By Bailey, Combs H.B. No. 2152
74R6072 PAM-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to powers of a property owners' association or other
1-3 designated representative relating to restrictive covenants in
1-4 certain residential real estate subdivisions.
1-5 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-6 SECTION 1. (a) Public policy considerations require that a
1-7 procedure be available to allow for the extension of, addition to,
1-8 or modification of existing property restrictions in residential
1-9 real estate subdivisions.
1-10 (b) The legislature finds that:
1-11 (1) property owners' associations or other designated
1-12 representatives serve to benefit residential real estate
1-13 subdivisions and assist in avoiding the problems described by
1-14 Section 201.002, Property Code;
1-15 (2) there is a special relationship between property
1-16 owners' associations or other designated representatives and the
1-17 property owners within the subdivisions;
1-18 (3) it is in the best interest of residential real
1-19 estate subdivisions that a procedure be available to readily
1-20 facilitate increases in the amount of the annual or special
1-21 assessments to allow the property owners' associations or other
1-22 designated representatives to better provide services to the
1-23 subdivisions; and
1-24 (4) restrictions that severely limit the amount of the
2-1 annual assessment may result in the inability of an ineffective
2-2 property owners' association or other designated representative to
2-3 maintain common area facilities, including swimming pools, tennis
2-4 courts, clubhouses, greenbelt areas, or jogging trails, or to
2-5 provide services, including streetlights, security, architectural
2-6 control, and deed restriction enforcement.
2-7 (c) The purpose of this Act is to:
2-8 (1) provide a less burdensome procedure for extending
2-9 the term of, adding to, or modifying residential real estate
2-10 restrictions by approval and circulation of a petition by a
2-11 property owners' association or other designated representative;
2-12 (2) provide for the removal of any restriction or
2-13 other provision relating to race, religion, or national origin that
2-14 is void and unenforceable under either the United States
2-15 Constitution or Section 5.026, Property Code; and
2-16 (3) codify certain powers of property owners'
2-17 associations or other designated representatives.
2-18 SECTION 2. Title 11, Property Code, is amended by adding
2-19 Chapter 204 to read as follows:
2-20 CHAPTER 204. POWERS OF DESIGNATED REPRESENTATIVES RELATING
2-21 TO RESTRICTIVE COVENANTS IN CERTAIN SUBDIVISIONS
2-22 Sec. 204.001. DEFINITIONS. In this chapter:
2-23 (1) "Restrictions," "residential real estate
2-24 subdivision," "subdivision," "owner," "real property records," and
2-25 "lienholder" have the meanings assigned by Section 201.003.
2-26 (2) "Dedicatory instrument," "property owners'
2-27 association," "petition," and "restrictive covenant" have the
3-1 meanings assigned by Section 202.001.
3-2 (3) "Designated representative" means a representative
3-3 designated by an owner of real property in a residential real
3-4 estate subdivision and includes a property owners' association.
3-5 Sec. 204.002. APPLICATION. (a) This chapter applies only
3-6 to a residential real estate subdivision, excluding a condominium
3-7 development governed by Title 7, Property Code, that is located in
3-8 whole or in part in:
3-9 (1) a county with a population of 2.8 million or more;
3-10 or
3-11 (2) a county with a population of 150,000 or more that
3-12 is adjacent to a county with a population of 2.8 million or more.
3-13 (b) This chapter applies to a restriction regardless of its
3-14 effective date.
3-15 Sec. 204.003. EXTENSION OF, ADDITION TO, OR MODIFICATION OF
3-16 EXISTING RESTRICTIONS. (a) A designated representative has
3-17 authority to approve and circulate a petition relating to the
3-18 extension of, addition to, or modification of existing
3-19 restrictions. A designated representative is not required to
3-20 comply with Sections 201.009 through 201.012.
3-21 (b) A petition to extend, add to, or modify existing
3-22 restrictions approved and circulated by a designated representative
3-23 is effective if:
3-24 (1) the petition is approved by the owners, excluding
3-25 lienholders, contract purchasers, and the owners of mineral
3-26 interests, of at least 60 percent of the real property in the
3-27 subdivision or a smaller percentage required by the original
4-1 dedicatory instrument; and
4-2 (2) the petition is filed as a dedicatory instrument
4-3 with the county clerk of the county in which the subdivision is
4-4 located.
4-5 (c) If a subdivision consisting of multiple sections, each
4-6 with its own restrictions, is represented by a single designated
4-7 representative, the approval requirement may be satisfied by
4-8 obtaining approval of at least 60 percent of the owners on a
4-9 section-by-section basis or of the total number of properties in
4-10 the designated representative's jurisdiction.
4-11 (d) If approved, the petition is binding on all properties
4-12 in the subdivision or section, as applicable.
4-13 (e) A designated representative who circulates a petition
4-14 must notify all record owners of property in the subdivision in
4-15 writing of the proposed extension, addition to, or modification of
4-16 the existing restrictions. Notice may be hand-delivered to
4-17 residences within the subdivision or sent by regular mail to the
4-18 owner's last known mailing address as reflected in the ownership
4-19 records maintained by the designated representative. The approval
4-20 of multiple owners of a property may be reflected by the signature
4-21 of a single co-owner.
4-22 Sec. 204.004. EFFECT ON LIENHOLDERS. (a) Extensions of,
4-23 additions to, or modifications of restrictions under this chapter
4-24 are binding on a lienholder, excluding restrictions relating to
4-25 annual or special assessment increases if the assessment is not
4-26 subordinated to purchase money or home improvement liens.
4-27 (b) If the assessment lien of the designated representative
5-1 is subordinate to purchase money or home improvement liens, the
5-2 lienholder is not entitled to notice of the proposed dedicatory
5-3 instrument and the lienholder is bound by the instrument if the
5-4 instrument is approved. If the assessment lien is not
5-5 subordinated, a lienholder who is not a signatory to the dedicatory
5-6 instrument and whose lien was established before the effective date
5-7 of the dedicatory instrument is not bound by the portion of the
5-8 dedicatory instrument that increases the amount of the annual or
5-9 special assessment during any period of ownership by the
5-10 lienholder.
5-11 (c) A person who acquires title to the property at a
5-12 foreclosure sale or by deed from a foreclosing lienholder is bound
5-13 by the assessment increase.
5-14 Sec. 204.005. METHOD OF ADOPTION. An extension, addition
5-15 to, or modification of restrictions proposed by a designated
5-16 representative may be adopted:
5-17 (1) by a written ballot that states the substance of
5-18 the amendment and specifies the date by which a ballot must be
5-19 received to be counted;
5-20 (2) at a meeting of the members represented by the
5-21 designated representative if written notice of the meeting stating
5-22 the purpose of the meeting is delivered to each owner of property
5-23 in the subdivision;
5-24 (3) by door-to-door circulation of a petition by the
5-25 designated representative or a person authorized by the designated
5-26 representative;
5-27 (4) by a method permitted by the existing
6-1 restrictions; or
6-2 (5) by a combination of the methods described by this
6-3 section.
6-4 Sec. 204.006. TEXAS NONPROFIT CORPORATIONS. (a) If the
6-5 designated representative is referenced in the existing, extended,
6-6 added to, or modified restrictions as a Texas nonprofit
6-7 corporation, the instrument contemplates the interaction of a
6-8 nonprofit corporation, its articles of incorporation, and its
6-9 bylaws.
6-10 (b) The designated representative has the powers and shall
6-11 promote the purposes enumerated in the articles of incorporation
6-12 and bylaws. These powers and purposes necessarily modify the
6-13 express provisions of the restrictions to include the referenced
6-14 powers and purposes.
6-15 Sec. 204.007. POWERS OF DESIGNATED REPRESENTATIVE. (a)
6-16 Unless otherwise provided by the restrictions, the designated
6-17 representative, acting through its board of directors, may:
6-18 (1) adopt and amend bylaws;
6-19 (2) adopt and amend budgets for revenues,
6-20 expenditures, and reserves and collect annual assessments or
6-21 special assessments for common expenses from property owners;
6-22 (3) hire and terminate managing agents and other
6-23 employees, agents, and independent contractors;
6-24 (4) institute, defend, intervene in, settle, or
6-25 compromise litigation or administrative proceedings on matters
6-26 affecting the subdivision;
6-27 (5) make contracts and incur liabilities relating to
7-1 the operation of the subdivision and the designated representative;
7-2 (6) regulate the use, maintenance, repair,
7-3 replacement, modification, and appearance of the subdivision;
7-4 (7) make additional improvements to be included as a
7-5 part of the common area;
7-6 (8) grant easements, leases, licenses, and concessions
7-7 through or over the common area;
7-8 (9) impose and receive payments, fees, or charges for
7-9 the use, rental, or operation of the common area and for services
7-10 provided to property owners;
7-11 (10) impose interest, late charges, and, if
7-12 applicable, returned check charges for late payments of annual
7-13 assessments or special assessments;
7-14 (11) if notice and an opportunity to be heard are
7-15 given, collect reimbursement of actual attorney's fees and other
7-16 reasonable costs incurred by the designated representative relating
7-17 to violations of the subdivision's restrictions or the designated
7-18 representative's bylaws and rules;
7-19 (12) charge costs to an owner's assessment account and
7-20 collect the costs in any manner provided in the restrictions for
7-21 the collection of assessments;
7-22 (13) adopt and amend rules regulating the collection
7-23 of delinquent assessments and the application of payments;
7-24 (14) impose reasonable charges for preparing,
7-25 recording, or copying amendments to the restrictions, resale
7-26 certificates, or statements of unpaid assessments;
7-27 (15) suspend the voting privileges of or the use of
8-1 certain general common areas by a property owner delinquent for
8-2 more than 60 days in the payment of assessments;
8-3 (16) purchase insurance and fidelity bonds, including
8-4 directors' and officers' liability insurance, that the board
8-5 considers appropriate or necessary;
8-6 (17) if the restrictions allow for an annual increase
8-7 in the maximum annual assessment without a vote of the membership,
8-8 assess the increase annually or accumulate and assess the increase
8-9 after a number of years;
8-10 (18) subject to the requirements of the Texas
8-11 Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
8-12 Texas Civil Statutes) and by majority vote of its board of
8-13 directors, indemnify a director or officer of the designated
8-14 representative who was, is, or may be made a named defendant or
8-15 respondent in a proceeding because the person is or was a director;
8-16 (19) if the restrictions vest the architectural
8-17 control authority in the designated representative or if the
8-18 authority is vested in the designated representative under Section
8-19 204.008:
8-20 (A) implement written architectural control
8-21 guidelines for its own use or record the guidelines in the real
8-22 property records of the applicable county; and
8-23 (B) modify the guidelines as the needs of the
8-24 subdivision change;
8-25 (20) exercise other powers conferred by the
8-26 restrictions, its articles of incorporation, or its bylaws;
8-27 (21) exercise other powers that may be exercised in
9-1 this state by a corporation of the same type as the designated
9-2 representative; and
9-3 (22) exercise other powers necessary and proper for
9-4 the government and operation of the designated representative.
9-5 (b) Powers enumerated by this section are in addition to any
9-6 other powers granted to a designated representative by this chapter
9-7 or other law.
9-8 Sec. 204.008. ARCHITECTURAL CONTROL COMMITTEE. (a) This
9-9 section applies to restrictions providing for the creation and
9-10 operation of an architectural control committee with the power to
9-11 approve or deny applications for proposed original construction or
9-12 modification of a building, structure, or improvement.
9-13 (b) Unless the restrictions applicable to a residential real
9-14 estate subdivision vest the architectural control committee
9-15 authority in the designated representative before either of the
9-16 following events, the architectural control committee authority
9-17 automatically vests in the designated representative when:
9-18 (1) the term of the architectural control committee
9-19 authority expires as prescribed by the restrictions;
9-20 (2) a residence on the last available building site is
9-21 completed and sold;
9-22 (3) the person or entity designated as the
9-23 architectural control committee in the restrictions assigns, in
9-24 writing, authority to the designated representative; or
9-25 (4) an assignee of the original holder abandons its
9-26 authority for more than one year.
9-27 (c) If the architectural control committee authority is
10-1 transferred to the designated representative, the authority is
10-2 vested in the designated representative until:
10-3 (1) the restrictions are modified to reflect
10-4 otherwise;
10-5 (2) the restrictions are terminated; or
10-6 (3) the designated representative ceases to exist.
10-7 SECTION 3. The importance of this legislation and the
10-8 crowded condition of the calendars in both houses create an
10-9 emergency and an imperative public necessity that the
10-10 constitutional rule requiring bills to be read on three several
10-11 days in each house be suspended, and this rule is hereby suspended.