Residential Real Estate Contracts in Texas:
Identifying the Parties and Property

This article discusses the need to properly identify the parties and property in a Texas residential real estate contract. The principles discussed in this article are not intended to be an exhaustive or academic treatise on the subject of real estate contract law. The intention is merely to hit upon certain practical and pragmatic highlights that affect TREC and Texas Realtors residential contracts. We do not cover business or commercial contracts and therefore do not discuss the Uniform Commercial Code, the Business & Commerce Code, and related statutes.

Identifying the Parties

Is either party a sole proprietorship? A corporation? An LLC? A determination needs to be made as to who actually owns the property being transferred and who has authority to speak and sign for the ownership entity (e.g., the manager of an LLC).

If either party is a registered entity (such as an LLC, corporation, or limited partnership) then several key questions arise:

(1) What is the actual name of the entity, including capitalizations, commas, and the like? Lawyers are surprised at the number of clients who do not know the correct name of their LLCs. The name of the entity used in a contract should match the Certificate of Filing (the secretary of state’s approval document) exactly, like a screenshot. If the COF shows the name in all caps, then that is the correct way to show the name of the company on the contract. Example: if the approved name of the entity is ALAMO ASSET MANAGEMENT, LLC, and the contract is completed using the name Alamo Asset Management LLC (in lower case without the comma), do you have a contract? Possibly not. Legally speaking, those are different LLC names.

(2) Is the entity in good standing with the Secretary of State and Comptroller? LLCs that are not in good standing do not have the legal capacity or authority to do business in Texas. The best practice is to check the status of an LLC before entering into a contract with it.

(3) Who has authority to sign on behalf of the entity and what is that person’s title? This should be clearly established at the contract stage and be accurately reflected on the signature line.

Marital Status

Texas is a community property state so marital status (even at the contract stage) should not be a mystery. What happens if only one spouse on the title signs a contract but the other refuses to sign?

Lawyers hear many excuses for not getting the signature of a spouse on a real estate contract. These include:

(1) “There is no need at this early stage to determine if the parties are married or to get both signatures.” This is false. To be a valid and comprehensive, a contract should bind and commit all persons who own any kind of interest in the property.

Consider the actual case of someone owned a life estate. The realtors (in a rush and focused on commissions) argued strenuously that it was not necessary to get the life tenant to sign as one of the sellers. The result was that the contract bound less than 100% of the total property interest to be conveyed. As it turned out, the life tenant refused to sign at closing and the transaction failed.

(2) “Not including the signature of a spouse on the contract is not a problem since the title company will resolve this.” Again, all persons with a property interest of any type should be named on the seller line of the contract. Contracts can and do fail to close because an absent or difficult spouse refuses to sign closing documents.

(3) “The property is business or investment property, not homestead, and therefore the spouse’s signature is not required.” This includes a potentially false assumption. Community property can (and usually does) extend beyond the homestead to business assets as well. Get the signature of both spouses.

(4) “The spouse is in China and we don’t need her signature because China does not recognize community property law.” This is false. Texas law governs real property located in Texas. Neither the culture nor the origin of the seller is relevant.

(5) “One spouse is about to be awarded the property in a divorce so the other spouse does not have to sign.” This is false. A divorce is not final until a final decree is signed by the family court. Until then the parties remain married and the community property estate still exists.

The most professional approach is to clarify marital status up front and write the contract accordingly. This means getting all parties with a property interest to sign the contract. Also, the word spouse should be included even if the two buyers or sellers have the same last name. Why? They could be siblings.

Identifying the Property

The legal rule in Texas is that a property description is sufficient if it identifies the property with reasonable accuracy. Morrow v. Shotwell, 477 S.W.2d 538 (Tex. 1972). However, a careful contract drafter should not be satisfied unless the legal description of the property is as correct as possible. Perfection may not be required at the contract stage but sloppiness can definitely cause problems.

If available documents show more than one description of the property, and there is a conflict, then the more specific metes-and-bounds description controls. Stribling v. Millican DPC Partners, LP, 458 S.W.3d 17 (Tex. 2015).

The property description should be such that a title examiner “can ascertain that the description in the instruments involved in a chain of title sufficiently describes the land so that it can be identified and located on the ground with reasonable certainty.” Comments to Standard 5.10, Texas Title Examination Standards.

The best sources of the property description are the last recorded deed or a recent title commitment or title policy. Appraisal district records are not recommended as a source. Their descriptions are often condensed or reformatted and may not match the official description as shown in the county clerk’s real property records. Appraisal districts often operate on a different computer system than the county clerk’s real property records. The official chain of title resides in the county clerk’s office not at the appraisal district.

Note that if a legal description is outdated or if there is any doubt as to its present accuracy (e.g., it refers to an “old oak tree for corner” or a “stream for boundary”) then the contract should probably provide that a new survey will be obtained within the due-diligence period.

Legal descriptions can evolve over time. “While any title is only as good as the weakest link the chain of descriptions, practical considerations justify reliance upon corrections or improved land descriptions appearing in later conveyances and upon the passage of time if no apparent difficulties have arisen from a less than perfect land description.” Pickett v. Bishop, 223 S.W.2d 222 (Tex. 1949).

Presumptions in Legal Descriptions

Absent an express reservation to the contrary, legal descriptions in Texas are presumed to include and convey omitted narrow strips of land that should logically be included in the conveyance, given the nature of the property, and which would otherwise have little utility to the grantor. Strait v. Savannah Court Partnership, 576 S.W. 3d 802 (Tex.App.—Fort Worth 2019, pet. denied). This presumption established by the strips-and-gores doctrine is rebuttable by evidence that the parties intended a different outcome.

Another presumption is the centerline presumption, which states that a landowner is presumed to have ownership of the soil all the way to the centerline of an adjoining street (subject to the public’s right of passage)even if the legal description in the landowner’s deed does not specifically extend that far.

Conclusion

A well-drafted contract should be a correct and comprehensive document. The parties should be properly identified, and the property should be described with reasonable certainty without reliance on oral statements or unwritten assumptions. Consult a real estate attorney for guidance before signing the contract.