SRC-ARR S.B. 954 76(R) BILL ANALYSIS
Senate Research Center S.B. 954
76R8210 PAM-DBy: Ellis
State Affairs
3/9/1999
As Filed
DIGEST
Currently, Texas law does not protect property owners from the actions of
property owners' associations. S.B. 954 regulates the governance of
property owners' associations, to certain procedures involving the
relationship between property owners and property owners' associations, and
to certain procedures involving the sale of residential real property and
provides a civil penalty.
PURPOSE
As proposed, S.B. 954 regulates the governance of property owners'
associations, certain procedures involving the relationship between
property owners and property owners' associations, and certain procedures
involving the sale of residential real property and provides a civil
penalty.
RULEMAKING AUTHORITY
Rulemaking authority is granted to a property owners' associations and the
attorney general in SECTION 4 (Sections 202.006(b) and 202.008, Chapter
202, Property Code) of this bill.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Section 27.031, Government Code, to provide that the
justice court has jurisdiction of disputes between property owners and
property owners' associations, including the enforcement of a lien for
failure to pay property owners' association dues, in cases in which the
amount in controversy is otherwise within the justice court's jurisdiction.
Provides that a justice court does not have jurisdiction of a suit for
enforcement of a lien on land except as provided by Subsection (a)(4).
SECTION 2. Amends Chapter 5A, Property Code, by adding Sections 5.012 and
5.13, as follows:
Sec. 5.012. NOTICE OF HOMESTEAD FORECLOSURE INFORMATION. Requires a seller
of residential property comprising not more than one dwelling unit located
in this state to give to the purchaser of the property a written notice as
prescribed by this section. Requires the notice to be conspicuous and
printed in 14-point bold-faced type. Sets forth an example of the notice
the notice. Set forth the consequences of the seller's failure to provide
the notice required by this section.
Sec. 5.013. NOTICE OF OBLIGATIONS RELATED TO MEMBERSHIP IN PROPERTY OWNERS'
ASSOCIATION. Requires a seller of residential real property that is subject
to membership in a property owners' association and comprises not more than
one dwelling unit located in this state to give to the purchaser of the
property before the transfer of the property a written notice as prescribed
by this section. Requires the notice to be conspicuous and printed in
14-point bold-faced type. Sets forth an example of the notice. Sets forth
the consequence of the seller's failure to provide notice.
SECTION 3. Amends Chapter 51, Property Code, by adding Sections 51.007 and
51.008, as follows:
Sec. 51.007. NOTICE OF SALE OF REAL PROPERTY UNDER PROPERTY OWNERS'
ASSOCIATION'S LIEN. Requires a notice of sale of real property under a
power of sale conferred by a property owners' association's lien,
designating the place of the sale and providing a brief description of the
property sufficient to identify the location of the property, to be
published in a newspaper of general circulation in each county in which the
property is located at least once each week for three consecutive weeks
before the date of the sale, with the first publication appearing at least
21 days before the date of the sale.
Sec. 51.008. RIGHT OF REDEMPTION IN CERTAIN CIRCUMSTANCES. Authorizes the
owner of real property in a residential real estate subdivision whose
property has been sold at a foreclosure sale under a property owners'
association's lien for assessments to redeem that property not later than a
certain date. Prohibits the association from transferring ownership of the
real property to a person other than a redeeming owner during the
redemption period, if the association purchases real property at a sale
foreclosing its assessment lien. Requires the property owner to pay to the
property owners' association certain fees, to redeem the real property.
Requires the property owners' association to execute a deed transferring
the property to the redeeming property owner, if the property owner redeems
the real property as provided by this section. Provides that the exercise
of the right of redemption is not effective after the redemption period
against a subsequent purchaser or lender for value without notice of the
redemption unless the redeeming property owner records the deed from the
property owners' association or an affidavit stating that the owner has
exercised the right of redemption. Provides that real property that has
been redeemed remains subjected to all liens and encumbrances on the real
property before the foreclosure sale. Provides that all rents and other
income collected by the property owners' association from the date of the
foreclosure sale to the date of the redemption belong to the association.
Requires the association to collect the rent and income against the
redemption amount.
SECTION 4. Amends Chapter 202, Property Code, by adding Sections
202.006-202.008, as follows:
Sec. 202.006. HEARING BEFORE PROPERTY OWNERS' ASSOCIATION. Requires a
property owners' association to establish a dispute resolution committee to
conduct hearings on disputes relating to a fine or penalty imposed on a
property owner by the association. Requires a property owners' association
to adopt rules relating to hearings conducted by a dispute resolution
committee. Sets forth requirements for rules.
Sec. 202.007. ALTERNATIVE DISPUTE RESOLUTION REQUIRED TO ENFORCE LIEN FOR
ASSESSMENTS. Prohibits a property owners' association from enforcing a lien
on real property for an assessment levied by the property owners'
association against the real property unless the association submits to an
alternative dispute resolution procedure to establish the existence and
amount of the debt owed. Requires the property owners' association to
provide written notice to the property owner of its intention to initiate
an alternative dispute resolution procedure. Requires the property owner to
participate in the alternative dispute resolution procedure. Provides that
the property owners' association is not required to comply with this
section, if the property owner refuses to participate in the alternative
dispute resolution procedure. Authorizes the property owners' association
and the property owner to agree on the type of alternative dispute
resolution procedure. Authorizes either party to file a petition in a
district court to refer the dispute to an alternative dispute resolution
procedure, if the parties fail to reach an agreement before a certain date.
Requires the court to refer the dispute before a certain date. Requires the
cost of the alternative dispute resolution to be paid by the property
owners' association.
Sec. 202.008. BOARD MEMBER TRAINING; INDEMNIFICATION. Requires the attorney
general to adopt rules establishing minimum standards for the training of
board members of a property owners' association. Requires each board member
of a property owners' association to attend a training program that meets
the standards developed under Subsection (a) not later than six months
after assuming the duties of the board. Prohibits a property owner from
indemnifying a board member for liability imposed as damages because of an
act, error, or omission committed in the individual's capacity as a board
member unless the board member has completed a training program as required
by Subsection (b).
SECTION 5. Amends Title 11, Property Code, by adding Chapter 207, as
follows:
CHAPTER 207. STANDARD OF CONDUCT OF AND CAUSES OF ACTION APPLICABLE TO
GOVERNING BOARDS OF PROPERTY OWNERS' ASSOCIATIONS
Sec. 207.001. DEDICATORY INSTRUMENT. Defines "dedicatory instrument."
Sec. 207.002. REASONABLY PRUDENT BUSINESS PERSON STANDARD. Requires the
governing board of a property owners' association to conduct the business
of the association in the same manner that a reasonably prudent business
person would conduct business under the same or similar circumstances.
Sec. 207.003. ENFORCEMENT. Authorizes the attorney general to bring an
action in the name of the state against the governing board of a property
owners' association to enjoin the governing board from certain violations.
Authorizes an action brought under this section to be commenced in the
district court of the county in which the real property covered by the
dedicatory instrument is located. Authorizes the court to issue appropriate
temporary or permanent injunctions to be issued without bond.
Sec. 208.004. CIVIL PENALTY. Provides that the governing board of a
property owners' association is liable to the state for a civil penalty of
not more than $10,000 for each violation described by Section 207.003 in
which the governing board engages. Provides that the governing board is
liable to the state for a civil penalty of not more than $10,000 for each
violation, if the governing board violates the terms of an injunction
issued under this chapter. Requires the district court issuing the
injunction to retain jurisdiction, and the cause to be continued.
Authorizes the attorney general to sue to collect a civil penalty.
Sec. 207.005. DAMAGES. Requires the court to make additional orders or
judgments as necessary to compensate identifiable persons for actual
damages resulting from an action described by Section 207.003. Authorizes
the court to award not more than three times the amount of actual damages,
if the court finds that the governing board of a property owners'
association has engaged or is engaging in action described by Section
207.003 in bad faith.
SECTION 6. (a) Effective date: September 1, 1999, except as provided by
Subsection (b).
(b) Provides that Sections 202.008(a) and (b), Property Code,
take effect January 1, 2000.
SECTION 7 and 8. Makes application of this Act prospective.
SECTION 9. Makes application of 51.007, Property Code, prospective to
October 1, 1999.
SECTION 10. Makes application of 51.008, Property Code, prospective to
September 1, 1999.
SECTION 11. Requires the attorney general to adopt rules not later than
December 1, 1999.
SECTION 12. Makes application of Chapter 207, Property Code, prospective to
September 1, 1999.
SECTION 13. Emergency clause.