Bulletin: TX000032

September 01, 1995
All Texas Issuing Offices
1995 Texas Legislation

Dear Associates:

The Texas Legislature passed a number of bills in 1995. The following are the most important bills:

Notary Fees
House Bill 172 - (effective 9/1/95)

This bill authorizes the employer of a notary public to charge the notary fee. The notary fee for taking an acknowledgment or jurat on a deed, deed of trust, or other instrument to be recorded is $6 for the first signature and $1 for each additional signature.

Notary Seals
House Bill 677 - (effective 6/14/95)

This bill allows an acknowledgment or jurat without a notary seal if the notary is located in another state and that state does not require a seal.

Company Policy: You may rely on this statute to waive a notary seal by a notary in another state if your local county clerk or our underwriting personnel confirm that state does not require a seal.

Deed in Lieu
House Bill 333 - (effective 8/28/95)

This bill expressly allows a mortgagee that received a deed in lieu of foreclosure to void the deed in lieu of foreclosure because of liens and encumbrances not disclosed by the mortgagor. The mortgagee may file an affidavit voiding the deed within four years after the execution of the deed. The mortgagee may foreclose its deed of trust if it voids the deed or if it chooses not to void the deed.

Company Policy: You may rely upon a foreclosure of the Deed of Trust after a Deed in Lieu of Foreclosure if the Deed of Trust is not expressly released in the Deed in Lieu of Foreclosure or by a separate release.

Colonias Liens
House Bill 1001 - (effective 6/17/95)

This bill applies to counties within 50 miles of an international border, with income 25 percent below the state average, and with unemployment 25 percent above state average. Subdivisions outside the city in these counties are subject to a lien or assessment by a local political entity (e.g., county) for state and federal funds used for water, wastewater, or drainage improvements. The lien expires 10 years after improvements are completed.

Company Policy: If the tax search or exam discloses this lien or assessment, you should separately except to it in Schedule B. Do not rely on the standard tax exception in the policy.

Crop Liens
House Bill 1463 - (effective 9/1/95)

This bill authorizes the filing with the Secretary of State of a lien on crop proceeds for agricultural chemicals and agricultural seeds. No refiling of lien is necessary. This bill is similar to UCC (Uniform Commercial Code) Law (9.401 Business and Commerce) that requires financing statements on crops to be filed in the Secretary of State's office.

Company Policy: Except to "liens or financing statements, if any, affecting crops growing or to be grown on the land" if (1) you insure on farmland with growing crops, and(2) you do not except the crops, and (3) a UCC search is not done in the Secretary of State's office.

Well Plugging Liens
House Bill 2294 - (effective 9/1/95)

This bill allows a groundwater conservation district to perfect a lien for closing or capping an open well. The lien attaches upon recordation of an affidavit that includes the legal description, well location, and expense.

Company Policy: Except to the notice or require a release if a notice of the lien is recorded.

Dormant Judgment
House Bill 2370 - (effective 9/1/95;
applies to actions to revive judgments brought on or after December 1, 1996)

This bill allows the judgment creditor to revive a dormant judgment by scire facias(a judicial writ) or action on the debt within two years after the judgment is dormant (generally 10 years after last writ of execution or 10 years after the judgment, if no prior writ of execution). This bill does not increase the maximum time the judgment lien is effective (20 years after recording if judgment by U.S.; 10 years after recording if judgment by others). It does mean that a judgment is not finally dormant for 12 years.

Company Policy: Call our underwriting personnel before waiving a judgment lien if the judgment appears to be dormant.

Foreclosure During Dependent Administration
House Bill 2866 - (effective 1/1/96)

This bill allows nonjudicial foreclosure of a deed of trust during dependent administration if (1) the clerk personally serves the personal representative and other lienholders and (2) the court authorizes the foreclosure. The court may fix a minimum price. The bill does not require a confirmation order after sale.

Company Policy: If you insure on such nonjudicial foreclosure (1) verify all other requirements for nonjudicial foreclosure are met, (2) verify that all other lienholders and owners are personally served, and (3) verify the bid complied with the minimum bid (if any).

County Lien: Dangerous Structure
Senate Bill 74 - (effective 6/16/95)

This bill applies only to a county bordering the Gulf and adjacent to Harris County. The county may file a lien notice for repair or removal of a dangerous shore structure. The notice must contain a legal description, amount of assessment, and owner (if known). The lien is subordinate to previously recorded mortgages.

Company Policy: Except to this lien if it is recorded, unless a prior mortgage is subsequently foreclosed.

Mechanic's Lien for Architects, Engineers, and Surveyors
Senate Bill 488 - (effective 9/1/95)

This bill allows an architect, engineer, or surveyor to file a mechanic's lien affidavit. The plan or plat does not have to be incorporated into improvements. The priority of the lien is based upon recording.

Company Policy: Except to the recorded architect's engineer's, and surveyor's affidavit of lien unless a prior mortgage is subsequently foreclosed.

Restitution Liens
Senate Bill 494 - (effective 9/1/96)

This bill authorizes a restitution lien in favor of the victim of a criminal offense and the state. The lien attaches when an affidavit is filed. The affidavit must include the name of the defendant; the criminal proceeding; the person entitled to the lien; and the amount of restitution, fines and costs. The lien is subordinate to previously recorded mortgages. The lien is effective for 10 years after filed. The lien may be extended for 10 years after refiling. Failure to execute does not cause dormancy. The clerk of the criminal court or the person executing the affidavit may execute a release. The person executing the affidavit may execute a partial release.

Company Policy: Except to the recorded lien, unless a prior bona fide mortgage is subsequently foreclosed.

County Nuisance Liens
Senate Bill 595 - (effective 8/28/95)

A county may file a notice of lien if it abates a public nuisance. The notice must include the costs, legal description, and name of owner (if known). The lien is subordinate to previously filed mortgages.

Company Policy: Except to the recorded notice of lien, unless a prior mortgage is subsequently foreclosed.

Owelty and Federal Tax Liens
Senate Bill 1032 and SJR 46

Please see our Bulletin dated June 20, 1995 (TX000029).

City Nuisance Liens
Senate Bill 1198 - (effective 8/28/95)

This bill provides that the municipal lien for abating a substandard building is a "privileged lien", subordinate only to tax liens. New Section 342.008, Health and Safety Code, authorizes the municipality to file a lien for abatement of dangerous weeds, which also is a "privileged" lien.

Company Policy: Except to any notice of lien for city abatement of substandard building, nuisances, or dangerous weeds, even if a previous mortgage is subsequently foreclosed.

Certificate of Attachment: Manufactured Homes
House Bill 785 - (effective 9/1/95)

A manufactured home is real property if (1) the home is permanently attached to real property, (2) the manufacturer's certificate of origin or the original document of title is surrendered for cancellation, and (3) a certificate of attachment is filed in the real property records. This section does not apply to manufactured homes attached to the land and for which the title was canceled before January 1, 1996.

Company Policy: If you close on a transaction and a manufactured home is permanently attached to the land on or after January 1, 1996, you must require recordation of the certificate of attachment. You must continue to require the cancellation of the document of title and satisfaction of all liens.

Subdivision Requirements
House Bill 1001 - (effective 6/17/95)

This bill applies to "economically distressed" counties within 50 miles of an international border. It contains numerous plat requirements for land outside the city, such as provision for water, sewer facilities, roadway, easements, topography delineation, and designation of floodplain status. If any land is in the floodplain, the plat must prohibit residential construction unless the housing qualified for flood insurance. Utilities may not connect services unless they secure a determination of plat approval or determination of installation of water and sewer services. An executory contract on lots for residential use (presumed if 5 acres or less) must be recorded. The subdivider must provide notice concerning utilities, ownership, and advice to obtain a title policy.

Company Policy: Our policy does not insure compliance with the requirements of this bill, such as subdivision requirements. If you secure and record an original contract to purchase, you may issue a policy to a purchaser insuring the current fee simple as vested in the seller or insuring the purchaser's rights to purchase the title to the land pursuant to the contract. You must except to the terms of the contract. If the plat contains any restrictions, such as limits on construction within a floodplain, you should except to them.

Contracts for Deed
Senate Bill 336 - (effective 9/1/95)

All Counties: This bill changes the requirements to forfeit or rescind an executory contract on land to be used as the buyer's residence. The notice must be 14-point boldface type. Example: 14-Point Bold Face. The seller must identify the terms breached and action required to cure.

"Colonias" Counties: New Subchapter E, Property Code (Sections 5.091 et seq.) applies to executory contracts in "economically distressed" counties determined by the Texas Department of Housing and Community Affairs to (1) have income 25 percent below state average and unemployment 25 percent above state average and (2) be within 200 miles of an international border. A lot of one acre or less is presumed residential. The subchapter does not apply to a sale by the Veteran's Land Board or a contract to provide a deed within 180 days. The seller must record the contract. If the buyer defaults after paying 40 percent of the amount due or 48 monthly installments, the seller must have the property sold by a trustee appointed by the seller after 60-day notice to cure is given. The sale is then conducted consistent with Deed of Trust notices and foreclosure. The seller must then convey fee simple title to the bidder. A bona fide purchaser may rely upon an affidavit stating compliance with sale requirements.

Company Policy: You may insure free of a contract for deed on residential property if the seller executes an affidavit stating (1) the contract (which should be attached and reviewed) was forfeited or rescinded; (2) the seller gave the required notices (under Section 5.062, Property Code), which should be attached; (3) the amount of the purchase price paid; (4) the time given to cure (15-day notice if less than 10 percent; 30-day notice if less than 20 percent but 10 percent or more; 60-day notice if 20 percent or more); (5) the purchaser is no longer in possession of the land; and (6) the seller indemnifies you and us for any loss, claim, expense, or liability arising out of the contract. You should record the affidavit.

You may insure on a trustee's sale held after a buyer defaults on the executory contract in an "economically distressed" county if (1) the seller or trustee furnishes an affidavit that 60-day notice of default was given to the purchaser (with a copy attached), (2) the seller has appointed the trustee before all notices required for a trustee's sale under Section 51.002, Property Code, occur; (3) the trustee or seller swears, in an affidavit, that the notices required by Section 51.002, Property Code, have been made, (4) the seller executes a deed to the high bidder, and (5) the seller swears, in an affidavit, that the prior purchaser under the contract is not in possession.

House Bill 1367 - (effective 8/28/95)

This bill generally prohibits discrimination by insurers, including title insurers, based on race, color, religion, national origin, age, gender, marital status, geographic location, or disability. Different treatment is allowed based on sound examination of title or closing the transaction or requirements relating to community, homestead, or other marital rights.

Company Policy: You may not decline to provide a commitment based upon issues such as marital status, geographic location (e.g., lower income areas or less profitable subdivisions, or suspicion that a subdivision has problems), or disability. You must, instead, make requirements based upon your examination. These may include requirements such as satisfactory evidence relating to homestead or marital status.

Title Insurance
Senate Bill 1284 - (effective 9/1/95)

This bill makes technical changes to our title insurance laws. These include the following:

a. Amendment of Article 9.30 to allow "legal promotional and educational activities that are not conditioned on the referral of business".

b. Amendment of Article 9.55 to require rejection of the owner policy in all sales of improved residential real property if a mortgagee title policy (or equivalent) is issued, even if the closing is not handled by the title company, its attorney, or representative.

c. Amendment of Article 9.07A to require issuance of the plain language owner policy (T-1R) if the insured is a "natural person".

Company Policy: Always secure the owner's rejection form if you will not issue an owner policy on a sale of improved residential property and if you will issue a mortgagee policy. You may continue to issue the owner policy form T-1R on "residential real property", even if the insured is a corporation, partnership, or company. You may disclose to that proposed insured that you will issue the form T-1 owner policy to an entity (corporation, partnership, or company) if it requests.

Forced Sale to Co-owner
House Bill 1125 - (effective 8/28/95)

This bill applies to property received as a result of the death of another person, such as by will or inheritance. It does not apply to homestead. A co-owner who pays real estate taxes for three of the last five years and who has not been reimbursed more than one-half of the amount paid on behalf of the other co-owner may petition the court for sale. The court may divest the other co-owner of title and order the petitioner to pay the fair market value of the defendant's interest, less taxes owed, as determined by a court-appointed appraiser. The court may order the defendant to execute a deed.

Company Policy: Require a deed from the defendant to the petitioner transferring the undivided interest in the land.

Trustee Transfers to City or County
House Bill 1454 - (effective 8/28/95)

A city or county may not purchase land held in trust unless the trustee furnishes a copy of the trust agreement "identifying the true owner of the property". A conveyance by the trustee is void if the disclosure has not occurred.

Company Policy: Require written evidence from the city or county that its "governing body" received a copy of the trust agreement if the city or county is acquiring from a trustee by purchase or condemnation or if the city or county is reselling after such acquisition.

Uniform Unincorporated Nonprofit Association Act
House Bill 1661 - (effective 9/1/95)

This bill allows an unincorporated nonprofit association (e.g., some churches) to own title in its own name. The association may execute and record a statement of authority to transfer land. The statement must include (1) name of the association; (2) address in this state, including street address; and (3) name or title of person authorized to transfer the land. The statement is effective no longer than five years. It must be executed by a person other than the person authorized to sell.

Company Policy: If title is vested in an unincorporated nonprofit association, review the association documents (e.g., articles or constitution and bylaws) and require recordation of a statement of authority. The documents and statement should authorize the conveyance or mortgage by the signatory.

Transfer to Minors
House Bill 2268 - (effective 9/1/95)

This bill is the Uniform Transfers to Minors Act. It replaces the Uniform Gifts to Minors Act. The transfer may be made to "____________________ as custodian for (name of minor) under the Texas Uniform Transfers to Minors Act". The custodian may sell the land without further approval until (1) the minor attains 21 (if the property was acquired by gift, trust, or will), (2) the minor attains 18 (if the property was acquired from a fiduciary or obligor to satisfy debt), and (3) the minor's death.

Company Policy: If the custodian acquires title by gift or purchase, you may insure on a bona fide sale by the custodian under the Uniform Transfers to Minors Act provided you verify the "minor" is not yet 21 and is alive.

Real Estate Investment Trust
Senate Bill 1617 - (effective 9/1/95)

This bill amends the Texas Real Estate Investment Trust Act. The Trust Declaration must be filed in the county clerk's office in the county of the principal place of business. Management is vested in one or more natural persons who are managers and who may appoint officers. A sale of all or substantially all assets must be approved by two-thirds of the shareholders and by managers.

Company Policy: Review the Declaration, bylaws, and resolution of managers to verify the trust REIT transaction is authorized. If the trust REIT is selling all or substantially all of its assets, require two-thirds shareholder approval evidenced by a resolution.

Checks and Notes
House Bill 1728 - (effective 1/1/96)

This bill includes a new statute of limitations for notes. The action for a note payable at a definite time must be brought six years after due. If the note is payable on demand, the action must be commenced within six years after demand or 10 years after last payments are made. This bill does not expressly amend Section 16.035, Civil Practices and Remedies Code, which generally contains a four-year limit after maturity of debt for foreclosure of a deed of trust. As a matter of caution, we will generally rely on this six-year time limit.

The bill generally allows an instrument, such as a check, to constitute an accord and satisfaction of a claim that is unliquidated or in bona fide dispute, if the instrument or accompanying written communication conspicuously states that the instrument is rendered in full satisfaction.

The bank statement must provide check numbers, amounts, and dates of payment. The bank must furnish at least two checks or copies without charge, if requested. The customer will have 30 days to report discrepancies (e.g., an alteration or unauthorized signatures).

Company Policy: If you insure on or after a bona fide mortgage or conveyance, you may rely upon the statute of limitations to waive the prior mortgage, if:

The mortgage is held by FDIC or RTC as receiver or conservator, and the mortgage is more than six years overdue, and more than six years have passed since the receivership or conservatorship began.

Final payment under any other mortgage is more than six years overdue.

Do not waive a mortgage because of limitations if it is held by a U.S. governmental agency (e.g., SBA, FmHA, FDIC corporation), or a state agency, or if the mortgagee or mortgagor is in a bankruptcy. Do not waive a mortgage that secures a demand note.

Covenants and Restrictions
House Bill 2151 - (effective 8/28/95)

New Chapter 204, Property Code, allows extension, modification, or amendment of restriction by agreement, new associations, or new assessment liens by association. The association or owners must file a petition and secure approval by specified majorities of the owner. This amendment applies to counties of 2.8 million or more.

Company Policy: If a petition to amend restrictions is filed, except to its terms. Do not determine its validity.

Cleanup Agreement
House Bill 2296 - (effective 9/1/95)

If an owner enters into a voluntary cleanup agreement and successfully completes the cleanup, the executive director of the Texas Natural Resource Conservation Commission shall file a certificate of completion that includes the description in the real property records. The certificate states the proposed use. If the use is different, the release of liability is not effective.

Company Policy: Except to the terms of any recorded certificate. Do not provide express insurance as to the certificate.

Water Quality Protection Zones
Senate Bill 1017 - (effective 6/17/95)

A water quality protection zone designation may be recorded in the real property records. The plan is a covenant running with the land.

Company Policy: Except to the terms of any recorded designation.

Rollback Taxes
House Bill 947 - (effective 5/11/95)

A lender may not require a borrower to pay the additional taxes for land assessed for agricultural or open space land if those taxes are not due. The lender may require an escrow for those taxes that would be due for the years before the loan is granted or amended. This bill does not apply to an agency of the U.S. government.

Company Policy: Please call our underwriting personnel if the land is specially assessed (for agricultural or open space use) and if you are asked to delete the rollback exception on the mortgagee policy.

Payment Under Protest
Senate Bill 101 - (effective 6/17/95)

This bill allows the taxpayer to pay taxes under protest by noting the protest on the instrument or in a document accompanying the payment.

Company Policy: If the taxpayer wants to pay taxes under protest, the taxpayer should write a separate letter to the taxing authority to include with the check from the escrow account.

Water Notice
(Senate Bill 626 - (effective 9/1/95)

This bill makes minor changes in the Water District Notice. Please see reference section below for a copy of this form.

Ad Valorem Tax Refinance
Senate Bill 1357 - (effective 9/1/95)

This bill authorizes transfer and subsequent nonjudicial foreclosure of an ad valorem tax lien. It also authorizes refinance of taxes by a Deed of Trust.

Company Policy: You may issue a mortgagee policy insuring a Deed of Trust to pay ad valorem taxes on the land, even if the Deed of Trust does not secure other debt.

Seizure and Sale
Senate Bill 1545 - (effective 8/28/95)

This bill authorizes seizure and administrative sale of property for ad valorem taxes. It applies if the land is in a municipality; if the land is less than one acre; and if the land has been abandoned, unused, or vacant at least one year. Taxes must be delinquent for the preceding five years or for the preceding three years if the municipality has a lien for remedying a health or safety hazard. A district court must issue a tax warrant. The warrant directs the sheriff or constable and collector to seize the land. The collector must deliver notice of the proposed sale (time, place, and description) to the owner and lienholder. The sale may be set aside within one year of sale.

Company Policy: We require review of the tax warrant issued by the District Court and recordable evidence of personal notice of the sale given to the owner and all lienholders. We will require a release of all liens on the land. We must be satisfied that the period of redemption has passed (two years on residential homestead; six months otherwise, after the deed is recorded). Verify that no one is in possession of the land. Do not issue until after one year after the sale.