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.