Newcomers Guide

When a new subdivision or area is developed and it is not located within the city water and sewer service areas, the need arises for the developer to plan for these utilities. As a result, the Municipal Utility District (MUD), Public Utility District (PUD), Water Control Improvement District, (WCID), or Water Authority (WA) will be formed to provide the services. Bonds are authorized and sold to finance the building of the district. The tax rate for this district will vary depending upon the number of participants (homeowners) in the subdivision or area being developed. The more numerous the homes, the lower the tax rate. These taxes are deductible on your income tax. Check with your Relocation Specialist to determine if the areas you are looking in have city services or those of a MUD district.

HOME OWNER ASSOCIATION FEES

COMMUNITY ASSOCIATION DUES

There are two types of homeowner or community assessment fees, those that are mandatory and those that are not. Most of the areas have mandatory dues. These dues are usually paid once a year and are billed direct to the homeowner. They provide for services such as the upkeep of entrances, parks, community pools, jogging trails, etc. If the homeowner does not pay them a lien may be placed against your property. This lien is usually in a second position to the one held by your mortgage company. Your Relocation specialist can assist you in determining what the yearly fees or dues are for the community you purchase in.

Residential service contracts (home warranties) are available from licensed residential service companies. Home warranties are agreements whereby the residential service company may, under the terms of the agreement, repair or replace all or any part of the appliances, electrical, plumbing, heating, cooling or other systems in a property.

A title insurance policy insures that the buyer receives good and indefeasible title to the property and that there are no outstanding claims against the property. Buyers are advised to obtain a title insurance policy or have an abstract of title reviewed by an attorney of the buyer’s selection when purchasing real property in Texas.

MOTOR VEHICLE INSURANCE REQUIREMENTS

The Texas Motor Vehicle Safety Responsibility Act states that no motor vehicle may be operated in Texas unless liability insurance coverage for at least the following amounts is in effect to insure against potential losses:

$20,000 coverage for bodily injury or death of one person arising from any one accident

$40,000 coverage for bodily injury or death of two or more persons due to any one accident, subject to a limit of $20,000 for one person

$15,000 coverage for destruction of others’ property arising from any one accident.

THE HOMESTEAD LAW IN TEXAS

In Texas, homestead rights were established in the Constitution and in various statutes enacted subsequent to the Constitution. The homestead exemption was originally designed as a means of protecting the home or residence of the family, and protected the land, the residence and all other improvements located on the land customary and necessary for family use.

As a general rule, property occupied as a homestead cannot be subjected to the satisfaction of debts or claims against the homestead owner. Thus, property owned and occupied as a homestead is not subject to a forced sale, and an attempted forced sale of such property, except in those circumstances were homestead is properly subject tot the payment of debts or claims, in ineffectual, void, and a purchaser acquires no title there under. The purpose of this homestead exemption is based in the public policy that a family must be secure in its home and shelter.

The homestead rights guaranteed and conferred by the Constitution and the statutes are enforced by Texas courts even though to do so may be inequitable to some parties, and even though in so doing they may assist a dishonest debtor to wrongfully defeat his creditor. Additionally, a homestead exemption is not necessarily lost even by fraudulent acts done with the intention of defeating a creditor. Since homestead is a favorite of the law, the Constitution and statutorial provisions granting homestead rights are given very liberal construction in order to fulfill their beneficial purpose.

A. URBAN PROPERTY: a homestead located in a city, town or village may consist of one or more lots that do not exceed in value $10,000.00. In determining the value of the lot or lots, the value of any improvements on the lots is not considered, and the time when the property is designated as a homestead is the time when the value of the homestead is determined. The fact that the property has a total value in excess of $10,000.00 does not preclude the property from being a homestead.

B. BUSINESS PROPERTY: A business homestead is a place to exercise the calling or the business of the head of the family. The kind or character of the business contemplated by the exemption is not restricted or defined. So long as the business in which the head of the family is engaged is a legitimate one, the provisions of the Constitution are satisfied. Since the business homestead is only a part of an urban homestead, there are not two separate homesteads. There can be a business homestead without a residence homestead or a residence homestead without a business homestead.

The original purpose of a homestead law was to protect the family. Therefore, any married couple was originally granted homestead rights in property that they owned and in which they resided. Once impressed with a homestead character, the homestead continued until it was abandoned, until another homestead was or is acquired, or until the death of a homestead claimant with out him being survived by constituent members of his family entitled to the homestead exemption. Recent amendments of the homestead laws have extended the homestead exemption to single adult persons, not otherwise constituents of a family.

A. SALES: To convey the homestead, both parties to the marriage must execute the deed. This is true even though title is in the name of only one of the spouses. If the property is actually the place of residence of a husband and wife, both husband and wife must be parties to the deed and must sign, acknowledge and deliver the deed.

B. ENCUMBRANCES: The general principle regarding encumbrances is that no mortgage, Deed of Trust, or any other lien is valid if a homestead claim is set up and proved. Any attempted encumbrance of the homestead is absolutely void and passes no rights to a creditor. However, the fact that a lien is otherwise unenforceable does not render invalid the debt that the lien purports to secure. Therefore, if a man and wife own a piece of property, sell it, and do not reinvest the proceeds into another homestead within certain time limits, the proceeds of the homestead sale are attachable against a creditor of the family.

There are certain permitted encumbrances of homestead. The law provides that if credit is extended for the purposes of the purchase of homestead property, or the erecting of valuable improvements on the property pursuant to a mechanic’s lien contract, then those types of encumbrances are valid, if the documents creating same are valid. Technically, another encumbrance that is permitted against a homestead is one for the payment of taxes. Because there is some disagreement in the cases relating to the type of taxes against which a valid encumbrance is permitted, care must be taken in the use of this as a means of trying to encumber the homestead. Each case must be looked on individually, and no broad approach should be attempted.

A. After the property has been designated as a homestead, it continues to be impressed wit the homestead character, until the homestead character is lost by dissolution of the family relationship, a sale of the homestead, or its being abandoned as a homestead. Therefore, once it appears that property has been the homestead of a man and wife, any attempt to encumber of sell the property without conforming to the rules mentioned above would be invalid unless it can be proven that the property is no longer the homestead, due to some abandonment or termination of homestead rights. Abandonment of homestead is a question of fact to be determined on a case-by-case basis by a court or by a jury, and turns mainly on a question of intent of the parties to a transaction. Thus, if there is a temporary removal from the presumes, i.e. where a person is temporarily out of the country, moves temporarily for health purposes, or other such instances, there is no abandonment of the homestead, if it can be proved that the intent of the homestead claimants was to return to the property as their permanent homestead.

B. In a dispute between a homestead claimant and one who is attempting to put a lien on homestead property, the issue is frequently whether or not the homestead claimant has disclaimed his homestead rights, or would be estopped to raise this homestead claim. One of the basic principles is that a homestead claimant may not, merely by the fact of signing a written disclaimer of property as his homestead, preclude himself from later claiming the property as his homestead, even if this written disclaimer includes someone else to lend money against the homestead. Therefore, in such a case it would behoove the lender to make an examination of the occupancy of the property, and if the person is in fact residing in the property which is being mortgaged, a disclaimer signed by the person attempting to borrow money against homestead, would be invalid, if the claimant later contests that disclaimer and denies that the property was ever abandoned as his homestead.

A distinction should be made between the law relating to homestead and the enforcement of liens and the transferability of homestead property as contrasted with the character of the property with relation to the payment of AD VALOREM taxes. That is to say, if a t the beginning of a calendar year, an affidavit is filed by homestead claimant claiming certain property as his homestead, the tax assessor does not make inquiries as to whether or not the person requesting the exemption is in fact in possession of the property for which he claims an exemption. Therefore, if a homeowner owns a residence on the East side of town and a residence on the West side of town, but files a homestead exemption on the property on the West side of town which may have a higher value, and therefore, save some taxes. However, when the question is which property is mortgagable, the actual occupancy of the property is determinative, and if the residence is that property on the East side of town, it could not be mortgaged except in the instances outlined in SALES AND ENCUMBRANCES, regardless of the disclaimer of the homestead filed with the tax assessor.

The law regarding homestead in Texas involves highly technical principles. Care should be taken to have a lawyer review your facts if you are ever in doubt regarding the principles outlined herein. Because of the safeguards built into the law, transactions involving homestead property should be carefully structured.

It is important to note that because of the dangers involved with homestead, title companies and mortgage lenders are very particular in the treatment of homestead property. Even if legal principles are on the side of a title company or a mortgage lender, they may decline to take action based on internal policy principles and risk of loss, rather than relying entirely on the legal principles outlined herein. Therefore, if homestead property is to be conveyed or mortgaged, a review of the facts with the lawyer for the title company or for the mortgage lender should be made before the transaction is attempted, in order to determine that the transactions one into which the title company or mortgage lender desires to enter.

A change in the above law now allows for homeowners to take out a home equity loan on their homesteaded property.