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  S.B. No. 889
 
 
 
 
AN ACT
  relating to assignment of rents to holders of certain security
  interests in real property.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subsection (d), Section 9.109, Business &
  Commerce Code, is amended to read as follows:
         (d)  This chapter does not apply to:
               (1)  a landlord's lien, other than an agricultural
  lien;
               (2)  a lien, other than an agricultural lien, given by
  statute or other rule of law for services or materials, but Section
  9.333 applies with respect to priority of the lien;
               (3)  an assignment of a claim for wages, salary, or
  other compensation of an employee;
               (4)  a sale of accounts, chattel paper, payment
  intangibles, or promissory notes as part of a sale of the business
  out of which they arose;
               (5)  an assignment of accounts, chattel paper, payment
  intangibles, or promissory notes that is for the purpose of
  collection only;
               (6)  an assignment of a right to payment under a
  contract to an assignee that is also obligated to perform under the
  contract;
               (7)  an assignment of a single account, payment
  intangible, or promissory note to an assignee in full or partial
  satisfaction of a preexisting indebtedness;
               (8)  a transfer of an interest in or an assignment of a
  claim under a policy of insurance, other than an assignment by or to
  a health care provider of a health-care-insurance receivable and
  any subsequent assignment of the right to payment, but Sections
  9.315 and 9.322 apply with respect to proceeds and priorities in
  proceeds;
               (9)  an assignment of a right represented by a
  judgment, other than a judgment taken on a right to payment that was
  collateral;
               (10)  a right of recoupment or set-off, but:
                     (A)  Section 9.340 applies with respect to the
  effectiveness of rights of recoupment or set-off against deposit
  accounts; and
                     (B)  Section 9.404 applies with respect to
  defenses or claims of an account debtor;
               (11)  the creation or transfer of an interest in or lien
  on real property, including a lease or rents, as defined by Section
  64.001, Property Code [thereunder], the interest of a vendor or
  vendee in a contract for deed to purchase an interest in real
  property, or the interest of an optionor or optionee in an option to
  purchase an interest in real property, except to the extent that
  provision is made for:
                     (A)  liens on real property in Sections 9.203 and
  9.308;
                     (B)  fixtures in Section 9.334;
                     (C)  fixture filings in Sections 9.501, 9.502,
  9.512, 9.516, and 9.519; and
                     (D)  security agreements covering personal and
  real property in Section 9.604;
               (12)  an assignment of a claim arising in tort, other
  than a commercial tort claim, but Sections 9.315 and 9.322 apply
  with respect to proceeds and priorities in proceeds; or
               (13)  an assignment of a deposit account, other than a
  nonnegotiable certificate of deposit, in a consumer transaction,
  but Sections 9.315 and 9.322 apply with respect to proceeds and
  priorities in proceeds.
         SECTION 2.  Subtitle B, Title 5, Property Code, is amended by
  adding Chapter 64 to read as follows:
  CHAPTER 64. ASSIGNMENT OF RENTS TO LIENHOLDER
  SUBCHAPTER A. GENERAL PROVISIONS
         Sec. 64.001.  DEFINITIONS. In this chapter:
               (1)  "Assignee" means a person entitled to enforce an
  assignment of rents.
               (2)  "Assignment of rents" means a transfer of an
  interest in rents in connection with an obligation secured by real
  property from which the rents arise. The term does not include a
  contract for a charge authorized by Section 306.101, Finance Code,
  or a true sale of rents.
               (3)  "Assignor" means an owner of real property who
  makes an assignment of rents arising from the property or that
  owner's successor in interest.
               (4)  "Cash proceeds" means proceeds that are money,
  checks, deposit accounts, or similar legal tender.
               (5)  "Day" means a calendar day.
               (6)  "Deposit account" means a demand, time, savings,
  passbook, escrow, or similar account maintained with a bank,
  savings bank, savings and loan association, credit union, trust
  company, or other person.
               (7)  "Document" means information that is inscribed on
  a tangible medium or that is stored on an electronic or other medium
  and is retrievable in perceivable form.
               (8)  "Proceeds" means personal property that is
  received, collected, or distributed on account of an obligation to
  pay rents.
               (9)  "Rents" means:
                     (A)  consideration payable for the right to
  possess or occupy, or for possessing or occupying, real property;
                     (B)  consideration payable to an assignor under a
  policy of rental interruption insurance covering real property;
                     (C)  claims arising out of a default in the
  payment of consideration payable for the right to possess or occupy
  real property;
                     (D)  consideration payable to terminate an
  agreement to possess or occupy real property;
                     (E)  consideration payable to an assignor for
  payment or reimbursement of expenses incurred in owning, operating,
  and maintaining, or constructing or installing improvements on,
  real property; or
                     (F)  any other consideration payable under an
  agreement relating to the real property that constitutes rents
  under a law of this state other than this chapter.
               (10)  "Secured obligation" means an obligation secured
  by an assignment of rents.
               (11)  "Security instrument" means:
                     (A)  a security instrument, as that term is
  defined by Section 51.0001; or
                     (B)  an agreement containing an assignment of
  rents.
               (12)  "Security interest" means an interest in property
  that arises by agreement and secures an obligation.
               (13)  "Sign" includes to sign by an electronic
  signature, as defined by Section 15.002.
               (14)  "Tenant" means a person who has an obligation to
  pay for the right to possess or occupy, or for possessing or
  occupying, real property.
         Sec. 64.002.  MANNER OF PROVIDING NOTICE. (a)  A person may
  provide a notice under this chapter:
               (1)  by transmitting the notice in the manner described
  by Section 51.002(e);
               (2)  by depositing the notice with the United States
  Postal Service or a commercially reasonable delivery service,
  properly addressed to the intended recipient's address in
  accordance with this section, with first class postage or other
  cost of delivery paid; or
               (3)  by transmitting the notice to the intended
  recipient by any means agreed to by the intended recipient.
         (b)  Except as agreed under Subsection (a)(3), notice to an
  assignee must be sent to the assignee's address as provided in the
  relevant security instrument or another document entered into for
  the purposes of this section by the assignee and the person sending
  the notice, unless a more recent address for notice has been given
  in a manner provided by Subsection (a) by the assignee to the person
  sending the notice or in a security instrument or other document
  signed by the assignee.
         (c)  Except as agreed under Subsection (a)(3), notice to an
  assignor must be sent to the assignor's address as provided in the
  relevant security instrument or another document entered into for
  the purposes of this section by the assignor and the person sending
  the notice or an address for the assignor to which a notice of
  default under Section 51.002 is properly sent, unless a more recent
  address for notice has been given in a manner provided by Subsection
  (a) by the assignor to the person sending the notice or in a
  security instrument or other document signed by the assignor.
         (d)  Except as agreed under Subsection (a)(3), notice to a
  tenant must be sent to:
               (1)  an address for notice to the tenant provided in a
  signed document entered into by the tenant and the person providing
  the notice, unless a more recent address for notice has been given
  by the tenant in accordance with that document;
               (2)  if an address for notice described by Subdivision
  (1) does not exist, the address provided in a written agreement
  between the tenant and the assignor for notices to the tenant if the
  person sending the notice has received a copy of that agreement or
  has actual knowledge of the address for notice specified in that
  agreement; or
               (3)  if an address for notice described by Subdivision
  (1) or (2) does not exist, the tenant's address at the real property
  covered by the security instrument.
         (e)  Notice provided in accordance with this section is
  considered received on the earliest of:
               (1)  the date the notice is received by the person to
  whom the notice is provided;
               (2)  the fifth day after the date the notice is provided
  in accordance with Subsection (a)(2); or
               (3)  the date on which notice is considered provided in
  accordance with an agreement made by the person to whom the notice
  is provided for the purposes of this section.
  [Sections 64.003-64.050 reserved for expansion]
  SUBCHAPTER B. ASSIGNMENT OF RENTS
         Sec. 64.051.  SECURITY INSTRUMENT CREATES ASSIGNMENT OF
  RENTS; ASSIGNMENT OF RENTS CREATES SECURITY INTEREST. (a)  An
  enforceable security instrument creates an assignment of rents
  arising from real property securing an obligation under the
  security instrument, unless the security instrument provides
  otherwise or the security instrument is governed by Section
  50(a)(6), (7), or (8), Article XVI, Texas Constitution.
         (b)  An assignment of rents creates a presently effective
  security interest in all accrued and unaccrued rents arising from
  the real property described in the document creating the
  assignment, regardless of whether the document is in the form of an
  absolute assignment, an absolute assignment conditioned on default
  or another event, an assignment as additional security, or any
  other form. The security interest in rents is separate and distinct
  from any security interest held by the assignee in the real property
  from which the rents arise.
         (c)  An assignment of rents does not reduce the secured
  obligation except to the extent the assignee collects rents and
  applies, or is obligated to apply, the collected rents to payment of
  the secured obligation.
         Sec. 64.052.  RECORDATION AND PERFECTION OF SECURITY
  INTEREST IN RENTS; PRIORITY OF INTERESTS IN RENTS.  (a)  A document
  creating an assignment of rents may be recorded in the county in
  which any part of the real property is located.
         (b)  On recordation of a document creating an assignment of
  rents, the security interest in the rents is perfected.  This
  subsection prevails over a conflicting provision in the document
  creating the assignment of rents or a law of this state other than
  this chapter that prohibits or defers enforcement of the security
  interest until the occurrence of a subsequent event, such as a
  subsequent default of the assignor, the assignee's obtaining
  possession of the real property, or the appointment of a receiver.
         (c)  Except as provided by Subsection (d), a perfected
  security interest in rents has priority over the rights of a person
  who, after the security interest is perfected, acquires:
               (1)  a lien on or other security interest in the rents
  or the real property from which the rents arise; or
               (2)  an interest in the rents or the real property from
  which the rents arise.
         (d)  An assignee of a perfected security interest in rents
  has the same priority over the rights of a person described by
  Subsection (c) with respect to future advances as the assignee has
  with respect to the assignee's security interest in the real
  property from which the rents arise.
         Sec. 64.053.  ENFORCEMENT OF SECURITY INTEREST IN RENTS
  GENERALLY. (a)  An assignee may enforce an assignment of rents
  using one or more of the methods provided by Section 64.054 or
  64.055 or another method sufficient to enforce the assignment under
  a law of this state other than this chapter.
         (b)  On and after the date on which an assignee begins to
  enforce an assignment of rents, the assignee is entitled to collect
  all rents that:
               (1)  accrued before but remain unpaid on that date; and
               (2)  accrue on or after that date.
         Sec. 64.054.  ENFORCEMENT BY NOTICE TO ASSIGNOR. (a)  After
  default, or as otherwise agreed by the assignor, the assignee may
  provide the assignor a notice demanding that the assignor pay the
  assignee the proceeds of any rents that the assignee is entitled to
  collect under Section 64.053.
         (b)  For the purposes of Section 64.053, the assignee begins
  enforcement under this section on the date on which the assignee
  provides notice to the assignor in accordance with Section 64.002.
         (c)  An assignee may not enforce an assignment of rents under
  this section if, on the date the security instrument was signed and
  the date of prospective enforcement, the real property constitutes
  the assignor's homestead on which is located a one-family to
  four-family dwelling.
         Sec. 64.055.  ENFORCEMENT BY NOTICE TO TENANT. (a)  After
  default, or as otherwise agreed by the assignor, the assignee may
  provide to a tenant of real property that is subject to an
  assignment of rents a notice demanding that the tenant pay to the
  assignee all unpaid accrued rents and all unaccrued rents as they
  accrue. The assignee shall provide a copy of the notice to the
  assignor in the manner provided by Section 64.002. The notice must
  substantially comply with the form prescribed by Section 64.056 and
  be signed by the assignee or the assignee's authorized agent or
  representative.
         (b)  For the purposes of Section 64.053(b), the assignee
  begins enforcement under this section on the date on which the
  tenant receives a notice complying with Subsection (a).
         (c)  Subject to Subsection (d) and any other claim or defense
  that a tenant has under a law of this state other than this chapter,
  after a tenant receives a notice under Subsection (a):
               (1)  the tenant is obligated to pay to the assignee all
  unpaid accrued rents and all unaccrued rents as they accrue, unless
  the tenant has previously received a notice under this section from
  another assignee of rents provided by that assignee in accordance
  with this section and the other assignee has not canceled that
  notice;
               (2)  except as otherwise provided by a document signed
  by the tenant, the tenant is not obligated to pay to an assignee
  rent that was prepaid to the assignor before the tenant received the
  notice under Subsection (a);
               (3)  unless the tenant occupies the premises as the
  tenant's primary residence, the tenant is not discharged from the
  obligation to pay rents to the assignee if the tenant pays rents to
  the assignor;
               (4)  the tenant's payment to the assignee of rents then
  due satisfies the tenant's obligation under the tenant's agreement
  with the assignor to the extent of the payment made; and
               (5)  the tenant's obligation to pay rents to the
  assignee continues until the earliest date on which the tenant
  receives:
                     (A)  a court order directing the tenant to pay the
  rents in a different manner;
                     (B)  a signed notice that a perfected security
  instrument that has priority over the assignee's security interest
  has been foreclosed; or
                     (C)  a signed document from the assignee canceling
  the assignee's notice.
         (d)  Except as otherwise provided by a document signed by the
  tenant, a tenant who has received a notice under Subsection (a) is
  not in default for nonpayment of rents that accrue during the 30
  days after the date the tenant receives the notice until the earlier
  of:
               (1)  the 10th day after the date the next regularly
  scheduled rental payment would be due; or
               (2)  the 30th day after the date the tenant receives the
  notice.
         (e)  On receiving a notice from another creditor who has
  priority under Section 64.052(c) that the creditor with priority
  has conducted a foreclosure sale of the real property from which the
  rents arise or is enforcing the creditor's interest in rents by
  notice to the tenant, an assignee that has provided a notice to a
  tenant under Subsection (a) shall immediately provide another
  notice to the tenant canceling the earlier notice.
         Sec. 64.056.  FORM OF NOTICE TO TENANT. The following form
  of notice, when properly completed, satisfies the requirements of
  Section 64.055(a):
         NOTICE TO PAY RENTS TO PERSON OTHER THAN LANDLORD
         Tenant: [Name of tenant]
         Property Occupied by Tenant (the "Premises"): [Address]
         Landlord: [Name of landlord]
         Assignee: [Name of assignee]
         Address of Assignee and Telephone Number of Contact Person:
  [Address of assignee] [Telephone number of person to contact]
         1. Assignee is entitled to collect rents on the Premises
  under [Name of Document] (the "Assignment of Rents") dated [Date of
  Assignment of Rents], and recorded at [Recording Data] of [Name of
  County] County, Texas. You may obtain additional information about
  the Assignment of Rents and the Assignee's right to enforce it at
  the address of the Assignee.
         2. A default exists under the Assignment of Rents or related
  documents between the Landlord and the Assignee. The Assignee is
  entitled to collect rents from the Premises.
         3. This notice affects your rights and obligations under the
  agreement under which you occupy the Premises (your "Lease
  Agreement"). Unless you have otherwise agreed in a document signed
  by you, if your next scheduled rental payment is due within 30 days
  after you receive this notice, you will not be in default under your
  Lease Agreement for nonpayment of that rental payment until the
  10th day after the due date of that payment or the 30th day
  following the date you receive this notice, whichever occurs first.
         4. You may consult a lawyer at your expense concerning your
  rights and obligations under your Lease Agreement and the effect of
  this notice.
         5. You must pay to the Assignee at the Address of the
  Assignee all rents under your Lease Agreement that are due and
  payable on the date you receive this notice and all rents accruing
  under your Lease Agreement after you receive this notice.
         6. If you pay rents to the Assignee after receiving this
  notice, the payment will satisfy your rental obligation to the
  extent of that payment.
         7. If you pay any rents to the Landlord after receiving this
  notice, your payment to the Landlord will not discharge your rental
  obligation, and the Assignee may hold you liable for that rental
  obligation notwithstanding your payment to the Landlord unless you
  occupy the Premises as your primary residence.
         8. If you have previously received a notice from another
  person who also holds an assignment of the rents due under your
  Lease Agreement, you should continue paying your rents to the
  person that sent that notice until that person cancels that notice.
  Once that notice is canceled, you must begin paying rents to the
  Assignee in accordance with this notice.
         Name of assignee: __________
         By: [Officer/authorized agent of assignee]
         Sec. 64.057.  EFFECT OF ENFORCEMENT. The enforcement of an
  assignment of rents by a method provided by Section 64.054 or
  64.055, the application of proceeds by the assignee under Section
  64.059 after enforcement, the payment of expenses under Section
  64.058, or an action under Section 64.060 does not:
               (1)  make the assignee a mortgagee in possession of the
  real property from which the rents arise;
               (2)  make the assignee an agent of the assignor;
               (3)  constitute an election of remedies that precludes
  a later action to enforce the secured obligation;
               (4)  make the secured obligation unenforceable;
               (5)  limit any right available to the assignee with
  respect to the secured obligation; or
               (6)  bar a deficiency judgment under any law of this
  state governing or relating to deficiency judgments following the
  enforcement of any encumbrance, lien, or security interest.
         Sec. 64.058.  APPLICATION OF PROCEEDS GENERALLY. Unless
  otherwise agreed by the assignor, an assignee who collects rents
  under this chapter or collects on a judgment in an action under
  Section 64.060 shall apply the sums collected in the following
  order to:
               (1)  reimbursement of the assignee's expenses of
  enforcing the assignee's assignment of rents, including, to the
  extent provided for by agreement by the assignor and not prohibited
  by a law of this state other than this chapter, reasonable
  attorney's fees and costs incurred by the assignee;
               (2)  reimbursement of any expenses incurred by the
  assignee to protect or maintain the real property that is subject to
  the assignment of rents if the assignee elects or is required to
  apply the proceeds to those expenses under Section 64.059;
               (3)  payment of the secured obligation;
               (4)  payment of any obligation secured by a subordinate
  security interest or other lien on the rents if, before
  distribution of the proceeds, the assignee receives a signed notice
  from the holder of the interest or lien demanding payment of the
  proceeds; and
               (5)  payment of any excess proceeds to the assignor.
         Sec. 64.059.  APPLICATION OF PROCEEDS TO EXPENSES OF
  PROTECTING REAL PROPERTY; CLAIMS AND DEFENSES OF TENANT.
  (a)  Unless otherwise agreed by the assignee, an assignee that
  collects rents following enforcement under Section 64.054 or 64.055
  is not obligated to apply the collected rents to the payment of
  expenses of protecting or maintaining the real property subject to
  an assignment of rents.
         (b)  Unless otherwise agreed by a tenant, the right of the
  assignee to collect rents from the tenant is subject to the terms of
  any agreement between the assignor and tenant and any claim or
  defense of the tenant arising from the assignor's nonperformance of
  that agreement.
         Sec. 64.060.  TURNOVER OF RENTS; LIABILITY OF ASSIGNOR.
  (a)  If an assignor collects rents that the assignee is entitled to
  collect under this chapter, the assignor shall turn over the
  proceeds to the assignee not later than the 30th day after the date
  the assignor receives notice from the assignee under Section 64.054
  or within another period prescribed by a security instrument or
  other document signed by the assignor and approved by the assignee,
  less any amount representing payment of expenses authorized by a
  security instrument or other document signed by the assignee.
         (b)  In addition to any other remedy available to the
  assignee under a law of this state other than this chapter, if an
  assignor does not turn over proceeds to the assignee as required by
  Subsection (a), the assignee may recover from the assignor in a
  civil action:
               (1)  the proceeds, or an amount equal to the proceeds,
  that the assignor was obligated to turn over under Subsection (a);
  and
               (2)  reasonable attorney's fees and costs incurred by
  the assignee to the extent provided for by an agreement between the
  assignor and assignee and not prohibited by a law of this state
  other than this chapter.
         (c)  The assignee may maintain an action under Subsection (b)
  with or without taking action to foreclose any security interest
  that the assignee has in the real property.
         (d)  Unless otherwise agreed by an assignee that has priority
  under Section 64.052, a subordinate creditor that has enforced the
  subordinate creditor's interest under Section 64.054 or 64.055
  before the priority assignee enforces the priority assignee's
  interests in rents is not obligated to turn over any proceeds that
  the subordinate creditor collects before the subordinate creditor
  receives a signed notice from the priority assignee informing the
  subordinate creditor that the priority assignee is enforcing the
  priority assignee's interest in rents. The subordinate creditor
  shall turn over to a priority assignee any proceeds that the
  subordinate creditor collects after the subordinate creditor
  receives the notice from the priority assignee that the priority
  assignee is enforcing the priority assignee's interest in rents not
  later than the 30th day after the date the subordinate creditor
  receives the notice or as otherwise agreed between the priority
  assignee and the subordinate creditor. Any proceeds subsequently
  collected by the subordinate creditor shall be turned over to the
  priority assignee not later than the 10th day after the date the
  proceeds are collected or as otherwise agreed between the priority
  assignee and the subordinate creditor.
         Sec. 64.061.  ATTACHMENT, PERFECTION, AND PRIORITY OF
  ASSIGNEE'S SECURITY INTEREST IN PROCEEDS. (a)  An assignee's
  security interest in rents attaches to identifiable proceeds.
         (b)  If an assignee's security interest in rents is
  perfected, the assignee's security interest in identifiable cash
  proceeds is perfected.
         (c)  Except as provided by Subsection (b), the provisions of
  Chapter 9, Business & Commerce Code, or the comparable Uniform
  Commercial Code provisions of another applicable jurisdiction,
  determine:
               (1)  whether an assignee's security interest in
  proceeds is perfected;
               (2)  the effect of perfection or nonperfection;
               (3)  the priority of an interest in proceeds; and
               (4)  the law governing perfection, the effect of
  perfection or nonperfection, and the priority of an interest in
  proceeds.
         (d)  For purposes of this chapter, cash proceeds are
  identifiable if they are maintained in a segregated deposit account
  or, if commingled with other funds, to the extent they can be
  identified by a method of tracing, including application of
  equitable principles, that is permitted under a law of this state
  other than this chapter with respect to commingled funds.
         Sec. 64.062.  PRIORITY SUBJECT TO SUBORDINATION. This
  chapter does not preclude subordination by agreement by a person
  entitled to priority.
         SECTION 3.  (a)  Except as otherwise provided by this
  section, Chapter 64, Property Code, as added by this Act, governs
  the enforcement of an assignment of rents, the perfection and
  priority of a security interest in rents, and the attachment and
  perfection of a security interest in proceeds regardless of whether
  the document creating the assignment of rents was signed and
  delivered before the effective date of this Act.
         (b)  Chapter 64, Property Code, as added by this Act, does
  not affect an action or other proceeding commenced before the
  effective date of this Act.
         (c)  Subsection (a), Section 64.051, Property Code, as added
  by this Act, applies only to a security instrument signed and
  delivered on or after the effective date of this Act.  A security
  instrument signed and delivered before the effective date of this
  Act is governed by the law that applied to the instrument
  immediately before that date, and the former law is continued in
  effect for that purpose.
         (d)  Chapter 64, Property Code, as added by this Act, does
  not affect:
               (1)  the enforceability of an assignee's security
  interest in rents or proceeds if, immediately before the effective
  date of this Act, that security interest was enforceable;
               (2)  the perfection of an assignee's security interest
  in rents or proceeds if, immediately before the effective date of
  this Act, that security interest was perfected; or
               (3)  the priority of an assignee's security interest in
  rents or proceeds with respect to the interest of another person if,
  immediately before the effective date of this Act, the interest of
  the other person was enforceable and perfected and that priority
  was established.
         SECTION 4.  This Act takes effect immediately if it receives
  a vote of two-thirds of all the members elected to each house, as
  provided by Section 39, Article III, Texas Constitution.  If this
  Act does not receive the vote necessary for immediate effect, this
  Act takes effect September 1, 2011.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 889 passed the Senate on
  March 24, 2011, by the following vote:  Yeas 31, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 889 passed the House on
  May 23, 2011, by the following vote:  Yeas 146, Nays 0, two
  present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor