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VOL. 3, NO. 1LAW PUBLICATION 672

A Reprint from the Real Center Journal Release

By Judon Fambrough

iterature regarding real by a third-party lender, the The of limitation for estate transactions focuses seller generally conveys the collecting (or foreclosing) on primarily on the prepara- vendor’s lien to the lender. both the vendor’s lien and tion of sales of trust is four years in Texas. andL the mechanics for closing. Recordable Release If no legal action has been filed What goes unaddressed, both in Because the promulgated forms for collection on the for the literature and in the pro- are silent on the issue of re- four years after the liens ma- mulgated forms, is the party lease, many buyers are confused ture, there is indication the responsible for preparing and as to the documents needed to liens have been paid. However, the release of liens clear when the mortgage is subsequent buyers of the prop- once the mortgage is paid. retired. Some buyers demand no erty may insist on filed releases Oversight is understandable documentation. They feel the before purchasing the . because far more are payment of the mortgage is Buyers who anticipate the prob- entered than ever reach maturity sufficient in and of itself. Oth- lem may wish to specify the 20 to 30 years later. ers require the mortgagee to parties, and their successors in Two possible liens return both the buyer’s promis- interest, responsible for preparing are created when a purchase is sory note and deed of trust with and recording the release instru- financed by either the seller or Paid in Full written across the ments. Specifications should be third-party lender. The first is face of each instrument. Neither placed in the sales , in the well known deed of trust alternative clears title. the promissory note and in the securing the buyer’s promissory What is needed is a recordable deed of trust. note (sometimes referred to as release of lien from the seller the real state lien note). The for the vendor’s lien (where New for Residential second is the lesser known applicable) and another release Property vendor’s lien retained by the from the mortgagee for the Effective September 1, 1993, seller in the deed. promissory note and deed of Section 12.017 was added to the A vendor’s lien is a charge trust. Both releases need to be imposed by law to secure the filed in the county where the Texas Property Code. The stat- ute allows title companies to payment of the purchase price property is located. Once re- file an affidavit of record that for . Usually the corded, the releases nullify any vendor’s lien is expressly re- further effectiveness of the has the effect of releasing a mortgage lien against a one- to served in the deed so that promissory note, the deed of four-family residence if, among notice will be given to third trust and the vendor’s lien. The parties when the deed is re- return of the lien instruments other things, the: corded. An express vendor’s lien to the buyer is customary but • mortgagor has proof that operates similarly to a contract not necessary in lieu of the the mortgage has been paid, for deed. The seller retains recorded releases. • mortgage remains unreleased superior title to the property If the sales contract does not for 60 days and until the purchase price is paid. address the party responsible for title company has given the The vendor’s lien arises inci- preparing and recording the • dent to a purchase-money . releases, it is the seller’s and mortgagee (lender) at least 15 days written notice of If there is no debt, there is no lender’s responsibility. If the its intent to execute and vendor’s lien. Consequently, the buyer does not insist on the retention of a vendor’s lien in preparation and recording of the record the affidavit. the deed is valid only when all releases, however, the matter may or a part of the purchase money go unattended. If so, the buyer’s Anticipate Problem is financed by the seller. When title will continue to be clouded Buyers who are about to retire the purchase is financed entirely after the mortgage is paid. a mortgage may wish to proceed in the following manner to A local title company may be for all or a part of the purchase assure release will come with helpful. money, a release from the seller the final mortgage payment. Alternatively, the buyer may also is necessary. Persons with First, the buyer may employ tender the final payment via a specific questions should consult an escrow agent to coordinate sight draft from a local . their attorney. the transaction. The buyer will Once the proper release instru- tender final payment to the ments are received at the bank, Fambrough is an attorney, member agent. The agent will forward the sight draft will be funded. of the State Bar of Texas and a senior the payment after receiving the Buyers must remember that a lecturer with the Real Estate Center proper releases from the recordable release of record is and in agricultural economics at Texas lienholders. However, an escrow necessary to clear title. If the A&M University. agent’s services will not be free. seller retained a vendor’s lien

©1996, Real Estate Center. All rights reserved. Director, Dr. R. Malcolm Richards; Associate Director, Gary Maler; Chief Economist, Dr. Ted C. Jones; Senior Editor, David S. Jones; Associate Editor, Dr. Shirley E. Bovey; Assistant Editor, Kammy Senter; Art Director, Robert P. Beals II; Circulation Manager, Gary Earle; Typography, Real Estate Center; Lithography, Wetmore Printing Corporation, Houston. Advisory Committee: Conrad Bering, Jr., Houston, chairman; John P. Schneider, Jr., Austin, vice chairman; Michael M. Beal, College Station; Melissa C. Cigarroa, Laredo; Dr. Donald S. Longworth, Lubbock; Carlos Madrid, Jr., San Antonio; Andrea Lopes Moore, Houston; Kay Moore, Big Spring; Gloria Van Zandt, Arlington; and Pete Cantu, Sr., San Antonio, ex-officio representing the Texas Real Estate Commission. Tierra Grande (ISSN 1070-0234), formerly Real Estate Center Journal, is published quarterly by the Real Estate Center at Texas A&M University, College Station, Texas 77843-2115. Subscriptions are free to Texas real estate licensees who provide their name, address, telephone and numbers to Department JS at the address given. Other Texas subscribers, $20 per year. Out-of-state subscribers, $25 per year. Views expressed are those of the authors and do not imply endorsement by the Real Estate Center, the College of Business and Graduate School of Business, or Texas A&M University.