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