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78R1649 KEL-D
By: West S.B. No. 999
A BILL TO BE ENTITLED
AN ACT
relating to the establishment of reserve accounts to fund necessary
repairs for multifamily rental housing developments assisted by the
Texas Department of Housing and Community Affairs.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter H, Chapter 2306, Government Code, is
amended by adding Section 2306.186 to read as follows:
Sec. 2306.186. MANDATORY DEPOSITS TO FUND NECESSARY
REPAIRS. (a) In this section:
(1) "Department assistance" means any state or federal
assistance administered by or through the department.
(2) "First lien lender" means a lender whose lien has
first priority.
(3) "Reserve account" means an individual account:
(A) created to fund any necessary repairs for a
multifamily rental housing development; and
(B) maintained by a first lien lender or state
bank trustee.
(4) "State bank trustee" means a state bank with the
power to act as trustee.
(b) Each developer who applies for and receives department
assistance for a multifamily rental housing development shall
deposit annually into a reserve account:
(1) at least $200 per unit, for a development based
primarily on new construction; and
(2) at least $300 per unit, for a development based
primarily on rehabilitation.
(c) The developer shall begin making annual deposits to the
reserve account on the date that occupancy of the multifamily
rental housing development stabilizes or the date that permanent
financing for the development is completely in place, whichever
occurs later, and shall continue making deposits until the earliest
of the following dates:
(1) the date of any involuntary change in ownership of
the development;
(2) the date on which the developer suffers a total
casualty loss with respect to the development or the date on which
the development becomes functionally obsolete, if the development
cannot be or is not restored;
(3) the date on which the development is demolished;
(4) the date on which the development ceases to be used
as multifamily rental property; or
(5) the 50th anniversary of the date that the
developer is required to make the first annual deposit with respect
to the development.
(d) To assess the repair needs of the multifamily rental
housing development and to evaluate the adequacy of the reserve
account for funding those repairs, the developer shall inspect the
development at least once during each five-year period after the
date the developer is required to make the first annual deposit with
respect to the development. The developer shall notify the
department of any necessary repairs and of the amount in the reserve
account. If the amount in the reserve account is considered by the
department to be inadequate to fund the costs of the necessary
repairs, the department shall reassess and, if appropriate, revise
the deposit amount required of the developer and the level of
department assistance provided for the development.
(e) The duties of the developer of a multifamily rental
housing development under this section cease on the date of a
voluntary change in ownership of the development, but the
subsequent owner of the development is subject to the deposit,
inspection, and notification requirements of Subsections (b), (c),
and (d).
(f) The first lien lender shall maintain the reserve
account. On the satisfaction of its lien, the first lien lender may
continue to maintain the reserve account. If the first lien lender
does not elect to continue maintaining the reserve account, the
department shall appoint a state bank trustee to continue
maintenance of the account.
(g) The department shall adopt rules that:
(1) establish requirements and standards regarding:
(A) for first lien lenders and state bank
trustees:
(i) maintenance of reserve accounts and
reasonable costs of that maintenance;
(ii) asset management;
(iii) transfer of money in reserve accounts
to the department to fund necessary repairs; and
(iv) oversight of reserve accounts and the
provision of financial data and other information to the
department; and
(B) for developers, inspections of the
multifamily rental housing developments and identification of
necessary repairs, including requirements and standards regarding
construction, rehabilitation, and occupancy that may enable
quicker identification of those repairs;
(2) identify circumstances in which money in the
reserve accounts may:
(A) be used for expenses other than necessary
repairs, including property taxes or insurance; and
(B) fall below mandatory deposit levels without
resulting in department action;
(3) define the scope of department oversight of
reserve accounts and the repair process;
(4) provide the consequences of any failure to make a
required deposit, including a definition of good cause, if any, for
a failure to make a required deposit;
(5) specify or create processes and standards to be
used by the department to obtain repairs for developments;
(6) define for purposes of Subsection (c) the date on
which occupancy of a development is considered to have stabilized
and the date on which permanent financing is considered to be
completely in place; and
(7) provide for appointment of a state bank trustee as
necessary under this section.
SECTION 2. (a) The Texas Department of Housing and
Community Affairs shall adopt the rules required by Section
2306.186, Government Code, as added by this Act, not later than
December 1, 2003.
(b) The change in law made by Section 2306.186, Government
Code, as added by this Act, applies only to multifamily rental
housing developments that receive assistance from the Texas
Department of Housing and Community Affairs on or after January 1,
2004.
SECTION 3. This Act takes effect September 1, 2003.