The following laws were passed in the 86
th
Regular Session of the Texas Legislature. Most become effective September 1, 2019.
National Investors has prepared this summary to make sure you have all the information you need to take advantage of and comply with the new laws. The summary does not include comprehensive information on every listed bill; only the most relevant portions of each bill are described. Please contact us with any questions or if you would like more information on any matter.
HB 1254
Home Equity Loans on Agricultural Property
EFFECTIVE DATE
January 1, 2020, if the related proposition passes in November
TOPIC DESCRIPTION
“Relating to the eligibility of land secured by a home equity loan to be designated for agricultural use for ad valorem tax purposes.”
RELEVANT HIGHLIGHTS
- Amends Section 23.42 of the Texas Property Tax Code to remove the prohibition against applying ag valuations on property secured by a home equity loan.
PRACTICAL TITLE AND ESCROW APPLICATION
In 2017, Texas voters approved an amendment to the Constitution that would permit home equity loans on property that was receiving agricultural use valuation. However, Section 23.42 of the Tax Code, which prohibited ag use valuations on property that was security for a home equity loan, remained on the books. These two provisions were in conflict with each other; this bill has eliminated the conflict.
More property owners will be eligible for home equity loans. The bill will provide more certainty as to tax amounts due at closing, because appraisal districts will no longer have the apparent authority to remove ag valuation status on an account when property owners obtain a home equity loan.
HB 1614
TTIGA Statute Updates
EFFECTIVE DATE
September 1, 2019
TOPIC DESCRIPTION
“Relating to the operation of the Texas Title Insurance Guaranty Association.”
RELEVANT HIGHLIGHTS
- Amends Chapter 2602 of the Texas Insurance Code to protect TTIGA representatives from liability.
- Establishes venue for TTIGA-related actions in Travis County.
- Expands and gives flexibility to TTIGA’s authorized activities.
- Permits TTIGA to establish a claims filing procedure and gives the Association flexibility and options with regard to the payment of certain expenses and claims.
- Doubles the limit of certain covered claims.
PRACTICAL TITLE AND ESCROW APPLICATION
This bill provided a comprehensive clean-up of the laws governing TTIGA.
The changes bring the TTIGA statutes up to date, while ensuring greater flexibility in the administration of GARC funds and efficiency in TTIGA operations.
HB 1833
Entity’s “Affidavit of Authority to Transfer”
EFFECTIVE DATE
September 1, 2019
TOPIC DESCRIPTION
“Relating to the authority to transfer real property in the name of an entity.”
RELEVANT HIGHLIGHTS
- Adds Section 12.019 to the Texas Property Code under Title 3—Public Records, Chapter 12—Recording of Instruments.
- Authorizes an “Affidavit of Authority to Transfer” (“AAT”)
- The AAT simplifies the method of proving a person has authority to sign for certain businesses when they convey, mortgage, plat, or otherwise dispose of an estate or interest in real property.
- An AAT that complies with the statute and is filed with the county clerk acts as conclusive proof of the information in the AAT, and third parties may rely on it.
PRACTICAL TITLE AND ESCROW APPLICATION
This bill will make it easier to determine whether a person is authorized to sign for an entity when the entity is transferring an interest in real estate.
Title agents frequently have to dig through layers of documents to determine who may sign for an entity. Often entities do not have adequate documentation, so progress towards closing slows while company documents are created or brought up to date. This law is designed to simplify the process and avoid delays. It also protects a person who acts in good faith in reliance upon the recorded affidavit, as long as the person does not have actual knowledge that any material fact in the AAT is incorrect.
The types of entities that may use AATs include any domestic LLC, LP, PA, PC, or PPLC, except for 501(c)(3) nonprofit entities, governmental entities, and certain government-created entities. Foreign entities may also utilize an AAT under certain conditions.
The use of an AAT is limited to transactions that involve the transfer of an interest in real property that is $1 million or less.
Each AAT is valid for only one year. The authority expires on the first anniversary of the date the AAT is recorded.
The entity using the AAT must be the entity that owns the interest in real property that is to be transferred.
The person signing the AAT may not be the person designated to sign, unless the person is the sole partner in a limited partnership, sole member and manager in an LLC, or the sole shareholder, director, and officer of a corporation.
The statute sets out the other requirements for the contents of the AAT and who may sign for each type of entity.
A person is not
required
to accept an AAT. Similarly, an entity may not be required to produce an AAT in order to effectuate a transfer of a real property interest. Underwriting guidelines may vary.
HB 2782
Estate Administrators; Probate; TODDs
EFFECTIVE DATE
September 1, 2019
TOPIC DESCRIPTION
“Relating to decedents estates/TOD deeds/probate.”
RELEVANT HIGHLIGHTS
- Amends the Texas Estates Code to allow a person to designate an administrator for his estate in the event no executor is able to serve. Unless otherwise stated in the will, the administrator would have the same right to sell property as an executor.
- Allows an administration of an estate in certain cases when a will is filed only as a muniment of title.
- Implemented new requirements for the place and time of public auctions of an estate’s real property.
- Specifies that funds coming into the custody of a public probate administrator must be deposited in the court registry rather than the county treasury, then disbursed as ordered by the court.
- Requires that in a judicial heirship proceeding, testimony relating to family history and heirship must be provided by two disinterested, credible witnesses, unless only one can be found.
- Repeals the section dictating the Transfer on Death Deed form, but states that the repeal of the form does not affect the validity of TODDs.
- Expands what may void or cancel a TODD. It now ranges from just an instrument conveying the property to a new third party to a memorandum noting the cancellation.
- Creates exception for four year statute of limitation to administer an estate.
PRACTICAL TITLE AND ESCROW APPLICATION
The bill clarifies language regarding the four-step process to make it clear that the court must
approve a proposed sale
, not
confirm it after the fact
.
This House bill had a lot of clean-up language sought by probate and estate practitioners; the title industry will not see many practical impacts on their day to day operations.
The absence of a statutory TODD form may impact underwriter’s requirements for transactions where a TODD is in the chain of title. NITIC refers its agents to its bulletin dated June 20, 2019, Transfer on Death Deeds, as amended.
HB 3228
TDI Rate Hearings – Clarifying
Who May Participate
EFFECTIVE DATE
September 1, 2019
TOPIC DESCRIPTION
“Relating to certain hearings concerning title insurance rates and other matters relating to regulating the business of title insurance.”
RELEVANT HIGHLIGHTS
- Amends the Texas Insurance Code to expand the list of persons who may request a public hearing to change title insurance premium rates.
- Implements procedural requirements.
PRACTICAL TITLE AND ESCROW APPLICATION
This bill brought to the table some of the parties who lobbied in past legislative sessions for re-regulation of the title insurance business. The bill was touted as a compromise bill that will provide stability for the foreseeable future in Texas’ title insurance regulatory system.
Previously, in addition to title insurance agents and trade associations, only the Office of Public Insurance Counsel could request a hearing. The list is now expanded to include Texas residents, businesses, political subdivisions, and public or private organizations.
SB 73 , SB 489
Expanded Definition of “Instrument”
EFFECTIVE DATE
September 1, 2019
TOPIC DESCRIPTION
“Relating to personal information that may be omitted from certain records, licenses, and reports and to other court security measures.”
RELEVANT HIGHLIGHTS
- Amends Section 11.008(a) of the Texas Property Code to expand the definition of “instrument” to include “any other record recorded by a county clerk related to real property, including a mineral lease, a mechanic’s lien, and the release of a mechanic’s lien.”
PRACTICAL TITLE AND ESCROW APPLICATION
In 2017 the Legislature passed the “Judge Julie Kocurek Judicial and Courthouse Security Act of 2017”, in response to an assassination attempt of a Travis County judge. This bill amends that law.
Section 11.08 of the Property Code discusses “Personal Information in Real Property Records” and mandates the “Notice of Confidentiality Rights” – the language usually typed in all capital letters at the top of a recorded deed or deed of trust. By expanding the definition of “instrument”, the legislature is requiring the notice on all other types of recorded documents that transfer an interest in real property to or from an individual.
SB 624
TREC Sunset
EFFECTIVE DATE
September 1, 2019
TOPIC DESCRIPTION
“Relating to the continuation and functions of the Texas Real Estate Commission and the Texas Appraiser Licensing and Certification Board; changing fees.”
RELEVANT HIGHLIGHTS
- Amends Section 1101.006 of the Texas Occupations Code to authorize the continuation of the Texas Real Estate Commission through September 1, 2025.
PRACTICAL TITLE AND ESCROW APPLICATION
Since 2011, TREC has been a self-directed, semi-independent state agency. Its authorization to function as such was scheduled to expire this year. The bill funds and staffs TREC until September 1, 2025. Because of complaints related to the agency’s budgeting and monitoring of its performance of essential functions, the legislature only extended authority for six years, rather than the requested 12. It is expected that TREC will be making changes to address concerns raised during the session.
SB 874
TODD forms
EFFECTIVE DATE
September 1, 2019
TOPIC DESCRIPTION
“Relating to forms for creating or revoking a transfer on death deed.”
RELEVANT HIGHLIGHTS
- Repeals the sections of the Texas Estates Code that dictated the Transfer on Death Deed form, but states that the repeal of the form does not affect the validity of TODDs.
- Amends the Texas Government Code to require the supreme court to promulgate forms for creating and revoking a TODD for individuals representing themselves.
PRACTICAL TITLE AND ESCROW APPLICATION
The lack of a statutory TODD form may impact underwriter’s requirements for transactions where a TODD is in the chain of title.
The bill does not create a deadline by which the supreme court must promulgate a new TODD form, but states that it should be done “as the court considers appropriate.”
Also see HB 2782.
SB 1642
Rights of Redemption After Tax Foreclosure
EFFECTIVE DATE
Effective immediately
TOPIC DESCRIPTION
“Relating to authority of owner of real property sold at a tax sale to transfer a right of redemption to another person.”
RELEVANT HIGHLIGHTS
- Amends Section 34.21 of the Texas Property Tax Code to state that any instrument purporting to transfer an owner’s right of redemption in tax-foreclosed property is void.
PRACTICAL TITLE AND ESCROW APPLICATION
After a property is foreclosed upon for delinquent taxes, the former property owner has up to two years to redeem the property by paying the tax sale purchaser the purchase amount plus a penalty. Businesses have arisen in the form of “redemption purchasers”—persons who pay the foreclosed owner for a conveyance of their right to redeem the property. This bill eliminates the former owner’s ability to sell or otherwise convey their right to redeem to a third party.
As a result of the bill, there may be fewer redemptions after tax sales. However, this bill will not eliminate all redemptions by someone other than the tax suit debtor. If an examiner is reviewing a property that has been through a tax foreclosure, attention should be given to any instrument executed prior to the date of foreclosure sale, because such a conveyance would still be valid despite this bill, and it could effectively convey the right of redemption.
SB 1943
“Heir Property” Definition and Homestead Rights
EFFECTIVE DATE
September 1, 2019
TOPIC DESCRIPTION
“Relating to the ad valorem taxation of heir property.”
RELEVANT HIGHLIGHTS
- Adds the term “heir property” to the Texas Property Tax Code, defined generally as residential homestead property acquired by will, intestacy, or a TODD, regardless of whether the ownership is recorded in the real property records.
- Permits an heir property owner to establish entitlement to various benefits in the Tax Code, including the homestead exemption.
- Clarifies that granting of a homestead exemption on heir property does not affect legal title to real property.
PRACTICAL TITLE AND ESCROW APPLICATION
Although the statute says that the benefits now granted on heir property doesn’t affect legal title to property, time is needed to see whether disputes arise based on an heir property owner’s belief that they do hold legal title.
Examiners will need to be aware of discrepancies between what the real property records reflect and what the tax rolls reflect when it comes to ownership, and make sure that all interests are addressed in commitments.
SB 2128
RON: Papering Out and Recording e-Notarized Documents and e-Closing Documents
EFFECTIVE DATE
September 1, 2019
TOPIC DESCRIPTION
“Relating to the recording by a county clerk of certain documents concerning real or personal property.”
RELEVANT HIGHLIGHTS
- “[A]mends the Texas Local Government Code and Texas Property Code to establish a process for county clerks to record a paper or tangible copy of an electronic record that is otherwise eligible under state law to be recorded in the real property records, provided the copy meets certain signature requirements and has been declared as true and correct by a notary public or other applicable officer.”
- “[E]stablishes a standard form for that declaration and requires the property record index entry for a paper document so recorded to contain the names of the grantors and grantees.”
PRACTICAL TITLE AND ESCROW APPLICATION
When legislation permitted remote online authorizations was enacted in 2017, it did not anticipate what would happen in the majority of Texas counties, as they do not yet provide for electronic filing.
This bill permits the traditional filing of a paper copy of an electronic record, as long as the copy would otherwise be appropriate for filing and if a notary or other officer declares it to be a true and correct copy. The bill sets out the form for the required declaration.
