Bulletin: TX2019008

Date:
August 14, 2019
To:
All Texas Issuing Offices
RE:
LEGISLATIVE UPDATE - 2019 Legislative Update - 1 of 2

Dear Associates:

TITLE INSURANCE

HB 1614 - Operation of the Texas Title Insurance Guaranty Association (TTIGA).
(Effective Date: 9-1-2019) 

  1. Relates to the operation of the Texas Title Insurance Guaranty Association (TTIGA). 
  2. Establishes venue of an action against TTIGA in Travis County.  
  3. Allows a Title Insurance Company with a board member to negotiate a reinsurance contract with the Board.  
  4. Allows TTIGA to lend money to the receiver et al of an impaired underwriter or its agent.  
  5. Allows TTIGA to take control of escrow accounts of an impaired agent and pay the claims thereof.  
  6. Deems the TTIGA plan of operation approved within 90 days of submission to the commissioner unless the commission disapproves the plan within that time.  
  7. Allows TTIGA to file a claim in a receivership against an impaired underwriter or its agent to recover the cost of administering its duties.  
  8. Raises the amount of a covered claim from $250,000 to $500,000 for each claimant or each policy.  

TTIGA is given the oversight authority to deal with impaired and insolvent agents. It does so through collection of guaranty fees and recoupment fees and audits of title insurance agents.  

What the title company should know: This bill resolves weaknesses in the prior law that were discovered in the last two large failures of a major agent and a small underwriter; primarily that the entity must be insolvent prior to TTIGA being allowed to step in. Texas is the leader in the United States by having a Guaranty Association that protects the solvency of title insurers and agents and provides coverage for claims and some escrow funds in the case of the failure of either.  

What the title company should do: No action to be taken, simply be aware of the changes. 

HB 3228 - Hearings concerning title insurance rates and other matters relating to regulating the business of title insurance.
(Effective Date: 9-1-2019) 

Amends §2703.202 of the Insurance Code, et al, to allow an interested person to request the commissioner to conduct a public hearing to consider changing title insurance premiums. The commissioner then has 90 days to determine whether to call such hearing. The interested person may also request the hearing be held as a contested case. Any party to a hearing may still request another party be removed if the party doesn't have a substantial interest in the subject matter of the hearing.  

What the title company should know: This bill was a compromise with certain groups that had been pressing the legislature to change the method of rate setting and regulation of title insurance. Such parties had not requested any rate changes or appeared in any hearings to do so. This settlement allows someone with an interest in title insurance to request a hearing, including a contested case. The law still allows other parties to the hearing to request the removal of a party if that party has no interest in the matter.   

What the title company should do: Simply be aware of the somewhat minor changes to existing law that was put into place originally to avoid expensive rate hearings due to the participation of persons not truly affected by title insurance rates.   

HB 3306 - Disclosure of information concerning the corporate governance structure of certain insurers and related entities. 
(Effective Date: 9-1-2019) 

Requires an insurer to make an annual disclosure to Texas Department of Insurance (TDI) of governance structure, policies and practices, as required by TDI rules to be passed. Information will be confidential. First disclosure will be due June 1, 2020. 

What the title company should do: Underwriters should comply once rules are passed. Does not apply to title insurance agents.  

SB 2128 - the “Papering Out Bill” - Recording by a county clerk of certain documents concerning real or personal property.
(Effective Date: 9-1-2019) 

Amends §12.0013 of the Property Code to provide that a printed copy of an electronic record may be recorded in the public land records. The copy must show the electronic signature that is acknowledged, sworn or proved. It must be declared by a notary to be a true and correct copy. The bill provides a statutory copy of the notary's declaration of authenticity.  

What the title company should know: This bill was required by county clerks that do not allow electronic recording of documents. When a document is electronically acknowledged by a remote electronic notary (RON), no paper copy exists that may be recorded. This bill allows a different notary to sign a statutory declaration of authenticity which may be attached to the printed copy of the electronically signed and notarized document. That paper copy and the paper declaration of authenticity may then be recorded manually by the county clerk. 

What the title company should do: If you are in a county where the clerk does not allow electronic recording, you should make the statutory declaration of authenticity available to your escrow officers. You should consider obtaining the license and hardware necessary to be able to print an electronically signed and remotely notarized document. We expect that RON documents will become increasingly used in the future and would advise that you should consider being able to accept such documents even where your clerk is not currently able to accept such documents electronically. 

If you are in a county that does accept electronic recording on RON documents, you should remain aware of the law and the declaration of authenticity so that you will be able to provide usable copies of e-recorded documents that may be recorded in a county that does not accept them.
 

REAL PROPERTY - GENERALLY

HB 1523 - Regulation of land surveyors and the transfer of the regulation to the Texas Board of Professional Engineers and Land Surveyors, following the recommendations of the Sunset Advisory Commission; changing fees. 
(Effective Date: 9-1-2019) 

Chapter 1001 Occupations Code has been amended to combine the regulation of engineers and surveyors into the Texas Board of Professional Engineers and Land Surveyors. It abolishes the prior Texas Board of Professional Land Surveyors (TBPLS).  The regulatory board will consist of 5 engineers, 1 land surveyor and 3 public members. 

It is anticipated that this board will need to readopt the regulations of the existing TBPLS. Until such time the existing rules will still apply.  

What the title company should know: This bill is the result of the Sunset Review process of the TBPLS. 

What the title company should do: Mostly just be aware of the law. If and when the rules and standards relating to surveys are changed, we will advise you.   

HB 2569 - Requirements for condominium plats or plans. 
(Effective Date: 9-1-2019) 

Amends §82.059 (b) and (d) of the Property Code related to showing horizontal unit boundaries for condominium plats or plans. Specifying that they must show horizontal unit boundaries if there are any on plats and plans, unless they are described in the declaration. It affects those that declare condominium associations, plat surveyors, and plans for condominium developments.  

What the title company should know: Examiners should look to the declaration for horizontal unit boundaries, and if not located therein the horizontal unit boundaries must be included on the plats or plans. 

What the title company should do: Examine plats and plans in the declaration documents for horizontal unit boundaries if not included in the plat or plan. If not contained in any of these places contact your Stewart Underwriter as the declaration, plat, or plan may have to be amended to include the horizontal unit boundaries to insure. Applies to condominium regimes filed after September 1, 2019.  

HB 2845 - Removal of wind power facilities. 
(Effective Date: 9-1-2019) 

Adds Chapter 301 to the Utilities Code. 

Sec. 301.0003. REQUIRED AGREEMENT PROVISIONS ON FACILITY REMOVAL. (a) A wind power facility agreement must provide that the grantee is responsible for removing the grantee's wind power facilities from the landowner's property.  

The details of the agreement are set out in the statute. The title company has no duty to determine if the agreement complies with the statute.   

What the title company should know: Although the P-72 Severable Improvements Endorsements Form T-54 has no rate and cannot be issued currently in Texas, Item 2 of the endorsement might be impacted by the costs set out in the agreement/lease.   

What the title company should do: When an agreement for the removal of facilities is found in the title search, exception should be taken to the agreement. Even if the agreement is found in a lease, then remember that §301.0004 requires evidence of financial assurance be provided to the grantor securing the grantee's obligation to remove the facilities. The form of the guarantee is set out in that section. The agreement must also provide the estimated cost of removal which must be updated every 5 years. The financial assurance must be delivered not later than the earlier of the date the agreement is terminated or the 10th anniversary the project begins commercial operations. Accordingly, the agreement should be excepted to in Schedule B, item 10. It would also be appropriate to list the agreement/lease as a matter in Schedule B, item 1.    

HB 3815 - Seller's disclosure notice for residential property regarding floodplains, flood pools, floodways, or reservoirs. 
(Effective Date: 9-1-2019) 

This bill amends the statutory form of the Sellers Disclosure §5.008(b) Property Code to add to deal with: 

6. Are you (Seller) aware of any of the following conditions? * 

Write Yes (Y) if you are aware, write No (N) if you are not aware. 

__ Present flood insurance coverage 

__ Previous flooding due to a failure or breach of a reservoir or a controlled or emergency release of water from a reservoir 

__ Previous water penetration into a structure on the property due to a natural flood event 

Write Yes (Y) if you are aware and check wholly or partly as applicable, write No (N) if you are not aware. 

__ Located wholly partly in 100-year floodplain (Special Flood Hazard Area-Zone A, V, A99, AE, AO, AH, VE, or AR) 

__ Located wholly partly in a 500-year floodplain (Moderate Flood Hazard Area-Zone X (shaded))  

__ Located wholly partly in a floodway  

__ Located wholly partly in a flood pool 

__ Located wholly partly in a reservoir 

This bill defines the various flood issues addressed. We would expect the Texas Real Estate Commission to adopt the revised language of the Seller's Disclosure by the effective date. Please recall that title insurance does not provide flood insurance or information as to the matters set out in the Seller's Disclosure statement. This bill was passed in light of the severe flooding in the Houston area after Hurricane Harvey in 2017.  

What the title company should know: It is a good practice for the closing title insurance agent to ascertain that the most current version of the Seller's Disclosure is in the file. This should help the closing title insurance agent avoid litigation involving issues addressed by the disclosure.  

What the title company should do: Since Texas title insurance policies do not provide flood insurance, we do not require that the survey provide such information.   

SB 339 - Seller's disclosure notice for residential property regarding floodplains, flood pools, floodways, or reservoirs. 
(Effective 9-1-2019) 

This bill revises §5.008(b) of the Property Code to amend the Seller's Disclosure notice to include information about flood insurance, previous flood damage due to failure or breaches of reservoirs or controlled or emergency release of water, damage to structures caused by natural flooding events. It also contains detailed questions as to various 100-year flood plains. Flood issues are not covered by title insurance policies.  

What the title company should know: These changes were included because of the damage in the Houston area by Hurricane Harvey in 2017.  

What the title company should do: The closing title agent should be sure the most current Seller's Disclosure Notice is in the closing package. Although not a title insurance matter, having the most current form, with these changes, should help prevent any allegations that the title insurance company, its agents and the agent's personnel bear any responsibility for flooding matters.  

HB 3838 - Disclosure in certain offers to purchase a mineral or royalty interest. 
(Effective Date: 9-1-2019) 

The amendment to Property Code §5.152 requires a disclosure statement on the top of each page and above the signature line on mineral or royalty conveyances that the conveyance is not a lease, but in fact a conveyance of a mineral or royalty interest in at least 14-point font. If this statement of disclosure is not done according to the requirements of the Chapter, the conveyance is void. It does not affect title insurance as Mineral Interests are not insured; however, it can have an effect when mineral examination is requested.  

What the title company should know: Be aware that disclosures are required on Mineral Interest or Royalty Interest conveyances that state on the top of each page and above the signature line in at least 14-point font. 

"THIS IS NOT AN OIL AND GAS LEASE. YOU ARE SELLING ALL OR A PORTION OF YOUR MINERAL OR ROYALTY INTERESTS (DESCRIPTION OF PROPERTY BEING CONVEYED)."  

What the title company should do: List these on Schedule B, and if you receive any after September 1,2019, that do not have the disclosure statements as required contact an underwriter for further requirements. 

SB 1845 - Amendment of the dedicatory instruments of certain mixed-use real estate developments. 
(Effective Date: 9-1-2019) 

Deals with new Chapter 214, Property Code, by amending the dedicatory instruments of certain mixed-use real estate developments. The bill allows amendment of certain developments located in a municipality with a population of 2 million or more; and in a county with a population of 3.3 million or more (Houston).  

What the title company should know: Mixed-use developments including single family homes or condominiums are not affected. A mixed-use development must contain 20 to 250 acres of deed restricted property with at least 10 separate tracts or parcels, include commercial properties, including hotel and retail properties, that constitute at least 70 percent of the total  land area of the development; and office properties, including hotel and retail properties, that constitute at least 70 percent of the total land area of the development; and office properties that constitute at least 50 percent of the total land area of the development; and may include other real estate uses. It must also be governed by a mandatory property owners association.  

What the title company should do: Currently this bill has extremely limited effect. It is possible that currently only 1 property exists that it affects. However, bills such as this often become amended in later sessions of the legislature to apply to more developments. If such extension occurs, we will notify you.  

If presented with an amendment to a qualifying mixed-use development with the features described above, you should carefully read such amendment and compare the uses to the amendment and take exception to the amendment in Schedule B, item 1. Violations of the amended restrictions would be excepted to on Schedule B.
    

CITY GOVERNMENT

HB 36 - Expedited proceedings in cases involving dangerously damaged or deteriorated or substandard buildings or improvements in certain municipalities. 
(Effective Date: 6-14-2019) 

It adds §54.0155 to the Local Government Code to expedite appeals proceedings in cases involving damaged or deteriorated or substandard buildings or improvements in certain municipalities with a population of 500,000 or more. 

Civil Practices and Remedies Code §51.014 adds that a person may appeal from an interlocutory (temporary) order of a district court, county court at law, statutory probate court, or a county court that denies a motion filed by a municipality with a population of 500,000 or more in an action filed under §54.012(6) of the Local Government Code, which are cases involving dangerously damaged or deteriorated or improvements. The district court shall render its final order or judgment with the least possible delay in an action filed under the section. 

What the title company should know: Expedited appeals review rights are being granted to persons with an order against them on property involving damaged or deteriorated or substandard buildings or improvements in municipalities with a population of 500,000 or more. 

What the title company should do: If a notice of substandard building has been recorded in a county of over 500,000 population, you must review the actions of the court to make sure that the appeals process is over on proceedings filed under §54.012(6), prior to insuring a transaction found to be damaged or deteriorated by court order. 

HB 2634 - Municipal boundaries used to determine cemetery location  
(Effective Date: 9-1-2019) 

Adds to §711.008(e) of the Health and Safety Code that the annexed area cannot be developed as residential or commercial property and is primarily used for flood control. 

What the title company should do: If presented with a transaction where the intention is to establish or operate a cemetery not now in existence, review §711.008 of the Health and Safety Code. 

HB 3314 - Public hearing on replats 
(Effective Date: 9-1-2019) 

Amends Texas Local Government Code §212.14 and §212.15 to remove the requirement of a public hearing on a replat, without vacating the existing plat, if it is signed by all owners of the property being replatted and does not attempt to amend or remove any covenants or restrictions. 

It requires the municipality to send notice of the replat within 15 days after approval to all owners within 200 feet of the replatted lots.  

A hearing is required if the replat requires a variance or exception. 

No hearing is required unless it is signed by all owners of the property being replatted and does not attempt to amend or remove any covenants or restrictions.  

What the title company should do: We would need proof the municipality has sent the required notice of the replat within 15 days after approval to all owners within 200 feet of the replatted lots.   Note: The 200 ft radius may extend to property outside the subdivision being replatted.

SB 741 - Restrictive covenants regarding firearms or firearm ammunition  
(Effective Date: 9-1-2019) 

Property Owners' Associations cannot prohibit lawful use of firearms within restrictive covenants 

What the title company should do: Take exception to the CC&Rs as usual  

SB 812 - Application of the limit on appraised value of a residence homestead for ad valorem tax purposes to an improvement that is a replacement structure for a structure that was rendered uninhabitable or unusable by a casualty or by wind or water damage.  
(Effective Date 5-7-2019) 

What the title company should do: Could be a factor in determining the policy amount under P-66.  

SB 1303 - Maps of the actual or proposed boundaries and extraterritorial jurisdiction of a municipality and certain notices related to expanding the boundaries. 
(Effective Date: 9-1-2019) 

If the municipality is online, it must have a map that shows the boundaries and of its extraterritorial jurisdiction, notice to property owners of adoption of annexation plan. More details as to contents of notice in §41.001 Local Government Code. 

What the title company should do: No effect although could be useful in determining if a property is urban or rural for homestead purposes under §41.002 Property Code.
  

ENTITIES

HB 1159 - Acknowledgment of a written instrument on behalf of a limited liability company or partnership. 
(Effective Date: 9-1-2019) 

Amends the Civil Practice and Remedies Code to establish a short form for certificates of acknowledgment for a limited liability company and to establish that a written instrument can be acknowledged on behalf of a limited liability company by a member, manager, authorized officer, or agent acting for the company if such a person personally appeared before the officer taking the acknowledgment and acknowledged executing the instrument in the capacity stated as the act of the company for the purposes and consideration expressed in it. The bill also includes an authorized officer or agent acting for a partnership among the persons who may make such an acknowledgement on behalf of the partnership in the same manner.  

It expands the designated persons and the capacities of each who can sign a written instrument on behalf of an LLC or partnership before a notary to acknowledge and provides a statutory short form acknowledgment to use.  

What the title company should know: Be aware that in addition to members and managers of an LLC and general partners of a partnership, authorized agents and officers duly appointed by the LLC/partnership can now sign instruments on behalf of the LLC/partnership and that there are promulgated short form acknowledgements to use in such situations. For example, Assistant Vice Presidents of entities are frequently appointed by officers rather than the board of directors. Under the revised law, a copy of the appointment of an Assistant Vice President should be reviewed and unless not specifically allowed to sign written instruments, can sign our necessary conveyance documents.  

What the title company should do: Continue to do your normal review of LLC/partnership organizational documents and resolutions to verify the authority of the person and capacity in which the person is signing on behalf of the LLC or partnership, including any authorized agents and officers appointed by LLC or partnership organizational documents/resolutions. Please also be aware of and use the short form acknowledgements as designated for use by notaries. 

HB 1833 - Authority to transfer real property in the name of an entity. 
(Effective Date: 9-1-2019) 

  1. Creates an Affidavit to be used to transfer property by an entity. 
  2. Applies to many types of real estate related documents. See §12.019 of the Property Code (2) for the list and (2b) exempting domestic and foreign entities that are exempt for federal taxation under or transferring an interest in real property that exceeds $1 million. 
  3. The entity may prove a recorded or recordable affidavit identifying 1 or more individuals with the authority to execute the transfer documents. 
  4. The affidavit must be executed by a person over 18 years, under penalty of perjury, is authorized to do so and is fully competent and understands that third parties will rely on the truthfulness of the statement. It must name the entity and its principal business street address. 
  5. The affidavit must also list the legal description of the real property and the name and title of the person signing the affidavit.  
  6. The bill provides at §12.019(f) a person may execute the affidavit if: 
    1. an LLC - a manager or a member and the affidavit so states 
    2. Limited partner - a general partner and the affidavit so states
    3. Professional entity - a director or officer and the affidavit so states
    4. For profit corporation - affidavit must be executed by a person other than the person signing for the corporation. 
  7. The affidavit must be recorded.
  8. A person who in good faith relies on the affidavit is considered a bona fide purchaser for value and does not have to inquire as to the facts stated. 
  9. A person does not have to rely on or accept the affidavit 
  10. An entity is not required to deliver such an affidavit. 
  11. The entity may terminate its affidavit at any time by recorded termination. 
  12. The transfer authority contained in the affidavit terminates 1 year after recording.  

What the title company should know: While the bill is an attempt to streamline the process of determining who can sign for an entity, it contains several provisions that really do not change current practices. Even though the affidavit states the LLC manager may sign, the title company still must review the LLC documents to see that the affiant is actually the manager or member. Likewise, for the other entities mentioned. As to the affidavit providing bona fide purchaser protection to the purchaser from an entity, it appears unlikely the purchaser is actually the person who relies on the affidavit. The purchaser relies on the title company to be satisfied that as to the authority of person executing the document. Only after a court decides this issue will there be certainty.  

What the title company should do:  Stewart appreciates the effort that the Texas Land Title Association expended in getting this bill passed. To the extent that it provides a format for an underwriter to obtain a document from an LLC, limited partnership or professional entity that is somewhat useful, the affidavit may be helpful. However, the title examination will still need to review the entity documents to ascertain who is the owner, manager, general partner or resolutions who, as the case may be, is authorized to sign the affidavit. The statute also does not provide the statutory form of the affidavit to be used. Accordingly, such affidavit will need to be approved by your examiner and if the examiner has questions about the form or information, the examiner or escrow office should contact a Stewart Texas underwriter.    

At this time, Stewart does not require the use of the affidavit. If one is presented to you and your examiner approves it after review of the entity documents, you may record it and rely on it. Please remember the authority provided in the affidavit is only good for 1 year after the affidavit is recorded. If the same entity is involved in a transaction after 1 year, a new affidavit should be obtained even if the same person is asserting their right to sign documents.  

You should not require such an affidavit. You may, in Schedule C of the commitment, indicate if an authority affidavit is presented, copies of the entity documents necessary to determine the status of the affiant will be required and for a for profit corporation the person signing the affidavit may not be the person stated as having conveying authority.  

HB 3609 - Filing of an assumed name certificate by certain business entities. 
(Effective Date: 9-1-2019) 

Amends §71.103 and §71.104 of Business & Commerce Code 

Removes requirement for corporations limited partnerships, limited liability partnerships, limited liability companies, and foreign filing entities to record assumed name certificates in counties where the entities principal or registered office is located.  

Assumed name certificates need only be filed with Secretary of State. 

What the title company should do: After the effective date, future filings may only be necessary with the Secretary of State's office. However, if dealing with an entity that currently operates under an assumed name, you will need to continue to check the local records.  

If the agent uses an assumed name it should review the act and statute to see if it applies to them. 

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter.

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.

THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER  AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.

References

Bulletins Replaced:
None
Related Bulletins:
None
Underwriting Manual:
None
Exceptions Manual:
None
Forms:
None