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Wholesaling in Texas Real Estate

Sale and Assignment of Earnest Money Contracts by David J. Willis J.D., LL.M.

Introduction

Wholesaling is the term for getting a property under contract and then selling that contract to a real estate investor who typically does fix-up work before re-selling the property at a profit—all within a reasonably brief timeframe. There are, of course, other wholesaling scenarios and contracts may be assigned more than once.

Both the Texas legislature and TREC have moved in recent years toward greater regulation of the business of sale and assignment of earnest money contracts. Current applicable law is discussed in detail below.

Assignability of a Contract

An earnest money contract that is destined to be assigned should expressly state that it is assignable. This obvious first step is often omitted by amateurs.

A common way to list the buyer in paragraph 1 of the TREC contract is (for example) “ABC LLC and/or its assigns.” This helpful but not really sufficient for wholesaling. Time and space permitting, careful lawyers would prefer a more comprehensive provision such as:

It is expressly agreed that this contract may be assigned at any time by Buyer before closing without prior notice to or consent by Seller. Seller unconditionally agrees: (1) that the effect of any such assignment will be to immediately relieve the person presently named as Buyer of any further obligations under the contract; (2) to accept the assignee as Buyer; and (3) to timely and without object cooperate in the execution and delivery of closing documents, including a warranty deed, according to the terms of this contract.

Since the available line on the TREC 1-4 form is just too short for this longer and more thorough clause, an investor involved in the business of wholesaling should consider including a custom attorney-drafted special provisions addendum. There is no substitute for such an assignability addendum if there is to be a smooth and successful sale and assignment of the earnest money contract to a substitute buyer.

Even if the contract is expressly designed to be assignable, it is always a good idea to attach the seller-owner’s written consent to any assignment instrument. More on this below.

Two Approaches

There are two main approaches to the business of selling and assigning earnest money contracts.

The First Method: One Step

In the first method, an earnest money contract is sold as a one-time, one-document event that is entirely independent from closing of the sale of the property. In other words, there is no executory due-diligence phase—no gap in time—in anticipation of a later finalization at a future closing. The full consideration is paid now, a final assignment instrument is executed, and the assignor (the original buyer under the contract) leaves the picture permanently.

Consideration usually consists of an assignment fee plus reimbursement for the down payment previously posted by the contract assignor. The assignee of the contract then assumes the role of buyer of the property and goes forward to closing of the property sale. No additional involvement by the contract assignor (now gone) is required.

The Second Method: Two Steps

The second approach is more complex. Instead of a one-time, one document event, the assignment process moves forward (or at least should move forward) in several distinct steps:

(1) Agreement to Assign . An interim/executory agreement is executed. This is an agreement to assign the earnest money contract (upon certain terms and conditions) in anticipation of a final assignment that will occur more or less simultaneously with a future closing of the sale of the property. The key drafting point to understand here is that there is major difference between an agreement to assign and the final assignment.

The interim agreement recites contingencies and critical deal points such as whether or not the final assignment of the contract will be made “as is,” in the contract’s present condition, and without representation, warranty, or recourse, express or implied. (The alternative is to include representations and warranties plus a means of recourse if the seller of the property fails to sign over a deed at closing.)

(2) Deposit . As consideration for the agreement to assign, the assignee pays a non-refundable deposit which is less than the full assignment fee that will be due at closing (but will be credited towards it).

(3) Due Diligence by Assignee . The time between execution of the interim agreement and the date of closing of the property sale may be used by the proposed assignee as a due-diligence period. The agreement to assign may contain provisions for accessing information about the contract and the property along with a provision for unilateral termination if the assignee decides not to proceed.

(4) Closing. At the property closing there is a two-step process (or back-to-back closings). In order to wind up the assignment, the contract assignee pays the balance of the assignment fee and refunds the earnest money to the contract assignor as required by the agreement to assign. The assignment should then be finalized by a “Sale and Assignment of Earnest Money Contract.” The assignment process thus concludes. The assignee now “owns” the earnest money contract, which really means that he now stands in the shoes of the buyer for purposes of moving forward with closing of the property sale (conveyance of title by warranty deed).

The obvious advantage to the above approach, at least for the buyer of the contract, is that only a deposit is required to begin the assignment process—not full payment of the entire assignment fee and earnest money refund to the contract assignor. Full payment is not due until closing when it is clear that the seller of the property has appeared and is ready to execute and deliver a warranty deed. The contract assignee thus risks less up-front money by using this approach.

Collapsing the Steps

One often sees an attempt to collapse these steps (in the documentary sense) by means of a single abbreviated and combined instrument that purports to join interim/executory and final assignment provisions within the same instrument. The result is muddled at best, akin to trying to combine an earnest money contract for the sale of property with the actual transfer of title in a deed. These steps are conceptually and transactionally separate, and that separation should be maintained in order to achieve a correct and durable legal outcome.

The details of wholesaling transactions can vary widely. This is an investment arena full of determined DIYers (using junk forms from the Internet that are non-specific to Texas) and many wholesale assignment transactions fail as a result.

LAW APPLICABLE TO WHOLESALING

Before delving into further practical aspects of the wholesaling process, we should stop and take a look at applicable law.

Occupations Code Licensing Requirement

Is a real estate broker’s license required in order to engage in wholesaling? Section 1101.002.A of the Occupations Code answers this question with a definite maybe depending on how one defines the brokerage of real estate. Chapter 1101 states that a real estate broker “means a person who, in exchange for a commission or other valuable consideration or with the expectation of receiving a commission or other valuable consideration, performs for another person one of the following acts . . . deals in options on real estate, including buying, selling, or offering to buy or sell options on real estate. . . .” An executed earnest money contract can be considered a kind of option to buy real estate. It definitely represents an interest in real estate. So if one is buying or selling such contracts (engaging in wholesaling) then a broker’s license may be required. More on this below.

Occupations Code Disclosure Requirement

Section 1101.0045 of the Occupations Code offers a loophole for wholesalers who are working without a broker’s license, but only so long as they make express disclosure that what they are selling is merely an equitable interest —as opposed to a legal interest . The difference can be challenging for non-lawyers to understand; however, an equitable interest means an interest that is less tangible, less certain, and more contingent than a solid and present legal interest. The statute reads:

OCC Sec. 1101.0045. Equitable Interests in Real Property

(a) A person may acquire an option or an interest in a contract to purchase real property and then sell or offer to sell the option or assign or offer to assign the contract without holding a license issued under this chapter if the person: (1) does not use the option or contract to purchase to engage in real estate brokerage; and (2) discloses in writing the nature of the equitable interest to any seller or potential buyer.

(b) A person selling or offering to sell an option or assigning or offering to assign an interest in a contract to purchase real property without disclosing the nature of that interest as provided by Subsection (a)(2) is engaging in real estate brokerage.

OCC Section 1101.0045 wants wholesalers to make full disclosure, which means making it clear that what is being transferred is not the property itself but only an equitable right to acquire the property subject to the terms and conditions of the contract being assigned. Accordingly, wholesalers who assign contracts are not illegally acting as real estate brokers if they fully disclose the nature of the interest they are selling. The difference between a broker’s license being required or not required comes down to disclosure.

Texas Administrative Code Disclosure Requirement

TAC contains TREC rules applicable to real estate license holders. Rule 535.6 states:

22 TAC Sec. [TREC Rule] 535.6. Equitable Interests in Real Property

(a) A person may acquire an option or enter into a contract to purchase real property and then sell or offer to sell the option or assign or offer to assign the interest in the contract without having a real estate license if the person: (1) does not use the option or contract to purchase to engage in real estate brokerage; and (2) discloses the nature of their equitable interest to any potential buyer.

(b) A person selling or offering to sell an option or assigning or offering to assign an interest in a contract to purchase real property without disclosing the nature of that interest to a potential buyer is engaging in real estate brokerage.

(c) A license holder who is engaging in real estate brokerage by selling or buying or offering to sell or buy an option or assigning or offering to assign an interest in a contract to purchase real property must disclose to any potential seller or buyer that the principal is selling or buying an option or assigning an interest in a contract and does not have legal title to the real property.

(d) A license holder acting on his or her own behalf or in a capacity described by §535.144(a) who is selling an option or assigning an interest in a contract to purchase real property must disclose to any potential buyer that the license holder is selling an option or assigning an interest in a contract and that the license holder does not have legal title to the real property.

This TREC rule echoes a theme found in the Real Estate License Act, the Property Code, and case law: full disclosure is always the safer route whether one is a license holder or not.

Property Code Disclosure Requirements

The Property Code sets out two disclosure requirements (in Sections 5.0205 and 5.086) that apply in the context of the sale and assignment of earnest money contracts:

Prop. Code Sec. 5.0205. Equitable Interest Disclosure

Before entering into a contract to sell an option or assign an interest in a contract to purchase real property, a person must disclose in writing to (1) any potential buyer that the person is selling only an option or assigning an interest in a contract and the person does not have legal title to the real property; and (2) [to] the owner of the real property that the person intends to sell an option or assign an interest in a contract.

This is the second disclosure requirement:

Prop. Code Sec. 5.086. Equitable Interest Disclosure

Before entering into a contract, a person selling an option or assigning an interest in a contract to purchase real property must disclose to any potential buyer that the person is selling only an option or assigning an interest in a contract and that the person does not have legal title to the real property.

These sections of the Property Code apply to everyone whether licensed or not. Every seller-assignor (wholesaler) must comply.

Reading the above statutes together, it should be clear that wholesaling without providing the required equitable interest disclosure (to the property owner and the buyer-assignee of the contract) can get an investor in double trouble, both for violating the Property Code and potentially for brokering real estate without a license.

Equitable Interest Disclosure

The following proposed wording at or near the top of the contract assignment would likely satisfy equitable interest disclosure requirements:

EQUITABLE INTEREST DISCLOSURE PURSUANT TO TEXAS PROPERTY CODE SECTIONS 5.0205 AND 5.086: THIS INSTRUMENT REPRESENTS ONLY AN OPTION TO PURCHASE REAL PROPERTY OR AN ASSIGNMENT OF AN INTEREST IN REAL PROPERTY. IT IS NOT A SALE OF THE PROPERTY OR A TRANSFER OF TITLE TO THE PROPERTY. ASSIGNOR DOES NOT HAVE LEGAL TITLE TO THE PROPERTY. ASSIGNOR IS NOT A REAL ESTATE BROKER AND HAS NOT GIVEN ASSIGNEE REAL ESTATE ADVICE. CONSULT AN ATTORNEY PRIOR TO EXECUTING THIS DOCUMENT IF YOU DO NOT UNDERSTAND IT.

The disclosure is probably best inserted beneath the customary notice of confidentiality rights that is required by Texas county clerks for recordable instruments.

Note that a buyer-assignee of an earnest money contract should probably want the assignment instrument to be recorded. Why? To insure that the contract will not later be sold by an unscrupulous seller-assignor to someone else.

THE ASSIGNMENT INSTRUMENT

General features of the assignment.

The assignment instrument is often entitled “Sale and Assignment of Earnest Money Contract” or “Assignment of Contract” or something similar. We will refer to it simply as the assignment.

It goes without saying that the assignment should adequately describe both: (1) the main features of the contract and (2) the underlying real property. In order to make the assignment a complete package, it is good practice to attach a copy of the contract as an exhibit. If there is a lengthy metes and bounds property description (rather than the usual lot and block) then this should be attached as well.

Assignment of a contract is comparable to assigning a promissory note since many of the same principles apply. The main difference is that earnest money contracts, unlike notes, are not negotiable instruments subject to the Uniform Commercial Code. Even so, these two types of assignments share a number of characteristics:

(1) the advisability of thorough due diligence by the prospective buyer-assignee, which requires not only an examination of the terms of the contract itself but also the underlying realty;

(2) the general preference on the part of the assignor to make the transfer “as is” and without recourse, to the extent possible;

(3) the inclusion and limitation of representations and warranties by the seller-assignor plus a method of recourse if the property seller fails to perform;

(4) the period during representations and warranties will survive, if at all; and

(5) the requirement that the seller-assignor disclose any material issues, facts, or conditions that could reasonably influence the buyer-assignee’s decision to buy or not buy the contract.

Failure by the seller-assignor to disclose known defects or adverse conditions in either the contract or the underlying realty (if justifiably relied upon by the buyer-assignee) constitutes fraud.

Representations and Warranties by Assignor

An assignment may include extensive representations and warranties, limited reps and warranties, or no reps and warranties at all—in which case the assignment is made entirely “as is” and without recourse against the assignor. It should be obvious that these issues need to be made clear in the instrument, but one often sees assignments that ignore reps and warranties altogether in the interest of “keeping it short.” Internet junk forms are particularly deficient in this respect.

A poorly-written assignment that does not address the full range of reps and warranties (and how they may be limited or excluded) is an engraved invitation to a lawsuit. If this subject is not thoroughly addressed, either or both parties may assume that reps and warranties exist when they do not, or they may later assert that reps and warranties were somehow implied in the course of dealing between the parties. Either outcome can lead to litigation involving a lot of finger-pointing and he-said-she-said allegations. Dodging reps and warranties in the interest of document brevity is amateurish and dangerous. Critical legal issues do not go away merely because they are ignored.

Covenants and Agreements

When it comes to duties and obligations of seller-assignor and buyer-assignee, clarity and express written provisions are important. Nothing oral should be relied upon. Nothing should be assumed or implied. For example, a well-drafted assignment would include agreement by the assignor to promptly deliver the original contract and any related documentation to the assignor. The assignee should agree to be bound by the earnest money contract and perform accordingly as the new buyer thereunder. Both parties should agree to take such other and further action, including the execution and delivery of additional documents, as may be reasonable or necessary to effectuate the assignment.

Recourse in Event the Contract or Closing Fails

As is the case with promissory notes, contracts can be assigned with or without recourse against the assignor. Recourse comes in three varieties: none, full, or limited. No recourse means what it says—if the contract does not close, then the assignee is stuck with a failed contract and is solely responsible for pursuing remedies against the selling property owner. Full recourse means that the buyer-assignee gets to give the contract back to the seller-assignor if the transaction fails to close through no fault of the buyer-assignee. Limited recourse can mean different things, but it falls somewhere between no recourse and full recourse. In any of these cases, the assignment should provide that the availability of recourse—whether none, full, or limited—is circumscribed within a specific time period.

It is often the case that earnest money contracts are assigned without recourse, meaning “as is.” If sale of a contract is to be entirely “as is,” an effective clause for this purpose is essential.

Drafting of an “as is” clause should be carefully done, since the seller-assignor will want not only to disclaim assurances regarding the transferred earnest money contract but also any reps or warranties concerning the condition and value of the underlying real property.

Oral statements should of course be disclaimed.

Express Consent from the Owner of the Property

It is important—vital, in fact—for the buyer-assignee of an earnest money contract to be sure that the property owner consents to the assignment and will honor the buyer-assignee’s status as the new buyer under the contract. Otherwise, the assignee may face a hostile seller at closing who refuses to accept the assignee of the contract as the legitimate buyer of the property.

The cooperation of the property seller should not be simply assumed. After all, the buyer-assignee of the contract does not want to be put in the position of being forced to sue the property owner for specific performance—an expensive event that could easily destroy the profitability of the transaction. Accordingly, the assignment should include owner-consent wording along the following lines:

I/We, the undersigned, am/are listed as Seller in the Contract which is the subject of this Sale and Assignment. I/We give my/our unconditional consent to the sale and assignment of the Contract to the above-named Assignee, and I/we agree to in all respects recognize and cooperate with Assignee as the rightful Buyer under the Contract to purchase the Property.

The equitable interest disclosure requirement of the Property Code could be the beginning of a future regulatory scheme for the wholesaling of earnest money contracts. Abuses and mishaps in this area make news from time to time, so Texas legislatures may decide to build on existing disclosure requirements and expand beyond them, just as occurred in the case of executory contracts in 2005. The pressure for regulation may also increase as cases appear that seek to bring wholesaling within the reach of the Deceptive Trade Practices Act.

Information in this article is provided for general informational and educational purposes only and is not offered as legal advice upon which anyone may rely. The law changes. No attorney-client relationship is created by the offering of this article. This firm does not represent you unless and until it is expressly retained in writing to do so. Legal counsel relating to your individual needs and circumstances is advisable before taking any action that has legal consequences. Consult your tax advisor as well.

Copyright © 2024 by David J. Willis. All rights reserved. Mr. Willis is board certified in both residential and commercial real estate law by the Texas Board of Legal Specialization. More information is available at his website, www.LoneStarLandLaw.com .

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ASSIGNMENT OF CONTRACT Document

This agreement serves to assign one party’s interest in a contract to a third-party, thereby typically releasing the assigning party from any further liability thereunder. In Texas, an assignment does not have to necessarily be agreed to by the second party to the contract unless the contract says otherwise, or if the contract calls for certain specific personal obligations. However, it is good practice to get all parties to sign off on the assignment in order to secure an adequate release of liability in favor of the assigning party.

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How To Create a Lease Assignment Agreement in Texas?

Introduction

Embarking on the journey to create a lease assignment agreement in Texas involves navigating across the terrains of the known and the unknown. This specific type of agreement, a vital instrument in the real estate landscape of Texas, transfers the rights and responsibilities of a lease from an existing tenant to a new one.

To ensure complete transparency, it's important to delve into the nuances of a lease assignment agreement in Texas. Understanding its various facets and implications requires a detailed exploration. Continue reading to equip yourself with essential knowledge and remain confident and secure during your journey through the process of creating a lease assignment agreement.

Brief Overview of a Lease Assignment Agreement

A lease assignment agreement is a legal contract that allows a tenant, referred to as the " assignor ," to transfer their rights and obligations under their current lease to another party, the " assignee ." This agreement enables tenants who need to vacate their rented property before the lease expires to do so without breaching the terms of the lease itself. Particularly in Texas, a lease assignment agreement Texas is an integral part of property law and is often utilized in complex real estate transactions to ensure a seamless and law-abiding transfer of rental rights and obligations among the parties involved.

In the context of a lease assignment agreement in Texas, the current tenant, or assignor, effectively steps out of their role and hands over the responsibilities and duties under the lease to the assignee. From paying rent to maintaining the property condition, all tasks are transferred to the new tenant. It's essential to highlight that the lease's terms and conditions can remain the same despite changing the parties responsible. 

When To Use the Lease Assignment Agreement?

There are several instances when using a lease assignment agreement in Texas is advantageous. It ensures parties involved in property rental transactions stay within the boundaries of Texas law and maintain their rights protected. Here are a few scenarios where it might be beneficial:

Tenant relocation: If a tenant has to move out of the rented property prematurely due to personal or professional reasons, such as a job transfer or family emergency, a lease assignment agreement in Texas is the go-to solution. It saves the tenant from breaching the lease agreement and suffering any associated penalties.

Business transfer: For commercial properties, if a business is sold mid-lease, the new owner would likely prefer to keep operating at the same location. In such cases, a lease assignment agreement in Texas allows a smooth transfer of the lease to the new business owner.

Subletting: In cases where a tenant plans to be away for a short period but intends to move back in later (for instance, a university professor on sabbatical), they can use a lease assignment agreement in Texas to legally assign the lease to another party for that duration.

Remember, each lease assignment agreement in Texas should be approached on a case-by-case basis and tailor-made to suit the specific circumstances, protect all parties involved, and adhere to Texas state laws.

Why Use a Lease Assignment Agreement in Texas?

Using a lease assignment agreement Texas brings a multitude of benefits and legal protections for everyone involved. It allows the assignor, who could be a tenant wanting to move out before the lease term ends or a business owner selling their enterprise, to seamlessly pass on their responsibilities to a new party. This way, the Assignor can avoid breaching the lease, paying hefty penalties, or tarnishing their rental or business history. Also, it provides the flexibility necessary in an ever-changing personal and business landscape, making it a versatile tool in real estate dealings.

Furthermore, a lease assignment agreement in Texas also protects the assignee. They gain a clear understanding of their new responsibilities and rights directly from the legal agreement, thus minimizing the risk of misunderstandings, which could lead to disputes. The landlord also remains protected as the rental income continues undisrupted, and there are clear legal remedies in case of discrepancies or violations. 

Difference between Assignment and Assumption of Lease Agreement in Texas

In Texas, both the assignment of lease and assumption of lease pertain to the transfer of lease rights and obligations from one party to another. Yet, there's a technical difference between these two in the context of a lease assignment agreement Texas.

• In an assignment of lease, the current tenant (the assignor) transfers all their rights and obligations under the lease to a new tenant (the assignee). The assignor is then released from all responsibilities linked to the property.
• While the lease rights are transferred, the initial lease agreement essentially remains unchanged.
• It allows the tenant to vacate the property before the lease term is up without breaching any lease terms.
• A lease assignment agreement in Texas ensures that the transfer follows Texas state laws and every party involved remains protected.
• Assumption of lease also involves the transfer of lease rights from the assignor to the assignee. However, it further includes the landlord’s explicit release of the original tenant (assignor) from future liabilities concerning the lease.
• In layman's terms, the new tenant (assignee) steps into the shoes of the old tenant (assignor) and is responsible not only for future obligations but also for any past liabilities if they were not fulfilled by the assignor.
• This process also calls for an agreement known as the assignment and assumption of a lease agreement.
• It offers an additional layer of protection for the original tenant, who then does not bear liabilities even if the assignee defaults on the lease terms.

Both types of lease transfers require proper documentation and legal assistance. To find a variety of related real estate legal templates , visit the reliable legaltech ecosystem Lawrina . For leases within the state, a lease assignment agreement in Texas needs to be completed to ensure compliance with local laws and protect all parties' rights.

Legal Considerations about Lease Assignment Agreements in Texas

Entering into a lease assignment agreement in Texas involves certain legal considerations that should be noticed. By law, such agreements must adhere to the Texas Property Code , which includes explicit clauses regarding rental leases. For instance, the code states that the landlord cannot unreasonably withhold consent to an assignment request. Additionally, upon the completion of an assignment, the landlord should, ideally, provide an acknowledgment of consent to keep all parties held harmless in court.

Furthermore, the process of creating a lease assignment agreement Texas also necessitates all parties involved to understand their respective roles, rights, and obligations under the agreement. For example, the assignor must ensure that there is a detailed account of the property and its current condition, all current terms of the lease, and any reasons for the assignment in the agreement. Conversely, the assignee must fully comprehend the lease's conditions they are assuming, ensuring they can and will adhere to the responsibilities placed upon them.

Given these legal implications, it's advisable to seek the expert advice of a real estate lawyer to ensure all parties have fulfilled their obligations and are legally protected. With a comprehensive understanding of respective rights and responsibilities, the parties can ensure a smoothly executed lease assignment agreement in Texas.

What Is Included in a Lease Assignment Agreement in Texas?

A lease assignment agreement in Texas encompasses several key components that shape the structure and contents of the agreement. Ensuring these elements are correctly defined guarantees a smooth transition and protects all parties involved. Here is what's typically included:

Identification of parties: This outlines who the 'assignor,' the 'assignee,' and the 'landlord' are. The parties involved should be clearly defined at the beginning of the document.

Property description: A comprehensive description of the property in question. This portion should include the property's address and any distinguishing features.

Lease reference: This section should contain details about the original lease, such as date, duration, and key terms.

Assignor's representation: The assignor should make certain declarations about the lease and the property. For instance, they must declare that they have complied with all the lease terms and there are no subsisting defaults under the lease, etc.

Assignment and assumption: This implies that the rights and duties of the lease are transferred to the assignee, who agrees to abide by them.

Landlord's consent: This includes the landlord's written agreement to the lease assignment. In Texas, landlords can't unreasonably withhold consent for lease assignment according to state law.

Governing law: This section states that Texas law shall govern the agreement and be followed in construing it.

Each of these components plays a fundamental role in the structure of a lease assignment agreement Texas, ensuring clarity of communication, legal protection, and smooth operation of the transfer.

How to create a lease assignment agreement?

Creating a lease assignment agreement Texas involves several steps. The first step involves reviewing the existing lease agreement, with a particular focus on any clauses that talk about lease assignment. In certain scenarios, the lease agreement might dictate that the landlord's consent is required for an assignment. If this is the case, your next step would be to obtain this written consent. According to Texas law, a landlord cannot unreasonably refuse consent to lease assignment. If you're unsure about how to decipher these clauses, it's recommended to seek professional advice.

The next step involves creating the lease assignment agreement template in Texas. Make sure to include clear identification of all parties involved, a comprehensive description of the property, the terms of the current lease, and the reason for the assignment in the document. Following the completion of the document, all parties should sign it. Then, to authenticate the signatures legally, get the document notarized. As a last step, ensure that every party, including the landlord, receives a copy of the signed and notarized lease assignment agreement for their records.

Get a ready-made lease assignment agreement template now

Creating a lease assignment agreement in Texas might initially seem like a complex task. However, with proper knowledge, tools, and guidance, it can be seamlessly navigated. A lease assignment agreement is essentially a tool of flexibility and security for individual tenants, new tenants, and landlords.

In conclusion, the importance of a lease assignment agreement Texas in the real estate landscape cannot be overstated. Despite the multitude of legal terminologies and procedures involved, its core purpose remains simple and straightforward. It provides security and clarity by defining the rights and responsibilities of every party involved — the original tenant, the new tenant, and the landlord. It serves as an indispensable instrument in ensuring a successful and legally compliant transfer of lease rights and responsibilities in Texas.

Ilona Riznyk is a Content Specialist at Lawrina. In her role, she creates and manages various types of content across the website, ranging from blog articles to user guides. Ilona's expertise lies in meticulous fact-checking, ensuring all the published content is accurate and reliable. 

Frequently Asked Questions

There are several reasons to consider a lease assignment agreement in Texas. One common cause is the need for a current tenant to vacate their rented property before the lease expires due to unforeseen personal or professional circumstances. This could include events such as changes in employment, family emergencies, or significant life changes that might necessitate relocation.

Utilizing a lease assignment agreement in Texas in such situations allows the tenant to transfer their rights and obligations to a new tenant without breaching the terms of their current lease. It avoids potential penalties that may come with breaking the lease and helps ensure that the landlord continues to receive rental income without interruption.

Notarization of a lease assignment agreement in Texas adds an extra layer of legitimacy and security to the document. It offers legal proof that the signatories are indeed who they claim to be and have willingly entered into the agreement. It also helps protect against any future claims of forged signatures or falsified identity.

Furthermore, a notarized document also serves as a deterrent to dishonesty, as the notary public acts as an impartial witness to the signing of the lease assignment agreement. This process can discourage individuals from entering into fraudulent agreements, balances the playing field, and offers a safer medium for formalizing the deal.

According to Texas law, a landlord cannot unreasonably withhold consent to a lease assignment. This means that if the tenant wishes to assign the lease or the proposed assignee meets all reasonable requirements, such as having a good credit history or providing proof of reliable income, a landlord should not reject the lease assignment without valid reasons.

However, if there are valid grounds for refusal, such as the proposed assignee having a history of evictions or poor credit, then the landlord has the right to refuse the lease assignment agreement in Texas. It's essential that the cause for refusal is valid under Texas law and not merely a matter of personal preference.

Real Estate Assignment Contract

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Last updated April 17th, 2023

• Purchase Agreements »

A real estate assignment contract  allows a real estate buyer to transfer their purchasing rights and responsibilities to someone else before the closing date. Typically, the new buyer pays a fee to the original buyer for the assignment. The form specifies the amount and due date of the assignment fee (if applicable), as well as all other details of the transaction, including the new buyer’s  liabilities , payment requirements , and rights under the purchase agreement . 

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REAL ESTATE ASSIGNMENT CONTRACT

1. THE PARTIES . This Real Estate Assignment Contract (“Assignment”) is entered into on [MM/DD/YYYY] (“Effective Date”), by and between:

Assignor : [ASSIGNOR’S NAME] (“Assignor”) with a mailing address of [ADDRESS] , and

Assignee : [ASSIGNEE’S NAME] (“Assignee”) with a mailing address of [ADDRESS] .

The Assignor and Assignee are each referred to herein as a “Party” and, collectively, as the “Parties.”

2. ORIGINAL AGREEMENT . The Assignor is the purchasing party to that certain purchase and sale agreement, dated [MM/DD/YYYY] , for the real property located at [PROPERTY ADDRESS] , and as more particularly described therein (“Original Agreement”).

3. ASSIGNMENT . The Assignor hereby transfers, assigns, and sets over to the Assignee all contractual rights, title, interests, and obligations in and to the Original Agreement on the Effective Date, pursuant to the terms of the Original Agreement

4. CONSIDERATION . For the sum of any dollar amount stipulated herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree to the following: [DESCRIBE PAYMENT OR OTHER CONSIDERATION] .

5. ASSUMPTION . By executing this Assignment, the Assignee accepts and assumes the transfer and ownership of all liabilities, obligations, and claims that currently exist or may in the future regarding the Assignment. As of the Effective Date, the Assignee agrees to comply with and assume all terms, payments, conditions, covenants, and any other duties and obligations as part of this Assignment and those set forth in the Original Agreement.

6. REPRESENTATIONS . The Parties acknowledge that they have a full understanding of the terms of this Assignment. The Assignor further warrants and represents that they own the rights transferred in this Assignment and has prior consent to execute this Assignment under the terms of the Original Agreement or otherwise through the written consent of the selling party under the Original Agreement; in the latter case, the written and signed consent of said party shall be attached to this Assignment. The Parties agree to provide and complete any obligations under this Assignment and the Original Agreement.

Assignor Signature : ___________________ Date:  [MM/DD/YYYY] Print Name: [ASSIGNOR’S NAME]

Assignee Signature : ___________________ Date:  [MM/DD/YYYY] Print Name:  [ASSIGNEE’S NAME]

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Appendix I, Assignments of Contracts

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Revision 98-1; Effective January 15, 1998

§49.5. Contract Assignment.

(a) A contract assignment must be made as part of an ownership change, a change in tax status, or a transfer from one legal entity to another through a legal process. No assignment is effective until approved, in writing, by the Texas Department of Human Services (DHS).

(b) If the provider agency plans to assign a contract, the assignor must inform the appropriate DHS staff, in writing, at least 60 days before assigning the contract. This notification must include the legal name of the entity that will be assuming the contract and must be submitted as soon as the provider agency decides to assign the contract. If the provider agency fails to provide this information in a timely manner, the contract assignment may be delayed. DHS reserves the right to deny any assignment if it is not in the best interest of DHS or its clients.

(c) If a contract assignment application is not completed according to subsection (e) of this section, DHS considers it unacceptable and returns it to the assignor.

(d) If the assignee does not meet the conditions for contracting, DHS immediately terminates the assignor's contract and transfers all clients to another provider agency.

(e) Before an assignment is made, the assignee must follow the requirements stipulated in paragraphs (1)-(3) of this subsection:

(1) resolve all audits completed or in progress;

(2) prepare a contract assignment agreement which includes the following statements:

(A) the reason(s) for the contract assignment;

(B) that both the assignee and assignor are each responsible for collecting and reporting financial and statistical data on DHS's cost report that corresponds to its respective contract periods;

(C) DHS reserves the right to require restitution for any audit exceptions from either agency;

(D) any adverse action pending or in place when the contract is assigned is applied to both the assignee and the assignor;

(E) the assignee adheres to the service contract, reimbursement method and amount, service delivery requirements, and standards established by DHS; and

(F) the assignee meets all service criteria for being a provider agency. Documentation of eligibility must be provided before DHS will agree to a contract assignment;

(3) include the following information in the contract assignment agreement:

(A) identify both legal entities;

(B) identify the current contract number(s) and service(s) to be assigned;

(C) be notarized and signed by the person authorized for each legal entity; and

(D) include a line for DHS's representative to sign and approve.

(f) The effective date of the contract assignment is the first day of the following month after the application has been fully processed by DHS. DHS may award a contract at an earlier date if it is in DHS's best interest.

All contract assignments must be completed according to these guidelines. Format and context of the contract assignment must be followed before the contract assignment can be made. Additionally, the assignee must complete a new enrollment application.

The contract assignment packet, which includes the assignee's enrollment application and the contract assignment, must be completed and returned to:

Texas Department of Human Services Community Care Section, MC W-521 P.O. Box 149030 Austin Texas 78714-9030

DHS's Office of General Counsel must review and approve all contract assignments prior to their execution. The effective date of the contract assignment is the first day of the month after the application has been fully processed.

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Assignees May Sue for Breach of Contract Under Texas Law

Written by John McConnell on June 8, 2021 . Posted in News .

The original parties to the contract are not the only parties who can sue on a contract. Assignees and third-party beneficiaries may also sue. This article deals with the rights of assignees.

Assignments are governed by general contract law. Cadle Co. v. Henderson , 982 S.W.2d 543, 546 (Tex. App.—San Antonio 1998, no pet.). “As a general rule, all contracts are assignable.” Crim Truck & Tractor Co. v. Navistar Intern. Transp. Corp. , 823 S.W.2d 591, 596 (Tex. 1992).  Assignments may be whole or partial. Ins. Network of Tex. v. Kloesel , 266 S.W.3d 456, 465 (Tex. App.—Corpus Christi 2008, pet. denied). An “assignment” is a transfer of some right or interest to an assignee who receives the authority to assert that right. Matter of Estate of Abraham , 583 S.W.3d 374, 379 (Tex. App.—El Paso 2019, pet. denied).

“[T]here are no required forms or formalities by which an assignment must be made.” In re Cooper Mfg. Corp. , 344 B.R. 496, 508 (Bankr. S.D. Tex. 2006) (applying Texas law). Like contracts in general, assignments need not be in writing, can be oral, do not need any particular form of words, and can even be inferred from circumstances showing the intent to assign. Banco Longoria, S. A. v. El Paso Nat. Bank , 415 S.W.2d 1, 5 (Tex. Civ. App.—Eastland 1967, writ ref’d n.r.e.); Brown v. Mesa Distributors, Inc. , 414 S.W.3d 279, 285 (Tex. App.—Houston [1st Dist.] 2013, no pet.); Escalante v. Luckie , 77 S.W.3d 410, 418 (Tex. App.—Eastland 2002, pet. denied); Adkins Services, Inc. v. Tisdale Co., Inc. , 56 S.W.3d 842, 846 (Tex. App.—Texarkana 2001, no pet.).

An assignment is created upon a manifestation of intent to transfer a right to another – that’s it. Miller v. Bank of the W. , 01-88-00195-CV, 1988 WL 88320, at *2 (Tex. App.—Houston [1st Dist.] Aug. 25, 1988, no writ); Banco Popular, N. Am. v. Kanning , 638 Fed. Appx. 328, 334 (5th Cir. 2016) (applying Texas law). An assignment may be proven by oral testimony. Adkins Services, Inc. v. Tisdale Co., Inc. , 56 S.W.3d 842, 846 (Tex. App.—Texarkana 2001, no pet.). An assignment may be shown or proven by circumstantial evidence. Banco , 638 Fed. Appx. at 334 (5th Cir. 2016).

“A plaintiff establishes standing to maintain a breach-of-contract action by demonstrating that it has an enforceable interest as a party to the contract, as an assignee of a party , or as a third party beneficiary.” Republic Petroleum LLC v. Dynamic Offshore Res. NS LLC , 474 S.W.3d 424, 430 (Tex. App.—Houston [1st Dist.] 2015, pet. denied) (emphasis added). See also , Foster v. Nat’l Collegiate Student Loan Tr. 2007-4 , 01-17-00253-CV, 2018 WL 1095760, at *8 (Tex. App.—Houston [1st Dist.] Mar. 1, 2018, no pet.) (since assignee stands in shoes of assignor, assignee has privity and may sue for breach of contract); Frontier Communications Nw., Inc. v. D.R. Horton, Inc. , 02-13-00037-CV, 2014 WL 7473764, at *1 (Tex. App.—Fort Worth Dec. 31, 2014, no pet.) (“To establish standing to assert a breach of contract cause of action, a party must prove its privity to the agreement or that it is a third-party beneficiary or assignee.”). An assignment places the assignee in privity of contract with the other contracting party. Stark v. Am. Nat. Bank of Beaumont , 100 S.W.2d 208, 213 (Tex. Civ. App.—Beaumont 1936, writ ref’d); Dodd v. Terrill , 05-93-00268-CV, 1994 WL 24378, at *5 (Tex. App.—Dallas Jan. 28, 1994, writ denied).

This article represents one author’s viewpoint and is not a substitute for legal advice .

assignees , breach of contract , contract law , rights under contract , texas contract law

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Notice of Assignment (TX)

Practical law standard document w-016-2255  (approx. 11 pages).

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Description assignment contract.

This Assignment of Contract for Deed by Seller form is for a Seller who has signed a contract for deed to assign it to a third party. This form is usually used to transfer the contract in exchange for a discounted cash value. The person who received the assigned contract steps into the shoes of the Seller and receives future payments from the Purchaser. The Seller may also desire to convey the property to the assignee, or if not, be prepared to execute a deed to the Purchaser upon request of the assignee.

Contract Deed Form Texas Related Forms

Agreement or Contract for Deed a/k/a Land or Executory Contract - Nonresidential

Contract for Deed Seller's Annual Accounting Statement to Purchaser - Residential - Land Contract, Executory Contract

Notice of Assignment of Contract for Deed

Residential Real Estate Sales Disclosure Statement

Lead Based Paint Disclosure for Sales Transaction

Related legal definitions

• Contracts Contract for Deed
• Real Estate - Contracts
• Purchase Money Mortgage

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Assignment contract template form rating, assignment of contract texas form popularity, north carolina deed other form names, assignment contract purchase faq, how long does the buyer have to record the contract for deed.

The buyer should record the contract for deed with the county recorder where the land is located and does so normally within four months after the contract is signed, though the time may vary depending on state law.

How do you do an assignment contract?

Find a motivated seller. First, let's understand what a motivated seller is. Get the contract. Submit contract to title. Assign the contract to the buyer. Get paid!

Does a contract for deed have to be recorded?

Contrary to normal expectations, the Deed DOES NOT have to be recorded to be effective or to show delivery, and because of that, the Deed DOES NOT have to be signed in front of a Notary Public. However, if you plan to record it, then it does have to be notarized as that is a County Recorder requirement.

How do you assign a contract?

An assignment of contract occurs when one party to an existing contract (the "assignor") hands off the contract's obligations and benefits to another party (the "assignee"). Ideally, the assignor wants the assignee to step into his shoes and assume all of his contractual obligations and rights.

What happens if you default on a contract for deed?

This means that if you default and can?t make your payments, you lose the property and all of the money you have already paid into it (often including repairs and improvements). Unlike a traditional mortgage, a defaulting buyer in a contact for deed may only have 30-60 days to cure the default or move out.

How do you assign a contract to real estate?

Find the right property. Acquire a real estate contract template. Submit the contract. Assign the contract. Collect the fee.

What happens if a seller fails to record the contract for deed?

In the first instance, if your deed is not recorded, there is nothing in the public record to stop the seller from conveying the property to another person.The second situation could happen if your seller fails to pay his or her debts and the seller's creditors file liens or judgments against your property.

Are contracts assignable in Texas?

While it is not legal in all states, under Texas law, contracts are assignable unless there is a specific clause in the contract that prohibits it.The Assignor hands off the contract's benefits to the Assignee while the property is still under contract. They may do this without the consent of the seller.

What happens if a deed is not recorded?

Failure to record a deed effectively makes it impossible for the public to know about the transfer of a property. That means the legal owner of the property appears to be someone other than the buyer, a situation that can generate serious ramifications.

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