BILL ANALYSIS

C.S.S.B. 241

By: West

Business & Industry

Committee Report (Substituted)

BACKGROUND AND PURPOSE

Property owners' associations are intended to maintain common areas in residential neighborhoods and protect homeowners' investments in their property by enforcing certain aesthetic guidelines.  In recent years, however, many homeowners have become dissatisfied with the operation of their associations. Disputes between association boards and individual homeowners often begin with the imposition of relatively small fines by the association board for violations of deed restrictions.  Such fines, when combined with assessments and legal fees, can quickly become insurmountable for a homeowner, ultimately resulting in foreclosure. Currently, a homeowner is not guaranteed access to the courts in a proceeding for the foreclosure of an assessment lien.  

C.S.S.B. 241 prohibits a property owners' association from foreclosing an association's assessment lien without first obtaining a court order in an application for expedited foreclosure.  The bill requires the Supreme Court of Texas to adopt rules establishing expedited foreclosure proceedings.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the Supreme Court of Texas in SECTIONS 1 and 4 of this bill.

ANALYSIS

C.S.S.B. 241 amends the Property Code to prohibit a property owners' association from foreclosing a property owners' association's assessment lien unless the association first obtains a court order in an application for expedited foreclosure under the rules adopted by the Supreme Court of Texas for expedited foreclosure proceedings. The bill authorizes a property owners' association to use the procedure described above in order to foreclose any lien described in a dedicatory instrument.  The bill requires the supreme court, not later than January 1, 2010, as an exercise of the court's authority, to adopt rules establishing expedited foreclosure proceedings for use by a property owners' association in foreclosing an assessment lien of the association.  The bill requires the rules to be substantially similar to the rules adopted by the supreme court under the Texas Constitution.  The bill establishes that expedited foreclosure is not required if the owner of the property that is subject to foreclosure agrees in writing at the time the foreclosure is sought to waive expedited foreclosure.  The bill prohibits a waiver from being required as a condition of the transfer of title to real property. 

C.S.S.B. 241 requires an association conducting a foreclosure sale to send the property owner a copy of the provision relating to an owner's right to redemption after foreclosure. 

EFFECTIVE DATE

January 1, 2010.

COMPARISON OF ORIGINAL AND SUBSTITUTE

C.S.S.B. 241 requires a property owners' association, before foreclosing a property owners' association's assessment lien, first to obtain a court order in an application for expedited foreclosure under the rules adopted by the Supreme Court of Texas, whereas the original requires the association first to obtain a court judgment foreclosing the lien and providing for issuance of an order of sale.  The substitute adds a provision not in the original authorizing a property owners' association to use a procedure outlined under the bill's provisions in order to foreclose any lien described in a dedicatory instrument.    

C.S.S.B. 241 adds a provision not in the original requiring the supreme court to adopt rules establishing expedited foreclosure proceedings for use by a property owners' association in foreclosing an assessment lien of the association and requiring the rules to be substantially similar to the rules adopted by the court under constitutional provisions for certain other expedited foreclosure proceedings.

C.S.S.B. 241 establishes that expedited foreclosure is not required if the owner of the property subject to foreclosure agrees in writing to waive expedited foreclosure, whereas the original makes that provision applicable to a waiver of judicial foreclosure rather than to a waiver of expedited foreclosure.  The substitute adds a provision not in the original prohibiting a waiver from being required as a condition of the transfer of title to real property.