By Ellis S.B. No. 954
76R8210 PAM-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the governance of property owners' associations, to
1-3 certain procedures involving the relationship between property
1-4 owners and property owners' associations, and to certain procedures
1-5 involving the sale of residential real property; providing a civil
1-6 penalty.
1-7 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-8 SECTION 1. Section 27.031, Government Code, is amended to
1-9 read as follows:
1-10 Sec. 27.031. JURISDICTION. (a) In addition to the
1-11 jurisdiction and powers provided by the constitution and other law,
1-12 the justice court has original jurisdiction of:
1-13 (1) civil matters in which exclusive jurisdiction is
1-14 not in the district or county court and in which the amount in
1-15 controversy is not more than $5,000, exclusive of interest;
1-16 (2) cases of forcible entry and detainer; [and]
1-17 (3) foreclosure of mortgages and enforcement of liens
1-18 on personal property in cases in which the amount in controversy is
1-19 otherwise within the justice court's jurisdiction; and
1-20 (4) disputes between property owners and property
1-21 owners' associations, including the enforcement of a lien for
1-22 failure to pay property owners' association dues, in cases in which
1-23 the amount in controversy is otherwise within the justice court's
1-24 jurisdiction.
2-1 (b) A justice court does not have jurisdiction of:
2-2 (1) a suit in behalf of the state to recover a
2-3 penalty, forfeiture, or escheat;
2-4 (2) a suit for divorce;
2-5 (3) a suit to recover damages for slander or
2-6 defamation of character;
2-7 (4) a suit for trial of title to land; or
2-8 (5) except as provided by Subsection (a)(4), a suit
2-9 for the enforcement of a lien on land.
2-10 SECTION 2. Subchapter A, Chapter 5, Property Code, is
2-11 amended by adding Sections 5.012 and 5.013 to read as follows:
2-12 Sec. 5.012. NOTICE OF HOMESTEAD FORECLOSURE INFORMATION.
2-13 (a) A seller of residential real property comprising not more than
2-14 one dwelling unit located in this state shall give to the purchaser
2-15 of the property before the transfer of the property a written
2-16 notice as prescribed by this section.
2-17 (b) The notice must be conspicuous and printed in 14-point
2-18 bold-faced type and read substantially similar to the following:
2-19 NOTICE OF HOMESTEAD FORECLOSURE INFORMATION
2-20 CONCERNING THE PROPERTY AT (street address and city)
2-21 WARNING: UNDER TEXAS LAW, YOU MAY LOSE THIS PROPERTY THROUGH
2-22 FORECLOSURE, EVEN IF IT IS DESIGNATED AS HOMESTEAD PROPERTY, IF YOU
2-23 FAIL TO TIMELY PAY ANY OF THE FOLLOWING OBLIGATIONS:
2-24 (1) a purchase money obligation secured by a lien on
2-25 this property;
2-26 (2) a home improvement contract obligation secured by
2-27 a lien on this property;
3-1 (3) a property owners' association assessment and
3-2 certain related costs secured by a lien on this property, including
3-3 a lien provided for in restrictive covenants applicable to this
3-4 property;
3-5 (4) ad valorem property taxes assessed against this
3-6 property;
3-7 (5) federal income taxes owed by you; or
3-8 (6) a lien on this property that preexists your
3-9 purchase of this property and that was not paid at the time you
3-10 purchased this property.
3-11 Depending on state law or the terms of the agreement relating
3-12 to the financial obligation, a financial obligation listed above
3-13 may be foreclosed by judicial foreclosure, which would require the
3-14 filing of a lawsuit against you, or by nonjudicial foreclosure,
3-15 which would require notifying you but would not require the filing
3-16 of a lawsuit against you. In certain circumstances, attorney's
3-17 fees and other costs associated with the foreclosure may be added
3-18 to the original obligation, which would increase the amount of the
3-19 debt owed.
3-20 If you cease using this home as your primary residence or
3-21 otherwise lose your homestead exemption, the failure to timely pay
3-22 financial obligations other than those listed above may result in
3-23 the foreclosure of this property.
3-24 I UNDERSTAND THAT I CAN LOSE THIS PROPERTY THROUGH
3-25 FORECLOSURE FOR THE REASONS STATED ABOVE.
3-26 Date:__________ ________________________________________
3-27 Signature of Purchaser
4-1 Print Name:_________________________
4-2 Property Address:_____________________
4-3 (c) The seller's failure to provide the notice required by
4-4 this section:
4-5 (1) is a false, misleading, or deceptive act or
4-6 practice within the meaning of Section 17.46, Business & Commerce
4-7 Code, and is actionable in a public or private suit brought under
4-8 Subchapter E, Chapter 17, Business & Commerce Code; and
4-9 (2) entitles the purchaser to cancel and rescind the
4-10 purchase contract and receive a full refund of any purchase payment
4-11 made to the seller.
4-12 Sec. 5.013. NOTICE OF OBLIGATIONS RELATED TO MEMBERSHIP IN
4-13 PROPERTY OWNERS' ASSOCIATION. (a) A seller of residential real
4-14 property that is subject to membership in a property owners'
4-15 association and comprises not more than one dwelling unit located
4-16 in this state shall give to the purchaser of the property before
4-17 the transfer of the property a written notice as prescribed by
4-18 this section.
4-19 (b) The notice must be conspicuous and printed in 14-point
4-20 bold-faced type and read substantially similar to the following:
4-21 NOTICE OF MEMBERSHIP IN PROPERTY OWNERS' ASSOCIATION
4-22 CONCERNING THE PROPERTY AT (street address)
4-23 (name of residential community)
4-24 As a purchaser of property in this residential community, you
4-25 are obligated to be a member of (name of property owners'
4-26 association).
4-27 Restrictive covenants governing the use and occupancy of
5-1 property located in this residential community and a dedicatory
5-2 instrument governing the establishment, maintenance, and operation
5-3 of this residential community have been or will be recorded in the
5-4 Real Property Records of (name of county). Copies of the
5-5 restrictive covenants and dedicatory instrument may be obtained
5-6 from the county clerk.
5-7 The restrictive covenants ________ may ________ may not be
5-8 amended without the approval of the members of the property owners'
5-9 association.
5-10 You are obligated to pay assessments to the property owners'
5-11 association. The amount of the assessments is subject to change.
5-12 Your failure to pay the assessments could result in a lien on and
5-13 the foreclosure of your property.
5-14 THE STATEMENTS CONTAINED IN THIS NOTICE ARE SUMMARY IN
5-15 NATURE. AS A PROSPECTIVE PURCHASER, YOU SHOULD REFER TO THE
5-16 RESTRICTIVE COVENANTS AND THE DEDICATORY INSTRUMENT FOR FURTHER
5-17 DETAIL.
5-18 I UNDERSTAND MY OBLIGATIONS RELATING TO MEMBERSHIP IN THE
5-19 PROPERTY OWNERS' ASSOCIATION AS STATED ABOVE.
5-20 Date:__________ ________________________________________
5-21 Signature of Purchaser
5-22 Print Name:_________________________
5-23 Property Address:_____________________
5-24 (c) The seller's failure to provide the notice required by
5-25 this section:
5-26 (1) is a false, misleading, or deceptive act or
5-27 practice within the meaning of Section 17.46, Business & Commerce
6-1 Code, and is actionable in a public or private suit brought under
6-2 Subchapter E, Chapter 17, Business & Commerce Code; and
6-3 (2) entitles the purchaser to cancel and rescind the
6-4 purchase contract and receive a full refund of any purchase payment
6-5 made to the seller.
6-6 SECTION 3. Chapter 51, Property Code, is amended by adding
6-7 Sections 51.007 and 51.008 to read as follows:
6-8 Sec. 51.007. NOTICE OF SALE OF REAL PROPERTY UNDER PROPERTY
6-9 OWNERS' ASSOCIATION'S LIEN. In addition to the requirements of
6-10 Section 51.002(b), a notice of sale of real property under a power
6-11 of sale conferred by a property owners' association's lien,
6-12 designating the place of the sale and providing a brief description
6-13 of the property sufficient to identify the location of the
6-14 property, must be published in a newspaper of general circulation
6-15 in each county in which the property is located at least once each
6-16 week for three consecutive weeks before the date of the sale, with
6-17 the first publication appearing at least 21 days before the date of
6-18 the sale.
6-19 Sec. 51.008. RIGHT OF REDEMPTION IN CERTAIN CIRCUMSTANCES.
6-20 (a) The owner of real property in a residential real estate
6-21 subdivision whose property has been sold at a foreclosure sale
6-22 under a property owners' association's lien for assessments may
6-23 redeem that property not later than the 90th day after the date the
6-24 property owners' association purchases the property at the
6-25 foreclosure sale.
6-26 (b) If the association purchases real property at a sale
6-27 foreclosing its assessment lien, the association may not transfer
7-1 ownership of the real property to a person other than a redeeming
7-2 owner during the redemption period.
7-3 (c) To redeem the real property, the property owner must pay
7-4 to the property owners' association:
7-5 (1) all amounts due to the association at the time of
7-6 the foreclosure sale;
7-7 (2) interest from the date of the foreclosure sale to
7-8 the date of the redemption at the rate provided by the dedicatory
7-9 instrument for a delinquent assessment;
7-10 (3) costs incurred by the association in foreclosing
7-11 the lien, including reasonable attorney's fees;
7-12 (4) any assessment levied against the property by the
7-13 association after the foreclosure sale; and
7-14 (5) any reasonable cost incurred by the association as
7-15 owner of the property, including costs of maintenance and leasing.
7-16 (d) If the property owner redeems the real property as
7-17 provided by this section, the property owners' association shall
7-18 execute a deed transferring the property to the redeeming property
7-19 owner.
7-20 (e) The exercise of the right of redemption is not effective
7-21 after the redemption period against a subsequent purchaser or
7-22 lender for value without notice of the redemption unless the
7-23 redeeming property owner records the deed from the property owners'
7-24 association or an affidavit stating that the owner has exercised
7-25 the right of redemption.
7-26 (f) Real property that has been redeemed remains subject to
7-27 all liens and encumbrances on the real property before the
8-1 foreclosure sale. All rents and other income collected by the
8-2 property owners' association from the date of the foreclosure sale
8-3 to the date of the redemption belong to the association, but the
8-4 association shall credit the rent and income against the redemption
8-5 amount.
8-6 SECTION 4. Chapter 202, Property Code, is amended by adding
8-7 Sections 202.006-202.008 to read as follows:
8-8 Sec. 202.006. HEARING BEFORE PROPERTY OWNERS' ASSOCIATION.
8-9 (a) A property owners' association shall establish a dispute
8-10 resolution committee to conduct hearings on disputes relating to a
8-11 fine or penalty imposed on a property owner by the association.
8-12 (b) A property owners' association shall adopt rules
8-13 relating to hearings conducted by a dispute resolution committee.
8-14 The rules must:
8-15 (1) provide a property owner with notice of a hearing
8-16 as provided by Rule 21a, Texas Rules of Civil Procedure;
8-17 (2) provide for the recording of a hearing by a court
8-18 reporter or by audio or video recording;
8-19 (3) require the property owners' association to retain
8-20 a record of a hearing for at least two years after the date of
8-21 the final determination of the matter in dispute; and
8-22 (4) allow a property owner to appeal the decision of
8-23 the dispute resolution committee to the entire board of the
8-24 property owners' association before the association may institute
8-25 any legal proceeding, including an alternative dispute resolution
8-26 procedure, relating to the fine or penalty in dispute.
8-27 Sec. 202.007. ALTERNATIVE DISPUTE RESOLUTION REQUIRED TO
9-1 ENFORCE LIEN FOR ASSESSMENTS. (a) Except as provided by
9-2 Subsection (b), a property owners' association may not enforce a
9-3 lien on real property for an assessment levied by the property
9-4 owners' association against the real property unless the
9-5 association submits to an alternative dispute resolution procedure
9-6 to establish the existence and amount of the debt owed.
9-7 (b) The property owners' association must provide written
9-8 notice to the property owner of its intention to initiate an
9-9 alternative dispute resolution procedure. The property owner shall
9-10 participate in the alternative dispute resolution procedure. If the
9-11 property owner refuses to participate in the alternative dispute
9-12 resolution procedure, the property owners' association is not
9-13 required to comply with this section.
9-14 (c) The property owners' association and the property owner
9-15 may agree on the type of alternative dispute resolution procedure.
9-16 If the parties fail to reach an agreement before the 30th day after
9-17 the date the property owners' association notifies the property
9-18 owner of its intention to initiate an alternative dispute
9-19 resolution procedure, either party may file a petition in a
9-20 district court in the county in which all or part of the property
9-21 is located requesting the court to refer the dispute to an
9-22 alternative dispute resolution procedure. The court shall refer the
9-23 dispute before the 31st day after the date the petition is filed.
9-24 (d) If the property owner agrees to be bound by the decision
9-25 reached in the alternative dispute resolution procedure, the cost
9-26 of the alternative dispute resolution procedure shall be paid by
9-27 the property owners' association.
10-1 Sec. 202.008. BOARD MEMBER TRAINING; INDEMNIFICATION. (a)
10-2 The attorney general shall adopt rules establishing minimum
10-3 standards for the training of board members of a property owners'
10-4 association.
10-5 (b) Each board member of a property owners' association
10-6 shall attend a training program that meets the standards developed
10-7 under Subsection (a) not later than six months after assuming the
10-8 duties of the board.
10-9 (c) A property owners' association may not indemnify a board
10-10 member for liability imposed as damages because of an act, error,
10-11 or omission committed in the individual's capacity as a board
10-12 member unless the board member has completed a training program as
10-13 required by Subsection (b).
10-14 SECTION 5. Title 11, Property Code, is amended by adding
10-15 Chapter 207 to read as follows:
10-16 CHAPTER 207. STANDARD OF CONDUCT FOR AND CAUSES OF ACTION
10-17 APPLICABLE TO GOVERNING BOARDS OF PROPERTY OWNERS' ASSOCIATIONS
10-18 Sec. 207.001. DEDICATORY INSTRUMENT. In this chapter,
10-19 "dedicatory instrument" has the meaning assigned by Section
10-20 202.001.
10-21 Sec. 207.002. REASONABLY PRUDENT BUSINESS PERSON STANDARD.
10-22 The governing board of a property owners' association shall conduct
10-23 the business of the association in the same manner that a
10-24 reasonably prudent business person would conduct business under the
10-25 same or similar circumstances.
10-26 Sec. 207.003. ENFORCEMENT. (a) The attorney general may
10-27 bring an action in the name of the state against the governing
11-1 board of a property owners' association to enjoin the governing
11-2 board from:
11-3 (1) violating a provision of a dedicatory instrument
11-4 applicable to the property owners' association; or
11-5 (2) violating the standard established by Section
11-6 207.002.
11-7 (b) An action brought under this section may be commenced in
11-8 the district court of the county in which the real property covered
11-9 by the dedicatory instrument is located.
11-10 (c) The court may issue appropriate temporary or permanent
11-11 injunctions under this section, and the injunctions shall be issued
11-12 without bond.
11-13 Sec. 207.004. CIVIL PENALTY. (a) The governing board of a
11-14 property owners' association is liable to the state for a civil
11-15 penalty of not more than $10,000 for each violation described by
11-16 Section 207.003 in which the governing board engages.
11-17 (b) If the governing board violates the terms of an
11-18 injunction issued under this chapter, the governing board is liable
11-19 to the state for a civil penalty of not more than $10,000 for each
11-20 violation. For purposes of this section, the district court
11-21 issuing the injunction shall retain jurisdiction, and the cause
11-22 shall be continued.
11-23 (c) The attorney general may sue to collect a civil penalty
11-24 under this section.
11-25 Sec. 207.005. DAMAGES. (a) The court may make additional
11-26 orders or judgments as necessary to compensate identifiable persons
11-27 for actual damages resulting from an action described by Section
12-1 207.003.
12-2 (b) If the court finds that the governing board of a
12-3 property owners' association has engaged or is engaging in an
12-4 action described by Section 207.003 in bad faith, the court may
12-5 award not more than three times the amount of actual damages.
12-6 SECTION 6. (a) Except as provided by Subsection (b), this
12-7 Act takes effect September 1, 1999.
12-8 (b) Sections 202.008(a) and (b), Property Code, as added by
12-9 this Act, take effect January 1, 2000.
12-10 SECTION 7. The change in law made by Section 27.031,
12-11 Government Code, as amended by this Act, applies only to actions
12-12 filed on or after September 1, 1999. An action filed before
12-13 September 1, 1999, is governed by the law in effect at the time the
12-14 action was filed, and the former law is continued in effect for
12-15 that purpose.
12-16 SECTION 8. The change in law made by Sections 5.012 and
12-17 5.013, Property Code, as added by this Act, applies only to a real
12-18 property transaction described by those sections in which the
12-19 transfer of the property occurs on or after September 1, 1999.
12-20 SECTION 9. The change in law made by Section 51.007,
12-21 Property Code, as added by this Act, applies only to a notice of
12-22 sale that must be provided under that section for a sale of real
12-23 property under a power of sale conferred by a property owners'
12-24 association lien that occurs on or after October 1, 1999. A notice
12-25 of sale that must be provided for a sale of real property under a
12-26 power of sale conferred by a property owners' association lien that
12-27 occurs before October 1, 1999, is governed by the law in effect
13-1 immediately preceding September 1, 1999, and the former law is
13-2 continued in effect for that purpose.
13-3 SECTION 10. The changes in law made by Section 51.008,
13-4 Property Code, as added by this Act, apply only to real property
13-5 sold at a foreclosure sale that occurs on or after September 1,
13-6 1999. Real property sold at a foreclosure sale before September 1,
13-7 1999, is governed by the law in effect on the date of the sale, and
13-8 the former law is continued in effect for that purpose.
13-9 SECTION 11. The attorney general shall adopt rules as
13-10 required by Section 202.008(a), Property Code, as added by this
13-11 Act, not later than December 1, 1999.
13-12 SECTION 12. The change in law made by Chapter 207, Property
13-13 Code, as added by this Act, applies only to an action described by
13-14 Section 207.003, Property Code, as added by this Act, that occurs
13-15 on or after September 1, 1999.
13-16 SECTION 13. The importance of this legislation and the
13-17 crowded condition of the calendars in both houses create an
13-18 emergency and an imperative public necessity that the
13-19 constitutional rule requiring bills to be read on three several
13-20 days in each house be suspended, and this rule is hereby suspended.