In the Lone Star State, understanding the ins and outs of property law is crucial for landlords who want to protect their foreclosure sale property investments. One key aspect often overlooked is the concept of “redemption rights.” Because redemption law can significantly impact the repossession process, it makes sense to understand how it all works before making a property purchase.
So let’s examine what Texas property investors need to know to navigate this complex legal terrain successfully. Whether you’re a seasoned property investor or new to purchasing foreclosures, our guide will help you grasp the essentials of redemption rights in Texas.
What Property Owners Can Do to Repossess Property in Texas
Specific state laws govern the rights and responsibilities of property owners. One of the most crucial aspects of the law is the redemption period rights of the previous owners.
However, first, let’s look at who you can and cannot evict from the premises and the steps to make it happen.
Eviction Process After Purchasing a Home at a Foreclosure Auction in Texas
When you purchase a home at a foreclosure public auction in Texas, you may encounter various types of occupants still residing in the property. Understanding your rights and responsibilities as a new homeowner is crucial for navigating the eviction process effectively.
Here’s a breakdown based on Texas law:
Evicting the Previous Owner Who Lost the Home to Foreclosure
In Texas, once a property sells at a foreclosure auction, the previous owner loses all rights to the property, except for the redemption rights outlined in Texas Property Code § 51.003.
The previous owner may not exercise these rights within the specified timeframe (two years for homestead properties and six months for non-homestead properties). If they don’t exercise these rights within the time frame, you have the statutory right to initiate eviction proceedings under Texas Property Code § 24.005.
Evicting Squatters
Squatters, or individuals occupying the property without legal permission, also have redemption rights under Texas Property Code § 51.003. If they fail to exercise these rights within the specified period, you can proceed with eviction under Texas Property Code § 24.005.
Evicting Lease Holders
The situation becomes more nuanced if tenants occupy the property with a valid lease agreement. According to Texas Property Code § 24.005, if the tenants are on a month-to-month lease, you can opt not to renew the lease, thereby initiating the eviction process.
For tenants with longer-term leases, you can only evict them for valid reasons such as non-payment of rent, and you must follow the county-specific eviction procedures.
Steps for Eviction
Notice to Vacate:
The first step in the eviction process is to provide a written “Notice to Vacate” to the occupant, as required by Texas Property Code § 24.005.
Filing an Eviction Suit:
If the occupant does not vacate within the time specified in the notice, you can file an eviction suit in the appropriate justice court.
Court Hearing:
Both parties will be summoned for a court hearing, where evidence can be presented.
Writ of Possession:
If the court rules in your favor, a “Writ of Possession” will be issued, allowing you to reclaim the property.
By understanding and adhering to Texas Property Code §§ 24.005 and 51.003, you can navigate the eviction process effectively, ensuring that you comply with state laws while taking possession of your new property.
Redemption Period Rights for Property Investors
According to Texas Property Code § 51.003, certain property owners who go through foreclosure have distinct redemption rights.
Foreclosure Due to Nonpayment of Mortgage
The foreclosure process generally begins because owners do not have enough funds to keep up with the outstanding debt owed to their mortgage. Mortgage borrowers tend to owe an outstanding loan balance that is more than they can handle. These owners do not receive a redemption period.
The right of redemption is limited to these situations:
- If a property is sold at a foreclosure auction because the previous owner didn’t pay their property taxes, the previous owner can get it back. If the property was their “homestead” (main home or used for farming), they have two years to reclaim it.
- Commercial properties that go through a foreclosure action have 180 days to reclaim their property.
- If a Homeowners Association (HOA) forecloses on a property because the owner didn’t pay their HOA fees, the previous owner has up to 180 days to reclaim the property after notification.
The former owner has no right to do the following during their exemption period:
- Occupy the property
- Receive rent from a tenant Texas Tax Code §34.21(h).
When a tax or HOA lien forces homeowners into a foreclosure sale, they may have missed tax payments or payments to their HOA. In these circumstances, they may also owe additional fees due to accrued interest. The foreclosure sale is their way of getting out of the heavy debt.
However, many homeowners who face a foreclosure auction do not want to leave their homes. So Texas law offers a redemption period in case they can rebound from their financial crisis and rebuy their home.
If the property is their homestead, they have a shocking two-year exemption period window to redeem it after the foreclosure sale. The redemption period after a foreclosure sale is six months for non-homestead or commercial properties.
To exercise this redemption period right, the original owner must pay the purchase price, any actual repairs the investor makes, and an additional 25% (Texas Property Code § 51.003).
Example: Navigating Redemption Rights as a Property Investor in Texas
Let’s say you’re a property investor named Alex who has just purchased a residential property at a foreclosure sale in Texas. After closing the deal and paying the entire foreclosure price, you discover that the previous owners, the Smith family, still live in the house.
The Smith family just lost their home and do not want to move out.
You may feel understandably stressed about the situation if you’ve never dealt with a foreclosed home! Here’s how the concept of redemption rights, as outlined in Texas Property Code § 51.003, could affect your investment:
Scenario 1: The Property is a Homestead
If the Smith family had been using the property as their primary residence (homestead), they have a two-year window to redeem the property.
This means that within two years, they can pay you the purchase price you paid for the property, any actual repairs you’ve made, plus an additional 25%. If they manage to do this, they can reclaim ownership of the property, and you would have to relinquish control.
However, you can go through the eviction process to remove them from the home. The eviction doesn’t mean they lose their redemption period rights.
Scenario 2: The Property is Not a Homestead
If the property was not the Smith family’s primary residence, the redemption period shortens to six months. They would still need to pay the purchase price, any repairs, and the additional 25% within this shorter redemption period to reclaim the property. And you could file for an eviction if they won’t leave of their own accord.
What This Means for Alex, the Investor
As an investor, you must be prepared for the possibility of redemption. This could affect your plans for renovations, leasing, or reselling the property.
You might decide to hold off on significant investments in the property until the redemption period has passed. Alternatively, you could proceed cautiously, keeping in mind that any repairs or improvements could be reimbursed if the Smith family exercises their redemption rights.
Understanding Texas Property Code § 51.003 is crucial for any property investor in Texas. It informs your strategy and helps you manage the risks associated with properties that have previous owners still in residence.
Dealing with Tenants and Squatters
When the occupant is not the owner, you’re likely dealing with a tenant or a squatter.
For squatters, the redemption as mentioned above rights apply.
If the occupant is a tenant, the eviction process is governed by Texas Property Code § 24.005.
For month-to-month leases, you can opt not to renew the lease. For longer-term leases, eviction due to non-payment of rent is permissible, but you must adhere to county-specific eviction procedures (Texas Property Code § 24.005).
Imagine you’re a property investor named Casey who has recently acquired a property at a foreclosure auction in Texas. Upon taking possession, you find out that the property is not vacant. Instead, it’s occupied by either a tenant or a squatter named Jamie.
Here’s how Texas Property Code § 24.005 could guide your next steps:
Scenario 1: Dealing with a Tenant
If Jamie turns out to be a legitimate tenant with a lease agreement, your options depend on the type of lease. You can simply choose not to renew a month-to-month lease, effectively ending Jamie’s right to occupy the property.
If Jamie has a longer-term lease and fails to pay rent, you can initiate an eviction process for non-payment and debt owed.
However, you must follow the specific eviction procedures outlined by the county in which the property is located, as mandated by Texas Property Code § 24.005.
Scenario 2: Addressing a Squatter
If Jamie is a squatter with no legal right to the property, the redemption rights mentioned earlier still apply. This means Jamie has the same rights as the previous owner to redeem the property within a specific timeframe, provided they can meet the financial requirements.
However, you can still proceed with eviction proceedings during this time period.
What This Means for Casey, the Investor
As an investor who has purchased a property at a foreclosure sale, it’s crucial to identify who occupies the property as quickly as possible. This will determine your legal options for repossession.
If you’re dealing with a tenant, you might need to wait until the lease expires or proceed with an eviction if there’s a valid reason. If you’re dealing with a squatter, you’ll need to know their redemption rights, which could affect your investment strategy.
An experienced real estate eviction attorney can help you make informed decisions based on the intricacies of Texas Property Code § 24.005, allowing you to manage the property effectively while adhering to state laws.
Utility and Access Considerations
Before taking any action to reclaim the property, it’s advisable not to transfer utilities into your name until you’ve legally removed the current occupants.
Texas Property Code § 92.0081 allows you to change the locks if the property is vacant.
Let’s say you’re a property investor named Taylor who has just acquired a home at a foreclosure sale in Texas. After the purchase, you discover that the property is not vacant.
Here’s how Texas Property Code § 92.0081 and general best practices could influence your approach to utilities and access:
Scenario 1: Occupied Property
If you find that the property is still occupied—either by a tenant or a squatter—it’s advisable not to transfer any utilities like water, gas, or electricity into your name just yet. Doing so could complicate the legal process of eviction or redemption rights.
Wait until you’ve legally removed the current occupants to assume responsibility for the utilities.
Scenario 2: Vacant Property
If you confirm that the property is vacant, Texas Property Code § 92.0081 allows you to change the locks to secure the property. This is an essential step to ensure that you have full control over the property and to prevent any unauthorized access.
What This Means for Taylor, the Investor
Understanding when to take over utilities and how to secure the property is crucial for an investor.
If the property is occupied, prematurely transferring utilities into your name could lead to legal complications. On the other hand, if the property is vacant, you have the legal right to change the locks and secure the property, as per Texas Property Code § 92.0081.
By adhering to these guidelines, you can navigate the complexities of managing a foreclosed property in Texas, ensuring that you comply with state laws while protecting your investment.
What Exactly Is the Redemption Price? Who Determines the Final Amount?
Understanding the redemption price is crucial for buying homes at a foreclosure sale. Property investors must adhere to Texas law when dealing with a squatter or previous owner looking to redeem a property.
According to Texas Property Code § 51.003, the redemption price is calculated based on several components:
Purchase Price:
The original amount paid for the property at the time of purchase at the foreclosure sale.
Actual Repairs Made:
Any costs incurred for repairs or improvements made to the property.
Additional 25%:
An extra 25% is added to the sum of the purchase price and repair costs.
Using the itemized list, the redemption price formula is as follows:
Redemption Price =
Purchase Price + Actual Repairs Made + 25% (Purchase Price + Actual Repairs Made)
Payment: Once you calculate the redemption price, the individual must pay this amount within the specified redemption period—two years for homestead properties and six months for non-homestead properties (Texas Property Code § 51.003).
Legal Consultation:
If there’s any discrepancy or if the property owner is unsure about the calculated amount, consulting an attorney familiar with Texas property law is advisable.
By following these steps and adhering to Texas Property Code § 51.003, both parties can ensure that the redemption price is accurately calculated and paid, minimizing the risk of legal complications. If there is a disagreement, an eviction attorney can help you meditate, negotiate, or take the matter to court.
Redemption Rights and Rising Property Values
Property values can rise in the ever-changing real estate market, and interest rates may fluctuate. However, for previous homeowners or squatters looking to exercise their redemption rights in Texas, the market conditions have a limited impact on the redemption price. According to Texas Property Code § 51.003, the redemption price is determined by the original foreclosure sale price, any actual repairs made, and an additional 25%.
Let’s consider Emily, a previous homeowner who lost her property in a foreclosure sale. She sold her home for $200,000 at the foreclosure auction. Since then, the property market has boomed, and similar homes in her area now sell for $250,000. Additionally, interest rates have come down, making mortgages more affordable.
Despite these favorable market conditions, Emily’s redemption price remains unaffected. According to Texas Property Code § 51.003, her redemption price would be calculated as follows:
Foreclosure Sale Price: $200,000
Actual Repairs Made by the New Owner: Let’s say $10,000
Additional 25%: 25% of ($200,000 + $10,000) = $52,500
So, the total redemption price Emily would need to pay is $262,500 ($200,000 + $10,000 + $52,500).
Even though the property’s market value has risen to $250,000, Emily is not required to pay this higher amount. She only needs to pay the foreclosure price, the cost of actual repairs made, and the additional 25%, as stipulated by Texas law.
Most borrowers in foreclosure can’t afford to rebuy their home. The conditions and debts that existed to cause the foreclosure in the first place are often still a problem.
For property investors, this means that while the market value and interest rates might be in your favor, the redemption price remains constant based on the original foreclosure sale price and any actual repairs made. Understanding this can help both previous homeowners and investors navigate the complexities of redemption rights in Texas.
When in doubt, consult a lawyer familiar with Texas property law. Legal advice is essential for navigating the complexities of repossession by state law. Make informed decisions about repossession while minimizing the risk of legal complications.
Our Experienced Real Estate Eviction Lawyers Can Help
At Jarrett Law, we understand the complexities of Texas property law, especially when it comes to eviction proceedings after purchasing a home at a foreclosure auction. Whether you’re dealing with previous homeowners, squatters, or leaseholders, our team of skilled lawyers is here to guide you through every step of the eviction process.
We’ll ensure that you’re in full compliance with Texas law, from issuing the initial “Notice to Vacate” to securing a “Writ of Possession” from the court. Don’t navigate these intricate legal waters alone; let our legal team help you reclaim your property swiftly and efficiently.
Get in touch today for expert legal advice.
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