Homestead Liens

Texas has very complicated homestead laws intended to protect individuals against “accidental” homelessness. There are very few ways a lien can be placed on a homestead, and each way is spelled out in the Texas Constitution. If you are a banker, homeowner, or work at a title company, you may have heard of the twin issues of “overburdening” the homestead and “spreading” liens on homestead property.

For many years, lawyers and title companies took the position that a giving a partial release of a portion of a homestead property created an “overburdening” of the remaining tract.  That is, the “per acre” or “proportion of value” allocation of the loan would be greater than at the inception of the loan and therefore impermissible, since the Texas Constitution only allows liens on the homestead for a strict list of reasons.  The fact is, there was little case law and no “black letter” law for that concept.  Article 16, Section 51 of the Texas Constitution was amended a number of years ago now to “fix” the problem, initiated by Stewart Title’s legislative group.  Per that provision, there is expressly now no prohibition to partially releasing a portion of the homestead or refinancing the remaining debt after such a release.

Similarly, title companies took the position that a lien could not be “spread” to include new property added to the homestead (that is, another lot adjoining the current homestead or additional acreage being purchased for a rural homestead).  Section 5.042 of the Property Code was amended several years ago to allow an existing lien on the original tract to be extended to cover and include a newly purchased tract, so long as that tract does, in fact, qualify as homestead.  Thus, the value of the original homestead can be “mixed in” with the value of the newly acquired tract and a lien taken on both tracts.  So, that amendment made it possible to use homestead property already owned as collateral to buy more homestead property.

Have questions about a lien on your property? Give us a call at (254) 300-7909 and set an up an appointment to come talk about it with us. We would love to help you!