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.