Doing Business in Texas: Real Estate Laws

Picture of Schuyler "Rocky" Reidel

Schuyler "Rocky" Reidel

Schuyler is the founder and managing attorney for Reidel Law Firm.

Doing Business in Texas: Real Estate Laws

Texas real estate laws embody the same principles that the US was founded upon: strong protections for private property, local taxation, and efficient conveyances. These principles have kept Texas at the forefront of low cost and protected property ownership for both citizens and non-citizens alike.

The US has the strongest private property protections for individuals in the world. Our free enterprise system has encouraged millions from around the world to seek the protections and opportunity afforded by our principals. Unlike most of the world, private property ownership is not restricted. Texas and the US allow land to be bought, sold, and owned by citizens, non-citizens, domestic business organizations, and foreign business organizations. Texas has remained one of the leading states for private property protections.

One unique aspect of Texas real estate laws is our many homestead protections. The homestead protections are a relic of our interesting history and founders. Many of the first Anglo settlers to Texas were escaping creditors in the United States. At the time, creditors could seize a debtors home and personal property for unpaid debts. Some states even allowed creditors to jail a delinquent debtor.

The early Mexican state of Coahuila and Texas passed the first homestead protections for settlers in Texas at the recommendation and request of Stephen F. Austin. The protection prevented creditors from seizing any lands granted by Mexico to settlers for unpaid debts. This principle was later enshrined in the state Constitution in 1845 which exempted up to 200 acres of land for a family from seizure by creditors. Homestead protections remain an important aspect of both property and debt law. Currently, the Texas homestead protection is extended to both families and single individuals and exempts 10 acre of land in urban areas and up to 200 acres (100 acres for an individual) in a rural area. The homestead exemption also includes up to $60,000 ($30,000 for an individual) of personal property listed in Texas Property Code 42.002. Some of these important exemptions include: home furnishing, farming or ranching vehicles, tools, equipment, clothes, two firearms, household pets, and various farm animals.

A more recent private property protection is the Truth in Condemnation Procedures Act. This law was a response to the infamous US Supreme Court Kelo case, which allowed government seizure of property to be given away for commercial purposes. The Act has three major components for property owners: a ban on the use of “public benefit” for eminent domain, statutory requirement for any condemning agency to provide a comprehensive assessment on the value of the property being condemned, and a statutory requirement for the agency to make a bona fide offer to the property owner. There are various other requirements within the Act that any agency attempting to use eminent domain must adhere. These requirements help make the process more open and transparent to the public and property owners.

Property taxation in Texas is based on local control, there is no state imposed property tax. Local tax units are the agencies responsible for levying, assessing, and collecting property taxes. These local tax entities include counties, cities, school district, and utility municipalities. While the State does not impose taxes on property, the State does provide the rules for how property is appraised, collected, and what exemptions are available to Texas property owners.

Often Texas will be listed as a state with higher than average property taxes than other states. This is true if you only consider the raw numbers and consider that the most weight for the average is the major populations centers like Houston, Dallas, Austin, and San Antonio. What is not considered is that the State does not levy any property tax statewide and also does not levy any income tax on residents. Keeping the property tax regime in local hands allows those with the most at stake, property owners in that community, to have the most say and control in how and why they are taxed. As a local property owner in Texas you have much more control in how you are taxed than in other states and countries.

The local tax entities will base their tax levy on the annual county tax assessment. You annual assessment can be protested if you feel that the assessment does not accurately reflect the value of the property. You will pay each tax entities tax levy directly to the entity, for example you will pay your school property tax directly to the school district. This system helps prevent waste of taxpayer dollars by eliminating a statewide bureaucracy to determine where the tax dollars go and for what reason.

The last major point about Texas real estate is the recording system. Texas uses a grantor-grantee index to record land deeds. This allows potential purchasers to track the property from buyer to seller to buyer and so on. Texas has some of the most complete and oldest land records in the New World, with some tracts being traced back to their original land grant from the Spanish Crown. Each county maintains it’s own deed record and index. It is necessary to perform basic search due diligence when purchasing real estate in Texas. Some major counties have free online access to their county land records. Most counties in Texas allow online access with a fee.

Texas property laws offer landowners a stable, efficient way to protect their land and wealth. As one of the strongest examples of private property ownership, local tax control, and non-bureaucratic recording, Texas leads the nation and world in real estate. If you are purchasing or selling real estate in Texas, call Reidel Law Firm today at (832)510-3292 or use the email button below.