Source: https://www.lonestarlandlaw.com/Redemption.html
Timestamp: 2019-04-24 12:42:30+00:00

Document:
There is no general right of redemption by a borrower after a Texas foreclosure. The right of redemption is limited to (1) sales for unpaid ad valorem taxes, in which case a former owner of homestead or agricultural property has a two-year right of redemption (for commercial properties, the redemption period is 180 days); and (2) HOA foreclosure of an assessment lien, in which case a former owner may redeem no later than the 180th day after notice.
The redemption right is the only right retained by the former owner, who is not allowed to occupy, possess, or receive rents from the property during the redemption period. Tex. Tax Code § 34.21(h). The purchaser therefore has the right to proceed with an eviction subject to any limitations that may apply as to eviction of servicemembers or tenants with bona fide leases.
(a) The owner of real property sold at a tax sale to a purchaser other than a taxing unit that was used as the residence homestead of the owner or that was land designated for agricultural use . . . may redeem the property on or before the second anniversary of the date on which the purchaser's deed is filed for record by paying the purchaser the amount of the purchaser bid for the property, the amount of the deed recording fee, and the amount paid by the purchaser as taxes, penalties, interest, and costs on the property, plus a redemption premium of 25 percent of the aggregate total if the property is redeemed during the first year of the redemption period or 50 percent of the aggregate total if the property is redeemed during the second year of the redemption period.
Accordingly, the return to the investor on the 366th day is double what it was on the 365th. This may provide the investor with an incentive to give the former owner a payment plan that will be completed in the second year of the redemption period. After all, the statute requires that the redeemer pay a certain aggregate amount; it does not require that this amount be paid in one lump sum.
What "costs" are allowed to an investor under this statute? Section 34.21(g)(2) expressly includes sums expended "for maintaining, preserving, and safekeeping the property" which would include insurance, legally-required repairs, payment of municipal liens imposed for health or safety reasons, HOA dues, and utility impact or standby fees. Allowable costs do not include a general rehab of the property if the repairs and improvements are not required by local ordinance, building code, or lease of the property which was in effect on the date of sale—so over-eager investors who engage in such improvements in anticipation of a quick flip do so at their own risk. Note that a former owner "may request that the purchaser of the property, or the taxing unit to which property was bid off, provide that owner a written itemization of all amounts spent. . . ." It is therefore essential that an investor keep a careful record of expenses in order to avoid a dispute.
(2) the redemption premium payable by the owner to a purchaser other than a taxing unit may not exceed 25 percent.
Contrary to what one might expect, the commercial rules as to what constitute allowable, recoverable costs apply are no more liberal than those applicable to homestead and agricultural properties. The same standards apply. Tex. Tax Code § 34.21(g)(2).
Redemption rights following an HOA foreclosure are part of the Texas Residential Property Owners Protection Act which was designed to reign in the once arbitrary power of HOAs (Tex. Prop. Code Chap. 209). Specifically, sec. 209.011(b) provides that the "owner of property in a residential subdivision or a lienholder of record may redeem the property from any purchaser at a sale foreclosing a property owners' association assessment lien not later than the 180th day after the date the association mails written notice of the sale to the owner and the lienholder. . . ." The notice must be sent by certified mail, not later than the 30th day after the date of sale, to the last known address of the property owner (as reflected in the records of the HOA) and to each lienholder (at the address indicated on the lienholder's most recent deed of trust). Tex. Prop Code § 209.010.
Note that a lienholder's right to redeem does not commence until 90 days after the statutory notice is given and exists only if the homeowner has not previously redeemed. Tex. Prop Code § 209.011(b).
So how is redemption accomplished? The answer is carefully and by the book. Prop. Code section 209.011 is divided into two general parts: the first deals with the situations where the HOA purchases the delinquent property, and the second pertains to purchases by a third party. If the HOA is the purchaser, then it may receive all amounts previously due; interest to the date of redemption (10% if no rate is stated in the association's documentation); costs including attorney's fees; the amount of any subsequent assessment that may have been levied; any sums expended for mortgage payments, repair, and leasing of the property; and any remaining net amount as determined by the purchase price paid by the HOA.
If the property was purchased by a third-party investor, then redemption is essentially accomplished by paying the amounts due the HOA (as outlined above) plus the purchase price paid by the investor; the amount of the deed recording fee; any amounts paid for taxes, penalties, and interest following the sale; and any costs incurred in connection with an eviction relating to the property. That is all. There is no premium due the investor. Additionally, if the investor collects rent from the property during the redemption period, this must be credited to the account of the homeowner if he or she redeems. Tex. Prop Code § 209.011(i).
Finally, to state what should be obvious, the property redeemed remains subject to all liens and encumbrances that existed before the foreclosure sale took place. Tex. Prop Code § 209.011(k).
If the investor leased the property to a tenant during the redemption period, and the homeowner redeems, then that lease is effectively canceled and the homeowner has the right to immediately reoccupy the premises. Tex. Prop Code § 209.011(k). Accordingly, any lease entered into by the investor during the redemption period should contain a disclosure and disclaimer to this effect.
An investor who buys property at a tax sale or HOA foreclosure should be prepared to hold the property and avoid either making substantial improvements to it or reselling it until after any applicable rights of redemption have expired. As is the case with all legal deadlines, the redemption period should not be calculated down to the hour and minute. A cushion should be allowed so as to avoid offering the opposition an opportunity to argue that statutorily-required time periods were not fully met.

References: § 34
 § 34
 § 209
 § 209
 § 209
 § 209
 § 209