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AN ACT
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relating to assignment of rents to holders of certain security |
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interests in real property. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subdivisions (1), (3), (4), and (9), Section |
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64.001, Property Code, as added by Chapter 636 (S.B. 889), Acts of |
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the 82nd Legislature, Regular Session, 2011, are amended to read as |
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follows: |
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(1) "Assignee" means a person entitled to enforce a |
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security instrument [an assignment of rents]. |
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(3) "Assignor" means a person [an owner of real
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property] who makes a security instrument that creates an |
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assignment of rents arising from real [the] property or that |
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person's [owner's] successor in interest with respect to the real |
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property. |
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(4) "Cash proceeds" means proceeds that are money, |
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checks, deposit accounts, or the like [similar legal tender]. |
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(9) "Rents" means[:
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[(A)] consideration payable for the right to |
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possess or occupy, or for possessing or occupying, real property, |
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[;
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[(B)] consideration payable to an assignor under |
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a policy of rental interruption insurance covering real property, |
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[;
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[(C)] claims arising out of a default in the |
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payment of consideration payable for the right to possess or occupy |
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real property, [;
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[(D)] consideration payable to terminate an |
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agreement to possess or occupy real property, [;
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[(E)] consideration payable to an assignor for |
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payment or reimbursement of expenses incurred in owning, operating, |
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and maintaining, or constructing or installing improvements on, |
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real property, [;] or |
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[(F)] any other consideration payable under an |
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agreement relating to the real property that constitutes rents |
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under a law of this state other than this chapter. The term does not |
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include consideration payable under an oil and gas lease, mineral |
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lease, or other conveyance of a mineral estate. |
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SECTION 2. Section 64.002, Property Code, as added by |
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Chapter 636 (S.B. 889), Acts of the 82nd Legislature, Regular |
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Session, 2011, is amended to read as follows: |
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Sec. 64.002. MANNER OF GIVING [PROVIDING] NOTICE. (a) A |
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person may give [provide a] notice under this chapter: |
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(1) by transmitting the notice in the manner described |
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by Section 51.002(e); |
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(2) by depositing the notice with the United States |
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Postal Service or a commercially reasonable delivery service, |
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properly addressed to the intended recipient's address in |
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accordance with this section, with first class postage or other |
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cost of delivery paid; or |
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(3) by transmitting the notice to the intended |
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recipient by any means agreed to by the intended recipient. |
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(b) The following rules determine the address for notices |
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under Subsection (a): |
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(1) the address for notices [Except as agreed under
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Subsection (a)(3), notice] to an assignee is [must be sent to] the |
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[assignee's] address of the assignee agreed [as provided] in the |
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[relevant] security instrument or other [another] document between |
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the parties as the address for notices to [entered into for the
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purposes of this section by] the assignee [and the person sending
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the notice], unless a more recent address for notices [notice] has |
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been given [in a manner provided by Subsection (a)] by the assignee |
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to the person giving [sending] the notice in accordance with |
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Subsection (a) or as agreed in a security instrument or other |
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document signed by the assignee; [.] |
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(2) the address for notices [(c)
Except as agreed
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under Subsection (a)(3), notice] to an assignor is [must be sent to] |
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the [assignor's] address of the assignor agreed [as provided] in |
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the [relevant] security instrument or other [another] document |
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between the parties as the address for notices to [entered into for
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the purposes of this section by] the assignor or as provided in [and
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the person sending the notice or an address for the assignor to
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which a notice of default under] Section 51.002 [is properly sent], |
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unless a more recent address for notices [notice] has been given [in
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a manner provided by Subsection (a)] by the assignor to the person |
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giving [sending] the notice in accordance with Subsection (a) or as |
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agreed in a security instrument or other document signed by the |
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assignor; and [.] |
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(3) for notices [(d)
Except as agreed under
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Subsection (a)(3), notice] to a tenant [must be sent to]: |
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(A) if there is [(1)] an address for notices |
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[notice] to the tenant [provided] in a signed document between |
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[entered into by] the tenant and the person giving [providing] the |
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notice, the person giving the notice shall use that address unless a |
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more recent address for notices [notice] has been given by the |
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tenant in accordance with that document; |
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(B) [(2)] if an address for notices [notice] |
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described by Paragraph (A) [Subdivision (1)] does not exist, but |
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the tenant's [the address provided in a written] agreement with |
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[between the tenant and] the assignor has an address for notices to |
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the tenant and [if] the person giving [sending] the notice has |
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received a copy of that document [agreement] or has actual |
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knowledge of the address for notices [notice] specified in that |
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document, the person giving the notice shall use that address |
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[agreement]; or |
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(C) [(3)] if an address for notices [notice] |
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described by Paragraphs (A) and (B) [Subdivision (1) or (2)] does |
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not exist, the person giving the notice shall use the tenant's |
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address at the real property covered by the security instrument. |
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(c) [(e)] Notice given [provided] in accordance with this |
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chapter [section] is deemed [considered] received on the earliest |
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of: |
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(1) the date the notice is received by the person to |
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whom the notice is given [provided]; |
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(2) the fifth day after the date the notice is given |
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[provided] in accordance with Subsection (a)(2); or |
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(3) the date on which notice is deemed received |
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[considered provided] in accordance with an agreement made by the |
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person to whom the notice is given [provided for the purposes of
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this section]. |
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(d) A notice under this chapter must be a document. |
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SECTION 3. Subsections (a) and (b), Section 64.051, |
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Property Code, are amended to read as follows: |
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(a) An enforceable security instrument creates an |
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assignment of rents arising from real property described in that |
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[securing an obligation under the] security instrument, unless the |
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security instrument provides otherwise or the security instrument |
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is governed by Section 50(a)(6), (7), or (8), Article XVI, Texas |
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Constitution. |
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(b) An assignment of rents creates a presently effective |
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security interest in all accrued and unaccrued rents arising from |
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the real property described in the security instrument [document] |
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creating the assignment, regardless of whether the security |
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instrument [document] is in the form of an absolute assignment, an |
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absolute assignment conditioned on default or other [another] |
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event, an assignment as additional security, or any other |
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form. The security interest in rents is separate and distinct from |
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any security interest held by the assignee in the real property from |
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which the rents arise. |
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SECTION 4. Subsections (a), (b), and (d), Section 64.052, |
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Property Code, are amended to read as follows: |
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(a) A security instrument [document] creating an assignment |
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of rents may be recorded in the county in which any part of the real |
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property is located in accordance with this code. |
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(b) On recordation of a security instrument [document] |
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creating an assignment of rents, the security interest in the rents |
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is perfected. This subsection prevails over a conflicting |
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provision in the security instrument [document] creating the |
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assignment of rents or a law of this state other than this chapter |
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that prohibits or defers enforcement of the security interest until |
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the occurrence of a subsequent event, including [such as] a |
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subsequent default of the assignor, the assignee's obtaining |
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possession of the real property, or the appointment of a receiver. |
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(d) An assignee with [of] a perfected security interest in |
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rents has the same priority over the rights of a person described by |
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Subsection (c) with respect to future advances as the assignee has |
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with respect to the assignee's security interest in the real |
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property from which the rents arise. |
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SECTION 5. Section 64.053, Property Code, is amended to |
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read as follows: |
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Sec. 64.053. ENFORCEMENT OF SECURITY INTEREST IN RENTS |
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GENERALLY. (a) An assignee may enforce an assignment of rents |
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using one or more of the methods provided by Section 64.054 or |
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64.055 or any other [another] method sufficient to enforce an [the] |
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assignment of rents under a law of this state other than this |
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chapter. |
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(b) On and after the date on which an assignee begins to |
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enforce an assignment of rents, the assignee is entitled to collect |
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all rents that: |
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(1) have accrued [before] but remain unpaid on that |
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date; and |
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(2) accrue on or after that date. |
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SECTION 6. Subsections (a) and (b), Section 64.054, |
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Property Code, as added by Chapter 636 (S.B. 889), Acts of the 82nd |
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Legislature, Regular Session, 2011, are amended to read as follows: |
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(a) After default, or as otherwise agreed by the assignor, |
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the assignee may give [provide] the assignor a notice demanding |
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that the assignor pay the assignee the proceeds of any rents that |
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the assignee is entitled to collect under Section 64.053. |
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(b) For the purposes of Section 64.053, the assignee begins |
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enforcement under this section on the date on which the assignee |
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gives [provides] notice to the assignor in accordance with Section |
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64.002. |
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SECTION 7. Subsections (a), (c), (d), and (e), Section |
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64.055, Property Code, are amended to read as follows: |
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(a) After default, or as otherwise agreed by the assignor, |
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the assignee may give [provide] to a tenant of real property that is |
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subject to an assignment of rents a notice demanding that the tenant |
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pay to the assignee all unpaid accrued rents and all unaccrued rents |
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as they accrue. The assignee shall give [provide] a copy of the |
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notice to the assignor in accordance with [the manner provided by] |
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Section 64.002. The notice must substantially comply with the form |
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prescribed by Section 64.056 and be signed by the assignee or the |
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assignee's authorized agent or representative. |
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(c) Subject to Subsection (d) and any other claim or defense |
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that a tenant has under a law of this state other than this chapter, |
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after a tenant receives a notice under Subsection (a): |
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(1) the tenant is obligated to pay to the assignee all |
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unpaid accrued rents and all unaccrued rents as they accrue, unless |
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the tenant has previously received a notice under this section from |
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another assignee of rents given [provided] by that assignee in |
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accordance with this section and the other assignee has not |
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canceled that notice; |
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(2) except as otherwise agreed in [provided by] a |
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document signed by the tenant, the tenant is not obligated to pay to |
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an assignee rent that was prepaid to the assignor before the tenant |
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received the notice under Subsection (a); |
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(3) unless the tenant occupies the premises as the |
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tenant's primary residence, the tenant is not discharged from the |
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obligation to pay rents to the assignee if the tenant pays rents to |
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the assignor; |
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(4) the tenant's payment to the assignee of rents then |
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due satisfies the tenant's obligation under the tenant's agreement |
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with the assignor to the extent of the payment made; and |
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(5) the tenant's obligation to pay rents to the |
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assignee continues until the earliest date on which the tenant |
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receives: |
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(A) a court order directing the tenant to pay the |
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rents in a different manner; |
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(B) a signed notice that a perfected security |
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instrument that has priority over the assignee's security interest |
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has been foreclosed; or |
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(C) a signed document from the assignee canceling |
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the assignee's notice. |
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(d) Except as otherwise agreed in [provided by] a document |
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signed by the tenant, a tenant who has received a notice under |
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Subsection (a) is not in default for nonpayment of rents that accrue |
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during the 30 days after the date the tenant receives the notice |
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until the earlier of: |
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(1) the 10th day after the date the next regularly |
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scheduled rental payment would be due; or |
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(2) the 30th day after the date the tenant receives the |
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notice. |
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(e) On receiving a notice from another assignee [creditor] |
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who has priority under Section 64.052(c) that the assignee |
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[creditor] with priority has conducted a foreclosure sale of the |
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real property from which the rents arise or is enforcing the |
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[creditor's] interest in rents of the assignee with priority by |
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notice to the tenant, an assignee that has given [provided] a notice |
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to a tenant under Subsection (a) shall immediately give [provide] |
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another notice to the tenant canceling the earlier notice. |
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SECTION 8. Section 64.058, Property Code, is amended to |
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read as follows: |
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Sec. 64.058. APPLICATION OF PROCEEDS GENERALLY. Unless |
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otherwise agreed [by the assignor], an assignee who collects rents |
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under this chapter or collects on a judgment in an action under |
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Section 64.060 shall apply the sums collected in the following |
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order to: |
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(1) reimbursement of the assignee's expenses of |
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enforcing the assignee's assignment of rents, including, to the |
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extent provided for by agreement by the assignor and not prohibited |
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by a law of this state other than this chapter, reasonable |
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attorney's fees and costs incurred by the assignee; |
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(2) reimbursement of any expenses incurred by the |
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assignee to protect or maintain the real property that is subject to |
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the assignment of rents [if the assignee elects or is required to
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apply the proceeds to those expenses under Section 64.059]; |
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(3) payment of the secured obligation; |
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(4) payment of any obligation secured by a subordinate |
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security interest or other lien on the rents if, before |
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distribution of the proceeds, the assignee receives a signed notice |
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from the holder of the interest or lien demanding payment of the |
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proceeds; and |
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(5) payment of any excess proceeds to the assignor. |
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SECTION 9. Subsection (b), Section 64.059, Property Code, |
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is amended to read as follows: |
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(b) Unless otherwise agreed by a tenant, the right of the |
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assignee to collect rents from the tenant is subject to the terms of |
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any agreement between the assignor and tenant or [and] any claim or |
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defense of the tenant arising from the assignor's nonperformance of |
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that agreement. |
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SECTION 10. Subsections (a) and (d), Section 64.060, |
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Property Code, are amended to read as follows: |
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(a) If an assignor collects rents that the assignee is |
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entitled to collect under this chapter, the assignor shall turn |
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over the proceeds to the assignee not later than the 30th day after |
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the date the assignor receives notice from the assignee under |
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Section 64.054 or within such other [another] period agreed |
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[prescribed] by the assignor and assignee in a security instrument |
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or other document [signed by the assignor and approved by the
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assignee], less any amount representing payment of expenses agreed |
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in that [authorized by a] security instrument or other document |
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[signed by the assignee]. |
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(d) Unless otherwise agreed, if [by] an assignee who [that] |
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has a security interest in rents that is subordinate to the security |
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interest of another assignee [priority] under Section 64.052 |
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enforces the [, a] subordinate assignee's [creditor that has
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enforced the subordinate creditor's] interest under Section 64.054 |
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or 64.055 before the [priority] assignee with [enforces the] |
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priority enforces the [assignee's] interests in rents of the |
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assignee with priority, the subordinate assignee is not obligated |
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to turn over any proceeds that the subordinate assignee [creditor] |
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collects before the subordinate assignee [creditor] receives a |
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signed notice from the [priority] assignee with priority informing |
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the subordinate assignee [creditor] that the [priority] assignee |
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with priority is enforcing the [priority assignee's] interest in |
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rents of the assignee with priority. The subordinate assignee |
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[creditor] shall turn over to the [a priority] assignee with |
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priority any proceeds that the subordinate assignee [creditor] |
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collects after the subordinate assignee [creditor] receives the |
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notice from the [priority] assignee with priority that the |
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[priority] assignee with priority is enforcing the [priority
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assignee's] interest in rents of the assignee with priority not |
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later than the 30th day after the date the subordinate assignee |
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[creditor] receives the notice or as otherwise agreed between the |
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[priority] assignee with priority and the subordinate assignee |
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[creditor]. Any proceeds subsequently collected by the subordinate |
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assignee [creditor] shall be turned over to the [priority] assignee |
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with priority not later than the 10th day after the date the |
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proceeds are collected or as otherwise agreed between the |
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[priority] assignee with priority and the subordinate assignee |
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[creditor]. |
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SECTION 11. The legislature finds that Subsection (c), |
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Section 64.051, Property Code, as added by Chapter 636 (Senate Bill |
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No. 889), Acts of the 82nd Legislature, Regular Session, 2011, was |
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intended by the 82nd Legislature to eliminate confusion arising |
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from language in the Texas Supreme Court's decision in Taylor v. |
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Brennan, 621 S.W.2d 592 (Tex. 1981), to the effect that an absolute |
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assignment of rents is a pro tanto payment of a secured obligation. |
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In accordance with Subsection (c), Section 64.051, Property Code, |
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as added by Chapter 636 (Senate Bill No. 889), Acts of the 82nd |
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Legislature, Regular Session, 2011, unless the parties expressly |
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agree otherwise, a secured obligation is reduced only if and to the |
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extent that the assignee collects rents and applies the rents to the |
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obligation. Simply taking an assignment of rents does not reduce |
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the secured obligation. |
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SECTION 12. (a) Except as otherwise provided by this |
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section, Chapter 64, Property Code, as added by Chapter 636 (Senate |
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Bill No. 889), Acts of the 82nd Legislature, Regular Session, 2011, |
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and amended by this Act, governs the enforcement of an assignment of |
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rents, the perfection and priority of a security interest in rents, |
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and the attachment and perfection of a security interest in |
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proceeds regardless of whether the document creating the assignment |
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of rents was signed and delivered before the effective date of this |
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Act or before June 17, 2011. |
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(b) Chapter 64, Property Code, as added by Chapter 636 |
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(Senate Bill No. 889), Acts of the 82nd Legislature, Regular |
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Session, 2011, and amended by this Act, does not affect an action or |
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other proceeding commenced before June 17, 2011. |
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(c) Subsection (a), Section 64.051, Property Code, as added |
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by Chapter 636 (Senate Bill No. 889), Acts of the 82nd Legislature, |
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Regular Session, 2011, and amended by this Act, does not apply to a |
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security instrument signed and delivered before June 17, 2011. |
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(d) Chapter 64, Property Code, as added by Chapter 636 |
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(Senate Bill No. 889), Acts of the 82nd Legislature, Regular |
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Session, 2011, and amended by this Act, does not affect: |
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(1) the enforceability of an assignee's security |
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interest in rents or proceeds if, immediately before June 17, 2011, |
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that security interest was enforceable; |
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(2) the perfection of an assignee's security interest |
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in rents or proceeds if, immediately before June 17, 2011, that |
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security interest was perfected; or |
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(3) the priority of an assignee's security interest in |
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rents or proceeds with respect to the interest of another person if, |
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immediately before June 17, 2011, the interest of the other person |
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was enforceable and perfected and that priority was established. |
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SECTION 13. This Act takes effect immediately if it |
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receives a vote of two-thirds of all the members elected to each |
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house, as provided by Section 39, Article III, Texas Constitution. |
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If this Act does not receive the vote necessary for immediate |
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effect, this Act takes effect September 1, 2013. |
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______________________________ |
______________________________ |
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President of the Senate |
Speaker of the House |
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I hereby certify that S.B. No. 848 passed the Senate on |
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March 27, 2013, by the following vote: Yeas 30, Nays 0. |
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______________________________ |
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Secretary of the Senate |
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I hereby certify that S.B. No. 848 passed the House on |
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May 17, 2013, by the following vote: Yeas 134, Nays 0, two |
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present not voting. |
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______________________________ |
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Chief Clerk of the House |
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Approved: |
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______________________________ |
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Date |
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______________________________ |
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Governor |