BILL ANALYSIS


                                                        H.B. 2152
                                            By: Bailey (Gallegos)
                                                    Jurisprudence
                                                          5-26-95
                              Senate Committee Report (Unamended)
BACKGROUND

Property owners' associations in certain counties have a special
relationship with the homeowners.  A large number of such
communities are subjected to restrictive covenants which are
extremely difficult, if not impossible, to amend or modify.  In
Houston, about 30 percent of all homes are rental properties,
making it difficult to track down the owners for their signatures. 
Homeowners in these areas are unable to amend the covenants to
provide for such things as contract deputies to fight crime.

PURPOSE

As proposed, H.B. 2152 sets forth provisions relating to
restrictive covenants in certain residential real estate
subdivisions.

RULEMAKING AUTHORITY

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

SECTION BY SECTION ANALYSIS

SECTION 1. (a)  Provides that public policy considerations require
that a procedure be available to allow for the extension of,
addition to, or modification of existing property restrictions in
residential real estate subdivisions.

     (b)  Sets forth the findings of the legislature relating to
     the relationship between property owners' associations and
     residential real estate subdivisions.
     
     SECTION 2.     Amends Title 11, Property Code, by adding Chapter 204,
as follows:

 CHAPTER 204.  POWERS OF PROPERTY OWNERS' ASSOCIATION RELATING TO
RESTRICTIVE COVENANTS IN CERTAIN SUBDIVISIONS

     Sec. 204.001.  DEFINITIONS.  Defines "restrictions,"
     "residential real estate subdivision," "subdivision," "owner,"
     "real property records," "lienholder," "dedicatory
     instrument," "petition," "restrictive covenant," "regular
     assessment," and "special assessment."
     
     Sec. 204.002.  APPLICATION.  (a)  Provides that this chapter
     applies only to a residential real estate subdivision,
     excluding a certain condominium development.
     
     (b)  Provides that this chapter applies to a restriction
       regardless of its effective date.
       
       (c)  Provides that this chapter does not apply to portions
       of a subdivision that are zoned for or that contain a
       commercial or industrial structure, an apartment complex, or
       a condominium development governed by Title 7, Property
       Code.  Defines "apartment complex."
       
       Sec. 204.003.     PROVISIONS OF RESTRICTIVE COVENANTS PREVAIL IN
     CERTAIN CIRCUMSTANCES.  Provides that an express designation
     in a document creating restrictions applicable to a
     residential real estate subdivision that provides for the
     extension of, addition to, or modification of existing
     restrictions by a designated number of owners of real property
     in the subdivision prevails over the provisions of this
     chapter.
     
     Sec. 204.004.  PROPERTY OWNERS' ASSOCIATION.  (a)  Provides
     that a property owners' association (association) is a
     designated representative of the owners of property in a
     subdivision and may be referred to as a "homeowners
     association," "community association," "civic association,"
     "civic club," "association," "committee," or similar term
     contained in the restrictions.  Provides that the membership
     of the association consists of the owners of property within
     the subdivision.
     
     (b)  Provides that the association must be nonprofit and may
       be incorporated as a Texas nonprofit corporation. 
       Authorizes an unincorporated association to incorporate
       under Article 1396-1.01, et seq. (Texas Non-Profit
       Corporation Act).
       
       Sec. 204.005.  EXTENSION OF, ADDITION TO, OR MODIFICATION OF
     EXISTING RESTRICTIONS.  (a)  Provides that an association has
     authority to approve and circulate a petition relating to the
     extension of, addition to, or modification of existing
     restrictions.  Provides that an association is not required to
     comply with Sections 201.009-201.012.
     
     (b)  Provides that a petition to extend, add to, or modify
       existing restrictions approved and circulated by an
       association is effective if the petition is approved by
       certain owners and filed with the county clerk of the county
       in which the subdivision is located.
       
       (c)  Authorizes the approval requirement to be satisfied by
       obtaining approval of at least 75 percent of the owners on
       a section-by-section basis or of the total number of
       properties in the association's jurisdiction, if a
       subdivision consisting of multiple sections.
       
       (d)  Provides that the petition is binding on all properties
       in the subdivision or section, as applicable, if approved. 
       Requires an association that circulates a petition to notify
       all record owners of property in the subdivision in writing
       of the proposed extension, addition to, or modification of
       the existing restrictions.  Authorizes notice to be hand-delivered to residences within the subdivision or sent by
       regular mail to the owner's last known mailing address as
       reflected in the ownership records maintained by the
       association.  Authorizes the approval of multiple owners of
       a property to be reflected by the signature of a single co-owner.
       
       Sec. 204.006.  CREATION OF PROPERTY OWNERS' ASSOCIATION.  (a) 
     Sets forth certain conditions under which a petition to add to
     or modify the existing restrictions for the sole purpose of
     creating and operating an association with mandatory
     membership, mandatory regular or special assessments, and
     equivalent voting rights for each of the owners in the
     subdivision is effective, if existing restrictions applicable
     to a subdivision do not provide for an association and require
     approval of more than 60 percent of the owners to add to or
     modify the original dedicating instrument.
     
     (b)  Provides that a petition is void and another petition
       committee may be formed, if the circulated petition is not
       approved by the required percentage of owners within one
       year of the creation of the petition committee.
       
       (c)  Provides that the petition is binding on all properties
       in the subdivision or section, as applicable, if the
       petition is approved.
       
       Sec. 204.007.  EFFECT ON LIENHOLDERS.  (a)  Provides that
     extensions of, additions to, or modifications of restrictions
     under this chapter are binding on a lienholder, excluding
     restrictions relating to regular or special assessment
     increases if the assessment is not subordinated to purchase
     money or home improvement liens.
     
     (b)  Provides that a lienholder is not entitled to notice of
       the proposed dedicatory instrument and the lienholder is
       bound by the instrument if the instrument is approved, if
       the assessment lien of the association is subordinate to
       purchase money or home improvement liens.  Provides that a
       lienholder who is not a signatory to the dedicatory
       instrument and whose lien was established before the
       effective date of the dedicatory instrument is not bound by
       the portion of the dedicatory instrument that increases the
       amount of the regular or special assessment during any
       period of ownership by the lienholder, if the assessment
       lien is not subordinated.
       
       (c)  Provides that a person who acquires title to the
       property at a foreclosure sale or by deed from a foreclosing
       lienholder is bound by the assessment increase.
       
       Sec. 204.008.  METHOD OF ADOPTION.  Sets forth the means by
     which an extension, addition to, or modification of
     restrictions proposed by an association may be adopted.
     
     Sec. 204.009.  TEXAS NONPROFIT CORPORATIONS.  (a)  Provides
     that if the association is referenced in the existing,
     extended, added to, or modified restrictions as a Texas
     nonprofit corporation, the instrument contemplates the
     interaction of a nonprofit corporation, its articles of
     incorporation, and its bylaws.
     
     (b)  Provides that the association has the powers and shall
       promote the purposes enumerated in the articles of
       incorporation and bylaws.  Provides that these powers and
       purposes necessarily modify the express provisions of the
       restrictions to include the referenced powers and purposes.
       
       Sec. 204.010.  POWERS OF PROPERTY OWNERS' ASSOCIATION.  (a) 
     Sets forth certain powers that an association, acting through
     its board of directors or trustees, may exercise, unless
     otherwise provided by the restrictions or the association's
     articles of incorporation or bylaws.
     
     (b)  Provides that powers enumerated by this section are in
       addition to any other powers granted to an association by
       this chapter or other law.
       
     Sec. 204.011.  ARCHITECTURAL CONTROL COMMITTEE.  (a)  Provides
     that this section applies to restrictions providing for the
     creation and operation of an architectural control committee
     with the power to approve or deny applications for proposed
     original construction or modification of a building,
     structure, or improvement.
     
     (b)  Provides that the architectural control committee
       authority automatically vests in the property owners'
       association under certain conditions, unless the
       restrictions applicable to a residential real estate
       subdivision vest the architectural control committee
       authority in the association before certain events.
       
       (c)  Provides that the authority is vested in an association
       until the restrictions are modified or terminated, or the
       association ceases to exist.
       
     SECTION 3.     Amends Title 11, Property Code, by adding Chapter 205,
as follows:

   CHAPTER 205.  RESTRICTIVE COVENANTS APPLICABLE TO REVISED
                SUBDIVISIONS IN CERTAIN COUNTIES

     Sec. 205.001.  DEFINITIONS.  Defines "restrictions" and
     "subdivision."
     
     Sec. 205.002.  APPLICABILITY.  Provides that this chapter
     applies only to a county with a population of 65,000 or more.
     
     Sec. 205.003.  RESTRICTIONS APPLICABLE TO REVISED
     SUBDIVISIONS.  (a)  Provides that the restrictions that apply
     to the subdivision before the revision apply to the newly
     created subdivision, if all or part of a subdivision plat is
     revised to provide for another subdivision of land within all
     or part of the earlier subdivision.
     
     (b)  Requires the property owners of the newly created
       subdivision to comply with the petition procedures
       prescribed by Chapter 204 to modify the restrictions.
       
       SECTION 4.   Emergency clause.
           Effective date:  90 days after adjournment.