Because a transfer on death deed is nontestamentary, probate proceedings are not necessary to transfer the transferor’s interest in the described real property.  This has caused quite a bit of confusion about what is to be done.  The fact that the marital status, divorce, property is as is without warranty of title and subject to prior liens and that it may be revoked (yet no specific form for revocation has been produced by the Texas Supreme Court), causes the use of transfer on death deeds to be risky at best.

During the transferor’s lifetime, a transfer on death deed does not affect any right, title, or interest of the transferor in the property.  It does not vest any legal or equitable title in a desginated beneficiary, or subject the property to the claims of creditors of any designated beneficiary.  Notwithstanding the recordation of a transfer on death deed, the transferor retains the right to transfer or encumber the property.  The transferor also retains their present or future homestead rights and any ad valoreum tax exemptions to which the transferor is entitled.  During the transferor’s lifetime, a transfer of death deed does not effect the rights of creditors of the transferor, secured or unsecured, and does not trigger any “due on sale” clause.  Upon death of the transferor, a secured creditor’s rights are subject to the Texas Estates Code.  Additionally, a transfer on death deed does not affect the eligibility for public assistance of either the transferor or any designated beneficiary.

To be effective, a transfer on death deed must be recorded before the transferor’s death.  Likewise, after the transferor’s death, an affidavit of death must be filed  that states that references the transfer on death deed.

Transfer on death deeds are relatively new to Texas.  Quite a bit of confusion can occur as a result of the transfer on death deed, because it is revocable, must be recorded properly, and requires a subsequent filing after death.  Further, if the real estate is owned by two (2) individuals, the death of one does not transfer the survivor’s interest and it is effected by divorce, For these reasons, and the fact the Texas Supreme Court has not provided guidance since 2019, transfer on death deeds are not a favored estate planning tool.

If you are making an estate plan in the near future, seek an attorney that can help answer any questions you may have and guide you on how to create the best least complicated estate plan.  Having a well-crafted estate plan, drafted by an attorney and not pulled off the internet, will save your loved ones grief and money in the long run.

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You would not believe what I have found right here in Walker County,  Texas with regards to property records. Hand written, homemade, or  instruments that have nothing to do with what they state they are, all proporting to convey property.  Just this week, I tried a case where a seller tried to evict someone even though they had entered a lease with option to purchase agreement.  Not only could they not evict, it only gets worse for them.  They are liable for fines and attorney fees because they did not understand the executory contract they had drawn up themselves.  They should have seen an attorney at the beginning because, in the end, it is going to cost them a lot more money.

A person may not practice law in the State of Texas unless they are licensed by the State Bar of Texas per Section 81.102 of the Texas Government Code.  In fact, the unauthorized practice of law is prohibited by Section 81.106 of the Texas Government Code.  However, there is always the shadetree “lawyer” who is going to do it himself.  Most of these homegrown documents or instruments end up creating problems with regards to the ownership of the property in question.  What we in the legal community call a “cloud on the title.” 

What would you do if one day you received a notice of eviction while sitting in your home because it turns out the person you purchased the home from did not pay off their lender?   Maybe you have been paying for the property for 10 years pursuant to a written agreement with your seller, but they have decided the property is worth more than what they agreed to sell it to you for, so they try to evict you.  Or perhaps you have decided to sell your property and find out that the conveyance to you when you purchased the property was not valid.  Think this could not happen to you? 

Each year thousands of lawsuits are filed involving title problems.  Many title problems can arise which cause the complete or partial loss of your home or business property.  Even the most careful search of the public records will not find every title problem.  Because some problems are hidden, your title may appear to be perfect when in fact there may be a problem that is a land mine waiting to explode.  

To give you an idea of the types of title problems that may occur, I have compiled this list of “Land Mines” that could result in partial or complete loss of your property or an expensive lawsuit.

“LAND MINES”

1.  Property still held by a deceased owner whose interest has not been properly conveyed by the surviving heirs. 

2.  Inadequate legal descriptions.

3.  Defective acknowledgments.

4.  Mistakes in recording legal documents.

5.  Misinterpretation of wills.

6.  Undisclosed or missing heirs.

7. Deeds by minors.

8.  Surviving children omitted from a will.

9.  Marital rights of spouse allegedly, but not legally, divorced.

11.  Deed of community property recited to be separate property.

12.  Instruments executed under fabricated, expired or not properly recorded powers of attorney.

13.  Birth or adoption of children after date of will.

14.  Falsification of records.

15.  Easements established through  continued use but not discovered by a survey or in the public record.

16.  Errors in indexing of legal documents by the County.

17.  Mistaken reports furnished from taxing authorities.

18.  Deeds to or from defunct corporations.

19.  Documents executed under duress.

20.  Errors in tax records.  (For example, listing payment against wrong property account.)

21.  Forged deeds, releases, other forged instruments.

22.  Deeds by persons supposedly single but secretly married.

23.  Deeds from persons not competent to handle their affairs (i.e., deed into a minor).

24.  Lease with Option to Purchase.

25.  Contract for Deed

Problems like these listed above, and many more, happen everyday.  I see them because it is my job to make sure there are no such problems with regard to the property in order to protect the parties’ interests. 

An uncovered “land mine” could result in an expensive lawsuit.  A title insurance policy insures that these matters have been diligently researched and addressed before closing the transaction.  

Owner’s title insurance protects you against financial loss caused by covered title risks.  The title insurer, without expense to you, will defend you against an attack on the title to your property as insured.  If the attack is successful, the title insurer will indemnify you against the defined financial loss up to the policy limit.  A small, one-time premium provides you with this valuable protection.

When buying or selling a home or real property, it is often the largest single investment a person or couple makes.  Therefore, you should seek the assistance of a real estate agent, attorney and title company before making your investment.  This is not a realm for the shadetree “attorney.”   

Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C.  He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.  www.moakandmoak.com

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The Texas Constitution Article I, §26 adopts the common law version of the Rule Against Perpetuities.  In 2021, the Texas Legislature made extensive revisions to Texas Property Code §112.036 that may extend the time period to 300 years from the effective date of a trust.  This was done to permit the creation of dynasty trusts in Texas.  Previously, the rule had stated property must transfer or vest within 21 years after some life in being at the time the interest was created, plus a period of gestation. 

The effective date of a trust is the date it becomes irrevocable, meaning the date the person setting up the trust dies or declares the trust is irrevocable.  This date is important because it is the date the interest in property is created and the time period subject to the Rule Against Perpetuities begins.  Thus, if grandfather’s trust states the property is to not be sold, but held in trust for grandson during grandson’s life, the maximum duration of the trust was the grandson’s life, plus 21 years.  If grandson had not been born, but was in gestation, then the period could be the grandson’s life, plus 21 years and an additional 9 months (gestation).  Now if that isn’t a complicated enough set of terms, imagine that the Texas Property Code now says that period maybe 300 years.  Article I, §26 of the Texas Constitution hasn’t changed.  So, the time period might be 300 years or the person’s lifetime plus 21 years.  

Head swimming yet?

Dynasty trust isan irrevocable trust that lets people keep wealth in the family for multiple generations.  Families can reduce the tax burden on successive generations of beneficiaries.  Now mind you, the current estate tax exempts the first 22 million dollars of a couple’s assets from estate tax.  So unless you are a professional sports athlete, politician or super rich, then this may not be an issue. 

It will be interesting to watch the legal battles over the issue of the Rule Against Perpetuities versus the Texas Property Code, but lawyers have certainly found a way to insure they will have work.  Not only will they have work, they will certainly be able to charge a high fee to their super rich clients. 

If you are thinking of leaving property to your family and want to protect the value of that property from taxation or make it a simple process to transfer those assets, you should seek the assistance of an attorney with experience in estate planning.  A little spent now, will save money and headaches for your family later.  If you are a professional athlete, politician or super rich, I would be glad to set up a retainer.  

Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C.  He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas.  www.moakandmoak.com

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First I will discuss the 2001 change. Effective September 1, 2001, Senate Bill 198 amended the Texas Property Code regarding Contracts for Deed. This amendment applies to all contracts regardless of when they were entered into. Again, if you are currently in a contract for deed, the following changes apply.

Under the current law sellers now have to provide purchasers under a contract for deed a tax certificate from the tax assessor collector, proof of insurance coverage, and a current survey of the property. 

Further, the law now requires that a Seller’s Disclosure Notice be provided. Such notice must inform the purchaser of the following:

1) Whether or not the property is in a recorded subdivision ;

2) Whether or not the property has sewer service;

3) Whether or not the property has water service;

4) Whether the property has been approved for a septic system by the appropriate authority;

5) Whether the property has electric service;

6) Whether the property is in a floodplain;

7) Who maintains the roads;

8) Whether anyone else has an interest in the property;

9) Whether any individual or entity has a lien filed against the property;

10) The purchaser has the right to obtain a title abstract or title commitment to the property; and,

11) The purchaser has the right to purchase a title policy to the property.

Another important change is that the law now requires the seller to disclose to the purchaser, BEFORE the contract is signed, in a written statement, the price, interest rate, total amount of principal and interest that will be paid and the amount of any late charge. 

Failure of the seller to provide any of the notices mentioned would be a violation of the Deceptive Trade Practices Act. This could nullify the contract, subject the seller to penalties of up to $500 per day, and subject the seller to treble (triple) damages and attorneys fees for the violation. 

Another important change affects the cancellation of the contract in the event of default. In the past the law required written notice be by either mail or personal delivery to the purchaser. The law now requires the seller to give written notice by certified or registered mail, return receipt requested.

Under the old law, the amount of time a purchaser had to cure the default varied depending upon what percentage of the purchase price had been paid. This ranged from 15 days to 60 days. The law now provides that purchasers have 60 days to cure the default. 

Perhaps a more significant development is related to what court has jurisdiction when there is a default under a Contract for Deed or a Lease with Option to Purchase. Historically, these matters were handled in the Justice Courts (i.e., by the Justice of the Peace) as a forcible entry and detainer suit. However, in Ward v. Malone, 115 S.W.3d 267 (Tex.App.-Corpus Christi-Edinburg 2003, pet. denied), the court held that in order to determine the right to possession, issues of title would have to be resolved; the Justice Court lacked jurisdiction to proceed with forcible entry and detainer actions because such actions involve the issue of tenants at sufferance; and, determining who has the right to possession and issues of title. Thus, suits involving Contracts for Deed, and possibly Leases with Option to Purchase, must be filed in District Court. 

It seems obvious that our legislature and courts want to discourage the use of contracts for deed and to protect purchasers under such instruments. This legislation and case law places a huge burden on the seller under a contract for deed with some very substantial penalties for non-compliance. These actions may very well do away with the use of contracts for deed. 

If you have sold or purchased property under a contract for deed, then you should consult an attorney to see how these changes may have affected your rights and duties.

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One way to trigger such action is for an aggrieved party to file an affidavit which includes the property’s legal description, send a copy of the affidavit to the perpetrating party, and demand that the fraudulent deed be canceled. If the affidavit is not done properly, then it will only make the cloud on the title to the property worse. Additionally, there is no guarantee a title company or lender will accept such an affidavit if and when the property is sold in the future.

A suit alleging fraud (both common law fraud and statutory fraud under Business & Commerce Code section 27.01) and requesting rescission and/or a declaratory judgment should be filed to quiet title to the property (i.e., clear the title). If such a judgment is obtained, then you have a much better chance a title company or lender will accept the problem is cured.

Note also that Civil Practice & Remedies Code section 12.002 provides that a person who knowingly and intentionally files a fraudulent lien or claim against real property may be held liable in civil district court for the greater of $10,000 or actual damages, exemplary damages, and recovery of attorney’s fees and costs. You should be aware, while attorney fees and damages may be awarded, the award of exemplary damages in such a suit requires an unanimous verdict.

Just last week, I had a couple come to see me because their property had been deeded partially to their minor daughter. They wanted to refinance the property and make some improvements to their home. However, the fact the property was partially owned by a minor caused a significant issue that will require some form of litigation. Bottom line, you should never deed property to a minor.

Such a lawsuit is expensive and takes a great deal of time. A title insurance policy insures that these matters have been diligently researched and addressed before money is exchanged in the transaction. You should understand there are different types of title insurance policies and different coverages and exemptions. However, a title policy may only be available upon the purchase of property. Fraudulent deeds could be filed at any time. If you know someone has filed a fraudulent lien or deed with regards to your property, you should seek legal assistance from an attorney immediately.

Sam A. Moak is an attorney with the Huntsville law firm of Moak & Moak, P.C. He is licensed to practice in all fields of law by the Supreme Court of Texas, is a Member of the State Bar College, and is a member of the Real Estate, Probate and Trust Law Section of the State Bar of Texas. www.moakandmoak.com

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