By Kaema Roberson, VP – Director of Education
If you haven’t already heard, beginning September 1, 2021, sellers will be required to provide notice to buyers when selling property located in a public improvement district (PID).
Let’s do a bit of Q&A to provide the answers you’re looking for?
Q: What exactly is a PID?
A: A PID is a funding mechanism that developers and municipalities can use to construct/extend infrastructure and utilities when creating subdivisions or communities. In layman’s terms, it’s a way for neighborhoods to enhance their communities. For example, you might have a downtown area developed for mixed-use that needs new lighting, additional trash cans, public bathrooms, or landscaping. A PID could fund these improvements.
Q: How will the seller provide notice?
A: According to the revised TREC contract forms,
“Seller must give Buyer written notice as required by §5.014, Property Code. An addendum containing the required notice shall be attached to this contract.”
Click here to view the revised contract forms.
Click here to view the new TREC addendum.
The addendum is not a required form. Your seller could use a notice created by the PID, but in most cases, the addendum will be the quickest and easiest way for the seller to meet the new statutory requirements.
Q: What if the seller fails to provide the required notice?
A: The buyer will have the right to terminate the contract, in addition to other penalties. Keep in mind the notice needs to be provided prior to the execution of the contract to avoid invoking the right to terminate.
Q: What are the best practices for the new PID notice?
A: Listing Agents-
- Determine if the property is in a PID at the time you take the listing. The best way to find this information is on the county tax site. Look up the property address, find the jurisdiction section and look for PID or public utility district listed as one of the taxing jurisdictions.
- If the property is in a PID, utilize the TREC addendum for the seller to give notice.
- You might consider uploading the notice to the MLS. This way, buyers’ agents have access to the completed document and can have their buyers sign it before the final execution of the contract.
- Finally, make sure when buyers’ agents submit offers that the signed notice is attached. If it’s not attached to the offer, request that the notice be signed before the final execution of the contract.
- Make sure to have your buyers sign the notice before the final execution of the contract and submit it with any offer.
Q: What is the title company’s role?
A: Because the notice must be given prior to the final execution of the contract, the front-end work of determining if the property is in a PID and helping the seller provide notice will fall on the agents and the seller. According to the new statutory requirements, “At the closing of purchase and sale, a separate copy of the notice required by Section 5.014 with current information shall be executed by the seller and purchaser, acknowledged, and recorded in the deed records of the county in which the property is located.”
Title companies will be having buyer and seller sign a notice at closing but remember this does not eliminate the need for a signed notice from the parties prior to the final execution of the contract.
Q. What if the seller provides the notice after the contract is signed?
A. If the notice is furnished at or before closing and the transaction closes, the buyer is presumed to have waived the right to terminate or recover damages.
Q. What about contracts I have opened or have already closed?
A. These new provisions apply only to contracts entered into on or after September 1, 2021.
If you would like more information on this topic, see the links below.
Texas Realtors® Memo