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What's a CCN? Why you should care.
A new regulation affects water service for rural land
by Charles E. Gilliland When a retail water or wastewater utility obtains a certificate of convenience and necessity (CCN) from the Texas Natural Resource Conservation Commission (TNRCC), it secures the exclusive right to supply water or sewer service to a specified area. The state created the CCN so landowners could identify an entity responsible for water and sewer service in rural areas. However, the CCN also bars any other entity from providing these services. Because of this monopoly, growing numbers of Texans purchasing land beyond municipal limits have increasingly faced unanticipated expenses and delays in obtaining water and sewer service from CCN holders.
Responding to this problem, the 77th Texas Legislature adopted HB 2033, which went into effect Sept. 1. This act requires a seller to notify a buyer that the land for sale lies within a given utility’s certified service area. The requirement applies to most sales of unimproved property lying outside the corporate limits of a municipality, including executory contracts for sale with performance periods of more than six months, so-called contracts for deed. Properties already receiving water or sewer service from a CCN holder are exempt from the requirement.
To comply with the new regulation, a seller must name the appropriate service provider and warn buyers that they may face expenses and delays in obtaining water and wastewater service from that utility. This information must be provided to a buyer before the execution of a contract of sale either as a separate document or part of the contract. And at the closing, a seller must provide, and a buyer must acknowledge, a separate notice stating this same information. That final notice must be recorded in the county where the property is located. Failure to provide such notice gives a buyer the option to terminate his contract.
If a buyer does not receive a CCN notice, and a sale is completed, he may sue the seller for damages, including all costs related to the purchase plus interest and attorney’s fees. The buyer must then reconvey the property to the seller. Alternatively, the buyer may recover up to $5,000 plus attorney’s fees and retain ownership of the property. The buyer must file the suit within four years of the date of transfer or within 90 days of discovering the cost of obtaining service or the delay expected before the utility can provide service.
To determine if a property lies within an area covered by a CCN, a seller may rely on maps recorded by the provider in county real property records or filed with the TNRCC. If both the utility provider and TNRCC fail to maintain an accurate map, a seller escapes liability for the specified damages.
Charles E. Gilliland, Ph.D., is a research economist at the Real Estate Center at Texas A&M University. For more information on CCNs, see his Tierra Grande article, "Rural Water: Plan Before You Plat,"at http://recenter.tamu.edu/Tgrande/vol8-3/1499.html.
Additional info about CCNs is available under the Recent Topics heading of the Legal section on TexasRealtors.com.
home current issue top 10 resources
Buyers & sellers,
visit www.texasrealestate.com.
REALTORS®, visit www.tar.org.
