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 PROTECTION ACT
 1-8           Sec. 209.001.  SHORT TITLE.  This chapter may be cited as the
 1-9     Texas Residential Property Owners Protection Act.
1-10           Sec. 209.002.  DEFINITIONS.  In this chapter:
1-11                 (1)  "Assessment" means a regular assessment, special
1-12     assessment, or other amount a property owner is required to pay a
1-13     property owners' association under the dedicatory instrument or by
1-14     law.
1-15                 (2)  "Board" means the governing body of a property
1-16     owners' association.
1-17                 (3)  "Declaration" means an instrument filed in the
1-18     real property records of a county that includes restrictive
1-19     covenants governing a residential subdivision.
1-20                 (4)  "Dedicatory instrument" means each governing
1-21     instrument covering the establishment, maintenance, and operation
1-22     of a residential subdivision.  The term includes restrictions or
1-23     similar instruments subjecting property to restrictive covenants,
1-24     bylaws, or similar instruments governing the administration or
1-25     operation of a property owners' association, to properly adopted
 2-1     rules and regulations of the property owners' association, and to
 2-2     all lawful amendments to the covenants, bylaws, rules, or
 2-3     regulations.
 2-4                 (5)  "Lot" means any designated parcel of land located
 2-5     in a residential subdivision, including any improvements on the
 2-6     designated parcel.
 2-7                 (6)  "Owner" means a person who holds record title to
 2-8     property in a residential subdivision and includes the personal
 2-9     representative of a person who holds record title to property in a
2-10     residential subdivision.
2-11                 (7)  "Property owners' association" or "association"
2-12     means an incorporated or unincorporated association that:
2-13                       (A)  is designated as the representative of the
2-14     owners of property in a residential subdivision;
2-15                       (B)  has a membership primarily consisting of the
2-16     owners of the property covered by the dedicatory instrument for the
2-17     residential subdivision; and
2-18                       (C)  manages or regulates the residential
2-19     subdivision for the benefit of the owners of property in the
2-20     residential subdivision.
2-21                 (8)  "Regular assessment" means an assessment, a
2-22     charge, a fee, or dues that each owner of property within a
2-23     residential subdivision is required to pay to the property owners'
2-24     association on a regular basis and that is designated for use by
2-25     the property owners' association for the benefit of the residential
2-26     subdivision as provided by the restrictions.
 3-1                 (9)  "Residential subdivision" or "subdivision" means a
 3-2     subdivision, planned unit development, townhouse regime, or similar
 3-3     planned development in which all land has been divided into two or
 3-4     more parts and is subject to restrictions that:
 3-5                       (A)  limit a majority of the land subject to the
 3-6     dedicatory instruments, excluding streets, common areas, and public
 3-7     areas, to residential use for single-family homes, townhomes, or
 3-8     duplexes only;
 3-9                       (B)  are recorded in the real property records of
3-10     the county in which the residential subdivision is located; and
3-11                       (C)  require membership in a property owners'
3-12     association that has authority to impose regular or special
3-13     assessments on the property in the subdivision.
3-14                 (10)  "Restrictions" means one or more restrictive
3-15     covenants contained or incorporated by reference in a properly
3-16     recorded map, plat, replat, declaration, or other instrument filed
3-17     in the real property records or map or plat records.  The term
3-18     includes any amendment or extension of the restrictions.
3-19                 (11)  "Restrictive covenant" means any covenant,
3-20     condition, or restriction contained in a dedicatory instrument,
3-21     whether mandatory, prohibitive, permissive, or administrative.
3-22                 (12)  "Special assessment" means an assessment, a
3-23     charge, a fee, or dues, other than a regular assessment, that each
3-24     owner of property located in a residential subdivision is required
3-25     to pay to the property owners' association, according to procedures
3-26     required by the dedicatory instruments, for:
 4-1                       (A)  defraying, in whole or in part, the cost,
 4-2     whether incurred before or after the assessment, of any
 4-3     construction or reconstruction, unexpected repair, or replacement
 4-4     of a capital improvement in common areas owned by the property
 4-5     owners' association, including the necessary fixtures and personal
 4-6     property related to the common areas;
 4-7                       (B)  maintenance and improvement of common areas
 4-8     owned by the property owners' association; or
 4-9                       (C)  other purposes of the property owners'
4-10     association as stated in its articles of incorporation or the
4-11     dedicatory instrument for the residential subdivision.
4-12           Sec. 209.003.  APPLICABILITY OF CHAPTER.  (a)  This chapter
4-13     applies only to a residential subdivision that is subject to
4-14     restrictions or provisions in a declaration that authorize the
4-15     property owners' association to collect regular or special
4-16     assessments on all or a majority of the property in the
4-17     subdivision.
4-18           (b)  This chapter applies only to a property owners'
4-19     association that requires mandatory membership in the association
4-20     for all or a majority of the owners of residential property within
4-21     the subdivision subject to the association's dedicatory
4-22     instruments.
4-23           (c)  This chapter applies to a residential property owners'
4-24     association regardless of whether the entity is designated as a
4-25     "homeowners' association," "community association," or similar
4-26     designation in the restrictions or dedicatory instrument.
 5-1           (d)  This chapter does not apply to a condominium development
 5-2     governed by Chapter 82.
 5-3           Sec. 209.004.  MANAGEMENT CERTIFICATES.  (a)  A property
 5-4     owners' association shall record in each county in which any
 5-5     portion of the residential subdivision is located a management
 5-6     certificate, signed and acknowledged by an officer or the managing
 5-7     agent of the association, stating:
 5-8                 (1)  the name of the subdivision;
 5-9                 (2)  the name of the association;
5-10                 (3)  the recording data for the subdivision;
5-11                 (4)  the recording data for the declaration;
5-12                 (5)  the mailing address of the association or the name
5-13     and mailing address of the person managing the association; and
5-14                 (6)  other information the association considers
5-15     appropriate.
5-16           (b)  The property owners' association shall record an amended
5-17     management certificate not later than the 30th day after the date
5-18     the association has notice of a change in any information in the
5-19     recorded certificate required by Subsection (a).
5-20           (c)  The property owners' association and its officers,
5-21     directors, employees, and agents are not subject to liability to
5-22     any person for a delay in recording or failure to record a
5-23     management certificate, unless the delay or failure is wilful or
5-24     caused by gross negligence.
5-25           Sec. 209.005.  ASSOCIATION RECORDS.  (a)  A property owners'
5-26     association shall make the books and records of the association,
 6-1     including financial records, reasonably available to an owner in
 6-2     accordance with Section B, Article 2.23, Texas Non-Profit
 6-3     Corporation Act (Article 1396-2.23, Vernon's Texas Civil Statutes).
 6-4           (b)  An attorney's files and records relating to the
 6-5     association, excluding invoices requested by an owner under Section
 6-6     209.008(d), are not:
 6-7                 (1)  records of the association;
 6-8                 (2)  subject to inspection by the owner; or
 6-9                 (3)  subject to production in a legal proceeding.
6-10           Sec. 209.006.  NOTICE REQUIRED BEFORE ENFORCEMENT ACTION.
6-11     (a)  Before a property owners' association may suspend an owner's
6-12     right to use a common area, file a suit against an owner other than
6-13     a suit to collect a regular or special assessment or foreclose
6-14     under an association's lien, charge an owner for property damage,
6-15     or levy a fine for a violation of the restrictions or bylaws or
6-16     rules of the association, the association or its agent must give
6-17     written notice to the owner by certified mail, return receipt
6-18     requested.
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 six 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)  All attorney's fees, costs, and other amounts collected
 9-5     from an owner shall be deposited into an account maintained at a
 9-6     financial institution in the name of the association or its
 9-7     managing agent.  Only members of the association's board or its
 9-8     managing agent or employees of its managing agent may be
 9-9     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 only 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           (f)  If the dedicatory instrument or restrictions of an
9-18     association allow for nonjudicial foreclosure, the amount of
9-19     attorney's fees that a property owners' association may include in
9-20     a nonjudicial foreclosure sale for an indebtedness covered by a
9-21     property owners' association's assessment lien is limited to the
9-22     greater of:
9-23                 (1)  one-third of the amount of all actual costs and
9-24     assessments, excluding attorney's fees, plus interest and court
9-25     costs, if those amounts are permitted to be included by law or by
9-26     the restrictive covenants governing the property; or
 10-1                (2)  $2,500.
 10-2          (g)  Subsection (f) does not prevent a property owners'
 10-3    association from recovering or collecting attorney's fees in excess
 10-4    of the amounts prescribed by Subsection (f) by other means provided
 10-5    by law.
 10-6          Sec. 209.009.  FORECLOSURE SALE PROHIBITED IN CERTAIN
 10-7    CIRCUMSTANCES.  A property owners' association may not foreclose a
 10-8    property owners' association's assessment lien if the debt securing
 10-9    the lien consists solely of:
10-10                (1)  fines assessed by the association; or
10-11                (2)  attorney's fees incurred by the association solely
10-12    associated with fines assessed by the association.
10-13          Sec. 209.010.  NOTICE AFTER FORECLOSURE SALE.  (a)  A
10-14    property owners' association that conducts a foreclosure sale of an
10-15    owner's lot must send to the lot owner not later than the 30th day
10-16    after the date of the foreclosure sale a written notice stating the
10-17    date and time the sale occurred and informing the lot owner of the
10-18    owner's right to redeem the property under Section 209.011.
10-19          (b)  The notice must be sent by certified mail, return
10-20    receipt requested, to the lot owner's last known mailing address,
10-21    as reflected in the records of the property owners' association.
10-22          (c)  Not later than the 30th day after the date the
10-23    association sends the notice required by Subsection (a), the
10-24    association must record an affidavit in the real property records
10-25    of the county in which the lot is located, stating the date on
10-26    which the notice was sent and containing a legal description of the
 11-1    lot.  Any person is entitled to rely conclusively on the
 11-2    information contained in the recorded affidavit.
 11-3          (d)  The notice requirements of this section also apply to
 11-4    the sale of an owner's lot by a sheriff or constable conducted as
 11-5    provided by a judgment obtained by the property owners'
 11-6    association.
 11-7          Sec. 209.011.  RIGHT OF REDEMPTION AFTER FORECLOSURE.  (a)  A
 11-8    property owners' association or other person who purchases occupied
 11-9    property at a sale foreclosing a property owners' association's
11-10    assessment lien must commence and prosecute a forcible entry and
11-11    detainer action under Chapter 24 to recover possession of the
11-12    property.
11-13          (b)  The owner of property in a residential subdivision may
11-14    redeem the property from any purchaser at a sale foreclosing a
11-15    property owners' association's assessment lien not later than the
11-16    180th day after the date the association mails written notice of
11-17    the sale to the owner under Section 209.010.
11-18          (c)  A person who purchases property at a sale foreclosing a
11-19    property owners' association's assessment lien may not transfer
11-20    ownership of the property to a person other than a redeeming lot
11-21    owner during the redemption period.
11-22          (d)  To redeem property purchased by the property owners'
11-23    association at the foreclosure sale, the lot owner must pay to the
11-24    association:
11-25                (1)  all amounts due the association at the time of the
11-26    foreclosure sale;
 12-1                (2)  interest from the date of the foreclosure sale to
 12-2    the date of redemption on all amounts owed the association at the
 12-3    rate stated in the dedicatory instruments for delinquent
 12-4    assessments or, if no rate is stated, at an annual interest rate of
 12-5    10 percent;
 12-6                (3)  costs incurred by the association in foreclosing
 12-7    the lien and conveying the property to the redeeming lot owner,
 12-8    including reasonable attorney's fees;
 12-9                (4)  any assessment levied against the property by the
12-10    association after the date of the foreclosure sale;
12-11                (5)  any reasonable cost incurred by the association,
12-12    including mortgage payments and costs of repair, maintenance, and
12-13    leasing of the property; and
12-14                (6)  the purchase price paid by the association at the
12-15    foreclosure sale less any amounts due the association under
12-16    Subdivision (1) that were satisfied out of foreclosure sale
12-17    proceeds.
12-18          (e)  To redeem property purchased at the foreclosure sale by
12-19    a person other than the property owners' association, the lot
12-20    owner:
12-21                (1)  must pay to the association:
12-22                      (A)  all amounts due the association at the time
12-23    of the foreclosure sale less the foreclosure sales price received
12-24    by the association from the purchaser;
12-25                      (B)  interest from the date of the foreclosure
12-26    sale through the date of redemption on all amounts owed the
 13-1    association at the rate stated in the dedicatory instruments for
 13-2    delinquent assessments or, if no rate is stated, at an annual
 13-3    interest rate of 10 percent;
 13-4                      (C)  costs incurred by the association in
 13-5    foreclosing the lien and conveying the property to the redeeming
 13-6    lot owner, including reasonable attorney's fees;
 13-7                      (D)  any unpaid assessments levied against the
 13-8    property by the association after the date of the foreclosure sale;
 13-9    and
13-10                      (E)  taxable costs incurred in a proceeding
13-11    brought under Subsection (a); and
13-12                (2)  must pay to the person who purchased the property
13-13    at the foreclosure sale:
13-14                      (A)  any assessments levied against the property
13-15    by the association after the date of the foreclosure sale and paid
13-16    by the purchaser;
13-17                      (B)  the purchase price paid by the purchaser at
13-18    the foreclosure sale;
13-19                      (C)  the amount of the deed recording fee;
13-20                      (D)  the amount paid by the purchaser as ad
13-21    valorem taxes, penalties, and interest on the property after the
13-22    date of the foreclosure sale; and
13-23                      (E)  taxable costs incurred in a proceeding
13-24    brought under Subsection (a).
13-25          (f)  If a lot owner redeems the property under this section,
13-26    the purchaser of the property at foreclosure shall immediately
 14-1    execute and deliver to the owner a deed transferring the property
 14-2    to the redeeming lot owner.  If a purchaser fails to comply with
 14-3    this section, the lot owner may file a cause of action against the
 14-4    purchaser and may recover reasonable attorney's fees from the
 14-5    purchaser if the lot owner is the prevailing party in the action.
 14-6          (g)  If, before the expiration of the redemption period, the
 14-7    redeeming lot owner fails to record the deed from the foreclosing
 14-8    purchaser or fails to record an affidavit stating that the lot
 14-9    owner has redeemed the property, the lot owner's right of
14-10    redemption as against a bona fide purchaser or lender for value
14-11    expires after the redemption period.
14-12          (h)  The purchaser of the property at the foreclosure sale or
14-13    a person to whom the person who purchased the property at the
14-14    foreclosure sale transferred the property may presume conclusively
14-15    that the lot owner did not redeem the property unless the lot owner
14-16    files in the real property records of the county in which the
14-17    property is located:
14-18                (1)  a deed from the purchaser of the property at the
14-19    foreclosure sale; or
14-20                (2)  an affidavit that:
14-21                      (A)  states that the lot owner has redeemed the
14-22    property; and
14-23                      (B)  contains a legal description of the
14-24    property.
14-25          (i)  If the property owners' association purchases the
14-26    property at foreclosure, all rent and other income collected by the
 15-1    association from the date of the foreclosure sale to the date of
 15-2    redemption shall be credited toward the amount owed the association
 15-3    under Subsection (d), and if there are excess proceeds, they shall
 15-4    be refunded to the lot owner.  If a person other than the
 15-5    association purchases the property at foreclosure, all rent and
 15-6    other income collected by the purchaser from the date of the
 15-7    foreclosure sale to the date of redemption shall be credited toward
 15-8    the amount owed the purchaser under Subsection (e), and if there
 15-9    are excess proceeds, those proceeds shall be refunded to the lot
15-10    owner.
15-11          (j)  If a person other than the property owners' association
15-12    is the purchaser at the foreclosure sale, before executing a deed
15-13    transferring the property to the redeeming lot owner, the purchaser
15-14    shall obtain an affidavit from the association or its authorized
15-15    agent stating that all amounts owed the association under
15-16    Subsection (e) have been paid.  The association shall provide the
15-17    purchaser with the affidavit not later than the 10th day after the
15-18    date the association receives all amounts owed to the association
15-19    under Subsection (e).  Failure of a purchaser to comply with this
15-20    subsection does not affect the validity of a redemption by a
15-21    redeeming lot owner.
15-22          (k)  Property that is redeemed remains subject to all liens
15-23    and encumbrances on the property before foreclosure.  Any lease
15-24    entered into by the purchaser of property at a sale foreclosing an
15-25    assessment lien of a property owners' association is subject to the
15-26    right of redemption provided by this section and the lot owner's
 16-1    right to reoccupy the property immediately after the redemption.
 16-2          (l)  If a lot owner makes partial payment of amounts due the
 16-3    association at any time before the redemption period expires but
 16-4    fails to pay all amounts necessary to redeem the property before
 16-5    the redemption period expires, the association shall refund any
 16-6    partial payments to the lot owner by mailing payment to the owner's
 16-7    last known address as shown in the association's records not later
 16-8    than the 30th day after the expiration date of the redemption
 16-9    period.
16-10          (m)  If a lot owner sends by certified mail, return receipt
16-11    requested, a written request to redeem the property on or before
16-12    the last day of the redemption period, the lot owner's right of
16-13    redemption is extended until the 10th day after the date the
16-14    association and any third party foreclosure purchaser provides
16-15    written notice to the lot owner of the amounts that must be paid to
16-16    redeem the property.
16-17          (n)  After the redemption period and any extended redemption
16-18    period provided by Subsection (m) expires, the association or third
16-19    party foreclosure purchaser shall record an affidavit in the real
16-20    property records of the county in which the property is located
16-21    stating that the lot owner did not redeem the property during the
16-22    redemption period or any extended redemption period.
16-23          (o)  The association or the person who purchased the property
16-24    at the foreclosure sale may file an affidavit in the real property
16-25    records of the county in which the property is located that states
16-26    the date the citation was served in a suit under Subsection (a) and
 17-1    contains a legal description of the property.  Any person may rely
 17-2    conclusively on the information contained in the affidavit.
 17-3          (p)  The rights of a lot owner under this section also apply
 17-4    if the sale of the lot owner's property is conducted by a constable
 17-5    or sheriff as provided by a judgment obtained by the property
 17-6    owners' association.
 17-7          SECTION 2.  S.B. No. 507, 77th Legislature, Regular Session,
 17-8    2001, is enacted in honor of Wenonah Blevins and may be
 17-9    unofficially referred to as the Wenonah Blevins Residential
17-10    Property Owners Protection Act.
17-11          SECTION 3.  This Act takes effect January 1, 2002.
                                                                S.B. No. 507
            _______________________________     _______________________________
                President of the Senate              Speaker of the House
                  I hereby certify that S.B. No. 507 passed the Senate on
            April 2, 2001, by a viva-voce vote; May 18, 2001, Senate refused to
            concur in House amendments and requested appointment of Conference
            Committee; May 21, 2001, House granted request of the Senate;
            May 27, 2001, Senate adopted Conference Committee Report by the
            following vote:  Yeas 17, Nays 1, one present not voting.
                                                _______________________________
                                                    Secretary of the Senate
                  I hereby certify that S.B. No. 507 passed the House, with
            amendments, on May 16, 2001, by a non-record vote; May 21, 2001,
            House granted request of the Senate for appointment of Conference
            Committee; May 27, 2001, House adopted Conference Committee Report
            by a non-record vote.
                                                _______________________________
                                                    Chief Clerk of the House
            Approved:
            _______________________________
                         Date
            _______________________________
                       Governor