A Texas Nuisance Receiver: Two Statutes, a Ten Percent Fee, and a Lien That Outranks the Rest

Texas has two nuisance-receivership statutes sitting next to each other in Chapter 214 of the Local Government Code, enacted twenty years apart, and the second expressly does not displace the first. For anyone doing the physical work on a receivership property, the difference between them decides who gave the instruction, how long the clock runs, whether the structure can be taken down, and what the buyer at the end actually gets.

The Older Route: Section 214.003

A home-rule municipality brings an action in district court against an owner of property not in substantial compliance with municipal ordinances on fire protection, structural integrity, zoning or disposal of refuse, or with an ordinance described by Section 54.012(1), (2), (5), (6), (7) or (9). The court may appoint a receiver on finding three things under Section 214.003(b): the structures violate the standards in Section 214.001(b) and an ordinance described in subsection (a); notice of violation was given to the record owner; and a public hearing as required by Section 214.001(b) has been conducted.

Who may be appointed is narrow. Section 214.003(b) names "a nonprofit organization or an individual with a demonstrated record of rehabilitating properties." Subsection (b-1) relaxes the record requirement only for a municipality wholly or partly in a county on the international border containing a municipality of 500,000 or more, and only where no one with such a record is available and the person appointed is competent and able.

Nine Powers, and One That Is Withheld

Section 214.003(g) is the operative list. The receiver may:

• Take control of the property
• Collect rents due on the property
• Make or have made any repairs necessary to bring it into compliance with minimum standards in local ordinances - or, for historic property under Section 214.00111, with the Secretary of the Interior's rehabilitation guidelines or the municipal historic preservation board's
• Make payments necessary for the maintenance or restoration of utilities
• Purchase materials necessary to accomplish repairs
• Renew existing rental contracts and leases
• Enter into new rental contracts and leases
• Affirm, renew or enter into a new contract providing for insurance coverage on the property
• Exercise all other authority that an owner of the property would have, except the authority to sell it

The last item is the shape of the role. A receiver under Section 214.003 is the owner for operational purposes and is not the owner for disposal purposes. Selling requires the court, under subsections (l) to (r).

The Accounting Is the Pay Claim

Section 214.003(h)(1) requires the receiver, on completing the restoration to the municipality's minimum code standards or before petitioning to terminate, to file with the court "a full accounting of all costs and expenses incurred in the repairs, including reasonable costs for labor and supervision, all income received from the property, and, at the receiver's discretion, a receivership fee of 10 percent of those costs and expenses."

Three things follow from that sentence. Labor and supervision are expressly recoverable, so supervision time is a line item rather than overhead. The 10 percent fee is calculated on costs and expenses, which makes the documented cost base the thing that determines the fee. And it is the receiver's discretion whether to claim the fee at all - it is not automatic, and an accounting that omits it does not get it later.

Then the three outcomes in Section 214.003(h)(2) and (3): if income exceeds costs, expenses and any fee, the rehabilitated property goes back to the owners and the net income with it; if the costs, expenses and fee exceed income, the receiver may keep control until they are recovered or the receivership is terminated. Section 214.003(h-1) secures the shortfall: "A receiver shall have a lien on the property under receivership for all of the receiver's unreimbursed costs and expenses and any receivership fee."

The Newer Route: Section 214.0031

Added in 2009, this one changes who can start it. A home-rule municipality may annually certify one or more nonprofit housing organizations, after finding that the organization has a record of community involvement and that certification furthers the municipality's purposes. A certified organization may then bring the action itself, and the municipality has standing to intervene at any time as a matter of right.

The threshold is harm rather than code category. Section 214.0031(e) requires the court to find that the property violates one or more ordinances regarding the prevention of substantial risk of injury or of an adverse health impact, that its condition "constitutes a serious and imminent public health or safety hazard," and that it is not an owner-occupied, single-family residence. Section 214.0031(h) requires certified-mail notice of the alleged violation to both the property's physical address and the address on the most recently approved municipal tax roll, on or before the 30th day before filing.

Where the Two Diverge

Section 214.0031(y) makes the relationship explicit: it "does not foreclose any right or remedy that may be available under Section 214.003, other state law, or the laws of equity." They sit side by side.

The Demolition Findings Are a Securing Checklist

Section 214.0031(m) lets a receiver demolish a single-family structure on court authorisation, but only if the court finds it is not economically feasible to bring the structure into compliance and that the structure is one of three things. The second is written in the language of an unsecured vacant building: "regardless of its structural condition," unoccupied by its owners, lessees or other invitees, and "unsecured from unauthorized entry to the extent that it could be entered or used by vagrants or other uninvited persons as a place of harborage or could be entered or used by children."

The third covers a building that is boarded, fenced or otherwise secured but still a danger, or where "the means used to secure the structure are inadequate to prevent unauthorized entry." Read in reverse, those findings describe the condition that competent securing work prevents, and the record of that work is what answers them.

Getting Paid at the Sale

Both statutes order the distribution the same way. Section 214.003(p) and Section 214.0031(v): court costs; then the costs and expenses of the receiver, the receivership fee and any lien held by the receiver; then other valid liens. Anything left goes to the owner, or into an interest-bearing account with the district clerk where the owner cannot be identified or located.

That ordering is how Texas reaches the result Ohio reaches by statute - see the R.C. 3767.41 receiver's first lien, which is superior to taxes but only if approved by the court and recorded within sixty days. Neither Texas section attaches a superiority label to the receiver's lien or says anything about recording it; the priority appears only in the distribution order, which pays the receiver before other valid lienholders out of the proceeds.

One more feature worth knowing: under Section 214.003(o) and Section 214.0031(u) the receiver may bid on the property at the sale and "may use a lien granted" under the relevant subsection "as credit toward the purchase." A receiver who has carried the cost of rehabilitation can convert that cost into equity rather than cash.

What This Means on the Ground

• Confirm which section the appointment is under - the clock, the demolition power and the title outcome all differ
• Itemise labor and supervision separately; Section 214.003(h)(1) names them as recoverable costs
• Document the cost base carefully, because the 10 percent fee is a percentage of it
• Treat the accounting as the pay claim rather than a formality - the fee is discretionary and claimed in that filing
• Record condition before and after each phase; the receiver's recovery depends on an accounting a court will allow
• On a Section 214.0031 matter, keep securing evidence current - the demolition findings turn on whether the structure is unsecured or inadequately secured
• Keep utilities, insurance and taxes in the record; Section 214.0031(l)(6) makes them receiver expenses
• Remember the exclusion: no receivership over an owner-occupied, single-family residence

For the general shape of the role, see a receiver's property preservation duties. For Pennsylvania's blighted-property analogue, which is an Act of its own rather than a chapter of the municipal code, see Act 135 conservatorship. For Texas's fiduciary regimes on an owner's own estate, see an executor's duty to maintain estate property and a Texas guardian of the estate.