By: Darby, et al. (Senate Sponsor - Harris) H.B. No. 8
(In the Senate - Received from the House May 5, 2011;
May 9, 2011, read first time and referred to Committee on Business
and Commerce; May 16, 2011, reported adversely, with favorable
Committee Substitute by the following vote: Yeas 9, Nays 0;
May 16, 2011, sent to printer.)
COMMITTEE SUBSTITUTE FOR H.B. No. 8 By: Estes
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; and
(3) the property is not subject to further obligation
under the private transfer fee obligation.
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. 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.
SECTION 2. Section 5.017, Property Code, is repealed.
SECTION 3. 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 4. 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.
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