Texas Law of Contracts
Fee simple absolute
The strongest and most enduring interest in real estate.
Statute of Limitations
is a law establishing a time limit for civil suits, setting a maximum period of time to elapse between the dates an injury occurs or the basis for a legal claim is discovered and the date a civil lawsuit is filed. Doctrine of Laches- a principle that courts use to bar dated claims.
Consideration
something valuable that each party exchanges in order to demonstrate that he or she agrees to the contract's terms; it can be a promise, money, property, forbearance or services.
Power of Attorney
the legal instrument that authorizes one party to act on behalf of another in making legal decisions.
Statute of Frauds
this law requires that specific contracts be in writing and signed by all of the parties who are bound by contract.
Fraud
when an individual purposefully deceives another individual in order to induce him or her to part with something valuable.
Joint Tenancy
A form of ownership where the owners have an undivided interest in the entire property and where there is the right of survivorship.
Mortgage
A legal document that creates a lien on a property as security for a loan. Sometimes the term refers to both the mortgage document and the promissory note.
Deed of Trust
A legal document used as security for a promissory note, which conveys temporary, but not full, title to a third party in a transaction, where it is held until either (a) the loan is paid off and the title is conveyed to the borrower or (b) the loan is foreclosed and the title is conveyed to the lender.
Promissory Note
A legal document wherein the borrower acknowledges his or her debt to a lender and agrees to repay.
Freehold Estate
A right of title to land that is characterized by two essential elements: immobility, meaning that the property involved is either land or an interest that is attached to or has been derived from land, and indeterminate duration, which means there is no fixed duration of ownership.
Title Insurance
An insurance policy that covers the holder in the event of loss due to an uncovering of some fault in the title (such as forgery or poorly filed records).
Fixture
An item of personal property that has been incorporated into real property.
Chattel
An item of tangible movable personal property (as livestock or an automobile) that is not permanently connected with real estate.
Condominums
An undivided interest in a common area together with a separate interest in space.
Emblements
Annual crops cultivated by a tenant that are treated as the tenant's property rather than the landowner's. If a tenant loses possession of the land on which the crops grow, he or she is still entitled to finish raising the crops and harvest them.
Encumbrances
Any claim against, limitation on or liability against real estate and can impede the transfer of title to the real estate.
Land
Any part of the earth's surface not covered by a body of water; the part of the earth's surface occupied by continents and islands.
Encumbrance
Any restriction, encroachment, claim, or lien on a property (such as a mortgage) that affects its value or use.
Cooperatives
A different type of home ownership. Instead of owning actual real estate, with cooperative housing you own a part of a corporation that owns the building. When living in cooperative housing, the shareholder helps pay for the mortgage, and maintenance of the entire building.
Amendment
A document that changes the terms in a sales contract that has been previously agreed to by all the parties. All parties must sign the amendment for it to be valid.
Origination Fee
A charge, usually a percentage of the loan amount, that a lender charges for underwriting or "originating" the loan.
Lien
A claim that one person has on another's property as security for a debt. A mortgage or money owed to a contractor, for instance, sometimes creates a lien on a borrower's property.
Power of Sale Clause
A clause in the loan document (e.g., mortgage, deed of trust, or note) that allows the lender to foreclose in the event of borrower default without the lender having to take judicial action.
Prepayment Clause
A clause in the loan document (e.g., mortgage, deed of trust, or note) that describes the amount of the principal balance that the borrower may pay within a certain time period. The most common clause generally indicates that the borrower has the right to repay the loan in whole or in part at any time.
Escrow Closing
A closing conducted with the help of a disinterested third party (the escrow agent) who holds funds and documents until they are required to be disbursed to the parties in the transaction.
Abstract
A compressed history of the title of a property, prepared by an abstracter, including all actions that have affected the title (such as conveyances) and all current encumbrances affecting the title.
Earnest Money Contract
A contract in which the buyer agrees to purchase (and seller agrees to sell) a seller's property for a specified amount and puts down a deposit of earnest money to demonstrate that her or his offer is in good faith.
Invalid Contracts
A contract that has no legal effect; this means that the stipulations and conditions in the contract cannot be legally enforced.
Unenforceable Contracts
A contract that was once a valid contract, but its enforcement is now barred by the statute of limitations or the doctrine of laches. It is essentially a contract without any legal remedy because the time allotted for enforcement has elapsed.
Tax Deduction
A cost or expense that reduces the amount of a taxpayer's taxable income, such as the interest payment on a mortgage loan. It may or may not be a dollarfor-dollar reduction, as the tax credit is.
Real Estate Settlement Procedures Act (RESPA)
A federal act outlining the procedures and disclosures that are necessary at the closing of a real estate transaction.
Joint Tenants
A special form of ownership by two or more persons of the same property. The individuals, who are called joint tenants, share equal ownership of the property and have the equal, undivided right to keep or dispose of the property. Joint tenancy creates a Right of Survivorship.
Tenants in Common
A specific type of concurrent, or simultaneous, ownership of real property by two or more parties. All tenants in common hold an individual, undivided ownership interest in the property. This means that each party has the right to alienate, or transfer the ownership of, her ownership interest.
Title Theory State
A state in which the title to the property is given to the lender as security for the loan, while granting the borrower the right to possession of the property. Texas is NOT a title theory state.
Lien Theory State
A state that interprets the mortgage as creating a lien on the mortgaged property, while the borrower retains the title (ownership rights). The mortgage lender's lien is removed once all loan payments have been completed by the borrower. Texas is a lien theory state.
Special Assessment
A tax on a property for a specific improvement that benefits it (such as street repair or lighting), which, unlike an ad valorem tax, is not calculated on the basis of the property's value but rather as a portion of the cost of the improvement.
Related
A term used to describe the types of real estate transactions that fall under the scope of RESPA, including most conventional, VA, and FHA loans.
Time Shares
A way for a number of people to share ownership of a property, usually a vacation property such as a condominium unit within a resort area. Each buyer usually purchases a certain period of time in a particular unit. Timeshares typically divide the property into one- to two-week periods.
Funding Fee
Afee charged by the Department of Veterans Affairs for guaranteeing loans to offset the cost of the VA guarantee program.
Real Property
All land, structures, firmly attached and integrated equipment (such as light fixtures or a well pump), anything growing on the land, and all "interests" in the property which may be the right to future ownership (remainder), right to occupy for a period of time (tenancy or life estate) the right to drill for oil, the right to get the property back (a reversion) if it is no longer used for its current purpose (such as use for a hospital, school or city hall), use of airspace (condominium) or an easement across another's property. Real property should be thought of as a group of rights like a bundle of sticks which can be divided. It is distinguished from the other type of property, personal property, which is made up of movable items.
Title
All the rights that ownership of real property entails.
Note
Also known as a promissory note; it is a written promise to pay back a loan, stating the conditions under which this promise is to be met.
Addendum
An addition attached to a real estate contract that becomes part of the agreement between the parties.
Periodic tenancy
An agreed-upon term, such as month-to-month for occupancy, this is known as a periodic tenancy or estate from period to period.
Tenancy at sufferance
An agreement in which a property renter is permitted to live in a property after a lease term has expired, but before the landlord demands the tenant vacate the property. If a tenancy at sufferance occurs, the original lease conditions must be met, including the payment of any rents.
Private Mortgage Insurance (PMI)
An amount charged by a private company to a borrower, in the form of an up-front or monthly premium, to insure the lender against loss in the event of borrower default.
Fee Simple Absolute Estate
An estate in land, a form of freehold ownership. It is a way that real estate may be owned in common law countries, and is the highest possible ownership interest that can be held in real property.
Prepaid Item
An expense that the seller has paid before closing that must be divided between the buyer and seller at closing.
Duress
Coercion or force to get the offeree to agree to the contract.
Fructus Industrials
Crops (as wheat, corn) produced by labor on the part of man— distinguished from fructus naturales. They are considered personal property.
Refinancing
The process of paying off an extant loan by taking out a new loan, for example, to receive a better interest rate.
Severance
In law can mean the act of severing a piece of land from a larger tract of land. The severed parcel of land becomes a separate lot (parcel).
Annexation
Involves land, a municipality is pulling land outside of their jurisdiction into their jurisdiction. In other words, it's attaching a fixture to real property and making that fixture part of the real property.
Real estate
Land plus everything permanently attached to it, including buildings, sheds, trees, etc.
Real property
Land, and anything growing on, affixed to, or built upon land. This also includes man-made buildings as well as crops. Real property is best characterized as property that doesn't move, or that is attached to the land. The terms "real estate" and "real property" can be used interchangeably. Also, real property may include not just the land, but anything that is permanently located within or under the land. This may include oil, gas, and minerals found under the land. Another term used for real property is "premises."
Community Property
Means that most property acquired during marriage belongs to both spouses and must be divided at divorce. In contrast, each spouse gets to keep his or her separate property when the marriage ends.
Water Rights
One of the interests that may attach to real estate ownership, and pertain to the rights to use adjacent bodies of water. Riparian rights are awarded to land owners whose property is located along a river, stream or lake.
Tenancy in Common
One of three types of concurrent estates (defined as an estate that has shared ownership, in which each owner owns a share of the property) and there is no right of a survivorship.
Allodial
Ownership of real property (land, buildings, and fixtures) that is independent of any superior landlord. Allodial title is related to the concept of land held "in allodium", or land ownership by occupancy and defense of the land.
Federal Housing Administration (FHA)
Part of the Department of Housing and Urban Development that works to help increase homeownership and contribute to building healthy neighborhoods and communities. As part of this goal, the FHA loan program insures loans to qualified applicants, reducing the required down payment and other qualifying factors. Federally
Legally Competent Parties
Parties to an agreement that are have legal capacity to enter into agreement that includes having sanity, sobriety, of legal age and authorized to enter the agreement.
Trade Fixture
Personal property that is usually a part of a business location. Includes shelves, display cases and frozen food cases.
Personalty
Personal property.
PITI
Principal + Interest + Taxes + Insurance, also known as the housing expense.
Sole Ownership
Property is owned entirely by one person. Words in the deed such as "John, a single man," establishes title as sole ownership.
Land
Property not including buildings or equipment that does not occur naturally.
Real Estate
Refers to land, as well as any physical property or improvements affixed to the land, including houses, buildings, landscaping, fencing, wells, etc.
Air Rights
The property interest in the "space" above the earth's surface. Generally speaking, owning, or renting, land or a building includes the right to use and develop the space above the land without interference by others.
Sub-surface Right
Rights to the earth below the land, and any substances found beneath the land's surface. Mineral rights are a type of subsurface right.
Tenants in Common
Tenants in common provides for multiple percentages of ownership interest, if desired, and inheritance rights for the heirs of each grantee. When someone who is a tenant in common with another person dies, the interest the deceased person has does not automatically pass to the other owner. Instead, that interest is transferred to the estate of the deceased owner.
Community Property
Texas recognizes community property, a special form of joint tenancy that exists between husband and wife, with each owning a one-half interest. Upon death, the decedent's interest passes in a manner similar to tenants in common. Words in the deed such as "John and Mary, husband and wife as community property," establishes community property ownership.
Acceptance
The act of agreeing to an offer made on a property to lease or purchase from an offeror.
Offer
The act of requesting to purchase or lease a piece a property usually in writing.
Heirs
The beneficiaries in an estate usually identified by a will.
Interest
The charge a borrower pays for the use of money. Joint Tenancy: Property is owned by two or more persons at the same time in equal shares. The unities of time, title, interest, and possession are vested in each joint tenant (four unities). Each joint tenant has an undivided right to possess the whole property and a proportionate right of equal ownership interest. When one joint tenant dies, his/her interest automatically vests in the surviving joint tenant(s) by operation of law. Words in the deed such as "John and Mary, as joint tenants with right of survivorship and not as tenants in common," establishes title in joint tenancy. Some states do not allow this form of property ownership. It is a legal form of ownership in Texas.
Feudalism
The dominant social system in medieval Europe, in which the nobility held lands from the Crown in exchange for military service, and vassals were in turn tenants of the nobles, while the peasants (villeins or serfs) were obliged to live on their lord's land and give him homage, labor, and a share of the produce, notionally in exchange for military protection.
Closing
The final step in the home-buying process, when the actual title to the property being purchased transfers from the seller to the buyer, and fees and prorated items are paid out of the escrow fund held by the closing entity.
Performance
The fulfillment of the terms and conditions of an agreed-upon contract.
Veterans Affairs, Department of (VA)
The government agency in charge of providing benefits to U.S. veterans and their dependents. As part of this mission, the VA guarantees portions of mortgages given to veterans that require no down payments and have limited purchaser closing costs.
Deed
The legal written document that conveys the intangible ownership rights (title) of a property to another party.
Fructus Naturales
The natural fruits of the land on which they arise, such as agricultural produce and wild game. In many common law legal systems, fructus naturales are considered to be part of the real property, and not separate chattels in relation to any legal conveyance of the property.
Life Estate
The ownership of land for the duration of a person's life. In legal terms, it is an estate in real property that ends at death when ownership of the property may revert to the original owner, or it may pass to another person.
Underwriting
The process of approving or denying a loan application on the basis of an evaluation of the property to be mortgaged and the applicant's creditworthiness. The process, if it results in approval, involves the underwriter's selecting an appropriate interest rate and loan term.
Surface Rights
Those ownership rights in a parcel of real estate that are limited to the surface. It does not include air rights or subsurface rights. The term 'surface rights' has a definite and well-understood meaning. It means the entire surface of the land, reserving the minerals to the grantor.
Truth in Lending Act (TILA)
Title I of the Consumer Credit Protection Act (CCPA), requiring that lenders disclose certain facts about loans they offer to consumers.
Equal Credit Opportunity Act (ECOA)
Title VII of the Consumer Credit Protection Act, protecting consumers against unfair and discriminatory lending.
Town Houses
Used to describe units mimicking a detached home that are attached in a multi-unit complex.
Valid Contracts
an agreement with all five essential elements.
Counteroffer
When an offeree desires to modify some terms and conditions of an offer and makes an offer back to the offeror.
Unilateral Contracts
a contract made between two or more parties in which only one of those parties makes a promise or otherwise accepts an obligation.
Executory Contracts
a contract which is not completely executed or performed. The terms are not fully carried out or are in the process of being carried out by one or more parties in the agreement.
Executed Contracts
a pre-existing contract in which all material terms have been fulfilled by all parties.
Voidable Contracts
are contracts entered into with one party not competent to make a contract.
Implied Contracts
contracts that are inferred from the actions of various parties; but are not necessarily written or spoken.
Lawful Objective
means that the contract cannot call for any illegal activities. When a contract contains lawful objective, it takes all necessary laws and statutes into consideration.
Mutual Assent
mutual agreement among the parties in the contract.
Mistake
occurs when there is an unintentional ambiguity or oversight that wholly affects the agreement. A mistake is an honest misinterpretation of the facts and information provided.
Innocent Misrepresentation
occurs when wrong information is provided, but it is not done intentionally or for the purposes of deceiving another individual.
Express Contracts
oral and written contracts in which the parties explicitly state, or "express," their intentions and their expectations regarding the contract. Bilateral Contracts- an agreement in which both parties give consideration and promise to perform the actions specified in a contract.