BILL ANALYSIS

 

 

 

H.B. 1558

By: Johnson, Ann

Business & Industry

Committee Report (Unamended)

 

 

 

BACKGROUND AND PURPOSE

 

The City of Houston does not have zoning regulations, and therefore restrictive covenants, also known as deed restrictions, have become an essential tool by which residential subdivisions are able to restrict the construction and use requirements within the subdivision. Subdivisions developed in the 1950s and after often have very robust and detailed deed restrictions that can be extended indefinitely and may also be amended with the consent of a majority or supermajority of the owners in the subdivision. However, many older subdivisions in the city have very basic deed restrictions that do not explicitly provide for unlimited extensions or for any kind of amendment. The inability of owners to extend or amend their deed restrictions in older subdivisions in which no zoning regulations apply can create uncertainty in living conditions and discourage investments in those subdivisions. Allowing the extension or amendment of deed restrictions would help these older subdivisions maintain and improve the subdivision's property value. H.B. 1558 seeks to address these issues by providing a procedure for extending or amending deed restrictions for certain older subdivisions. 

 

CRIMINAL JUSTICE IMPACT

 

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

 

RULEMAKING AUTHORITY

 

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

 

ANALYSIS

 

H.B. 1558 amends the Property Code to provide for the extension or amendment of deed restrictions in certain older subdivisions that are described by a recorded map or plat filed before 1947 in the real property records of the county in which the subdivision is located and that are wholly or partly located in a municipality with a population of two million or more. The bill sets out legislative findings and establishes that the purpose of its provisions is to provide a procedure for extending or amending restrictions for certain older subdivisions.

 

H.B. 1558 authorizes an extension or amendment of restrictions in a dedicatory instrument for an applicable subdivision without action by a property owners' association. The bill establishes that the amendment of restrictions includes the adoption of new restrictions or the modification or removal of existing restrictions. The bill prohibits an amendment of restrictions from creating a property owners' association with mandatory membership and makes such an amendment void. The bill, with respect to the extension or amendment of restrictions, does the following:

·         authorizes a procedure in a dedicatory instrument for an initial extension of the original restrictions to be used for successive extensions of the original restrictions unless the dedicatory instrument expressly prohibits the procedure from being used;

·         prohibits a procedure from being used to provide for automatic extensions if the dedicatory instrument prohibits the procedure from being used for that purpose;

·         establishes that a provision in a dedicatory instrument that prohibits the extension of an existing restriction during a certain period does not apply to a successive extension under a procedure for initial extension of original restrictions;

·         authorizes an extension to be for a period equal to the term of the original restriction or a shorter period and provide for additional automatic extensions of the term of the restrictions for a period of not more than 10 years for each extension; and

·         authorizes a dedicatory instrument that provides for the extension and does not provide for amendments to be amended, including by amending the provision providing for the extension.

 

H.B. 1558 authorizes the extension or amendment by a petition or ballots that indicate the written consent of the owners of at least 66.6 percent of the total number of separately owned parcels or tracts in the subdivision, regardless of whether the parcels or tracts contain part or all of one or more platted lots or combination of lots. A restriction that is so extended or amended applies to all sections of the subdivision, including any annex, to the extent that the extended or amended restriction expressly applies to the entire subdivision, regardless of whether:

·         each section has separate restrictions; or

·         each owner is a member of the property owners' association.

If the original restrictions for a subdivision contain a lower percentage to extend or amend the restrictions, the percentage in the original restrictions controls.

 

H.B. 1558 provides for the method of distribution for the petition or ballots and the effective date of an extension or amendment of a restriction. The bill establishes that an owner's signature on a petition or ballot conclusively establishes the owner's consent and provides the following regarding the effect of the owner's signature and the effective date of an extension or an amendment under the bill's provisions:

·         the vote of multiple owners of a lot, parcel, or tract may be reflected by the signature of one of the owners;

·         after an owner signs a petition or ballot for an extension or amendment of a restriction, the owner's subsequent conveyance of the owner's interest in real property in the subdivision covered by the extension or amendment does not affect the validity of the signature for the purposes of the petition or ballot; and

·         an extension or amendment of a restriction under the bill's provisions takes effect on the date the extension or amendment and the petition or ballots that reflect the written consent of the required number of owners in the subdivision for the adoption of the extension or amendment are filed and recorded in the real property records of the county in which the subdivision is located.

 

H.B. 1558, with respect to the applicability of an extension or amendment, provides the following:

·         an extension or amendment of a restriction is binding on a lot, parcel, or tract in the subdivision as provided by the restriction, regardless of whether the owner or owners of the lot, parcel, or tract consented to the extension or amendment;

·         an owner may not opt out of the applicability to the owner's property of a restriction that is extended or amended under the bill's provisions; and

·         an extension or amendment is binding on a lienholder or a person who acquires title to property at a foreclosure sale or by deed from a foreclosing lienholder.

 

H.B. 1558 establishes the following:

·         if a provision in extended restrictions is void and unenforceable under the U.S. Constitution or statutory provisions relating to discriminatory provisions, the restrictions are considered as if the void and unenforceable provision was never contained in the restrictions;

·         the procedure provided by the bill's provisions for the extension or amendment is cumulative of and not in lieu of any other method by which restrictions of a subdivision to which the bill applies may be extended or amended;

·         the bill's provisions and any petition or ballot made or action taken in connection with an attempt to comply with the bill's provisions must be liberally construed to effectuate the intent of the provisions and the petition, ballot, or action; and

·         a restriction that is extended or amended under the bill's provisions must be liberally construed to give effect to the restriction's purposes and intent.

 

H.B. 1558 applies to an older subdivision in an applicable municipality that:

·         had original restrictions that:

o   did not have an express procedure that provides for successive extensions of the restrictions;

o   did not have an express procedure for amending the restrictions;

o   could not be amended without certain unanimous consent; and

o   may no longer be valid due to an inability to extend or amend the restrictions; and

·         has a single property owners' association in which all owners in the subdivision are eligible for membership but in which membership is not mandatory.

 

H.B. 1558 applies to a restriction regardless of the date on which the restriction was created and supersedes any contrary requirement for the extension or amendment of a restriction in a dedicatory instrument of a subdivision to which the bill's provisions apply.

 

H.B. 1558 defines "dedicatory instrument," "lienholder," "petition," and "restriction" by reference to the meanings assigned those terms for purposes of Property Code provisions regarding restrictive covenants. The bill also defines the following terms:

·         "property owners' association" means an incorporated or unincorporated homeowners' association, community association, civic club, or similar entity that:

o   has a membership primarily consisting of the owners of real property in a subdivision; and

o   supports the enforcement of or promotes the observance of the deed restrictions applicable to all or part of the property located in the subdivision; and

·         "subdivision" means land that consists of multiple sections that have each been divided into two or more parts on a map or plat that has been recorded in the real property records of a county and is or was subject to restrictions that limit a majority of the land, excluding streets and public areas, to residential use and were recorded in the real property records of the county.

 

EFFECTIVE DATE

 

On passage, or, if the bill does not receive the necessary vote, September 1, 2023.