Even though TREC just updated their contracts in November of 2020, they’re updating them again to reflect a new requirement that sellers will now be required to provide a new notice to buyers when selling property located in a Public Improvement District (PID). The changes were adopted in order to comply with HB1543. in relation to Public Improvement Districts (PID) and HB1560 which transfers regulation of residential service companies to the Texas Department of Licensing and Regulation.
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▼What Changed?
Texas sellers must now notify buyers if the property is in a PID before the buyers sign a purchase agreement. If a seller fails to provide the required notice, a buyer will have the right to terminate the contract, in addition to other penalties. TREC and TAR both have updated sales contracts and there is a new promulgated PID notice that meets the statutory requirements.
How do you know if a property is in a Public Improvement District?
The tax records for the property should reflect this and should always be checked before the property is listed so you can prepare the necessary PID notice and have it available before your client accepts a signed contract.
Find your Texas County Appraisal District’s website.
Are there penalties if I fail provide a PID notice to a buyer?
Yes, there are some stiff penalties if you fail to provide a PID notice to a buyer before contract execution.
- Buyers may terminate the contract at any time prior to closing.
- Buyers can file a lawsuit for damages after closing. Damages may require a seller to return all costs related to the purchase of the property back to a buyer with the buyer reconveying the property back to the seller.
**These penalties are similar to current penalties applicable to the failure to provide a MUD notice.
When do the Texas PID Notice changes go into effect?
The new versions of the sales contracts must be used if the contract will be executed on or after September 1, 2021. Sellers are required to attach the new PID notice (TREC 53-0) as an addendum if the property is located in a PID when using the updated contracts.
Where can I find the PID Notice?
Every PID is required to maintain and file with the county clerk a service plan which includes information about the PID. Every time after 9/1/21 that a PID updates their service plan, they must include a copy of the PID notice complete with the required information. The service plan and completed PID notice will typically be publicly available on the PID website.,
Are there any exemptions to providing the PID notice to buyers?
Yes, there’s a list of exemptions where your seller might not be required to provide a PID notice to buyers before execution of the contract.
The PID Notice does not apply to a transfer:
- Under court order or foreclosure
- By a trustee in bankruptcy
- By an owner to the lender or by a trustor to a beneficiary under a deed of trust
- By a lender or a deed of trust beneficiary that acquired the property under a deed of trust sale, court ordered foreclosure, or deed in lieu of foreclosure
- By a fiduciary in the course of the administration of a decedent’s estate, guardianship, conservatorship, or trust
- From one co-owner to another of an undivided interest in the property
- To a spouse or blood relative of the seller
- To or from a governmental entity, or
- Of only mineral interest, leasehold interest, or security interest
What forms changed to accommodate the PID requirements?
- Unimproved Property Contract
- One to Four Family Residential Contract (Resale)
- New Home Contract (Incomplete Construction)
- New Home Contract (Complete Construction)
- Farm and Ranch Contract
- Residential Condominium Contract (Resale)
New Texas PID Notice Form
Download or view a copy of the final version of the new form TREC 53-0 Addendum containing Notice of Obligation to Pay Improvement District Assessment.
Texas Association of Realtors More Information
Texas Association of Realtors has provided a memo concerning the new PID requirement that covers this topic in greater detail.
Steps to help you stay in compliance
Your transaction coordinator’s first step in any transaction is to always confirm the most current contract is being used. This is especially important when a change has been made. The version of the contract is found in the upper right-hand corner. If there is an addendum present, they will be sure to check the form is completed properly.
Whether you are handling the paperwork for the listing or transaction by yourself or have hired a professional, make sure you’ve got the right forms for the job. For even more details, check out the TREC Rule and Contract Changes From the August 2021 Meeting.
