What is a MUD, PID and Title Commitment?

Within a few days to a week or so of going under contract, the Title Company will send what is called a Title Commitment for your review. They may also send a preliminary settlement statement so you can get an idea of the fees you will incur for the purchase of your new home. Below are a few questions you may have...

What is a Title Commitment?

A Commitment for Title Insurance (“Title Commitment”) provides you and your lender with the terms and conditions for how the final title policy will be issued. Title insurance offers protection for you and the lenders from certain defects or errors in the title to a property. There are four main parts (called “Schedules”) of the title commitment.

SCHEDULE A

Section 1 of Schedule A lists the types of policies that are going to be issued (Owner’s Title Policy and/or Lender’s Title Policy). Be sure that everyone to be on the deed is there and the sales price are shown accurately. Section 2 of Schedule A shows the type of interest that you are going to acquire in the property, which in most sales should always be “Fee Simple.”

Section 3 shows the legal owner/s of the property are after a search in the real property records. Section 3 is important to review to make sure that the names listed here match the seller on the contract. If there are additional people listed here, that did not sign the contract, then you likely do not have a valid binding contract. There are many reasons why this may not match and they typically include issues like: a death or divorce in the chain of title, bankruptcy or marriages since acquisition of the property. In all cases, something shown in this section that does not match the contract means that the listing agent and sellers need to work closely with their escrow team to help work through any issues. The agents work on getting additional signatures on the contract as quickly as possible.

Section 4 of Schedule A shows the legal description. When dealing with real property it is the legal description that controls the transaction, not the physical property address. Legal documents that are recorded at closing should always describe the property by the description found in Section 4. Review this section to be sure what is shown here is what the parties mean to transfer at closing.

SCHEDULE B

Schedule is directed to the buyer and lender that will receive a title policy. This schedule includes the EXCEPTIONS to the policy that will be issued. An exception is something that will not be covered in the title policy. Schedule B includes both standard exceptions and property specific exceptions. A “standard exception” is one that includes promulgated language from the Texas Department of Insurance. These are exceptions to coverage that are to be found in every Owner’s or Lender’s title policy that is issued. These exceptions do not change. A specific exception is one that affects the property to be insured and is not standard in all Texas title policies. Specific exceptions can include things like: restrictions, easements, mineral severances, and setback requirements. Review Schedule B in detail. It tells you about possible limitations in use or encumbrances on the property.

SCHEDULE C

The items listed here must be addressed prior to or at closing in order for a title company to fund and issue its policies. We call them REQUIREMENTS. This section lists items such as: mortgage liens, tax liens, abstracts of judgment, and assessment liens. Schedule C also lists any requirements that must be satisfied to get to closing. This schedule is important to both buyers and sellers as it itemizes what has to be satisfied before closing can occur. Pay special attention to this schedule. It is the checklist of tasks to cure in order to close on time. Many “simple” matters are easily resolved by tasks that the closing team handles through the closing process. Most commonly these are matters like ordering a payoff statement on an existing mortgage lien or tracking down certified copies of documents. The more complex matters will require participation by the seller and listing agent to be able to get to closing on time. Therefore it is important for the listing agent to work closely together with the Title Company to be sure everything is on track.

SCHEDULE D

This schedule is primarily for disclosure purposes. This schedule outlines the parties who have a share in any part of the title premiums, including underwriters and title agents.

What is a MUD and a PID? How are they different?

MUD taxes (Municipal Utility District Taxes) and PID taxes (Public Improvement District) tax are additional assessments above standard property taxation. MUD taxes generally have no expiration date. As more homes are constructed in MUD districts, MUD taxes can decrease or be eliminated over time. PID taxes can also be paid in full up front, versus prorated year by year during the years the PID is active. PIDs can run from 20 to 40 years in duration.

The purpose for these special assessments is to fund new infrastructure development when the standard tax base alone is insufficient. The various online Tax Appraisal Districts will reveal if MUD or PID taxes apply. If you would like the StarCoast Team to send you a copy of this for review please let us know.  

A Municipal Utility District (MUD) is one of several types of special districts that function as independent, limited governments. The purpose of a MUD is to provide a developer an alternate way to finance infrastructure, such as water, sewer, drainage, and road facilities. Managed by a Board elected by property owners within the MUD, a MUD may issue bonds to reimburse a developer for authorized improvements and the MUD will utilize property tax revenues and user fees received from water and sewer services operated by the MUD to repay the debt. 

As the MUD pays off its debt, more of its tax revenue can be directed to other services. Originally, MUDs were very limited in what they were allowed to finance and what services they could provide. Over time, MUDs began taking on more responsibilities and providing enhanced services for their residents such as parks and recreation, deed restriction enforcement, and solid waste service. MUDs rely on the County to provide police and road maintenance services and Emergency Service Districts (ESDs) for providing fire protection.

A Public Improvement District is a special district created by a City or County under the authority of Chapter 372 of the Texas Local Code. The statute allows for a city or county to levy a special assessment against properties within the District to pay for improvements to the properties within the District.

PID Assessments are payments made to cover the costs associated with improvements and services in the District. Haslet PIDs are the type that are known as a fixed assessment that is allocated to each lot located within the District to pay for improvements that provide a special benefit to the properties within the District.

The fixed assessments levied against properties in the public improvement districts pay for improvements to the properties that may include: Roads, Water Distribution Lines, Wastewater Collection Lines, and Drainage Improvements, Landscaping and Irrigation, Trails, Parks, Open Space, and Monuments and Entry Features. Each PID document lists the improvements to be paid for by that districts assessment.

Here are a few links that may be useful in your research:

Harris County Appraisal District

Brazoria County Appraisal District

Galveston County Appraisal District

Chambers County Appraisal District

Fort Bend County Appraisal District

Disclaimer:    The material contained herein is for informational and educational purposes only. It should not be used as a substitute for legal advice. If legal advice is required or desired, the services of a real estate attorney should be sought.