Untitled Texas Attorney General Opinion ( 2018 )

KEN PAXTON
ATTORNEY GENERAL OF TEXAS
April 23, 2018
The Honorable James White Opinion No. KP-0195
Chair, House Corrections Committee
Texas House of Representatives Re: Consequences of failing to comply with
Post Office Box 2910 the requirements for continuation of existing
Austin, Texas 78768-2910 private transfer fee obligations under section
5.203 of the Property Code (RQ-0205-KP)
Dear Representative White:
You ask multiple questions regarding compliance with the requirements for continuation
of existing private transfer fee obligations pursuant to the Texas Property Code. 1 While private
transfer fee obligations occur in different forms, one example is a subdivision deed restriction that
a developer places· on all property in the subdivision, requiring each subsequent buyer of the
property to pay a transfer fee to the developer. 2
In 2011, the Legislature enacted laws regulating, and in large part prohibiting, the use of
private transfer fees associated with real property transactions. Act of May 21, 2011, 82d Leg.,
R.S., ch. 211, § 1, 2011 Tex. Gen. Laws 780, 780-84. It defined "private transfer fee" as "an
amount of money, regardless of the method of determining the amount, that is payable on the
transfer of an interest in real property or payable for a right to make or accept a transfer." TEX.
PROP. CODE§ 5.201(4). It also defined "private transfer fee obligation" as:
an obligation to pay a private transfer fee created under:
(A) a declaration or other covenant recorded in the real property
records in the county in which the property subject to the private
transfer fee obligation is located;
(B) a contractual agreement or promise; or
( C) an unrecorded contractual agreement or promise.
1
Letter from Honorable James White, Chair, House Corrs. Comm., to Honorable Ken Paxton, Tex. Att'y
Gen. at I (Jan. 8, 2018), https://www.texasattomeygeneral.gov/opinion/requests-for-opinion-rqs ("Request Letter").
2
See Senate Research Ctr., Bill Analysis, Tex. H.B. 8, 82d Leg., R.S: (2011), available at
http://www.capitol.state.tx.us/tlodocs/82R/analysis/pdf/HB00008E.pdf#navpanes=0 (explaining the real estate
practice of private transfer fees).
The Honorable James White - Page 2 (KP-0195)
Id. § 5.201(5). The Legislature generally made a private transfer fee obligation created on or after
the effective date of these provisions void and unenforceable against a subsequent owner or
subsequent purchaser of an interest in real property. 3 Id. § 5.202(a). In addition, for preexisting
private transfer fee obligations, the Legislature enacted detailed notice provisions for the
continuation of those private transfer fee obligations:
(a) A person who receives a private transfer fee under a private
transfer fee obligation created before [June 17, 2011] must, on or
before January 31, 2012, file for record a "Notice
of Private Transfer Fee Obligation" as provided by this section in
the real property records of each county in which the property is
located.
(c) A notice under Subsection (a) must:
(1) be printed in at least 14-point boldface type;
(2) state the amount of the private transfer fee and the method of
determination, if applicable;
(3) state the date or any circumstance under which the private
transfer fee obligation expires, if any;
(4) state the purpose for which the money from the private
transfer fee obligation will be used;
(5) notwithstanding Subsection (b), state the name of each payee
and each payee's contact information;
(6) state the name and address of the payee of record to whom
the payment of the fee must be sent;
(7) include the acknowledged signature of each payee or
authorized representative of each payee; and
(8) state the legal description of the property subject to the
private transfer fee obligation.
Id. § 5.203(a), (c). The Legislature also required refiling of the notice at regular intervals and
amended notices in certain circumstances. Id.§ 5.203(d).
!
3
Chapter 5, subchapter G of the Property Code, regulating private transfer fees, became effective on June 17,
2011. Act of May 21, 2011, 82d Leg., R.S., ch. 211, 2011 Tex. Gen. Laws 780, 784.
The Honorable James White - Page 3 (KP-0195)
Relevant to these provisions, you first ask whether a private transfer fee obligation is void
if the person who receives the private transfer fee does not comply with the notice requirements of
section 5.203 of the Property Code and whether the private transfer fee obligation would be
enforceable against a subsequent conveyance of the property. Request Letter at 1. Our primary
objective in construing statutes is to give effect to the Legislature's intent. Molinet v. Kimbrell,
356 S.W.3d 407, 411 (Tex. 2011). "The plain meaning of the text is the best expression
oflegislative intent unless a different meaning is apparent from the context .... " Id. Through
section 5.203, the Legislature established detailed and extensive notice requirements with which a
payee must comply to continue the existence of a private transfer fee obligation. TEX. PROP. CODE
§ 5.203(c). The Legislature could not have been more clear ab9ut the effect of failing to comply
with those notice requirements: "If a person required to file notice under this section fails to comply
with this section[,] ... the private transfer fee obligation is void," and "the property is not subject
to further obligation under the private transfer fee obligation." Id. § 5.203(£)(2)-(3).
You also ask whether "failure to meet just one requirement" of section 5 .203 is sufficient
to void the private transfer fee obligation. Request Letter at 1. Section 5.203 details numerous
specific requirements for the notice to continue the private transfer fee obligation, including font
size, the significant information that must be included in the notice, and when and where the notice
must be filed. TEX. PROP. CODE § 5.203(a), (c), (d). The notice requirements are clear, and
"[w]here text is clear, text is determinative." Entergy Gulf States v. Summers, 282 S.W.3d 433,
437 (Tex. 2009). In other notice contexts, the Legislature has allowed for substantial, rather than
strict, compliance with notice provisions. See BankDirect Capital Fin., LLC v. Plasma Fab, LLC,
519 S.W.3d 76, 81 (Tex. 2017) (noting that lawmakers have codified substantial compliance
throughout numerous categories oflegislation). "When the Legislature desires a not-so-bright line
forgiving noncompliance, it knows what to say and how to say it." Id.· The Legislature did not do
so here, and a court would therefore likely conclude that a payee must strictly comply with the
requirements of section 5.203. See id. Failure to meet even one requirement of section 5.203
would likely void the private transfer fee obligation. 4
You next ask whether a change in the use of the land affects the validity or enforceability
of the private transfer fee obligation. Request Letter at 1. Nothing in the statutory provisions
related to private transfer fees addresses a change in the use of the land and its effect on the
underlying obligation. It is possible that the contractual obligations related to the private transfer
fee could address this issue and limit the applicability of the obligation if the use of the land
changes. See Tex. Att'y Gen. Op. No. GA-1081 (2014) at 3 n.3 (stating that attorney general
opinions do not construe contracts). However, subchapter G, chapter 5 of the Property Code does
not impact the enforceability of a private transfer fee obligation simply because the use of the land
changed.
In your final question, you ask how a seller must disclose an existing private transfer fee
obligation to a potential purchaser of real property and when that disclosure must be made.
Request Letter at 1. Section 5.205 of the Property Code provides that a "seller of real property
4
The Legislature authorized the attorney general to "institute an action for injunctive or declaratory relief to
restrain a violation" of the laws regulating private transfer fee obligations. TEX. PROP. CODE § 5.207(a). Furthermore,
the attorney general may institute an action for civil penalties against a payee for a violation. Id.§ 5.207(b).
The Honorable James White - Page 4 (KP-0195)
that may be subject to a private transfer fee obligation shall provide written notice to a potential
purchaser stating that the obligation may be governed by this subchapter." TEX. PROP. CODE
§ 5.205. Unlike the notice requirements placed on the payee in section 5.203, the Legislature did
not provide detailed requirements for the seller of property encumbered with a private transfer fee
obligation in providing notice to a potential purchaser. Cf id. § 5.203. It did not specify a form
for this disclosure or explain where or when the disclosure must be made, and the seller will
therefore not be held to the strict requirements found in section 5.203. In other instances when a
statute requires a seller to give notice to a potential buyer about the condition of the property or an
encumbrance on the property, the statute provides specific details about how to give such
notice. See, e.g., id. §§ 5.008 (establishing substance and timing requirements for seller's
disclosure of property condition to purchaser), 5.011 ("Seller's Disclosure Regarding Potential
Annexation"), 5.012 ("Notice of Obligations Related to Membership in Property Owner's
Association"). The Legislature has not established similar specific requirements here about how
a seller must give notice to a potential purchaser under section 5.205. In construing statutes, courts
take statutes as they find them and will not amend a statute by adding words that are not contained
in the language ofthe statute. Lippincottv. Whisenhunt, 462 S.W.3d 507,508 (Tex. 2015). Thus,
while a seller must provide notice under section 5.205 in writing, no additional statutory
requirements exist concerning the form such notice must take. You also ask when the seller must
make the disclosure to a potential purchaser. By requiring the seller give notice to a "potential
purchaser," the language suggests that the seller must give notice before the purchase transaction.
See TEX. PROP. CODE§ 5.205. However, beyond this timing requirement, the Legislature did not
specify when the notice must be made.
You also ask whether the private transfer fee obligation is void if this disclosure is not
properly made. Request Letter at 1. The Legislature provided that the obligation is void if the
payee does not provide the notice required by section 5.203. TEX. PROP. CODE§ 5.203(f)(3). It
did not do the same for notice required by the seller to a potential purchaser. See id. § 5.205. After
the first sale of the property, the payee of the private transfer fee obligation, who must give notice
under section 5.203, generally will not be the seller required to give notice under section 5.205.
While a purchaser may attempt to void a sale if the seller does not provide the notice required
under section 5.205, a seller's failure to provide notice will not void the payee's interest in the
underlying private transfer fee obligation.
The Honorable James White - Page 5 (KP-0195)
SUMMARY
If the payee of a private transfer fee obligation fails to
comply with the notice requirements under section 5.203 of the
Property Code, the private transfer fee obligation is void, and the
property is not subject to further obligation under the private transfer
fee obligation. The Legislature did not authorize substantial
compliance with the notice requirements of section 5.203. A court
would therefore likely conclude that a payee must strictly comply
with those requirements, and failure to meet even one payee
requirement would void the private transfer fee obligation.
Chapter 5, subchapter G of the Property Code does not
address the validity or enforceability of a private transfer fee
obligation when a change in the use of the underlying land occurs.
Section 5.205 of the Property Code requires that a "seller of
real property that may be subject to a private transfer fee obligation
shall provide written notice to a potential purchaser stating that the
obligation may be governed by this subchapter." The Legislature
did not provide specific requirements regarding this notice, and a
court is unlikely to read requirements into the statute that the
Legislature did not enact. A seller's failure to provide notice under
section 5.205 will not void the private transfer fee obligation.
Very truly yours,
KEN PAXTON
Attorney General of Texas
JEFFREY C. MATEER
First Assistant Attorney General
BRANTLEY STARR
Deputy First Assistant Attorney General
VIRGINIA K. HOELSCHER ·
Chair, Opinion Committee
Assistant Attorney General, Opinion Committee