1-1 By: Brown S.B. No. 434 1-2 (In the Senate - Filed February 8, 1999; February 9, 1999, 1-3 read first time and referred to Committee on State Affairs; 1-4 April 6, 1999, reported adversely, with favorable Committee 1-5 Substitute by the following vote: Yeas 8, Nays 0; April 6, 1999, 1-6 sent to printer.) 1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 434 By: Brown 1-8 A BILL TO BE ENTITLED 1-9 AN ACT 1-10 relating to the disclosure of certain information by a property 1-11 owners' association. 1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-13 SECTION 1. Title 11, Property Code, is amended by adding 1-14 Chapter 207 to read as follows: 1-15 CHAPTER 207. DISCLOSURE OF INFORMATION BY PROPERTY OWNERS' 1-16 ASSOCIATIONS 1-17 Sec. 207.001. DEFINITIONS. In this chapter: 1-18 (1) "Restrictions" has the meaning assigned by Section 1-19 201.003. 1-20 (2) "Dedicatory instrument," "property owners' 1-21 association," and "restrictive covenant" have the meanings assigned 1-22 by Section 202.001. 1-23 (3) "Owner" means a person who owns record title to 1-24 property in a subdivision or the personal representative of an 1-25 individual who owns record title to property in a subdivision. 1-26 (4) "Regular assessment" and "special assessment" have 1-27 the meanings assigned by Section 204.001. 1-28 (5) "Resale certificate" means a written statement 1-29 issued, signed, and dated by an officer or authorized agent of a 1-30 property owners' association that contains the information 1-31 specified by Section 207.003(b). 1-32 (6) "Subdivision" means all land that has been divided 1-33 into two or more parts and that is or was burdened by restrictions 1-34 limiting at least the majority of the land area burdened by 1-35 restrictions, excluding streets and public areas, to residential 1-36 use only, if the instrument or instruments creating the 1-37 restrictions are recorded in the deed or real property records of a 1-38 county. 1-39 Sec. 207.002. APPLICABILITY. This chapter applies to a 1-40 subdivision with a property owners' association that is entitled to 1-41 levy regular or special assessments. 1-42 Sec. 207.003. DELIVERY OF SUBDIVISION INFORMATION TO OWNER. 1-43 (a) Not later than the 10th day after the date a written request 1-44 for subdivision information is received from an owner, owner's 1-45 agent, or title insurance company or its agent acting on behalf of 1-46 the owner, the property owners' association shall deliver to the 1-47 owner, owner's agent, or title insurance company or its agent: 1-48 (1) a current copy of the restrictions applying to the 1-49 subdivision; 1-50 (2) a current copy of the bylaws and rules of the 1-51 property owners' association; and 1-52 (3) a resale certificate that complies with Subsection 1-53 (b). 1-54 (b) A resale certificate under Subsection (a) must contain: 1-55 (1) a statement of any right of first refusal or other 1-56 restraint contained in the restrictions or restrictive covenants 1-57 that restricts the owner's right to transfer the owner's property; 1-58 (2) the frequency and amount of any regular 1-59 assessments; 1-60 (3) the amount of any special assessment that is due 1-61 after the date the resale certificate is prepared; 1-62 (4) the total of all amounts due and unpaid to the 1-63 property owners' association that are attributable to the owner's 1-64 property; 2-1 (5) capital expenditures, if any, approved by the 2-2 property owners' association for the property owners' association's 2-3 current fiscal year; 2-4 (6) the amount of reserves, if any, for capital 2-5 expenditures; 2-6 (7) the property owners' association's current 2-7 operating budget and balance sheet; 2-8 (8) the total of any unsatisfied judgments against the 2-9 property owners' association; 2-10 (9) the style and cause number of any pending lawsuit 2-11 in which the property owners' association is a defendant; 2-12 (10) a copy of a certificate of insurance showing the 2-13 property owners' association's property and liability insurance 2-14 relating to the common areas and common facilities; 2-15 (11) a description of any conditions on the owner's 2-16 property that the property owners' association board has actual 2-17 knowledge are in violation of the restrictions applying to the 2-18 subdivision or the bylaws or rules of the property owners' 2-19 association; 2-20 (12) a summary or copy of notices received by the 2-21 property owners' association from any governmental authority 2-22 regarding health or housing code violations existing on the 2-23 preparation date of the certificate relating to the owner's 2-24 property or any common areas or common facilities owned or leased 2-25 by the property owners' association; 2-26 (13) the amount of any administrative transfer fee 2-27 charged by the property owners' association for a change of 2-28 ownership of property in the subdivision; 2-29 (14) the name, mailing address, and telephone number 2-30 of the property owners' association's managing agent, if any; and 2-31 (15) a statement indicating whether the restrictions 2-32 allow foreclosure of a property owners' association's lien on the 2-33 owner's property for failure to pay assessments. 2-34 (c) A property owners' association may charge a reasonable 2-35 fee to assemble, copy, and deliver the information required by this 2-36 section and may charge a reasonable fee to prepare and deliver an 2-37 update of a resale certificate. 2-38 (d) The property owners' association shall deliver the 2-39 information required by Subsection (a) to the person specified in 2-40 the written request. A written request that does not specify the 2-41 name and location to which the information is to be sent is not 2-42 effective. The property owners' association may deliver the 2-43 information required by Subsection (a) and any update to the resale 2-44 certificate by mail, hand delivery, or alternative delivery means 2-45 specified in the written request. 2-46 (e) Unless required by a dedicatory instrument, neither a 2-47 property owners' association or its agent is required to inspect a 2-48 property before issuing a resale certificate or an update to a 2-49 resale certificate. 2-50 Sec. 207.004. OWNER'S REMEDIES FOR FAILURE BY PROPERTY 2-51 OWNERS' ASSOCIATION TO TIMELY DELIVER INFORMATION. (a) If a 2-52 property owners' association does not timely deliver information in 2-53 accordance with Section 207.003, the owner, owner's agent, or title 2-54 insurance company or its agent acting on behalf of the owner may 2-55 submit a second request for the information. 2-56 (b) If a property owners' association fails to deliver the 2-57 information required under Section 207.003 before the 7th day after 2-58 the second request for the information was mailed by certified 2-59 mail, return receipt requested, or hand delivered, evidenced by 2-60 receipt, the owner: 2-61 (1) may seek one or any combination of the following: 2-62 (A) a court order directing the property owners' 2-63 association to furnish the required information; 2-64 (B) a judgment against the property owners' 2-65 association for not more than $500; 2-66 (C) a judgment against the property owners' 2-67 association for court costs and attorney's fees; or 2-68 (D) a judgment authorizing the owner or the 2-69 owner's assignee to deduct the amounts awarded under Paragraphs (B) 3-1 and (C) from any future regular or special assessments payable to 3-2 the property owners' association; and 3-3 (2) may provide a buyer under contract to purchase the 3-4 owner's property an affidavit that states that the owner, owner's 3-5 agent, or title insurance company or its agent acting on behalf of 3-6 the owner made, in accordance with this chapter, two written 3-7 requests to the property owners' association for the information 3-8 described in Section 207.003 and that the association did not 3-9 timely provide the information. 3-10 (c) If the owner provides a buyer under contract to purchase 3-11 the owner's property an affidavit in accordance with Subsection 3-12 (b)(2): 3-13 (1) the buyer, lender, or title insurance company or 3-14 its agent is not liable to the property owners' association for: 3-15 (A) any money that is due and unpaid to the 3-16 property owners' association on the date the affidavit was 3-17 prepared; and 3-18 (B) any debt to the property owners' association 3-19 or claim by the property owners' association that accrued before 3-20 the date the affidavit was prepared; and 3-21 (2) the property owners' association's lien to secure 3-22 the amounts due the property owners' association on the owner's 3-23 property on the date the affidavit was prepared shall automatically 3-24 terminate. 3-25 Sec. 207.005. EFFECT OF RESALE CERTIFICATE; LIABILITY. 3-26 (a) A property owners' association may not deny the validity of 3-27 any statement in the resale certificate. The property owners' 3-28 association's lien to secure undisclosed amounts due the property 3-29 owners' association on the date the resale certificate is prepared 3-30 shall automatically terminate as a lien securing the undisclosed 3-31 amount. A buyer, buyer's agent, owner, owner's agent, lender, and 3-32 title insurance company and its agent are not liable for any debt 3-33 or claim existing on the preparation date of the resale certificate 3-34 that is not disclosed in the resale certificate. 3-35 (b) A resale certificate does not affect: 3-36 (1) the right of a property owners' association to 3-37 recover debts or claims that arise or become due after the date the 3-38 resale certificate is prepared; or 3-39 (2) a lien on a property securing payment of future 3-40 assessments held by the property owners' association. 3-41 (c) The owner's agent and the title insurance company and 3-42 its agent are not liable to a buyer for any delay or failure by the 3-43 property owners' association in delivering the information required 3-44 by Section 207.003. 3-45 (d) Except as provided by Section 207.004, the property 3-46 owners' association is not liable to an owner selling property in 3-47 the subdivision for delay or failure to deliver the information 3-48 required by Section 207.003. An officer or agent of the property 3-49 owners' association is not liable for a delay or failure to furnish 3-50 a resale certificate. 3-51 SECTION 2. This Act takes effect September 1, 1999. 3-52 SECTION 3. The importance of this legislation and the 3-53 crowded condition of the calendars in both houses create an 3-54 emergency and an imperative public necessity that the 3-55 constitutional rule requiring bills to be read on three several 3-56 days in each house be suspended, and this rule is hereby suspended. 3-57 * * * * *