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Real Estate Law
Real estate law involves rights in the ownership and possession of land and buildings
attached to land. Real estate law often is referred to as the law of real property--the land
and buildings upon land--to distinguish it from the law of personal property, which includes
all other property. A stumbling block for many consumers entering the real estate market
is the number of unfamiliar terms frequently used by real estate professionals. Because
real estate is one of the oldest areas of the law, it uses many old terms and concepts, but
many rights and responsibilities regarding real estate have evolved and been updated as
society has changed.

Encumbrances
An encumbrance is a legal interest in property held by someone other than the owner of
the property. An encumbrance is not an ownership interest in real property, but it creates
some kind of obligation for the owner of the property. Encumbrances attach to property,
not the property owners, so the property may be bought and sold even though there is an
encumbrance attached. A person who buys property with an encumbrance is bound by the
encumbrance. Encumbrances include easements, deed restrictions, liens, assessments, and
taxes.

Easement
An easement is a nonpossessory interest in real property that gives the holder of the
easement the right to use another person's land for a particular purpose. There are many
forms of easements. Public utility companies frequently have utility easements that permit
them to run gas, water, or electrical lines through the property of others. The owner of
property near a lake might buy from the owner of lakeshore property an easement to
cross his or her property to access the lake. A person who owns property that is
landlocked may receive an easement from an adjacent land owner to have access in and
out of the property. This is called a right of way.

Deed Restriction
Deed restrictions also may be known as covenants, conditions, or restrictions. Deed
restrictions, which usually are included in the seller's deed to the buyer, generally are
imposed to maintain certain standards. Restrictions may limit the color one may paint a
house, the kind of trees one may plant, or the size of home that may be built on the
property.

Lien
A lien is a charge against property that provides security for a debt or obligation of the
property owner. The lien holder does not own the property. Some liens are voluntary, such
as when the owner of property takes out a mortgage. Other liens may be imposed. For
example, a lien may be imposed on property for nonpayment of taxes. One of the most
common liens is the mechanics lien. A mechanics lien arises when someone furnishes labor
or materials to improve a piece of property. A worker or supplier who is not paid may
establish a lien by filing an affidavit with the county clerk of the county in which the
property is located and sending a copy of the affidavit by registered or certified mail to the
property owner. A mechanics lien may be foreclosed only by a judgment of a court
ordering the sale of the property subject to the lien.

Assessment
An assessment is a tax levied on real property by a local taxing authority. Real estate taxes
are calculated by multiplying the taxable value of a piece of property by the tax rate.
Taxable value is calculated by subtracting any allowable exemptions from the appraised
value of property to determine net appraised value, multiplying the net appraised value by
the assessment ratio to determine assessed value, and then subtracting any allowable
exemptions from the assessed value to determine taxable value. Most properties are
reappraised periodically, and a property's taxable value may not be the same as its actual
market value. A special assessment is a tax levied on a piece of property to pay for
improvements that benefit the particular property, such as streets, sidewalks, and street
lighting. Special assessments are liens on the property until they are paid.

Real Estate Ownership
Typically, ownership of real estate includes the right to sell (convey), the right to use the
property as security for loans (encumber), the right to improve the land or buildings on the
land, and the right to use and possess the property.

Property can be owned by one or more persons. The two common ways in which parties
co-own a piece of property are joint tenancy and tenancy in common. In Texas, spouses
also can own community property.

Joint Tenancy
Although joint tenancy is a popular way for a husband and wife to own property, there is
no requirement that joint tenants be married or that there only be two joint tenants. Each
individual owner in joint tenancy has a right to sell, encumber, and possess the entire
property. Unlike many states, Texas does not allow joint tenants to automatically enjoy a
right of survivorship. Under Texas law, if one joint tenant dies before the tenancy is
severed, the interest owned by the deceased joint tenant does not survive to the remaining
joint tenants, but instead passes by will or intestacy. Joint tenants may agree in writing,
however, that the interest of any joint owner who dies will pass to the surviving joint
tenants, but no such agreement is inferred from the fact that the property is held in joint
ownership.

Tenants in Common
Tenants in common, like joint tenants, share the right to possess, sell, and encumber the
property. Upon the death of one tenant in common, his or her ownership interest passes to
his or her heirs as part of the estate.

Community Property and Separate Property
In Texas, spouses have separate property and community property. Separate property
consists of property owned or claimed by a spouse before marriage; property acquired by
a spouse during marriage by gift, devise, or descent; and damages for personal injuries
received by a spouse during marriage, except any recovery for loss of earning capacity
during the marriage. Community property consists of all property other than separate
property acquired by either spouse during marriage. Property possessed by either spouse
during or on dissolution of a marriage is presumed to be community property unless a
spouse can establish by clear and convincing evidence that the property is separate
property.

Each spouse has the sole management, control, and disposition of his or her separate
property. In addition, each spouse has the sole management, control, and disposition of the
community property that he or she would have owned if single. Any other community
property, such as mixed or combined community property (which neither spouse would
have owned if single), is subject to the joint management, control, and disposition of the
husband and wife. Spouses can provide otherwise by power of attorney in writing or other
agreement.

At any time, spouses may partition or exchange between themselves any part of their
community property. Property transferred to a spouse by partition or exchange agreement
becomes his or her separate property. A partition or exchange agreement must be in
writing and signed by both parties. Separate property then can be transferred to both
spouses in joint tenancy, discussed above.

Advantages and Disadvantages of Co-Ownership
Although there are advantages to co-owning property, there are drawbacks as well. If
co-owners cannot agree on use, sale, or possession of a piece of property, they may have
to go to court to resolve the matter in a partition action. In a partition action a joint tenant
or tenant in common asks the court to split the property in a fair and just manner. A
partition action dissolves the co-tenancy, but does not change the title to the property.
Each person will be given a specific share of the property to be used to the exclusion of
any other co-tenant, who previously had equal possession rights.

Residential Real Estate
The most common consumer real estate transaction involves the sale of a home. Unlike
years past, today a home buyer has a variety of options in deciding the type of dwelling to
buy. Single family houses are still the most common selections for home buyers. Single
family homes provide the maximum amount of privacy and freedom to their owners, but
they also may be the most expensive option and require the most upkeep.

Condominiums and townhouses may be an option for some purchasers. Both give their
owners many of the advantages of home ownership, such as tax deductibility of mortgage
interest, without some of the responsibilities some people consider to be disadvantages,
such as lawn care and exterior upkeep. Residents usually pay association fees to cover
maintenance.

A homestead is not a particular type of dwelling; instead, it is a tax classification that can
dramatically lower what a homeowner pays in real estate taxes. People who live in the
property they own are taxed at a much lower rate than if they rent out that property to
others. If a person buys property that currently is rental property, he or she must fill out
an application to change the property's tax status; otherwise, the person could end up
paying non-homestead taxes for the first year of ownership. An application for homestead
status is due before May 1. The chief appraiser may extend the deadline by written order
for a single period not to exceed 60 days. The chief appraiser also must accept and either
approve or deny an application for a homestead exemption after the deadline for filing has
passed if it is filed not later than one year after the date the taxes on the homestead were
paid or became delinquent, whichever is earlier.

Title
Title to real estate is the ownership of the property. Title may refer to the actual ownership
or to the documentary evidence of that ownership. Title is what gives the owner the right
to the property. In order to sell a piece of property, all title matters must be cleared.
Usually, this is accomplished through a title search. A title search is a diligent search of all
records relating to the property to determine whether the owner is authorized to sell the
property and whether there are any claims against it. If any defects in title are discovered
during the title search, the seller usually has time to cure the defect.

Often people have title insurance to protect them against any hidden defects in the title.
There are two types of title insurance. One type protects the lender's interest in the
property and the other protects the home owner's interest.

Deeds
A deed is a written instrument that transfers the title of property from one person to
another. There are many different types of deeds. Generally, in Texas, title is transferred
by a general warranty deed. A general warranty deed provides the greatest protection to
the purchaser because the seller pledges or warrants that he or she legally owns the
property and that there are no outstanding liens, mortgages, or other encumbrances against
it. A warranty deed is also a guaranty of title, which means that the seller may be held liable
for damages if the buyer discovers that the title is defective. A warranty deed is no
substitute for title insurance, however, because a warranty from a seller who later dies or
goes bankrupt may have little value. Texas provides a statutory form for use as a general
warranty deed, but any form is acceptable as long as it conforms to the law.

Another type of deed used is a quitclaim deed. A quitclaim deed relinquishes whatever
interest, if any, the seller may have in the property to the buyer. A quitclaim deed gives the
buyer the least protection of any deed. If the seller is the sole owner of the property, the
quitclaim deed is enough to transfer title, but the buyer takes a risk by accepting a
quitclaim deed because it offers the buyer no guarantee that the title is valid. Quitclaim
deeds customarily are used during the property settlement phase of a marriage dissolution.

Recording
In Texas, real estate owners and parties with real estate interests may file with the county
all documents affecting their interest in property in order to give public notice of the
interest. Although valid title passes without recording any documents, a buyer could later
lose the property to a subsequent buyer who purchases the property without notice of the
earlier buyer's interest. To prevent such an occurrence, it always is wise to file all
documents relating to property ownership or interest. In Texas, titles are transferred under
the abstract system. Abstract records go back hundreds of years and an abstract of title is
a record of all the entries for that property.

Buying or Selling a Home
Because Texas has many programs to help people buy homes, home ownership is a
possibility for people at all income levels. Buying a home may be both rewarding and
stressful. Every home purchase involves a number of complex legal issues, unfamiliar
terminology, and lots of paperwork. Knowing how the process works may reduce much of
the headache.

Real Estate Brokers
One of the first decisions for someone interested in buying or selling a home is whether to
use the services of a real estate broker. Real estate brokers are hired to help buyers and
sellers meet to complete the sale of a house. Home buyers and sellers may choose to work
with a broker exclusively or non-exclusively.

A person who decides to work with a broker will sign several contracts to clarify the
relationship between the consumer and the broker. These contracts may include provisions
regarding dual agency. This term refers to the arrangement in which a broker represents
both the buyer and the seller of the house. It may be difficult for one broker to represent
both a buyer and a seller fairly. When the broker finds a buyer for a house that the broker
has listed, the broker's dual loyalties become apparent. The seller wants the highest price
possible while the buyer wants to pay the lowest price. The contracts state what the broker
may share with the other party and which information must remain confidential.

Seller Disclosures
In Texas, on or before the effective date of a contract binding the buyer to purchase the
property, the seller must deliver to the buyer a disclosure notice. This document must
disclose to the buyer any material defects that are known hazards; or problems with the
structure; or problems with the heating, plumbing, mechanical, or electrical systems. Just
because problems are listed on this statement does not mean that the seller must repair the
problems, but the buyer may request either repair or a price break because of the
problem. If a contract to purchase a home is entered before the seller provides this
disclosure notice, the buyer may cancel the contract for any reason within seven days after
receiving the notice.

Foreclosure
Nobody in the process of buying a house wants to think about the possibility of falling
behind in house payments to the extent that the bank or mortgage company will foreclose
on the loan and claim possession of the house. Nevertheless, it is wise for a consumer to
understand why a lender forecloses on a piece of property, so the consumer can minimize
the possibility of losing a house.

Up to a point, a lender typically will work with a homeowner who falls behind in making
payments because the lender does not want to go through the hassle and expense of
foreclosing on a property. Homeowners should communicate with their lenders as soon as
financial difficulties arise that make paying the mortgage difficult. It can take months for a
lender to begin a foreclosure, and more months before it is completed, so usually there is
time to get the money needed to assure a lender that there will not be a default. After a
lender has foreclosed on a property, a homeowner may be able to set aside the foreclosure
sale, or "redeem" the property, by paying the purchase price at the foreclosure sale plus
any taxes or assessments.

Under certain circumstances, a Texas lender may accept the deed to the property instead
of foreclosing. The property owner loses the property, but if he or she truly has no other
way to avoid foreclosure, offering the deed as a way to satisfy the debt can prevent his or
her credit rating from being severely damaged by a foreclosure. However, because lenders
generally want cash and not real estate, there is no guarantee that a lender will accept a
deed offered in lieu of foreclosure.

Landlord--Tenant
Under Texas law, whenever the owner (landlord) of a house, apartment, room, or any
other living space agrees to let someone else (tenant) use the space for a fee, the two
parties enter into a legally binding rental contract. General contract principles are discussed
in the Contract Law Chapter. Rental contracts are a special class of contracts that are
governed by many unique rules. This section discusses the laws applicable to rental
contracts.

Leases
The terms of any rental agreement are stated in the lease. A lease can be an oral
agreement or a written document. A lease establishes or modifies the terms, conditions,
rules, or other provisions regarding the use and occupancy of the rental property. There
are two general types of leases: the periodic lease and the lease for a definite term. If the
lease is an agreement to rent the property for an unspecified length of time, it is
considered a periodic, or month-to-month lease. A periodic lease continues for a specific
time period and automatically is renewed at the end of the period for an indefinite time
without a specific end date. For example, parties may agree on a month-to-month lease
without specifying how many months the renter will stay. The lease continues until one
party terminates it. If the periodic lease does not specify when or how notice is to be given,
the parties must follow state law. Under Texas law, if the rental period is at least one
month, the tenancy terminates on the later of the day given in a notice for termination or
one month after the day on which a notice for termination is given. If the rental period is
less than one month, the tenancy terminates on the later of the day given in a notice of
termination or the day after the expiration of the period beginning on the day on which
notice is given and extending for a number of days equal to the number of days in the
rental period. In lieu of these statutory notice requirements, a landlord and tenant can
agree on a different period of notice to terminate or can agree that no notice is required.
Such an agreement must be in writing and signed by both parties. A tenant is liable for rent
only up to the date of termination, even if this does not correspond to the end of a rental
period.

A term lease is a rental agreement specifying a definite time period. For example, a lease
for one year is a term lease. Term leases are almost always written. If the parties to the
lease do not state when and what kind of notice is required, the lease automatically ends on
the last day of the time period.

Security Deposits
A landlord has the right to insist that a renter pay a security deposit before moving in. The
security deposit is used to pay for any damage beyond ordinary wear and tear that the
tenant might do to the rental property, or to satisfy any debts between the tenant and
landlord. The deposit cannot be used by the renter to pay rent. There is no limit to how
much the landlord may require for a security deposit. The landlord may increase the
security deposit at any time during a periodic lease if the tenant is given proper notice,
which generally is one rental period plus one day. If the lease is a term lease, no changes
may be made to the deposit until the lease comes up for renewal or the parties agree
otherwise.

At the end of the tenancy, the landlord must return the deposit within 30 days to the
forwarding address provided in writing by the renter. A requirement that a residential
tenant give advance notice of termination as a condition for refunding the security deposit
is effective only if the requirement is underlined or is printed in conspicuous bold print in
the lease. Before returning the security deposit, the landlord may deduct the amount of the
deposit necessary to repair damages (beyond normal wear and tear) and any charges for
which the tenant is legally liable under the terms of the lease or as a result of breaching the
lease. The landlord then must give any remaining balance of the security deposit to the
tenant with a written description and itemized list of all deductions.

Repairs
Landlords are required to keep rental property in reasonable repair. If a condition
materially affects the physical health or safety of a tenant, the landlord is required to make
a diligent effort to repair or remedy the condition if the tenant gives the landlord notice of
the condition and the tenant is not delinquent in the payment of rent when the notice is
given. The tenant's notice must be in writing only if the tenant's lease is in writing and
requires written notice. This repair and remedy requirement generally may not be waived
by the parties, but a landlord and tenant may agree that the tenant can make repairs at the
landlord's expense. If the parties have not made some contrary agreement, the landlord
remains responsible to make repairs. If the landlord refuses to make repairs, the tenant has
several options.

Call an Inspector
The renter may call local fire, health, housing, or energy inspectors to investigate whether
there is a code violation in the unit. Often, an inspector's report of a code violation or a
notice that the condition materially affects the health or safety of tenants is enough to
convince a landlord to correct problems. The law provides protection for a renter if the
owner attempts to evict the renter in retaliation for calling an inspector.

Repair and Deduct
If a landlord fails to repair or remedy a problem after notice by the tenant to the landlord
of the problem, the tenant may be able to have the problem repaired or remedied and
then deduct the cost from a subsequent rent payment. Prior to using this option, the tenant
must give the landlord written notice that he or she intends to use the repair or remedy
option and a description of the intended repair or remedy. Note, however, that this option
is only available for specific serious conditions contained in the Texas Code. If this option
is available to a tenant, the tenant's deduction for the cost of repair or remedy may not
exceed the amount of one month's rent under the lease. Repairs and deductions may be
made as often as necessary so long as the total repairs and deductions in any one month
do not exceed one month's rent.

Judicial Remedies
A tenant also may sue a landlord who fails to repair or remedy a condition after proper
notice. Such an action may be brought in the justice, county, or district courts, but the
justice courts may not order repairs. In such a civil action, the court can: issue an order
directing the landlord to take reasonable action to repair or remedy the condition; issue an
order reducing the tenant's rent, from the date of the first repair notice, in proportion to
the reduced rental value resulting from the condition until the condition is repaired or
remedied; enter a judgment against the landlord for a civil penalty of one month's rent plus
$500; enter a judgment against the landlord for the amount of the tenant's actual damages;
and award the tenant court costs and attorneys' fees.

Terminate the Lease
A tenant may terminate a lease for a failure of a landlord to repair or remedy only after
taking several steps. The tenant first must have given the landlord proper notice to repair
or remedy the condition. The landlord then must have had a reasonable time to repair or
remedy the condition. The tenant then must give subsequent written notice to the landlord
stating that the tenant intends to terminate the lease. The tenant must not be delinquent in
the payment of rent at the time either of the notices are given. The tenant then may
terminate the lease if the condition is not repaired or remedied within seven days after the
tenant's notice of intent to terminate. The tenant is entitled to a pro rata refund of rent
from the date of termination or the date the tenant moves out, whichever is later. The
tenant also may deduct the tenant's security deposit from the tenant's rent or obtain a
refund of the tenant's security deposit. A tenant who elects to terminate a lease for the
failure of a landlord to repair or remedy is not entitled to the repair and deduct remedies
or the judicial remedies discussed above.

Eviction
Under no circumstances may a landlord forcibly remove a tenant from rental property. In
order to get a tenant out of a rental unit, the landlord must bring a lawsuit called a forcible
detainer or forcible entry and detainer against the tenant. Legitimate grounds for bringing a
suit include nonpayment of rent, breach of a lease, or refusal to leave a unit after the
tenancy expires.

If the occupant is a tenant under a written lease or oral rental agreement, the landlord
must give the tenant at least three days' written notice to vacate the leased premises before
the landlord files an action for forcible detainer, unless the landlord and tenant contract
otherwise in a written lease or agreement. A landlord who files a forcible detainer suit on
the grounds that the tenant is holding over beyond the end of the rental term or renewal
period also must comply with the termination requirements discussed above in the Leases
section.

A justice of the peace court in the precinct in which the property is located has jurisdiction
in forcible detainer actions. If the landlord wants to recover attorneys' fees in a forcible
detainer lawsuit, the landlord must give the tenant a written demand to vacate the premises
by registered or certified mail at least ten days before the date the action is filed. The
landlord then may recover his or her attorneys' fees if he or she prevails in the lawsuit and
either the written lease entitles the landlord to recover attorneys' fees or the written
demand to vacate indicated that the landlord could recover attorneys' fees if the tenant did
not vacate the premises before the 11th day after the date of receipt of the notice. The
prevailing party in a forcible detainer action also is entitled to recover all court costs.

A landlord who prevails in a forcible detainer action is entitled to a judgment for
possession of the premises and a writ of possession. The writ of possession orders the
officer executing the writ to deliver possession of the premises to the landlord, including, if
necessary, physically removing the tenant and his or her property from the premises. If a
tenant's personal property is placed in storage, the tenant may recover this property within
30 days by paying the reasonable costs of moving and storage of the property. After 30
days, the tenant's property may be sold to satisfy the moving and storage charges.

Tenant's Rights
Tenants enjoy a number of rights, even if those rights are not specified in the rental
contract. The tenant has a right to quiet enjoyment of the premises, which means that the
landlord may not interfere illegally or unreasonably in the tenant's life, just because the
landlord owns the property. A renter has the right to use the rented premises in any way,
as long as it is legal.

Privacy
Generally, a landlord may enter a tenant's unit only with the tenant's consent, except in an
emergency. After a tenant has given notice of termination, a landlord has the right to enter
the unit to show it to prospective renters. A landlord also may enter for a "reasonable
business purpose," such as maintenance, only after giving the tenant reasonable notice. If a
landlord fails to get permission or give notice, the landlord is trespassing and may be sued
in court. The tenant whose privacy rights have been violated may recover damages.

Access
Tenants have a right of access to the property they rent. It is illegal for a landlord to lock a
tenant out of his or her unit without a court order, unless the exclusion results from bona
fide repairs, construction, emergency, removing the contents of premises abandoned by a
tenant, or changing the door locks of a tenant who is delinquent in paying at least part of
the rent. Although a landlord may change the door lock of a tenant who is delinquent in
paying rent, the landlord must follow all the procedures and notices required by law and
must provide a new key upon request without the payment of delinquent rent. A tenant
who is unlawfully locked out may either recover possession of the premises by going to
court or terminate the lease. In addition, the tenant may recover from the landlord a civil
penalty of one month's rent plus $500, actual damages, court costs, and reasonable
attorneys' fees, less any delinquent rent or other sums for which the tenant owes the
landlord.

Sublease
Subleasing is having someone else take over a tenant's rights and obligations under a lease
before the original lease expires. Under Texas law, a tenant may not sublet a unit to any
other person without the prior consent of the landlord. A landlord may, however, waive
the right to prior consent. If subletting is allowed and the new tenant does not pay rent,
damages the unit, leaves before the lease expires, or breaches another condition of the
lease, the landlord may hold the original tenant responsible. The original tenant then may
sue the new tenant for those costs.

Utilities
Landlords are forbidden under Texas law from shutting off or causing the interruption of
utilities, except in bona fide emergencies or for repairs or construction. Electrical service
also may be shut off in specific instances as allowed by law. A tenant whose electricity,
water, or heat are terminated because the landlord has failed to pay the bills has several
options. A tenant may pay the utility company to reconnect or avert the cutoff of utilities.
The tenant may deduct from his or her rent the amounts paid to the utility company to
reconnect or avert a cutoff. Or, a tenant may terminate the lease if the termination notice
is in writing and the tenant will move out within 30 days from the date he or she has notice
from the utility company of a future cutoff or notice of an actual cutoff, whichever is
sooner. The tenant also may recover any actual damages, including moving costs, utility
connection fees, storage fees, and lost wages, as well as court costs and attorneys' fees.

Energy Crises Program
The Texas Department of Housing and Community Affairs is the supervising state agency
for the energy crises program. The Department provides grant money to utility companies
and to households in cases of undue hardship. The beneficiaries of the grant money must
be persons who are in imminent danger of having utility service terminated, are
experiencing other energy-related and supply shortage emergencies, or meet federal
poverty income guidelines. Priority is given to the elderly and disabled.

Discrimination in Housing
Federal and Texas laws prohibit home sellers and landlords from discriminating on the
basis of race, color, religion, sex, familial status, national origin, or disability. Federal law
provides additional protections against discriminating on the basis of other factors, such as
age. In Texas, landlords generally cannot discriminate against children unless the building is
intended to provide housing for elderly persons.

Resources
Stuart M. Saft, Commercial Real Estate Transactions, Shepard's/McGraw Hill, Inc.
(Colorado Springs, CO, 2d ed. 1995).