By Coleman                                            H.B. No. 3298
         Line and page numbers may not match official copy.
         Bill not drafted by TLC or Senate E&E.
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the powers of property owners' associations.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Sections 204.001 and 204.002, Property Code, are
 1-5     amended to read as follows:
 1-6           Sec. 204.001.  Definitions.  In this chapter:
 1-7                 (1)  "Restrictions," "residential real estate
 1-8     subdivision," "subdivision," "owner," "real property records," and
 1-9     "lienholder" have the meanings assigned by Section 201.003.
1-10                 (2)  "Dedicatory instrument," "petition," and
1-11     "restrictive covenant" have the meanings assigned by Section
1-12     202.001.
1-13                 (3)  "Regular assessment" means an assessment, charge,
1-14     fee, or dues that each owner of property within a subdivision is
1-15     required to pay to the property owners' association on a regular
1-16     basis and that are to be used by the association for the benefit of
1-17     the subdivision in accordance with the original, extended, added,
1-18     or modified restrictions.
1-19                 (4)  "Special assessment" means an assessment, charge,
1-20     fee, or dues that each owner of property within a subdivision is
1-21     required to pay to the property owners' association, after a vote
 2-1     of the membership, for the purpose of paying for the costs of
 2-2     capital improvements to the common areas that are incurred or will
 2-3     be incurred by the association during the fiscal year.  A special
 2-4     assessment may be assessed before or after the association incurs
 2-5     the capital improvement costs.
 2-6                 (5)  "Unrestricted Subdivision" means a subdivision
 2-7     which was formerly burdened by restrictions limiting all or at
 2-8     least a majority of the land area, excluding streets and public
 2-9     areas, to residential use, but the restrictions have lapsed or
2-10     terminated as to some or all the subdivision.  The entirety of the
2-11     subdivision is subject to this chapter.
2-12                 (6)  "Lapsed Restrictions" means restrictions which are
2-13     no longer in effect due to the passing of the stated term of years
2-14     or the termination date in the restrictions.
2-15                 (7)  "Chapter 201 Subdivision" means a subdivision
2-16     which utilized the procedures of Chapter 201 to create, modify or
2-17     extend restrictions and the created, modifies or extended
2-18     restrictions burden only a portion of the subdivision due to the
2-19     application of Section 201.009(b).  The entirety of the subdivision
2-20     is subject to this chapter.
2-21                 (8)  "Subdivision" and "Residential real estate
2-22     subdivision" have the same meaning, and include subdivisions
2-23     reflected on recorded maps or plats approved by applicable
2-24     governmental authorities, subdivisions created by unrecorded maps
2-25     or plats (even if created in violation of applicable governmental
 3-1     rules and regulations), subdivisions created by separate
 3-2     conveyances of lots by metes and bounds descriptions, and any other
 3-3     method of division of real property.
 3-4                 (9)  "Restrictions" include restrictive covenants
 3-5     contained in separate deeds to real property in a subdivision, in a
 3-6     recorded map or plat, in a separate master document applicable to
 3-7     the subdivision, or any other instrument sufficient to establish
 3-8     restrictive covenants under applicable law.
 3-9           Sec. 204.002.  Application.  (a)  This chapter applies only
3-10     to a residential real estate subdivision including a Chapter 201
3-11     subdivision and an unrestricted subdivision, excluding a
3-12     condominium development governed by Title 7, Property Code, that is
3-13     located in whole or in part in a county with a population of 2.8
3-14     million or more.
3-15           (b)  This chapter applies to a restriction regardless of its
3-16     effective date.
3-17           (c)  This chapter does not apply to portions of a subdivision
3-18     that are zoned for or that contain a commercial structure, an
3-19     industrial structure, an apartment complex, or a condominium
3-20     development governed by Title 7, Property Code.  For purposes of
3-21     this subsection, "apartment complex" means two or more dwellings in
3-22     one or more buildings that are owned by the same owner, located on
3-23     the same lot or tract, and managed by the same owner, agent, or
3-24     management company.
3-25           (d)  This chapter applies without regard to the prior use of
 4-1     Chapter 201 to create, modify or extend restrictions over a portion
 4-2     of a subdivision.
 4-3           SECTION 2.  Section 204.004(c), Government Code, is amended
 4-4     to read as follows:
 4-5           (c)  The association's board of directors or trustees must be
 4-6     elected or appointed in accordance with the applicable provisions
 4-7     of the restrictions, if any, and the association's articles of
 4-8     incorporation or bylaws.
 4-9           SECTION 3.  Sections 204.005 through 204.009, Government
4-10     Code, are amended to read as follows:
4-11           Sec. 204.005.  CREATION OF, Extension of, Addition to, or
4-12     Modification of Existing Restrictions.  (a)  A property owners'
4-13     association has authority to approve and circulate a petition
4-14     relating to the creation of, extension of, addition to, or
4-15     modification of existing restrictions.  A property owners'
4-16     association is not required to comply with Sections
4-17     201.009-201.012.
4-18           (b)  A petition to create, extend, add to, or modify existing
4-19     restrictions approved and circulated by a property owners'
4-20     association is effective if:
4-21                 (1)  the petition is approved by the owners, excluding
4-22     lienholders, contract purchasers, and the owners of mineral
4-23     interests, of at least 75 percent of the real property in the
4-24     subdivision or a smaller percentage required by the original
4-25     dedicatory instrument; and
 5-1                 (2)  the petition is filed as a dedicatory instrument
 5-2     with the county clerk of the county in which the subdivision is
 5-3     located.
 5-4           (c)  If a subdivision consisting of multiple sections, each
 5-5     with its own restrictions, is represented by a single property
 5-6     owners' association, the approval requirement may be satisfied by
 5-7     obtaining approval of at least 75 percent of the owners on a
 5-8     section-by-section basis or of the total number of properties in
 5-9     the property owners' association's jurisdiction.
5-10           (d)  If approved, the petition is binding on all properties
5-11     in the subdivision or section, as applicable.
5-12           (e)  A property owners' association that circulates a
5-13     petition must notify all record owners of property in the
5-14     subdivision in writing of the proposed creation of restrictions or,
5-15     extension, addition to, or modification of the existing
5-16     restrictions.  Notice may be hand-delivered to residences within
5-17     the subdivision or sent by regular mail to the owner's last known
5-18     mailing address as reflected in the ownership records maintained by
5-19     the property owners' association, or in the records of the relevant
5-20     central appraisal district.  The approval of multiple owners of a
5-21     property may be reflected by the signature of a single co-owner.
5-22           Sec. 204.006.  Creation of Property Owners' Association.
5-23     (a)  If existing restrictions applicable to a subdivision do not
5-24     provide for a property owners' association and require approval of
5-25     more than 60 percent of the owners to add to or modify the original
 6-1     dedicating instrument, a petition to add to or modify the existing
 6-2     restrictions for the sole purpose of creating and operating a
 6-3     property owners' association with mandatory membership, mandatory
 6-4     regular or special assessments, and equivalent voting rights for
 6-5     each of the owners in the subdivision is effective if:
 6-6                 (1)  a petition committee has been formed as prescribed
 6-7     by Section 201.005;
 6-8                 (2)  the petition is approved by the owners, excluding
 6-9     lienholders, contract purchasers, and the owners of mineral
6-10     interests, of at least 60 percent of the real property in the
6-11     subdivision; and
6-12                 (3)  the procedure employed in the circulation and
6-13     approval of the petition to create restrictions, or add to or amend
6-14     the existing restrictions for the specified purpose complies with
6-15     the requirements of this chapter.
6-16           (b)  If the circulated petition is not approved by the
6-17     required percentage of owners within one year of the creation of
6-18     the petition committee, the petition is void and another petition
6-19     committee may be formed.
6-20           (c)  If the petition is approved, the petition is binding on
6-21     all properties in the subdivision or section, as applicable.
6-22           (d)  Subsections (a), (b) and (c) do not apply to
6-23     unrestricted subdivisions or Chapter 201 subdivisions.  For the
6-24     purpose of creating restrictions in unrestricted subdivisions, an
6-25     entity is deemed to be a property owners association with powers
 7-1     under this Chapter if:
 7-2                 (1)  the entity is a Texas Non Profit Corporation,
 7-3                 (2)  the articles of incorporation or bylaws of the
 7-4     entity state that the entity is (i) a designated representative of
 7-5     owners of property in the unrestricted subdivision, or (ii) a
 7-6     "homeowner association," "community association," "civic
 7-7     association," or "civic club" for the unrestricted subdivision.
 7-8                 (3)  membership in the entity is open to all owners of
 7-9     property in the unrestricted subdivision, and
7-10                 (4)  As of the date the entity exercises rights under
7-11     this Chapter, the entity has membership of owners of at least    %
7-12     of the unrestricted subdivision, determined by either number of
7-13     lots, number of separately owned parcels or square footage,
7-14     excluding streets and public areas.
7-15           Sec. 204.007.  Effect on Lienholders.  (a)  [Extensions]
7-16     Creation of restrictions, or extensions of, additions to, or
7-17     modifications of restrictions under this chapter are binding on a
7-18     lienholder, excluding restrictions relating to regular or special
7-19     assessment increases if the assessment is not subordinated to
7-20     purchase money or home improvement liens.
7-21           (b)  If the assessment lien of the property owners'
7-22     association is subordinate to purchase money or home improvement
7-23     liens, the lienholder is not entitled to notice of the proposed
7-24     dedicatory instrument and the lienholder is bound by the instrument
7-25     if the instrument is approved.  If the assessment lien is not
 8-1     subordinated, a lienholder who is not a signatory to the dedicatory
 8-2     instrument and whose lien was established before the effective date
 8-3     of the dedicatory instrument is not bound by the portion of the
 8-4     dedicatory instrument that increases the amount of the regular or
 8-5     special assessment during any period of ownership by the
 8-6     lienholder.
 8-7           (c)  A person who acquires title to the property at a
 8-8     foreclosure sale or by deed from a foreclosing lienholder is bound
 8-9     by the assessment increase.
8-10           Sec. 204.008.  Method of Adoption.  [An] Creation of
8-11     restrictions, or the extension, addition to, or modification of
8-12     restrictions proposed by a property owners' association may be
8-13     adopted:
8-14                 (1)  by a written ballot that states the substance of
8-15     the amendment and specifies the date by which a ballot must be
8-16     received to be counted;
8-17                 (2)  at a meeting of the members represented by the
8-18     property owners' association if written notice of the meeting
8-19     stating the purpose of the meeting is delivered to each owner of
8-20     property in the subdivision;
8-21                 (3)  by door-to-door circulation of a petition by the
8-22     property owners' association or a person authorized by the property
8-23     owners' association;
8-24                 (4)  by a method permitted by the existing
8-25     restrictions; or
 9-1                 (5)  by a combination of the methods described by this
 9-2     section.
 9-3           Sec. 204.009.  Texas Nonprofit Corporations.  (a)  If the
 9-4     property owners' association is referenced in the created,
 9-5     existing, extended, added to, or modified restrictions as a Texas
 9-6     nonprofit corporation, the instrument contemplates the interaction
 9-7     of a nonprofit corporation, its articles of incorporation, and its
 9-8     bylaws.
 9-9           (b)  The property owners' association has the powers and
9-10     shall promote the purposes enumerated in the articles of
9-11     incorporation and bylaws.  These powers and purposes necessarily
9-12     modify the express provisions of the restrictions to include the
9-13     referenced powers and purposes.
9-14           SECTION 4.  Chapter 204, Government Code, is amended by
9-15     adding new Section 204.012 to read as follows:
9-16           Sec. 204.012.  REINSTATEMENT OF LAPSED RESTRICTIONS.  (a)  An
9-17     unrestricted subdivision may reinstate its lapsed restrictions by a
9-18     petition to reinstate the lapsed restrictions if:
9-19                 (1)  a petition committee has been formed as prescribed
9-20     by Section 201.005;
9-21                 (2)  the petition is approved by the owners, excluding
9-22     lienholders, contract purchasers, and the owners of mineral
9-23     interests, of at least 60 percent of the real property in the
9-24     subdivision; and
9-25                 (3)  the procedure employed in the circulation and
 10-1    approval of the petition to create restrictions, or add to or amend
 10-2    the existing restrictions for the specified purpose complies with
 10-3    the requirements of this chapter.
 10-4          (b)  If the circulated petition is not approved by the
 10-5    required percentage of owners within one year of the creation of
 10-6    the petition committee, the petition is void and another petition
 10-7    committee may be formed.
 10-8          (c)  If the petition is approved, the petition is binding on
 10-9    all properties in the subdivision or section, as applicable.  The
10-10    provisions of subsections 204.005 do not apply to reinstatement of
10-11    lapsed restrictions.
10-12          (d)  The reinstated restrictions shall have an initial term
10-13    of 10 years and automatic renewals of 10 years each, subject to a
10-14    vote to amend or terminate the restrictions of the owners of at
10-15    least 60% of the real property in the subdivision.
10-16          (e)  Other than reinstating the lapsed restrictions for the
10-17    term set forth in subsection 204.012(d), the restrictions may not
10-18    be modified except as follows:
10-19                (1)  to remove any illegal or unconstitutional
10-20    provisions, including those relating to race;
10-21                (2)  to create a formal property owners association
10-22    with mandatory membership and equivalent voting rights for each
10-23    owner, which voting rights may be subject to payment of applicable
10-24    dues or assessments but without any mandatory assessments;
10-25                (3)  to provide that both use and structures shall be
 11-1    residential; or
 11-2                (4)  to clarify any ambiguous provisions, as determined
 11-3    by the petition committee.
 11-4          (f)  This subsection also applies to a Chapter 201
 11-5    subdivision which acted prior to the termination of its former
 11-6    restrictions to extent, modify or create restrictions under Chapter
 11-7    201, as if the restrictions had lapsed. The restrictions which
 11-8    would have lapsed, but for the Chapter 201 petition, shall be the
 11-9    restrictions to be reinstated, not the Chapter 201 petition
11-10    restrictions.  The Chapter 201 petition restrictions shall continue
11-11    in effect, unless provided to the contrary in the petition provided
11-12    for in subsection 204.012(a) above.
11-13          SECTION 5.  EMERGENCY.  The importance of this legislation
11-14    and the crowded condition of the calendars in both houses create an
11-15    emergency and an imperative public necessity that the
11-16    constitutional rule requiring bills to be read on three several
11-17    days in each house be suspended, and this rule is hereby suspended,
11-18    and that this Act take effect and be in force from and after its
11-19    passage, and it is so enacted.