCLA. Failure to providethe written statement subjects the contractorto a civil penalty of $500 in addition to otherremedies provided for in RCLA.

Drafting Suggestions:See Exhibit J for the notice required to be

included in construction contracts subject toRCLA. The notice must be placed next to thesignature line and be in 10-point boldface type.Owners may also want to include a waiver ofthe right to mandatory mediation underSection 27.0041 of the Texas Property Code;however, the statute does not address whetherthis right is waivable.

Effective: September 1, 1999, except forthe notice required in RCLA constructioncontracts, which will be requiredbeginning September 1, 2000.

Document Filing

HB 1351 Relating to execution and filingof an assumed name certificate

Author: Woolley

Amends: Various Sections, Chapter 36,Business and Commerce Code

Summary:This bill provides that assumed name

certificates filed with the Secretary of State nolonger need to be acknowledged (butmaintains the requirement of anacknowledgment for those filed with thecounty clerk). In addition, the Secretary ofState may accept copies and faxed signatures.The bill also clarifies the criminal penalty forfailure to file as a Class A misdemeanor, andestablishes criminal penalties for fraudulentfilings.


SB 478 Relating to filing of financingstatements and certain other filings

Author: Carona Sponsor: George

Adds: Subsection 9.402(i), Business andCommerce Code

Summary:SB 478 provides that filing a financing

statement electronically does not render itineffective or insufficient.

Effective: May 21, 1999

SB 479 Relating to the fee for the electronicfiling of a financing statement with thesecretary of state

Author: Carona Sponsor: George


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Adds: Section 9.4095, Business and Summary:Commerce Code SB 888 authorizes county clerks to accept

Summary:This bill sets the fee for electronic filing of

a financing statement at $5 rather than the $10charge for a standard paper filing. Thisreduced charge is designed to encourageelectronic filings.

Effective: June 18, 1999

SB 570 Relating to certain businessdocuments filed and recorded with thesecretary of state

Author: Shapiro Sponsor: Brimer

Amends: Section 405.032(a), GovernmentCode

Summary:This bill increases fees for expedited

handling of searches by, and filings with, theSecretary of State as follows: (a) handlingcertified record searches or filing financingstatements from $5.00 to $15.00; (b) filing or Summary:review of entity documents from $10.00 to This bill requires a landlord to give prior$25.00; and (c) handling requests for certified written notice (in person to the tenant, incopies from $5.00 to $10.00. person to a person over 16 residing in the


SB 888 Relating to the electronic filing ofrecords with a county clerk

Author: Harris Sponsor: Ramsay

Adds: Section 191.009 and Chapter 195,Local Government Code

instruments by electronic filing and to recordthe instruments electronically (including in thereal property records) pursuant to rules to beadopted by the Texas State Library andArchives Commission not later than January 1,2001. Among those persons authorized to filedocuments electronically are licensedattorneys, licensed lenders, title companies,federal agencies and lenders, and stateagencies. No additional fee may be charged bya county clerk to file or record a documentelectronically.


Landlord/Tenant

HB 2408 Relating to notice to tenants ofcertain changes in policy by a landlord

Author: Hill Sponsor: Lucio

Adds: Section 92.013, Property Code

premises, by affixing to the inside of the mainentry door, by mail, or by posting to theoutside of the door (in cases where thelandlord cannot get in or a dangerous animal isinside the unit)) to a tenant regarding alandlord rule or change in policy not includedin the lease agreement that will affect anypersonal property owned by the tenant that islocated outside the tenant’s dwelling, includingany change in automobile towing policies. A


landlord is liable to the tenant for whom he/she designated person who can remove a deceasedfails to give such notice for any expense the tenant’s personal property and to include atenant incurred as a result of the landlord’s copy of the statute.failure to give the notice.


HB 2769 Relating to the disposition of thepersonal property and security deposit ofa deceased residential tenant

Author: Pickett Sponsor: Cain

Adds: Section 92.013; amends Section92.005(a), Property Code

Summary:This bill provides for landlord and tenants

to give the other a request for and notice of adesignated person who can remove thetenant’s personal property after his/her death.Generally, landlords may dispose of thetenant’s unclaimed property without liabilityafter requesting the information prior to thetenant’s death, notifying the designated personafter the tenant’s death, and then waiting 30days for the person to remove the property. Ifthe tenant failed to designate a person and thelandlord provided a copy of the statute to thetenant, then the landlord may remove thetenant’s personal property without liability.Also provides that attorneys’ fees may beawarded for lawsuits brought underSubchapter A of Chapter 92, in addition toSubchapters B, E, and F.

Drafting Suggestions: Effective: September 1, 1999Residential landlords should revise their

leases to require the tenant to list the


Manufactured Housing

HB 1086 Relating to liens on manufacturedhomes

Author: Solomons Sponsor: Shapleigh

Adds: Chapter 62, Property Code

Summary:This bill clarifies the status of a lien on a

manufactured home when it converts to realproperty (i.e., when it is permanently attachedto real property, certificate of title issurrendered, and certificate of attachment isfiled). If the loan documents indicate that thelien on the manufactured home is, or is in thenature of, a purchase money lien, a vendor’slien or a retail installment lien, then the lienwill be a purchase money lien on real propertywhen it converts. The lien will exist“independently” of any existing lien on the realproperty to which it is attached. However, thelien can be refinanced along with a lien on thereal property to which it is attached.

Drafting Suggestions:Loan documents covering a loan for a

manufactured housing should specify that thelien is, or is in the nature of, a purchase moneylien, a vendor’s lien or a retail installment lien.

Environmental


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HB 480 Relating to notice and hearings for anapplication for a permit for a landtreatment or other disposal facility

Author: Seaman

Adds: Sections 91.116 and 91.117 to theNatural Resources Code

Summary:Under current law, a person seeking a

permit for disposing of waste materials frombyproducts of an oil and gas operation mustonly notify adjacent landowners of the permitapplication. Under the permit rules, oil and gaswastes can be disposed of either in a pit orspread over the soil to speed bioremediation.The process has received limited attention inthe past, especially in rural areas where thesetypes of disposal plans were poorly publicizedand sometimes involved flood-prone areas.This new law requires broader notification, byobligating the permit applicant to publishnotice in a newspaper of general circulation inthe county. The Railroad Commission staff isalso asked to conduct a public commenthearing on the matter before granting a permit.

Drafting Suggestions:The notice required by this Act must

include (a) the date the application was filed;(b) a description of the location of the site,including the county, name of the originalsurvey and abstract number and the directionand distance from the nearest municipality; (c)the name of the owner of the site; (d) the nameof the applicant; (e) the type of fluid or wasteto be disposed of at the facility; (f) the disposalmethod proposed; and (g) the procedure forprotesting the application.


HB 732 Relating to stormwater managementand regulation by certain politicalsubdivisions

Author: Bosse

Adds: Chapter 422, Local GovernmentCode

Summary:This bill permits large metropolitan areas (the

population bracket, 2.8 million, would only atthe present include the City of Houston andsurrounding Harris County) to implementstormwater permitting programs in compliancewith the federal Clean Water Act. This isPhase I of the so-called National PollutantDischarge Elimination System (“NPDES”)program on stormwater permitting. HarrisCounty falls within the Phase I guidelines butneeds state authority to implement the type ofprogram required under the Clean Water Act.This bill will probably mark the beginning, firstin Harris County, later in other majormetropolitan areas of the state, to require newreal estate developments and newmanufacturing/production facilities to seekstormwater permits for construction andoperation from the local county or other localgovernment.

Drafting Suggestions:If an architect, engineer or contractor is

required to file applications for and obtainpermits for a project, then owner should clarifyin the relevant agreement for services that thearchitect, engineer or contractor will obtain the


required NPDES stormwater permits for both December 1998, but the law did notowner and contractor. Because of the national specifically prohibit the use of non-compliantapplication of NPDES, such a provision tanks after such date. This new law addressesshould be provided in a contract regardless of that gap, as well as requires owners andwhere the property is located, but depending operators of USTs to file annual tankupon the applicable state programs, may need compliance certifications with the state.to be revised to address similar state statute Violations are Class A misdemeanors. Therequirements such as those in HB 732. Below Senate version of the bill clearly exempted fuelis some sample language that could be tailored transporters from liability under this provisionto a particular agreement: as long as they did not own or operate the

Contractor shall file applications for,secure, pay for and strictly complywith all permits and licenses requiredof the Owner and Contractor inconnection with the Project,including, without limitation, federalNPDES General Permit for StormWater Discharges from ConstructionActivities and any permit requiredunder any similar state or localprogram such as those requiredunder Chapter 422 of the TexasLocal Government Code.


HB 2815 Relating to the petroleumstorage tank program; providing a penalty

Author: Junell Sponsor: Brown, Buster

Amends: Sections 7.156, 26.342, 26.346,26.3512 and 26.36731; adds Sections7.1565, 26.3465 and 26.3467, WaterCode

Summary:Prior state and federal law required that

all underground storage tanks be incompliance with federal regulations by

non-compliant tank into which the fuel wasdeposited and did not deliver the substanceinto the tank itself. The final, enrolled versionof the bill adopted the Senate’s language inthis regard. The bill also requires the TNRCCto respond to requests for reimbursementwithin 90 days under the state’s PetroleumStorage Remediation Fund. It extends someof the dates for submitting corrective actionplans. The bill also adds a definition of“operator” under the statute to mean “anyperson in day-to-day control of and havingresponsibility for the daily operation of theunderground storage tank system.” The billdoes not provide for a timetable within whichthe TNRCC must issue regulationsimplementing the new annual reportingrequirement so it is not clear when the first ofsuch reports will become due, but the bill itselfcomes into effect on September 1, 1999.

Drafting Suggestions:Purchasers of property containing USTs,

lenders with liens on property containing USTsand landlords with tenants who operate USTsmay want to include representations andwarranties in their respective agreements thatthe filing requirements of HB 2815 have beenmet and may also want to require the seller ortenant, as applicable to provide copies of the


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filings. A sample provision could read as Summary:follows: This bill extends the deadline for termination

Seller represents and warrants thatSeller has completed and filed allregistrations and annual undergroundstorage tank compliancecertifications required by Section26.346(a) of the Texas Water Code.Seller must provide a copy of all suchregistrations and compliancecertifications to Buyer within ten(10) days after the Effective Date ofthis Contract and, for thoseregistrations and compliancecertifications Seller files after theEffective Date, within ten (10) daysafter filing thereof with the TexasNatural Resource ConservationCommission (“TNRCC”). Sellershall also deliver to Buyer copies ofany registration and complianceconfirmation certificates issued toSeller by the TNRCC within ten (10)days after the later of the EffectiveDate of this Contract and Seller’sreceipt of the same.


HB 2816 Relating to the fee on delivery ofcertain petroleum products and thetermination of the petroleum storage tankprogram

Author: Junell Sponsor: Brown, Buster

Amends: Sections 26.3573(d), 26.3574and 26.361, Water Code

of the state’s Petroleum Storage TankRemediation Fund (“Fund”) and makes otherchanges in this Fund. Currently, under Texaslaw, a fee is assessed on bulk loads of motorfuel for the Fund. The Fund serves as astate-sponsored insurance fund to clean upsites contaminated by leaking petroleumstorage tanks. In 1995, the fee was doubled topay back loans from the general revenue fundissued when the account was insolvent. As ofDecember 22, 1998, tank owners could nolonger rely on the account as proof of federallymandated insurance. Lenders and owners ofproperties with active storage tanks on them,should note that there are now no exceptionsto the federal requirement that tank owners oroperators have private cleanup insurance onthe tank. In addition, this bill now specifiesthat the Fund will accept no new claims forcleanup. This bill decreases by one quarter thefees on bulk loads of motor fuel and limitsfuture expenses to designated administrativeexpenses to handle the existing projects in theFund. The life of the Fund is also extended toSeptember 1, 2003, rather than 2001.

Drafting Suggestions:If property securing a lien has an active

storage tank, then the lenders should include acovenant in the loan documents that theborrower will maintain private cleanupinsurance as required by applicable federallegal requirements. Landlords should includesimilar requirements in leases of propertycontaining active storage tanks.



SB 1238 Relating to accreditation of purposesenvironmental testing laboratories

Author: Nelson Sponsor: Capelo

Adds: Chapter 421, Health and Safety Code 23.76(g), 25.02(a), 25.22(a),

Summary:SB 1238 establishes authority for the

Texas Department of Health to develop andimplement a voluntary accreditation programfor environmental testing laboratories in thestate, consistent with national standards. The Summary:bill does not specify a timetable for adoption This bill provides for new tax exemptions onof the voluntary program. Once the voluntary the timber industry and establishes a specialprogram is available, lenders and property use valuation for “Restricted Use Timberowners should review Phase II and higher Land” at one-half of the appraised value. Toenvironmental assessments to determine qualify, the land must be regenerated withwhether any testing done for the report was timber, or must be an aesthetic managementperformed by an accredited lab. zone, critical wildlife habitat zone, or

Drafting Suggestions:If a lender will require a Phase II or other

environmental assessment involving samplingfor a property, then the loan documents shouldspecify that any testing done for the report willbe performed by an environmental testinglaboratory accredited under the voluntary Drafting Suggestions:environmental testing laboratory accreditation Purchasers should add the followingprogram established by Chapter 421 of the representations to their contracts:Health and Safety Code.

Effective: June 18, 1999 no part of the Land has been assessed

Ad Valorem Taxation

SB 977 Relating to exemptions from advalorem and sales and use taxation ofcertain timber and certain items used intimber operations and the valuation ofcertain timber land for ad valorem tax

Author: Ratliff Sponsor: Sadler

Amends: Sections 6.12(b), 11.16(c), 11.161,

31.01(c)-(d), 41.01(a), 41.03, 41.41(a),41.44(a), 151.3111(b), 151.317(c)(2),152.091; adds Subchapter H and Section151.3162; repeals Section 151.3161, TaxCode

streamside management zone. This bill alsoexempts implements used in the production oftimber from ad valorem taxes and exemptsseedlings, timber, machinery, trailers, andsemitrailers used in timber production fromsales and motor vehicle taxes.

Seller represents and warrants that

for real estate taxes during thepreceding five (5) years (i) by using"agricultural use" value within themeaning of Texas Constitution, art.XIII, 1-d to value the Land or anypart thereof; (ii) by treating the Landor any part thereof as "open-spaceland devoted to timber production on


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the basis of its productive capacity" and contain the following information:or "open-space land devoted to farm,ranch or wildlife managementpurposes on the basis of itsproductive capacity" within themeaning of Texas Constitution, art.XIII, 1-d-1, (iii) by treating the Landor any part thereof as "landdesignated for agricultural use"within the meaning of Texas TaxCode, §§ 23.41-23.46; (iv) bytreating the Land or any part thereofas "qualified open space land" withinthe meaning of Texas Tax Code, §§23.51-23.57; (v) by treating the Landor any portion thereof as "QualifiedTimber Land" within the meaning ofTexas Tax Code, §§ 23.71-23.79; or(vi) by treating the Land as“Qualified restricted-use timber land”within the meaning of Texas TaxCode, §§ 23.9801-23.9807.


SB 1359 Relating to the rendition andappraisal of property for ad valorem taxpurposes

Author: Harris Sponsor: King, Tracy

Amends: Sections 22.24 and 41.45, TaxCode

Summary:Requires an affidavit of evidence offered

to an appraisal review board to be attested toby an officer authorized to administer oaths,

b.The name of the property owner initiatingthe protest.b.A description of the property that is subjectto the protest.b.Evidence or argument, which requirementwill be met if the property owner makes astatement that specifies the determination orother action of the chief appraiser, appraisaldistrict or appraisal review board relating tothe subject property from which the propertyowner seeks relief.

The comptroller is required to prescribe astandard form affidavit for the appraisaldistricts to make available to property ownerswithout charge, but the property owner is notrequired to use the form.


Title Insurance

HB 1453 Relating to coverage under a titleinsurance policy issued with respect toresidential real property

Author: Smith, Todd Sponsor: Madla

Adds: Article 9.07A(f), Insurance Code

Summary:Authorizes the Commissioner of the

Department of Insurance to adopt coverages ina residential owner policy issued to a naturalperson that insure against (i) ad valorem taxes,penalties, and interest to be paid with respectto the property for a previous tax year and thatare delinquent on the date of the policybecause of sale, diversion or change of use,


unless the insured has actual knowledge ofdelinquent taxes and (ii) ad valorem taxes,penalties, and interest to be paid with respectto the property for a previous tax year becauseof a residence homestead exemption orbecause of improvements not assessed for aprevious tax year, unless the insured has actualknowledge of delinquent taxes.

Drafting Suggestions:TREC forms and other residential earnest

money contracts should be revised to requirethese coverages.


EXHIBIT A

Seller’s Affidavit

Before me, the undersigned came in person ______________________ (hereinafter referred toas “Affiant”) who, being duly sworn according to law, deposes and says under oath and penalty ofperjury that Affiant is the ________________ of _______________________ (“Seller”), that Affiantis authorized, empowered and fully qualified to make this Affidavit on behalf of Seller, and that:

b.On _____________, 200__ Seller sold to “Purchaser” certain real property located in___________ County, Texas, and more particularly described in the attached Exhibit A“Property” pursuant to that certain Contract of Sale dated _______, 200__ (“Contract”);

b.Seller represents and warrants that Seller has not contacted or entered into any agreement,including, without limitation, any commission agreement, with any broker, agent, finder or otherintermediary in connection with the transactions contemplated by the Contract other than___________________ (“Seller’s Broker”). Affiant is not aware of and has not received anynotice of any lien or claim of lien under the Broker’s and Appraiser’s Lien on Commercial RealEstate Act, Chapter 62, Texas Property Code in connection with any act or agreement of Sellerthat relates to the transactions contemplated by the Contract;

b.Seller’s Broker and Purchaser’s Broker have been paid in full all commissions and othercompensation earned or to be earned in connection with the transactions contemplated by the


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Contract, except as follows:_________________________________________________________________.

b.The Purchaser, any escrow agent for the transactions contemplated by the Contract, anyattorney certifying the title to the Property, and any title insurance company insuring the title tothe Property may rely on this Affidavit.

Sworn to and subscribed before me on _______________, ______. Name:

NOTARY PUBLIC[Affix Notarial Seal & Stamp]


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EXHIBIT B

Release of Broker’s Lien Claims

STATE OF TEXAS §§

COUNTY OF §

The undersigned (“Broker”) is a broker who has earned a commission (“Commission”) undera Commission Agreement (“Agreement”) dated __________, 200__, by _____________________,a ____________________ (“Seller”), in connection with Seller’s sale of real property to________________________, a _______________ (“Purchaser”) located at____________________, _____________ County, Texas, and described in Exhibit B1 which isattached hereto and incorporated herein by reference (the “Property”).

The Broker hereby acknowledges receipt of the sum of $_______________, representing theentire commission earned or to be earned by Broker relating the sale of the Property.

Broker is not owed any amounts, and no amounts have been retained.

Therefore, the Broker:

1. Has been paid in full for all sums owed to Broker in connection with Broker’scommission concerning the Property;

2. Acknowledges complete satisfaction of, and forever waives and releases, all claims ofevery kind against Seller, Purchaser and the Property, including, but not limited to, allliens and claims of liens, which the undersigned may have as a result of or in connectionwith any commission earned or to be earned, any commission agreement and the saleof the Property;

3. Has represented and warranted and does hereby represent and warrant that all personsor entities who Broker employed or with whom Broker made any agreement pursuantto which any such person or entity could or might assert a claim for any commissionor similar compensation in connection with the sale of the Property have been paid allamounts they are owed;

4. Agrees unconditionally to indemnify Seller and hold Purchaser harmless against allliability, loss, cost or expense (including but not limited to attorney’s fees) now orhereafter incurred, paid or suffered by or asserted against Seller or Purchaser or the


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Property because of any claim or action by Broker, or by any person or entity claimingby, through or under Broker, with respect to the claims, liens and rights herein waivedand released or arising out of any breach or untruth of any representation herein madeor any act or agreement by Broker.

The person signing this document represents and warrants that he or she has personal knowledgeof the matters stated herein is duly authorized to sign this document on behalf of the undersignedBroker.

All of the provisions of this document shall bind the undersigned Broker and its heirs, legalrepresentatives, successors and assigns and shall inure to the benefit of Purchaser and Seller and theirrespective heirs, legal representatives, successors, assigns and sureties.

EXECUTED this _______ day of ________________, 200__.

By:Name: Title:


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[Entity Acknowledgment]

STATE OF TEXAS §§

COUNTY OF ________ §

This instrument was acknowledged before me on ___________________, 200__, by________________________, _________________________ of and on behalf of_______________________________, a ______________________________.

(S E A L)

Notary Public, State of Texas

My Commission Expires: Printed or Typed Name of Notary

[Individual acknowledgment]

STATE OF TEXAS §§

COUNTY OF ___________ §

This instrument was acknowledged before me on this the ____ day of_________________, 200__, by _______________________.

Notary Public, State of Texas


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EXHIBIT B1

Property Description


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EXHIBIT C

Financing Statements


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EXHIBIT D

Notification of Disposition of Collateral (Non-Consumer Transaction)

NOTIFICATION OF DISPOSITION OF COLLATERAL

To:_______________________________ (Name of debtor, obligor, or other person to which thenotification is sent)

From: (Name, address, and telephone number of secured party)

Name of Debtor(s):________________________ (Include only if debtor(s) are not an addressee)

(For a public disposition)

We will sell (or lease or license, as applicable) the (describecollateral) (to the highest qualified bidder) in public as follows:

Day and Date:___________________________________Time:__________________________________________Place:__________________________________________

(For a private disposition)

We will sell (or lease or license, as applicable the ______________________ (describecollateral) privately sometime after _____________________ (day and date).

You are entitled to an accounting of the unpaid indebtedness secured by the property that weintend to sell (or lease or license, as applicable) (for a charge of $____________). You may requestan accounting by calling us at _________________ (telephone number).


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EXHIBIT E

Notification of Disposition of Collateral (Consumer Transaction)

____________________________ (Name and address of secured party____________________________ (Date)

NOTICE OF OUR PLAN TO SELL PROPERTY

______________________________ (Name and address of any obligor who is also a debtor)

Subject:________________________ (Identification of Transaction)

We have your ___________________ (describe collateral), because you broke promises in ouragreement.

(For a public disposition)

We will sell _______________________ (describe collateral) at public sale. A sale could include alease or license.

The sale will be held as follows:Date: ______________________Time:______________________Place:______________________

You may attend the sale and bring bidders if you want.

(For a private disposition)

We will sell _______________________ (describe collateral) at private sale sometime after______________ (date). A sale could include a lease or license.

The money that we get from the sale (after paying our costs) will reduce the amount you owe. If weget less money than you owe, you ___________ (will or will not, as applicable) still owe us thedifference. If we get more money than you owe, you will get the extra money, unless we must payit to someone else. You can get the property back at any time before we sell it by paying us the fullamount you owe (not just the past due payments), including our expenses.

To learn the exact amount you must pay, call us at _____________ (telephone number). If youwant us to explain to you in writing how we have figured the amount that you owe us, you may call


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us at ______________ (telephone number) (or write us at ____________ (secured party’s address)and request a written explanation. (We will charge you $___________ for the explanation if we sentyou another written explanation of the amount you owe us within the last six months.)

If you need more information about the sale call us at _____________ (telephone number) (or writeus at __________________ (secured party’s address).

We are sending this notice to the following other people who have an interest in ____________(describe collateral) or who owe money under your agreement: _______________________

(Names of all other debtors and obligors, if any).


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EXHIBIT F

Form MUD Notices

[Comment: Use the following form of notice if any portion of the property is located in a districtwithin the extraterritorial jurisdiction of one or more home-rule municipalities and is not locatedwithin the corporate boundaries of a municipality.]

“The real property, described below, that you are about to purchase is located in the___________________ District. The district has taxing authority separate from any other taxingauthority and may, subject to voter approval, issue an unlimited amount of bonds and levy anunlimited rate of tax in payment of such bonds. As of this date, the rate of taxes levied by the districton real property located in the district is $__________ on each $100 of assessed valuation. If thedistrict has not yet levied taxes, the most recent projected rate of tax, as of this date, is $__________on each $100 of assessed valuation. The total amount of bonds, excluding refunding bonds and anybonds or any portion of bonds issued that are payable solely from revenues received or expected tobe received under a contract with a governmental entity, approved by the voters and which have beenor may, at this date, be issued is $__________, and the aggregate initial principal amounts of allbonds issued for one or more of the specified facilities of the district and payable in whole or in partfrom property taxes is $__________.

The district has the authority to adopt and impose a standby fee on property in the district thathas water, sanitary sewer, or drainage facilities and services available but not connected and whichdoes not have a house, building, or other improvement located thereon and does not substantiallyutilize the utility capacity available to the property. The district may exercise the authority withoutholding an election on the matter. As of this date, the most recent amount of the standby fee is$__________. An unpaid standby fee is a personal obligation of the person that owned the propertyat the time of imposition and is secured by a lien on the property. Any person may request acertificate from the district stating the amount, if any, of unpaid standby fees on a tract of propertyin the district.

The district is located in whole or in part in the extraterritorial jurisdiction of the City of_______________. By law, a district located in the extraterritorial jurisdiction of a municipality maybe annexed without the consent of the district or the voters of the district. When a district is annexed,the district is dissolved.

The purpose of this district is to provide water, sewer, drainage, or flood control facilities andservices within the district through the issuance of bonds payable in whole or in part from propertytaxes. The cost of these utility facilities is not included in the purchase price of your property, andthese utility facilities are owned or to be owned by the district. The legal description of the property


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you are acquiring is as follows: See the attached Exhibit A.

______________________ (Date)

____________________________ Signature of Seller

PURCHASER IS ADVISED THAT THE INFORMATION SHOWN ON THIS FORM ISSUBJECT TO CHANGE BY THE DISTRICT AT ANY TIME. THE DISTRICT ROUTINELYESTABLISHES TAX RATES DURING THE MONTHS OF SEPTEMBER THROUGHDECEMBER OF EACH YEAR, EFFECTIVE FOR THE YEAR IN WHICH THE TAX RATESARE APPROVED BY THE DISTRICT. PURCHASER IS ADVISED TO CONTACT THEDISTRICT TO DETERMINE THE STATUS OF ANY CURRENT OR PROPOSED CHANGESTO THE INFORMATION SHOWN ON THIS FORM.

The undersigned purchaser hereby acknowledges receipt of the foregoing notice at or prior toexecution of a binding contract for the purchase of the real property described in such notice or atclosing of purchase of the real property.

-------------------------------------------------------------------

______________________ (Date)

____________________________ Signature of Purchaser

(Note: Correct district name, tax rate, bond amounts, and legal description are to be placed in theappropriate space.) Except for notices included as an addendum or paragraph of a purchase contract,the notice shall be executed by the seller and purchaser, as indicated. If the district does not proposeto provide one or more of the specified facilities and services, the appropriate purpose may beeliminated. If the district has not yet levied taxes, a statement of the district's most recent projectedrate of tax is to be placed in the appropriate space. If the district does not have approval from thecommission to adopt and impose a standby fee, the second paragraph of the notice may be deleted.For the purposes of the notice form required to be given to the prospective purchaser prior toexecution of a binding contract of sale and purchase, a seller and any agent, representative, or personacting on the seller's behalf may modify the notice by substitution of the words 'January 1, ______'for the words 'this date' and place the correct calendar year in the appropriate space.”[Comment: Use the following form of notice if any portion of the property is located in a districtwithin the corporate boundaries of a municipality.]

The real property, described below, that you are about to purchase is located in the


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___________________ District. The district has taxing authority separate from any other taxingauthority and may, subject to voter approval, issue an unlimited amount of bonds and levy anunlimited rate of tax in payment of such bonds. As of this date, the rate of taxes levied by the districton real property located in the district is $__________ on each $100 of assessed valuation. If thedistrict has not yet levied taxes, the most recent projected rate of tax, as of this date, is $__________on each $100 of assessed valuation. The total amount of bonds, excluding refunding bonds and anybonds or any portion of bonds issued that are payable solely from revenues received or expected tobe received under a contract with a governmental entity, approved by the voters and which have beenor may, at this date, be issued is $__________, and the aggregate initial principal amounts of allbonds issued for one or more of the specified facilities of the district and payable in whole or in partfrom property taxes is $__________.


The district is located in whole or in part within the corporate boundaries of the City of___________. The taxpayers of the district are subject to the taxes imposed by the municipality andby the district until the district is dissolved. By law, a district located within the corporate boundariesof a municipality may be dissolved by municipal ordinance without the consent of the district or thevoters of the district.

The purpose of this district is to provide water, sewer, drainage, or flood control facilities andservices within the district through the issuance of bonds payable in whole or in part from propertytaxes. The cost of these utility facilities is not included in the purchase price of your property, andthese utility facilities are owned or to be owned by the district. The legal description of the propertyyou are acquiring is as follows: See the attached Exhibit A.

______________________ (Date)


PURCHASER IS ADVISED THAT THE INFORMATION SHOWN ON THIS FORM IS


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SUBJECT TO CHANGE BY THE DISTRICT AT ANY TIME. THE DISTRICT ROUTINELYESTABLISHES TAX RATES DURING THE MONTHS OF SEPTEMBER THROUGHDECEMBER OF EACH YEAR, EFFECTIVE FOR THE YEAR IN WHICH THE TAX RATESARE APPROVED BY THE DISTRICT. PURCHASER IS ADVISED TO CONTACT THEDISTRICT TO DETERMINE THE STATUS OF ANY CURRENT OR PROPOSED CHANGESTO THE INFORMATION SHOWN ON THIS FORM.


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______________________ (Date)


(Note: Correct district name, tax rate, bond amounts, and legal description are to be placed in theappropriate space.) Except for notices included as an addendum or paragraph of a purchase contract,the notice shall be executed by the seller and purchaser, as indicated. If the district does not proposeto provide one or more of the specified facilities and services, the appropriate purpose may beeliminated. If the district has not yet levied taxes, a statement of the district's most recent projectedrate of tax is to be placed in the appropriate space. If the district does not have approval from thecommission to adopt and impose a standby fee, the second paragraph of the notice may be deleted.For the purposes of the notice form required to be given to the prospective purchaser prior toexecution of a binding contract of sale and purchase, a seller and any agent, representative, or personacting on the seller's behalf may modify the notice by substitution of the words 'January 1,______' forthe words 'this date' and place the correct calendar year in the appropriate space.”


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[Comment: Use the following form of notice if any portion of the property is located in a district thatis not located in whole or in part within the corporate boundaries of a municipality nor within theextraterritorial jurisdiction of one or more home-rule municipalities.]

“The real property, described below, that you are about to purchase is located in the___________________ District. The district has taxing authority separate from any other taxingauthority and may, subject to voter approval, issue an unlimited amount of bonds and levy anunlimited rate of tax in payment of such bonds. As of this date, the rate of taxes levied by the districton real property located in the district is $__________ on each $100 of assessed valuation. If thedistrict has not yet levied taxes, the most recent projected rate of tax, as of this date, is $__________on each $100 of assessed valuation. The total amount of bonds, excluding refunding bonds and anybonds or any portion of bonds issued that are payable solely from revenues received or expected tobe received under a contract with a governmental entity, approved by the voters and which have beenor may, at this date, be issued is $__________, and the aggregate initial principal amounts of allbonds issued for one or more of the specified facilities of the district and payable in whole or in partfrom property taxes is $__________.


The purpose of this district is to provide water, sewer, drainage, or flood control facilities andservices within the district through the issuance of bonds payable in whole or in part from propertytaxes. The cost of these utility facilities is not included in the purchase price of your property, andthese utility facilities are owned or to be owned by the district. The legal description of the propertyyou are acquiring is as follows: See the attached Exhibit A.

______________________ (Date)


PURCHASER IS ADVISED THAT THE INFORMATION SHOWN ON THIS FORM ISSUBJECT TO CHANGE BY THE DISTRICT AT ANY TIME. THE DISTRICT ROUTINELY


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ESTABLISHES TAX RATES DURING THE MONTHS OF SEPTEMBER THROUGHDECEMBER OF EACH YEAR, EFFECTIVE FOR THE YEAR IN WHICH THE TAX RATESARE APPROVED BY THE DISTRICT. PURCHASER IS ADVISED TO CONTACT THEDISTRICT TO DETERMINE THE STATUS OF ANY CURRENT OR PROPOSED CHANGESTO THE INFORMATION SHOWN ON THIS FORM.


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______________________ (Date)


(Note: Correct district name, tax rate, bond amounts, and legal description are to be placed in theappropriate space.) Except for notices included as an addendum or paragraph of a purchase

contract, the notice shall be executed by the seller and purchaser, as indicated. If the district doesnot propose to provide one or more of the specified facilities and services, the appropriate

purpose may be eliminated. If the district has not yet levied taxes, a statement of the district'smost recent projected rate of tax is to be placed in the appropriate space. If the district does nothave approval from the commission to adopt and impose a standby fee, the second paragraph of

the notice may be deleted. For the purposes of the notice form required to be given to theprospective purchaser prior to execution of a binding contract of sale and purchase, a seller and

any agent, representative, or person acting on the seller's behalf may modify the notice bysubstitution of the words 'January 1, ______' for the words 'this date' and place the correct

calendar year in the appropriate space.”


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EXHIBIT G

Form Notice for Mandatory POA Membership

NOTICE OF MEMBERSHIP IN PROPERTY OWNERS’ ASSOCIATIONCONCERNING THE PROPERTY AT (STREET ADDRESS)

(NAME OF RESIDENTIAL COMMUNITY)

As a Purchaser of property in the residential community in which this property is located, youare obligated to be a member of a property owners’ association. Restrictive covenants governing theuse and occupancy of the property and a dedicatory instrument governing the establishment,maintenance, and operation of this residential community have been or will be recorded in the RealProperty Records of the county in which the property is located. Copies of the restrictive covenantsand dedicatory instrument may be obtained from the county clerk.

You are obligated to pay assessments to the property owners’ association. The amount ofthe assessments is subject to change. Your failure to pay the assessments could result in a lien on andthe foreclosure of your property.

Date:

Signature of Purchaser


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EXHIBIT H

Annexation Notice

NOTICE REGARDING POSSIBLE ANNEXATION

If the property that is the subject of this contract is located outside the limits of a municipality,the property may now or later be included in the extraterritorial jurisdiction of a municipality and maynow or later be subject to annexation by the municipality. Each municipality maintains a map thatdepicts its boundaries and extraterritorial jurisdiction. To determine if the property is located withina municipality’s extraterritorial jurisdiction or is likely to be located within a municipality’sextraterritorial jurisdiction, contact all municipalities located in the general proximity of the propertyfor further information.


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EXHIBIT I

Construction Disclosure Statement

DISCLOSURE STATEMENT FORRESIDENTIAL CONSTRUCTION CONTRACT

KNOW YOUR RIGHTS AND RESPONSIBILITIES UNDER THE LAW. You are about to enterinto a transaction to build a new home or remodel existing residential property. Texas law requiresyour contractor to provide you with this brief overview of some of your rights, responsibilities, andrisks in this transaction.

CONVEYANCE TO CONTRACTOR NOT REQUIRED. Your contractor may not require you toconvey your real property to your contractor as a condition to the agreement for the construction ofimprovements on your property.

KNOW YOUR CONTRACTOR. Before you enter into your agreement for the construction ofimprovements to your real property, make sure that you have investigated your contractor. Obtainand verify references from other people who have used the contractor for the type and size ofconstruction project on your property.

GET IT IN WRITING. Make sure that you have a written agreement with your contractor thatincludes: (1) a description of the work the contractor is to perform; (2) the required or estimated timefor completion of the work; (3) the cost of the work or how the cost will be determined; and (4) theprocedure and method of payment, including provisions for statutory retainage and conditions forfinal payment. If your contractor made a promise, warranty, or representation to you concerning thework the contractor is to perform, make sure that promise, warranty, or representation is specifiedin the written agreement. An oral promise that is not included in the written agreement may not beenforceable under Texas law.

READ BEFORE YOU SIGN. Do not sign any document before you have read and understood it.NEVER SIGN A DOCUMENT THAT INCLUDES AN UNTRUE STATEMENT. Take your timein reviewing documents. If you borrow money from a lender to pay for the improvements, you areentitled to have the loan closing documents furnished to you for review at least one business daybefore the closing. Do not waive this requirement unless a bona fide emergency or another goodcause exists, and make sure you understand the documents before you sign them. If you fail tocomply with the terms of the documents, you could lose your property. You are entitled to have yourown attorney review any documents. If you have a question about the meaning of a document,consult an attorney.

GET A LIST OF SUBCONTRACTORS AND SUPPLIERS. Before construction commences, your


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contractor is required to provide you with a list of the subcontractors and suppliers the contractorintends to use on your project. Your contractor is required to supply updated information on anysubcontractors and suppliers added after the list is provided. Your contractor is not required tosupply this information if you sign a written waiver of your rights to receive this information.

MONITOR THE WORK. Lenders and governmental authorities may inspect the work in progressfrom time to time for their own purposes. These inspections are not intended as quality controlinspections. Quality control is a matter for you and your contractor. To ensure that your home isbeing constructed in accordance with your wishes and specifications, you should inspect the workyourself or have your own independent inspector review the work in progress.

MONITOR PAYMENTS. If you use a lender, your lender is required to provide you with a periodicstatement showing the money disbursed by the lender from the proceeds of your loan. Each timeyour contractor requests payment from you or your lender for work performed, your contractor isalso required to furnish you with a disbursement statement that lists the name and address of the eachsubcontractor or supplier that the contractor intends to pay from the requested funds. Review thesestatements and make sure that the money is being properly disbursed.

CLAIMS BY SUBCONTRACTORS AND SUPPLIERS. Under Texas law, if a subcontractor orsupplier who furnishes labor or materials for the construction of improvements on your property isnot paid, you may become liable and your property may be subject to a lien for the unpaid amount,even if you have not contracted directly with the subcontractor or supplier. To avoid liability, youshould take the following actions:

(1) If you receive a written notice from a subcontractor or supplier, youshould withhold payment from your contractor for the amount of the claim stated inthe notice until the dispute between your contractor and the subcontractor or supplieris resolved. If your lender is disbursing money directly to your contractor, you shouldimmediately provide a copy of the notice to your lender, and instruct the lender towithhold payment in the amount of the claim stated in the notice. If you continue topay the contractor after receiving the written notice without withholding the amountof the claim, you may be liable and your property may be subject to a lien for theamount you failed to withhold.

(2) During construction and for 30 days after final completion, termination,or abandonment of the contract by the contractor, you should withhold or cause yourlender to withhold 10 percent of the amount of payments made for the workperformed by your contractor. This is sometimes referred to as ‘statutory retainage.’If you choose not to withhold the 10 percent for at least 30 days after finalcompletion, termination, or abandonment of the contract by the contractor and if a


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valid claim is timely made by a claimant and your contractor fails to pay the claim, youmay be personally liable and your property may be subject to a lien up to the amountthat you failed to withhold.

If a claim is not paid within a certain time period, the claimant is required to file a mechanic’s lienaffidavit in the real property records in the county where the property is located. A mechanic’s lienaffidavit is not a lien on your property, but the filing of the affidavit could result in a court imposinga lien on your property if the claimant is successful in litigation to enforce the lien claim.

SOME CLAIMS MAY NOT BE VALID. When you receive a written notice of a claim or when amechanic’s lien affidavit is filed on your property, you should know your legal rights andresponsibilities regarding the claim. Not all claims are valid. A notice of a claim by a subcontractoror supplier is required to be sent, and the mechanic’s lien affidavit is required to be filed, within stricttime periods. The notice and the affidavit must contain certain information. All claimants may notfully comply with the legal requirements to collect on a claim. If you have paid the contractor in fullbefore receiving a notice of a claim and have fully complied with the law regarding statutoryretainage, you may not be liable for that claim. Accordingly, you should consult your attorney whenyou receive a written notice of a claim to determine the true extent of your liability or potentialliability for that claim.

OBTAIN A LIEN RELEASE AND A BILLS-PAID AFFIDAVIT. When you receive a notice ofclaim, do not release withheld funds without obtaining a signed and notarized release of lien and claimfrom the claimant. You can also reduce the risk of having a claim filed by a subcontractor or supplierby requiring as a condition of each payment made by you or your lender that your contractor furnishyou with an affidavit stating that all bills have been paid. Under Texas law, on final completion ofthe work and before final payment, the contractor is required to furnish you with an affidavit statingthat all bills have been paid. If the contractor discloses any unpaid bill in the affidavit, you shouldwithhold payment in the amount of the unpaid bill until you receive a waiver of lien or release fromthat subcontractor or supplier.

OBTAIN TITLE INSURANCE PROTECTION. You may be able to obtain a title insurance policyto insure that the title to your property and the existing improvements on your property are free fromliens claimed by subcontractors and suppliers. If your policy is issued before the improvements arecompleted and covers the value of the improvements to be completed, you should obtain, on thecompletion of the improvements and as a condition of your final payment, a ‘completion ofimprovements’ policy endorsement. This endorsement will protect your property from liens claimedby subcontractors and suppliers that may arise from the date the original title policy is issued to thedate of the endorsement.

The undersigned hereby acknowledge(s) receipt as of the date executed below from ,


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as lender, the following documents: .

Executed on (date)

Name

Name


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EXHIBIT J

RCLA Notice

This contract is subject to Chapter 27, Property Code. The provisions of that chapter mayaffect your right to recover damages arising from the performance of this contract. If you have acomplaint concerning a construction defect arising from the performance of this contract and thatdefect has not been corrected through normal warranty service, you must provide notice regardingthe defect to the contractor by certified mail, return receipt requested, not later than the 60 dayth

before the date you file suit to recover damages in a court of law. The notice must refer to Chapter27, Property Code, and must describe the construction defect. If requested by the contractor, youmust provide the contractor an opportunity to inspect and cure the defect as provided by Section27.004, Property Code.

UPDATING YOUR FORMS UNDER RECENT LEGISLATION … · MEMBERSHIPS State Bar of Texas Travis County...

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Transcript of UPDATING YOUR FORMS UNDER RECENT LEGISLATION … · MEMBERSHIPS State Bar of Texas Travis County...