A MUD disclosure is the written notice a Texas seller must hand you before you sign a purchase contract when the home sits inside a Municipal Utility District. It tells you the property is inside a district that levies its own property taxes on top of county and school taxes, and it spells out the current rate, the district’s bond debt, and any assessments or standby fees tied to your lot. If the seller skips it, you have the right to terminate the contract. The requirement lives in Texas Water Code Sections 49.452 and 49.4521.1State of Texas. Texas Water Code 49.452 – Notice to Purchasers
A Municipal Utility District is a local governmental entity that provides water, wastewater, drainage, roads, or recreational facilities in areas a city or county doesn’t already serve. It funds that infrastructure by issuing bonds and repays the bonds through property taxes on homes inside its boundaries. So a MUD tax is a real line on your tax bill, set by an elected board of directors, and it can be substantial in newer subdivisions still paying down construction debt.
What the Notice Has to Tell You
The statute prescribes what a compliant notice must contain, and each item is there because it changes the math of owning the home.2Texas Public Law. Texas Water Code 49.4521 – Prescribed Notice to Purchasers
- The name of the district and a statement that the property is inside it and may be subject to district taxes or assessments.
- A statement that the district may, subject to voter approval, impose taxes and issue bonds at an unlimited rate to repay them.
- The current property tax rate per $100 of assessed valuation, or the projected rate if the district hasn’t started taxing yet.
- The current assessment rate or amount, if the district imposes assessments, or the projected figure if it hasn’t started.
- The total voter-approved bond amounts and the aggregate initial principal of bonds actually issued, broken out by water/sewer/drainage, roads, parks and recreation, and any other facility categories.
- If the district has TCEQ approval to impose a standby fee, the amount and a statement that unpaid standby fees become a personal obligation secured by a lien on the property.
The facility-by-facility bond breakdown is worth reading closely. It shows what your taxes are actually financing and how much authorized debt remains unissued.
When You Get It, and Where It Ends Up
The seller or the seller’s agent must deliver the notice before the purchase contract is signed, or include it as an addendum during negotiations. A signed copy with current figures is then executed by both parties at closing, acknowledged, and recorded in the deed records of the county where the property sits.1State of Texas. Texas Water Code 49.452 – Notice to Purchasers Because it’s recorded, prior notices on the same property are often already sitting in county records; your title company or agent can pull one if you want to see the district’s history before an offer.
Your Right to Terminate — and How You Lose It
If the seller enters a purchase contract without providing the notice, you have the right to terminate.1State of Texas. Texas Water Code 49.452 – Notice to Purchasers The statute doesn’t put a day count on that right. It stays available until the seller cures by delivering the notice.
Here’s the trap. If the seller furnishes the required notice at or before closing and you go ahead and close anyway, the law conclusively presumes you have waived all rights to terminate and to recover damages under this section.1State of Texas. Texas Water Code 49.452 – Notice to Purchasers Closing is the moment the leverage disappears. That’s why you review the disclosure before the closing table, not at it. If the numbers surprise you, the time to raise it is when you can still walk.
What MUD Taxes Actually Cost
Rates vary widely with how much bond debt the district still carries. Newer subdivisions where infrastructure was recently built tend to sit at the high end, often $1.00 to $1.25 per $100 of assessed value, because the full principal is still outstanding. Established districts that have retired most of their debt might charge $0.30 to $0.50 per $100.
On a home assessed at $350,000, the difference is real money. At $1.20 per $100, the MUD tax alone runs $4,200 a year. At $0.40 per $100, it’s $1,400. That’s about $233 a month between the two extremes, enough to push a mortgage payment past what a buyer budgeted. Lenders typically escrow MUD taxes with the rest of your property taxes, so the cost lands inside your monthly payment. Some buyers only feel it when the escrow analysis adjusts upward after the first year.
The bond-debt figures on the disclosure tell you where the district sits in its repayment arc. A district with most of its approved bonds already issued and a shrinking outstanding balance is a better bet for stable or declining taxes than one carrying large unissued authorizations, which means future debt still to come.
What to Check Before You Sign
Don’t let the disclosure blur into the rest of the closing stack. A few items deserve real attention:
- Compare the MUD tax rate against the property tax figure you used to size your monthly payment. Online mortgage calculators often use county-level rates that leave MUD taxes out entirely.
- Look at the gap between voter-approved bond amounts and bonds actually issued. A wide gap signals more debt ahead, which can push future rates higher.
- Read the facility categories. Road and parks bonds sometimes carry different repayment timelines than the water and sewer bonds.
- Check whether a standby fee applies to your lot, and remember an unpaid fee becomes a lien on the property.
- Confirm whether the district imposes assessments in addition to taxes. Both must appear separately on the notice if they exist.
If a number looks off or something in the notice is unfamiliar, talk to a Texas real estate attorney or a tax advisor before you close. An hour of advice is cheap next to a tax obligation that can run for decades.