This article is drawn from the report of the Real Estate Legislative Affairs Committee (RELACs) of the Real Estate, Probate and Trust Law Section of the State Bar of Texas (REPTL), which report summarizes legislation passed during the 85th Texas Legislature affecting real estate, mortgage lending, and related topics of interest to real estate lawyers. Some of the more noteworthy legislation included in the report is discussed in this article.
If approved by the voters in November, SJR 60 will usher in the most significant changes to home equity lending in Texas since voters first approved the practice in 1997. An in-depth discussion is beyond the scope of this article, but a few key provisions that are likely to contribute to an uptick in home equity lending should be noted. Perhaps most significant is the reduction of the 3% fee cap to 2% of the loan amount, coupled with the exclusion of many categories of loan-related fees from the cap, including, inter alia, discount points, title insurance premiums, appraisal fees, and survey fees. These exclusions greatly simplify lender-compliance with the fee cap and as a result, largely eliminate one of the major disincentives for lenders to engage in home equity lending in this State. SJR 60 also removes restrictions on home equity loans involving agricultural property and (subject to certain conditions and limitations) allows home equity loans to be refinanced as rate and term loans no longer subject to home equity lending requirements.
HB 1217 is the so-called e-notary bill, which allows documents to be notarized remotely using two-way video and audio conference technology and provides that the acknowledging person need not be in Texas at the time of notarization. The secretary of state is responsible to develop standards and rules for online notarization and is given time to do so, as the law does not take effect until July 1, 2018.
HB 1470 and HB 1128 are two pieces of legislation which alter the non-judicial foreclosure process in Texas. First, HB 1470 allows a trustee or substitute trustee to contract with an attorney and auction company to conduct the sale. This law requires the winning bidder at the public sale, if it is not the foreclosing mortgagee or mortgage servicer, to provide the trustee or substitute trustee with various information. If the winning bidder fails to do so, then the trustee may reject the bid. A trustee or substitute trustee must now keep funds from a sale in a separate account and maintain account records of deposits and disbursements. Disbursement of sale proceeds is provided in this bill and it now requires the trustee to make “reasonable attempts to identify and locate the persons” entitled to those sales proceeds. What is considered a reasonable fee for the trustee is outlined and even though such fee is earned at the time of the sale, the fee and any reasonable actual costs are only paid from funds remaining after the foreclosed lien is paid.
Previously, if the first Tuesday of the month fell on January 1 or July 4, nonjudicial foreclosure sales were still held at the location designated by the Commissioners Court in each Texas County. HB 1128 changed the date and time for non-judicial foreclosures to between 10 a.m. and 4 p.m. on the first Wednesday of those months. It also establishes that public sales of real property by court order and foreclosures of tax liens (unless conducted by online bidding and sale) will also be carried out on the same date and time as non-judicial foreclosures (i.e. between 10 a.m. and 4 p.m. on the first Tuesday of a month, or if the first Tuesday of a month occurs on January 1 or July 4, between 10 a.m. and 4 p.m. on the first Wednesday of the month).
Foreclosures of tax liens conducted using online bidding may begin at any time and must conclude by 4 p.m. on the first Tuesday of a month, or if the first Tuesday of a month occurs on January 1 or July 4, then they must be concluded by 4 p.m. on the first Wednesday of that month.
HB 3879 One of the most interesting pieces of legislation passed during the 2017 session allows non-lawyers to practice in County and District Courts. This amendment to Section 24.011 of the Property Code provides that in an appeal of an eviction suit for nonpayment of rent, an individual owner of a multifamily residential property may be represented by an authorized agent who need not be an attorney, or, if the owner is a corporation or other legal entity, then by an employee, owner, officer, or partner of the landlord who need not be an attorney.
HB 1974 makes sweeping changes to the laws governing durable powers of attorney, but perhaps the most significant is to require that persons presented with durable powers of attorney must accept them, subject only to limited exceptions. Upon request within timeframes established by the statute, an agent must provide a certification or an opinion of counsel to confirm the validity of an instrument, but if these are provided in compliance with the statutory requirements, then there is no discretion to reject the instrument. HB 1974 is intended to facilitate more widespread use and acceptance of powers of attorneys and will almost certainly have that effect. Financial institutions and title companies, in particular, will be impacted because the new law will by necessity require new policies and procedures.
SB 1955 clarifies that recording an expunction of a notice of lis pendens does not give actual or constructive notice of any of matters relating to the subject of the notice and real property may be transferred or encumbered free of all matters asserted or disclosed in the notice and the litigation related thereto. These clarifications should go a long way to address the concerns of buyers and lenders who previously were uncertain whether an expunged lis pendens still put them on notice of a dispute that might impact title.
SB 2212 relates to certain real estate sales, brokerage, and advertising activities, and certain functions of the Texas Real Estate Commission. A person without a real estate license is now permitted to buy and then sell or assign an option or an interest in a contract if: (1) the person does not use the option or contract to engage in real estate brokerage and (2) the person discloses the nature of the equitable interest to a potential buyer. A provision is added to The Texas Real Estate License Act that states that a person selling or assigning an option or an interest in a contract is “engaging in real estate brokerage” if the person does so without disclosing the nature of the interest to the buyer (being that the person does not have legal title to the property, but merely has an option or an interest in a contract).
This act prohibits the Texas Real Estate Commission from requiring, as part of the regulation of deceptive practices by licensed brokers or sales agents, a rule that the broker include the term “broker,” “agent” or a similar designation, a reference to the commission, or the person’s license number, in a broker’s advertisement.
It also prohibits a broker from publishing an advertisement that implies that a sales agent is responsible for the operation of the broker’s real estate brokerage business or fails to include the name of the broker for whom the license holder acts (which may be an assumed name as authorized by law and registered with the Texas Real Estate Commission). SB 2212 adds a required disclosure that, prior to entry into a contract, a seller of an option or assignor of an interest in a contract disclose to the buyer that the seller is only selling an option or assigning an interest in a contract and does not have legal title to the property.
Additional information regarding other laws that may impact your practice can be found in the RELACs report, which is available on the REPTL website (www.reptl.org). The special session of the 85th Legislature considered a number of items of interest to real estate lawyers, including municipal annexation reform and property tax reform, but the results were not available at the time of publication. The RELACs report will be updated to include important legislation passed during special session.
Richard L. Spencer is an attorney and shareholder with the law firm of Ferguson Braswell Fraser Kubasta, PC. He is a past-chair of the Real Estate Probate and Trust Law Section of the State Bar of Texas, a Fellow of the American College of Real Estate Lawyers and Board Certified in Commercial and Residential Real Estate Law.
Richard A. Crow is a partner in the Houston office of Strasburger & Price, LLP. He is chair of the Real Estate Legislative Affairs Committee of the Real Estate, Probate and Trust Law Section of the State Bar of Texas and Board Certified in Commercial Real Estate Law.