What the legislation passed during the 77th Texas Legislature will mean for REALTORS¨ and property owners in Texas

The 77th Texas Legislature adjourned on May 28, 2001. The biennial 140-day session was very successful for TAR-sponsored legislation that will have an impact on REALTORS® and private-property owners.

The following is a brief summary of legislation from this session that affects the real estate industry and the rights of property owners, including a look at legislation that was amended or defeated to benefit real estate professionals and property owners. (At press time, some bills have been signed by the governor, while others still await his approval. Gov. Rick Perry can sign or veto a bill or take no action. Bills that are not vetoed or signed become law without a signature. Unless noted otherwise, the bills summarized in this article have been sent to the governor for his approval, and if approved will become effective Sept. 1, 2001.)

House Bill 695 by Rep. Arthur Reyna; House Bill 659 by Rep. Joe Pickett; Senate Bill 362 by Sen. Jeff Wentworth.

House Bill 695 is an omnibus "constructive housekeeping" bill designed to make the administration of the Real Estate License Act more efficient and effective. The bill contains numerous measures designed to streamline licensing procedures and minimize several outdated and counterproductive statutory requirements that no longer benefit the Texas Real Estate Commission, the consumer, or real estate professionals in Texas.

The bill also addresses a growing problem by empowering TREC to assess administrative penalties against persons who engage in the practice of real estate without obtaining a license under the Real Estate License Act. Finally, the bill clarifies that a residential service contract or a listing agreement is not subject to the three-day right-of-rescission statute.

House Bill 1493 by Rep. Miguel Wise; Sponsored in the Senate by Sen. Todd Staples.

Effective on Sept. 1, 2001.

During the 76th Legislature, various groups, including REALTORS®, consumers, and mortgage brokers, worked together to develop a system whereby individuals engaged in the business of brokering mortgages would be licensed by a state agency. The licensing act is working well and is addressing complaints many consumers had regarding abuses related to the practices of mortgage brokers. However, in reviewing recent consumer complaints, it is obvious that standardized forms for pre-qualifying and commitment letters are needed to avoid consumers’ confusion about the true status of their loan applications. House Bill 1493 addresses the need for standardized forms for pre-qualifying and commitment letters as well as other technical changes needed to the Mortgage Brokers Licensing Act.

Senate Bill 507 by Sen. John Carona; Sponsored in the House by Rep. Harold Dutton, et al.

Effective on Jan. 1, 2002, if approved.

Senate Bill 507 establishes guidelines for the operation of property owners’ associations (POAs) and to provide homeowners a mechanism by which to redeem property in the event of a foreclosure. The bill includes efforts to curb exorbitant and uncontrolled legal fees charged to a homeowner, a 90-day right of redemption in all foreclosures by property owners’ associations, a user-friendly dispute-resolution procedure, limits on the amount of attorney’s fees a property owners’ association may include in an indebtedness covered by an assessment lien, and does not allow foreclosure on property for failure to pay fines assessed by the association or legal fees solely associated with the fines.

The bill also requires a POA to give written notice to a homeowner of the right to cure a violation or request a board hearing before the property owners’ association can levy a fine or initiate other enforcement actions.

Senate Bill 393 by Sen. John Carona; House Bill 1201 by Rep. Kenneth "Kim" Brimer.

Effective on Jan. 1, 2002, if approved.

Senate Bill 393, or UETA, is a pro-consumer measure that will enhance and promote the use of electronic signatures and electronic transactions in a positive manner for the real estate industry. This bill will encourage and enhance the development and use of electronic platforms, which may save consumers transaction costs and make real estate transactions more efficient.

The Uniform Electronic Transaction Act is a model uniform state law that is designed to complement and enhance the legal details concerning electronic signatures and electronic transactions. Currently, 28 states have adopted UETA, which provides additional details and standards on how to conduct an electronic transaction.

Residential service contracts

Senate Bill 560 by Sen. David Sibley; House Bill 493 by Rep. Patrick Haggerty.

Senate Bill 560 failed to pass due to legislative deadlines.

Although Senate Bill 560 was not passed by the Texas House, the language from the bill was added to House Bill 695. The language added to HB 695 clarifies that residential service contracts and listing agreements are not subject to Chapter 39 of the Texas Business and Commerce Code. Chapter 39 allows for a three-day right of rescission when entering into certain contracts.

TAR-sponsored bills that were not passed

Down-zoning

Senate Bill 1398 by Sen. Troy Fraser; Sponsored in the House by Rep. Gary Walker.

Failed to be scheduled for debate on the House Floor.

Currently, the governing body of a municipality has the power to enact zoning regulations in accordance with its comprehensive plan, and occasionally has reason to change zoning regulations. Some changes may adversely affect property value.

Senate Bill 1398 was a private-property-rights bill and would have required municipalities to compensate a property owner when the municipality changed the zoning classification of a property that resulted in a devaluation of the property of more than 25% unless the property owner gave consent for the change. The bill was not an attempt to impede the zoning authority of a municipality. Although TAR was not successful in passing this bill, most legislators did agree with TAR’s position that changing the zoning classification without the consent of the owner is wrong and that the House and Senate should further study this issue before the next legislative session. TAR will also study this issue during the next year and a half to determine the most feasible way to accomplish the merits of SB 1398.

Bills opposed by TAR

During the 77th Legislature, more than 5,700 bills were filed. TAR read every bill to identify those that adversely affected REALTORS® and private-property rights. TAR identified 36 bills that would unfavorably impact the real estate industry and private-property rights. None of these bills were passed. Two major areas included the following issues:

This legislative session saw numerous proposals that would have increased various taxes and fees for all Texas consumers. The most controversial was a proposal to tax all real estate transactions at the current tax rate of 8.25%. The proposal was an attempt to fix the mechanisms in place to fund our public schools. Although the proposal was a good-hearted attempt to fix a real problem in Texas, TAR and the Legislative Management Team did not believe that this proposal was the correct solution. Thanks to the efforts of TAR, the bill never made it out of committee.

Property owners’ associations

The 77th Legislature again saw numerous proposals relating to the rights and responsibilities of property owners’ associations. Many of these proposals, with the exception of Senate Bill 507, would have restricted the rights of POAs and their ability to exist in Texas. TAR adamantly opposed any proposal that would have adversely affected the rights of POAs.

Bills amended by TAR

This session, TAR identified more than 650 bills that affected REALTORS® or the real estate industry. These bills were tracked, and many were amended to satisfy concerns TAR had on the pending legislation. TAR works very closely with legislators and their staffs to amend legislation that may be detrimental. TAR would like to thank all the legislators who graciously allowed TAR to work with their offices this session. Below are a few bills TAR succeeded in amending:

Regulation of telemarketers

House Bill 472 by Rep. Burt Solomons; Sponsored in the Senate by Sen. Eliott Shapleigh.

Effective on Jan. 1, 2002, if approved.

House Bill 472 will create a statewide "no-call" list for Texas consumers. Telemarketers would be required to purchase the list and could face economic damages for violating the law. Under the bill as it was originally filed, cold calling on listings or sales would have included REALTORS® as telemarketers. TAR worked closely with the bill sponsor to exempt REALTORS® who make telephone calls to potential buyers.

House Bill 1514 by Rep. Rob Junell; Sponsored in the Senate by Sen. Chris Harris.

Effective immediately upon approval.

This bill, as originally filed, would have required a seller of residential property to provide the purchaser with a written disclosure of the location of any commercial enterprise that is within one mile of the property and could be "…considered by a reasonable person to cause an unacceptable offense to the senses, including smoke, odors, noise, or vibrations, of a person living at the residential property." TAR was initially opposed to this bill as filed and worked extensively with the bill author to determine the exact problem that needed to be addressed. TAR was successful in amending the bill so it did not adversely affect the real estate transaction.

Texas Department of Housing and Community Affairs

Senate Bill 322 by Sen. Eddie Lucio; Sponsored in the House by Rep. Pete Gallego.

Senate Bill 322, as originally filed, prohibited real estate licensees from serving on the board of directors for the Texas Department of Housing and Community Affairs. TAR was opposed to the bill as filed and worked closely with the bill’s author and sponsor to re-draft the bill. TAR was successful amending the bill so it would not preclude a real estate licensee from serving on the department’s board.

Durable power of attorney

House Bill 1883 by Rep. Senfronia Thompson; Sponsored in the Senate by Sen. Royce West.

The intent of House Bill 1883, as filed, was to protect elderly consumers when signing a durable power of attorney. The bill, as it was voted out of the House, would have required a ten-day waiting period before the close of any transaction involving real estate by a person (regardless of the person’s age) who signed a durable power of attorney. TAR quickly worked with the bill author and sponsor to amend the bill so it would not have a serious impact on the ability of a person to close on a real estate transaction involving a durable power of attorney.

The bill, as finally approved by the legislature, removed the ten-day waiting requirement and added an accounting requirement on persons acting with a durable power of attorney to disclose to the principal of the actions that are being transacted on the person’s behalf. This bill is an excellent example of why TAR continuously monitors legislation and the quick action that can be taken to amend bills working their way through the legislative process.

Predatory lending practices

Senate Bill 1581 by Sen. Royce West; Sponsored in the House by Rep. Senfronia Thompson.

Senate Bill 1581 requires lenders to provide borrowers with resources indicating where additional mortgage information can be found. In addition, the bill provides mortgage and refinancing applicants with additional information that should better protect individuals with imperfect credit histories when obtaining high-interest mortgage loans. Initially, the bill would have placed numerous burdens and delays on consumers when closing a home loan. TAR worked throughout the session with the bill author and helped draft language that was beneficial to consumers.

Other legislation affecting the real estate industry

Senate Bill 1380 by Sen. Kenneth Armbrister; Sponsored in the House by Rep. Ray Allen.

Effective on Sept. 1, 2001.

Senate Bill 1380 further clarifies current law relating to the requirement that a real estate licensee, builder, or lessor does not have the duty to disclose the location of a registered sex offender. This law is much more clear than the language approved by the 76th Texas Legislature two years ago. In addition, the bill removes the duty of the buyer broker from the disclosure requirement.

House Bill 1869 by Rep. Arlene Wohlgemuth; Sponsored in the Senate by Sen. Chris Harris.

Manufactured housing represents a growing proportion of the homes currently being purchased in Texas. Although manufactured housing can be constructed and sold more quickly than site-built housing, some counties and school districts have experienced difficulties in keeping up with the rapid growth and the need to provide services for the community. Some consumers may be unaware of their obligation to pay county and school taxes, unaware of their duty to maintain private roads, and unaware of their need to provide for and maintain on-site sewage disposal.

House Bill 1869 establishes financing and acquisition procedures for retailers and consumers of manufactured homes and provides for notification to consumers of their responsibilities before purchasing a manufactured home.

Senate Bill 731 by Sen. Buster Brown; Sponsored in the House by Rep. Fred Bosse

Currently, volunteer directors in a nonprofit corporation receive only limited liability with respect to acts and omissions performed within the scope of their duties. Senate Bill 731 amends the Texas Non-Profit Corporation Act to include a limitation on officer liability. This legislation exempts a nonprofit corporation officer from liability concerning any action taken or omission made, unless the officer's conduct was not made in good faith or in the best interest of the corporation.

This amendment will help protect all officers of local REALTOR® boards and associations.

Photo © 2001 PhotoDisc.

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