8.2 Texas Disclosures and Consumer Protection
Key Takeaways
- Texas Property Code Section 5.008 requires the seller of residential property with one dwelling unit to deliver a written Seller's Disclosure Notice on or before the effective date of the contract
- If the seller delivers the notice after the contract is signed, the buyer may terminate within 7 days of receiving it
- The Section 5.008 notice now includes flood disclosures: 100/500-year floodplain, flooding in the past 5 years, flood-pool location, and prior flood insurance claims
- The Texas Deceptive Trade Practices Act (DTPA) lets consumers recover economic damages plus up to two additional times the first $1,000 of damages for knowing violations (treble-type damages)
- Buyers of property in a MUD must receive a statutory Notice (Texas Water Code 49.452) before a binding contract, and PID property requires a separate Local Government Code Chapter 372 notice
The Seller's Disclosure Notice (Property Code §5.008)
Texas Property Code Section 5.008 requires a seller of residential real property comprising not more than one dwelling unit to give the buyer a written Seller's Disclosure Notice describing the property's condition. This is a statutory duty on the seller, separate from the agent's common-law duty to disclose known material defects.
Timing
The notice must be delivered on or before the effective date of a binding contract. If the seller delivers it late:
| When buyer receives the notice | Buyer's remedy |
|---|---|
| Before signing the contract | None needed—properly delivered |
| After signing the contract | May terminate for any reason within 7 days of receipt |
| Never delivered | Termination right continues (no clean cutoff) |
What the Notice Covers
The seller completes the notice to the best of their belief and knowledge as of the date signed; if an item is unknown, the seller marks it unknown. Required categories include:
| Category | Examples |
|---|---|
| Structural | Foundation, roof, walls, floors, ceilings, slab defects |
| Systems | Plumbing, electrical, HVAC, water heater, septic |
| Water/flood | 100-year or 500-year floodplain, flooding in past 5 years, flood-pool/reservoir location, prior flood-damage repairs, prior flood-insurance claims |
| Environmental | Asbestos, lead paint, prior fires, hazardous materials |
| Legal/title | Liens, lawsuits, encroachments, unrecorded easements |
Exam Trap: The seller's §5.008 notice does not relieve the agent. An agent who knows of a material defect must disclose it even if the seller leaves it off the form.
Exemptions From §5.008
Several transfers are exempt from the Seller's Disclosure Notice because the seller has no real knowledge of the occupied property:
- Court-ordered transfers (e.g., probate, divorce, foreclosure)
- Transfers by a trustee in bankruptcy
- Transfers to a mortgagee by foreclosure or deed in lieu
- Transfers by a fiduciary administering an estate
- Transfers between co-owners or to a spouse/descendant
- Transfers of new residences not previously occupied
Warning: Even in an exempt transaction, the lead-based paint federal rule and the agent's duty to disclose known material defects still apply.
The Texas Deceptive Trade Practices Act (DTPA)
The DTPA (Texas Business & Commerce Code, Chapter 17) is the state's primary consumer-protection statute and a major source of license-holder liability. A real estate buyer is a "consumer" who can sue an agent for deceptive conduct.
The "Laundry List"
Section 17.46(b) lists specific false, misleading, or deceptive acts. The most common real estate violations are:
| Laundry-List Act | Real Estate Example |
|---|---|
| Representing goods have characteristics they don't | Saying a home has "new" wiring that is old |
| Representing quality/grade that's different | Calling a flood-prone lot "high and dry" |
| Failing to disclose known information to induce a sale | Hiding a known foundation problem |
| Misrepresenting authority to negotiate | Claiming agency authority not held |
Damages
| Conduct | Recovery |
|---|---|
| Ordinary violation | Economic damages + court costs + attorney's fees |
| Knowing violation | Above plus up to two times the economic damages (and mental-anguish damages) |
| Intentional violation | Up to three times economic + mental anguish |
The enhanced "treble-type" exposure makes the failure to disclose category the most dangerous trap for agents.
Special-District Notices: MUD and PID
When a property sits inside a special taxing or assessment district, the buyer must be told before they are bound, because the district adds taxes or assessments to the cost of ownership.
Municipal Utility District (MUD)
A MUD is a political subdivision that finances water, sewer, and drainage infrastructure through bonds repaid by property taxes. Texas Water Code §49.452 requires the seller to deliver a statutory MUD Notice disclosing the district's tax rate, bonded indebtedness, and any standby fee, before the buyer executes a binding contract.
- TREC's voluntary Notice to Purchaser of Special Taxing or Assessment District (Form 59-0) contains the statutory language with blanks for the specific district data.
- Remedy for failure: the buyer may terminate the contract and recover earnest money if the MUD notice was not delivered as required.
Public Improvement District (PID)
A PID is created under Local Government Code Chapter 372 to fund neighborhood improvements via assessments. A separate PID notice is required—a MUD notice does not satisfy the PID requirement, and vice versa.
| Feature | MUD | PID |
|---|---|---|
| Authority | Texas Water Code Ch. 49 | Local Government Code Ch. 372 |
| Funds | Water/sewer/drainage | Neighborhood improvements |
| Charge | Property tax | Assessment |
| Notice timing | Before binding contract | Before binding contract |
HOA / Property Owners' Association Disclosure
If the property is subject to mandatory membership in a property owners' association (POA/HOA), the seller must provide a subdivision information / resale certificate (Property Code Chapter 207) covering dues, assessments, restrictions, and the association's financials. The TREC HOA Addendum (36-10) is attached to the contract, and the buyer typically has a termination right tied to receipt of the subdivision information.
Lead-Based Paint (Federal)
For homes built before 1978, federal law (not Texas law) requires the seller to give the EPA pamphlet Protect Your Family From Lead in Your Home, disclose known lead hazards, and allow the buyer a 10-day period to test. The TREC Lead-Based Paint Addendum (9-x) documents compliance.
Other Required Texas Notices
| Notice | When Required |
|---|---|
| Coastal area / Gulf-facing | Property seaward of the Gulf Intracoastal Waterway |
| Annexation | Property in a municipality's extraterritorial jurisdiction |
| Certificated service area | Property served by a utility certificate of convenience and necessity |
A seller delivers the Seller's Disclosure Notice required by Property Code §5.008 three days AFTER the buyer signs the contract. What is the buyer's remedy?
An agent tells a buyer a home has "never had any water problems," knowing it flooded twice in the last three years. Under the Texas DTPA, what is the agent's greatest exposure if the conduct is found to be knowing?
A home is located in both a Municipal Utility District (MUD) and a Public Improvement District (PID). The seller provides only the MUD notice. Which statement is correct?