I've previously posted articles on this real estate blog describing some of the pitfalls associated with buying and selling property in Texas under a Contract for Deed. A Contract for Deed is one type of an "executory contract," or contract that remains unperformed by both parties. Contracts for the purchase and sale of real estate that have not yet closed are executory in that the Buyer has not yet paid the full purchase price, and the Seller has not yet conveyed title by way of executing a deed.
Executory contracts of all stripes -- including contracts for deed -- have been under fire in texas for more than a decade. This disfavor results from frequent abuses of unsophisticated Buyers by malevolent Sellers. In order to stem these abuses, the Texas Legislature adopted sweeping revisions to the Texas Property Code in 2001.The major change was to make applicable statewide amended versions of provisions that had previously applied only in certain economically distressed (mostly border) counties. The revised provisions are set-forth in Subchapter D of Chapter 5 of the Texas Property Code ("Prop. Code").
One of the frequently violated provisions of Subchapter D is the annual accounting requirement of Texas Property Code Section 5.077. This provision REQUIRES Sellers under Texas Contracts for Deed to provide Buyers with an annual statement in January of each year that the Contract for Deed is in place.
The annual statement must include the following information:
(1) the amount paid under the contract;
(2) the remaining amount owed under the contract;
(3) the number of payments remaining under the contract;
(4) the amounts paid to taxing authorities on the purchaser's behalf if collected by the seller;
(5) the amounts paid to insure the property on the purchaser's behalf if collected by the seller;
(6) if the property has been damaged and the seller has received insurance proceeds, an accounting of the proceeds applied to the property; and
(7) if the seller has changed insurance coverage, a legible copy of the current policy, binder, or other evidence of insurance.
Failure to timely provide this statement can be costly to a Seller. The statute provides for liquidated damages, and attorneys' fees. In some instances, a Buyer might retain remedies under the Texas Deceptive Trade Practices Act. These penalties are most severe for Sellers who enter more than 2 Contracts for deed in a single year.
A savvy Seller of Texas real estate under a Contract for Deed should contact an experienced real estate attorney to advise them on all of the legal hurdles associated with this type of transaction, and to ensure that an innocent mistake doesn't end-up leading to a costly legal problem.
Use the largest online attorney directory to quickly find detailed profiles of Texas lawyers and law firms in your area.
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