1-1     By:  Carona, Ellis                                     S.B. No. 507
 1-2           (In the Senate - Filed February 1, 2001; February 5, 2001,
 1-3     read first time and referred to Committee on State Affairs;
 1-4     March 26, 2001, reported adversely, with favorable Committee
 1-5     Substitute by the following vote:  Yeas 6, Nays 0; March 26, 2001,
 1-6     sent to printer.)
 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 507                   By:  Carona
 1-8                            A BILL TO BE ENTITLED
 1-9                                   AN ACT
1-10     relating to residential subdivisions that require membership in a
1-11     property owners' association.
1-12           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13           SECTION 1.  Title 11, Property Code, is amended by adding
1-14     Chapter 209 to read as follows:
1-15               CHAPTER 209.  TEXAS RESIDENTIAL PROPERTY OWNERS
1-16                               PROTECTION ACT
1-17           Sec. 209.001.  SHORT TITLE.   This chapter may be cited as
1-18     the Texas Residential Property Owners Protection Act.
1-19           Sec. 209.002.  DEFINITIONS.   In this chapter:
1-20                 (1)  "Assessment" means a regular assessment, special
1-21     assessment, or other amount a property owner is required to pay a
1-22     property owners' association under the dedicatory instrument or by
1-23     law.
1-24                 (2)  "Board" means the governing body of a property
1-25     owners' association.
1-26                 (3)  "Declaration" means an instrument filed in the
1-27     real property records of a county that includes restrictive
1-28     covenants governing a residential subdivision.
1-29                 (4)  "Dedicatory instrument" means each governing
1-30     instrument covering the establishment, maintenance, and operation
1-31     of a residential subdivision.  The term includes restrictions or
1-32     similar instruments subjecting property to restrictive covenants,
1-33     bylaws, or similar instruments governing the administration or
1-34     operation of a property owners' association, to properly adopted
1-35     rules and regulations of the property owners' association, and to
1-36     all lawful amendments to the covenants, bylaws, rules, or
1-37     regulations.
1-38                 (5)  "Lot" means any designated parcel of land located
1-39     in a residential subdivision, including any improvements on the
1-40     designated parcel.
1-41                 (6)  "Owner" means a person who holds record title to
1-42     property in a residential subdivision and includes the personal
1-43     representative of a person who holds record title to property in a
1-44     residential subdivision.
1-45                 (7)  "Property owners' association" or "association"
1-46     means an incorporated or unincorporated association that:
1-47                       (A)  is designated as the representative of the
1-48     owners of property in a residential subdivision;
1-49                       (B)  has a membership primarily consisting of the
1-50     owners of the property covered by the dedicatory instrument for the
1-51     residential subdivision; and
1-52                       (C)  manages or regulates the residential
1-53     subdivision for the benefit of the owners of property in the
1-54     residential subdivision.
1-55                 (8)  "Regular assessment" means an assessment, a
1-56     charge, a fee, or dues that each owner of property within a
1-57     residential subdivision is required to pay to the property owners'
1-58     association on a regular basis and that is designated for use by
1-59     the property owners' association for the benefit of the residential
1-60     subdivision as provided by the restrictions.
1-61                 (9)  "Residential subdivision" or "subdivision" means a
1-62     subdivision, planned unit development, townhouse regime, or similar
1-63     planned development in which all land has been divided into two or
1-64     more parts and is subject to restrictions that:
 2-1                       (A)  limit a majority of the land subject to the
 2-2     dedicatory instruments, excluding streets, common areas, and public
 2-3     areas, to residential use for single-family homes, townhomes, or
 2-4     duplexes only;
 2-5                       (B)  are recorded in the real property records of
 2-6     the county in which the residential subdivision is located; and
 2-7                       (C)  require membership in a property owners'
 2-8     association that has authority to impose regular or special
 2-9     assessments on the property in the subdivision.
2-10                 (10)  "Restrictions" means one or more restrictive
2-11     covenants contained or incorporated by reference in a properly
2-12     recorded map, plat, replat, declaration, or other instrument filed
2-13     in the real property records or map or plat records.  The term
2-14     includes any amendment or extension of the restrictions.
2-15                 (11)  "Restrictive covenant" means any covenant,
2-16     condition, or restriction contained in a dedicatory instrument,
2-17     whether mandatory, prohibitive, permissive, or administrative.
2-18                 (12)  "Special assessment" means an assessment, a
2-19     charge, a fee, or dues, other than a regular assessment, that each
2-20     owner of property located in a residential subdivision is required
2-21     to pay to the property owners' association, according to procedures
2-22     required by the dedicatory instruments, for:
2-23                       (A)  defraying, in whole or in part, the cost,
2-24     whether incurred before or after the assessment, of any
2-25     construction or reconstruction, unexpected repair, or replacement
2-26     of a capital improvement in common areas owned by the property
2-27     owners' association, including the necessary fixtures and personal
2-28     property related to the common areas;
2-29                       (B)  maintenance and improvement of common areas
2-30     owned by the property owners' association; or
2-31                       (C)  other purposes of the property owners'
2-32     association as stated in its articles of incorporation or the
2-33     dedicatory instrument for the residential subdivision.
2-34           Sec. 209.003.  APPLICABILITY OF CHAPTER.  (a)  This chapter
2-35     applies only to a residential subdivision that is subject to
2-36     restrictions or provisions in a declaration that authorize the
2-37     property owners' association to collect regular or special
2-38     assessments on all or a majority of the property in the
2-39     subdivision.
2-40           (b)  This chapter applies only to a property owners'
2-41     association that requires mandatory membership in the association
2-42     for all or a majority of the owners of residential property within
2-43     the subdivision subject to the association's dedicatory
2-44     instruments.
2-45           (c)  This chapter applies to a property owners' association
2-46     regardless of whether the entity is designated as a "homeowners'
2-47     association," "community association," or similar designation in
2-48     the restrictions or dedicatory instrument.
2-49           (d)  This chapter does not apply to a condominium development
2-50     governed by Chapter 82.
2-51           Sec. 209.004.  MANAGEMENT CERTIFICATES.  (a)  A property
2-52     owners' association shall record in each county in which any
2-53     portion of the residential subdivision is located a management
2-54     certificate, signed and acknowledged by an officer of the
2-55     association, stating:
2-56                 (1)  the name of the subdivision;
2-57                 (2)  the name of the association;
2-58                 (3)  the recording data for the subdivision;
2-59                 (4)  the recording data for the declaration;
2-60                 (5)  the mailing address of the association or the name
2-61     and mailing address of the person managing the association; and
2-62                 (6)  other information the association considers
2-63     appropriate.
2-64           (b)  The property owners' association shall record an amended
2-65     management certificate not later than the 30th day after the date
2-66     the association has notice of a change in any information in the
2-67     recorded certificate required by Subsection (a).
2-68           (c)  The property owners' association and its officers,
2-69     directors, employees, and agents are not subject to liability to
 3-1     any person for a delay in recording or failure to record a
 3-2     management certificate, unless the delay or failure is wilful or
 3-3     caused by gross negligence.
 3-4           Sec. 209.005.  ASSOCIATION RECORDS.  (a)  A property owners'
 3-5     association shall make all records of the association, including
 3-6     financial records, reasonably available for examination by an owner
 3-7     during normal business hours at the association's registered office
 3-8     or its principal office in this state.
 3-9           (b)  An attorney's files and records relating to the
3-10     association, excluding invoices requested by an owner under Section
3-11     209.008(d), are not:
3-12                 (1)  records of the association;
3-13                 (2)  subject to inspection by the owner; or
3-14                 (3)  subject to production in a legal proceeding.
3-15           Sec. 209.006.  NOTICE REQUIRED BEFORE ENFORCEMENT ACTION.
3-16     (a)  Before a property owners' association may suspend an owner's
3-17     right to use a common area, file a suit against an owner other than
3-18     a suit to foreclose under an association's lien, charge an owner
3-19     for property damage, or levy a fine for a violation of the
3-20     restrictions or bylaws or rules of the association, the association
3-21     or its agent must give written notice to the owner.
3-22           (b)  The notice must:
3-23                 (1)  describe the violation or property damage that is
3-24     the basis for the suspension action, charge, or fine and state any
3-25     amount due the association from the owner; and
3-26                 (2)  inform the owner that the owner:
3-27                       (A)  is entitled to a reasonable period to cure
3-28     the violation and avoid the fine or suspension unless the owner was
3-29     given notice and a reasonable opportunity to cure a similar
3-30     violation within the preceding 12 months; and
3-31                       (B)  may request a hearing under Section 209.007
3-32     on or before the 30th day after the date the owner receives the
3-33     notice.
3-34           Sec. 209.007.  HEARING BEFORE BOARD; ALTERNATIVE DISPUTE
3-35     RESOLUTION.  (a)  If the owner is entitled to an opportunity to
3-36     cure the violation, the owner has the right to submit a written
3-37     request for a hearing to discuss and verify facts and resolve the
3-38     matter in issue before a committee appointed by the board of the
3-39     property owners' association, or before the board if the board does
3-40     not appoint a committee.
3-41           (b)  If a hearing is to be held before a committee, the
3-42     notice prescribed by Section 209.006 must state that the owner has
3-43     the right to appeal the committee's decision to the board by
3-44     written notice to the board.
3-45           (c)  The association shall hold a hearing under this section
3-46     not later than the 30th day after the date the board receives the
3-47     owner's request for a hearing and shall notify the owner of the
3-48     date, time, and place of the hearing not later than the 10th day
3-49     before the date of the hearing.  The board or the owner may request
3-50     a postponement, and, if requested, a postponement shall be granted
3-51     for a period of not more than 10 days.  Additional postponements
3-52     may be granted by agreement of the parties.  The owner or the
3-53     association may make an audio recording of the meeting.
3-54           (d)  The notice and hearing provisions of Section 209.006 and
3-55     this section do not apply if the association files a suit seeking a
3-56     temporary restraining order or temporary injunctive relief or files
3-57     a suit that includes foreclosure as a cause of action.  If a suit
3-58     is filed relating to a matter to which those sections apply, a
3-59     party to the suit may file a motion to compel mediation.  The
3-60     notice and hearing provisions of Section 209.006 and this section
3-61     do not apply to a temporary suspension of a person's right to use
3-62     common areas if the temporary suspension is the result of a
3-63     violation that occurred in a common area and involved a significant
3-64     and immediate risk of harm to others in the subdivision.  The
3-65     temporary suspension is effective until the board makes a final
3-66     determination on the suspension action after following the
3-67     procedures prescribed by this section.
3-68           (e)  An owner or property owners' association may use
3-69     alternative dispute resolution services.
 4-1           Sec. 209.008.  ATTORNEY'S FEES.  (a)  A property owners'
 4-2     association may collect reimbursement of reasonable attorney's fees
 4-3     and other reasonable costs incurred by the association relating to
 4-4     collecting amounts, including damages, due the association for
 4-5     enforcing restrictions or the bylaws or rules of the association
 4-6     only if the owner is provided a written notice that attorney's fees
 4-7     and costs will be charged to the owner if the delinquency or
 4-8     violation continues after a date certain.
 4-9           (b)  An owner is not liable for attorney's fees incurred by
4-10     the association relating to a matter described by the notice under
4-11     Section 209.006 if the attorney's fees are incurred before the
4-12     conclusion of the hearing under Section 209.007 or, if the owner
4-13     does not request a hearing under that section, before the date by
4-14     which the owner must request a hearing.  The owner's presence is
4-15     not required to hold a hearing under Section 209.007.
4-16           (c)  Attorney's fees and other costs incurred by the
4-17     association collected from the owner shall be paid directly to the
4-18     association or its management company or jointly to the association
4-19     or its management company and the attorney representing the
4-20     association.
4-21           (d)  On written request from the owner, the association shall
4-22     provide copies of invoices for attorney's fees and other costs
4-23     relating to the matter for which the association seeks
4-24     reimbursement of fees and costs.
4-25           (e)  The notice provisions of Subsection (a) do not apply to
4-26     a counterclaim of an association in a lawsuit brought against the
4-27     association by a property owner.
4-28           Sec. 209.009.  FORECLOSURE SALE PROHIBITED IN CERTAIN
4-29     CIRCUMSTANCES.  A property owners' association may not foreclose a
4-30     property owners' association assessment lien if the debt securing
4-31     the lien consists solely of:
4-32                 (1)  fines assessed by the association; or
4-33                 (2)  attorney's fees incurred by the association solely
4-34     associated with fines assessed by the association.
4-35           Sec. 209.010.  NOTICE AFTER FORECLOSURE SALE.  (a)  A
4-36     property owners' association that conducts a foreclosure sale of an
4-37     owner's lot must send to the lot owner, by certified mail, return
4-38     receipt requested, not later than the 30th day after the date of
4-39     the foreclosure sale a written notice stating the date and time the
4-40     sale occurred and informing the lot owner of the owner's right to
4-41     redeem the property under Section 209.011.
4-42           (b)  The notice must be sent by certified mail, return
4-43     receipt requested, to the property owner's last known mailing
4-44     address, as reflected in the records of the property owners'
4-45     association.
4-46           (c)  Not later than the 30th day after the date the
4-47     association sends the notice required by Subsection (a), the
4-48     association must record an affidavit in the real property records
4-49     of the county in which the lot is located, stating the date on
4-50     which the notice was sent and containing a legal description of the
4-51     lot.  Any person is entitled to rely conclusively on the
4-52     information contained in the recorded affidavit.
4-53           Sec. 209.011.  RIGHT OF REDEMPTION AFTER FORECLOSURE.
4-54     (a)  The owner of property in a residential subdivision may redeem
4-55     the property from any purchaser at a sale foreclosing a property
4-56     owners' association's assessment lien not later than the 90th day
4-57     after the date the association mails written notice of the sale to
4-58     the owner under Section 209.010.
4-59           (b)  A person who purchases property at a sale foreclosing a
4-60     property owners' association's assessment lien may not transfer
4-61     ownership of the property to a person other than a redeeming lot
4-62     owner during the redemption period.
4-63           (c)  To redeem property purchased by the property owners'
4-64     association at foreclosure sale, the lot owner must pay to the
4-65     association:
4-66                 (1)  all amounts due the association at the time of the
4-67     foreclosure sale;
4-68                 (2)  interest from the date of the foreclosure sale to
4-69     the date of redemption on all amounts owed the association at the
 5-1     rate stated in the dedicatory instruments for delinquent
 5-2     assessments or, if no rate is stated, at an annual interest rate of
 5-3     10 percent;
 5-4                 (3)  costs incurred by the association in foreclosing
 5-5     the lien and conveying the property to the redeeming lot owner,
 5-6     including reasonable attorney's fees;
 5-7                 (4)  any assessment levied against the property by the
 5-8     association after the date of the foreclosure sale;
 5-9                 (5)  any reasonable cost incurred by the association,
5-10     including mortgage payments and costs of repair, maintenance, and
5-11     leasing of the property; and
5-12                 (6)  the purchase price paid by the association at the
5-13     foreclosure sale less any amounts due the association under
5-14     Subdivision (1) that were satisfied out of foreclosure sale
5-15     proceeds.
5-16           (d)  To redeem property purchased at the foreclosure sale by
5-17     a person other than the property owners' association, the lot
5-18     owner:
5-19                 (1)  must pay to the association:
5-20                       (A)  all amounts due the association at the time
5-21     of the foreclosure sale less the foreclosure sales price received
5-22     by the association from the purchaser;
5-23                       (B)  interest from the date of the foreclosure
5-24     sale through the date of redemption on all amounts owed the
5-25     association at the rate stated in the dedicatory instruments for
5-26     delinquent assessments or, if no rate is stated, at an annual
5-27     interest rate of 10 percent;
5-28                       (C)  costs incurred by the association in
5-29     foreclosing the lien and conveying the property to the redeeming
5-30     lot owner, including reasonable attorney's fees; and
5-31                       (D)  any unpaid assessments levied against the
5-32     property by the association after the date of the foreclosure sale;
5-33     and
5-34                 (2)  must pay to the person who purchased the property
5-35     at the foreclosure sale:
5-36                       (A)  any assessments levied against the property
5-37     by the association after the date of the foreclosure sale and paid
5-38     by the purchaser;
5-39                       (B)  the purchase price paid by the purchaser at
5-40     the foreclosure sale;
5-41                       (C)  interest from the date of foreclosure to the
5-42     date of redemption on the purchase price amount at an annual
5-43     interest rate of 10 percent; and
5-44                       (D)  any reasonable cost incurred by the
5-45     purchaser, including costs of repair, maintenance, and leasing of
5-46     the property.
5-47           (e)  If a lot owner redeems the property under this section,
5-48     the purchaser of the property at foreclosure shall immediately
5-49     execute and deliver to the owner a deed transferring the property
5-50     to the redeeming lot owner.
5-51           (f)  If, before the expiration of the redemption period, the
5-52     redeeming lot owner fails to record the deed from the foreclosing
5-53     purchaser or fails to record an affidavit stating that the lot
5-54     owner has redeemed the property, the lot owner's right of
5-55     redemption as against a bona fide purchaser or lender for value
5-56     expires after the redemption period.
5-57           (g)  If the property owners' association purchases the
5-58     property at foreclosure, all rent and other income collected by the
5-59     association from the date of the foreclosure sale to the date of
5-60     redemption shall be credited toward the amount owed the association
5-61     under Subsection (c), and if there are excess proceeds, they shall
5-62     be refunded to the lot owner.  If a person other than the
5-63     association purchases the property at foreclosure, all rent and
5-64     other income collected by the purchaser from the date of the
5-65     foreclosure sale to the date of redemption shall be credited toward
5-66     the amount owed the purchaser under Subsection (d), and if there
5-67     are excess proceeds, those proceeds shall be refunded to the lot
5-68     owner.
5-69           (h)  If a person other than the property owners' association
 6-1     is the purchaser at the foreclosure sale, before executing a deed
 6-2     transferring the property to the redeeming lot owner, the purchaser
 6-3     shall obtain an affidavit from the association or its authorized
 6-4     agent stating that all amounts owed the association under
 6-5     Subsection (d) have been paid.  The association shall provide the
 6-6     purchaser with the affidavit not later than the 10th day after the
 6-7     date the association receives all amounts owed to the association
 6-8     under Subsection (d).  Failure of a purchaser to comply with this
 6-9     subsection does not affect the validity of a redemption by a
6-10     redeeming lot owner.
6-11           (i)  Property that is redeemed remains subject to all liens
6-12     and encumbrances on the property before foreclosure.  Any lease
6-13     entered into by the purchaser of property at a sale foreclosing an
6-14     assessment lien of a property owners' association is subject to the
6-15     right of redemption provided by this section and the lot owner's
6-16     right to reoccupy the property immediately after the redemption.
6-17           (j)  If a lot owner makes partial payment of amounts due the
6-18     association at any time before the redemption period expires but
6-19     fails to pay all amounts necessary to redeem the property before
6-20     the redemption period expires, the association shall refund any
6-21     partial payments to the lot owner by mailing payment to the owner's
6-22     last known address as shown in the association's records not later
6-23     than the 30th day after the expiration date of the redemption
6-24     period.
6-25           (k)  If a lot owner sends by certified mail, return receipt
6-26     requested, a written request to redeem the property on or before
6-27     the last day of the redemption period, the lot owner's right of
6-28     redemption is extended until the 10th day after the date the
6-29     association and any third party foreclosure purchaser provides
6-30     written notice to the lot owner of the amounts that must be paid to
6-31     redeem the property.
6-32           (l)  After the redemption period and any extended redemption
6-33     period provided by Subsection (k) expires, the association or third
6-34     party foreclosure purchaser shall record an affidavit in the real
6-35     property records of the county in which the property is located
6-36     stating that the lot owner did not redeem the property during the
6-37     redemption period or any extended redemption period.
6-38           SECTION 2.   This Act takes effect January 1, 2002.
6-39                                  * * * * *