If you buy Texas real estate through owner financingor a contract for deed, many people assume that missing a payment allows the seller to immediately take the property back. That may have been closer to reality decades ago, but modern Texas law provides significant protections for many purchasers.

One of the most important—and least understood—protections appears in Texas Property Code Chapter 5, which requires sellers in many executory contracts to provide advance notice and an opportunity to cure before declaring a forfeiture.

Understanding these protections can help both buyers and sellers avoid expensive litigation.

What Is an Executory Contract?

An executory contract is generally a contract in which the seller retains legal title until the buyer satisfies certain obligations, usually payment of the purchase price. Contracts for deed are the most common example.

Historically, these contracts created harsh outcomes because buyers could spend years making payments and improving property, only to lose everything after a default.

The Texas Legislature substantially changed that result by enacting statutory protections in Chapter 5 of the Texas Property Code.

Texas Property Code § 5.063

Texas Property Code § 5.063 provides in relevant part:

"The seller may enforce the remedy of rescission or of forfeiture and acceleration against a purchaser in default under an executory contract for conveyance only after the seller serves the purchaser with a written notice..."

The statute further provides that, in many qualifying transactions, the purchaser must be given at least 90 days to cure the default before forfeiture may occur.

The notice must identify the default and provide the purchaser the statutory opportunity to cure before the seller may terminate the contract.

Why Does the 90-Day Notice Matter?

Without complying with the statutory notice requirements, a seller may be unable to lawfully terminate the contract.

This means a buyer who has fallen behind on payments may still possess valuable legal rights despite being in default.

Likewise, sellers who attempt to bypass the statutory procedures risk delaying their ability to recover the property and may expose themselves to additional litigation.

Does Every Owner-Financing Agreement Qualify?

No.

Chapter 5 contains numerous definitions, exceptions, and procedural requirements. Certain transactions are excluded from these protections, and different remedies may apply depending upon:

• the nature of the property;
• the amount already paid by the purchaser;
• whether the contract falls within Chapter 5's definition of an executory contract;
• whether the seller has complied with all statutory disclosure obligations.

Because these issues are highly fact-specific, neither buyers nor sellers should assume that every owner-financed transaction is governed by identical rules.

Additional Seller Obligations

Texas Property Code Chapter 5 imposes numerous obligations upon sellers using executory contracts, including various disclosure and annual accounting requirements.

Failure to comply with these provisions may limit available remedies and, in some circumstances, expose the seller to statutory liability.

For that reason, owner financing should never be treated as an informal arrangement.

Practical Advice for Buyers

If you purchased property under a contract for deed and receive a notice of default:

• Read the notice carefully.
• Determine whether your agreement is governed by Chapter 5.
• Calculate any applicable cure period.
• Do not assume you have already lost the property simply because you missed payments.
• Consult qualified legal counsel immediately.

Waiting until after the seller declares a forfeiture may significantly reduce your available options.

Practical Advice for Sellers

If you are selling property through owner financing:

• Follow Chapter 5 carefully before attempting cancellation.
• Keep complete payment records.
• Ensure statutory notices strictly comply with the Texas Property Code.
• Avoid relying upon old contract forms that may no longer satisfy current law.

A relatively small procedural mistake can become expensive litigation.

Final Thoughts

Owner financing remains a valuable tool for Texas real estate transactions, but it is no longer governed solely by whatever the parties place into the contract. Texas Property Code Chapter 5 imposes important statutory protections that both buyers and sellers must understand.

Whether you are attempting to enforce an executory contract or defending against an alleged forfeiture, obtaining legal advice early can often prevent far more costly disputes later.

Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. Every real estate transaction is unique, and you should consult an attorney regarding your specific circumstances.

At David C. Barsalou, Attorney at Law, PLLC, we help clients navigate business, family, tax, estate planning, and real estate matters ranging from document drafting to litigation with clarity and confidence. If you’d like guidance on your situation, schedule a consultation today. Call us at (713) 397-4678, email barsalou.law@gmail.com, or reach us through our Contact Page. We’re here to help you take the next step.