Specific Insuring Concerns - Do We Insure That?

Transcription

1 Specific Insuring Concerns - Do We Insure That? 2012 Texas Land Title Institute Michael C. Savas Vice President, Senior Texas Counsel First American Title Insurance Company, Houston

2 Michael C. Savas Vice President, Senior Texas Counsel First American Title Insurance Company 1500 S. Dairy Ashford, Ste. 300 Houston, Texas Toll-free: 800-FIRSTAM ( ) EDUCATION AND LICENSING Colgate University, B.A., 1988; Double Major in Economics and English The University of Texas at Austin, J.D., Licensed to practice law in Texas and Arkansas TITLE INDUSTRY EXPERIENCE Mike began his career in the Title Industry in 1992 and has served in various capacities including residential examiner, commercial examiner, residential closer, commercial closer, and commercial division manager. He has worked for direct operations of national underwriters as well as for an independent agency. Mike s underwriting experience includes underwriting for Texas, New Mexico, Oklahoma and Arkansas. TEXAS LAND TITLE ASSOCIATION INVOLVEMENT Underwriter Section Chair, TLTA Board of Directors Chair, TLTA Regulatory Committee Member, TLTA Rate Making Advisory Group Member, TLTA Legislative Committee Trustee, TLTA PAC Board of Trustees PUBLICATIONS FOR TEXAS AND ARKANSAS SEMINARS Texas Probate, 1998 The Fast Paced World of Intestacy!, 2005 Home Equity Loans and Reverse Mortgages, Arkansas Intestacy and Probate, 2006 Texas Tax Sales, 2007 Texas Foreclosures, 2007 Arkansas Judgments and Liens, 2007 Foreclosures, 2008 Hot Button Foreclosure Issues, 2008 Unusual Sales, 2009 Minerals and Title Insurance, 2010 Home Equity Loans and Reverse Mortgages, 2010 Reverse Mortgages-Everything You Want to Know, 2011 Foreclosures in 2011 Minerals and Title Insurance in 2012

3 I. ESTATES IN LAND A. A SNAPSHOT OF SCHEDULE A: 1. Name of Insured: 2. The estate or interest in the Land that is insured by this policy is: 3. Title is insured as vested in: 4. The Land referred to in this policy is described as follows: B. WHAT IS AN ESTATE OR INTEREST IN LAND? 1. WALK DOWN MEMORY LANE: Classification of Interests in Real Property per my First Year Law School Property Textbook (Property: Cases and Materials, Fifth Edition, May, 1987, John E. Cribbet and Corwin W. Johnson, Foundation Press): 1. Freehold Estates (Real Property) a) Fee Simple i) Fee Simple Absolute ii) Fee Simple Determinable b) Fee Tail c) Life Estates i) For life of the grantee ii) For life of one other than the grantee ( estate pur autre vie ) 2. Non-Freehold Estates (Personal Property) a) Tenancy for years b) Periodic Tenancy c) Tenancy at Will d) Tenancy at Sufferance 3. Concurrent Estates (Meaning ownership or possession by two or more persons at the same time) a) Joint Tenancy b) Tenancy by the Entirety c) Tenancy in Common d) Tenancy in Coparcenary 4. Incorporeal Interests in Real Property (these cannot be possessed physically because they consist of mere rights) a) Easements b) Profits Page 1

4 c) Covenants Running with the Land d) Equitable Servitudes e) Licenses 5. Future Interests a) Reversions b) Possibilities of Reverter c) Rights of Re-Entry for condition broken (more recently called powers of termination) d) Remainders (vested or contingent) e) Executory Interests (by will or by deed) BACK TO REALITY WHAT INTERESTS ARE WE ASKED TO INSURE? WHAT ARE WE WILLING TO INSURE? C. FEE SIMPLE 1. Fee Simple Absolute- This is our normal, cookie cutter deal. Fee simple absolute is an estate over which the owner has unlimited power of disposition in perpetuity without condition or limitation. Walker v. Foss, 930 S.W.2d 701 (Tex.App.-San Antonio 1996, no writ). 2. Fee Simple Determinable - Vesting until a contingent event. Examples: Property to John as long as the property is used for a park. If the property is not used at a park, title shall automatically terminate and shall vest in Mary. Property to John. If alcohol is served, then title shall automatically terminate and shall vest in Mary. John wants a policy. Can we insure? Generally, yes, with exception to the instrument that provides for the contingency (deed, will, etc.). What about Mary? See H3 below. 5. What about Minerals? Minerals are part of the fee, do we insure them separately outside of a policy insuring the surface? Can we? Yes, in theory. Do we? No, we have not historically in Texas or the US due to the nature of title plants, the nature of the search, etc. Page 2

5 4. Insuring Liens on Fee Simple Estate- These are our cookie cutter LTPs. a) Legal Principal When a mortgagor executes a deed of trust the legal and equitable estates in the property are severed. The mortgagor retains the legal title and the mortgagee holds the equitable title. Texas has always followed this lien theory of mortgages. Under this theory, the mortgagee is not the owner of the property and is not entitled to its possession, rentals or profits. Flag- Redfern Oil v. Humble Exploration Co., 744 S.W.2d 6 (Tex.1987). 5. Different Liens. a) Deed in Lieu of foreclosure? Yes, but check your underwriter. There are issues that the underwriter may be concerned with, including: i) Merger of title ii) Estoppel by Grantor iii) Creditor s Rights Issues iv) Actual consideration given v) Value of the Property in relation to outstanding loan amount vi) Continued possession by Grantor vii) Junior Liens D. LIFE ESTATES b) Transfer of Tax Liens. Can in theory, but check your underwriter. There are issues that the underwriter may be concerned with, including: i) Redemption Rights ii) Value of the property in relation to the amount of Tax Lien iii) Priority Issues and affect on other lienholders iv) Rights and possession of former owner/borrower 1. Definition A life estate is an interest in land lasting for the life a person or person, or to the happening or non-happening of some uncertain event. Sargeant v. Sargeant, 15 S.W.2d 589 (Tex.Comm.App.1929) A life estate cannot be inherited. Sargeant v. Sargeant, 15 S.W.2d 589 (Tex.Comm.App.1929) 2. Creation Can be created by deed, through will, or through operation of law (inheriting a 1/3 life estate under intestacy under Texas Probate Code, 38). 3. Insurable? It is an interest in land. Page 3

6 4. Different Life Estates a) Life Estate with power to determine remaindermen is still a life estate! Arnold v. Southern Pine Lumber Co., 123 S.W. 1162, writ dis. b) Life Estate with power of sale is still a life estate! Will giving life estate holder to sell, lease, transfer, mortgage and convey part or all of properties during her lifetime was still a life estate and did not expand the interest into fee simple. Medlin v. Medlin, 203 S.W.2d 635 (Tex.Civ.App. Amarillo 1947, writ ref d) 5. Homestead interest is a Life Estate?..it is clear to us that the homestead right in land contains every element of a life estate, and is therefore at least in the nature of a legal life estate, or, in other words, a life estate. Sargeant v. Sargeant, 15 S.W.2d 589 (Tex.Comm.App.1929) E. TENANCIES OR LEASEHOLDS (NON-FREEHOLD ESTATES) These are our cookie cutter Leasehold estates. Remember, however, to include Leasehold Endorsements a) Endorsement to T-1 OTP: T-4. b) Endorsement to T-1R OTP: T-4R c) Endorsement to T-2 LTP: T-5 F. MULTIPLE OWNERS (CONCURRENT ESTATES) 1. Joint Tenancy with Right of Survivorship Why do people ask for this? Texas has a Community Property regime wherein a husband and wife are co-owners, each owning an undivided ½ in the property with associated rights. When one spouse dies, the other will have rights to the property. In common law states, many people opt for vesting as JT w/ros because without it there is no survivorship between spouses. That is, husband and wife would each own a ½ interest, but own it separately. In Texas, the community estate owns it. Concerns about insuring this way: a) Do you affirmatively insure such status? b) Do you risk escrow liability for a customer s ignorance of the laws of Texas? c) Do you set up the next insured transaction for added curative? Joint Tenancies recognized in Texas, but upon death of a joint tenant, title does NOT pass to remaining joint tenant UNLESS you have to agree in writing to a Joint Tenancy with Right of Survivorship. Texas Probate Code 46. Page 4

7 Note, BETWEEN SPOUSES, an agreement shall be in writing. Texas Probate Code, 451. Written agreement shall be signed by both spouse and contain any of the following phrases: i) with right of survivorship ; ii) will become the property of the survivor ; iii) will vest in and belong to the surviving spouse ; or iv) shall pass to the surviving spouse. Texas Probate Code, 451 Insurable? Ask your underwriter. Your underwriter may ask for an adjudication of the agreement prior to relying on it. Or your underwriter may just ask for joinder by the heirs anyway. 2. Tenants in Common When multiple parties own property. This is the most common situation in the case where multiple parties own the property. PRACTICE TIP: Avoid stipulating percentage ownerships owned by co-tenants. Consider as their interests may appear language. 3. Time Shares? Underwriters will always place upon the foundation of title insurance a system of tracking, indexing and filing. One particular unit may be owned by 52 separate co-tenants, with ownership based on a week interval. Who is maintaining the tracking of these? How would we know that these units won t be oversold? Is there a third party who is handling such tracking and recording? 4. Common Elements Often unit owners will also own an undivided interest in the common areas. Concerns will be similar to those stated above. Do the interests add up? Do the restrictions appear to be in order? Do these interests match up? Does the interest run with the particular unit? G. NON-POSSESSARY INTERESTS (I HAVE A RIGHT TO..) 1. Easements. This is typical. Note that you need to reference the interest under A2 of the commitment and policy. Also, do you not need to reference the document under which the easement was created. If so, where does that reference go? Section A2? A4? You do not need to except to the easement in Schedule B unless it is a mutual easement that also burdens the property (ie. mutual access easement). Page 5

8 2. Licenses. Generally, an easement constitutes an interest in the land itself, while a license merely confers a privilege to do some act or acts upon the land without conveying any interest in or title to the land itself. Samuelson v. Alvardo, 847 S.W.2d 319 (Tex.App.-El Paso, 1993, no pet.) Licenses are generally not assignable and revocable at will. Dyre v. Eagle Rock Ranch, Inc., 364 S.W.2d 196 (Tex.1963) Typically given by governmental agency which otherwise is not willing to provide easement. Right to use sidewalk. Right to travel over state park. Insurable? Ask your underwriter. Your underwriter may require review of the license and may ask for it to be placed of record. 3. Covenants/Conditions Running with the Land. a) Real Covenants For a covenant to run with the land, it must be made between parties who are in privity of estate at the time the covenant is made, and must be contained in a grant of the land or in a grant of some property interest in the land. Panhandle & S.F.R. v. Wiggins, 161 S.W.2d 501 (Texas.Civ.App.-Amarillo 1942, writ ref d w.o.m.) It must touch and concern the land; related to a thing in existence, or specifically bind the parties and their assigns; must be intended by the original parties to run with the land; and the successor to the burden must have notice. Wayne Harwell Props. V. Pan Am. Logistics Ctr., Inc., 945 S.W.2d 216 (Tex.App. San Antonio 1997, writ denied). b) Equitable Covenants Don t technically run with the land but are binding against subsequent purchasers who acquire the land with notice of the restriction. If no privity of estate existed between the original parties, it must be shown that the restriction is imposed for the benefit of adjacent land; absent this showing, the covenant will be construed as a personal covenant with the grantor. Wayne Harwell Props. V. Pan Am. Logistics Ctr., Inc., 945 S.W.2d 216 (Tex.App. San Antonio 1997, writ denied). c) Examples: i) Standard Restrictions. Who has the right to enforce the restriction? Is this an interest we are willing to insure? Page 6

9 ii) Right of First Refusal Right of First Refusal is a Covenant that runs with the Land and therefore an interest in land. MPH Production Co., Inc. v. Smith, Not Reported in S.W.3d, 2012 WL (Tex.App.-Texarkana, 2012) Insurable? Not typical or common. Generally not considered insurable. ii) Royalty Interests/Income from the Land Stream of Income to a third party NOT a covenant that runs with the land and not assignable. An interest in cash flow from a piece of land is not so closely linked to the land itself that it constitutes an interest in the land and so satisfies the privity of estate requirement. Wayne Harwell Props. V. Pan Am. Logistics Ctr., Inc., 945 S.W.2d 216 (Tex.App. San Antonio 1997, writ denied). However, an action seeking royalty and overriding royalty is considered a suit on real property interests for the purpose of fixing venue in suits for recovery of such interests or damages thereto. Madera Production Co. v. Atlantic Richfield Co., 107 S.W.3d 652 (Tex.App. Texarkana, 2003) Insurable? Not considered insurable. iii) HOA liens An HOA can foreclose on a lien established under restrictive covenants. Even if this can be established as an equitable covenant, do we want to insure these? What about insuring a lien with redemption rights associated with it (eg. Transfer of Tax Lien Deeds of Trust). Do we want to insure after the foreclosure of an HOA lien? An underwriter will be looking at the relative amounts foreclosed upon, lien issues, redemption rights, and defense costs when there are multiple foreclosures. d) So, do we insure Restrictive Covenants? Pros: There is evidence to demonstrate that much of these may be determined to be interests in real property. Cons: Are we entering into insuring propriety and effectiveness of restrictions? Are we providing legal opinions as to adequacy of covenants? Have they complied with the law? Page 7

10 4. Other unusual Non-Possessory Interests What about Parking Spaces, Boat Slips, Storage Units, Etc.? Underwriters will always place upon the foundation of title insurance a system of tracking, indexing and filing. There may be a right to a parking space in a restriction, for example, either with a space specifically designated to each unit, or just a right to a space. Who is maintaining the tracking of these? How would we know that these units won t be oversold? If they are a part of a transaction wherein, for example, a condo unit is being insured, that may be more acceptable, but can a parking space be separately sold? Or insured? H. FUTURE INTERESTS / EQUITABLE INTERESTS 1. Option to Purchase A sale of an Option to Purchase is a sale of an interest in Real Estate (for purposes of the Real Estate Licensing Act). Hitchcock Props. V. Levering, 776 S.W.2d 236 (Tex.App.-Houston [1 st Dist.] 1976, writ denied) Do we insure? Generally not considered insurable. 2. Contract for Deed/Executory Contracts. Texas courts have been conflicted as to whether a purchaser under a contract for deed has not equitable title but only an equitable right to the consummation of the contract upon performance (Johnson v. Wood, 157 S.W.2d 146 (Tex.Comm n App.1941, opinion adopted) or whether a buyer has equitable title beginning at the date of the contract (Leeson v. City of Houston, 243 S.W. 485 (Tex.Comm n App. 1922, judgm t adopted). Generally, however, courts have settled on the proposition that a contract for deed does not convey legal or equitable title to the purchaser until the purchase price is fully paid. See Club Corp. of America v. Concerned Property Owners for April Sound, 881 S.W. 2d 620 (Tex.App.- Beaumont, 1994, writ denied). Do we insure? Generally not considered insurable. 3. Rights of Reverter See above under Fee Simple Determinable. A Right of Reverter is a right to fee ownership in the real property reverting to him if the condition terminating the determinable fee occurs. Luckel v. White, 819 S.W.2d 459 (Tex.1991). Most cases are along the lines of a mineral lease expiring and the treatment of the remainder interest of the grantor, but we can use the examples above as well. There s something about Mary (examples from above): Page 8

11 Property to John as long as the property is used for a park. If the property is not used at a park, title shall automatically terminate and shall vest in Mary. Property to John. If alcohol is served, then title shall automatically terminate and shall vest in Mary. Mary wants a policy. Can we insure? Cases indicate that this is a right, but it s based on the other interest terminating. Who gets to decide this? Do we want to wade into this? 4. Remainder Interest Property to Mom for life, then to my children. Children have a remainder interest. When does this interest take hold? A remainder interest is vested where there is a person in being who would have an immediate right to possession on the termination of the intermediate estate See Caples v. Ward, 179 S.W. 856 (1915). If it s through a will, it vests upon the death of the testator. See Trimble v. Farmer, 305 S.W.2d 157 (1957). If it s through a deed, it vests at the time of the deed. See Eversole v. Williams, 943 S.W.2d 141 (Tex.App.-Houston [1 st Dist.] 1997, no writ). Do we insure? Extremely rare II. INSURING WRAPS A. WHAT IS A WRAP? If a seller has a current mortgage on the real property at a relatively low interest rate, and if a buyer is unable to obtain a mortgage that does not provide for a significantly higher interest rate, then the buyer and seller may enter into an alternative financing arrangement called a wrap. In such an instance, the buyer enters into a seller finance arrangement where the seller loans to the buyer at a mutually agreeable rate, but the underlying seller loan is not paid off. In theory, the seller who is no longer in title to the property but is still obligated under the original note, still pays that underlying note while receiving new note payments from the buyer, thus wrapping around the original loan. In some instances a third party administrator is hired to collect the funds from the buyer and pay the underlying lender directly. In many instances the underlying lender is unaware of such a situation and in fact may not agree to such a transaction. Many deeds of trust contain a due on sale provision which states that the loan can be in default and payable in full upon sale of the encumbered property by the original borrower. B. WHAT S THE DIFFERENCE BETWEEN A WRAP AND AN ASSUMPTION? Under a wrap the old borrower still maintains liability for the original loan and the new buyer does not have liability under the original loan. In the case of an assumption, the Page 9

12 new buyer assumes the old borrower s liability to pay the original loan. There are some loans which do not have due on sale clauses and are assumable. In such an instance the new buyer/borrower deals directly with the old lender to assume the duties of the old loan. The original lender may require that the new borrower meet qualification requirements, that the new borrower pay assumption fees, and may also require the loan to be modified to provide for a higher interest rate. C. UNDERWRITING CONSIDERATIONS Underwriters will most likely have an outstanding position set forth under memorandum. Issues that underwriters would be concerned with may include: 1. Notice and consent of parties to the transaction 2. Notice and consent to original (wrapped) lender 3. Notice and consent from new lender (if any). 4. Exception in policy with regard to original (wrapped) loan. 5. Requirement for third party administrator such as a financial or trust institution involved in collection and disbursement. 6. Concerns regarding violation of due on sale clause. III. ISLAMIC FINANCING A. THE ISSUE While we have the concept of Usury, Muslim law Shari ah prohibits, essentially, the loaning of money based on charging interest. B. THE SOLUTION Islamic lenders have introduced concepts such as profit sharing, safekeeping, joint venture, cost plus financing, and leasing. C. PRACTICALLY WHAT HAPPENS The most common form structures the transaction as follows: 1. Deed from seller to two parties, a single purpose entity, typically an LLC and the ultimate purchaser or Consumer. The Co-Owner (LLC) may charge, separately a co-owner fee. 2. An obligation to pay is signed wherein the Consumer promises to pay the co-owner single purpose entity an amount which includes the original acquisition balance plus accrued Profit Payments. acquisition payments may be included where the consumer pays periodic amounts to acquire the interest of the coowner. A note is also signed. 3. Co-Ownership Agreement is signed. Page 10

13 4. Deed of Trust is signed where the Single Purpose Entity AND the Consumer are listed as Grantors. 5. Co-Owner Deed may be executed and requested to be filed wherein single purpose entity deeds to the Consumer. D. WHAT YOU NEED TO DO: 1. Check with your underwriter for approval and additional exceptions or requirements as may be needed. Exceptions may be made to a) Co-ownership agreement b) Deed of trust c) Co-owner deed or invalidity of the deed d) Co-tenants 2. Check closing instructions for specific ORDER OF RECORDING 3. Check amount of insurance on LTP versus amounts of note, co-ownership balance, deed of trust amount, etc. 4. Check to see that if a deed is into two entities, that BOTH are listed as grantors on the deed of trust. IV. SALES BY MINORS A. WHAT IS A MINOR? A person who is younger than 18 years of age and who has never been married or who has not had the person s disabilities of minority removed for general purposes. 601(16), Texas Probate Code B. HOW WOULD A MINOR GET IN TITLE ANYWAY? 1. UNIFORM TRANSFERS TO MINORS ACT , et. seq., Texas Property Code. a) Vesting is through deed listing individual grantee s name as custodian for (name of minor) under the Texas Uniform Transfers to Minors Act. See b) Effect: Property is indefeasibly vested in the minor. Custodian has all rights, powers, duties, and authority and the minor or minor s legal representative does not. See c) Power of Custodian: Among other things, to collect, hold, manage, sell, convey, invest, and reinvest custodial property. See d) BFP Protection: A third person in good faith and without a court order may deal with the custodian and is not responsible to determine the validity of the custodian s designation, the authority of the acts of the custodian, or the validity of a transfer by the custodian. See Page 11

14 e) Termination upon age of majority or death of the minor. See f) Uniform Transfers to Minors Act has a different definition of Minors!!! Minor means an individual who is younger than 21 years of age (11), Texas Property Code. 2. OUTRIGHT DEED TO MINOR! 3. MINOR INHERITS PROPERTY Through intestacy if parent died with all children not child or descendant of surviving spouse. C. METHODS OF INSURING SALES BY MINORS 1. UNIFORM TRANSFERS TO MINORS ACT See above. 2. GUARDIANSHIP 3. COURT ORDER WITHOUT GUARDIANSHIP. D. GUARDIANSHIPS 1. PROBATE COURT HAS JURISDICTION All guardianship proceedings must be filed and heard in a court exercising original probate jurisdiction. The court exercising original probate jurisdiction also has jurisdiction of all matters related to the guardianship proceeding as specified in Section 606A of this code for that type of court. 605(a), Texas Probate Code. In a county in which there is no statutory probate court or county court at law exercising original probate jurisdiction, the county court has original jurisdiction of guardianship proceedings. 607A, Texas Probate Code. 2. APPOINTMENT OF GUARIDANS FOR MINORS Guardian is qualified when she has taken an oath to discharge faithfully the duties of guardian of the ward, and has made the required bond, filed the bond with the court, and the judge has approved the bond. 699 & 700, Texas Probate Code. Once appointed guardian, the clerk shall issue Letters of Guardianship. 659(a), Texas Probate Code All letters of guardianship expire one year and four months after the date of issuance unless renewed. 659(b), Texas Probate Code. Page 12

15 3. RELIANCE UPON ACTS OF GUARDIAN Letters of guardianship or a certificate under seal of the clerk of the court that granted the letters issued under Section 659 of this code is sufficient evidence of the appointment and qualification of the guardian and the date of qualification. 660(a), Texas Probate Code. When a guardian who has qualified performs any act as guardian that is in conformity with the guardian's authority and the law, the guardian's act continues to be valid for all intents and purposes in regard to the rights of an innocent purchaser of the property of the guardianship estate who purchased the property from the guardian for a valuable consideration, in good faith, and without notice of any illegality in the title to the property, even if the guardian's act or the authority under which the act was performed may later be set aside, annulled, or declared invalid. 662, Texas Probate Code. 4. WHO SHOULD BE GUARDIAN? If both parents live together, both parents are the natural guardians of the person of the minor children by the marriage, and one of the parents is entitled to be guardian of the children s estates. 676(b), Texas Probate Code. REMINDER: Difference between guardian of the person and guardian of the estate. Guardian of the person does not have power to dispose of the property of the ward. Only guardian of the estate has that power. If parents disagree: Court makes the appointment on the basis of which parent is better qualified to serve in that capacity. If one parent is dead: Survivor is appointed guardian. If parents do not live together: "the guardianship of their minor children shall be assigned to one or the other, considering only the best interests of the children 676(b), Texas Probate Code. Minor orphan guardians are determined by statute, similar to intestacy provision of Probate Code. See 676(c). 5. SALES THROUGH FOUR STEP SHUFFLE (a) Application to Sell Real Estate , Texas Probate Code Guardian applies with amounts of claims, necessity/advisability of sale, etc. 821 Clerk files citation, by posting, to all interest persons. Informs of right to file an opposition to the sale. 823 Hearing not required in absence of filed opposition. 824A Page 13

16 (b) Order of Sale, , Texas Probate Code After hearing, court issues order which must specify: i) description of property; ii) whether property is sold at public auction or private sale; iii) necessity or advisability of the sale and its purpose; iv) whether a bond is required; v) the sale shall be made and the report returned in accordance with law; vi) the terms of the sale. Can the guardian buy the property? In case of minor, yes if the court determines that the sale is in the best interest of the estate. An attorney ad litem must be appointed. Court may require additional notice and an interested person may file written complaint. Written complaint triggers additional hearing. 831 (c) Report of Sale, 832, Texas Probate Code After 30 days from date of the sale, a report of sale is filed with the court including: i) the date of the order of sale; ii) a description of the property sold; iii) the time and place of sale iv) the name of the purchaser; v) the amount for which each parcel was sold; vi) the terms of the sale, & whether sold at private sale or public auction; vii) whether the purchaser is ready to comply with the order of sale Court will determine whether the general bond is sufficient to protect the estate after the proceeds of the sale are received. If not sufficient, the court will require increase in bond or additional bond. 833 (d) Action of Court on Report of Sale ( Decree Confirming Sale ), , Texas Probate Code. After 5 days after the filing of the report of sale, the court shall inquire into the sale, hear evidence, etc. If the court is satisfied, it shall enter a decree confirming sale and authorizing the conveyance of the property to be made by the guardian. 834 When the real estate is sold, the conveyance shall be by property deed that refers to and identifies the decree of the court that confirmed the sale. The deed shall vest in the purchaser all right, title, and interest of the estate to the property and shall be prima facie evidence that the sale has met all applicable requirements of the law. 835 Page 14

17 After a sale is confirmed by the court and one purchaser has complied with the terms of the sale, the guardian shall execute and deliver to the purchaser a property deed conveying the property SALE OF MINOR PROPERTY BY PARENT WITHOUT GUARDIANSHIP 889, Texas Probate Code Parent can sell minor property without guardianship, but with court order: (a) Net value of the interest does not exceed $100,000 (b) Application to sell must contain: (i) legal description of property (ii) name of minor and the minor s interest in the property (iii) name of the purchaser (iv) statement that the sale of the minor s interest in the property is for cash (v) statement that all funds received by the parent shall be used for the use and benefit of the minor. (c) Court set s hearing not later than 5 days after filing of application (d) After order of sale, proceeds go into the court registry. 7. SALE OF MINOR PROPERTY BY GUARDIAN OF THE PERSON WITHOUT GUARDIANSHIP 890, Texas Probate Code Same rules as above except applicant is Guardian of the Person, not the Parent. 8. MORTGAGE OF RESIDENTIAL HOMESTEAD INTEREST OF A MINOR WARD BY PARENT OR MANAGING CONSERVATOR 889A, Texas Probate Code Guardian of the person of the minor ward can mortgage minor s interest in homestead. (a) Statute language unclear if this is exclusively to be used for home equity loans. (b) Net value of the interest cannot exceed $100,000 (c) Applicant can be natural parent, adoptive parent, or managing conservator (d) Proceeds of the home equity may be used only to: (i) make improvements to the homestead, (ii) pay for education or medical expenses of the minor, or (iii)pay the outstanding balance of the loan. (e) Application to sell must contain: (i) name and address of minor (ii) legal description of property (iii) description of the minor s interest in the property (iv) name of the minor and the FMV of the property (v) the amount of the home equity loan (vi) purpose for which the home equity loan is being sought, Page 15

18 (vii) detailed description of the proposed expenditure of the loan proceeds, (viii) statement that all loan proceeds received shall be used in a manner that is for the minor s benefit. (d) Court set s hearing not later than 5 days after filing of application (e) Bond must be filed by applicant (f) Annual reports shall be filed outlining expenditures of a home equity loan. Once all proceeds expended, applicant shall file sworn report accounting for proceeds. (g) A minor may not disaffirm a home equity loan authorized by the court under this section. 9. MORTGAGE OF RESIDENTIAL HOMESTEAD INTEREST OF A MINOR WARD BY GUARDIAN OF THE PERSON 890A, Texas Probate Code Same rules as above except applicant is Guardian of the Person or Managing Conservator, not the Parent. Page 16