Some of our clients find themselves in the unfortunate position of co-owning their home with someone who, due to absence, inability, or both, does not contribute to the upkeep of the home. Perhaps the client’s former spouse failed to comply with a divorce decree and moved out without deeding their half ownership of the marital home to the client; perhaps the client’s parents died without wills and their estranged siblings inherited an interest in the family home, despite only the client living there; perhaps a close friend or significant other agreed to be named as co-owner of a new home to help the client qualify for financing, but the relationship has soured and the client has lost contact. Whatever the reason, co-ownership with an absentee co-owner can present unique challenges to successfully maintaining one’s home.
In addition to having to foot the entire property tax bill to keep the property out of foreclosure and pay the home’s carrying costs with no contribution from the absentee co-owner, the occupying co-owner may have a difficult time making necessary repairs to the home due to their inability to obtain the co-owner’s written consent. Construction contractors, especially on large projects, often require the property owner’s agreement to the placement of a mechanic’s lien on the property and may refuse to enter a contract without the signatures of all co-owners. Similarly, construction lenders frequently condition their loans upon the property owner’s granting of a deed of trust upon which the lender can foreclose if the loan falls into default. They may decline to extend financing if they can only obtain a security interest in the occupying owner’s fractional share of the property.
For a client in such a position who doesn’t mind finding another home, the right of partition permits them to compel the property to be divided or sold, even without the consent of the other co-owners. But what if the occupying owner wants to keep the home and simply needs a way to make major repairs that require encumbering the home’s title?
Chapter 65 of the Texas Property Code provides a remedy. Under certain circumstances, the provisions of Chapter 65 allow an occupying co-owner to act as the legal agent for the non-contributing co-owner for the purpose of signing construction contracts and construction loan documents as if the missing co-owner had granted the occupying co-owner a power of attorney.
To make use of this remedy, both the property and the occupying owner must meet certain qualifications. The property must be a residence designed for no more than four families, must sit upon no more than ten acres, and must be owned by more than one person, at least one of whom has received the homestead tax exemption found in Texas Tax Code § 11.13. Tex. Prop. Code § 65.001. The occupying owner must be the one who received the homestead exemption, must have occupied the property for at least five years, and must have paid all of the ad valorem property taxes for the home for the previous five years without delinquency and without contribution from the non-occupying co-owner. Tex. Prop. Code § 65.002 (1-3). Under these circumstances, the occupying co-owner may record an affidavit in the county where the home is located attesting to the foregoing facts, supported by the affidavits of two personally knowledgeable witnesses confirming the required five years of occupancy and a certificate from the tax assessor-collector affirming the required tax payments. Tex. Prop. Code § 65.002(4); § 65.003. Once such an affidavit is recorded, Chapter 65 empowers the occupying co-owner to sign for the absentee co-owner on contracts that result in the placement of a mechanic’s lien on the property and deeds of trust for securing construction loans to preserve or improve the home. Tex. Prop. Code § 65.004(a).
The non-occupying owner does not become personally liable for the debt incurred by the contract or secured by the deed of trust, meaning that the contractor or lender cannot sue the non-occupying co-owner for money damages if the contract price is not paid or the loan falls behind. Tex. Prop. Code § 65.004(a). Should the non-occupying co-owner later object to the contract or the loan, Chapter 65 prevents them from having the contract or deed of trust invalidated on the grounds that he or she did not agree to them. Tex. Prop. Code § 65.004(b).
If you co-own a home with an absentee co-owner and wish to sign on their behalf using the powers granted by Chapter 65 of the Texas Property Code, a qualified real estate attorney can help you determine whether you and your property qualify and prepare the necessary affidavit and documentation to establish your authority under the statute.
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