Can a Texas tax office refuse to transfer my property tax lien to a tax lender, and what costs does that lien cover?

Plain-English summary

Texas has a property-tax-lending system. When a homeowner cannot pay property taxes, the homeowner can authorize a third party (a property tax lender) to pay them. Under section 32.06 of the Tax Code, once the taxpayer files the right sworn paperwork and the conditions are met, the tax lien that secures those taxes is transferred to the person who paid. The lender then holds the lien, and the homeowner repays the lender. A state representative chairing a House committee asked the Attorney General who controls that transfer and what the transferred lien actually secures.

The first set of questions was about control. Does the tax assessor-collector, acting alone, transfer the lien, and can the collector or the taxing unit refuse even when the taxpayer consents? The opinion answered that the transfer is mandatory and ministerial. Section 32.06(b) says the collector "shall" issue a tax receipt to the transferee and certify that the lien is transferred. The word "shall" imposes a duty, so once the statute's requirements are met, the lien transfers by operation of law. The collector has no discretion to deny the transfer, and the Legislature gave the taxing unit's governing body no role in it at all. Neither one can block a transfer that otherwise qualifies under section 32.06.

The second question was about scope: does the transferred lien also secure closing costs, lien recordation fees, or other costs the lender charges? The opinion explained that for these purposes the Tax Code defines "taxes" to include charges, fees, or expenses "expressly authorized by" section 32.06 or 32.065 (section 34.02(e)). It said the statutory text does not give a crisp yes-or-no answer and no court had addressed the question, so it offered guidance rather than a definitive ruling.

On closing costs, the opinion noted that section 32.06(a-4)(2) directs the Finance Commission to adopt rules on the reasonableness of "closing costs, fees, and other charges permitted under this section," and that the Commission's Office of Consumer Credit Commissioner had adopted rules treating closing costs as expressly authorized charges. From that, a court could conclude closing costs are secured by the transferred lien as "taxes." On lien recordation fees, the statute does not specifically mention them, so one could argue they are not secured. But the opinion found support in sections 32.065(b) and (b-1), which make the contract between the owner and the transferee secured by the lien and require payment of the entire amount owed to release it. So to the extent the owner-transferee contract provides for a charge or fee, including a lien recordation fee, a court could conclude the transferred lien secures it. As for unspecified "other costs," the opinion said it could not address them because the request did not identify what they were.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

Tax assessor-collectors (as the opinion described it): The opinion treated the section 32.06 transfer as a ministerial duty. The collector, acting alone, must issue the receipt and certify the transfer once the conditions are met, with no discretion to refuse.

Taxing units and their governing bodies (as the opinion described it): The opinion said the Legislature gave the governing body no role in the transfer, so it cannot deny a qualifying transfer.

Property owners and property tax lenders (as the opinion described it): The opinion read section 32.06 as guaranteeing the transfer when its conditions are met. On the secured amount, it said a court could conclude closing costs are secured, and that charges like lien recordation fees are secured to the extent the owner-transferee contract provides for them.

Common questions

Can my local tax office refuse to transfer a property tax lien if I have consented?
No, as the opinion read the statute. Section 32.06(b) makes the transfer a ministerial duty once the conditions are met. The collector must carry it out and cannot refuse, and the taxing unit's governing body has no role to block it.

Does the taxing unit's board get a vote on the transfer?
No. The opinion said the Legislature granted the governing body of the taxing unit no role in transferring a tax lien.

Are closing costs covered by the transferred lien?
The opinion said a court could conclude they are. It pointed to section 32.06(a-4)(2) and the Office of Consumer Credit Commissioner's rules treating closing costs as charges expressly authorized by section 32.06, which would make them secured as "taxes" under section 34.02(e).

What about lien recordation fees and other charges?
The opinion said those are not specifically named in the statute, but to the extent the contract between the property owner and the transferee provides for them, a court could conclude the transferred lien secures them. It could not address unspecified "other costs" the request did not identify.

Background and statutory framework

Under Tax Code section 32.01(a), a tax lien attaches to property on January 1 each year to secure that year's taxes, penalties, and interest, in favor of each taxing unit. Section 32.06 lets a property owner authorize another person to pay those taxes; when the conditions are met, subsection (b) requires the collector to issue a tax receipt and certify that the taxing unit's lien is transferred to the transferee. Government Code section 311.016(2) confirms that "shall" imposes a duty. Section 34.02(e) defines "taxes," for applying tax-sale proceeds, to include charges, fees, or expenses expressly authorized by section 32.06 or 32.065. Section 32.06(a-4)(2) directs the Finance Commission to adopt rules on the reasonableness of closing costs and other charges permitted under the section, and the Office of Consumer Credit Commissioner has done so at 7 Texas Administrative Code section 89.601. Sections 32.065(b) and (b-1) govern the owner-transferee contract and its release.

The opinion's interpretive approach followed Marsh USA Inc. v. Cook, giving effect to the Legislature's intent as discerned from the words used in the statute.

Citations

Cases:

• Marsh USA Inc. v. Cook, 354 S.W.3d 764, 778 (Tex. 2011)

Statutes:

• Tex. Tax Code Ann. § 32.01(a) (West 2008)
• Tex. Tax Code Ann. § 32.06(a-1), (a-4)(2), (b), (j) (West Supp. 2012)
• Tex. Tax Code Ann. § 32.065(b)(1)-(2), (b-1) (West Supp. 2012)
• Tex. Tax Code Ann. § 34.02(e) (West Supp. 2012)
• Tex. Gov't Code Ann. § 311.016(2) (West 2005)
• 7 Tex. Admin. Code § 89.601 (2012)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0965
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2012/ga0965.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

September 12, 2012

The Honorable Burt R. Solomons Opinion No. GA-0965
Chair, Committee on Redistricting
Texas House of Representatives Re: Transfer of a tax lien pursuant to section
Post Office Box 2910 32.06 of the Tax Code, and the items that may be
Austin, Texas 78768-2910 secured by the transferred lien (RQ-1051-GA)

Dear Representative Solomons:

You ask a series of questions about the respective roles of the tax assessor-collector (the "Collector") and the governing body of a taxing unit in relation to the transfer of a tax lien.[1] Under section 32.01 of the Tax Code, "[o]n January 1 of each year, a tax lien attaches to property to secure the payment of all taxes, penalties, and interest ultimately imposed for the year on the property .... The lien exists in favor of each taxing unit having power to tax the property." TEX. TAX CODE ANN. § 32.01(a) (West 2008). A person may authorize another person to pay his or her property taxes under certain circumstances by filing with the Collector a sworn document that satisfies the requirements of subsection 32.06(a-1). See id. § 32.06(a-1) (West Supp. 2012). If certain conditions are met, the tax lien is transferred to the person who paid the property taxes. Id. § 32.06(b).

You first ask whether the Collector has the authority, acting alone, to transfer the taxing unit's tax lien in a case that otherwise meets the requirements of section 32.06 of the Tax Code. See Request Letter at 1. If so, you ask whether the Collector has the discretion to decline to transfer a tax lien despite a taxpayer's consent to the transfer. See id. If not, you ask whether the governing body of the taxing unit has the discretion to decline to transfer the tax lien despite a taxpayer's consent to the transfer. See id.

In construing a statute, our goal is to give effect to the Legislature's intent as discerned from the words used in the statute. See Marsh USA Inc. v. Cook, 354 S.W.3d 764, 778 (Tex. 2011). As we have indicated, subsection 32.06(a-1) permits a taxpayer to authorize another person to pay his or her property taxes under certain circumstances. See TEX. TAX CODE ANN. § 32.06(a-1) (West Supp. 2012). Subsection 32.06(b) further provides that once that person pays the taxes and any penalties and interest imposed,

the collector shall issue a tax receipt to that transferee. In addition, the collector ... shall certify that the taxes and any penalties and interest ... and collection costs have been paid by the transferee on behalf of the property owner and that the taxing unit's tax lien is transferred to that transferee.

Id. § 32.06(b) (emphasis added). The Legislature's use of the word "shall" imposes a duty on the Collector to certify that the taxing unit's lien is transferred to the person who paid the taxes. See TEX. GOV'T CODE ANN. § 311.016(2) (West 2005). Thus, under the plain language of the statute, the Collector has no discretion to deny a tax lien transfer. Once the requirements of the statute are met, the tax lien transfers by operation of law to the "transferee authorized to pay a property owner's taxes." TEX. TAX CODE ANN. § 32.06(b) (West Supp. 2012). The Collector has a ministerial duty to "issue a tax receipt to [the] transferee" and to make the statutorily required certification "that the taxing unit's tax lien is transferred to [the] transferee," but the statute gives the Collector no discretion in carrying out these duties. Id. In addition, the Legislature has granted the governing body of the taxing unit no role in the transfer of a tax lien. Thus, in answer to your first set of questions, the Collector, acting alone, must carry out the ministerial duties related to the transfer. Neither the Collector nor the governing body of the taxing unit is empowered to deny the transfer of a tax lien if the conditions of section 32.06 of the Tax Code are otherwise met.

Your second question concerns the scope of the transferred lien. You ask whether the transferred tax lien extends to and secures closing costs associated with the loan to the property owner, lien recordation fees, or any other costs incurred before or after the tax lien transfer. See Request Letter at 1. Tax liens "secure the payment of all taxes, penalties, and interest ultimately imposed for the year on the property." TEX. TAX CODE ANN. § 32.01(a) (West 2008). For purposes of applying tax sale proceeds toward those payments, the Legislature has specified that the term "'taxes' includes a charge, fee, or expense that is expressly authorized by [s]ection 32.06 or 32.065." Id. § 34.02(e) (West Supp. 2012).[2] Thus, your question requires us to examine whether closing costs, lien recordation fees, and other costs constitute "charge[s], fee[s], or expense[s] that [are] expressly authorized by [s]ection 32.06 or 32.065." Id. No judicial decision of which we are aware addresses this question. And, because the statutory text does not yield a clear answer, we cannot definitively resolve your question. Subject to these limitations, however, we can provide the following guidance.

With respect to closing costs, neither section 32.06 nor section 32.065 specifically empowers transferees to charge closing costs. Subsection 32.06(a-4)(2), however, directs the Texas Finance Commission (the "Commission") to adopt rules "relating to the reasonableness of closing costs, fees, and other charges permitted under this section," suggesting that closing costs are charges expressly permitted under section 32.06. Id. § 32.06(a-4)(2) (emphasis added). Indeed, the Commission, through its Office of Consumer Credit Commissioner, has promulgated rules treating closing costs as expressly authorized charges, which further supports the view that closing costs are expressly authorized by section 32.06. See 7 TEX. ADMIN. CODE § 89.601 (2012) (Office of Consumer Credit Commissioner, Fees for Closing Costs). Thus, a court could conclude that closing costs are expressly authorized by section 32.06 and are thereby secured by the transferred lien as "taxes" under subsection 34.02(e).

With respect to lien recordation fees, the statute does not specifically reference any charges or fees related to the recording of the lien. Thus, it could be argued that lien recordation fees are not among the charges, fees, or expenses "expressly authorized by [s]ection 32.06 or 32.065" and are therefore not secured as "taxes" under subsection 34.02(e). TEX. TAX CODE ANN. § 34.02(e) (West Supp. 2012). However, we also find support in the Tax Code for the view that any charges and fees included in the contract between the property owner and the transferee, which could include lien recordation fees, are secured by the transferred lien. Subsection 32.065(b) provides that "a contract entered into ... between a transferee and the property owner under [s]ection 32.06 that is secured by a priority lien on the property shall provide for ... (1) an event of default; [and] (2) notice of acceleration[,]" among other requirements. TEX. TAX CODE ANN. § 32.065(b)(1)-(2) (West Supp. 2012) (emphasis added). Upon such default and notice of acceleration, subsection 32.065(b-1) provides that "the mortgage servicer of a recorded lien ... may obtain a release of a transferred tax lien on the property by paying the transferee ... or the holder of the tax lien the amount owed by the property owner to that transferee or holder." Id. § 32.065(b-1) (emphasis added). Under these provisions, the contract between a property owner and a transferee is expressly secured by the lien, and only the payment of the entire amount owed will be sufficient to release the lien. Thus, to the extent that any charge or fee, including a lien recordation fee, is provided for in the contract entered into between a property owner and a transferee under section 32.06, a court could conclude that the transferred tax lien extends to and secures that charge or fee.

You do not specify which "other costs" incurred before or after the tax lien transfer you are concerned about. Thus, we cannot address whether unspecified "other costs" are expressly authorized by section 32.06 or section 32.065.

SUMMARY

The tax assessor-collector, acting alone, must carry out the statutorily required duties related to a transfer of a tax lien under section 32.06 of the Tax Code. Neither the tax assessor-collector nor the governing body of the taxing unit is empowered to deny the transfer of a tax lien if the conditions of section 32.06 of the Tax Code are otherwise met.

A court could conclude that closing costs and lien recordation fees charged by a property tax lien transferee under section 32.06 of the Tax Code are secured by the transferred tax lien.

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

JASON BOATRIGHT
Chairman, Opinion Committee

Becky P. Casares
Assistant Attorney General, Opinion Committee

[1] See Letter from Honorable Burt R. Solomons, Chair, House Comm. on Redistricting, to Honorable Greg Abbott, Tex. Att'y Gen. at 1 (Mar. 28, 2012), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] See also TEX. TAX CODE ANN. § 32.06(j) (West Supp. 2012) (specifying the particular order of tax sale proceeds to be applied "following a judicial foreclosure as provided by this subsection").