When we are researching topics that our Realtor® partners, we generally stick to non-state specific topics! However, Texas has been making a lot of contract changes that are leaving agents scratching their heads and looking for answers! So, for our Texas Realtors®, we hope that this help clarify what this means for you!
During the August 18th TREC meeting, they voted to make emergency changes to our state promulgated forms in order to comply with the new HB 1543 bill. While there were several changes, you may have noticed emails circulating over the past few weeks in regards to Texas Real Estate Commission's newest contract addendum: Addendum containing Notice of Obligation to Pay Improvement District Assessment! Here are some of the most frequently asked questions that our team has gotten over the last two weeks!
What is a Public Improvement District or PID?
A PID, per Texas Local Government Code, is a geographical area established to provide specific types of improvements or maintenance within the area which is financed by assessments against the property owners within the area.
In layman terms, a PID is a government bond that a developer takes to finance public improvements (parks, lakes, landscaping, etc.) in a development that is assessed over a period of time via property taxes. These grounds are maintained by the public works or local city government & available for public use. These assessment funds are collected with the yearly property taxes and held in a separate city fund! These PID's are a percentage of the tax assessed value that are paid over 20-40 years, or until the bonds are paid in full.
What is the difference between a PID and an HOA?
A PID is a local government regulated and managed fund for public use. These are mandatory and assessed annually with the property taxes. The public improvements do not restrict access!
A homeowners association, whether mandatory or voluntary, are privately managed and maintained funds & amenities. These are put into place with deed restrictions filed at the county and each homeowner has a voting right within the association. Most amenities with HOA's restrict access to association members and guests & their fee(s) are assessed monthly or annually at a set rate.
Why is this all of a sudden an issue to cause TREC to release an addendum?
In the past 5+ years, PID's have been more popular in the newer residential developments. Because the PID's terms had not regulated disclosure requirements like an homeowners association fee, many homeowners were buying without notice of what the assessment would change on their yearly tax bill. Many homeowners were faced with several thousands of dollars of PID assessments as an unplanned expense! In order to reduce the liability for all parties involved, TREC has provided an addendum for disclosure purposes.
How do I know if a home is in a PID or will have PID assessments?
The best source of information is the county central appraisal district. If you pull the
properties tax record, there should be a break-down of what the previous year's were and what those percentages were. The PID will be listed just like any school district, county hospital, water district or city tax rate! If you are still concerned, your local tax appraisal district should be able to tell you if the home is in a PID by looking up the home's legal description or development!
When does this new amendment take effect?
Per TREC's meeting release on August 18th, the addendum will be available for mandatory use as of September 1st as an emergency basis in order to comply with the requirements of the HB 1543 Act from the State of Texas Legislature. This form will be available via the TREC website & in Zipforms on September 1, 2021. Check with your office to see when your office databases and forms libraries will be available!
As always, if you still have questions about this new addendum, the best source of information is your Broker or as a Texas Association of Realtors® member - the TAR Legal Hotline, (800-873-9155).