MUD and CCN notices
A seller of real estate in Texas may be required to provide to a buyer one or more notices regarding the property in question. Failure to provide the proper notice may result in liability for the seller of the real estate and/or the real estate licensee handling the transaction.
MUD notice information
If a property is located within a Municipal Utility District (MUD), the seller is required by the Texas Water Code to provide to a buyer prior to the buyer's entering into a sales contract a notice regarding the MUD in which the property is located. The notice provides information regarding the tax rate, bonded indebtedness, and standby fee, if any, of the MUD.
A seller will typically know if a MUD is providing service to a property because the MUD assessment will be listed on the tax bill that the county sends to the property owner. The property seller will frequently not, however, have access to the MUD notice required to be given to the buyer and may require the assistance of a real estate licensee to obtain the proper notice. One method you may use to obtain the proper notice is to contact an agent for the MUD and request a copy of the most current notice. The name, address, and phone number of all MUDs in Texas are available through the Texas Commission on Environmental Quality's website.
After entering the website, you may look up any MUD by going to the first search field entitled "Search by Water District Name or Number." Type in the name of the MUD for which you are seeking information and press enter. The website will provide information regarding that MUD, including contact information for the MUD's agent. You may then contact the MUD's agent to obtain a copy of the current notice form.
Section 49.455(b)(9) of the Water Code requires that all MUDs file the particular form of Notice to Purchasers that the seller must furnish to a buyer in the property records of the county in which the MUD is located with all information completed.
Certificated service area information
When a retail water or wastewater utility obtains a certificate of convenience and necessity (CCN) from the Public Utility Commission of Texas (PUC), it secures the exclusive right to supply water or sewer service to a specified area. This type of entity is referred to as a certificated service area.
Background and notice required
In some cases, individuals purchase lots for residential or commercial purposes without realizing that the extension of water or sewer services may require additional expense on the individual's part, and that there might be a delay in the utility's ability to provide the services. This is problematic in areas served by private utilities, nonprofit water supply and sewer service corporations, and special utility districts, which typically have service areas outside a municipality's jurisdiction.
Except in connection with certain specified transactions and interests (such as mortgages, leases, and sales of governmental properties, among others), Section 13.257 of the Water Code requires sellers of property located outside a municipality's jurisdiction to provide a statutory notice to a purchaser of unimproved real property that extension of water or sewer services may require additional expense on the individual's part and that there might be a delay in the utility's ability to provide the services. The notice must be executed by seller and purchaser either as a separate document or as part of the contract of sale and must be provided to the purchaser before the execution of the contract. TAR’s unimproved property contract forms satisfy this requirement: see Paragraph 6(E)(6) of Form 1607, Unimproved Property Contract (for residential sales), and Paragraph 25(C) of Form 1807, Commercial Contract – Unimproved Property. In addition, at the closing, the seller and purchaser must execute and acknowledge a separate copy of the notice with current information and subsequently record it in the real property records of the county in which the property is located.
If the seller fails to provide the notice, the purchaser may terminate the contract; however, if the seller provides the notice at or before the closing of the purchase and sale contract and the purchaser elects to close despite the seller's failure to timely provide the notice at the time of contract execution, then the purchaser waives her rights to terminate the contract and recover damages.
Obtaining information regarding certificated service areas
If the seller of an unimproved property that is not currently receiving water or wastewater service does not know the name of the certificated service provider for the property, it is possible to search the PUC’s Water and Sewer CCN Viewer by property address to obtain that information. For questions regarding the CCN Viewer, email email@example.com.
Advice for REALTORS®
The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.
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