By: Lindsay, Moncrief S.B. No. 1834 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to reimbursements to property owners following foreclosure 1-3 sales by property owners' associations. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Chapter 51, Property Code, is amended by adding 1-6 Section 51.008 to read as follows: 1-7 Sec. 51.008. FORECLOSURE OF LIEN FOR NONPAYMENT OF 1-8 ASSESSMENTS; MINIMUM BID PRICE. (a) In this section: 1-9 (1) "Assessment" means a regular assessment or special 1-10 assessment as defined by Section 204.001. 1-11 (2) "Property owners' association" means an 1-12 incorporated or unincorporated association that: 1-13 (A) is designated as the representative of the 1-14 owners of property in a residential subdivision; 1-15 (B) has a membership primarily consisting of the 1-16 owners of the property covered by the dedicatory instrument for the 1-17 residential subdivision; and 1-18 (C) manages or regulates the residential 1-19 subdivision for the benefit of the owners of property in the 1-20 residential subdivision. 1-21 (b) This section applies to a property owners' association 1-22 that forecloses a lien on real property to secure payment of 1-23 assessments due the association by the property owner. 1-24 (c) If a property owners' association authorizes the sale of 1-25 real property, the property owners' association shall establish a 2-1 minimum bid price and may not sell the property for less than the 2-2 minimum bid price. The minimum bid price shall be the greater of: 2-3 (1) the value of the property according to the most 2-4 recent appraisal by the appraisal district established for the 2-5 county in which the property is located, minus: 2-6 (A) the amount owing on any liens of record 2-7 against the property; and 2-8 (B) the amount of any taxes owing on the 2-9 property, whether or not the taxes are delinquent; or 2-10 (2) the amount owed on the debt for which the sale is 2-11 authorized plus any expenses expected to be attributed to the sale. 2-12 (d) In establishing the minimum bid price under Subsection 2-13 (c), the property owners' association may use any amount applicable 2-14 under Subsection (c) on or after the 20th day before the date the 2-15 property owners' association mails notice of sale to the property 2-16 owner. 2-17 (e) The property owners' association shall mail a 2-18 preforeclosure notice to the property owner not later than the 60th 2-19 day before the date the notice of sale under Subsection (d) is 2-20 mailed to the property owner. The preforeclosure notice must: 2-21 (1) inform the property owner that the property 2-22 owners' association: 2-23 (A) intends to foreclose the association's lien 2-24 on the property; and 2-25 (B) will establish a minimum bid price for the 2-26 foreclosure sale; 3-1 (2) request the property owner to provide documentary 3-2 evidence to the property owners' association regarding the 3-3 existence and amount of any lien on the property; 3-4 (3) state that if the requested documentary evidence 3-5 is provided on or before the 40th day after the date the notice is 3-6 mailed, the minimum bid price will be the greater of: 3-7 (A) the value of the property according to the 3-8 most recent appraisal by the appraisal district established for the 3-9 county in which the property is located, minus: 3-10 (i) the amount owing on any liens of 3-11 record against the property; and 3-12 (ii) the amount of any taxes owing on the 3-13 property, whether or not the taxes are delinquent; or 3-14 (B) the amount owed on the debt for which the 3-15 sale is authorized plus any expenses expected to be attributed to 3-16 the sale; 3-17 (4) state that if the property owner does not provide 3-18 the requested documentary evidence on or before the 40th day after 3-19 the date the notice is mailed or provides incomplete information 3-20 and there are any liens of record against the property, the 3-21 property owners' association may establish a minimum bid price that 3-22 is the amount owed for the debt for which the sale is authorized 3-23 plus any expenses expected to be attributed to the sale; 3-24 (5) provide the name and address of the person to whom 3-25 the requested documentary evidence may be provided; and 3-26 (6) state the amount the property owners' association 4-1 claims is owed on the debt for which the foreclosure sale will be 4-2 authorized and the amount the property owners' association will add 4-3 for expenses. 4-4 (f) The property owner has the burden of ensuring that any 4-5 documentary evidence reaches the person designated in the 4-6 preforeclosure notice within the period prescribed by Subsection 4-7 (e). 4-8 (g) The property owners' association has the burden of: 4-9 (1) checking the real property records of the county 4-10 in which all or part of the property is located to determine 4-11 whether a lien of record has been filed on the property; and 4-12 (2) obtaining a statement of the appraised value of 4-13 the property from the appraisal district established for the county 4-14 in which the property is located. 4-15 (h) If the real property to be sold under this section is 4-16 the principal residence of the property owner, not later than the 4-17 20th day after the date the preforeclosure notice is mailed, the 4-18 property owners' association shall make a reasonable attempt to 4-19 contact the property owner in person to advise the property owner 4-20 regarding the information required to be in the preforeclosure 4-21 notice. An attempt to contact the property owner must be made by a 4-22 member of the governing body of the property owners' association. 4-23 If no contact is made, the property owners' association must make 4-24 at least three attempts to contact the property owner by telephone 4-25 and three attempts to contact the owner in person at the owner's 4-26 residence. If the attempts to contact the property owner by 5-1 telephone and in person are not successful, a member of the 5-2 governing body of the property owners' association shall leave an 5-3 additional copy of the preforeclosure notice affixed to the front 5-4 door of the residence. 5-5 (i) If the property owners' association finds no liens of 5-6 record filed on the property to be sold, the minimum bid price is 5-7 the appraised value of the property according to the most recent 5-8 appraisal by the appraisal district established for the county in 5-9 which the property is located. If the property owners' association 5-10 finds a lien of record filed on the property and provides a 5-11 preforeclosure notice as prescribed by this section, and the 5-12 property owner fails to respond to the notice in the period 5-13 prescribed by Subsection (e): 5-14 (1) it is conclusively presumed that the amount owed 5-15 on the lien equals or exceeds the difference between the appraised 5-16 value of the property and the amount owed on the debt for which the 5-17 sale is authorized plus any expenses expected to be attributed to 5-18 the sale; and 5-19 (2) the minimum bid price may be established as the 5-20 amount owed on the debt for which the sale is authorized plus any 5-21 expenses expected to be attributed to the sale. 5-22 (j) A person does not have a cause of action against a 5-23 property owners' association for the property owners' association's 5-24 failure to establish a lower minimum bid price. 5-25 (k) The property owner has a cause of action against the 5-26 property owners' association for damages caused by the property 6-1 owners' association's failure to set a greater minimum bid price as 6-2 prescribed by this section. Damages under this subsection are 6-3 limited to the difference between the greater minimum bid price 6-4 that the property owners' association should have established under 6-5 this section and the amount owed on the debt for which the sale is 6-6 authorized plus the expenses of the sale. The property owner is 6-7 also entitled to recover reasonable attorney's fees. 6-8 (l) If no other bidder bids the minimum bid price, the 6-9 property owners' association may hold the property and must resell 6-10 the property for a price that equals or exceeds the minimum bid 6-11 price. If the property is held by the property owners' association 6-12 as provided by this subsection and the property was the principal 6-13 residence of the property owner at the time the preforeclosure 6-14 notice was mailed, the property owner may continue to reside on the 6-15 property until the closing on the resale of the property if all 6-16 mortgage or other lien payments are current and no taxes owed on 6-17 the property are delinquent. 6-18 (m) If the property owner continues to reside on the 6-19 property after the foreclosure sale, the property owners' 6-20 association may charge a reasonable rent to be deducted from the 6-21 amount owed the property owner at the time of the resale. If the 6-22 property owner does not pay all mortgage and other lien payments 6-23 and taxes when due, the property owners' association may evict the 6-24 property owner. 6-25 (n) When the property is sold to a buyer other than the 6-26 property owners' association, the proceeds shall be applied in the 7-1 following priority: 7-2 (1) expenses of the sale; 7-3 (2) the amount owed on the debt for which the sale was 7-4 authorized; 7-5 (3) any assessments that accrued against the property 7-6 after the sale was authorized; 7-7 (4) the remainder, if any, to be paid to the property 7-8 owner. 7-9 (o) Assessments continue to accrue against the property 7-10 after a foreclosure sale, regardless of who owns the property. 7-11 (p) If the property owner continues to live on the property 7-12 after a foreclosure sale as provided by Subsection (l), the 7-13 property owner is responsible for reasonable maintenance of the 7-14 property. The property owners' association is entitled to make an 7-15 inspection of the property at a reasonable time on or before the 7-16 10th day after the date of the foreclosure sale and once every 60 7-17 days thereafter. If a property owner does not reasonably maintain 7-18 the property in a condition as good as or better than the condition 7-19 of the property on the date of the foreclosure sale, the property 7-20 owners' association may make the needed repairs or maintenance and 7-21 deduct the reasonable cost of the repairs or maintenance from the 7-22 amount due the property owner at the time of resale. 7-23 (q) If the property is held by the property owners' 7-24 association as provided by Subsection (l) and the property is the 7-25 principal residence of the property owner at the time the 7-26 preforeclosure notice is mailed and the property owner is evicted 8-1 from the property, on or before the first anniversary of the date 8-2 the property owner moved from the property, the property owners' 8-3 association shall pay the property owner: 8-4 (1) the full amount due the property owner from a 8-5 resale; or 8-6 (2) if the property is not resold, the full amount 8-7 that would have been due the property owner if a resale had been 8-8 made for the minimum bid price. 8-9 SECTION 2. This Act applies to a foreclosure sale conducted 8-10 on or after January 1, 2001. 8-11 SECTION 3. This Act takes effect immediately if it receives 8-12 a vote of two-thirds of all the members elected to each house, as 8-13 provided by Section 39, Article III, Texas Constitution. If this 8-14 Act does not receive the vote necessary for immediate effect, this 8-15 Act takes effect September 1, 2001.