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When is a Deed Effective in Texas

Some of the disputes related to Texas real estate require a determination of WHEN an interest in real property was transferred. Many lawsuits have been fought over the determination of exactly when the title was conveyed. The resolution of that issue can have tremendous implications.

Under Texas law, a conveyance of an interest in real property must meet the following criteria:

  1. Be in writing
  2. Be signed by the grantor, and
  3. Be delivered to the grantee.

There is no requirement that a deed be recorded to make it effective. This is because, in the state of Texas, a deed does not have to be recorded to convey title. It is not the act of filing or recording a deed that conveys title, but rather, a conveyance is effective and title is conveyed when a signed deed has been delivered to the grantee.

What constitutes “delivery” of a deed is a question of law for the Court to decide. Whether there has been a delivery of a deed may in fact be a question that will be determined by a jury.

In general there are two factors that determine whether “delivery” has occurred. They are: 1) the deed must be delivered to the control of the grantee, and 2) the grantor must intend the deed to become effective as a conveyance of real property. In the end, the question of whether a deed has been delivered is primarily one of the grantor’s intent. The intent of the grantor is determined by examining all the facts and circumstances preceding, attending, and following the execution of the deed.

Litigating the effective date of a conveyance, and trying to prove that a deed’s effective date pre-dates the date of recording are complex legal issues. The facts and circumstances surrounding the execution and delivery of every deed can be very different. If you have a lawsuit that requires a determination of the actual delivery date of a deed, you need to contact an attorney that has experience in litigating title to real estate.

Susan J. Taylor is a Houston-based commercial litigation and business law attorney. She began practicing law in Texas in 1985 with a primary concentration in business, real estate, and commercial litigation and bankruptcy. Ms. Taylor is Board Certified in Civil Trial Law by the Texas Board of Legal Specialization. For expert help with commercial litigation or business law issues, please contact The Taylor Law Group for a consultation.

Do Your Invoices Run Afoul of Texas Usury Laws?

Many businesses send out monthly invoices that have language in them about charging interest on past-due balances such as: “1.5% interest on unpaid balance,” or “interest will be charged at 18% on accounts over 30 days,” or something similar. Creditors who add this language to their invoices may be violating the Texas usury laws and may incur serious penalties if the interest is actually charged.

If you don’t have a written agreement with your customer to charge interest, creditors are limited to charging 6% per annum (.5% per month), beginning 30 days after the invoice becomes due. With a written contract, the legal interest rate can be up to 18% per year.

Texas usury laws can be a nasty surprise to businesses because the penalties for violating them are so severe. The creditor can be liable to the debtor for the greater of 1) three times the excessive interest contracted for, charged or received, or 2) $2,000 or 20 percent of the amount of the principal, whichever is less. The penalty is subtracted from the principal amount due, which could result in the creditor actually owing the debtor. It can get worse. If more than twice the legal rate of interest is contracted for, charged, or received, then the creditor can also lose the principal amount of the debt.

Here’s an example of how this might work. You provide $5,000 worth of goods and/or services for a customer without having a written contract agreeing to how much interest you can charge the customer. You send invoices to the customer showing an 18% per annum interest charge for two years before filing suit to collect the balance. The customer files a counter claim alleging usury. The total interest charged is $1,800.00 (.18 x $5,000 x 2 years). the legal interest allowed under the law is $600.00 (.06 x $5,000 x 2 years). Since the interest that you charged is more than twice the legal amount, you can 1) lose the principal amount ($5,000), 2) be liable to the customer for $3,600.00 ($1,800 – $600 = $1,200 excess interest charged, x 3 = $3,600), and 3) be responsible for paying the customer’s attorney’s fees and court costs. This is not what you expected when you filed suit to collect your invoice.

The penalties can apply even if you don’t actually collect any interest payments, but only send invoices showing the charges. I suggest that if you want to charge customers more than 6% per year, you need to get the customer to sign an agreement with a higher interest rate. The agreement doesn’t have to be in any particular form. It can be a work order, estimate, proposal or memo, as long as it sets forth the interest rate to be used, and is signed as agreed to by the customer.

There are ways to get around the usury issue, but the best way is not to charge excessive interest in the first place. This is only a brief overview of a complicated area of the law. If you think that you may have a problem, you should contact an attorney for advice.

Susan J. Taylor is a Houston-based commercial litigation and business law attorney. She began practicing law in Texas in 1985 with a primary concentration in business, real estate, and commercial litigation and bankruptcy. Ms. Taylor is Board Certified in Civil Trial Law by the Texas Board of Legal Specialization. For expert help with commercial litigation or business law issues, please contact The Taylor Law Group for a consultation.

 

 

 

This entry was posted in Commercial Litigation, Contracts and tagged business law, commercial litigation, contract law, contracts, Usury on by admin.