By Carona, et al. S.B. No. 507
77R5447 PAM-F
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 the
1-10 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 property owners' association
4-24 regardless of whether the entity is designated as a "homeowners'
4-25 association," "community association," or similar designation in
4-26 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 of the
5-6 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 all records of the association, including
5-26 financial records, reasonably available for examination by a
5-27 property owner during normal business hours at the association's
6-1 registered office or its principal office in this state.
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 property owner; or
6-7 (3) subject to production in a legal proceeding.
6-8 Sec. 209.006. NOTICE REQUIRED BEFORE ENFORCEMENT ACTION. (a)
6-9 Before a property owners' association may suspend an owner's right
6-10 to use a common area, file a suit against an owner, other than a
6-11 suit to foreclose under an association's lien, charge an owner for
6-12 property damage, or levy a fine for a violation of the restrictions
6-13 or bylaws or rules of the association, the association or its agent
6-14 must give written notice to the owner.
6-15 (b) The notice must:
6-16 (1) describe the violation or property damage that is
6-17 the basis for the suspension action, charge, or fine and state any
6-18 amount due to the association by the owner; and
6-19 (2) inform the owner that the owner:
6-20 (A) is entitled to a reasonable period to cure
6-21 the violation and avoid the fine or suspension unless the owner was
6-22 given notice and a reasonable opportunity to cure a similar
6-23 violation within the preceding 12 months; and
6-24 (B) may request a hearing under Section 209.007
6-25 on or before the 30th day after the date the owner receives the
6-26 notice.
6-27 Sec. 209.007. HEARING BEFORE BOARD; ALTERNATIVE DISPUTE
7-1 RESOLUTION. (a) If the property owner is entitled to an
7-2 opportunity to cure the violation, the owner has the right to
7-3 submit a written request for a hearing to discuss and verify facts
7-4 and resolve the matter in issue before a committee appointed by the
7-5 board of the property owners' association, or before the board if
7-6 the board does not appoint a committee.
7-7 (b) If a hearing is to be held before a committee, the
7-8 notice prescribed by Section 209.006 must state that the owner has
7-9 the right to appeal the committee's decision to the board by
7-10 written notice to the board.
7-11 (c) The association shall hold a hearing under this section
7-12 not later than the 30th day after the date the board receives the
7-13 owner's request for a hearing and shall notify the owner of the
7-14 date, time, and place of the hearing not later than the 10th day
7-15 before the date of the hearing. The board or the owner may request
7-16 a postponement, and, if requested, a postponement shall be granted
7-17 for a period of not more than 10 days. Additional postponements
7-18 may be granted by agreement of the parties. The owner or the
7-19 association may make an audio recording of the meeting.
7-20 (d) The notice and hearing provisions of Section 209.006 and
7-21 this section do not apply if the association files a suit seeking a
7-22 temporary restraining order or temporary injunctive relief or files
7-23 a suit that includes foreclosure as a cause of action. If a suit
7-24 is filed relating to a matter to which those sections apply, a
7-25 party to the suit may file a motion to compel mediation. The notice
7-26 and hearing provisions of Section 209.006 and this section do not
7-27 apply to a temporary suspension of a person's right to use common
8-1 areas if the temporary suspension is the result of a violation that
8-2 occurred in a common area and involved a significant and immediate
8-3 risk of harm to others in the subdivision. The temporary
8-4 suspension is effective until the board makes a final determination
8-5 on the suspension action after following the procedures prescribed
8-6 by this section.
8-7 (e) An owner or property owners' association may use
8-8 alternative dispute resolution services.
8-9 Sec. 209.008. ATTORNEY'S FEES. (a) A property owners'
8-10 association may collect reimbursement of reasonable attorney's fees
8-11 and other reasonable costs incurred by the association relating to
8-12 collecting amounts, including damages, due the association for
8-13 enforcing restrictions or the bylaws or rules of the association
8-14 only if the owner is provided a written notice that attorney's fees
8-15 and costs will be charged to the owner if the delinquency or
8-16 violation continues after a date certain.
8-17 (b) An owner is not liable for attorney's fees incurred by
8-18 the association relating to a matter described by the notice under
8-19 Section 209.006 if the attorney's fees are incurred before the
8-20 conclusion of the hearing under Section 209.007 or, if the owner
8-21 does not request a hearing under that section, before the date by
8-22 which the owner must request a hearing. The owner's presence is
8-23 not required to hold a hearing under Section 209.007.
8-24 (c) Attorney's fees and other costs incurred by the
8-25 association collected from the owner shall be paid directly to the
8-26 association or its management company or jointly to the association
8-27 or its management company and the attorney representing the
9-1 association.
9-2 (d) On written request from the owner, the association shall
9-3 provide copies of invoices for attorney's fees and other costs
9-4 relating to the matter for which the association seeks
9-5 reimbursement of fees and costs.
9-6 (e) The notice provisions of Subsection (a) do not apply to
9-7 a counterclaim of an association in a lawsuit brought against the
9-8 association by a property owner.
9-9 Sec. 209.009. NOTICE AFTER FORECLOSURE SALE. (a) A
9-10 property owners' association that conducts a foreclosure sale of an
9-11 owner's lot must send to the lot owner, by certified mail, return
9-12 receipt requested, not later than the 30th day after the date of
9-13 the foreclosure sale a written notice stating the date and time the
9-14 sale occurred and informing the lot owner of the owner's right to
9-15 redeem the property under Section 209.010.
9-16 (b) The notice must be sent by certified mail, return
9-17 receipt requested, to the property owner's last known mailing
9-18 address, as reflected in the records of the property owners'
9-19 association.
9-20 (c) Not later than the 30th day after the date the
9-21 association sends the notice required by Subsection (a), the
9-22 association must record an affidavit in the real property records
9-23 of the county in which the lot is located, stating the date on
9-24 which the notice was sent and containing a legal description of the
9-25 lot. Any person is entitled to rely conclusively on the
9-26 information contained in the recorded affidavit.
9-27 Sec. 209.010. RIGHT OF REDEMPTION AFTER FORECLOSURE. (a)
10-1 The owner of property in a residential subdivision may redeem the
10-2 property from any purchaser at a sale foreclosing a property
10-3 owners' association's assessment lien not later than the 90th day
10-4 after the date the association mails written notice of the sale to
10-5 the owner under Section 209.009.
10-6 (b) A person who purchases property at a sale foreclosing a
10-7 property owners' association's assessment lien may not transfer
10-8 ownership of the property to a person other than a redeeming lot
10-9 owner during the redemption period.
10-10 (c) To redeem property purchased by the property owners'
10-11 association at foreclosure sale, the lot owner must pay to the
10-12 association:
10-13 (1) all amounts due the association at the time of the
10-14 foreclosure sale;
10-15 (2) interest from the date of the foreclosure sale to
10-16 the date of redemption on all amounts owed the association at the
10-17 rate stated in the dedicatory instruments for delinquent
10-18 assessments, or if no rate is stated, at an annual interest rate of
10-19 10 percent;
10-20 (3) costs incurred by the association in foreclosing
10-21 the lien and conveying the property to the redeeming lot owner,
10-22 including reasonable attorney's fees;
10-23 (4) any assessment levied against the property by the
10-24 association after the date of the foreclosure sale;
10-25 (5) any reasonable cost incurred by the association,
10-26 including mortgage payments and costs of repair, maintenance, and
10-27 leasing of the property; and
11-1 (6) the purchase price paid by the association at the
11-2 foreclosure sale less any amounts due the association under
11-3 Subdivision (1) that were satisfied out of foreclosure sale
11-4 proceeds.
11-5 (d) To redeem property purchased at the foreclosure sale by
11-6 a person other than the property owners' association, the lot
11-7 owner:
11-8 (1) must pay to the association:
11-9 (A) all amounts due the association at the time
11-10 of the foreclosure sale less the foreclosure sales price received
11-11 by the association from the purchaser;
11-12 (B) interest from the date of the foreclosure
11-13 sale through the date of redemption on all amounts owed the
11-14 association at the rate stated in the dedicatory instruments for
11-15 delinquent assessments, or if no rate is stated, at an annual
11-16 interest rate of 10 percent;
11-17 (C) costs incurred by the association in
11-18 foreclosing the lien and conveying the property to the redeeming
11-19 lot owner, including reasonable attorney's fees; and
11-20 (D) any unpaid assessments levied against the
11-21 property by the association after the date of the foreclosure sale;
11-22 and
11-23 (2) must pay to the person who purchased the property
11-24 at the foreclosure sale:
11-25 (A) any assessments levied against the property
11-26 by the association after the date of the foreclosure sale and paid
11-27 by the purchaser;
12-1 (B) the purchase price paid by the purchaser at
12-2 the foreclosure sale;
12-3 (C) interest from the date of foreclosure to the
12-4 date of redemption on the purchase price amount at an annual
12-5 interest rate of 10 percent; and
12-6 (D) any reasonable cost incurred by the
12-7 purchaser, including costs of repair, maintenance, and leasing of
12-8 the property.
12-9 (e) If a lot owner redeems the property under this section,
12-10 the purchaser of the property at foreclosure shall immediately
12-11 execute and deliver to the owner a deed transferring the property
12-12 to the redeeming lot owner.
12-13 (f) If, before the expiration of the redemption period, the
12-14 redeeming lot owner fails to record the deed from the foreclosing
12-15 purchaser or fails to record an affidavit stating that the lot
12-16 owner has redeemed the property, the lot owner's right of
12-17 redemption as against a bona fide purchaser or lender for value
12-18 expires after the redemption period.
12-19 (g) If the property owners' association purchases the
12-20 property at foreclosure, all rent and other income collected by the
12-21 association from the date of the foreclosure sale to the date of
12-22 redemption shall be credited toward the amount owed the association
12-23 under Subsection (c), and if there are excess proceeds, they shall
12-24 be refunded to the lot owner. If a person other than the
12-25 association purchases the property at foreclosure, all rent and
12-26 other income collected by the purchaser from the date of the
12-27 foreclosure sale to the date of redemption shall be credited toward
13-1 the amount owed the purchaser under Subsection (d), and if there
13-2 are excess proceeds, those proceeds shall be refunded to the lot
13-3 owner.
13-4 (h) If a person other than the property owners' association
13-5 is the purchaser at the foreclosure sale, before executing a deed
13-6 transferring the property to the redeeming lot owner, the purchaser
13-7 shall obtain an affidavit from the association or its authorized
13-8 agent stating that all amounts owed the association under
13-9 Subsection (d) have been paid. The association shall provide the
13-10 purchaser with the affidavit not later than the 10th day after the
13-11 date the association receives all amounts owed to the association
13-12 under Subsection (d). Failure of a purchaser to comply with this
13-13 subsection does not affect the validity of a redemption by a
13-14 redeeming lot owner.
13-15 (i) Property that is redeemed remains subject to all liens
13-16 and encumbrances on the property before foreclosure. Any lease
13-17 entered into by the purchaser of property at a sale foreclosing an
13-18 assessment lien of a property owners' association is subject to the
13-19 right of redemption provided by this section and the lot owner's
13-20 right to reoccupy the property immediately after the redemption.
13-21 (j) If a lot owner makes partial payment of amounts due to
13-22 the association at any time before the redemption period expires
13-23 but fails to pay all amounts necessary to redeem the property
13-24 before the redemption period expires, the association shall refund
13-25 any partial payments to the lot owner by mailing payment to the
13-26 owner's last known address as shown in the association's records
13-27 not later than the 30th day after the expiration date of the
14-1 redemption period.
14-2 (k) If a lot owner sends by certified mail, return receipt
14-3 requested, a written request to redeem the property on or before
14-4 the last day of the redemption period, the lot owner's right of
14-5 redemption is extended until the 10th day after the date the
14-6 association and any third party foreclosure purchaser provides
14-7 written notice to the lot owner of the amounts that must be paid to
14-8 redeem the property.
14-9 (l) After the redemption period and any extended redemption
14-10 period provided by Subsection (k) expires, the association or third
14-11 party foreclosure purchaser shall record an affidavit in the real
14-12 property records of the county in which the property is located
14-13 stating that the lot owner did not redeem the property during the
14-14 redemption period or any extended redemption period.
14-15 SECTION 2. This Act takes effect January 1, 2002.