Danger - Muds And Suds

When advising sellers of rural lands, Seller=s attorney must determine whether or not the real property is located in a water or other utility district. If the land is located in such a district, then Section 49.452 of the Texas Water Code mandates that the Seller must give the Purchaser a special notice prior to the Purchaser=s execution of the sale contract. In the absence of such notice, the Purchaser Ashall be entitled to terminate the contract.@ Therefore, locating the property within the territorial limits of Municipal Utility Districts (MUDs) or Special Utility Districts (SUDs) is critical to the enforceability of the contract of sale.

The Texas Legislature has passed a number of enabling laws allowing the creation of Municipal Utility Districts (MUDs) and Special Utility Districts (SUDs), each of which has a defined territorial limit. Each of the Districts may have certain requirements with regard to development within the District and/or usage of water or other utilities. These restrictions are applicable to all lands located within the MUD or SUD. Each MUD or SUD has an obligation to file a map or plat of its territorial limits with the County Clerk of each county in which it is located. Unfortunately, most of the County Clerks have no idea where to file or how to locate any of the map filings. Most of the County Clerks do not know how many MUDs or SUDs are located within their County. Only MUDs can assess taxes. SUDs cannot. Accordingly, it is possible that your client owning interests in real property in rural areas may not know, either from tax statements or otherwise, whether his property is located within a MUD or SUD. However, if your client desires to sell any real property and it IS located within a MUD or SUD, the statute requires a special Notice to Purchaser form be furnished to the Purchaser. Each District must have or maintain a ANotice to Purchaser@ form. In order to get the appropriate form to give to the Purchaser at or before closing, you must be able to determine whether your client=s property is located within the MUDs or SUDs in the County or is outside of them. The Texas Commission on Environmental Quality (TCEQ) has been delegated the responsibility of managing the MUDs and SUDs programs. Accordingly, all MUDs and SUDs that have heretofore been created and are still in existence must file their maps with TCEQ. Those maps have been digitalized and are used in the database maintained by TCEQ. In order to access that database for the purpose of determining whether your client=s property is within a MUD or SUD, you need to contact TCEQ. Your contact is Komal Patel, a member of the finance review team in the Utility and District Section of the Water Supply Division of TCEQ. Her phone number is (512) 239-3760. She informed me that in order to obtain the determination of whether your property is within or outside a MUD or SUD, you must complete a special form (copy attached) and forward that to her by email, fax or letter. If accompanied by a map other than a street address, the map or your client=s property must reflect the location with county roads and/or highways.

Your starting place should be at the following link that will show you all of the MUDs or SUDs that have registered with TCEQ on a county-by-county basis: http://www3.tnrcc.state.tx.us/iwud/util/. You must understand that some MUDs may not have registered as required by law, some have expired, gone out of business and disappeared. Also, some MUDs may have applications for approval pending and will not have made that list. The list is good but not guaranteed.

I trust these instructions will assist you in locating your client=s property within MUDs and SUDs for the purposes indicated above.

P.S. It is also a good idea to run down the check list of mandatory notices related to real property sales as reflected in the Texas State Bar Real Estate Manual, Section 2.62.