Bulletin: TX2015004

Dear Associates:

2015 Texas Legislative Bulletin

Introduction: In terms of numbers, the 2015 Texas Legislative Session was typical. Six thousand two hundred eight four bills were filed and 1333 were passed. There was about a 7% increase in the total number of bills filed and a 12% increase in the number of House bills passed. The Senate passed 29% fewer bills than in 2013. The governor vetoed 43 bills.  

INSURANCE CODE

SB 655 Relating to Own Risk and Solvency Assessment by Insurers and Insurance groups; Applies to Chapter 830 insurance code which does not apply to title insurance companies pursuant to 2551.001, Ins Code Effective date: 5-15-2015

SB 783 Relating to the Development of Antifraud Educational Programs by the Texas Department of Insurance and Acceptance of Gifts, Grants, and Donations for the Department's Fraud Unit.

This bill applies to Section 701, Insurance Code which does affect title insurance companies pursuant to 2551.001 Ins Code. It allows the commissioner’s fraud unit to develop fraud prevention programs and to accept gifts, grants, and donations from anyone other than regulated entities or persons. This would allow the fraud unit to accept third party funding of its programs.
Effective date: 9-1-2015

HB 1168 Deals with the Management of Property Owner Association (“POA”) 
For the purposes of title insurance Section 213.001, et seq appears to have consequences. This section deals with modification or termination of restrictions in certain developments by the POA. It deals with amenity property such as a golf course or country club. It allows the owners who are reluctant or unable to operate or maintain an amenity property to petition the owners to vote to amend the restrictions to eliminate the amenity. There are specific rules that the parties will need to follow.

Underwriting issue: 
If presented with an opportunity to underwrite the sale of a former amenity property, you will need to read and determine that the owners complied with the notices, petition process, and vote as required under this section. The petition circulator shall maintain a record of the signed statements and affidavit for only one year. If you are dealing with a sale of amenity property after that year is up and the records are not available, please contact a Texas underwriter. 
Effective date:  9-19-2015

NON-JUDICIAL FORECLOSURES

HB 2063 Relating to the Recording and Effective Date of Certain Paper Documents Relating to Non-judicial Foreclosure Sales

(a)  Requires a county clerk to record all of the normal foreclosure documents including:

(1)  an instrument appointing or authorizing a trustee or substitute trustee to exercise the power of sale in a security instrument;

(2)  a notice of sale pursuant to which the sale under a power of sale occurred;

(3)  a notice of default on which the sale evidenced by a deed conveying title from a trustee or substitute trustee to a purchaser occurred;

(4)  documentation from the United States Department of Defense indicating that a debtor was not on active duty military service on the date of a foreclosure sale;

(5)  a statement of facts regarding a foreclosure sale prepared by an attorney representing the trustee, substitute trustee, or mortgage servicer; or

(6)  proof of service of the mailing of any notice related to a foreclosure sale.

(b)  A document described by Subsection (a) must be attached as an exhibit to:

(1)  a deed that conveys title from a trustee or substitute trustee to a purchaser at a foreclosure sale and that meets the requirements for recording under Section 12.0011(b); or

(2)  an affidavit of a trustee or substitute trustee that meets the requirements for recording under Section 12.0011(b) and relates to a foreclosure sale.

It also affects the notice of substitute trustee appointment:

Sec. 51.0076. EFFECTIVE DATE OF APPOINTMENT. The appointment or authorization of a trustee or substitute trustee made in a notice of sale is effective as of the date of the notice if the notice:

(1)  complies with Sections 51.002 and 51.0075(e); and 

(2) is signed by an attorney who:

(A)  is licensed to practice law in this state and includes the attorney's state bar identification number; and

(B)  represents the trustee, substitute trustee, or mortgage servicer.

What you should do:  In addition to determining that all of the statutory notices and other matters have been complied with and that the terms of the deed of trust relating to foreclosures have been complied with, determine that all such matters have been recorded and that the appointment of substitute trustee, if any, was properly signed with a representation that the attorney represents the trustee, substitute trustee, lender or mortgage servicer.
Effective date: 9-1-2015

HB 2066 Relating to the Rescission of Non-judicial Foreclosure Sales
This bill deals with Chapter 51 Property Code and authorizes a practice that has been widely done for some time. It allows a lender that conducted a non-judicial foreclosure of a residential real property to rescind the foreclosure within 15 days after the foreclosure sale occurs. The trustee must notify the purchaser and each debtor obligated to pay the debt with the reasons for the rescission and record the notice in the land records. The lender has 5 days after sale is rescinded to return the purchase price paid at the sale. A rescission is void as to a creditor or bona fide purchaser for value unless notice has been recorded. An action challenging the effectiveness of a rescission must be commenced within 30 days after date the notices are filed for record and a lis pendens must be recorded within the same 30 days.
Effective date: 9-1-2015 

HB 2067 Relating to the Rescission or Waiver of an Acceleration of the Maturity Date of Certain Debt Secured by a Lien on Real Property
This bill deals with Section 16.038, Civil Practices and Remedies Code and allows a creditor to rescind an acceleration of an obligation by serving the rescission notice of the party owing the debt. As long as the notice is sent before the limitations period has expired, the result is that the note is treated as if no acceleration has expired. 

Underwriting standard:  Since the notice does not have to be recorded, there is no way for the examiner to know if the acceleration has been rescinded. If it appears that a note was accelerated (for example by a notice of the notice of foreclosure sent to the borrower appearing in the land records) and then no foreclosure documents are recorded and the limitations period on the note would have expired, do not insure a new foreclosure sale without obtaining a copy of the notice rescinding the acceleration of the note.
Effective date: 6-17-2015

PROPERTY CODE

HB2207 Relating to the Foreclosure Sale of Property Subject to Oil or Gas Lease.

This bill adds Chapter 66 to the Property Code and provides that an oil and gas lease that was recorded prior to the foreclosure sale remains in effect after the sale. The bill affects only real property that includes both the surface and the mineral interest with a deed of trust that covers both estates. The foreclosure of the mortgage terminates and extinguishes any right to use the surface of the land to the extent that the mortgage had priority of the rights of the lease.

Underwriting standards:

• A mortgage on the surface only with minerals already severed is not affected by this bill.
• A mortgage must attach to the mineral interest for the bill to attach.
• Although title insurance does not separately insure royalty interests or payments, the right to receive royalty payments that become due and payable after the foreclosure passes to the purchaser of the foreclosed property.
• Do not provide express insurance or otherwise insure severed mineral rights without approval of a Texas underwriter.   

Effective date:  1-1-16

HB 311 Dealing with Executory Contracts
This bill provides additional remedies when the “contract for deed’ has been recorded in the county in which the property is located.

Additionally, 5.019(a) of the Property Code provides that a recorded contract for deed “shall be the same as a deed with a vendor’s lien” for the unpaid contract price and a general warranty is implied unless limited by the recorded contract. 

Underwriting Comment: “shall be the same as” is an uncertain legal phrase. How a court would interpret such language is unknown as of the effective date of the bill. We would still require a deed after the contract terms have been met and the sales price paid. If for some reason the contract seller is not available to do so, contact a Texas underwriter. 

What you should know: The remedy of recording the contract by notice is affected by the failure to record the contract. Before relying on the informal foreclosure procedure, you must determine if the contract was recorded.
Effective date: 9-1-2015

HB 2261 Relating to the Transfer or Termination of Certain Timeshare Interests
This bill deals with many aspects of timeshare ownership. It amends a number of sections of Chapter 221, Property Code:

• a timeshare interest if the timeshare interest has been acquired only for the purchaser's personal, family, or household use and: 

(1)  the timeshare interest is owned by a resident of this state; 

(2)  the timeshare property is located in this state;

or 

(3)  the timeshare interest acquired is in a multisite timeshare plan required to be registered under Subchapter C.

• certain general disclosure are required including the name, telephone number and physical address of a person providing service under the agreement
• a description of the method for transferring ownerships
• a statement of amounts the owner is required to pay
• any third party that can use or occupy the unit
• and a number of other things. 

Title companies are exempted from disclosures required.

What you should know:  Should you be requested to handle the closing of a timeshare interest, you should review the management agreement to determine who has the authority to act on behalf of the regime and see that the various required notices have been given. 
Effective date: 9-1-2015

TAXES 

SB 1452 Relating to the Power of a Commissioner’s Court to Authorize Ad Valorem Tax Sales of Real Property to be Conducted by Means of Online Auctions

SECTION 1. Section 34.01, Tax Code, is amended by adding Subsection (a-1) and amending Subsection (r) to read as follows:

(a-1) The commissioner’s court of a county by official action may authorize the officer charged with selling property under this section to conduct a public auction using online bidding and sale. The commissioner’s court may adopt rules governing online auctions authorized under this subsection. Rules adopted by the commissioner’s court under this subsection take effect on the 90th day after the date the rules are published in the real property records of the county.

What you should do:  Be aware if your commissioner’s court establishes an online bidding and sale process. If so, you must determine that any sale conducted in that manner complies with the regulations that the court establishes.
Effective date: 5-15-2015

SB 1452 Amends Section 34.01, Tax Code to Allow the Commissioners Court to Allow The Office Charged with Selling Property Under this Section to Conduct a Public Auction Using Online Bidding and Sale. 
The commissioner’s court may adopt rules governing online auctions authorized under this subsection. Rules adopted by the commissioner’s court under this subsection take effect on the 90th day after the date the rules are published in the real property records of the county.

Underwriting Issue: If the commissioners in your county authorize online tax sales, you will need to review the rules created and determine that a sale to be insured followed those rules. You will still need to review the court case to determine proper procedures and due process notices were followed.
Effective date: 5-15-2015

AD VALOREM TAX SALES

HB 3951 Eligibility and registration of persons to participate in an ad valorem tax sale of real property
HB 3951 amends current law relating to the eligibility of persons to participate in an ad valorem tax sale of real property and is intended to facilitate the bidding and deed issuance process in the current “First Tuesday” auctions of delinquent real property and the online auctions of delinquent real property. HB 3951 allows all counties the authority to require bidders to register in advance to ensure that bidders are qualified and that the tax sales will be completed.

Texas Tax Code Section 34.015(b) currently prohibits the officer conducting the tax sale from executing or delivering a deed to the purchaser unless the purchaser provides an unexpired written statement issued by the county assessor-collector showing that the purchaser owes no delinquent taxes to the county, any school district, or any municipality within the county. This bill adds a new Section 34.011 of the Tax Code to permit the county commissioner’s court to adopt a bidder pre-registration process that clearly identifies both the bidder and the intended purchaser, if different from the bidder, and requires the bidder/purchaser to at least annually certify to the assessor-collector that the person or entity owes no delinquent county taxes to any of the specified entities in the county. Once the bidder satisfies these requirements, the county assessor will issue that individual a written registration statement.

Civil Practice and Remedies Code Sections 34.0445 (a) and (c) are amended to require that the officer conducting the sale obtain from the purchaser either: (1) a non-delinquency statement under Tax Code Section 34.015 or (2) the new written registration statement under the new Tax Code 34.011, both issued by the county tax assessor, prior to conveying the property sold at auction to the purchaser. 

The new registration procedure does not apply to counties with a population of 250,000 or more if the county commissioners’ court does not adopt the new bidder registration procedure.

What you should know:  As it creates an alternative pre-registration method to qualify bidders for tax sale auctions, examiners should be aware of this alternative pre-registration procedure and certification if adopted by the county where the property is located.
Effective date: 1-1-2016

TRANSPORTATION CODE

HB 1709 Amends the Transportation Code to Require that an Order of a County State Whether a Public Utility with the Right if Eminent Domain Continues to have Rights if the Right of Way is Abandoned. 

What you should do:  If you are asked to insure property where the county has closed, abandoned and vacated all or a portion of a public road, in addition to determining that the commissioner’s court has properly conducted hearings after notice to the public, enacted an ordinance and provided a deed, you must also determine that all costs including the market value of the interest has been paid.
Effective date: 6-16-2015

HB 3002 Relating to the Imposition of a Fee for Street Lights by a County and Imposing a Lien
Under Section 280.003 Transportation Code, the commissioner’s court may impose a fee for the installation and maintenance of streetlights. The fee is included in the tax bill for each landowner benefited by the lights. The tax bill must separately state the amount of the fee. The county may impose a lien by filing a notice with county clerk that describes the fee and the amount of the fee and the legal description of the property and the name of the landowner. The lien is inferior to a previously recorded mortgage lien. The county may not foreclose the lien if it is the only lien on the property. 

Underwriting Issues: 

When the lien notice is recorded, it has priority over later filed documents. The term mortgage is not defined in this bill. Our belief is that any form of voluntary lien including a new loan that renews and extends a mortgage that exists prior to the creating of this street light lien would continue to have priority. Any other matter would be subordinate. However, if you are asked to insure without exception to this type of lien when refinancing any lien instrument other than a deed of trust, contact a Texas Underwriter.

As a legislative aside, HB 1050 passed in the 2001 legislative session and written by Stewart required all street-paving liens to include the name of the landowner, a legal description, and the amount of the lien. See bulletin TX000060 for a discussion of that bill. 
Effective date: 9-1-2015

WATER

HB 4112   Owner groundwater rights
HB 4112 amends current law relating to the rights of an owner of groundwater. HB 4112 amends the Water Code to establish that the groundwater ownership and rights recognized by the legislature entitle a landowner, including a landowner's lessees, heirs, or assigns, to have any right recognized under common law and not just the right to drill for and produce the groundwater below the surface of real property without causing waste or malicious drainage of other property or negligently causing subsidence. This is a codification of the Texas Supreme Court’s 2012 opinion in the EAA v. Day McDaniel case protecting the surface owner’s right in the groundwater underneath the surface owner’s property. 

What you should know:  Stewart does not currently insure water rights in Texas.
Effective date: 6-16-2015

HB 1221 Relating to Seller's Disclosures in Connection with Residential Real Property Subject to Groundwater Regulation.
The bill adds the following language to the normal Seller’s Disclosure Notice: Any portion of the property that is located in a groundwater conservation district, a subsidence district, or other special purpose district with the authority to regulate the withdrawal of groundwater.

What you should do: 

Make sure that the current form is provided with the sales contract. While we are not responsible for the accuracy or even the provision of such form, assuring that the form was provided should reduce the chances of the title company becoming involved in a dispute between the buyer and the seller. 
Effective date: 1-1-2016

HB 1665 Relating to Notice of Water Level Fluctuations to Purchasers of Real Property Adjoining an Impoundment of Water.
Sec. 5.019. NOTICE OF WATER LEVEL FLUCTUATIONS. (a) This section applies only to the sale of residential or commercial real property adjoining an impoundment of water, including a reservoir or lake, constructed and maintained under Chapter 11, Water Code, that has a storage capacity of at least 5,000 acre-feet at the impoundment's normal operating level.

(b)  A seller of real property shall give to the purchaser of the property a written notice in substantially the following form:

NOTICE OF WATER LEVEL FLUCTUATIONS

The water level of the impoundment of water adjoining the property at ______________ (street address and city) or described as ______________ (legal description) fluctuates for various reasons, including as a result of:

(1)  an entity lawfully exercising its right to use the water stored in the impoundment; or

(2)  drought or flood conditions.

(c)  The notice described by Subsection (b) shall be delivered by the seller to the purchaser on or before the effective date of an executory contract binding the purchaser to purchase the property.

(d)  If a contract is entered into without the seller providing the notice within the period required by Subsection (c), the purchaser may terminate the contract for any reason within seven days after the date the purchaser receives:

(1)  the notice described by Subsection (b) from the seller; or

(2)  information described by the notice under Subsection (b) from any other person.

(e)  After the date of the conveyance, the purchaser may bring an action for misrepresentation against the seller if the seller:

(1)  failed to provide the notice before the date of the conveyance; and

(2)  had actual knowledge that the water level described by Subsection (b) fluctuates for various reasons, including the reasons stated in Subsection (b).

What you should do:

Any time a survey shows that a property adjoins a lake or reservoir require that the surveyor note to size of the lake as more or less than 5000 acre feet and if 5000 acre feet or more, require the notice in substantially the statutory form. Title insurance does not cover fluctuations in water level. Additionally, you should not close until the 8th day after the buyer receives the notice.
Effective date: 9-1-2015

CORPORATE COMPLIANCE

SB 859 Registration requirements of Partnerships and Limited Liability Companies
SB 859 amends current law on annual registration requirements of partnerships and limited liability companies. It replaces the annual renewal-of-registration requirement for limited liability partnerships with a requirement of an annual report filing that contains the name of the partnership and the number of partners of the partnership, the secretary of state must provide to each registered limited liability by March 31 of each year, to a written notice to file  the annual report and applicable filing fee by June 1 of that year or risk termination of registration; it confirms that a partnership agreement or company agreement may contain an irrevocable power-of-attorney with respect to matters relating to the organization, internal affairs, or termination of a limited liability company; and removes confusing statutory provisions in Sections 101.351 and 152.802(g) of the Business Organizations Code relating to voting by the governing person and members of a limited company.   

What you should know:  The bill may affect the registration status of partnerships and limited liability companies owning/acquiring properties in Texas. Examiners should be aware of the annual report filing and fee payment process when examining the status of a partnership/LLC in the transaction.
Effective Date: 9-1-2015 (except for Sections 1, 4, 5, 8 and 10, which take effect on 1-1-2016) 

HOMESTEAD EXEMPTIONS

SB 833 Residential Homestead Property Exemptions for Military Owners
SB 833 amends the Tax Code to expand the circumstances under which a residence homestead property tax exemption continues when the owner temporarily stops occupying it as a principal residence due to absence caused by the owner's military service whether stationed outside or inside of the United States. Currently Texas property owners who are temporarily absent from the state because of military service outside of the United States are allowed to retain their homestead exemptions. No such protection was given where the owner is absent from the state of Texas because of military service inside the United States. SB 833 allows the homestead designation to continue for owners who are temporarily stationed away from their homestead, whether inside or outside the USA.

What you should know:  This expansion of the homestead tax exemption should be noted by title examiners and closers, as it affects homestead status of homeowners in active military service who are temporarily stationed away from their homestead, whether inside or outside the USA.
Effective Date: 6-19-2015

OTHER MATTERS

HB 40:  Preemption of Regulation of Oil and Gas Operations (fracking) As Exclusive Jurisdiction of the State, 

What it does:  the caption provides the general subject matter. See Bulletin TX2015002 for more details.
Effective Date: 5-18-2015

HB 230 Relating to Recovery of Attorney's Fees in Certain Civil Cases
What it does: does not authorize the recovery of attorney’s fees from the state, an agency or institution of the state, or a political subdivision of the state.

What you should do:  Simply be aware of the bill. 
Effective Date: 5-21-2015

SB 656 Amends the Health and Safety Code by adding Sec. 712.020 and 712.0255 relating to the modification or termination of the fund for perpetual care cemeteries.
Commissioner may petition a court to modify or terminate a fund if the income from the fund is inadequate to maintain, repair and care for perpetual care cemetery and if another source for providing additional contributions is unavailable. A court may not modify or terminate the fund without the consent of the commissioner. The fund may be distributed to a nonprofit corporation, municipality, county, or other appropriate person willing to accept, care, and maintain the perpetual care cemetery per Court order with Commissioner’s consent. Penalties can be imposed against a person. Amends Section 712.0444 as to what an emergency order must contain and when it takes effect.

What you should do: If you have a present or former perpetual care cemetery property, make sure any court orders distributing and transferring all or a portion of the assets in the fund or modifying or terminating the fund have been consented to by the commissioner. 
Effective Date: 9-1-2015

HB 281 Relating to a Limitation on the Expansion of Certain Landfills.
Sec. 361.1231.  LIMITATION ON EXPANSION OF CERTAIN LANDFILLS. 

(a) This section applies only to a Type I municipal solid waste landfill that is located: (1)  in a municipality that is located in a county with a population of more than 600,000; and (2)  not more than 500 feet from another municipality located in a county described by Subdivision (1). (b) Notwithstanding any other provision of this subchapter, the commission may not approve an application for the issuance, amendment, or renewal of a permit that seeks to expand the area or capacity of a landfill unless the governing body of each municipality described by Subsection (a) first approves by resolution or order the issuance, amendment, or renewal of the permit. (c)  The commission shall provide the members of the legislature who represent the district containing the landfill described in the permit with an opportunity to comment on the application and shall consider those comments in evaluating an application under this subchapter.

What you should know: This bill is bracketed to apply in very limited situations but continues the legislature’s run of interest in landfill legislation.

What you should do: Since the bill applies to the expansion of landfills, even if we are asked to insure the acquisition of the land to be so used, the process of obtaining a license is not a matter for title insurance. 
Effective date: 6-18-2015

HB 831 Relating to Disclosure of Home Mortgage Information to a Surviving Spouse
What you should know:  A lender or loan servicer has 30 days after a request by a surviving spouse to provide to them a copy of the note, the balance and other information and any other information provided to the servicer. The spouse must prove their status by death certificate and affidavit.

What you should do: Be aware that a surviving spouse has the right to obtain this information when the lender is reluctant or refuses to provide to you.
Effective date: 9-1-2015

HB 939 Relating to Unenforceable Restrictive Covenants Regarding Standby Electric Generators Affecting Residential Homes
Prohibits HOAs from filing restrictions prohibiting standby generators, but does allow certain limitations on locations, types, storage of fuel and installation.

What you should do: Take exception to any such restrictions.
Effective date: 6-19-2015

HB 1062 Relates to a Records Technology Fee in Certain Counties 

The commissioner’s court of a county that borders the United Mexican States and the Gulf of Mexico may adopt a $2 records technology and infrastructure fee as part of the county's annual budget.

Bill would only affect Cameron County. 
Effective date: 9-1-2015

HB 1289 Relating to the Acquisition and Sale of Unimproved Real Property by an Urban Land Bank
This bill expands a city’s ability to create an urban land bank demonstration program and to allow land to be sold for commercial development as well as residential use.

What you should do: Rely on the police power exclusion of the policy if called upon to insure such property.
Effective date:  6-17-2015

SB 572/HB 1357 Title Insurance Single Risk Limit Bill
This industry supported bill increases the amount of risk a single company can retain without coinsurance or reinsurance to ½ of its capital, surplus, and statutory premium reserves.  

See Bulletin TX2015001 for details.
Effective Date: 9-1-2015

HB 2044 Setback Lines for Junk Yards
SECTION 1. Section 396.022(a), Transportation Code, is amended to read as follows:

(a)  A junkyard or an automotive wrecking and salvage yard may not be located:

(1)  within 50 feet of the right-of-way of a public street or state highway; or

(2)  within 50 feet of the nearest property line of a residence.

Applies only to new junk yards or an automotive wrecking and salvage yard

What you should do:  Require a current survey and determine that the proper set back lines have been met.
Effective Date: 9-1-2015

HB 2491 Relating to Appointment of Escrow Officers
2652.1511 (e) Unless otherwise notified by the department, the escrow officer may act as an escrow officer for the appointing title insurance agent or direct operation after:

(1)  the second business day after the date the appointment is submitted to the department electronically; or

(2)  the eighth business day after the date the appointment is submitted to the department on a nonelectronic form.

SECTION 5. Section 2652.058, Insurance Code, is amended by adding Subsection (g) to read as follows:

(g)  Continuing education programs to satisfy the requirements of this section must be certified under Subchapter C, Chapter 4004. The department may enter into an agreement with an independent contractor as authorized by Section 4004.104 to certify and register the programs and providers of those programs

Sec. 2652.006. RECORD OF ESCROW OFFICERS; PUBLIC INFORMATION (b)  The department shall make available to the public from the records maintained under Subsection (a) or from other records of the department each escrow officer's name, license number, continuing education compliance status, and appointment history.

What you should know:  Although this bill places additional burdens on the Texas Insurance Department to perform in the licensing of escrow officers, TDI enforcement traditionally has been vigorous in prosecuting companies and individuals that have operated prior to receiving an escrow officer license. 
Effective date: 9-1-2015

SB 584: Relating to Indexing of Correction Instruments

The index entry for a correction instrument must contain the names of the grantors and grantees as stated in the correction instrument.

What you should know: This bill solves the problem that some county clerks cause by indexing a correction affidavit by the name of the affiant rather than the names of the parties to the original instrument.

What you should do: Make sure that any correction affidavit contains the names of the grantor, grantee, and lender.
Effective Date: 9-1-2015 

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