By: West S.B. No. 979

(In the Senate - Filed February 27, 2007; March 7, 2007, read first time and referred to Committee on Intergovernmental Relations; April 16, 2007, reported adversely, with favorable Committee Substitute by the following vote: Yeas 4, Nays 0; April 16, 2007, sent to printer.)

COMMITTEE SUBSTITUTE FOR S.B. No. 979 By: West

A BILL TO BE ENTITLED

AN ACT

relating to the operation of property owners' associations.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subsection (a), Section 5.006, Property Code, is amended to read as follows:

(a) In an action based on breach of a restrictive covenant pertaining to real property, the court shall allow to a prevailing party [who asserted the action] reasonable attorney's fees in addition to the party's costs and claim.

SECTION 2. Section 5.012, Property Code, is amended by amending Subsection (a) and adding Subsection (f) to read as follows:

(a) A seller of residential real property that is subject to membership in a property owners' association and that comprises not more than one dwelling unit located in this state shall give to the purchaser of the property a written notice that reads substantially similar to the following:

NOTICE OF MEMBERSHIP IN PROPERTY OWNERS' ASSOCIATION CONCERNING THE

PROPERTY AT (street address) (name of residential community)

As a purchaser of property in the residential community in which this property is located, you are obligated to be a member of a property owners' association. Restrictive covenants governing the use and occupancy of the property and a dedicatory instrument governing the establishment, maintenance, and operation of this residential community have been or will be recorded in the Real Property Records of the county in which the property is located. Copies of the restrictive covenants and dedicatory instrument may be obtained from the county clerk.

You are obligated to pay assessments to the property owners' association. The amount of the assessments is subject to change. Your failure to pay the assessments could result in a lien on and the foreclosure of your property.

Section 207.003, Property Code, entitles an owner to receive copies of restrictions, bylaws, and a resale certificate from a property owners' association. A resale certificate contains information including, but not limited to, statements specifying the amount and frequency of regular assessments, the property owners' association's operating budget and balance sheet, and the style and cause number of lawsuits to which the property owners' association is a party. These documents must be made available to you by the seller on your request. Date: ____________________________________________

Signature of Purchaser

(f) On the purchaser's request, the seller shall provide the purchaser with a copy of a resale certificate issued for the property under Chapter 207. A seller is not required to provide a purchaser with more than one resale certificate and one updated resale certificate in a six-month period.

SECTION 3. Chapter 202, Property Code, is amended by adding Sections 202.008 and 202.010 to read as follows:

Sec. 202.008. RIGHT OF FIRST REFUSAL PROHIBITED. (a) In this section, "development period" means a period stated in a declaration during which a declarant reserves:

(1) a right to facilitate the development, construction, and marketing of the subdivision;

(2) a right to direct the size, shape, and composition of the subdivision; or

(3) any other right customarily reserved by a declarant for the benefit of developers and builders.

(b) To the extent a restrictive covenant provides a right of first refusal for the sale or lease of a residential unit or residential lot in favor of the property owners' association or the association's members, the covenant is void.

(c) This section does not apply to a restrictive covenant that provides a right of first refusal in favor of a developer or builder during the development period.

Sec. 202.010. REGULATION OF SOLAR ENERGY DEVICES. (a) In this section, "solar energy device" has the meaning assigned by Section 171.107, Tax Code.

(b) Except as otherwise provided by this section, a property owners' association may not include or enforce a provision in a dedicatory instrument that prohibits or restricts a property owner from installing a solar energy device.

(c) A provision that violates Subsection (b) is void.

(d) This section does not prohibit the inclusion or enforcement of a provision in a dedicatory instrument that prohibits a solar energy device that:

(1) threatens the public health or safety;

(2) violates a law;

(3) is located on property owned or maintained by the property owners' association;

(4) is located on property owned in common by the members of the property owners' association;

(5) is located in an area on the property owner's property other than:

(A) on the roof of the home; or

(B) in a fenced yard or patio maintained by the property owner; or

(6) is mounted on a device that is taller or more visually obtrusive than is necessary for the solar energy device to operate at not less than 90 percent of its rated efficiency.

SECTION 4. Subsection (b), Section 207.003, Property Code, is amended to read as follows:

(b) A resale certificate under Subsection (a) must contain:

(1) a statement of any right of first refusal or other restraint contained in the restrictions or restrictive covenants that restricts the owner's right to transfer the owner's property;

(2) the frequency and amount of any regular assessments;

(3) the amount of any special assessment that is due after the date the resale certificate is prepared;

(4) the total of all amounts due and unpaid to the property owners' association that are attributable to the owner's property;

(5) capital expenditures, if any, approved by the property owners' association for the property owners' association's current fiscal year;

(6) the amount of reserves, if any, for capital expenditures;

(7) the property owners' association's current operating budget and balance sheet;

(8) the total of any unsatisfied judgments against the property owners' association;

(9) the style and cause number of any pending lawsuit in which the property owners' association is a party, other than a lawsuit relating to unpaid property taxes of an individual member of the association [defendant];

(10) a copy of a certificate of insurance showing the property owners' association's property and liability insurance relating to the common areas and common facilities;

(11) a description of any conditions on the owner's property that the property owners' association board has actual knowledge are in violation of the restrictions applying to the subdivision or the bylaws or rules of the property owners' association;

(12) a summary or copy of notices received by the property owners' association from any governmental authority regarding health or housing code violations existing on the preparation date of the certificate relating to the owner's property or any common areas or common facilities owned or leased by the property owners' association;

(13) the amount of any administrative transfer fee charged by the property owners' association for a change of ownership of property in the subdivision;

(14) the name, mailing address, and telephone number of the property owners' association's managing agent, if any; and

(15) a statement indicating whether the restrictions allow foreclosure of a property owners' association's lien on the owner's property for failure to pay assessments.

SECTION 5. Chapter 209, Property Code, is amended by adding Sections 209.0041 through 209.0044 to read as follows:

Sec. 209.0041. AMENDMENT OF RESTRICTIVE COVENANTS. (a) This section applies only to a residential subdivision in which property owners are subject to mandatory regular or special assessments.

(b) This section applies to a declaration or restriction regardless of the date on which the declaration or restriction was created.

(c) This section does not apply to the amendment of a declaration during a development period, as defined by Section 202.008.

(d) To the extent of any conflict with another provision of this title, this section prevails.

(e) Unless a declaration creating a residential subdivision provides a lower percentage, the declaration and any subsequently enacted restrictions may be amended on a vote of not less than 51 percent of the total votes allocated to owners of property in the subdivision. If the declaration provides a lower percentage, the percentage in the declaration controls.

Sec. 209.0042. TABULATION OF VOTES. (a) In a contested election held in the subdivision, the property owners' association shall retain a neutral third party to tabulate the votes if the association receives, at least 10 days before the date of the meeting at which the vote will be taken or, if no meeting is to be held, at least 10 days before the deadline to cast a vote, written requests from at least 25 percent of the owners of property in the subdivision.

(b) For the purposes of this section, a person is considered a neutral third party if the person is anyone other than a candidate for office, a current or former member or officer of the board of directors, an attorney who represents the property owners' association, or a representative of the association's management company, or a person related to one of those persons within the second degree by consanguinity or affinity, as determined under Chapter 573, Government Code.

Sec. 209.0043. RIGHT TO VOTE. A restrictive covenant that would disqualify a property owner from voting in an association election is void.

Sec. 209.0044. BOARD MEMBERSHIP. (a) A restrictive covenant that restricts a property owner's right to run for a position on the board of the property owners' association is void.

(b) A board member of a property owners' association may not serve more than six consecutive years.

(c) A board member who owes an amount to the association that is six months or more overdue may not vote on the initiation of legal proceedings against a member of the property owners' association related to a debt owed by the member to the association.

SECTION 6. Section 209.005, Property Code, is amended by adding Subsection (c) to read as follows:

(c) If a property owners' association fails to comply with this section, an owner may seek one or more of the following remedies:

(1) a court order directing the property owners' association to provide the required information;

(2) a judgment against the property owners' association for a penalty of not more than $1,500;

(3) a judgment against the property owners' association for court costs and attorney's fees incurred in connection with seeking a remedy under this section; or

(4) a judgment authorizing the owner or the owner's assignee to deduct the amounts awarded under Subdivisions (2) and (3) from any future regular or special assessments payable to the property owners' association.

SECTION 7. Section 209.006, Property Code, is amended by amending Subsection (b) and adding Subsections (c) and (d) to read as follows:

(b) The notice must:

(1) describe the violation or property damage that is the basis for the suspension action, charge, or fine and state any amount due the association from the owner; [and]

(2) inform the owner that the owner:

(A) is entitled to a reasonable period to cure the violation and avoid the fine or suspension unless the owner was given notice and a reasonable opportunity to cure a similar violation within the preceding six months; and

(B) may request a hearing under Section 209.007 on or before the 30th day after the date notice was delivered to the owner; and

(3) specify a date certain by which the owner must cure the violation [receives the notice].

(c) Notice under Subsection (b) must be personally delivered, sent by certified mail with a five-day return requested, or delivered by the United States Postal Service with signature confirmation service to the owner at the owner's last known address as shown on the association's records.

(d) The date specified in the notice under Subsection (b)(3) must provide a reasonable period for the owner to cure the violation.

SECTION 8. Chapter 209, Property Code, is amended by adding Sections 209.0061 through 209.0064 and Section 209.0091 to read as follows:

Sec. 209.0061. ASSESSMENT OF FINES. (a) A fine assessed by the property owners' association must be reasonable in the context of the nature, frequency, and effect of the violation. If the association allows fines for a continuing violation to accumulate against a lot or an owner, the association must establish a maximum fine amount for a continuing violation, at which point the total fine amount is capped.

(b) If a lot occupant other than the owner violates a provision of the dedicatory instrument, the property owners' association, in addition to exercising any of the association's powers against the owner, may assess a fine directly against the nonowner occupant in the same manner as provided for an owner but may not require payment from both the owner and a nonowner occupant for the same violation.

Sec. 209.0062. ALTERNATIVE PAYMENT SCHEDULE FOR CERTAIN ASSESSMENTS. (a) A property owners' association shall adopt guidelines to establish an alternative payment schedule by which an owner may make partial payments to the property owners' association for delinquent regular or special assessments or any other amount owed to the association.

(b) A property owners' association is not required to allow a payment plan that extends more than 12 months from the date of the owner's request for a payment plan or to enter into a payment plan with an owner who failed to honor the terms of a previous payment plan.

(c) The property owners' association shall file the association's guidelines under this section in the real property records of each county in which the subdivision is located.

Sec. 209.0063. PRIORITY OF PAYMENTS. Unless otherwise provided in a writing by the property owner, a payment received by a property owners' association from the owner shall be applied to the owner's debt in the following order of priority:

(1) any delinquent assessment;

(2) any current assessment;

(3) any attorney's fees incurred by the association associated solely with assessments;

(4) any fines assessed by the association;

(5) any attorney's fees incurred by the association associated solely with fines assessed by the association; and

(6) any other amount owed to the association.

Sec. 209.0064. COLLECTIONS. A property owners' association must bring suit or otherwise initiate against an owner a collection action authorized by the dedicatory instruments or other law on or before the 10th anniversary of the date on which the cause of action for collection of the debt accrues. Section 16.004, Civil Practice and Remedies Code, does not apply to the collection of a debt owed by an owner to a property owners' association.

Sec. 209.0091. JUDICIAL FORECLOSURE REQUIRED. (a) Except as provided by Subsection (b), 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.

(b) Judicial foreclosure is not required under this section if the owner of the property that is subject to foreclosure agrees in writing to waive judicial foreclosure under this section.

SECTION 9. Subsection (a), Section 209.010, Property Code, is amended to read as follows:

(a) A property owners' association that conducts a foreclosure sale of an owner's lot must send to the lot owner not later than the 30th day after the date of the foreclosure sale:

(1) a written notice stating the date and time the sale occurred and informing the lot owner of the owner's right to redeem the property under Section 209.011; and

(2) a copy of Section 209.011.

SECTION 10. Chapter 209, Property Code, is amended by adding Section 209.012 to read as follows:

Sec. 209.012. PLATS. A filed plat that establishes a residential subdivision that is subject to this chapter must:

(1) provide the location of all utility easements and any utility infrastructure to be built; and

(2) specifically identify amenities that must be built and label those amenities "MUST BE BUILT."

SECTION 11. Subsection (a), Section 211.002, Property Code, is amended to read as follows:

(a) This chapter applies only to a residential real estate subdivision or any unit or parcel of a subdivision to which another chapter in this title that provides a procedure under which a subdivision's restrictions may be amended does not apply [located in whole or in part within an unincorporated area of a county if the county has a population of less than 65,000].

SECTION 12. Subsection (c), Section 202.004, Property Code, is repealed.

SECTION 13. (a) Subsection (a), Section 5.006, Property Code, as amended by this Act, and the repeal by this Act of Subsection (c), Section 202.004, Property Code, apply 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 the effective date of this Act, and that law is continued in effect for that purpose.

(b) Section 5.012, Property Code, as amended by this Act, applies only to a sale of property that occurs on or after the effective date of this Act. For the purposes of this section, a sale of property occurs before the effective date of this Act if the executory contract binding the purchaser to purchase the property is executed before that date. A sale of property 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) Sections 202.008, 202.010, 209.0043, and Subsection (a), Section 209.0044, Property Code, as added by this Act, apply to a deed restriction enacted before, on, or after the effective date of this Act.

(d) Subsection (b), Section 209.0044, Property Code, as added by this Act, applies to a property owners' association board member elected before, on, or after the effective date of this Act.

(e) Subsection (c), Section 209.005, Property Code, as added by this Act, applies only to a property owners' association's failure to comply with that section on or after the effective date of this Act. A property owners' association's failure to comply with that section before the effective date of this Act is governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.

(f) Sections 209.0061, 209.0062, and 209.0064, Property Code, as added by this Act, apply only to an assessment or other debt that becomes due on or after the effective date of this Act. An assessment or other debt that becomes due before the effective date of this Act is governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.

(g) Section 209.0063, Property Code, as added by this Act, applies only to a payment received by a property owners' association on or after the effective date of this Act. A payment received by a property owners' association before the effective date of this Act is governed by the law in effect immediately before the effective date of this Act, and that law is continued in effect for that purpose.

(h) Section 209.0091, Property Code, as added by this Act, applies 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.

(i) Section 209.012, Property Code, as added by this Act, applies only to a plat filed on or after the effective date of this Act. A plat 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.

SECTION 14. This Act takes effect January 1, 2008.

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