By: Darby, Geren, Anderson of Dallas, Pitts, H.B. No. 8
Menendez, et al.
A BILL TO BE ENTITLED
AN ACT
relating to prohibiting certain private transfer fees and the
preservation of private real property rights; providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 5, Property Code, is amended by adding
Subchapter G to read as follows:
SUBCHAPTER G. CERTAIN PRIVATE TRANSFER FEES PROHIBITED;
PRESERVATION OF PRIVATE REAL PROPERTY RIGHTS
Sec. 5.201. DEFINITIONS. In this subchapter:
(1) "Encumbered property" means all property,
including the property of a subsequent purchaser, subject to the
same private transfer fee obligation.
(2) "Lender" means a lending institution, including a
bank, trust company, banking association, savings and loan
association, mortgage company, investment bank, credit union, life
insurance company, and governmental agency, that customarily
provides financing or an affiliate of a lending institution.
(3) "Payee" means a person who claims the right to
receive or collect a private transfer fee payable under a private
transfer fee obligation and who may or may not have a pecuniary
interest in the obligation.
(4) "Private transfer fee" means an amount of money,
regardless of the method of determining the amount, that is payable
on the transfer of an interest in real property or payable for a
right to make or accept a transfer.
(5) "Private transfer fee obligation" means an
obligation to pay a private transfer fee created under:
(A) a declaration or other covenant recorded in
the real property records in the county in which the property
subject to the private transfer fee obligation is located;
(B) a contractual agreement or promise; or
(C) an unrecorded contractual agreement or
promise.
(6) "Subsequent owner" means a person who acquires
real property by transfer from a person other than the person who is
the seller of the property on the date the private transfer fee
obligation is created.
(7) "Subsequent purchaser" means a person who
purchases real property from a person other than the person who is
the seller on the date the private transfer fee obligation is
created. The term includes a lender who provides a mortgage loan to
a subsequent purchaser to purchase the property.
(8) "Transfer" means the sale, gift, conveyance,
assignment, inheritance, or other transfer of an ownership interest
in real property.
Sec. 5.202. CERTAIN PRIVATE TRANSFER FEE OBLIGATIONS VOID.
(a) Except as provided by this subchapter, a private transfer fee
obligation created on or after the effective date of this
subchapter is not binding or enforceable against a subsequent owner
or subsequent purchaser of an interest in real property and is void.
(b) For purposes of this subchapter, the following payments
are not considered private transfer fee obligations:
(1) consideration paid by a purchaser to a seller for
an interest in real property transferred, including, as applicable,
a mineral interest transferred, including additional consideration
paid to a seller for the property's appreciation, development, or
sale after the interest in the property has been transferred to the
purchaser, if the additional consideration is paid only once and
that payment does not bind successors in interest to the property to
any private transfer fee obligation;
(2) a commission paid to a licensed real estate broker
under a written agreement between a seller or purchaser and the
broker, including an additional commission for the property's
appreciation, development, or sale after the interest in property
is transferred to the purchaser;
(3) interest, a fee, a charge, or another type of
payment to a lender under a loan secured by a mortgage on the
property, including:
(A) a fee payable for the lender's consent to an
assumption of the loan or transfer of the property subject to the
mortgage;
(B) a fee or charge payable for an estoppel
letter or certificate;
(C) a shared appreciation interest or profit
participation; or
(D) other consideration payable in connection
with the loan;
(4) rent, reimbursement, a fee, a charge, or another
type of payment to a lessor under a lease, including a fee for
consent to an assignment, sublease, encumbrance, or transfer of a
lease;
(5) consideration paid to the holder of an option to
purchase an interest in property, or to the holder of a right of
first refusal or first offer to purchase an interest in property,
for waiving, releasing, or not exercising the option or right when
the property is transferred to another person;
(6) a fee payable to or imposed by a governmental
entity in connection with recording the transfer of the property;
(7) dues, a fee, a charge, an assessment, a fine, a
contribution, or another type of payment under a declaration or
other covenant or under law, including a fee or charge payable for a
change of ownership entered in the records of an association to
which this subdivision applies or an estoppel letter or resale
certificate issued under Section 207.003 by an association to which
this subdivision applies or the person identified under Section
209.004(a)(6), provided that no portion of the fee or charge is
required to be passed through to a third party designated or
identifiable in the declaration or other covenant or law or in a
document referenced in the declaration or other covenant or law,
unless paid to:
(A) an association as defined by Section 82.003
or 221.002 or the person or entity managing the association as
provided by Section 82.116(a)(5) or 221.032(b)(11), as applicable;
(B) a property owners' association as defined by
Section 202.001 or 209.002 or the person or entity described by
Section 209.004(a)(6); or
(C) a property owners' association as defined by
Section 202.001 that does not require an owner of property governed
by the association to be a member of the association or the person
or entity described by Section 209.004(a)(6);
(8) dues, a fee, a charge, an assessment, a fine, a
contribution, or another type of payment for the transfer of a club
membership related to the property;
(9) dues, a fee, a charge, an assessment, a fine, a
contribution, or another type of payment paid to an organization
exempt from federal taxation under Section 501(c)(3) or 501(c)(4),
Internal Revenue Code of 1986, only if the organization uses the
payments to directly benefit the encumbered property by:
(A) supporting or maintaining only the
encumbered property;
(B) constructing or repairing improvements only
to the encumbered property; or
(C) providing activities or infrastructure to
support quality of life, including cultural, educational,
charitable, recreational, environmental, and conservation
activities and infrastructure, that directly benefit the
encumbered property; or
(10) a fee payable to or imposed by the Veterans' Land
Board for consent to an assumption or transfer of a contract of sale
and purchase.
(c) The benefit described by Subsection (b)(9)(C) may
collaterally benefit a community composed of:
(1) property that is adjacent to the encumbered
property; or
(2) property a boundary of which is not more than 1,000
yards from a boundary of the encumbered property.
(d) Notwithstanding Subsection (c), an organization may
provide a direct benefit under Subsection (b)(9) if:
(1) the organization provides to the general public
activities or infrastructure described by Subsection (b)(9)(C);
(2) the provision of activities or infrastructure
substantially benefits the encumbered property; and
(3) the governing body of the organization:
(A) is controlled by owners of the encumbered
property; and
(B) approves payments for activities or
infrastructure at least annually.
(e) An organization may provide activities and
infrastructure described by Subsection (b)(9)(C) to another
organization exempt from federal taxation under Section 501(c)(3)
or 501(c)(4), Internal Revenue Code of 1986, at no charge for de
minimis usage without violating the requirements of this section.
Sec. 5.203. NOTICE REQUIREMENTS FOR CONTINUATION OF
EXISTING PRIVATE TRANSFER FEE OBLIGATIONS. (a) A person who
receives a private transfer fee under a private transfer fee
obligation created before the effective date of this subchapter
must, on or before January 31, 2012, file for record a "Notice of
Private Transfer Fee Obligation" as provided by this section in the
real property records of each county in which the property is
located.
(b) Multiple payees of a single private transfer fee under a
private transfer fee obligation must designate one payee as the
payee of record for the fee.
(c) A notice under Subsection (a) must:
(1) be printed in at least 14-point boldface type;
(2) state the amount of the private transfer fee and
the method of determination, if applicable;
(3) state the date or any circumstance under which the
private transfer fee obligation expires, if any;
(4) state the purpose for which the money from the
private transfer fee obligation will be used;
(5) notwithstanding Subsection (b), state the name of
each payee and each payee's contact information;
(6) state the name and address of the payee of record
to whom the payment of the fee must be sent;
(7) include the acknowledged signature of each payee
or authorized representative of each payee; and
(8) state the legal description of the property
subject to the private transfer fee obligation.
(d) A person required to file a notice under this section
shall:
(1) refile the notice described by this section not
earlier than the 30th day before the third anniversary of the
original filing date described by Subsection (a) and within a
similar 30-day period every third year thereafter; and
(2) amend the notice to reflect any change in the name
or address of any payee included in the notice not later than the
30th day after the date the change occurs.
(e) A person who amends a notice under Subsection (d)(2)
must include:
(1) the recording information of the original notice
filed as required by this section; and
(2) the legal description of the property subject to
the private transfer fee obligation.
(f) If a person required to file a notice under this section
fails to comply with this section:
(1) payment of the private transfer fee may not be a
requirement for the conveyance of an interest in the property to a
purchaser;
(2) the property is not subject to further obligation
under the private transfer fee obligation; and
(3) the private transfer fee obligation is void.
Sec. 5.204. ADDITIONAL COMPLIANCE REQUIREMENT: TIMELY
ACCEPTANCE OF FEES PAID UNDER EXISTING PRIVATE TRANSFER FEE
OBLIGATIONS. (a) The payee of record on the date a private
transfer fee is paid under a private transfer fee obligation
subject to Section 5.203 must accept the payment on or before the
30th day after the date the payment is tendered to the payee.
(b) If the payee of record fails to comply with Subsection
(a):
(1) the payment must be returned to the remitter;
(2) payment of the private transfer fee may not be a
requirement for the conveyance of an interest in the property to a
purchaser;
(3) the property is not subject to further obligation
under the private transfer fee obligation; and
(4) the private transfer fee obligation is void.
Sec. 5.205. DISCLOSURE OF EXISTING TRANSFER FEE OBLIGATION
REQUIRED IN CONTRACT FOR SALE. A seller of real property that may
be subject to a private transfer fee obligation shall provide
written notice to a potential purchaser stating that the obligation
may be governed by this subchapter.
Sec. 5.206. WAIVER VOID. A provision that purports to waive
a purchaser's rights under this subchapter is void.
Sec. 5.207. LIABILITY FOR IMPOSING PRIVATE TRANSFER FEE
OBLIGATION. A person who imposes or enters into an agreement
imposing a private transfer fee obligation in the person's favor in
violation of this subchapter is liable for:
(1) damages resulting from the imposition of the
private transfer fee obligation, including the amount of any
private transfer fee paid; and
(2) attorney's fees, expenses, and costs incurred in
an action to recover the private transfer fee paid or to quiet title
to the real property.
Sec. 5.208. INJUNCTIVE OR DECLARATORY RELIEF; PROVIDING
PENALTIES. (a) The attorney general may institute an action for
injunctive or declaratory relief to restrain a violation of this
subchapter.
(b) In addition to instituting an action for injunctive or
declaratory relief under Subsection (a), the attorney general may
institute an action for civil penalties against a payee for a
violation of this chapter. Except as provided by Subsection (c), a
civil penalty assessed under this section may not exceed an amount
equal to two times the amount of the private transfer fee charged or
collected by the payee in violation of this subchapter.
(c) If the court in which an action under Subsection (b) is
pending finds that a payee violated this subchapter with a
frequency that constitutes a pattern or practice, the court may
assess a civil penalty not to exceed $250,000.
(d) The comptroller shall deposit to the credit of the
general revenue fund all money collected under this section.
Sec. 5.209. DECEPTIVE TRADE PRACTICE. A person commits a
false, misleading, or deceptive act or practice within the meaning
of Section 17.46, Business & Commerce Code, by violating this
subchapter.
Sec. 5.210. PROPERTY OWNERS' ASSOCIATION COVENANTS
RELATING TO PRIVATE TRANSFER FEE OBLIGATIONS. (a) In this section:
(1) "Dedicatory instrument," "property owners'
association," and "restrictive covenant" have the meanings
assigned by Section 202.001.
(2) "Development period" means a period stated in a
dedicatory instrument during which a declarant reserves a right to:
(A) facilitate the development, construction,
and marketing of a subdivision; and
(B) direct the size, shape, and composition of
the subdivision.
(b) A restrictive covenant requiring a private transfer fee
obligation is void, unless the covenant is amended in accordance
with Subsections (c) and (d), if the covenant does not comply with a
rule or regulation regarding qualification of subdivision property
for an insured or guaranteed mortgage loan that is adopted by the
United States Department of Housing and Urban Development, Consumer
Financial Protection Bureau, Federal Housing Finance Agency,
United States Department of Veterans Affairs, Texas Veterans' Land
Board, or other federal or state agency, as applicable.
(c) A restrictive covenant requiring a private transfer fee
obligation may be amended to comply with a rule or regulation
described by Subsection (b) by:
(1) a developer or builder during the development
period; or
(2) the governing body of a property owners'
association.
(d) An amendment under Subsection (c) must:
(1) specifically reference this section;
(2) indicate that the amendment is adopted under
authority of this section; and
(3) be filed in the real property records of the county
in which the property is located.
SECTION 2. Section 17.46(b), Business & Commerce Code, is
amended to read as follows:
(b) Except as provided in Subsection (d) [of this section],
the term "false, misleading, or deceptive acts or practices"
includes, but is not limited to, the following acts:
(1) passing off goods or services as those of another;
(2) causing confusion or misunderstanding as to the
source, sponsorship, approval, or certification of goods or
services;
(3) causing confusion or misunderstanding as to
affiliation, connection, or association with, or certification by,
another;
(4) using deceptive representations or designations
of geographic origin in connection with goods or services;
(5) representing that goods or services have
sponsorship, approval, characteristics, ingredients, uses,
benefits, or quantities which they do not have or that a person has
a sponsorship, approval, status, affiliation, or connection which
he does not;
(6) representing that goods are original or new if
they are deteriorated, reconditioned, reclaimed, used, or
secondhand;
(7) representing that goods or services are of a
particular standard, quality, or grade, or that goods are of a
particular style or model, if they are of another;
(8) disparaging the goods, services, or business of
another by false or misleading representation of facts;
(9) advertising goods or services with intent not to
sell them as advertised;
(10) advertising goods or services with intent not to
supply a reasonable expectable public demand, unless the
advertisements disclosed a limitation of quantity;
(11) making false or misleading statements of fact
concerning the reasons for, existence of, or amount of price
reductions;
(12) representing that an agreement confers or
involves rights, remedies, or obligations which it does not have or
involve, or which are prohibited by law;
(13) knowingly making false or misleading statements
of fact concerning the need for parts, replacement, or repair
service;
(14) misrepresenting the authority of a salesman,
representative or agent to negotiate the final terms of a consumer
transaction;
(15) basing a charge for the repair of any item in
whole or in part on a guaranty or warranty instead of on the value of
the actual repairs made or work to be performed on the item without
stating separately the charges for the work and the charge for the
warranty or guaranty, if any;
(16) disconnecting, turning back, or resetting the
odometer of any motor vehicle so as to reduce the number of miles
indicated on the odometer gauge;
(17) advertising of any sale by fraudulently
representing that a person is going out of business;
(18) advertising, selling, or distributing a card
which purports to be a prescription drug identification card issued
under Section 4151.152, Insurance Code, in accordance with rules
adopted by the commissioner of insurance, which offers a discount
on the purchase of health care goods or services from a third party
provider, and which is not evidence of insurance coverage, unless:
(A) the discount is authorized under an agreement
between the seller of the card and the provider of those goods and
services or the discount or card is offered to members of the
seller;
(B) the seller does not represent that the card
provides insurance coverage of any kind; and
(C) the discount is not false, misleading, or
deceptive;
(19) using or employing a chain referral sales plan in
connection with the sale or offer to sell of goods, merchandise, or
anything of value, which uses the sales technique, plan,
arrangement, or agreement in which the buyer or prospective buyer
is offered the opportunity to purchase merchandise or goods and in
connection with the purchase receives the seller's promise or
representation that the buyer shall have the right to receive
compensation or consideration in any form for furnishing to the
seller the names of other prospective buyers if receipt of the
compensation or consideration is contingent upon the occurrence of
an event subsequent to the time the buyer purchases the merchandise
or goods;
(20) representing that a guarantee or warranty confers
or involves rights or remedies which it does not have or involve,
provided, however, that nothing in this subchapter shall be
construed to expand the implied warranty of merchantability as
defined in Sections 2.314 through 2.318 and Sections 2A.212 through
2A.216 to involve obligations in excess of those which are
appropriate to the goods;
(21) promoting a pyramid promotional scheme, as
defined by Section 17.461;
(22) representing that work or services have been
performed on, or parts replaced in, goods when the work or services
were not performed or the parts replaced;
(23) filing suit founded upon a written contractual
obligation of and signed by the defendant to pay money arising out
of or based on a consumer transaction for goods, services, loans, or
extensions of credit intended primarily for personal, family,
household, or agricultural use in any county other than in the
county in which the defendant resides at the time of the
commencement of the action or in the county in which the defendant
in fact signed the contract; provided, however, that a violation of
this subsection shall not occur where it is shown by the person
filing such suit he neither knew or had reason to know that the
county in which such suit was filed was neither the county in which
the defendant resides at the commencement of the suit nor the county
in which the defendant in fact signed the contract;
(24) failing to disclose information concerning goods
or services which was known at the time of the transaction if such
failure to disclose such information was intended to induce the
consumer into a transaction into which the consumer would not have
entered had the information been disclosed;
(25) using the term "corporation," "incorporated," or
an abbreviation of either of those terms in the name of a business
entity that is not incorporated under the laws of this state or
another jurisdiction;
(26) selling, offering to sell, or illegally promoting
an annuity contract under Chapter 22 (S.B. 17), Acts of the 57th
Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon's
Texas Civil Statutes), with the intent that the annuity contract
will be the subject of a salary reduction agreement, as defined by
that Act, if the annuity contract is not an eligible qualified
investment under that Act or is not registered with the Teacher
Retirement System of Texas as required by Section 8A of that Act;
[or]
(27) taking advantage of a disaster declared by the
governor under Chapter 418, Government Code, by:
(A) selling or leasing fuel, food, medicine, or
another necessity at an exorbitant or excessive price; or
(B) demanding an exorbitant or excessive price in
connection with the sale or lease of fuel, food, medicine, or
another necessity; or
(28) receiving a private transfer fee in violation of
Subchapter G, Chapter 5, Property Code.
SECTION 3. Section 5.017, Property Code, is repealed.
SECTION 4. Section 5.205, Property Code, as added by this
Act, applies only to a contract for the sale of real property
entered into on or after January 1, 2012. A contract for the sale of
real property entered into before January 1, 2012, is governed by
the law in effect immediately before the effective date of this Act,
and the former law is continued in effect for that purpose.
SECTION 5. This Act takes effect immediately if it receives
a vote of two-thirds of all the members elected to each house, as
provided by Section 39, Article III, Texas Constitution. If this
Act does not receive the vote necessary for immediate effect, this
Act takes effect September 1, 2011.