By: Dutton H.B. No. 3993
A BILL TO BE ENTITLED
AN ACT
relating to lease-option contracts.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 5.062(a), Property Code, is amended to
read as follows:
(a) This subchapter applies only to a transaction involving
an executory contract for conveyance of real property used or to be
used as the purchaser's residence or as the residence of a person
related to the purchaser within the second degree by consanguinity
or affinity, as determined under Chapter 573, Government Code. For
purposes of this subchapter, and only for the purposes of this
subchapter,[:
[(1)] a lot measuring one acre or less is presumed to
be residential property[; and
[(2) an option to purchase real property that
includes or is combined or executed concurrently with a residential
lease agreement, together with the lease, is considered an
executory contract for conveyance of real property].
SECTION 2. Chapter 5, Property Code, is amended by adding
Subchapter G to read as follows:
SUBCHAPTER G. LEASE-OPTION CONTRACTS
Sec. 5.201. DEFINITIONS. In this subchapter:
(1) "Default" means:
(A) the failure to make a timely payment under a
lease-option contract; or
(B) a material breach of a term of the
lease-option contract.
(2) "Lease-option contract" means one or more
contracts that together provide an option to purchase residential
property to the purchaser who is also authorized to occupy the
property under a lease.
(3) "Purchaser" means a potential purchaser of
property under an option contract who is also authorized in a lease
agreement to occupy the property as a tenant.
(4) "Seller" means a potential seller of property
under an option contract who has also leased the property to the
purchaser.
Sec. 5.202. APPLICABILITY. (a) Unless otherwise excluded,
this subchapter applies only to a lease-option contract for real
property used or to be used as the purchaser's principal residence
or as the principal residence of a person related to the purchaser
within the second degree by consanguinity or affinity, as
determined under Chapter 573, Government Code.
(b) This subchapter does not apply to the following
transactions:
(1) the sale of state land;
(2) a sale of land by:
(A) the Veterans' Land Board;
(B) this state or a political subdivision of this
state; or
(C) an instrumentality, public corporation, or
other entity created to act on behalf of this state or a political
subdivision of this state, including an entity created under
Chapter 303, 392, or 394, Local Government Code; or
(3) a transaction involving a lease-option contract if
the purchaser of the property:
(A) is related to the seller of the property
within the second degree by consanguinity or affinity, as
determined under Chapter 573, Government Code; and
(B) has waived the applicability of this
subchapter in a written agreement.
Sec. 5.203. CONSTRUCTION WITH OTHER LAW. (a) Except as
provided by Subsection (b), the provisions of this subchapter do
not affect the rights or remedies provided by other law, including
Chapters 91 and 92.
(b) A seller may not:
(1) lock out or terminate the utility service of a
purchaser except:
(A) for bona fide repairs or construction; or
(B) in an emergency; or
(2) seize personal property unless the purchaser has
abandoned the premises.
(c) In addition to any other remedy available by law, a
seller who violates Subsection (b) is liable to the purchaser for:
(1) actual damages;
(2) a civil penalty of one month's rent plus $1,000;
and
(3) court costs and reasonable attorney's fees.
(d) To remedy a violation under this section, a purchaser
is entitled to injunctive relief and a writ of reentry under Section
92.009, if applicable.
Sec. 5.204. NOTICE. (a) Notice under Section 5.205 must be
in writing and must be delivered by regular and certified mail,
return receipt requested. The notice must be conspicuous and
printed in 14-point boldfaced type or 14-point uppercase
typewritten letters, and must include on a separate page the
statement:
NOTICE
YOU ARE NOT COMPLYING WITH THE TERMS OF THE CONTRACT TO BUY
YOUR PROPERTY. UNLESS YOU TAKE THE ACTION SPECIFIED IN THIS NOTICE
BY (date) THE SELLER HAS THE RIGHT TO TERMINATE YOUR LEASE-OPTION
CONTRACT AND TAKE POSSESSION OF THE PROPERTY.
(b) The notice must also:
(1) identify and explain the remedy the seller intends
to enforce;
(2) if the purchaser has failed to make a timely
payment, specify:
(A) the delinquent amount;
(B) any additional charges claimed, including
late charges; and
(C) the period to which the delinquency and
additional charges relate; and
(3) if the purchaser has failed to comply with a term
of the contract, identify the term violated and the action required
to cure the violation.
(c) Notice by mail is given when it is mailed to the
purchaser's residence by regular and certified mail, return receipt
requested. The affidavit of a person knowledgeable of the facts
indicating that notice was given is prima facie evidence of notice
in an action involving a subsequent bona fide purchaser for value if
the purchaser is not in possession of the real property and if the
stated time to avoid the forfeiture has expired. A bona fide
subsequent purchaser for value who relies on the affidavit under
this subsection shall take title free and clear of the contract.
Sec. 5.205. SELLER'S REMEDIES ON DEFAULT. A seller may
enforce the remedy of rescission or of forfeiture and acceleration
against a purchaser in default under a lease-option contract only
if:
(1) the seller notifies the purchaser of:
(A) the seller's intent to enforce a remedy under
this section; and
(B) the purchaser's right to cure the default
within the 30-day period described by Section 5.206; and
(2) the purchaser fails to cure the default within the
30-day period described by Section 5.206.
Sec. 5.206. RIGHT TO CURE DEFAULT. A purchaser in default
under a lease-option contract may avoid the forfeiture of the
option fee or the enforcement of a remedy described by Section 5.205
by complying with the terms of the contract on or before the 30th
day after the date notice is given under that section or the date
indicated in the notice, whichever is later.
Sec. 5.207. FOREIGN LANGUAGE REQUIREMENT. If the
negotiations that precede the execution of a lease-option contract
are conducted primarily in a language other than English, the
seller shall provide a copy in that language of all written
documents relating to the transaction, including the contract,
disclosure notices, annual accounting statements, and a notice of
default required by this subchapter.
Sec. 5.208. SELLER'S DISCLOSURE OF PROPERTY
CONDITION. (a) Not later than the fifth day before a lease-option
contract is signed by the purchaser, the seller shall provide the
purchaser with:
(1) a survey that was completed within the past year or
a plat of a current survey of the real property;
(2) a legible copy of any document, or a copy as it
appears in the official real property records, that describes an
encumbrance or other claim, including a restrictive covenant or
easement, that affects title to the real property; and
(3) a written notice attached to the contract
informing the purchaser of the condition of the property that must,
at a minimum, be executed by the seller and purchaser and read
substantially similar to the following:
WARNING
IF ANY OF THE ITEMS BELOW HAVE NOT BEEN CHECKED, YOU MAY NOT BE ABLE
TO LIVE ON THE PROPERTY OR BE ABLE TO OBTAIN CLEAR TITLE TO THE
PROPERTY.
SELLER'S DISCLOSURE NOTICE
CONCERNING THE PROPERTY AT (street address or legal description and
city)
THIS DOCUMENT STATES CERTAIN APPLICABLE FACTS ABOUT THE PROPERTY
YOU ARE CONSIDERING PURCHASING.
CHECK ALL THE ITEMS THAT ARE APPLICABLE OR TRUE:
_____ The property is in a recorded subdivision.
_____ The property has water service that provides potable water.
_____ The property has sewer service.
_____ The property has been approved by the appropriate municipal,
county, or state agency for installation of a septic system.
_____ The property has electric service.
_____ The property is not in a floodplain.
_____ The roads to the boundaries of the property are paved and
maintained by:
____ the seller;
____ the owner of the property on which the road exists;
____ the municipality;
____ the county; or
____ the state.
____ No individual or entity other than the seller:
(1) owns the property;
(2) has a claim of ownership to the property; or
(3) has an interest in the property.
____ No individual or entity has a lien filed against the property.
____ There are no restrictive covenants, easements, or other title
exceptions or encumbrances that prohibit construction of a house on
the property.
NOTICE: SELLER ADVISES PURCHASER TO:
(1) OBTAIN A TITLE ABSTRACT OR
TITLE COMMITMENT COVERING THE PROPERTY AND
HAVE THE ABSTRACT OR COMMITMENT REVIEWED BY
AN ATTORNEY BEFORE SIGNING A CONTRACT OF
THIS TYPE; AND
(2) PURCHASE AN OWNER'S POLICY
OF TITLE INSURANCE COVERING THE PROPERTY.
________________________________________________________________
(Date) (Signature of Seller)
________________________________________________________________
(Date) (Signature of Purchaser)
(b) If the property is not located in a recorded
subdivision, the seller shall provide the purchaser with a separate
disclosure form stating that utilities may not be available to the
property until the subdivision is recorded as required by law.
(c) If the seller advertises property for sale under a
lease-option contract, the advertisement must disclose information
regarding the availability of water, sewer, and electric service.
(d) The seller's failure to provide information required by
this section:
(1) is a false, misleading, or deceptive act or
practice within the meaning of Section 17.46, Business & Commerce
Code, and is actionable in a public or private suit brought under
Subchapter E, Chapter 17, Business & Commerce Code; and
(2) entitles the purchaser to cancel and rescind the
lease-option contract and receive a full refund of all payments
made to the seller.
(e) Subsection (d) does not limit the purchaser's remedy
against the seller for other false, misleading, or deceptive acts
or practices actionable in a suit brought under Subchapter E,
Chapter 17, Business & Commerce Code.
Sec. 5.209. SELLER'S DISCLOSURE OF LIENS, APPRAISED VALUE,
TAX PAYMENTS, AND INSURANCE COVERAGE. (a) Not later than the
fifth day before a lease-option contract is signed by the
purchaser, the seller shall provide the purchaser with:
(1) a statement disclosing each recorded lien that is
filed against the property including:
(A) the name and address of the lienholder;
(B) the amount of the lien;
(C) the payments required to be made on the debt
secured by the lien;
(D) the name of the account holder; and
(E) whether or not the lienholder has consented
to the purchaser's ownership of the property;
(2) a statement disclosing the appraised value of the
property according to the last valuation of the tax appraisal
district with a copy of the last appraisal performed on the property
attached;
(3) a tax certificate from the collector for each
taxing unit that collects taxes due on the property as provided by
Section 31.08, Tax Code; and
(4) a legible copy of any insurance policy, binder, or
other evidence of coverage relating to the property that indicates:
(A) the name of the insurer and the insured;
(B) a description of the property insured; and
(C) the amount for which the property is insured.
(b) The seller's failure to provide information required by
this section:
(1) is a false, misleading, or deceptive act or
practice within the meaning of Section 17.46, Business & Commerce
Code, and is actionable in a public or private suit brought under
Subchapter E, Chapter 17, Business & Commerce Code; and
(2) entitles the purchaser to cancel and rescind the
lease-option contract and receive a full refund of all payments
made to the seller.
(c) Subsection (b) does not limit the purchaser's remedy
against the seller for other false, misleading, or deceptive acts
or practices actionable in a suit brought under Subchapter E,
Chapter 17, Business & Commerce Code.
Sec. 5.210. ORAL AGREEMENTS PROHIBITED. (a) A
lease-option contract is not enforceable unless the contract is in
writing and signed by the party to be bound or by that party's
authorized representative.
(b) The rights and obligations of the parties to a contract
are determined solely from the written contract, and any prior oral
agreements between the parties are superseded by and merged into
the contract.
(c) A lease-option contract may not be varied by any oral
agreements or discussions that occur before or contemporaneously
with the execution of the contract.
(d) The seller shall include in a separate document or in a
provision of the contract a statement printed in 14-point boldfaced
type or 14-point uppercase typewritten letters that reads
substantially similar to the following:
THIS LEASE-OPTION CONTRACT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE SELLER AND PURCHASER AND MAY NOT
BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
________________________________________________________________
(Date) (Signature of Seller)
________________________________________________________________
(Date) (Signature of Purchaser)
(e) The seller's failure to provide the notice required by
this section:
(1) is a false, misleading, or deceptive act or
practice within the meaning of Section 17.46, Business & Commerce
Code, and is actionable in a public or private suit brought under
Subchapter E, Chapter 17, Business & Commerce Code; and
(2) entitles the purchaser to cancel and rescind the
lease-option contract and receive a full refund of all payments
made to the seller.
(f) Subsection (e) does not limit the purchaser's remedy
against the seller for other false, misleading, or deceptive acts
or practices actionable in a suit brought under Subchapter E,
Chapter 17, Business & Commerce Code.
Sec. 5.211. CONTRACT TERMS, CERTAIN WAIVERS
PROHIBITED. (a) A seller may not include as a term of the
lease-option contract a provision that:
(1) imposes a late-payment fee that exceeds eight
percent of the monthly payment under the contract;
(2) imposes a penalty, charge, or fee if the purchaser
elects to pay the entire amount due under the contract before the
scheduled payment date under the contract;
(3) terminates the lease-option contract or forfeits
the option payment for a late payment;
(4) increases the purchase price, imposes a penalty,
charge, or fee of any type, or otherwise penalizes the purchaser
leasing property for requesting repairs or exercising any other
right under Chapter 92;
(5) permits the option to purchase to be exercised
after the third anniversary of the execution of the lease-option
contract; or
(6) provides for a purchase price that exceeds the
appraised value of the property according to the last valuation of
the tax appraisal district by more than five percent for each year
of the lease-option contract.
(b) A provision of the lease-option contract that purports
to waive a right or exempt a party from a liability or duty under
this subchapter is void. In addition to any other remedy provided
by law, a landlord who knowingly violates this subsection by
contracting with a purchaser to waive a right of the purchaser or a
liability or duty by the seller under this subchapter is liable to
the purchaser for:
(1) actual damages;
(2) a civil penalty of one month's rent plus $2,000;
and
(3) reasonable attorney's fees.
(c) A violation of this subchapter is actionable regardless
of whether a purchaser pays the improper penalty, charge, or fee.
(d) A lease-option contract must include each provision of
this subchapter unless the seller provides the purchaser a copy of
this subchapter at the execution of the lease-option contract.
Sec. 5.212. PURCHASER'S RIGHT TO CANCEL CONTRACT WITHOUT
CAUSE. (a) In addition to other rights or remedies provided by
law, the purchaser may cancel and rescind a lease-option contract
for any reason by sending by regular or certified mail, return
receipt requested, or by delivering in person a signed, written
notice of cancellation to the seller not later than the 14th day
after the date of the contract or the date the option fee is
tendered, whichever is later.
(b) If the purchaser cancels the contract as provided by
Subsection (a), the seller shall, not later than the 10th day after
the date the seller receives the purchaser's notice of
cancellation:
(1) return to the purchaser the executed contract and
any property exchanged or payments made by the purchaser under the
contract; and
(2) cancel any security interest arising out of the
contract.
(c) The seller shall include in immediate proximity to the
space reserved in the lease-option contract for the purchaser's
signature a statement printed in 14-point boldfaced type or
14-point uppercase typewritten letters that reads substantially
similar to the following:
YOU, THE PURCHASER, MAY CANCEL THIS CONTRACT AT ANY TIME DURING THE
NEXT TWO WEEKS OR THE TWO WEEKS AFTER YOU PAY THE OPTION FEE,
WHICHEVER ENDS LATER. THE DEADLINE FOR CANCELING THE CONTRACT IS
(date) UNLESS YOU PAY THE OPTION FEE AFTER THE DATE ON WHICH THIS
CONTRACT IS ENTERED INTO, IN WHICH CASE THE DEADLINE FOR
CANCELLATION IS THE 14TH DAY AFTER THE DATE THAT PAYMENT IS MADE.
THE ATTACHED NOTICE OF CANCELLATION EXPLAINS THIS RIGHT.
(d) The seller shall provide a notice of cancellation form
to the purchaser at the time the purchaser signs the lease-option
contract that is printed in 14-point boldfaced type or 14-point
uppercase typewritten letters and that reads substantially similar
to the following:
(date of contract)
NOTICE OF CANCELLATION
YOU MAY CANCEL THE LEASE-OPTION CONTRACT FOR ANY REASON
WITHOUT ANY PENALTY OR OBLIGATION BY (date) UNLESS YOU PAY THE
OPTION FEE AFTER THE DATE ON WHICH THIS CONTRACT IS ENTERED INTO, IN
WHICH CASE THE DEADLINE FOR CANCELLATION IS THE 14TH DAY AFTER THE
DATE THAT PAYMENT IS MADE.
(1) YOU MUST SEND BY REGULAR OR CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, OR DELIVER IN PERSON A SIGNED AND DATED COPY OF
THIS CANCELLATION NOTICE OR ANY OTHER WRITTEN NOTICE TO (Name of
Seller) AT (Seller's Address) BY (date) UNLESS YOU PAY THE OPTION
FEE AFTER THE DATE ON WHICH YOU ENTERED INTO THE LEASE-OPTION
CONTRACT, IN WHICH CASE THE LAST DAY TO SEND OR DELIVER NOTICE IS
THE 14TH DAY AFTER THE DATE THAT PAYMENT IS MADE.
(2) THE SELLER SHALL, NOT LATER THAN THE 10TH DAY AFTER
THE DATE THE SELLER RECEIVES YOUR CANCELLATION NOTICE:
(A) RETURN THE EXECUTED CONTRACT AND ANY PROPERTY
EXCHANGED OR PAYMENTS MADE BY YOU UNDER THE CONTRACT; AND
(B) CANCEL ANY SECURITY INTEREST ARISING OUT OF
THE CONTRACT.
I ACKNOWLEDGE RECEIPT OF THIS NOTICE OF CANCELLATION FORM.
________________________________________________________________
(Date) (Purchaser's Signature)
I HEREBY CANCEL THIS CONTRACT.
________________________________________________________________
(Date) (Purchaser's Signature)
(e) The seller may not request the purchaser to sign a
waiver of receipt of the notice of cancellation form required by
this section.
Sec. 5.213. RECORDING REQUIREMENTS. (a) Except as
provided by Subsection (b), the seller shall record the
lease-option contract, including the attached disclosure statement
required by Section 5.208, as prescribed by Title 3 on or before the
30th day after the date the contract is executed.
(b) Section 12.002(c) does not apply to a lease-option
contract filed for record under this section.
(c) If the lease-option contract is terminated for any
reason, the seller shall record the instrument that terminates the
contract.
(d) The county clerk shall collect the filing fee prescribed
by Section 118.011, Local Government Code.
Sec. 5.214. ANNUAL ACCOUNTING STATEMENT. (a) The seller
shall provide the purchaser with an annual statement in January of
each year for the term of the lease-option contract. If the seller
mails the statement to the purchaser, the statement must be
postmarked not later than January 31.
(b) The statement must include the following information:
(1) the amount paid under the contract;
(2) the remaining amount owed under the contract;
(3) the number of payments remaining under the
contract;
(4) the amounts paid to taxing authorities on the
purchaser's behalf if collected by the seller and any amount owing
to the taxing authorities;
(5) the amounts paid to insure the property if
collected by the seller;
(6) if the property has been damaged and the seller has
received insurance proceeds, an accounting of the proceeds applied
to the property; and
(7) if the seller has changed insurance coverage, a
legible copy of the current policy, binder, or other evidence that
satisfies the requirements of Section 5.209(a)(4).
(c) A seller who violates this section is liable to the
purchaser for:
(1) actual damages;
(2) a civil penalty in the amount of $50 for each day
the seller fails to provide the purchaser the complete statement as
required under Subsection (a);
(3) an additional civil penalty in the amount of $25
for each day after the 60th day after the date on which the
provision of the statement as required under Subsection (a) becomes
overdue; and
(4) court costs and reasonable attorney's fees.
(d) A purchaser is not required to demonstrate actual harm
to be entitled to recover under this section.
Sec. 5.215. DISPOSITION OF INSURANCE PROCEEDS. (a) The
named insured under an insurance policy, binder, or other coverage
relating to property subject to a lease-option contract shall
inform the insurer, not later than the 10th day after the date the
coverage is obtained or the contract executed, whichever is later,
of:
(1) the lease-option contract for conveyance and the
term of the contract; and
(2) the name and address of the other party to the
contract.
(b) An insurer who disburses proceeds under an insurance
policy, binder, or other coverage relating to property that has
been damaged shall issue the proceeds jointly to the purchaser and
the seller designated in the contract.
(c) If proceeds under an insurance policy, binder, or other
coverage are disbursed, the purchaser and seller shall ensure that
the proceeds are used to repair, remedy, or improve the condition on
the property.
(d) The failure of a seller or purchaser to comply with
Subsection (c) is a false, misleading, or deceptive act or practice
within the meaning of Section 17.46, Business & Commerce Code, and
is actionable in a public or private suit brought under Subchapter
E, Chapter 17, Business & Commerce Code.
(e) Subsection (d) does not limit either party's remedy for
other false, misleading, or deceptive acts or practices actionable
in a suit brought under Subchapter E, Chapter 17, Business &
Commerce Code.
Sec. 5.216. TITLE TRANSFER. (a) The seller shall transfer
recorded, legal title of the property covered by the lease-option
contract to the purchaser on receiving the purchaser's final
payment due under the contract. The title transferred may be
subject only to a lien described by Section 5.220.
(b) In addition to any other remedy provided by law, a
seller who violates Subsection (a) is liable to the purchaser for:
(1) a civil penalty of:
(A) $250 a day for each day the seller fails to
transfer the title to the purchaser during the period that begins
the 31st day and ends the 90th day after the date the seller
receives the purchaser's final payment due under the contract; and
(B) $500 a day for each day the seller fails to
transfer title to the purchaser after the 90th day after the date
the seller receives the purchaser's final payment due under the
contract; and
(2) court costs and reasonable attorney's fees.
(c) If a person to whom a seller's property interest passes
by will or intestate succession is required to obtain a court order
to clarify the person's status as an heir or to clarify the status
of the seller or the property before the person may convey good and
indefeasible title to the property, the court in which the action is
pending may waive payment of the liquidated damages and attorney's
fees under Subsection (b) if the court finds that the person is
pursuing the action to establish good and indefeasible title with
reasonable diligence.
(d) In this section, "seller" includes a successor,
assignee, personal representative, executor, or administrator of
the seller.
Sec. 5.217. LIABILITY FOR DISCLOSURES. For purposes of
this subchapter, a disclosure required by this subchapter that is
made by a seller's agent is a disclosure made by the seller.
Sec. 5.218. RIGHT TO CANCEL CONTRACT FOR IMPROPER
PLATTING. (a) Except as provided by Subsection (c), in addition to
other rights or remedies provided by law, the purchaser may cancel
and rescind a lease-option contract at any time if the purchaser
learns that the seller has not properly subdivided or platted the
property that is covered by the contract in accordance with state
and local law. A purchaser canceling and rescinding a contract
under this subsection must:
(1) deliver a signed, written notice of the
cancellation and rescission to the seller in person; or
(2) send a signed, written notice of the cancellation
and rescission to the seller by regular or certified mail, return
receipt requested.
(b) If the purchaser cancels the contract as provided under
Subsection (a), the seller, not later than the 30th day after the
date the seller receives the notice of cancellation and rescission,
shall:
(1) deliver in person or send by regular and certified
mail, return receipt requested, to the purchaser a signed, written
notice that the seller intends to properly subdivide or plat the
property; or
(2) return to the purchaser all payments of any kind
made to the seller under the contract, including reimbursement to
the purchaser for any payments the purchaser made to a taxing
authority for the property and the value of any improvements made to
the property by the purchaser, minus the fair market rental value of
the property during the term of the purchaser's occupancy.
(c) A purchaser may not exercise the purchaser's right to
cancel and rescind a lease-option contract under this section if,
on or before the 90th day after the date the purchaser receives the
seller's notice under Subsection (b)(1), the seller:
(1) properly subdivides or plats the property; and
(2) delivers in person or sends by regular and
certified mail, return receipt requested, to the purchaser a
signed, written notice providing evidence that the property has
been subdivided or platted in accordance with state and local law.
(d) The seller may not terminate the purchaser's possession
of the property covered by the contract being canceled and
rescinded before the seller properly plats or subdivides the
property and pays the purchaser any money to which the purchaser is
entitled under Subsection (b).
Sec. 5.219. RIGHT TO DEDUCT. (a) Except as provided by
Subsection (b), if a seller is liable to a purchaser under this
subchapter, the purchaser, without taking judicial action, may
deduct the amount owed to the purchaser by the seller from any
amounts owed to the seller by the purchaser under the terms of a
lease-option contract.
(b) A purchaser may not make a deduction under this section
unless, before making the deduction, the purchaser:
(1) notifies the seller in writing of the amount for
which the seller is liable and specifies the date after which the
purchaser will make a deduction under this section if the seller
does not pay the specified amount; and
(2) if the deduction is for an expenditure made by the
purchaser in connection with the property, provides the seller with
adequate documentation of the amount and purpose of the
expenditure.
(c) The seller may recover from the purchaser any improper
reduction plus court costs and attorney's fees by taking judicial
action.
Sec. 5.220. MAINTENANCE OF TITLE. (a) A potential seller
may enter into a lease-option contract with a potential purchaser
only if the seller maintains the property free from any liens other
than liens described by this section.
(b) Except as provided by this section, a seller, or the
seller's heirs or assigns, must maintain title to the property
covered by the lease-option contract free from any liens against
the property covered by the lease-option contract for the entire
duration of the contract. This subsection does not apply to a lien
placed on the property that is:
(1) placed on the property because of the conduct of
the purchaser; or
(2) described in a title commitment for the leasehold
estate provided by the seller to the purchaser under Subsection (c)
before the lease-option contract is executed that:
(A) is placed on the property by the seller
before the date the lease-option contract is executed in exchange
for a loan that is secured only by the property that is the subject
of the lease-option contract;
(B) is attached only to the property sold to the
purchaser under the contract; and
(C) secures in its aggregate with all liens or
other indebtedness an amount that at no time is or will be greater
than the amount of the total outstanding balance owed by the
purchaser under the lease-option contract.
(c) The seller must:
(1) provide to the purchaser at the seller's sole
expense at the time the lease-option contract is executed a current
title policy for the leasehold estate; and
(2) file a memorandum of the lease-option contract for
record in the official real property records of the county in which
the property is located.
(d) A violation of this section:
(1) is a false, misleading, or deceptive act or
practice within the meaning of Section 17.46, Business & Commerce
Code, and is actionable in a public or private suit brought under
Subchapter E, Chapter 17, Business & Commerce Code; and
(2) in addition to other rights or remedies provided
by law, entitles the purchaser to cancel and rescind the
lease-option contract and receive from the seller:
(A) the return of all payments of any kind made to
the seller by the purchaser under the contract; and
(B) reimbursement for the costs of any
improvements made to the property by the purchaser.
(e) A seller is not liable under this section if:
(1) a lien is placed on the property by a person other
than the seller; and
(2) not later than the 30th day after the date the
seller receives notice of the lien, the seller:
(A) takes all steps necessary to remove the lien;
and
(B) has the lien removed from the property.
SECTION 3. Sections 5.062(e), (f), and (g), Property Code,
are repealed.
SECTION 4. The change in law made by this Act applies only
to a lease-option contract entered into on or after the effective
date of this Act. A contract entered into before the effective date
of this Act is governed by the law in effect immediately before that
date, and that law is continued in effect for that purpose.
SECTION 5. This Act takes effect September 1, 2009.