A Public Improvement District, also known as a PID, is created by developers or communities to fund infrastructure or enhancements of neighborhoods. A PID may fund a new playground in a subdivision or a repair of its pool, for example, similar to the way a Homeowners’ Association functions. As of September 1, 2021, House Bill 1543 has amended the way that PID notifications are shared with potential buyers.
Why It Matters
While enhancements provided by a PID may make a neighborhood more desirable, they do come at a cost. In order to pay for community projects, a PID taxes the property owners within the community, often resulting in higher property taxes. Because property owners usually pay for those funds, they must be notified of their existence before they purchase a home, so that they can assess not only the purchase price but also the total cost of owning a particular home. While the purchase price of the house may be within a buyer’s budget, additional unexpected taxes may not be. Therefore, prospective buyers need to be fully aware of whether their home is within a PID.
With the new legislation, any person “who proposes to sell or otherwise convey real property” is required to inform a prospective buyer if the property lies within a public improvement district. In addition, the notice must use the exact wording of the statute, as opposed to previous expectations that the language and format be similar but not necessarily identical to the statute.
Timing is also critical for PID notification. The buyer must be informed of the PID before signing the contract. According to Texas Property Code §5.014, notification “containing the required notice shall be attached to [the] contract” in the form of a paragraph within the contract or a separate addendum. The buyer must next sign an agreement form which is then recorded. If the seller fails to inform the buyer of the PID status, the buyer may terminate the contract.
Purchasing a home is often the largest investment a person makes. Working with a qualified real estate lawyer is the best way to eliminate unexpected surprises and expenses before, during, and after closing.
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