H.B. No. 2152
1-1 AN ACT
1-2 relating to restrictive covenants in certain residential real
1-3 estate subdivisions.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. (a) Public policy considerations require that a
1-6 procedure be available to allow for the extension of, addition to,
1-7 or modification of existing property restrictions in residential
1-8 real estate subdivisions.
1-9 (b) The legislature finds that:
1-10 (1) property owners' associations serve to benefit
1-11 residential real estate subdivisions and assist in avoiding the
1-12 problems described by Section 201.002, Property Code;
1-13 (2) there is a special relationship between property
1-14 owners' associations and the property owners within the
1-15 subdivisions;
1-16 (3) it is in the best interest of residential real
1-17 estate subdivisions that a procedure be available to readily
1-18 facilitate increases in the amount of the regular or special
1-19 assessments to allow the property owners' associations to better
1-20 provide services to the subdivisions; and
1-21 (4) restrictions that severely limit the amount of the
1-22 regular assessment may result in the inability of an ineffective
1-23 property owners' association to maintain common area facilities,
1-24 including swimming pools, tennis courts, clubhouses, greenbelt
2-1 areas, or jogging trails, or to provide services, including
2-2 streetlights, security, architectural control, and deed restriction
2-3 enforcement.
2-4 (c) The purpose of this Act is to:
2-5 (1) provide a less burdensome procedure for extending
2-6 the term of, adding to, or modifying residential real estate
2-7 restrictions by approval and circulation of a petition by a
2-8 property owners' association;
2-9 (2) provide for the removal of any restriction or
2-10 other provision relating to race, religion, or national origin that
2-11 is void and unenforceable under either the United States
2-12 Constitution or Section 5.026, Property Code; and
2-13 (3) codify certain powers of property owners'
2-14 associations.
2-15 SECTION 2. Title 11, Property Code, is amended by adding
2-16 Chapter 204 to read as follows:
2-17 CHAPTER 204. POWERS OF PROPERTY OWNERS' ASSOCIATION RELATING
2-18 TO RESTRICTIVE COVENANTS IN CERTAIN SUBDIVISIONS
2-19 Sec. 204.001. DEFINITIONS. In this chapter:
2-20 (1) "Restrictions," "residential real estate
2-21 subdivision," "subdivision," "owner," "real property records," and
2-22 "lienholder" have the meanings assigned by Section 201.003.
2-23 (2) "Dedicatory instrument," "petition," and
2-24 "restrictive covenant" have the meanings assigned by Section
2-25 202.001.
2-26 (3) "Regular assessment" means an assessment, charge,
2-27 fee, or dues that each owner of property within a subdivision is
3-1 required to pay to the property owners' association on a regular
3-2 basis and that are to be used by the association for the benefit of
3-3 the subdivision in accordance with the original, extended, added,
3-4 or modified restrictions.
3-5 (4) "Special assessment" means an assessment, charge,
3-6 fee, or dues that each owner of property within a subdivision is
3-7 required to pay to the property owners' association, after a vote
3-8 of the membership, for the purpose of paying for the costs of
3-9 capital improvements to the common areas that are incurred or will
3-10 be incurred by the association during the fiscal year. A special
3-11 assessment may be assessed before or after the association incurs
3-12 the capital improvement costs.
3-13 Sec. 204.002. APPLICATION. (a) This chapter applies only
3-14 to a residential real estate subdivision, excluding a condominium
3-15 development governed by Title 7, Property Code, that is located in
3-16 whole or in part in a county with a population of 2.8 million or
3-17 more.
3-18 (b) This chapter applies to a restriction regardless of its
3-19 effective date.
3-20 (c) This chapter does not apply to portions of a subdivision
3-21 that are zoned for or that contain a commercial structure, an
3-22 industrial structure, an apartment complex, or a condominium
3-23 development governed by Title 7, Property Code. For purposes of
3-24 this subsection, "apartment complex" means two or more dwellings in
3-25 one or more buildings that are owned by the same owner, located on
3-26 the same lot or tract, and managed by the same owner, agent, or
3-27 management company.
4-1 Sec. 204.003. PROVISIONS OF RESTRICTIVE COVENANTS PREVAIL IN
4-2 CERTAIN CIRCUMSTANCES. An express designation in a document
4-3 creating restrictions applicable to a residential real estate
4-4 subdivision that provides for the extension of, addition to, or
4-5 modification of existing restrictions by a designated number of
4-6 owners of real property in the subdivision prevails over the
4-7 provisions of this chapter.
4-8 Sec. 204.004. PROPERTY OWNERS' ASSOCIATION. (a) A property
4-9 owners' association is a designated representative of the owners of
4-10 property in a subdivision and may be referred to as a "homeowners
4-11 association," "community association," "civic association," "civic
4-12 club," "association," "committee," or similar term contained in the
4-13 restrictions. The membership of the association consists of the
4-14 owners of property within the subdivision.
4-15 (b) The association must be nonprofit and may be
4-16 incorporated as a Texas nonprofit corporation. An unincorporated
4-17 association may incorporate under the Texas Non-Profit Corporation
4-18 Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes).
4-19 (c) The association's board of directors or trustees must be
4-20 elected or appointed in accordance with the applicable provisions
4-21 of the restrictions and the association's articles of incorporation
4-22 or bylaws.
4-23 Sec. 204.005. EXTENSION OF, ADDITION TO, OR MODIFICATION OF
4-24 EXISTING RESTRICTIONS. (a) A property owners' association has
4-25 authority to approve and circulate a petition relating to the
4-26 extension of, addition to, or modification of existing
4-27 restrictions. A property owners' association is not required to
5-1 comply with Sections 201.009-201.012.
5-2 (b) A petition to extend, add to, or modify existing
5-3 restrictions approved and circulated by a property owners'
5-4 association is effective if:
5-5 (1) the petition is approved by the owners, excluding
5-6 lienholders, contract purchasers, and the owners of mineral
5-7 interests, of at least 75 percent of the real property in the
5-8 subdivision or a smaller percentage required by the original
5-9 dedicatory instrument; and
5-10 (2) the petition is filed as a dedicatory instrument
5-11 with the county clerk of the county in which the subdivision is
5-12 located.
5-13 (c) If a subdivision consisting of multiple sections, each
5-14 with its own restrictions, is represented by a single property
5-15 owners' association, the approval requirement may be satisfied by
5-16 obtaining approval of at least 75 percent of the owners on a
5-17 section-by-section basis or of the total number of properties in
5-18 the property owners' association's jurisdiction.
5-19 (d) If approved, the petition is binding on all properties
5-20 in the subdivision or section, as applicable.
5-21 (e) A property owners' association that circulates a
5-22 petition must notify all record owners of property in the
5-23 subdivision in writing of the proposed extension, addition to, or
5-24 modification of the existing restrictions. Notice may be
5-25 hand-delivered to residences within the subdivision or sent by
5-26 regular mail to the owner's last known mailing address as reflected
5-27 in the ownership records maintained by the property owners'
6-1 association. The approval of multiple owners of a property may be
6-2 reflected by the signature of a single co-owner.
6-3 Sec. 204.006. CREATION OF PROPERTY OWNERS' ASSOCIATION. (a)
6-4 If existing restrictions applicable to a subdivision do not provide
6-5 for a property owners' association and require approval of more
6-6 than 60 percent of the owners to add to or modify the original
6-7 dedicating instrument, a petition to add to or modify the existing
6-8 restrictions for the sole purpose of creating and operating a
6-9 property owners' association with mandatory membership, mandatory
6-10 regular or special assessments, and equivalent voting rights for
6-11 each of the owners in the subdivision is effective if:
6-12 (1) a petition committee has been formed as prescribed
6-13 by Section 201.005;
6-14 (2) the petition is approved by the owners, excluding
6-15 lienholders, contract purchasers, and the owners of mineral
6-16 interests, of at least 60 percent of the real property in the
6-17 subdivision; and
6-18 (3) the procedure employed in the circulation and
6-19 approval of the petition to add to or amend the existing
6-20 restrictions for the specified purpose complies with the
6-21 requirements of this chapter.
6-22 (b) If the circulated petition is not approved by the
6-23 required percentage of owners within one year of the creation of
6-24 the petition committee, the petition is void and another petition
6-25 committee may be formed.
6-26 (c) If the petition is approved, the petition is binding on
6-27 all properties in the subdivision or section, as applicable.
7-1 Sec. 204.007. EFFECT ON LIENHOLDERS. (a) Extensions of,
7-2 additions to, or modifications of restrictions under this chapter
7-3 are binding on a lienholder, excluding restrictions relating to
7-4 regular or special assessment increases if the assessment is not
7-5 subordinated to purchase money or home improvement liens.
7-6 (b) If the assessment lien of the property owners'
7-7 association is subordinate to purchase money or home improvement
7-8 liens, the lienholder is not entitled to notice of the proposed
7-9 dedicatory instrument and the lienholder is bound by the instrument
7-10 if the instrument is approved. If the assessment lien is not
7-11 subordinated, a lienholder who is not a signatory to the dedicatory
7-12 instrument and whose lien was established before the effective date
7-13 of the dedicatory instrument is not bound by the portion of the
7-14 dedicatory instrument that increases the amount of the regular or
7-15 special assessment during any period of ownership by the
7-16 lienholder.
7-17 (c) A person who acquires title to the property at a
7-18 foreclosure sale or by deed from a foreclosing lienholder is bound
7-19 by the assessment increase.
7-20 Sec. 204.008. METHOD OF ADOPTION. An extension, addition
7-21 to, or modification of restrictions proposed by a property owners'
7-22 association may be adopted:
7-23 (1) by a written ballot that states the substance of
7-24 the amendment and specifies the date by which a ballot must be
7-25 received to be counted;
7-26 (2) at a meeting of the members represented by the
7-27 property owners' association if written notice of the meeting
8-1 stating the purpose of the meeting is delivered to each owner of
8-2 property in the subdivision;
8-3 (3) by door-to-door circulation of a petition by the
8-4 property owners' association or a person authorized by the property
8-5 owners' association;
8-6 (4) by a method permitted by the existing
8-7 restrictions; or
8-8 (5) by a combination of the methods described by this
8-9 section.
8-10 Sec. 204.009. TEXAS NONPROFIT CORPORATIONS. (a) If the
8-11 property owners' association is referenced in the existing,
8-12 extended, added to, or modified restrictions as a Texas nonprofit
8-13 corporation, the instrument contemplates the interaction of a
8-14 nonprofit corporation, its articles of incorporation, and its
8-15 bylaws.
8-16 (b) The property owners' association has the powers and
8-17 shall promote the purposes enumerated in the articles of
8-18 incorporation and bylaws. These powers and purposes necessarily
8-19 modify the express provisions of the restrictions to include the
8-20 referenced powers and purposes.
8-21 Sec. 204.010. POWERS OF PROPERTY OWNERS' ASSOCIATION. (a)
8-22 Unless otherwise provided by the restrictions or the association's
8-23 articles of incorporation or bylaws, the property owners'
8-24 association, acting through its board of directors or trustees,
8-25 may:
8-26 (1) adopt and amend bylaws;
8-27 (2) adopt and amend budgets for revenues,
9-1 expenditures, and reserves and collect regular assessments or
9-2 special assessments for common expenses from property owners;
9-3 (3) hire and terminate managing agents and other
9-4 employees, agents, and independent contractors;
9-5 (4) institute, defend, intervene in, settle, or
9-6 compromise litigation or administrative proceedings on matters
9-7 affecting the subdivision;
9-8 (5) make contracts and incur liabilities relating to
9-9 the operation of the subdivision and the property owners'
9-10 association;
9-11 (6) regulate the use, maintenance, repair,
9-12 replacement, modification, and appearance of the subdivision;
9-13 (7) make additional improvements to be included as a
9-14 part of the common area;
9-15 (8) grant easements, leases, licenses, and concessions
9-16 through or over the common area;
9-17 (9) impose and receive payments, fees, or charges for
9-18 the use, rental, or operation of the common area and for services
9-19 provided to property owners;
9-20 (10) impose interest, late charges, and, if
9-21 applicable, returned check charges for late payments of regular
9-22 assessments or special assessments;
9-23 (11) if notice and an opportunity to be heard are
9-24 given, collect reimbursement of actual attorney's fees and other
9-25 reasonable costs incurred by the property owners' association
9-26 relating to violations of the subdivision's restrictions or the
9-27 property owners' association's bylaws and rules;
10-1 (12) charge costs to an owner's assessment account and
10-2 collect the costs in any manner provided in the restrictions for
10-3 the collection of assessments;
10-4 (13) adopt and amend rules regulating the collection
10-5 of delinquent assessments and the application of payments;
10-6 (14) impose reasonable charges for preparing,
10-7 recording, or copying amendments to the restrictions, resale
10-8 certificates, or statements of unpaid assessments;
10-9 (15) purchase insurance and fidelity bonds, including
10-10 directors' and officers' liability insurance, that the board
10-11 considers appropriate or necessary;
10-12 (16) if the restrictions allow for an annual increase
10-13 in the maximum regular assessment without a vote of the membership,
10-14 assess the increase annually or accumulate and assess the increase
10-15 after a number of years;
10-16 (17) subject to the requirements of the Texas
10-17 Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
10-18 Texas Civil Statutes) and by majority vote of its board of
10-19 directors, indemnify a director or officer of the property owners'
10-20 association who was, is, or may be made a named defendant or
10-21 respondent in a proceeding because the person is or was a director;
10-22 (18) if the restrictions vest the architectural
10-23 control authority in the property owners' association or if the
10-24 authority is vested in the property owners' association under
10-25 Section 204.011:
10-26 (A) implement written architectural control
10-27 guidelines for its own use or record the guidelines in the real
11-1 property records of the applicable county; and
11-2 (B) modify the guidelines as the needs of the
11-3 subdivision change;
11-4 (19) exercise other powers conferred by the
11-5 restrictions, its articles of incorporation, or its bylaws;
11-6 (20) exercise other powers that may be exercised in
11-7 this state by a corporation of the same type as the property
11-8 owners' association; and
11-9 (21) exercise other powers necessary and proper for
11-10 the governance and operation of the property owners' association.
11-11 (b) Powers enumerated by this section are in addition to any
11-12 other powers granted to a property owners' association by this
11-13 chapter or other law.
11-14 Sec. 204.011. ARCHITECTURAL CONTROL COMMITTEE. (a) This
11-15 section applies to restrictions providing for the creation and
11-16 operation of an architectural control committee with the power to
11-17 approve or deny applications for proposed original construction or
11-18 modification of a building, structure, or improvement.
11-19 (b) Unless the restrictions applicable to a residential real
11-20 estate subdivision vest the architectural control committee
11-21 authority in the property owners' association before either of the
11-22 following events, the architectural control committee authority
11-23 automatically vests in the property owners' association when:
11-24 (1) the term of the architectural control committee
11-25 authority expires as prescribed by the restrictions;
11-26 (2) a residence on the last available building site is
11-27 completed and sold;
12-1 (3) the person or entity designated as the
12-2 architectural control committee in the restrictions assigns, in
12-3 writing, authority to the property owners' association; or
12-4 (4) an assignee of the original holder abandons its
12-5 authority for more than one year.
12-6 (c) If the architectural control committee authority is
12-7 transferred to the property owners' association, the authority is
12-8 vested in the property owners' association until:
12-9 (1) the restrictions are modified to reflect
12-10 otherwise;
12-11 (2) the restrictions are terminated; or
12-12 (3) the property owners' association ceases to exist.
12-13 SECTION 3. Title 11, Property Code, is amended by adding
12-14 Chapter 205 to read as follows:
12-15 CHAPTER 205. RESTRICTIVE COVENANTS APPLICABLE TO REVISED
12-16 SUBDIVISIONS IN CERTAIN COUNTIES
12-17 Sec. 205.001. DEFINITIONS. In this chapter, "restrictions"
12-18 and "subdivision" have the meanings assigned by Section 201.003.
12-19 Sec. 205.002. APPLICABILITY. This chapter applies only to a
12-20 county with a population of 65,000 or more.
12-21 Sec. 205.003. RESTRICTIONS APPLICABLE TO REVISED
12-22 SUBDIVISIONS. (a) If all or part of a subdivision plat is revised
12-23 to provide for another subdivision of land within all or part of
12-24 the earlier subdivision, the restrictions that apply to the
12-25 subdivision before the revision apply to the newly created
12-26 subdivision.
12-27 (b) The property owners of the newly created subdivision
13-1 must comply with the petition procedures prescribed by Chapter 204
13-2 to modify the restrictions.
13-3 SECTION 4. The importance of this legislation and the
13-4 crowded condition of the calendars in both houses create an
13-5 emergency and an imperative public necessity that the
13-6 constitutional rule requiring bills to be read on three several
13-7 days in each house be suspended, and this rule is hereby suspended.