Bulletin: TX000076

Date:
August 29, 2005
To:
All Issuing Offices
RE:
2005 Texas Legislation

Dear Associates:

The Texas Legislature passed a number of bills relating to real estate in 2005. The following are some of the most significant legislation.

EASEMENTS

Conservation Easements - SB 1273 (effective 9/1/05): This bill authorizes agricultural conservation easements, which are easements in gross (§§183.051-183.063, Natural Resources Code). A qualified easement holder is a state agency or municipality, or an exempt organization organized to preserve agriculture, open space, or natural resources. §183.052, Natural Resources Code.

Company Policy: You may insure an agricultural conservation easement or other easements in gross to governmental entities or other entities. If you are asked to insure easements in gross to natural persons, please call our underwriting personnel.

EMINENT DOMAIN

Private Takings Prohibited - SB 7 (Second Special Session) (Not yet signed): This bill adds Chapter 2206, Government Code, to impose limitations on eminent domain. A governmental or private entity may not take private property if the taking confers a private benefit on a particular private party. Takings for governmental ownership, possession and use would remain lawful, but takings that will benefit private parties (such as parties who will be the fee owners or lessees) generally will not be allowed unless for public related uses such as utilities or to "eliminate an existing affirmative harm on society from slum or blighted areas."

Company Policy: You may continue to insure based on condemnations, if the use and ownership are solely for the benefit of a governmental entity, or if the use is for operations of persons such as common carriers or an energy transporter. Otherwise, please call our underwriting personnel.

ESTATES

Timeshares - HB 1045 (effective 1/15/06): This bill amends the Texas Timeshare Act.

Company Policy: Please call our underwriting personnel if you are asked to insure a timeshare right other than a timeshare interest in specific weeks.

First Refusals in Condominiums - SB 810 (effective 9/1/05): New §5.014, Property Code provides that "A person who has a right of first refusal in real property that is a condominium subject to Chapter 81 or Chapter 82 may not charge a fee for declining to exercise that right, such as a fee for providing written evidence of the declination."

Company Policy: No change. Require a release or waiver of a right of first refusal for the transaction.

FORECLOSURES UNDER POWER OF SALE

Location of Foreclosure - HB 961 (effective 6/17/05): New §51.002(h) Property Code, provides that the commissioners court of a county may designate an area other than the area of the courthouse where foreclosure sales will take place. The designated location must be a public place within reasonable proximity of the county courthouse and in a location as accessible to the public as the courthouse door. The designation shall be recorded in the real property records of the county. The posting of notice of a sale remains at the courthouse door of the appropriate county.

Company Policy: You may rely upon recitals in the trustee's deed or an affidavit stating that the foreclosure complied with the law.

Authority of Mortgage Servicers - HB 1234 (effective 9/1/05): Amended §51.0075, Property Code, authorizes a mortgagee to appoint or to authorize a mortgage servicer to appoint a substitute trustee or substitute trustees to succeed to the powers and duties of the original trustee, notwithstanding any agreement (such as in the deed of trust) to the contrary. A mortgagee or mortgage servicer may make the appointment by power of attorney, corporate resolution or other written instrument (no longer requiring a power of attorney exclusively). A mortgage servicer may authorize an attorney in fact to appoint a substitute trustee or substitute trustees on behalf of the mortgagee. These changes would apply to a deed of trust executed after the effective date of the act and to a deed of trust executed before the date of the act that does not conflict with these changes.

Company Policy: You may rely upon recitals in the trustee's deed or an affidavit stating that the foreclosure complied with the law.

Foreclosure Requirements - HB 1235 (effective 9/1/05): Amended §51.002, Property Code, deletes requirement that the written notice served on each debtor by certified mail must be given by the mortgage servicer; it continues the requirements that notice be given at least 21 days before the sale by posting at the courthouse door, filing with the county clerk, and serving written notice by certified mail on each debtor who according to the mortgage servicer's records is obligated to pay the debt. Amended §51.0025, Property Code, provides that the mortgage servicer may administer the foreclosure if the mortgage servicer and mortgagee agreed to grant the current mortgage servicer authority to service the mortgage. Unless the deed of trust executed before the act provides otherwise, the changes apply to any foreclosure notice after the effective date of the act.

Company Policy: You may rely upon recitals in the trustee's deed or an affidavit stating that the foreclosure complied with the law.

HOMESTEAD

Home Equity Loans - HB 637 (effective 9/1/05): Amended §781, Probate Code, authorizes a guardian of the estate to create a home equity mortgage under court order if necessary to make improvements or repairs to the homestead or pay for education or medical expenses of the ward. New §889A, Probate Code, authorizes a natural or adoptive parent or managing conservator of a minor who is not a ward to secure a court order authorizing a home equity mortgage on the residence homestead, the net value of the minor's interest which does not exceed $100,000. New §890, Probate Code authorizes a guardian of the person of a minor who is not subject to a guardianship of the estate to secure a court order authorizing a home equity mortgage on the residence homestead, the net value of the minor's interest which does not exceed $100,000. Proceeds may be used only to make improvements on the homestead, pay for education or medical expenses of the minor, or pay the outstanding balance of the loan.

Company Policy: You may insure a home equity mortgage by on behalf of a ward if you secure an order under the above conditions. You do not need to determine the actual expenditure of the loan proceeds. You must verify compliance with our other requirements for issuance of the T-42 and T-42.1 Endorsements.

Reverse Mortgages - SJR 7 (vote: 11/8/05): This proposed constitutional amendment would amend §50(p), Article XVI, Texas Constitution to allow line of credit advances under a reverse mortgage, by advances at regular intervals, at regular intervals in amounts that the debtor may reduce, in amounts requested by the borrower until the credit limit is reached, or in amounts requested by the borrower so long as the credit limit is not exceeded after repayment.

MECHANIC'S LIENS

HB 629 (effective 9/1/05): This bill adds §53.107, Property Code to provide that the owner must give notice of termination of work or abandonment of performance by the original contractor or owner to subcontractors who have provide prior notices or a request for notice. If the owner does not provide this notice, the lien claimant will have a lien even though it fails to file its lien within 30 days after work is completed, so long as the subcontractor otherwise complies with the chapter (e.g. timely filing of affidavit by 15th day of fourth month after accrual of indebtedness if not residential construction project, or 15th day of third calendar month if residential construction project, per §53.052).

Company Policy: If you issue a policy without the (P-8) mechanic's lien exception, verify all bills are paid. Do not waive a mechanic's lien because it appears that the lien was filed too late, unless our underwriting personnel approve.

PROBATES AND TRUSTS

Revocation of Will or Trust - HB 1186 (effective 9/1/05): Amended §58b, Probate Code, provides that a bequest or devise in a will is void if made to any attorney who prepared or supervised the will preparation, to a parent or descendant of a parent or employee of the attorney, or to a spouse of any such persons. This section does not apply to a bona fide purchaser for value from the devisee. New §472, Probate Code, provides that the dissolution of marriage revokes trust provisions nominating the former spouse to serve in a fiduciary or representative capacity. New §473, Probate Code, provides that a bona fide purchaser of property from a divorced individual's former spouse or a person who receives from a divorced former spouse any property in partial or full satisfaction of an enforceable obligation is not required to return the property and is not liable for the value of the property.

Trust Provisions - HB 1190 (effective 1/1/06): Amended §112.057, Property Code provides that the trustee may divide a trust into two or more separate trusts or combine multiple trusts into one trust without court order if the result does impair the rights of a beneficiary or adversely affect achievement of the original trust purposes, and if the trust does not expressly prohibit division. New §113.003, Property Code, authorizes a trustee to grant an option, even if the option is exercisable beyond the trust duration. New §113.027, Property Code, authorizes a trustee to make distributions in divided or undivided interests. Amended §113.085, Property Code, authorizes cotrustees to act by majority decision. A trustee may delegate the performance of a trustee's function to a co-trustee unless the settler specifically directs that the function be performed jointly. Unless the delegation is irrevocable, the cotrustee may revoke the delegation. Amended §114.003, Property Code, provides that the terms of the trust may give a trustee or other person a power to direct the modification or termination of the trust.

RECORDING STATUTES AND BONA FIDE PURCHASERS

Recording Fees - HB 950 (effective 9/1/05):Amended §118.011(a), Local Government Code, provides that the real property records filing fee for the first page is $5, for each additional page is $4, and for each 8-1/2" x 14" attachment or rider is $4.

Manufactured Housing - HB 2438 (effective 6/18/05): This bill relates to acquisition and regulation of manufactured homes. This bill will be the subject of a separate bulletin.

Notary Records - SB 220 (effective 9/1/05): Amended §406.014(e), Government Code, provides that "A notary public may maintain the records required by subsection (a) electronically in a computer or other storage device." Formerly the notary public was required to keep written records in a book.

Electronic Recording - SB 335 (effective 9/1/05): This bill adopts the Uniform Real Property Electronic Recording Act (URPERA), Chapter 15, Property Code. Electronic document is defined by §15.001, Property Code, as a document that is received by a county clerk in an electronic form. The URPERA authorizes the filing of electronically generated documents and scanned (originally paper) documents. New §15.004(c), Property Code, provides that a requirement of an acknowledgment is satisfied if the electronic signature of the person authorized to perform that act, and all other information required to be included, is attached to or logically associated with the document or signature. A physical image of a stamp or seal need not accompany an electronic signature. New §15.005(a), Property Code, provides that a county clerk who implements any of the functions shall act in compliance with the rules adopted by the Texas State Library and Archives Commission under Chapter 195, Local Government Code. Authorized filers of electronic documents are established by §195.003, Local Government Code, and include certain institutional lenders, governmental agencies, government-sponsored entities, attorneys, title insurance companies, and title insurance agents. The filing fees for electronic documents may not vary from the costs for paper documents pursuant to §195.006, Local Government Code. The county clerk may, but is not required to, accept electronic documents or records. §195.002, Local Government Code. An authorized filer and a participating county clerk must enter an agreement of understanding containing the terms of participation in the county clerk's electronic filing and recording program. Tex. Adm. Code Ch. 13, Section 7.142. The county clerk must confirm or reject the electronic filing no later than the first business day after the date the electronic document or other instrument is filed.

Company Policy: We encourage you to file documents electronically if your county clerk cooperates.

Confidentiality Notice - SB 461 (effective 5/13/05): This bill amends §11.008, Property Code. Amended §11.008, Property Code, and 191.007, Local Government Code, recognize that if a notice is placed on the deed or deed of trust pursuant to §11.008, then the notice is placed above the heading of the instrument, which otherwise appears at the top of the instrument. Amended §11.008(b), Property Code, provides that an instrument disclosing an individual's social security number or driver's license number must include substantially the following (modified) notice in 12-point boldfaced type or 12-point uppercase letters:

NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM THIS INSTRUMENT BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER'S LICENSE NUMBER.

The notice is not required on a deed or deed of trust that contains neither the social security number nor driver's license number. The county clerk may not reject an instrument that fails to contain this required notice.

Records Archive Fee - SB 526 (effective 6/17/05): This bill eliminates the sunset of the records archive fee. Previously there was a sunset of September 1, 2008, for the records archive fee of not more than $5 for preservation, restoration and maintenance of county clerk's records filed before January 1, 1990.

TAXES, AD VALOREM

Notice of Public Improvement District - HB 1919 (effective 1/1/06): New §5.014, Property Code requires the seller of residential real property located in a public improvement district that consists of not more than one dwelling unit to give the purchaser a written notice substantially as follows:

NOTICE OF OBLIGATION TO PAY PUBLIC IMPROVEMENT DISTRICT ASSESSMENT
TO (municipality or county levying assessment) CONCERNING THE
PROPERTY AT (street address)

As a purchaser of this parcel of real property you are obligated to pay an assessment to a municipality or county for an improvement project undertaken by a public improvement district under Chapter 372, Local Government Code. The assessment may be due annually or in periodic installments. More information concerning the amount of the assessment and the due dates of that assessment may be obtained from the municipality or county levying the assessment.
The amount of the assessments is subject to change. Your failure to pay the assessments could result in a lien on and the foreclosure of your property.

Date: ____________________

______________________________
Signature of Purchaser

The contract may be given separately, as part of the contract, or as part of any other notice. If included in the contract, the title to the notice, reference to the street address and date of notice and purchaser's signature may be omitted.

Certificated Service Notice - HB 2876 (effective 9/1/05): Amended §13.257, Water Code, establishes the notice for a certificated water or sewer service area. If a person proposes to sell or convey land in a certificated service area of a utility service provider, the person must provide the purchaser with a written notice. The revised notice must be executed by the seller and must state:

"The real property, described below, that you are about to purchase may be located in a certificated water or sewer service area, which is authorized by law to provide water or sewer service to the properties in the certificated area. If your property is located in a certificated area there may be special costs or charges that you will be required to pay before you can receive water or sewer service. There may be a period required to construct lines or other facilities necessary to provide water or sewer service to your property. You are advised to determine if the property is in a certificated area and contact the utility service provider to determine the cost that you will be required to pay and the period, if any, that is required to provide water or sewer service to your property.

"The undersigned purchaser hereby acknowledges receipt of the foregoing notice at or before the execution of a binding contract for the purchase of the real property described in the notice or at closing of purchase of the real property."

________________________________
Date
________________________________
Signature of Purchaser

The notice must be executed by the seller and purchaser unless the notice is included in or as an addendum to the purchase contract. The utility service provider must record in the real property records a certified copy of the map of the certificate of public convenience and necessity and any amendment as contained in the commission's records, and a boundary description of the service area.

Assignment of Tax Lien - HB 2491 (Effective 9/1/05): This bill relates to assignment and refinance of ad valorem tax liens. The bill will be the subject of a separate bulletin.

Tax Sales - HB 2926 (effective 6/17/05): Current §34.015, Tax Code, prohibits selling officers of land sold by court order from executing or delivering a deed to a purchaser unless the purchaser furnishes an unexpired statement from the county tax assessor-collector of the county of the land showing the purchaser does not owe delinquent taxes to the county or school district. This has resulted in purchasers avoiding taxes for land they purchase at a foreclosure by delaying the filing of the written unexpired statement. Amended §34.015, Tax Code, requires the officer who conducted the sale to provide a copy of the officer's return to the county assessor-collector if the successful bidder does not exhibit to the officer the unexpired statement within six months of the sale. On receipt, the county assessor-collector shall record the return in the records kept for that purpose and shall index and cross-index the return in the name of the bidder at the auction and each former landowner. The chief appraiser may list the successful bidder in the appraisal records as the landowner.

Company Policy: You must require a recorded officer's deed (and our other requirements for tax sales) to rely upon a tax foreclosure sale. You may assume that the purchaser provided a statement showing no taxes due, if the officer's deed is recorded.

Tax Sales - SB 644 (effective 5/17/05): Previously adopted §34.0445, Civil Practice and Remedies Code, had provided that an officer may not execute or deliver a deed to a purchaser under a sale, unless the purchaser exhibits an unexpired written statement from the county tax assessor collector pursuant to §34.015, Tax Code, showing no delinquent taxes are owed to the county and no known or reported taxes are owed to the school district or municipality. Amended §34.0445(g), Civil Practice and Remedies Code, is modified to state that the requirements of the written statement are required only if (1) the county is 250,000 or more, or (2) the county is less than 250,000 and the commissioners court elects to adopt the requirements of §34.0445, Civil Practice and Remedies Code.

Company Policy: You must require a recorded officer's deed (and our other requirements for tax sales) to rely upon a tax foreclosure sale. You may assume that the purchaser provided a statement showing no taxes due, if the officer's deed is recorded.

TITLE INSURANCE

Rebates - HB 2565 (effective 9/1/05): This bill relates to rebates regarding certain insurance coverage. Amended §2502.055, Insurance Code, reads as follows:

Sec. 2502.055. PROMOTIONAL AND EDUCATIONAL ACTIVITIES NOT REBATES .
(a) The activities described in this section are not rebates. Nothing in this subchapter prohibits a title insurance company or a title insurance agent from:

(1) engaging in legal promotional and educational activities that are not conditioned on the referral of title insurance business;
(2) purchasing advertising promoting the title insurance company or the title insurance agent at market rates from any person in any publication, event, or media;
(3) delivering to a party in the transaction or the party's representative legal documents or funds which are directly or indirectly related to a transaction closed by the title insurance company or title insurance agent; or
(4) participating in an association of attorneys, builders, developers, realtors, or other real estate practitioners provided that the level of such participation does not exceed normal participation of a volunteer member of the association and is not activity that would ordinarily be performed by paid staff of an association.

(b) "Market rate" means the price at which a seller, under no obligation or duress to sell, is willing to accept and a buyer, under no obligation or duress to buy, is willing to pay in an arms-length transaction. The market rate is determined by comparing the rights or items purchased or sold to similar rights or items that have been recently purchased by others or sold to others, including others not in the title insurance business.
These changes apply to conduct with respect to a title insurance policy delivered, issued for delivery, or renewed on or after January 1, 2006.

Company Policy: The Texas Department of Insurance has proposed changes to P-53 to conform to this bill. We will inform you when these changes are adopted.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None