The 87th Texas Legislative Session: Real Estate Law Updates

by Richard L. Spencer and Richard A. Crow | Texas Bar Journal,  Vol. 84, No. 8

This article contains a summary of bills enacted this session relating to real estate law and should not be relied on as a complete list of bills affecting these areas or a full description of any bill.

SB 219 adds Sections 59.001-59.052 to the Texas Business and Commerce Code regarding civil liability for the consequences of defects in the plans, specifications, or related documents for the construction or repair of an improvement to real property or of a road or highway. SB 219 provides that contractors are not liable for design defects in (and may not warranty the accuracy or suitability of) plans, specifications, or other design documents provided to the contractor by a person other than the contractor’s agents. SB 219 applies to the construction of improvements to real property, including additions to improvements and repair, alteration, or remodeling of improvements (exempts contracts for construction or repair of “critical infrastructure” facilities, certain design-build contracts, and certain engineering, procurement, and construction contracts). The statute imposes an affirmative duty for contractors to disclose, in writing, any defect, inaccuracy, or insufficiency a contractor discovers (or reasonably should have discovered) during construction. The statute imposes the same standard of care on design services found in Section 130.0021 of the Texas Civil Practice and Remedies Code and amends that section to provide that any attempt to contractually establish a different standard of care is void. SB 219 applies to contracts entered on or after September 1, 2021.

HB 390 adds Business and Commerce Code §§ 114.0001-114.0104. Effective January 1, 2022, hotels (and other commercial lodging establishments with more than 10 rooms) must put all employees through an approved training program designed to identify and prevent human trafficking and post pre-approved signs regarding human trafficking. HB 390 authorizes civil penalties for non-compliance.

HB 3415 amends Texas Local Government Code § 191.010 effective September 1, 2021, so that county clerks in a county with a population of 800,000 or more may require “a person presenting a document in person for filing in the real property records” to present photo identification.

HB 1475 amends Local Government Code § 211.009 allowing municipal board of adjustment zoning variances based on unnecessary hardship. Zoning boards of adjustment, in variance cases, can now consider “as grounds to determine whether compliance with the ordinance as applied to a structure that is the subject of the appeal would result in unnecessary hardship,” whether: (1) “financial cost of compliance” would be greater than 50% of the structure’s tax-roll value; (2) compliance would cause a loss of at least 25% of the lot area “on which development may physically occur;” (3) compliance would result in non-compliance with a “municipal ordinance, building code, or other requirement;” (4) compliance would result in “unreasonable encroachment on an adjacent property or easement;” or (5) the municipality considers the structure “nonconforming.” (Texas courts held financial cost, alone, insufficient to establish the “hardship” for issuance of a variance.) HB 1475 is effective September 1, 2021.

SB 30 adds Texas Property Code § 5.0261, effective September 1, 2021, allowing removal of certain discriminatory provisions from a recorded conveyance instrument. An owner of property subject to an instrument containing a discriminatory provision (as defined under Section 5.026(a)) may request removal of the provision by filing a motion verified by affidavit. A court may rule on the motion “solely on a review of the conveyance instrument, without hearing any testimonial evidence.” If the court does not rule by the 15th day after the motion is filed, it is deemed granted. The court must enter a finding of fact and conclusion of law, and that finding must be transferred to the county clerk and recorded. A county clerk cannot charge a fee for recording the finding.

SB 885 adds Property Code § 13.006 and amends Civil Practice and Remedies Code § 16.025(b) concerning quitclaim deeds. Beginning September 1, 2021, SB 885 protects a lender’s or buyer’s ability to be a good faith purchaser for value and to be shielded by Property Code § 13.001 by establishing that a quitclaim deed recorded more than four years prior does not affect a buyer’s or creditor’s “good faith” or constitute notice of an unrecorded deed or lien.

HB 900 adds Property Code § 24.0061(i) relating to the liability of a landlord for damages resulting from the execution of a writ of possession. HB 900 protects a landlord from liability to the tenant resulting from an officer’s (sheriff or constable pursuant to Property Code § 24.0054(a-1)) execution of a writ of possession pursuant following an eviction suit filed on or after September 1, 2021.

HB 2237 amends Insurance Code § 3503.051(3) and Property Code Chapter 53, and various sections, relating to mechanic’s, contractor’s, or materialman’s liens. HB 2237, effective January 1, 2022, clarifies various provisions pertaining to mechanic’s liens by replacing text with defined terms. HB 2237 adds real property and clarifies that the definition of “residence” includes multi-unit condominium projects. HB 2237 changes method of notices required by Chapter 53 and revises the deadlines for filing a lien affidavit and retainage, dependent on whether the party filing is an original contractor or a subcontractor and on whether the project is residential or commercial. HB 2237 requires subcontractors to give a funds trapping notice (with form) one month prior to the applicable deadline. Creates a similar notice for a claim of unpaid retainage. Shortens the limitations to bring suit to foreclose a lien to one year from the last day a claimant may file a lien affidavit, unless the claimant enters a written agreement to extend the limitations period and the agreement is filed (in which case the limitations period may be up to two years).

SB 1783 adds Property Code § 92.111 and codifies the practice of accepting small monthly “deposit waiver fees” instead of large down payments at move-in. Starting September 1, 2021, this bill 738 Texas Bar Journal • September 2021 texasbar.com allows a residential landlord to give a prospective tenant the option to pay a fee in lieu of a security deposit and creates restrictions and notice requirements for a landlord that chooses this option, such as:

a.The landlord cannot use the choice to pay such a fee in lieu of a deposit as a criterion for lease application approval.

b.The tenant has the option to terminate the fee agreement and pay a security deposit instead.

c.Notice to the tenant and the fee agreement must both be in writing.

d.This is a recurring fee of equal amount, payable when rent is due.

 

SB 1783 also:

(a)delineates specific language in the fee agreement;

(b)caps the fee at the reasonable cost of insurance for tenant damages and charges;

(c)sets up restrictions and notice requirements for an insurance claim for unpaid rent or damages; and

(d)provides that fees collected under this section are still security deposits for purposes of Chapter 92 of the Property Code unless the parties enter into an agreement providing otherwise (which agreement must comply with this section) and the fees are used to purchase insurance coverage for damages and unpaid rent arising from the tenant’s default.

 

SB 1588, effective September 1, 2021, amends various sections of and adds sections to Property Code §§ 202, 207, and 209 to, among other things, address fees, notices, and disclosures of a property owners’ association, or POA. SB 1588 limits the cost for delivering a resale certificate and the cost of an update, requires a POA to deliver subdivision information to an owner or their agent within five business days after a second request is made, and allows for increased recovery of actual damages for a POA’s failure. SB 1588 requires a POA to make current dedicatory instruments available on its website and requires that an association’s certificate of management include any amendments to the declaration, contact information for the person managing the association, and the website with its dedicatory instruments. SB 1588 requires a POA to electronically file any certificate or amended certificate with the Texas Real Estate Commission, or TREC, within seven days and requires that TREC establish a system for electronic filing of management certificates no later than December 1, 2021. Any denial of the construction of improvements by a POA’s architectural review authority must be in writing and may be appealed to the POA’s board with a hearing relating to the denial. At least 144 hours’ notice must be given to the members before a regular POA board meeting and 72 hours’ notice prior to a special board meeting. A POA must give written notice to an owner before reporting any delinquency to a credit reporting service. An owner’s cure period for a delinquency is extended to 45 days before any collection action. A POA may not report delinquencies that are the subject of a pending dispute. Advance disclosures to owners prior to a hearing by a POA are required, and a member of the POA must present the case against the owner. SB 1588 clarifies that an association is not prohibited from adopting or enforcing provisions restricting occupancy or leasing.

 

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