2003S0359-1 02/25/03
By: Bailey H.B. No. 2646
A BILL TO BE ENTITLED
AN ACT
relating to the operation of property owners' associations;
providing an administrative penalty.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 51, Property Code, is amended by adding
Section 51.009 to read as follows:
Sec. 51.009. LIEN OF PROPERTY OWNERS' ASSOCIATION. (a) In
this section, "dedicatory instrument" and "property owners'
association" have the meanings assigned by Section 202.001.
(b) Notwithstanding the provisions of a dedicatory
instrument, a property owners' association's lien on real property
that arises under a dedicatory instrument governing the property
does not have priority over a purchase money lien on the property
arising from a mortgage insured by the Federal Housing
Administration, the Veterans Administration, or a successor to one
of those agencies.
SECTION 2. The chapter heading for Chapter 203, Property
Code, is amended to read as follows:
CHAPTER 203. ENFORCEMENT OF PROVISIONS RELATING TO LAND USE
RESTRICTIONS OR PROPERTY OWNERS' ASSOCIATIONS IN CERTAIN COUNTIES
SECTION 3. Section 203.003, Property Code, is amended to
read as follows:
Sec. 203.003. ENFORCEMENT AUTHORITY OF COUNTY ATTORNEY
[AUTHORIZED TO ENFORCE RESTRICTIONS]. (a) The county attorney
may:
(1) sue in a court of competent jurisdiction to enjoin
or abate a violation of this title by a property owners' association
or owner or a violation [violations] of a restriction contained or
incorporated by reference in a properly recorded plan, plat,
replat, or other instrument affecting a real property subdivision
located in the county, including architectural control guidelines
and a property owners' association's articles of incorporation or
bylaws, regardless of the date on which the instrument was
recorded; and
(2) recover from a property owners' association that
violates this title an administrative penalty of $1,000 for each
violation.
(b) The county attorney may not enforce a restriction
relating to race or any other restriction that violates the state or
federal constitution.
SECTION 4. Section 204.010, Property Code, is amended by
amending Subsection (a) and adding Subsections (c), (d), and (e) to
read as follows:
(a) Unless otherwise provided by the restrictions or the
association's articles of incorporation or bylaws, the property
owners' association, acting through its board of directors or
trustees, may:
(1) [adopt and amend bylaws;
[(2)] adopt and amend budgets for revenues,
expenditures, and reserves and collect regular assessments or
special assessments for common expenses from property owners;
(2) [(3)] hire and terminate managing agents and other
employees, agents, and independent contractors;
(3) [(4)] institute, defend, intervene in, settle, or
compromise litigation or administrative proceedings on matters
affecting the subdivision;
(4) [(5)] make contracts and incur liabilities
relating to the operation of the subdivision and the property
owners' association;
(5) [(6)] regulate the use, maintenance, repair,
replacement, modification, and appearance of the subdivision;
(6) [(7)] make additional improvements to be included
as a part of the common area;
(7) [(8)] grant easements, leases, licenses, and
concessions through or over the common area;
(8) [(9) impose and receive payments, fees, or charges
for the use, rental, or operation of the common area and for
services provided to property owners;
[(10) impose interest, late charges, and, if
applicable, returned check charges for late payments of regular
assessments or special assessments;
[(11) if notice and an opportunity to be heard are
given, collect reimbursement of actual attorney's fees and other
reasonable costs incurred by the property owners' association
relating to violations of the subdivision's restrictions or the
property owners' association's bylaws and rules;
[(12) charge costs to an owner's assessment account
and collect the costs in any manner provided in the restrictions for
the collection of assessments;
[(13) adopt and amend rules regulating the collection
of delinquent assessments and the application of payments;
[(14) impose reasonable charges for preparing,
recording, or copying amendments to the restrictions, resale
certificates, or statements of unpaid assessments;
[(15)] purchase insurance and fidelity bonds,
including directors' and officers' liability insurance, that the
board considers appropriate or necessary;
(9) [(16) if the restrictions allow for an annual
increase in the maximum regular assessment without a vote of the
membership, assess the increase annually or accumulate and assess
the increase after a number of years;
[(17)] subject to the requirements of the Texas
Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
Texas Civil Statutes) and by majority vote of its board of
directors, indemnify a director or officer of the property owners'
association who was, is, or may be made a named defendant or
respondent in a proceeding because the person is or was a director;
(10) [(18)] if the restrictions vest the
architectural control authority in the property owners'
association or if the authority is vested in the property owners'
association under Section 204.011,[:
[(A)] implement written architectural control
guidelines and [for its own use or] record the guidelines in the
real property records of the applicable county; and
(11) [(B) modify the guidelines as the needs of the
subdivision change;
[(19)] exercise other powers conferred by the
restrictions, its articles of incorporation, or its bylaws[;
[(20) exercise other powers that may be exercised in
this state by a corporation of the same type as the property owners'
association; and
[(21) exercise other powers necessary and proper for
the governance and operation of the property owners' association].
(c) A property owners' association may be granted the
following powers not provided by the association's articles of
incorporation or bylaws if the association follows the petition
procedures prescribed by Section 204.005 for adding to or modifying
existing restrictions, except that the approval requirements of
Section 204.005(b)(1) are satisfied if the owners of at least 50
percent of the real property interests plus one owner of real
property interests, excluding lienholders, contract purchasers,
and the owners of mineral interests, approve the petition:
(1) to adopt and amend bylaws;
(2) to impose and receive payments, fees, or charges
for the use, rental, or operation of the common area and for
services provided to property owners;
(3) to impose interest, late charges, and, if
applicable, returned check charges for late payments of regular
assessments or special assessments;
(4) if notice and an opportunity to be heard are given,
to collect reimbursement of actual attorney's fees and other
reasonable costs incurred by the property owners' association
relating to violations of the subdivision's restrictions or the
property owners' association's bylaws and rules;
(5) to charge costs to an owner's assessment account
and to collect the costs in any manner provided in the restrictions
for the collection of assessments;
(6) to adopt and amend rules regulating the collection
of delinquent assessments and the application of payments;
(7) to impose reasonable charges for preparing,
recording, or copying amendments to the restrictions, resale
certificates, or statements of unpaid assessments;
(8) if the restrictions allow for an annual increase
in the maximum regular assessment without a vote of the membership,
to assess the increase annually or accumulate and assess the
increase after a number of years;
(9) to exercise other powers that may be exercised in
this state by a corporation of the same type as the property owners'
association; and
(10) to exercise other powers necessary and proper for
the governance and operation of the property owners' association.
(d) A property owners' association may not exercise a power
granted by petition under Subsection (c) before the petition is
filed as a dedicatory instrument under Section 204.005(b).
(e) Notwithstanding Subsection (c), any change to an
existing architectural control guideline must be made by petition
under Section 204.005.
SECTION 5. The section heading for Section 207.003,
Property Code, is amended to read as follows:
Sec. 207.003. DELIVERY OF SUBDIVISION INFORMATION TO OWNER
OR BUYER.
SECTION 6. Subsection (c), Section 207.003, Property Code,
is amended to read as follows:
(c) A property owners' association or its representative
may charge a reasonable fee to assemble, copy, and deliver the
information required by this section but [and] may not charge more
than 20 cents for each letter-sized or legal-sized page or more than
a total of $75 [a reasonable fee to prepare and deliver an update of
a resale certificate].
SECTION 7. Section 209.005, Property Code, is amended to
read as follows:
Sec. 209.005. ASSOCIATION RECORDS. (a) A property owners'
association shall make the books and records of the association,
including financial records, [reasonably] available to an owner for
inspection at its principal office on request [in accordance with
Section B, Article 2.23, Texas Non-Profit Corporation Act (Article
1396-2.23, Vernon's Texas Civil Statutes)].
(b) If the requested information is not available to examine
at the time of the request because it is in active use or in storage,
the property owners' association or its representative shall
certify this fact in writing to the requestor and set a date and
time that is not later than the fifth business day after the date
the association receives the request when the information will be
available for inspection.
(c) The property owners' association or its representative
may not question the basis for the requestor's request for
information but may verify that the requestor is an owner.
(d) A property owners' association or its representative
may charge a reasonable fee for providing copies of documents under
this section but may not charge more than 20 cents per letter-sized
or legal-sized page. For a request of 50 or fewer pages, the charge
may not include costs of materials, labor, or overhead, other than
photocopying costs.
(e) The property owners' association or its representative
shall treat all requests for information uniformly.
(f) The property owners' association or its representative
shall provide all reasonable comfort and facility for the full
exercise of the right granted by this section.
(g) This section does not authorize a requestor to remove an
original of a property owners' association record from the location
where it is kept.
(h) An action for a declaratory judgment or injunctive
relief may be brought in accordance with this section against a
property owners' association that violates this chapter.
(i) If a property owners' association fails to deliver the
information required under this section, the county attorney may
seek a court order directing the property owners' association to
furnish the required information. In an action under this section,
the county attorney may also seek a judgment against the property
owners' association for court costs and attorney's fees.
(j) This section shall be liberally construed in favor of
granting a request for information [An attorney's files and records
relating to the association, excluding invoices requested by an
owner under Section 209.008(d), are not:
[(1) records of the association;
[(2) subject to inspection by the owner; or
[(3) subject to production in a legal proceeding].
SECTION 8. Chapter 209, Property Code, is amended by adding
Sections 209.0051 and 209.0052 to read as follows:
Sec. 209.0051. AVAILABILITY OF ANNUAL BUDGET PROPOSALS.
Not later than the 10th business day before the date of a property
owners' association meeting to approve an annual budget, the
association shall post a written copy of the proposed budget on a
bulletin board at a place convenient to the public at the meeting
location of the board.
Sec. 209.0052. ASSOCIATION MEETINGS. (a) A property
owners' association shall meet at least once each year.
(b) A meeting of a property owners' association and its
board must be conducted as provided by the bylaws. If the bylaws do
not provide a manner for conducting meetings, meetings must be open
to the owners, subject to the right of the board to adjourn a
meeting of the board and reconvene in closed executive session to
consider actions involving personnel, pending litigation, contract
negotiations, enforcement actions, matters involving the invasion
of privacy of individual owners, or matters that are to remain
confidential by request of the affected parties and agreement of
the board. The general nature of any business to be considered in
executive session must first be announced at the open meeting.
(c) Notice of a meeting of the property owners' association
and board must be given as provided by the bylaws. If the bylaws do
not provide for notice, written or printed notice stating the
place, day, and time of a meeting of the association, and, if the
meeting is a special meeting, the purpose for which the meeting is
called, must be posted on a bulletin board at a place convenient to
the public at the meeting location of the board not later than the
10th day before the date of the meeting and must be delivered not
later than the 10th day or earlier than the 60th day before the date
of the meeting to each member entitled to vote at the meeting.
(d) Notice under Subsection (c) may be delivered in person,
by facsimile transmission, or by mail, as provided by the
president, secretary, or officers or persons calling the meeting.
If mailed, the notice is considered to be delivered when deposited
in the United States mail addressed to the member at the member's
address as it appears on the records of the corporation, with
postage paid. If transmitted by facsimile, notice is considered
delivered when the facsimile is successfully transmitted.
SECTION 9. Section 209.006, Property Code, is amended to
read as follows:
Sec. 209.006. NOTICE REQUIRED BEFORE ENFORCEMENT ACTION.
(a) Before a property owners' association may suspend an owner's
right to use a common area, file a suit against an owner [other than
a suit to collect a regular or special assessment or foreclose under
an association's lien], charge an owner for property damage, or
levy a fine for a violation of the restrictions, architectural
control guidelines, [or] bylaws, or rules of the association, the
association or its agent must give written notice to the owner by
certified mail, return receipt requested.
(b) The notice must:
(1) describe the violation or property damage and cite
each bylaw, rule, guideline, or restriction that is the basis for
the suspension, suit, action, charge, or fine and state any amount
due the association from the owner; and
(2) inform the owner that [the owner]:
(A) the owner is entitled to a reasonable period
to cure the violation and avoid the suspension, suit, action,
charge, or fine [or suspension] unless the owner was given notice
and a reasonable opportunity to cure a similar violation within the
preceding six months or within the preceding 12 months for a
violation affecting the health and safety of the neighborhood;
[and]
(B) the owner may request a hearing under Section
209.007 on or before the 30th day after the date the owner receives
the notice;
(C) the owner is entitled to request that the
association settle the matter through mediation; and
(D) if the county in which the owner's property
is located provides mediation services at no cost, the mediation
may be conducted using those services at no cost to the owner.
SECTION 10. Subsection (c), Section 209.007, Property Code,
is amended to read as follows:
(c) The association shall hold a hearing under this section
not later than the 30th day after the date the board receives the
owner's request for a hearing and shall notify the owner of the
date, time, and place of the hearing not later than the 10th day
before the date of the hearing. The board or the owner may request a
postponement, and, if requested, a postponement shall be granted
for a period of not more than 10 days unless the association and the
owner agree in writing to a longer period. Additional
postponements may be granted by agreement of the parties. The owner
or the association may make an audio recording of the meeting.
SECTION 11. Chapter 209, Property Code, is amended by
adding Section 209.0071 to read as follows:
Sec. 209.0071. PAYMENT OF CERTAIN ASSESSMENTS. (a) A
property owners' association shall adopt guidelines under which an
owner who is unable to pay a delinquent regular or special
assessment in full may, at the owner's request, make partial
payments of the delinquent assessments until the delinquency is
cured.
(b) Guidelines adopted under Subsection (a) may provide for
the payment of a reasonable amount of interest on unpaid
assessments, not to exceed 10 percent interest annually. Interest
charged under this subsection may accrue from the time the
assessment becomes delinquent.
(c) A payment plan under this section may require an owner
to make payments to the property owners' association weekly,
biweekly, semimonthly, monthly, or as otherwise agreed by the
association and the owner.
(d) Before agreeing to allow an owner to make payments under
this section, a property owners' association may require an owner
to provide substantive proof of financial hardship.
(e) A property owners' association is not required to agree
to a payment plan that:
(1) does not bind the owner to make at least one pro
rata payment monthly; or
(2) concludes later than six months after the date the
delinquent assessment was due.
SECTION 12. Section 209.008, Property Code, is amended by
amending Subsection (b) and adding Subsection (h) to read as
follows:
(b) An owner is not liable for attorney's fees incurred by
the association relating to a matter involving a violation of the
association's restrictions, bylaws, rules, or architectural
control guidelines, including a violation involving overdue
assessments, before the first anniversary of the date on which the
violation occurred or arrearage accrued [described by the notice
under Section 209.006 if the attorney's fees are incurred before
the conclusion of the hearing under Section 209.007 or, if the owner
does not request a hearing under that section, before the date by
which the owner must request a hearing. The owner's presence is not
required to hold a hearing under Section 209.007].
(h) A court may assess costs of litigation and reasonable
attorney's fees incurred by a plaintiff or defendant who
substantially prevails in an action involving a property owners'
association, including an action by or against a management company
or attorney representing a property owners' association. In
exercising its discretion under this subsection, the court shall
consider whether the action was brought, defended, or conducted in
good faith.
SECTION 13. Section 209.009, Property Code, is amended to
read as follows:
Sec. 209.009. FORECLOSURE SALE PROHIBITED IN CERTAIN
CIRCUMSTANCES. (a) A property owners' association may not
foreclose a property owners' association's assessment lien unless:
(1) [if] the debt for which the lien secures payment
includes a mandatory regular or special assessment that is at least
two years overdue; and
(2) the board approves the foreclosure by a majority
vote taken in a meeting open to the public.
(b) A debt described by Subsection (a)(1) may include:
(1) any accrued interest on assessments;
(2) collection costs, attorney's fees, expenses, and
court costs associated with collection of the debt; and
(3) any fees or fines allowed by the dedicatory
instruments [securing the lien consists solely of:
[(1) fines assessed by the association; or
[(2) attorney's fees incurred by the association
solely associated with fines assessed by the association].
SECTION 14. Chapter 209, Property Code, is amended by
adding Section 209.0091 to read as follows:
Sec. 209.0091. JUDICIAL FORECLOSURE REQUIRED. A property
owners' association may not foreclose a property owners'
association's assessment lien unless the association first obtains
a court judgment foreclosing the lien and providing for issuance of
an order of sale.
SECTION 15. Section 209.011, Property Code, is amended by
amending Subsections (b) and (m) and adding Subsection (q) to read
as follows:
(b) The owner of property in a residential subdivision may
redeem the property from any purchaser at a sale foreclosing a
property owners' association's assessment lien not later than the
second anniversary of [180th day after] the date the association
mails written notice of the sale to the owner under Section 209.010.
(m) If a lot owner sends by certified mail, return receipt
requested, a written request to redeem the property on or before the
last day of the redemption period, the lot owner's right of
redemption is extended until the 10th day after the date the
association and any third party foreclosure purchaser provides
written notice to the lot owner of the amounts that must be paid to
redeem the property. If a third party foreclosure purchaser does
not provide the person's current mailing address as required under
Subsection (q) and a lot owner is unable to contact the purchaser,
the redemption period is extended by one day for each day the
required notification of a change in address is not provided.
(q) A person, other than the property owners' association,
who purchases the property at the foreclosure sale shall provide
the association with the person's mailing address not later than
the 10th business day after the sale and notify the association of
any change in the person's mailing address during the redemption
period not later than the 10th business day after the date the
change becomes effective.
SECTION 16. Chapter 209, Property Code, is amended by
adding Sections 209.012 through 209.015 to read as follows:
Sec. 209.012. CONTRACT WITH MANAGEMENT COMPANY.
(a) Except as provided by Subsection (b), a property owners'
association or a person in privity with a property owners'
association may not contract with or compensate any person to
manage, enforce, or represent the association in connection with
enforcing restrictions, bylaws, rules, or guidelines.
(b) If expressly described in a budget approved by the
board, a property owners' association or a person in privity with a
property owners' association may pay a management company a flat
fee plus actual postage costs for enforcing all restrictions,
bylaws, rules, or guidelines, including payment of assessments, for
the budget period.
Sec. 209.013. CONFLICTS OF INTEREST. A person who is a
member of the board of a property owners' association or related
within the third degree by consanguinity or within the second
degree by affinity to a member of the board may not be compensated
for providing legal representation or management services to the
association.
Sec. 209.014. SUSPENSION OF VOTING PRIVILEGES. A property
owners' association may not suspend an owner's voting privileges in
the association because of the owner's overdue assessments or
failure to cure a violation of a deed restriction unless:
(1) the assessments are more than 60 days overdue; or
(2) the violation of the deed restriction remains
uncured after notice and opportunity for a hearing under Sections
209.006 and 209.007 or after the violation has been otherwise
mediated or adjudicated.
Sec. 209.015. FEE FOR TRANSFER OF CERTAIN INFORMATION. A
property owners' association or its representative may not charge a
homebuyer more than $75 for the transfer of personal and contact
information in connection with the purchase of a home in the
subdivision.
SECTION 17. Subchapter C, Chapter 82, Government Code, is
amended by adding Section 82.067 to read as follows:
Sec. 82.067. DEFERRED BILLING FOR CERTAIN LEGAL SERVICES
AND CERTAIN COLLECTION PRACTICES PROHIBITED. (a) In this section,
"property owners' association" has the meaning assigned by Section
202.001, Property Code.
(b) An attorney who provides legal services to a property
owners' association or management company in matters involving
collections of mandatory or special assessments or violations of
the association's restrictions, bylaws, or rules may not collect
the attorney's fees for those services directly from a homeowner
from whom the association or company has the right to collect the
attorney's fees.
SECTION 18. Section 5.006, Subsection (c), Section 202.004,
and Subsections (d), (f), and (g), Section 209.008, Property Code,
are repealed.
SECTION 19. (a) Section 51.009, Property Code, as added by
this Act, applies to a property owners' association's lien that
attaches to real property before, on, or after the effective date of
this Act.
(b) Section 203.003, Property Code, as amended by this Act,
applies only to a violation of Title 11, Property Code, that occurs
on or after the effective date of this Act. A violation that occurs
before the effective date of this Act is governed by the law in
effect immediately before that date, and that law is continued in
effect for that purpose.
(c) Section 204.010, Property Code, as amended by this Act,
applies only to an action of a property owners' association that
occurs on or after the effective date of this Act. An action of a
property owners' association that occurs before the effective date
of this Act is governed by the law in effect immediately before that
date, and that law is continued in effect for that purpose.
(d) Section 209.012, Property Code, as added by this Act,
applies only to a contract between a property owners' association
and a management company entered into on or after the effective date
of this Act. A contract between a property owners' association and
a management company entered into before the effective date of this
Act is governed by the law in effect immediately before that date,
and that law is continued in effect for that purpose.
(e) Section 209.013, Property Code, as added by this Act,
does not apply to legal representation or management services
provided under a contract entered into before the effective date of
this Act.
(f) Section 209.014, Property Code, as added by this Act,
applies only to a vote taken on or after the effective date of this
Act. A vote taken before the effective date of this Act is governed
by the law in effect immediately before that date, and that law is
continued in effect for that purpose.
(g) Section 209.0051, Property Code, as added by this Act,
applies only to a property owners' association budget adopted on or
after the effective date of this Act.
(h) Section 209.006, Property Code, as amended by this Act,
applies only to an enforcement action taken by a property owners'
association on or after the effective date of this Act. An
enforcement action taken before the effective date of this Act is
governed by the law in effect immediately before that date, and that
law is continued in effect for that purpose.
(i) Section 209.0071, Property Code, as added by this Act,
applies only to an assessment that becomes due on or after the
effective date of this Act. An assessment that becomes due before
the effective date of this Act is governed by the law in effect
immediately before that date, and that law is continued in effect
for that purpose.
(j) Subsection (b), Section 209.008, Property Code, as
amended by this Act, applies only to a violation that occurs or an
arrearage that accrues on or after the effective date of this Act.
A violation that occurred or an arrearage that accrued before the
effective date of this Act is governed by the law in effect
immediately before that date, and that law is continued in effect
for that purpose.
(k) Subsection (h), Section 209.008, Property Code, as
added by this Act, applies only to an action filed on or after the
effective date of this Act. An action filed before the effective
date of this Act is governed by the law in effect immediately before
that date, and that law is continued in effect for that purpose.
(l) Section 209.009 and Subsections (b) and (m), Section
209.011, Property Code, as amended by this Act, and Section
209.0091 and Subsection (q), Section 209.011, Property Code, as
added by this Act, apply only to foreclosure of a lien that attaches
on or after the effective date of this Act. Foreclosure of a lien
that attaches before the effective date of this Act is governed by
the law in effect immediately before that date, and that law is
continued in effect for that purpose.
(m) The repeal of Section 5.006, Property Code, by this Act
applies only to the award of attorney's fees in an action filed on
or after the effective date of this Act. The award of attorney's
fees in an action filed before the effective date of this Act is
governed by the law in effect immediately before that date, and that
law is continued in effect for that purpose.
(n) The repeal of Subsection (c), Section 202.004, Property
Code, by this Act applies only to civil damages assessed for a
violation of a restrictive covenant that occurs on or after the
effective date of this Act. Civil damages assessed for a violation
of a restrictive covenant that occurs before the effective date of
this Act are governed by the law in effect immediately before that
date, and that law is continued in effect for that purpose.
SECTION 20. This Act takes effect September 1, 2003.