77R15398 E
By Carona, et al. S.B. No. 507
Substitute the following for S.B. No. 507:
By Dutton C.S.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,
2-1 bylaws, or similar instruments governing the administration or
2-2 operation of a property owners' association, to properly adopted
2-3 rules and regulations of the property owners' association, and to
2-4 all lawful amendments to the covenants, bylaws, rules, or
2-5 regulations.
2-6 (5) "Lot" means any designated parcel of land located
2-7 in a residential subdivision, including any improvements on the
2-8 designated parcel.
2-9 (6) "Owner" means a person who holds record title to
2-10 property in a residential subdivision and includes the personal
2-11 representative of a person who holds record title to property in a
2-12 residential subdivision.
2-13 (7) "Property owners' association" or "association"
2-14 means an incorporated or unincorporated association that:
2-15 (A) is designated as the representative of the
2-16 owners of property in a residential subdivision;
2-17 (B) has a membership primarily consisting of the
2-18 owners of the property covered by the dedicatory instrument for the
2-19 residential subdivision; and
2-20 (C) manages or regulates the residential
2-21 subdivision for the benefit of the owners of property in the
2-22 residential subdivision.
2-23 (8) "Regular assessment" means an assessment, a
2-24 charge, a fee, or dues that each owner of property within a
2-25 residential subdivision is required to pay to the property owners'
2-26 association on a regular basis and that is designated for use by
2-27 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
3-27 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.
4-27 (d) This chapter does not apply to a condominium development
5-1 governed by Chapter 82.
5-2 Sec. 209.004. MANAGEMENT CERTIFICATES. (a) A property
5-3 owners' association shall record in each county in which any
5-4 portion of the residential subdivision is located a management
5-5 certificate, signed and acknowledged by an officer or the managing
5-6 agent of the association, stating:
5-7 (1) the name of the subdivision;
5-8 (2) the name of the association;
5-9 (3) the recording data for the subdivision;
5-10 (4) the recording data for the declaration;
5-11 (5) the mailing address of the association or the name
5-12 and mailing address of the person managing the association; and
5-13 (6) other information the association considers
5-14 appropriate.
5-15 (b) The property owners' association shall record an amended
5-16 management certificate not later than the 30th day after the date
5-17 the association has notice of a change in any information in the
5-18 recorded certificate required by Subsection (a).
5-19 (c) The property owners' association and its officers,
5-20 directors, employees, and agents are not subject to liability to
5-21 any person for a delay in recording or failure to record a
5-22 management certificate, unless the delay or failure is wilful or
5-23 caused by gross negligence.
5-24 Sec. 209.005. ASSOCIATION RECORDS. (a) A property owners'
5-25 association shall make the books and records of the association,
5-26 including financial records, reasonably available to an owner in
5-27 accordance with Section B, Article 2.23, Texas Non-Profit
6-1 Corporation Act (Article 1396-2.23, Vernon's Texas Civil Statutes).
6-2 (b) An attorney's files and records relating to the
6-3 association, excluding invoices requested by an owner under Section
6-4 209.008(d), are not:
6-5 (1) records of the association;
6-6 (2) subject to inspection by the owner; or
6-7 (3) subject to production in a legal proceeding.
6-8 Sec. 209.006. NOTICE REQUIRED BEFORE ENFORCEMENT ACTION.
6-9 (a) Before a property owners' association may suspend an owner's
6-10 right to use a common area, file a suit against an owner other than
6-11 a suit to collect a regular or special assessment or foreclose
6-12 under an association's lien, charge an owner for property damage,
6-13 or levy a fine for a violation of the restrictions or bylaws or
6-14 rules of the association, the association or its agent must give
6-15 written notice to the owner.
6-16 (b) The notice must:
6-17 (1) describe the violation or property damage that is
6-18 the basis for the suspension action, charge, or fine and state any
6-19 amount due the association from the owner; and
6-20 (2) inform the owner that the owner:
6-21 (A) is entitled to a reasonable period to cure
6-22 the violation and avoid the fine or suspension unless the owner was
6-23 given notice and a reasonable opportunity to cure a similar
6-24 violation within the preceding 12 months; and
6-25 (B) may request a hearing under Section 209.007
6-26 on or before the 30th day after the date the owner receives the
6-27 notice.
7-1 Sec. 209.007. HEARING BEFORE BOARD; ALTERNATIVE DISPUTE
7-2 RESOLUTION. (a) If the owner is entitled to an opportunity to
7-3 cure the violation, the owner has the right to submit a written
7-4 request for a hearing to discuss and verify facts and resolve the
7-5 matter in issue before a committee appointed by the board of the
7-6 property owners' association or before the board if the board does
7-7 not appoint a committee.
7-8 (b) If a hearing is to be held before a committee, the
7-9 notice prescribed by Section 209.006 must state that the owner has
7-10 the right to appeal the committee's decision to the board by
7-11 written notice to the board.
7-12 (c) The association shall hold a hearing under this section
7-13 not later than the 30th day after the date the board receives the
7-14 owner's request for a hearing and shall notify the owner of the
7-15 date, time, and place of the hearing not later than the 10th day
7-16 before the date of the hearing. The board or the owner may request
7-17 a postponement, and, if requested, a postponement shall be granted
7-18 for a period of not more than 10 days. Additional postponements
7-19 may be granted by agreement of the parties. The owner or the
7-20 association may make an audio recording of the meeting.
7-21 (d) The notice and hearing provisions of Section 209.006 and
7-22 this section do not apply if the association files a suit seeking a
7-23 temporary restraining order or temporary injunctive relief or files
7-24 a suit that includes foreclosure as a cause of action. If a suit
7-25 is filed relating to a matter to which those sections apply, a
7-26 party to the suit may file a motion to compel mediation. The
7-27 notice and hearing provisions of Section 209.006 and this section
8-1 do not apply to a temporary suspension of a person's right to use
8-2 common areas if the temporary suspension is the result of a
8-3 violation that occurred in a common area and involved a significant
8-4 and immediate risk of harm to others in the subdivision. The
8-5 temporary suspension is effective until the board makes a final
8-6 determination on the suspension action after following the
8-7 procedures prescribed by this section.
8-8 (e) An owner or property owners' association may use
8-9 alternative dispute resolution services.
8-10 Sec. 209.008. ATTORNEY'S FEES. (a) A property owners'
8-11 association may collect reimbursement of reasonable attorney's fees
8-12 and other reasonable costs incurred by the association relating to
8-13 collecting amounts, including damages, due the association for
8-14 enforcing restrictions or the bylaws or rules of the association
8-15 only if the owner is provided a written notice that attorney's fees
8-16 and costs will be charged to the owner if the delinquency or
8-17 violation continues after a date certain.
8-18 (b) An owner is not liable for attorney's fees incurred by
8-19 the association relating to a matter described by the notice under
8-20 Section 209.006 if the attorney's fees are incurred before the
8-21 conclusion of the hearing under Section 209.007 or, if the owner
8-22 does not request a hearing under that section, before the date by
8-23 which the owner must request a hearing. The owner's presence is
8-24 not required to hold a hearing under Section 209.007.
8-25 (c) All attorney's fees, costs, and other amounts collected
8-26 from an owner shall be deposited into an account maintained at a
8-27 financial institution in the name of the association or its
9-1 managing agent. Only members of the association's board or its
9-2 managing agent or employees of its managing agent may be
9-3 signatories on the account.
9-4 (d) On written request from the owner, the association shall
9-5 provide copies of invoices for attorney's fees and other costs
9-6 relating only to the matter for which the association seeks
9-7 reimbursement of fees and costs.
9-8 (e) The notice provisions of Subsection (a) do not apply to
9-9 a counterclaim of an association in a lawsuit brought against the
9-10 association by a property owner.
9-11 (f) The amount of attorney's fees that a property owners'
9-12 association may include in an indebtedness covered by a property
9-13 owners' association's assessment lien is limited to the greater of:
9-14 (1) one-third of the amount of all actual costs and
9-15 assessments, excluding attorney's fees, plus interest and court
9-16 costs, if those amounts are permitted to be included by law or by
9-17 the restrictive covenants governing the property; or
9-18 (2) $2,500.
9-19 (g) Subsection (f) does not prevent a property owners'
9-20 association from recovering or collecting attorney's fees in excess
9-21 of the amounts prescribed by Subsection (f) by other means provided
9-22 by law.
9-23 Sec. 209.009. FORECLOSURE SALE PROHIBITED IN CERTAIN
9-24 CIRCUMSTANCES. A property owners' association may not foreclose a
9-25 property owners' association's assessment lien if the debt securing
9-26 the lien consists solely of:
9-27 (1) fines assessed by the association; or
10-1 (2) attorney's fees incurred by the association solely
10-2 associated with fines assessed by the association.
10-3 Sec. 209.010. NOTICE AFTER FORECLOSURE SALE. (a) A property
10-4 owners' association that conducts a foreclosure sale of an owner's
10-5 lot must send to the lot owner, by certified mail, return receipt
10-6 requested, not later than the 30th day after the date of the
10-7 foreclosure sale a written notice stating the date and time the
10-8 sale occurred and informing the lot owner of the owner's right to
10-9 redeem the property under Section 209.011.
10-10 (b) The notice must be sent by certified mail, return
10-11 receipt requested, to the property owner's last known mailing
10-12 address, as reflected in the records of the property owners'
10-13 association.
10-14 (c) Not later than the 30th day after the date the
10-15 association sends the notice required by Subsection (a), the
10-16 association must record an affidavit in the real property records
10-17 of the county in which the lot is located, stating the date on
10-18 which the notice was sent and containing a legal description of the
10-19 lot. Any person is entitled to rely conclusively on the
10-20 information contained in the recorded affidavit.
10-21 (d) The notice requirements of this section also apply to
10-22 the sale of an owner's lot by a sheriff or constable conducted as
10-23 provided by a judgment obtained by the property owners'
10-24 association.
10-25 Sec. 209.011. RIGHT OF REDEMPTION AFTER FORECLOSURE. (a) A
10-26 property owners' association or other person who purchases property
10-27 at a sale foreclosing a property owners' association's assessment
11-1 lien must commence and prosecute a forcible entry and detainer
11-2 action under Chapter 24 to recover possession of the property.
11-3 (b) The owner of property in a residential subdivision may
11-4 redeem the property from any purchaser at a sale foreclosing a
11-5 property owners' association's assessment lien not later than the
11-6 earlier of:
11-7 (1) the 90th day after the date the owner is served
11-8 with citation in a forcible entry and detainer action; or
11-9 (2) the second anniversary of the date of the
11-10 foreclosure sale.
11-11 (c) A person who purchases property at a sale foreclosing a
11-12 property owners' association's assessment lien may not transfer
11-13 ownership of the property to a person other than a redeeming lot
11-14 owner during the redemption period.
11-15 (d) To redeem property purchased by the property owners'
11-16 association at the foreclosure sale, the lot owner must pay to the
11-17 association:
11-18 (1) all amounts due the association at the time of the
11-19 foreclosure sale;
11-20 (2) interest from the date of the foreclosure sale to
11-21 the date of redemption on all amounts owed the association at the
11-22 rate stated in the dedicatory instruments for delinquent
11-23 assessments or, if no rate is stated, at an annual interest rate of
11-24 10 percent;
11-25 (3) costs incurred by the association in foreclosing
11-26 the lien and conveying the property to the redeeming lot owner,
11-27 including reasonable attorney's fees;
12-1 (4) any assessment levied against the property by the
12-2 association after the date of the foreclosure sale;
12-3 (5) any reasonable cost incurred by the association,
12-4 including mortgage payments and costs of repair, maintenance, and
12-5 leasing of the property; and
12-6 (6) the purchase price paid by the association at the
12-7 foreclosure sale less any amounts due the association under
12-8 Subdivision (1) that were satisfied out of foreclosure sale
12-9 proceeds.
12-10 (e) To redeem property purchased at the foreclosure sale by
12-11 a person other than the property owners' association, the lot
12-12 owner:
12-13 (1) must pay to the association:
12-14 (A) all amounts due the association at the time
12-15 of the foreclosure sale less the foreclosure sales price received
12-16 by the association from the purchaser;
12-17 (B) interest from the date of the foreclosure
12-18 sale through the date of redemption on all amounts owed the
12-19 association at the rate stated in the dedicatory instruments for
12-20 delinquent assessments or, if no rate is stated, at an annual
12-21 interest rate of 10 percent;
12-22 (C) costs incurred by the association in
12-23 foreclosing the lien and conveying the property to the redeeming
12-24 lot owner, including reasonable attorney's fees;
12-25 (D) any unpaid assessments levied against the
12-26 property by the association after the date of the foreclosure sale;
12-27 and
13-1 (E) taxable costs incurred in a proceeding
13-2 brought under Subsection (a); and
13-3 (2) must pay to the person who purchased the property
13-4 at the foreclosure sale:
13-5 (A) any assessments levied against the property
13-6 by the association after the date of the foreclosure sale and paid
13-7 by the purchaser;
13-8 (B) the purchase price paid by the purchaser at
13-9 the foreclosure sale;
13-10 (C) the amount of the deed recording fee;
13-11 (D) the amount paid by the purchaser as ad
13-12 valorem taxes, penalties, and interest on the property after the
13-13 date of the foreclosure sale;
13-14 (E) taxable costs incurred in a proceeding
13-15 brought under Subsection (a); and
13-16 (F) a redemption premium of 25 percent of the
13-17 aggregate total of the amount paid under Paragraphs (A)-(E).
13-18 (f) If a lot owner redeems the property under this section,
13-19 the purchaser of the property at foreclosure shall immediately
13-20 execute and deliver to the owner a deed transferring the property
13-21 to the redeeming lot owner. If a purchaser fails to comply with
13-22 this section, the lot owner may file a cause of action against the
13-23 purchaser and may recover reasonable attorney's fees from the
13-24 purchaser if the lot owner is the prevailing party in the action.
13-25 (g) If, before the expiration of the redemption period, the
13-26 redeeming lot owner fails to record the deed from the foreclosing
13-27 purchaser or fails to record an affidavit stating that the lot
14-1 owner has redeemed the property, the lot owner's right of
14-2 redemption as against a bona fide purchaser or lender for value
14-3 expires after the redemption period.
14-4 (h) The purchaser of the property at the foreclosure sale or
14-5 a person to whom the person who purchased the property at the
14-6 foreclosure sale transferred the property may presume conclusively
14-7 that the lot owner did not redeem the property unless the lot owner
14-8 files in the real property records of the county in which the
14-9 property is located:
14-10 (1) a deed from the purchaser of the property at the
14-11 foreclosure sale; or
14-12 (2) an affidavit that:
14-13 (A) states that the lot owner has redeemed the
14-14 property; and
14-15 (B) contains a legal description of the
14-16 property.
14-17 (i) If the property owners' association purchases the
14-18 property at foreclosure, all rent and other income collected by the
14-19 association from the date of the foreclosure sale to the date of
14-20 redemption shall be credited toward the amount owed the association
14-21 under Subsection (d), and if there are excess proceeds, they shall
14-22 be refunded to the lot owner. If a person other than the
14-23 association purchases the property at foreclosure, all rent and
14-24 other income collected by the purchaser from the date of the
14-25 foreclosure sale to the date of redemption shall be credited toward
14-26 the amount owed the purchaser under Subsection (e), and if there
14-27 are excess proceeds, those proceeds shall be refunded to the lot
15-1 owner.
15-2 (j) If a person other than the property owners' association
15-3 is the purchaser at the foreclosure sale, before executing a deed
15-4 transferring the property to the redeeming lot owner, the purchaser
15-5 shall obtain an affidavit from the association or its authorized
15-6 agent stating that all amounts owed the association under
15-7 Subsection (e) have been paid. The association shall provide the
15-8 purchaser with the affidavit not later than the 10th day after the
15-9 date the association receives all amounts owed to the association
15-10 under Subsection (e). Failure of a purchaser to comply with this
15-11 subsection does not affect the validity of a redemption by a
15-12 redeeming lot owner.
15-13 (k) Property that is redeemed remains subject to all liens
15-14 and encumbrances on the property before foreclosure. Any lease
15-15 entered into by the purchaser of property at a sale foreclosing an
15-16 assessment lien of a property owners' association is subject to the
15-17 right of redemption provided by this section and the lot owner's
15-18 right to reoccupy the property immediately after the redemption.
15-19 (l) If a lot owner makes partial payment of amounts due the
15-20 association at any time before the redemption period expires but
15-21 fails to pay all amounts necessary to redeem the property before
15-22 the redemption period expires, the association shall refund any
15-23 partial payments to the lot owner by mailing payment to the owner's
15-24 last known address as shown in the association's records not later
15-25 than the 30th day after the expiration date of the redemption
15-26 period.
15-27 (m) If a lot owner sends by certified mail, return receipt
16-1 requested, a written request to redeem the property on or before
16-2 the last day of the redemption period, the lot owner's right of
16-3 redemption is extended until the 10th day after the date the
16-4 association and any third party foreclosure purchaser provides
16-5 written notice to the lot owner of the amounts that must be paid to
16-6 redeem the property.
16-7 (n) After the redemption period and any extended redemption
16-8 period provided by Subsection (m) expires, the association or third
16-9 party foreclosure purchaser shall record an affidavit in the real
16-10 property records of the county in which the property is located
16-11 stating that the lot owner did not redeem the property during the
16-12 redemption period or any extended redemption period.
16-13 (o) The association or the person who purchased the property
16-14 at the foreclosure sale may file an affidavit in the real property
16-15 records of the county in which the property is located that states
16-16 the date the citation was served under Subsection (b)(1) and
16-17 contains a legal description of the property. Any person may rely
16-18 conclusively on the information contained in the affidavit.
16-19 (p) The rights of a lot owner under this section also apply
16-20 if the sale of the lot owner's property is conducted by a constable
16-21 or sheriff as provided by a judgment obtained by the property
16-22 owners' association.
16-23 Sec. 209.012. POWERS OF PROPERTY OWNERS' ASSOCIATION. In
16-24 addition to other powers granted by law, a property owners'
16-25 association subject to this chapter may:
16-26 (1) impose fines on property owners for littering
16-27 within the subdivision;
17-1 (2) prohibit property owners from keeping animals on
17-2 property within the subdivision that disrupt the quiet enjoyment of
17-3 other property owners within the subdivision;
17-4 (3) impose fines on property owners for keeping
17-5 animals prohibited by the restrictions governing the subdivision on
17-6 property within the subdivision; and
17-7 (4) remove or authorize the removal of an animal
17-8 described by Subdivision (2) or (3) from property within the
17-9 subdivision.
17-10 SECTION 2. This Act takes effect January 1, 2002.