Underwriting Manual: TX
9.00
Incapacitateds And Mentally Incapacitated Persons
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9.00.1
In General
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| Incapacitateds and mentally incapacitated persons possess the legal capacity to acquire ownership of real estate as long as no specific obligations are attached to the acquisition thereof. However, incapacitateds and mentally incapacitated persons experience a disability that prevents them from executing a legal conveyance or encumbrance of title to real property. Obviously, this disability presents a hidden threat or risk to the insurance of land titles because the possibility of its existence can rarely be detected. |
| Although the terms “incapacitated” and “mentally incapacitated” are oftentimes used interchangeably, it is customary in real estate closing practice to utilize the latter in situations in which the condition is voluntary, transitory and has not been judicially determined. Texas law now uses the term incapacitated in either case. |
| A person, though actually incapacitated, may have never been legally disqualified to convey or encumber real property. Any finding or adjudication of incompetency is exclusively a judicial function. No person should be referred to as being an incapacitated unless that person has been judicially determined incapacitated. |
| If a person is adjudged to be incapacitated, the court will appoint a guardian, conservator, or committee for the estate and the person of the incapacitated person. However, guardians, conservators, or committees have no other powers except those specifically granted to them by statutes or by proper court orders, and they are not vested with any interest in the incapacitated’s property. |
9.00.2
Instruments Executed By Mentally Incapacitated
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| Transactions that may be considered voidable require a review of the following: |
| · | The fair consideration received by the conveyor or encumbrancer. |
| · | The bona fide condition of the purchaser or lender. |
| · | Whether the transaction is executory or nonexecutory. |
| · | That no disaffirmance of the instrument is made within a certain statutory period of time. |
| · | Whether there is a statute restricting the time allowed to persons under disabilities to assert their claims. |
| Texas law holds that a deed from an incapacitated person is voidable. The time in which to challenge such a deed is 4 years. |
9.00.3
Instruments Executed By Mentally Incapacitated
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| Any conveyance or encumbrance made by a person previously adjudicated incapacitated is void. |
| After a judicial adjudication of incompetency, the guardian, conservator, or committee appointed by the court can be empowered by the same court, under the pertinent statutory provisions, to execute any real estate transaction either affecting or in relation to the estate of the incapacitated. |
9.00.4
Parties Who Seem To Be Mentally Incapacitated A
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| Closers of real estate transactions must be aware of the fact that any instrument can be set aside upon proof that the grantor was mentally incapacitated at the time of its execution. |
| Because a grantor must possess adequate and sufficient mental capacity, no closing should be consummated if the grantor is found not to comprehend any of the following: |
| · | The purpose and nature of the transaction. |
| · | How the execution of the transaction will affect the grantor’s title. |
| · | The extent and value of the grantor’s property. |
| · | The full amount of consideration the grantor is receiving. |
| · | The manner in which the grantor intends to dispose of the property. |
| Although mental incompetency cannot always be objectively determinable, the following physical signs or characteristics must obligate the closer to cancel the closing of the transaction: |
| · | Amnesia or lack of full memory. |
| · | Drunkenness |
| · | Drug intoxication |
| · | Extreme senility |
| · | Undue influence exerted upon a party by another party. |
9.00.5
Vesting Of Title
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| An adjudication of incompetency has no effect whatsoever on the incapacitated’s ownership of real property. |
| Title to any property owned by an incapacitated person remains unaffected by a subsequent judicial finding of incompetency. The same applies to property acquired subsequently to the adjudication. |
| Any title to real property held by the adjudged incapacitated, either prior to adjudication or subsequently acquired, is never vested in or held by the court, guardian, conservator or committee. Title remains exclusively vested in the incapacitated, subject only to the pertinent statutory disabilities in regard to its conveyance or encumbrance. Nevertheless, a guardian or conservator may be empowered to deal with the incapacitated’s real property. |