By: Carona, Ellis S.B. No. 507
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to residential subdivisions that require membership in a
1-3 property owners' association.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Title 11, Property Code, is amended by adding
1-6 Chapter 209 to read as follows:
1-7 CHAPTER 209. TEXAS RESIDENTIAL PROPERTY OWNERS
1-8 PROTECTION ACT
1-9 Sec. 209.001. SHORT TITLE. This chapter may be cited as
1-10 the Texas Residential Property Owners Protection Act.
1-11 Sec. 209.002. DEFINITIONS. In this chapter:
1-12 (1) "Assessment" means a regular assessment, special
1-13 assessment, or other amount a property owner is required to pay a
1-14 property owners' association under the dedicatory instrument or by
1-15 law.
1-16 (2) "Board" means the governing body of a property
1-17 owners' association.
1-18 (3) "Declaration" means an instrument filed in the
1-19 real property records of a county that includes restrictive
1-20 covenants governing a residential subdivision.
1-21 (4) "Dedicatory instrument" means each governing
1-22 instrument covering the establishment, maintenance, and operation
1-23 of a residential subdivision. The term includes restrictions or
1-24 similar instruments subjecting property to restrictive covenants,
1-25 bylaws, or similar instruments governing the administration or
2-1 operation of a property owners' association, to properly adopted
2-2 rules and regulations of the property owners' association, and to
2-3 all lawful amendments to the covenants, bylaws, rules, or
2-4 regulations.
2-5 (5) "Lot" means any designated parcel of land located
2-6 in a residential subdivision, including any improvements on the
2-7 designated parcel.
2-8 (6) "Owner" means a person who holds record title to
2-9 property in a residential subdivision and includes the personal
2-10 representative of a person who holds record title to property in a
2-11 residential subdivision.
2-12 (7) "Property owners' association" or "association"
2-13 means an incorporated or unincorporated association that:
2-14 (A) is designated as the representative of the
2-15 owners of property in a residential subdivision;
2-16 (B) has a membership primarily consisting of the
2-17 owners of the property covered by the dedicatory instrument for the
2-18 residential subdivision; and
2-19 (C) manages or regulates the residential
2-20 subdivision for the benefit of the owners of property in the
2-21 residential subdivision.
2-22 (8) "Regular assessment" means an assessment, a
2-23 charge, a fee, or dues that each owner of property within a
2-24 residential subdivision is required to pay to the property owners'
2-25 association on a regular basis and that is designated for use by
2-26 the property owners' association for the benefit of the residential
3-1 subdivision as provided by the restrictions.
3-2 (9) "Residential subdivision" or "subdivision" means a
3-3 subdivision, planned unit development, townhouse regime, or similar
3-4 planned development in which all land has been divided into two or
3-5 more parts and is subject to restrictions that:
3-6 (A) limit a majority of the land subject to the
3-7 dedicatory instruments, excluding streets, common areas, and public
3-8 areas, to residential use for single-family homes, townhomes, or
3-9 duplexes only;
3-10 (B) are recorded in the real property records of
3-11 the county in which the residential subdivision is located; and
3-12 (C) require membership in a property owners'
3-13 association that has authority to impose regular or special
3-14 assessments on the property in the subdivision.
3-15 (10) "Restrictions" means one or more restrictive
3-16 covenants contained or incorporated by reference in a properly
3-17 recorded map, plat, replat, declaration, or other instrument filed
3-18 in the real property records or map or plat records. The term
3-19 includes any amendment or extension of the restrictions.
3-20 (11) "Restrictive covenant" means any covenant,
3-21 condition, or restriction contained in a dedicatory instrument,
3-22 whether mandatory, prohibitive, permissive, or administrative.
3-23 (12) "Special assessment" means an assessment, a
3-24 charge, a fee, or dues, other than a regular assessment, that each
3-25 owner of property located in a residential subdivision is required
3-26 to pay to the property owners' association, according to procedures
4-1 required by the dedicatory instruments, for:
4-2 (A) defraying, in whole or in part, the cost,
4-3 whether incurred before or after the assessment, of any
4-4 construction or reconstruction, unexpected repair, or replacement
4-5 of a capital improvement in common areas owned by the property
4-6 owners' association, including the necessary fixtures and personal
4-7 property related to the common areas;
4-8 (B) maintenance and improvement of common areas
4-9 owned by the property owners' association; or
4-10 (C) other purposes of the property owners'
4-11 association as stated in its articles of incorporation or the
4-12 dedicatory instrument for the residential subdivision.
4-13 Sec. 209.003. APPLICABILITY OF CHAPTER. (a) This chapter
4-14 applies only to a residential subdivision that is subject to
4-15 restrictions or provisions in a declaration that authorize the
4-16 property owners' association to collect regular or special
4-17 assessments on all or a majority of the property in the
4-18 subdivision.
4-19 (b) This chapter applies only to a property owners'
4-20 association that requires mandatory membership in the association
4-21 for all or a majority of the owners of residential property within
4-22 the subdivision subject to the association's dedicatory
4-23 instruments.
4-24 (c) This chapter applies to a residential property owners'
4-25 association regardless of whether the entity is designated as a
4-26 "homeowners' association," "community association," or similar
5-1 designation in the restrictions or dedicatory instrument.
5-2 (d) This chapter does not apply to a condominium development
5-3 governed by Chapter 82.
5-4 Sec. 209.004. MANAGEMENT CERTIFICATES. (a) A property
5-5 owners' association shall record in each county in which any
5-6 portion of the residential subdivision is located a management
5-7 certificate, signed and acknowledged by an officer or the managing
5-8 agent of the association, stating:
5-9 (1) the name of the subdivision;
5-10 (2) the name of the association;
5-11 (3) the recording data for the subdivision;
5-12 (4) the recording data for the declaration;
5-13 (5) the mailing address of the association or the name
5-14 and mailing address of the person managing the association; and
5-15 (6) other information the association considers
5-16 appropriate.
5-17 (b) The property owners' association shall record an amended
5-18 management certificate not later than the 30th day after the date
5-19 the association has notice of a change in any information in the
5-20 recorded certificate required by Subsection (a).
5-21 (c) The property owners' association and its officers,
5-22 directors, employees, and agents are not subject to liability to
5-23 any person for a delay in recording or failure to record a
5-24 management certificate, unless the delay or failure is wilful or
5-25 caused by gross negligence.
5-26 Sec. 209.005. ASSOCIATION RECORDS. (a) A property owners'
6-1 association shall make all records of the association, including
6-2 financial records, reasonably available for examination by an owner
6-3 during normal business hours at the association's registered office
6-4 or its principal office in this state.
6-5 (b) An attorney's files and records relating to the
6-6 association, excluding invoices requested by an owner under Section
6-7 209.008(d), are not:
6-8 (1) records of the association;
6-9 (2) subject to inspection by the owner; or
6-10 (3) subject to production in a legal proceeding.
6-11 Sec. 209.006. NOTICE REQUIRED BEFORE ENFORCEMENT ACTION.
6-12 (a) Before a property owners' association may suspend an owner's
6-13 right to use a common area, file a suit against an owner other than
6-14 a suit to collect a regular or special assessment or foreclose
6-15 under an association's lien, charge an owner for property damage,
6-16 or levy a fine for a violation of the restrictions or bylaws or
6-17 rules of the association, the association or its agent must give
6-18 written notice to the owner.
6-19 (b) The notice must:
6-20 (1) describe the violation or property damage that is
6-21 the basis for the suspension action, charge, or fine and state any
6-22 amount due the association from the owner; and
6-23 (2) inform the owner that the owner:
6-24 (A) is entitled to a reasonable period to cure
6-25 the violation and avoid the fine or suspension unless the owner was
6-26 given notice and a reasonable opportunity to cure a similar
7-1 violation within the preceding 12 months; and
7-2 (B) may request a hearing under Section 209.007
7-3 on or before the 30th day after the date the owner receives the
7-4 notice.
7-5 Sec. 209.007. HEARING BEFORE BOARD; ALTERNATIVE DISPUTE
7-6 RESOLUTION. (a) If the owner is entitled to an opportunity to
7-7 cure the violation, the owner has the right to submit a written
7-8 request for a hearing to discuss and verify facts and resolve the
7-9 matter in issue before a committee appointed by the board of the
7-10 property owners' association, or before the board if the board does
7-11 not appoint a committee.
7-12 (b) If a hearing is to be held before a committee, the
7-13 notice prescribed by Section 209.006 must state that the owner has
7-14 the right to appeal the committee's decision to the board by
7-15 written notice to the board.
7-16 (c) The association shall hold a hearing under this section
7-17 not later than the 30th day after the date the board receives the
7-18 owner's request for a hearing and shall notify the owner of the
7-19 date, time, and place of the hearing not later than the 10th day
7-20 before the date of the hearing. The board or the owner may request
7-21 a postponement, and, if requested, a postponement shall be granted
7-22 for a period of not more than 10 days. Additional postponements
7-23 may be granted by agreement of the parties. The owner or the
7-24 association may make an audio recording of the meeting.
7-25 (d) The notice and hearing provisions of Section 209.006 and
7-26 this section do not apply if the association files a suit seeking a
8-1 temporary restraining order or temporary injunctive relief or files
8-2 a suit that includes foreclosure as a cause of action. If a suit
8-3 is filed relating to a matter to which those sections apply, a
8-4 party to the suit may file a motion to compel mediation. The
8-5 notice and hearing provisions of Section 209.006 and this section
8-6 do not apply to a temporary suspension of a person's right to use
8-7 common areas if the temporary suspension is the result of a
8-8 violation that occurred in a common area and involved a significant
8-9 and immediate risk of harm to others in the subdivision. The
8-10 temporary suspension is effective until the board makes a final
8-11 determination on the suspension action after following the
8-12 procedures prescribed by this section.
8-13 (e) An owner or property owners' association may use
8-14 alternative dispute resolution services.
8-15 Sec. 209.008. ATTORNEY'S FEES. (a) A property owners'
8-16 association may collect reimbursement of reasonable attorney's fees
8-17 and other reasonable costs incurred by the association relating to
8-18 collecting amounts, including damages, due the association for
8-19 enforcing restrictions or the bylaws or rules of the association
8-20 only if the owner is provided a written notice that attorney's fees
8-21 and costs will be charged to the owner if the delinquency or
8-22 violation continues after a date certain.
8-23 (b) An owner is not liable for attorney's fees incurred by
8-24 the association relating to a matter described by the notice under
8-25 Section 209.006 if the attorney's fees are incurred before the
8-26 conclusion of the hearing under Section 209.007 or, if the owner
9-1 does not request a hearing under that section, before the date by
9-2 which the owner must request a hearing. The owner's presence is
9-3 not required to hold a hearing under Section 209.007.
9-4 (c) Attorney's fees and other costs incurred by the
9-5 association collected from an owner shall be deposited into an
9-6 account maintained at a financial institution in the name of the
9-7 association or its managing agent. Only members of the
9-8 association's board or its managing agent or employees of its
9-9 managing agent may be signatories on the account.
9-10 (d) On written request from the owner, the association shall
9-11 provide copies of invoices for attorney's fees and other costs
9-12 relating to the matter for which the association seeks
9-13 reimbursement of fees and costs.
9-14 (e) The notice provisions of Subsection (a) do not apply to
9-15 a counterclaim of an association in a lawsuit brought against the
9-16 association by a property owner.
9-17 Sec. 209.009. FORECLOSURE SALE PROHIBITED IN CERTAIN
9-18 CIRCUMSTANCES. A property owners' association may not foreclose a
9-19 property owners' association assessment lien if the debt securing
9-20 the lien consists solely of:
9-21 (1) fines assessed by the association; or
9-22 (2) attorney's fees incurred by the association solely
9-23 associated with fines assessed by the association.
9-24 Sec. 209.010. NOTICE AFTER FORECLOSURE SALE. (a) A
9-25 property owners' association that conducts a foreclosure sale of an
9-26 owner's lot must send to the lot owner, by certified mail, return
10-1 receipt requested, not later than the 30th day after the date of
10-2 the foreclosure sale a written notice stating the date and time the
10-3 sale occurred and informing the lot owner of the owner's right to
10-4 redeem the property under Section 209.011.
10-5 (b) The notice must be sent by certified mail, return
10-6 receipt requested, to the property owner's last known mailing
10-7 address, as reflected in the records of the property owners'
10-8 association.
10-9 (c) Not later than the 30th day after the date the
10-10 association sends the notice required by Subsection (a), the
10-11 association must record an affidavit in the real property records
10-12 of the county in which the lot is located, stating the date on
10-13 which the notice was sent and containing a legal description of the
10-14 lot. Any person is entitled to rely conclusively on the
10-15 information contained in the recorded affidavit.
10-16 Sec. 209.011. RIGHT OF REDEMPTION AFTER FORECLOSURE.
10-17 (a) The owner of property in a residential subdivision may redeem
10-18 the property from any purchaser at a sale foreclosing a property
10-19 owners' association's assessment lien not later than the 90th day
10-20 after the date the association mails written notice of the sale to
10-21 the owner under Section 209.010.
10-22 (b) A person who purchases property at a sale foreclosing a
10-23 property owners' association's assessment lien may not transfer
10-24 ownership of the property to a person other than a redeeming lot
10-25 owner during the redemption period.
10-26 (c) To redeem property purchased by the property owners'
11-1 association at foreclosure sale, the lot owner must pay to the
11-2 association:
11-3 (1) all amounts due the association at the time of the
11-4 foreclosure sale;
11-5 (2) interest from the date of the foreclosure sale to
11-6 the date of redemption on all amounts owed the association at the
11-7 rate stated in the dedicatory instruments for delinquent
11-8 assessments or, if no rate is stated, at an annual interest rate of
11-9 10 percent;
11-10 (3) costs incurred by the association in foreclosing
11-11 the lien and conveying the property to the redeeming lot owner,
11-12 including reasonable attorney's fees;
11-13 (4) any assessment levied against the property by the
11-14 association after the date of the foreclosure sale;
11-15 (5) any reasonable cost incurred by the association,
11-16 including mortgage payments and costs of repair, maintenance, and
11-17 leasing of the property; and
11-18 (6) the purchase price paid by the association at the
11-19 foreclosure sale less any amounts due the association under
11-20 Subdivision (1) that were satisfied out of foreclosure sale
11-21 proceeds.
11-22 (d) To redeem property purchased at the foreclosure sale by
11-23 a person other than the property owners' association, the lot
11-24 owner:
11-25 (1) must pay to the association:
11-26 (A) all amounts due the association at the time
12-1 of the foreclosure sale less the foreclosure sales price received
12-2 by the association from the purchaser;
12-3 (B) interest from the date of the foreclosure
12-4 sale through the date of redemption on all amounts owed the
12-5 association at the rate stated in the dedicatory instruments for
12-6 delinquent assessments or, if no rate is stated, at an annual
12-7 interest rate of 10 percent;
12-8 (C) costs incurred by the association in
12-9 foreclosing the lien and conveying the property to the redeeming
12-10 lot owner, including reasonable attorney's fees; and
12-11 (D) any unpaid assessments levied against the
12-12 property by the association after the date of the foreclosure sale;
12-13 and
12-14 (2) must pay to the person who purchased the property
12-15 at the foreclosure sale:
12-16 (A) any assessments levied against the property
12-17 by the association after the date of the foreclosure sale and paid
12-18 by the purchaser;
12-19 (B) the purchase price paid by the purchaser at
12-20 the foreclosure sale;
12-21 (C) interest from the date of foreclosure to the
12-22 date of redemption on the purchase price amount at an annual
12-23 interest rate of 10 percent; and
12-24 (D) any reasonable cost incurred by the
12-25 purchaser, including costs of repair, maintenance, and leasing of
12-26 the property.
13-1 (e) If a lot owner redeems the property under this section,
13-2 the purchaser of the property at foreclosure shall immediately
13-3 execute and deliver to the owner a deed transferring the property
13-4 to the redeeming lot owner.
13-5 (f) If, before the expiration of the redemption period, the
13-6 redeeming lot owner fails to record the deed from the foreclosing
13-7 purchaser or fails to record an affidavit stating that the lot
13-8 owner has redeemed the property, the lot owner's right of
13-9 redemption as against a bona fide purchaser or lender for value
13-10 expires after the redemption period.
13-11 (g) If the property owners' association purchases the
13-12 property at foreclosure, all rent and other income collected by the
13-13 association from the date of the foreclosure sale to the date of
13-14 redemption shall be credited toward the amount owed the association
13-15 under Subsection (c), and if there are excess proceeds, they shall
13-16 be refunded to the lot owner. If a person other than the
13-17 association purchases the property at foreclosure, all rent and
13-18 other income collected by the purchaser from the date of the
13-19 foreclosure sale to the date of redemption shall be credited toward
13-20 the amount owed the purchaser under Subsection (d), and if there
13-21 are excess proceeds, those proceeds shall be refunded to the lot
13-22 owner.
13-23 (h) If a person other than the property owners' association
13-24 is the purchaser at the foreclosure sale, before executing a deed
13-25 transferring the property to the redeeming lot owner, the purchaser
13-26 shall obtain an affidavit from the association or its authorized
14-1 agent stating that all amounts owed the association under
14-2 Subsection (d) have been paid. The association shall provide the
14-3 purchaser with the affidavit not later than the 10th day after the
14-4 date the association receives all amounts owed to the association
14-5 under Subsection (d). Failure of a purchaser to comply with this
14-6 subsection does not affect the validity of a redemption by a
14-7 redeeming lot owner.
14-8 (i) Property that is redeemed remains subject to all liens
14-9 and encumbrances on the property before foreclosure. Any lease
14-10 entered into by the purchaser of property at a sale foreclosing an
14-11 assessment lien of a property owners' association is subject to the
14-12 right of redemption provided by this section and the lot owner's
14-13 right to reoccupy the property immediately after the redemption.
14-14 (j) If a lot owner makes partial payment of amounts due the
14-15 association at any time before the redemption period expires but
14-16 fails to pay all amounts necessary to redeem the property before
14-17 the redemption period expires, the association shall refund any
14-18 partial payments to the lot owner by mailing payment to the owner's
14-19 last known address as shown in the association's records not later
14-20 than the 30th day after the expiration date of the redemption
14-21 period.
14-22 (k) If a lot owner sends by certified mail, return receipt
14-23 requested, a written request to redeem the property on or before
14-24 the last day of the redemption period, the lot owner's right of
14-25 redemption is extended until the 10th day after the date the
14-26 association and any third party foreclosure purchaser provides
15-1 written notice to the lot owner of the amounts that must be paid to
15-2 redeem the property.
15-3 (l) After the redemption period and any extended redemption
15-4 period provided by Subsection (k) expires, the association or third
15-5 party foreclosure purchaser shall record an affidavit in the real
15-6 property records of the county in which the property is located
15-7 stating that the lot owner did not redeem the property during the
15-8 redemption period or any extended redemption period.
15-9 SECTION 2. This Act takes effect January 1, 2002.