1-1 By: Bailey, Combs (Senate Sponsor - Gallegos) H.B. No. 2152
1-2 (In the Senate - Received from the House May 10, 1995;
1-3 May 11, 1995, read first time and referred to Committee on
1-4 Jurisprudence; May 25, 1995, reported favorably by the following
1-5 vote: Yeas 4, Nays 0; May 25, 1995, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to restrictive covenants in certain residential real
1-9 estate subdivisions.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. (a) Public policy considerations require that a
1-12 procedure be available to allow for the extension of, addition to,
1-13 or modification of existing property restrictions in residential
1-14 real estate subdivisions.
1-15 (b) The legislature finds that:
1-16 (1) property owners' associations serve to benefit
1-17 residential real estate subdivisions and assist in avoiding the
1-18 problems described by Section 201.002, Property Code;
1-19 (2) there is a special relationship between property
1-20 owners' associations and the property owners within the
1-21 subdivisions;
1-22 (3) it is in the best interest of residential real
1-23 estate subdivisions that a procedure be available to readily
1-24 facilitate increases in the amount of the regular or special
1-25 assessments to allow the property owners' associations to better
1-26 provide services to the subdivisions; and
1-27 (4) restrictions that severely limit the amount of the
1-28 regular assessment may result in the inability of an ineffective
1-29 property owners' association to maintain common area facilities,
1-30 including swimming pools, tennis courts, clubhouses, greenbelt
1-31 areas, or jogging trails, or to provide services, including
1-32 streetlights, security, architectural control, and deed restriction
1-33 enforcement.
1-34 (c) The purpose of this Act is to:
1-35 (1) provide a less burdensome procedure for extending
1-36 the term of, adding to, or modifying residential real estate
1-37 restrictions by approval and circulation of a petition by a
1-38 property owners' association;
1-39 (2) provide for the removal of any restriction or
1-40 other provision relating to race, religion, or national origin that
1-41 is void and unenforceable under either the United States
1-42 Constitution or Section 5.026, Property Code; and
1-43 (3) codify certain powers of property owners'
1-44 associations.
1-45 SECTION 2. Title 11, Property Code, is amended by adding
1-46 Chapter 204 to read as follows:
1-47 CHAPTER 204. POWERS OF PROPERTY OWNERS' ASSOCIATION RELATING
1-48 TO RESTRICTIVE COVENANTS IN CERTAIN SUBDIVISIONS
1-49 Sec. 204.001. DEFINITIONS. In this chapter:
1-50 (1) "Restrictions," "residential real estate
1-51 subdivision," "subdivision," "owner," "real property records," and
1-52 "lienholder" have the meanings assigned by Section 201.003.
1-53 (2) "Dedicatory instrument," "petition," and
1-54 "restrictive covenant" have the meanings assigned by Section
1-55 202.001.
1-56 (3) "Regular assessment" means an assessment, charge,
1-57 fee, or dues that each owner of property within a subdivision is
1-58 required to pay to the property owners' association on a regular
1-59 basis and that are to be used by the association for the benefit of
1-60 the subdivision in accordance with the original, extended, added,
1-61 or modified restrictions.
1-62 (4) "Special assessment" means an assessment, charge,
1-63 fee, or dues that each owner of property within a subdivision is
1-64 required to pay to the property owners' association, after a vote
1-65 of the membership, for the purpose of paying for the costs of
1-66 capital improvements to the common areas that are incurred or will
1-67 be incurred by the association during the fiscal year. A special
1-68 assessment may be assessed before or after the association incurs
2-1 the capital improvement costs.
2-2 Sec. 204.002. APPLICATION. (a) This chapter applies only
2-3 to a residential real estate subdivision, excluding a condominium
2-4 development governed by Title 7, Property Code, that is located in
2-5 whole or in part in a county with a population of 2.8 million or
2-6 more.
2-7 (b) This chapter applies to a restriction regardless of its
2-8 effective date.
2-9 (c) This chapter does not apply to portions of a subdivision
2-10 that are zoned for or that contain a commercial structure, an
2-11 industrial structure, an apartment complex, or a condominium
2-12 development governed by Title 7, Property Code. For purposes of
2-13 this subsection, "apartment complex" means two or more dwellings in
2-14 one or more buildings that are owned by the same owner, located on
2-15 the same lot or tract, and managed by the same owner, agent, or
2-16 management company.
2-17 Sec. 204.003. PROVISIONS OF RESTRICTIVE COVENANTS PREVAIL IN
2-18 CERTAIN CIRCUMSTANCES. An express designation in a document
2-19 creating restrictions applicable to a residential real estate
2-20 subdivision that provides for the extension of, addition to, or
2-21 modification of existing restrictions by a designated number of
2-22 owners of real property in the subdivision prevails over the
2-23 provisions of this chapter.
2-24 Sec. 204.004. PROPERTY OWNERS' ASSOCIATION. (a) A property
2-25 owners' association is a designated representative of the owners of
2-26 property in a subdivision and may be referred to as a "homeowners
2-27 association," "community association," "civic association," "civic
2-28 club," "association," "committee," or similar term contained in the
2-29 restrictions. The membership of the association consists of the
2-30 owners of property within the subdivision.
2-31 (b) The association must be nonprofit and may be
2-32 incorporated as a Texas nonprofit corporation. An unincorporated
2-33 association may incorporate under the Texas Non-Profit Corporation
2-34 Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes).
2-35 (c) The association's board of directors or trustees must be
2-36 elected or appointed in accordance with the applicable provisions
2-37 of the restrictions and the association's articles of incorporation
2-38 or bylaws.
2-39 Sec. 204.005. EXTENSION OF, ADDITION TO, OR MODIFICATION OF
2-40 EXISTING RESTRICTIONS. (a) A property owners' association has
2-41 authority to approve and circulate a petition relating to the
2-42 extension of, addition to, or modification of existing
2-43 restrictions. A property owners' association is not required to
2-44 comply with Sections 201.009-201.012.
2-45 (b) A petition to extend, add to, or modify existing
2-46 restrictions approved and circulated by a property owners'
2-47 association is effective if:
2-48 (1) the petition is approved by the owners, excluding
2-49 lienholders, contract purchasers, and the owners of mineral
2-50 interests, of at least 75 percent of the real property in the
2-51 subdivision or a smaller percentage required by the original
2-52 dedicatory instrument; and
2-53 (2) the petition is filed as a dedicatory instrument
2-54 with the county clerk of the county in which the subdivision is
2-55 located.
2-56 (c) If a subdivision consisting of multiple sections, each
2-57 with its own restrictions, is represented by a single property
2-58 owners' association, the approval requirement may be satisfied by
2-59 obtaining approval of at least 75 percent of the owners on a
2-60 section-by-section basis or of the total number of properties in
2-61 the property owners' association's jurisdiction.
2-62 (d) If approved, the petition is binding on all properties
2-63 in the subdivision or section, as applicable.
2-64 (e) A property owners' association that circulates a
2-65 petition must notify all record owners of property in the
2-66 subdivision in writing of the proposed extension, addition to, or
2-67 modification of the existing restrictions. Notice may be
2-68 hand-delivered to residences within the subdivision or sent by
2-69 regular mail to the owner's last known mailing address as reflected
2-70 in the ownership records maintained by the property owners'
3-1 association. The approval of multiple owners of a property may be
3-2 reflected by the signature of a single co-owner.
3-3 Sec. 204.006. CREATION OF PROPERTY OWNERS' ASSOCIATION. (a)
3-4 If existing restrictions applicable to a subdivision do not provide
3-5 for a property owners' association and require approval of more
3-6 than 60 percent of the owners to add to or modify the original
3-7 dedicating instrument, a petition to add to or modify the existing
3-8 restrictions for the sole purpose of creating and operating a
3-9 property owners' association with mandatory membership, mandatory
3-10 regular or special assessments, and equivalent voting rights for
3-11 each of the owners in the subdivision is effective if:
3-12 (1) a petition committee has been formed as prescribed
3-13 by Section 201.005;
3-14 (2) the petition is approved by the owners, excluding
3-15 lienholders, contract purchasers, and the owners of mineral
3-16 interests, of at least 60 percent of the real property in the
3-17 subdivision; and
3-18 (3) the procedure employed in the circulation and
3-19 approval of the petition to add to or amend the existing
3-20 restrictions for the specified purpose complies with the
3-21 requirements of this chapter.
3-22 (b) If the circulated petition is not approved by the
3-23 required percentage of owners within one year of the creation of
3-24 the petition committee, the petition is void and another petition
3-25 committee may be formed.
3-26 (c) If the petition is approved, the petition is binding on
3-27 all properties in the subdivision or section, as applicable.
3-28 Sec. 204.007. EFFECT ON LIENHOLDERS. (a) Extensions of,
3-29 additions to, or modifications of restrictions under this chapter
3-30 are binding on a lienholder, excluding restrictions relating to
3-31 regular or special assessment increases if the assessment is not
3-32 subordinated to purchase money or home improvement liens.
3-33 (b) If the assessment lien of the property owners'
3-34 association is subordinate to purchase money or home improvement
3-35 liens, the lienholder is not entitled to notice of the proposed
3-36 dedicatory instrument and the lienholder is bound by the instrument
3-37 if the instrument is approved. If the assessment lien is not
3-38 subordinated, a lienholder who is not a signatory to the dedicatory
3-39 instrument and whose lien was established before the effective date
3-40 of the dedicatory instrument is not bound by the portion of the
3-41 dedicatory instrument that increases the amount of the regular or
3-42 special assessment during any period of ownership by the
3-43 lienholder.
3-44 (c) A person who acquires title to the property at a
3-45 foreclosure sale or by deed from a foreclosing lienholder is bound
3-46 by the assessment increase.
3-47 Sec. 204.008. METHOD OF ADOPTION. An extension, addition
3-48 to, or modification of restrictions proposed by a property owners'
3-49 association may be adopted:
3-50 (1) by a written ballot that states the substance of
3-51 the amendment and specifies the date by which a ballot must be
3-52 received to be counted;
3-53 (2) at a meeting of the members represented by the
3-54 property owners' association if written notice of the meeting
3-55 stating the purpose of the meeting is delivered to each owner of
3-56 property in the subdivision;
3-57 (3) by door-to-door circulation of a petition by the
3-58 property owners' association or a person authorized by the property
3-59 owners' association;
3-60 (4) by a method permitted by the existing
3-61 restrictions; or
3-62 (5) by a combination of the methods described by this
3-63 section.
3-64 Sec. 204.009. TEXAS NONPROFIT CORPORATIONS. (a) If the
3-65 property owners' association is referenced in the existing,
3-66 extended, added to, or modified restrictions as a Texas nonprofit
3-67 corporation, the instrument contemplates the interaction of a
3-68 nonprofit corporation, its articles of incorporation, and its
3-69 bylaws.
3-70 (b) The property owners' association has the powers and
4-1 shall promote the purposes enumerated in the articles of
4-2 incorporation and bylaws. These powers and purposes necessarily
4-3 modify the express provisions of the restrictions to include the
4-4 referenced powers and purposes.
4-5 Sec. 204.010. POWERS OF PROPERTY OWNERS' ASSOCIATION. (a)
4-6 Unless otherwise provided by the restrictions or the association's
4-7 articles of incorporation or bylaws, the property owners'
4-8 association, acting through its board of directors or trustees,
4-9 may:
4-10 (1) adopt and amend bylaws;
4-11 (2) adopt and amend budgets for revenues,
4-12 expenditures, and reserves and collect regular assessments or
4-13 special assessments for common expenses from property owners;
4-14 (3) hire and terminate managing agents and other
4-15 employees, agents, and independent contractors;
4-16 (4) institute, defend, intervene in, settle, or
4-17 compromise litigation or administrative proceedings on matters
4-18 affecting the subdivision;
4-19 (5) make contracts and incur liabilities relating to
4-20 the operation of the subdivision and the property owners'
4-21 association;
4-22 (6) regulate the use, maintenance, repair,
4-23 replacement, modification, and appearance of the subdivision;
4-24 (7) make additional improvements to be included as a
4-25 part of the common area;
4-26 (8) grant easements, leases, licenses, and concessions
4-27 through or over the common area;
4-28 (9) impose and receive payments, fees, or charges for
4-29 the use, rental, or operation of the common area and for services
4-30 provided to property owners;
4-31 (10) impose interest, late charges, and, if
4-32 applicable, returned check charges for late payments of regular
4-33 assessments or special assessments;
4-34 (11) if notice and an opportunity to be heard are
4-35 given, collect reimbursement of actual attorney's fees and other
4-36 reasonable costs incurred by the property owners' association
4-37 relating to violations of the subdivision's restrictions or the
4-38 property owners' association's bylaws and rules;
4-39 (12) charge costs to an owner's assessment account and
4-40 collect the costs in any manner provided in the restrictions for
4-41 the collection of assessments;
4-42 (13) adopt and amend rules regulating the collection
4-43 of delinquent assessments and the application of payments;
4-44 (14) impose reasonable charges for preparing,
4-45 recording, or copying amendments to the restrictions, resale
4-46 certificates, or statements of unpaid assessments;
4-47 (15) purchase insurance and fidelity bonds, including
4-48 directors' and officers' liability insurance, that the board
4-49 considers appropriate or necessary;
4-50 (16) if the restrictions allow for an annual increase
4-51 in the maximum regular assessment without a vote of the membership,
4-52 assess the increase annually or accumulate and assess the increase
4-53 after a number of years;
4-54 (17) subject to the requirements of the Texas
4-55 Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
4-56 Texas Civil Statutes) and by majority vote of its board of
4-57 directors, indemnify a director or officer of the property owners'
4-58 association who was, is, or may be made a named defendant or
4-59 respondent in a proceeding because the person is or was a director;
4-60 (18) if the restrictions vest the architectural
4-61 control authority in the property owners' association or if the
4-62 authority is vested in the property owners' association under
4-63 Section 204.011:
4-64 (A) implement written architectural control
4-65 guidelines for its own use or record the guidelines in the real
4-66 property records of the applicable county; and
4-67 (B) modify the guidelines as the needs of the
4-68 subdivision change;
4-69 (19) exercise other powers conferred by the
4-70 restrictions, its articles of incorporation, or its bylaws;
5-1 (20) exercise other powers that may be exercised in
5-2 this state by a corporation of the same type as the property
5-3 owners' association; and
5-4 (21) exercise other powers necessary and proper for
5-5 the governance and operation of the property owners' association.
5-6 (b) Powers enumerated by this section are in addition to any
5-7 other powers granted to a property owners' association by this
5-8 chapter or other law.
5-9 Sec. 204.011. ARCHITECTURAL CONTROL COMMITTEE. (a) This
5-10 section applies to restrictions providing for the creation and
5-11 operation of an architectural control committee with the power to
5-12 approve or deny applications for proposed original construction or
5-13 modification of a building, structure, or improvement.
5-14 (b) Unless the restrictions applicable to a residential real
5-15 estate subdivision vest the architectural control committee
5-16 authority in the property owners' association before either of the
5-17 following events, the architectural control committee authority
5-18 automatically vests in the property owners' association when:
5-19 (1) the term of the architectural control committee
5-20 authority expires as prescribed by the restrictions;
5-21 (2) a residence on the last available building site is
5-22 completed and sold;
5-23 (3) the person or entity designated as the
5-24 architectural control committee in the restrictions assigns, in
5-25 writing, authority to the property owners' association; or
5-26 (4) an assignee of the original holder abandons its
5-27 authority for more than one year.
5-28 (c) If the architectural control committee authority is
5-29 transferred to the property owners' association, the authority is
5-30 vested in the property owners' association until:
5-31 (1) the restrictions are modified to reflect
5-32 otherwise;
5-33 (2) the restrictions are terminated; or
5-34 (3) the property owners' association ceases to exist.
5-35 SECTION 3. Title 11, Property Code, is amended by adding
5-36 Chapter 205 to read as follows:
5-37 CHAPTER 205. RESTRICTIVE COVENANTS APPLICABLE TO REVISED
5-38 SUBDIVISIONS IN CERTAIN COUNTIES
5-39 Sec. 205.001. DEFINITIONS. In this chapter, "restrictions"
5-40 and "subdivision" have the meanings assigned by Section 201.003.
5-41 Sec. 205.002. APPLICABILITY. This chapter applies only to a
5-42 county with a population of 65,000 or more.
5-43 Sec. 205.003. RESTRICTIONS APPLICABLE TO REVISED
5-44 SUBDIVISIONS. (a) If all or part of a subdivision plat is revised
5-45 to provide for another subdivision of land within all or part of
5-46 the earlier subdivision, the restrictions that apply to the
5-47 subdivision before the revision apply to the newly created
5-48 subdivision.
5-49 (b) The property owners of the newly created subdivision
5-50 must comply with the petition procedures prescribed by Chapter 204
5-51 to modify the restrictions.
5-52 SECTION 4. The importance of this legislation and the
5-53 crowded condition of the calendars in both houses create an
5-54 emergency and an imperative public necessity that the
5-55 constitutional rule requiring bills to be read on three several
5-56 days in each house be suspended, and this rule is hereby suspended.
5-57 * * * * *