Richard A. Crow & Richard L. Spencer 2015-08-26 00:42:26
This article is drawn from the final report of the Real Estate Legislative Affairs Committee of the Real Estate, Probate & Trust Law Section of the State Bar of Texas. During session, Texans’ elected representatives introduced 6,476 bills and joint resolutions. Among those, the committee identified more than 2,241 to track. The authors chose for inclusion in this report four bills that we believed would be of interest to practitioners of Texas real estate law, but readers are encouraged to review the final report prepared by RELAC, as there are other bills that may also be of interest. (The final report is available at reptl.org; access is restricted to section members only.) HB 2063. Residential foreclosures usually require the designation of a substitute trustee (to replace the original trustee), and nearly all residential deeds of trust allow substitution without formality, except that it be in writing. Appointments have no practical function in real estate records unless a foreclosure actually occurs, and only appointments related to actual sales matter. Thus, recorded appointments designating substitute trustees for sales that do not occur add nothing and may actually confuse the state of title. HB 2063 simplifies and clarifies by further defining the process for a lender to designate a substitute trustee to conduct the foreclosure sale. This law allows the notice of sale, served on the borrower under the Texas Property Code, to also act as the written designation of a substitute trustee. It will be recorded as an attachment to the substitute trustee’s deed and signed by an attorney with that attorney’s bar number. Current law already requires that the notice of sale identify and give an address for the substitute trustee(s) and that the notice be served on borrowers, posted at the courthouse, and filed with the county clerk where the property is located. HB 2063 also permits the recording of other documents that may be proof of satisfaction of certain foreclosure prerequisites. Thus, this bill facilitates the organization of all foreclosure information in one document in the real property records, preventing duplication and confusion. It is important to note that this bill should not and does not prevent other historically used methods for documenting foreclosure events. An appointment of substitute trustee or resolution can still be recorded in other appropriate places or times in the real property records. Consumers should not be disadvantaged in any way by this change. To the contrary, this law should actually enhance their notice of important facts about the foreclosure early in the process. HB 2066. This bill allows a trustee to correct errors and omissions in a foreclosure sale that has already occurred. It is to no one’s benefit to have a defective foreclosure sale. Such a sale merely clouds the title to the property in question and prompts time-consuming litigation. In modern legal practice, facts that would have affected a foreclosure sale, if known, occasionally are not discovered until after the sale occurs. Such facts might include a bankruptcy filed immediately before the sale or a suit invoking an automatic stay under Texas Rule of Civil Procedure 736. A receivership, an undiscovered dependent probate or administration, or death of an intestate borrower could also impair or render a foreclosure sale void. A workout may be achieved at the last minute before a sale, but that information does not reach the selling trustee quickly enough. Where such mistakes occur and can be promptly identified, it is important that they be promptly corrected. Rather than having an unsaleable property, resulting in lengthy and unproductive litigation, this addition to Chapter 51 of the Property Code allows a trustee to rescind a sale without judicial action, if done within 60 days. This change requires a trustee to return the funds to a purchaser, with interest, to eliminate harm to a third party, and it essentially restores the loan parties to their pre-sale rights and positions. Once rescinded, defects could be corrected and a “clean” sale would result, making title more certain. Neither third-party purchasers nor borrowers would be damaged by this streamlined corrections process. HB 2067. This law gives the parties to a mortgage loan transaction more flexibility and certainty. Increasingly, federal and state regulation and federally backed foreclosure avoidance programs can make the default resolution (whether through workout or foreclosure) a very lengthy process. Texas case-law currently implies that notices of acceleration can be waived and the related installment loan can be put back on an installment basis. But decisional law reaches varying conclusions about how that waiver or rescission can be effectively accomplished. Texas courts mostly agree that acceptance of payments is effective to reinstate a defaulted loan and beyond that the law is mixed and case-specific. Courts have held Civil Practice and Remedies Code Section 16.035 to be a general statute of limitations and not a catchall, so fact-specific limitations “tolling” concepts are frequently at play, making it difficult to calculate when a limitations period may expire. This uncertainty on how to waive an acceleration to restore a loan’s installment character encourages litigation. Because case-law is made in diversity jurisdiction cases, federal courts guessing at what Texas courts would do are more frequently the source of that decisional law. This bill gives them direction. HB 2067 provides a clear and uniform rule that allows a unilateral waiver of a unilateral act as well as acceleration of the debt, and it places the borrower and the lender in their original positions. By having a statutory method to essentially reset the clock, both parties can be assured that they have time to work toward an agreement. Forcing a deadline rarely results in satisfactory compromise. SB 462. This bill, also called the Texas Real Property Transfer on Death Act, adds Chapter 114 to the Estates Code and creates the “transfer on death deed,” which will allow for the transfer of real property after the transferor’s death without the necessity of probate. A TOD does not create any legal or equitable interests in the designated beneficiary, as such interests vest upon the death of the transferor. To be effective, a TOD must: (1) contain the same legal requirements as a recordable deed, (2) state that the interest in real property to the designated beneficiary shall transfer upon the transferor’s death, and (3) be recorded in the applicable real property records before the transferor’s death. A helpful sample form of TOD is included in the statute to ensure compliance with the statute. A TOD may not be revoked by a will, which is perhaps counter-intuitive and should be stressed to anyone electing to use a TOD. Instead, a TOD may be revoked only by one of the methods set forth in the statute, including by recording of an instrument specifically revoking the TOD or recording a subsequent TOD. Because the TOD is brand new to Texas, it might be prudent to exercise some caution before advising a client to use one; however, attorneys should at least consider this option when advising clients seeking to limit or even eliminate the need for probate.
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