What is a Municipal Utility District (MUD)?

MUD. It's a strange acronym that you should be aware of as a real estate agent. A Municipal Utilities District, also known as MUD, is essentially a special political subdivision that functions as an independent and limited government. These subdivisions are approved by the Texas Commission of Environmental Quality (TCEQ) and provide sewage, water, drainage and other services to property owners within the district boundaries. Once a district is formed, a MUD board of directors is then appointed by property owners to oversee the reimbursement of the developer.

What are my obligations as a real estate agent when it comes to MUD?

As a seller, you're required by the Texas Water Code to inform any buyers if the property you're selling is located in a MUD prior to entering into any kind of sales contract. The notice you give them should include tax rates, bonded indebtedness, and any applicable fees to the MUD. It should be clear to the seller (i.e. you) that a property is in a Municipal Utility District because it will be listed on the tax bill sent to the owner by the county. While you may know that the property is in a MUD, it's also important to know which notice to send to the contracting party. The notice you use can differ based on where the MUD is located. These are the notices you'll need to keep in mind when dealing with MUDs and when you'll need to use them:

  • If the MUD is located within city limits: use notice 49.452(c) of the Water Code
  • If the MUD is not in city limits but within the extraterritorial jurisdiction of the city: use notice 49.452(b) of the Water Code
  • If the MUD isn't in either of these categories: use notice 49.452(d) of the Water Code

To obtain these forms, you can either contact the Municipal Utilities District itself and pay a small administrative fee of $10, or get in touch with the county property records office. Both of these offices should be in possession of the appropriate notices you'll need to send buyers. ## What does MUD mean for the property owner?

While living in a MUD could mean increased taxes, this isn't always the case. Like all property taxes, rates vary based on property values and debt requirements. The good news is that as the MUD is built out and the cost is shared by more homeowners, the rates in these types of districts usually decline over time. Real estate agents should be communicating rates and fees to buyers. MUDs have also evolved over the years and now help to support additional community amenities like parks and recreation facilities, solid waste management, and deed restriction enforcement.

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