By Coleman                                            H.B. No. 1580
         77R1131 AJA-F                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to the creation of restrictions, the extension of,
 1-3     addition to, or modification of existing restrictions, and the
 1-4     reinstatement of expired restrictions in certain residential
 1-5     subdivisions.
 1-6           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-7           SECTION 1.  Section 204.001, Property Code, is amended by
 1-8     amending Subdivision (1) and adding Subdivisions (5)-(7) to read as
 1-9     follows:
1-10                 (1)  "Owner [Restrictions," "residential real estate
1-11     subdivision," "subdivision," "owner]," "real property records," and
1-12     "lienholder" have the meanings assigned by Section 201.003.
1-13                 (5)  "Residential real estate subdivision" or
1-14     "subdivision" means:
1-15                       (A)  all land encompassed within one or more maps
1-16     or plats of land that is divided into two or more parts regardless
1-17     of whether the map or plat is recorded or the division of land
1-18     violated applicable law; and
1-19                       (B)  any other area of land that is divided into
1-20     two or more parts by any other means.
1-21                 (6)  "Restrictions" has the meaning assigned by Section
1-22     201.003 and includes restrictive covenants contained in separate
1-23     deeds to real property in a subdivision.
1-24                 (7)  "Unrestricted subdivision" means a subdivision
 2-1     that was formerly burdened by restrictions that limited all or at
 2-2     least a majority of the land area, excluding streets and public
 2-3     areas, to residential use and that are no longer in effect for all
 2-4     or part of the subdivision.
 2-5           SECTION 2.  Section 204.002(a), Property Code, is amended to
 2-6     read as follows:
 2-7           (a)  This chapter applies only to a residential real estate
 2-8     subdivision, excluding a condominium development governed by Title
 2-9     7, Property Code, that is located in whole or in part in a county
2-10     with a population of 2.8 million or more.  For purposes of this
2-11     chapter, a residential real estate subdivision includes an
2-12     unrestricted subdivision and a subdivision that created, modified,
2-13     or extended restrictions under Chapter 201 that burden only a
2-14     portion of the subdivision as provided by Section 201.009(b).
2-15           SECTION 3.  Section 204.005, Property Code, is amended to
2-16     read as follows:  
2-17           Sec. 204.005.  CREATION OF RESTRICTIONS AND EXTENSION OF,
2-18     ADDITION TO, OR MODIFICATION OF EXISTING RESTRICTIONS.  (a)  A
2-19     property owners' association has authority to approve and circulate
2-20     a petition relating to the creation of restrictions or the
2-21     extension of, addition to, or modification of existing
2-22     restrictions.  A property owners' association is not required to
2-23     comply with Sections 201.009-201.012.
2-24           (b)  A petition to create restrictions or extend, add to, or
2-25     modify existing restrictions approved and circulated by a property
2-26     owners' association is effective if:
2-27                 (1)  the petition is approved by the owners, excluding
 3-1     lienholders, contract purchasers, and the owners of mineral
 3-2     interests, of at least 75 percent of the real property in the
 3-3     subdivision or a smaller percentage required by the original
 3-4     dedicatory instrument; and
 3-5                 (2)  the petition is filed as a dedicatory instrument
 3-6     with the county clerk of the county in which the subdivision is
 3-7     located.
 3-8           (c)  If a subdivision consisting of multiple sections, each
 3-9     with its own restrictions, is represented by a single property
3-10     owners' association, the approval requirement may be satisfied by
3-11     obtaining approval of at least 75 percent of the owners on a
3-12     section-by-section basis or of the total number of properties in
3-13     the property owners' association's jurisdiction.
3-14           (d)  If approved, the petition is binding on all properties
3-15     in the subdivision or section, as applicable.
3-16           (e)  A property owners' association that circulates a
3-17     petition must notify all record owners of property in the
3-18     subdivision in writing of the proposed creation of restrictions or
3-19     extension of, addition to, or modification of [the] existing
3-20     restrictions.  Notice may be hand-delivered to residences within
3-21     the subdivision or sent by regular mail to the owner's last known
3-22     mailing address as reflected in the ownership records maintained by
3-23     the property owners' association or in the records of the
3-24     appropriate appraisal district.  The approval of multiple owners of
3-25     a property may be reflected by the signature of a single co-owner. 
3-26           SECTION 4.  The heading to Section 204.006, Property Code, is
3-27     amended to read as follows:
 4-1           Sec. 204.006.  CREATION OF PROPERTY OWNERS' ASSOCIATION:
 4-2     SUBDIVISIONS GENERALLY.
 4-3           SECTION 5.  Section 204.006, Property Code, is amended by
 4-4     adding Subsection (d) to read as follows:
 4-5           (d)  This section does not apply to an unrestricted
 4-6     subdivision or a subdivision that created, modified, or extended
 4-7     restrictions under Chapter 201 that burden only a portion of the
 4-8     subdivision as provided by Section 201.009(b).
 4-9           SECTION 6.  Chapter 204, Property Code, is amended by adding
4-10     Section 204.0065 to read as follows:
4-11           Sec. 204.0065.  DESIGNATED PROPERTY OWNERS' ASSOCIATION IN
4-12     UNRESTRICTED SUBDIVISIONS.  For the purpose of creating
4-13     restrictions under this chapter in an unrestricted subdivision, an
4-14     entity is considered a property owners' association under this
4-15     chapter if:
4-16                 (1)  the entity is a Texas nonprofit corporation;
4-17                 (2)  the articles of incorporation or bylaws of the
4-18     entity state that the entity is:
4-19                       (A)  a designated representative of the property
4-20     owners in the unrestricted subdivision; or
4-21                       (B)  designated as the "homeowners' association,"
4-22     "community association," "civic association," or "civic club" for
4-23     the unrestricted subdivision;
4-24                 (3)  membership in the entity is open to all property
4-25     owners in the unrestricted subdivision; and
4-26                 (4)  on the date the entity initiates an action under
4-27     this chapter, the membership of the entity consists of owners of at
 5-1     least 50 percent of the number of lots or separately owned parcels
 5-2     in the unrestricted subdivision or 50 percent of the amount of
 5-3     square footage within all of the lots or separately owned parcels
 5-4     in the unrestricted subdivision, excluding streets and public
 5-5     areas.
 5-6           SECTION 7.  Section 204.007(a), Property Code, is amended to
 5-7     read as follows:
 5-8           (a)  Restrictions created, extended, added to, or modified
 5-9     [Extensions of, additions to, or modifications of restrictions]
5-10     under this chapter are binding on a lienholder, excluding
5-11     restrictions relating to regular or special assessment increases if
5-12     the assessment is not subordinated to purchase money or home
5-13     improvement liens.
5-14           SECTION 8.  Section 204.008, Property Code, is amended to
5-15     read as follows:
5-16           Sec. 204.008.  METHOD OF ADOPTION.  Restrictions [An
5-17     extension, addition to, or modification of restrictions] proposed
5-18     by a property owners' association as provided by this chapter may
5-19     be adopted:
5-20                 (1)  by a written ballot that states the substance of
5-21     the amendment and specifies the date by which a ballot must be
5-22     received to be counted;
5-23                 (2)  at a meeting of the members represented by the
5-24     property owners' association if written notice of the meeting
5-25     stating the purpose of the meeting is delivered to each owner of
5-26     property in the subdivision;
5-27                 (3)  by door-to-door circulation of a petition by the
 6-1     property owners' association or a person authorized by the property
 6-2     owners' association;
 6-3                 (4)  by a method permitted by the existing
 6-4     restrictions; or
 6-5                 (5)  by a combination of the methods described by this
 6-6     section.
 6-7           SECTION 9.  Section 204.009(a), Property Code, is amended to
 6-8     read as follows:
 6-9           (a)  If the property owners' association is referenced [in
6-10     the existing, extended, added to, or modified restrictions] as a
6-11     Texas nonprofit corporation in existing restrictions or in
6-12     restrictions created, extended, added to, or modified under this
6-13     chapter, the instrument contemplates the interaction of a nonprofit
6-14     corporation, its articles of incorporation, and its bylaws.
6-15           SECTION 10.  Chapter 204, Property Code, is amended by adding
6-16     Section 204.012 to read as follows:
6-17           Sec. 204.012.  REINSTATEMENT OF EXPIRED RESTRICTIONS.  (a)
6-18     An unrestricted subdivision may reinstate expired restrictions by
6-19     petition if:
6-20                 (1)  a petition committee is formed as provided by
6-21     Section 201.005;
6-22                 (2)  the petition is approved by the owners, excluding
6-23     lienholders, contract purchasers, and owners of mineral interests,
6-24     of at least 60 percent of the real property in the subdivision; and
6-25                 (3)  the procedure used in the circulation and approval
6-26     of the petition to reinstate the expired restrictions complies with
6-27     the requirements of this chapter, excluding Section 204.005(b).
 7-1           (b)  If the petition is not approved by the required
 7-2     percentage of owners on or before the first anniversary of the date
 7-3     the petition committee was created, the petition is void and
 7-4     another petition committee may be formed.
 7-5           (c)  If the petition is approved, the petition is binding on
 7-6     all properties in the subdivision or section, as applicable.
 7-7           (d)  Expired restrictions reinstated under this section are
 7-8     effective for 10 years and may be automatically renewed for 10-year
 7-9     terms unless the owners of at least 60 percent of the real property
7-10     in the subdivision vote to amend or terminate the restrictions.
7-11           (e)  Expired restrictions reinstated under this section may
7-12     be modified only to:
7-13                 (1)  establish 10-year terms as provided by Subsection
7-14     (d);
7-15                 (2)  remove an unlawful provision, including an
7-16     unlawful provision relating to race;
7-17                 (3)  create a formal property owners' association that
7-18     provides for mandatory membership and equivalent voting rights for
7-19     each member;
7-20                 (4)  restrict the use of the real property in the
7-21     subdivision to residential use; or
7-22                 (5)  clarify ambiguous provisions as identified by the
7-23     petition committee.
7-24           (f)  The voting rights granted under Subsection (e)(3) may be
7-25     contingent on the payment of association dues or assessments.  The
7-26     association created under Subsection (e)(3) may not impose
7-27     mandatory assessments.
 8-1           (g)  A subdivision that created, modified, or extended
 8-2     restrictions under Chapter 201 that burden only a portion of the
 8-3     subdivision as provided by Section 201.009(b) before the former
 8-4     restrictions expired may use the procedures provided by this
 8-5     section to reinstate the former restrictions.  Unless the petition
 8-6     to reinstate the former restrictions provides otherwise, the
 8-7     restrictions created, extended, or modified under Chapter 201
 8-8     continue in effect.
 8-9           SECTION 11.  This Act takes effect immediately if it receives
8-10     a vote of two-thirds of all the members elected to each house, as
8-11     provided by Section 39, Article III, Texas Constitution.  If this
8-12     Act does not receive the vote necessary for immediate effect, this
8-13     Act takes effect September 1, 2001.