81R22910 AJA-D

By: Solomons, et al. H.B. No. 1976

Substitute the following for H.B. No. 1976:

By: Quintanilla C.S.H.B. No. 1976

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

(a) In an action based on breach of a restrictive covenant pertaining to real property or a statute pertaining to real property subject to a restrictive covenant or to restrictive covenants to which real property is subject, the court may [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 Subsections (f) and (g) 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 all [a] dedicatory instruments [instrument] governing the establishment, maintenance, or [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 instruments [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 any document that governs the establishment, maintenance, or operation of a subdivision, including, but not limited to, restrictions, bylaws, rules and regulations, 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 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 for a resale certificate from the seller, the seller shall:

(1) promptly deliver a copy of a current resale certificate if one has been issued for the property under Chapter 207; or

(2) if the seller does not have a current resale certificate:

(A) request the property owners' association or its agent to issue a resale certificate under Chapter 207; and

(B) promptly deliver a copy of the resale certificate to the purchaser on receipt of the resale certificate from the property owners' association or its agent.

(g) The seller or the purchaser, as agreed to by the parties, shall pay the fee to the property owners' association or its agent for issuing the resale certificate. The property owners' association may not require payment for a resale certificate requested under Chapter 207 until the certificate is available for delivery. The association may not charge a fee if the certificate is not provided in the time prescribed by Section 207.003(a).

SECTION 3. Section 202.001(1), Property Code, is amended to read as follows:

(1) "Dedicatory instrument" means each document governing [instrument covering] the establishment, maintenance, or [and] operation of a residential subdivision, planned unit development, condominium or townhouse regime, or any similar planned development. The term includes:

(A) a declaration or similar instrument subjecting real property to:

(i) restrictive covenants, bylaws, or similar instruments governing the administration or operation of a property owners' association;

(ii)[, to] properly adopted rules and regulations of the property owners' association; or

(iii)[, or to] all lawful amendments to the covenants, bylaws, instruments, rules, or regulations; and

(B) bylaws, rules, regulations, or guidelines adopted by a property owners' association under an instrument described by Paragraph (A).

SECTION 4. Section 202.004, Property Code, is amended by adding Subsection (d) to read as follows:

(d) In evaluating an alleged violation of a restrictive covenant, the property owners' association or other representative designated by an owner of real property may not take action if:

(1) the property owners' association's position is not sufficiently strong to justify taking any action or further action;

(2) the provision alleged to have been violated may be inconsistent with applicable law;

(3) the alleged violation is not of such a material or visible nature as to be objectionable to a reasonable person or to justify expending the property owners' association's resources; or

(4) enforcement of the provision is not in the association's best interests, based on hardship, expense, or other reasonable criteria.

SECTION 5. Section 202.006, Property Code, is amended to read as follows:

Sec. 202.006. PUBLIC RECORDS. (a) A property owners' association shall file all [the] dedicatory instruments [instrument] in the real property records of each county in which the property to which the dedicatory instruments relate [instrument relates] is located.

(b) A dedicatory instrument that is not filed in accordance with this section has no effect until filed and cannot be enforced against a property owner who purchased the property before the dedicatory instrument was filed unless the unfiled dedicatory instrument differs from a dedicatory instrument filed at the time of purchase only with respect to modifications or amendments necessary to comply with state or federal law.

SECTION 6. Chapter 202, Property Code, is amended by adding Sections 202.008, 202.010, 202.011, 202.012, 202.013, 202.014, and 202.015 to read as follows:

Sec. 202.008. ASSOCIATION'S RIGHT OF ENTRY. (a) Except as provided by this section, a provision in a dedicatory instrument that provides a property owners' association the right or authority to enter onto an owner's private property to enforce or abate an alleged violation of a restrictive covenant is void as against public policy except for entry in circumstances in which it is reasonably determined the property has been abandoned and not maintained for more than 30 days. This subsection does not apply to an entry for a forced mow or to remove trash or debris if the dedicatory instrument allows entry for that purpose.

(b) This section does not prohibit a provision in a dedicatory instrument allowing a property owners' association a right of entry on the property of an owner that is limited to a dedicated access or other easement contained in a final plat.

(c) This section does not apply to:

(1) an association regulated under Title 7; or

(2) a property owners' association that funds through assessments:

(A) insurance on residences;

(B) one or more utility payments for residences; or

(C) exterior maintenance of residences.

Sec. 202.010. CERTAIN PARKING RESTRICTIONS PROHIBITED. (a) A provision in a dedicatory instrument that restricts or prohibits an owner from parking an operable, noncommercial, and personal automobile or truck on a public street is void as against public policy.

(b) A provision in a dedicatory instrument that restricts or prohibits an owner from parking the owner's operable, noncommercial, and personal automobile or truck in the owner's driveway is void as against public policy.

(c) For the purposes of this section, "noncommercial automobile" means a motor vehicle that may be legally driven on public roads under state law and that exhibits no commercial advertising other than standard dealer or manufacturer advertising.

(d) For the purposes of this section, a recreational vehicle, motor home, camper, all-terrain vehicle, trailer, or watercraft is not considered to be a personal automobile or truck.

(e) This section does not apply to:

(1) an association regulated under Title 7; or

(2) a property owners' association that funds through assessments:

(A) insurance on residences;

(B) one or more utility payments for residences; or

(C) exterior maintenance of residences.

Sec. 202.011. 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; and

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

(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. 202.012. 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) as adjudicated by a court:

(A) threatens the public health or safety; or

(B) violates a law;

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

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

(4) 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.

Sec. 202.013. RENTAL RESTRICTIONS. A property owners' association may not amend a dedicatory instrument to prohibit the rental of property subject to the dedicatory instrument without the consent of 67 percent of all owners of property subject to the dedicatory instrument, except that a property owners' association may require an owner to exercise due diligence in not leasing to an occupant who is a registered sex offender or who has a history of violent crime.

Sec. 202.014. RESTRICTIONS REQUIRING CAPITAL IMPROVEMENTS. (a) A dedicatory instrument may not be amended to retroactively require a person who owns property subject to the dedicatory instrument at the time the amendment is adopted to make a capital improvement to the owner's property that is not required before the amendment. A provision of a dedicatory instrument requiring an owner to make a capital improvement to the owner's property may only be adopted by a vote of 67 percent of all owners of property subject to the dedicatory instrument and may be applicable only to owners purchasing property subject to the dedicatory instrument after the provision is adopted.

(b) For the purposes of this section, "capital improvement" means items such as additional tree plantings, additional sodding, fence construction, hardscape installation, new construction, or any similar capital improvement. The term does not include repair or maintenance of existing improvements or the removal of conditions that are in violation of a dedicatory instrument.

Sec. 202.015. INJUNCTION; DAMAGES. (a) If a property owners' association or other representative designated by the property owners' association has violated, is violating, or is threatening to violate this chapter, a member of the property owners' association may bring a civil action against the property owners' association but may not bring an action against an association's officer or board member individually.

(b) A member of a property owners' association bringing an action under this section may seek:

(1) injunctive relief;

(2) damages in an amount equal to the greater of:

(A) actual damages arising from the violation; or

(B) $1,500 for each violation; or

(3) both injunctive relief and damages as provided in this subsection.

(c) The court may increase an award under Subsection (b)(2) to an amount not to exceed three times the amount awarded under Subsection (b)(2) if the court finds that violations have occurred with a frequency that constitutes a pattern or practice.

(d) Each day a violation continues is not considered a separate violation for purposes of an assessment of damages.

(e) The court may award damages to a property owners' association for a suit brought by a member of the property owners' association that the court finds frivolous or groundless in an amount that is not more than the greater of:

(1) three times the association's actual damages; or

(2) $4,500.

SECTION 7. Section 207.003(b), 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 and purpose 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; and

(16) a statement of all fees associated with the transfer of ownership, including a description of each fee, to whom each fee is paid, and the amount of each fee.

SECTION 8. Chapter 209, Property Code, is amended by adding Sections 209.0035 and 209.0041 to read as follows:

Sec. 209.0035. INJUNCTION; DAMAGES. (a) If a property owners' association or other representative designated by the property owners' association has violated, is violating, or is threatening to violate this chapter, a member of the property owners' association may bring a civil action against the property owners' association but may not bring an action against an association's officer or board member individually.

(b) A member of a property owners' association bringing an action under this section may seek:

(1) injunctive relief;

(2) damages in an amount equal to the greater of:

(A) actual damages arising from the violation; or

(B) $1,500 for each violation; or

(3) both injunctive relief and damages as provided in this subsection.

(c) The court may increase an award under Subsection (b)(2) to an amount not to exceed three times the amount awarded under Subsection (b)(2) if the court finds that violations have occurred with a frequency that constitutes a pattern or practice.

(d) Each day a violation continues is not considered a separate violation for purposes of assessment of damages.

(e) The court may award damages to a property owners' association for a suit brought by a member of the property owners' association that the court finds frivolous or groundless in an amount that is not more than the greater of:

(1) three times the association's actual damages; or

(2) $4,500.

Sec. 209.0041. AMENDMENT OF RESTRICTIVE COVENANTS AND BYLAWS. (a) This section applies to a residential subdivision in which property owners are subject to mandatory membership in a property owners' association.

(b) This section applies to a restrictive covenant or bylaw regardless of the date on which the restrictive covenant or bylaw was created.

(c) This section does not apply to the amendment of a restrictive covenant or bylaw during a development period, as defined by Section 202.011.

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

(e) A restrictive covenant or bylaw may be amended only by a vote of 51 percent of the total votes allocated to property owners in the property owners' association if the amendment impacts the use and enjoyment of personal or real property or may result in a fine or loss of a privilege of a member of the association.

(f) All ballots cast in a vote that results in an amendment to a restrictive covenant or bylaw are records of the association subject to inspection under Section 209.005.

SECTION 9. Section 209.005, Property Code, is amended to read as follows:

Sec. 209.005. ASSOCIATION RECORDS. (a) This section does not apply to a property owners' association that is subject to Chapter 552, Government Code, by application of Section 552.0036.

(b) A property owners' association shall make the books and records of the association, including financial records, open to and reasonably available for examination by [to] an owner [in accordance with Section B, Article 2.23, Texas Non-Profit Corporation Act (Article 1396-2.23, Vernon's Texas Civil Statutes)]. An owner is entitled to copies of information contained in the books and records.

(c) [(a-1) A property owners' association described by Section 552.0036(2), Government Code, shall make the books and records of the association, including financial records, reasonably available to any person requesting access to the books or records in accordance with Chapter 552, Government Code. Subsection (a) does not apply to a property owners' association to which this subsection applies.

[(b)] 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.

(d) In addition to the requirements of Subsection (b), a property owners' association shall maintain a copy of the association's books and records, including financial records and invoices, in a building:

(1) in which the books and records are appropriately stored; and

(2) that is:

(A) staffed during normal business hours;

(B) accessible to members of the association during normal business hours; and

(C) located on property commonly owned by the association within the boundaries of the subdivision governed by the association.

(e) If a building described by Subsection (d) does not exist on property described by Subsection (d), the property owners' association shall make the books and records available in accordance with Subsections (g) and (h).

(f) A party requesting association books or records shall submit the request in writing to a current board member or to the mailing address of the association or authorized representative as provided on the most current management certificate filed under Section 209.004.

(g) A property owners' association shall make books and records requested under Subsection (b) available to the requesting party within a reasonable time of the property owners' association's receipt of the request.

(h) A reasonable time for providing information requested under Subsection (b) is considered to be 10 business days after the date the property owners' association receives a request, except as otherwise provided by this section.

(i) If the property owners' association is unable to produce a requested book or record on or before the 10th business day after the date the information is requested, the property owners' association must provide to the requestor notice that:

(1) informs the requestor that the property owners' association is unable to produce the information on or before the 10th business day after the date of the request; and

(2) states a date by which the information will be available for inspection that occurs not later than the 30th day after the date notice under this subsection is given.

(j) A property owners' association shall make books and records requested under this section available to the requestor in one or more of the following formats, as agreed on by the requestor and the property owners' association:

(1) an electronic format:

(A) delivered to an electronic mail address provided by the requestor; or

(B) delivered in a disc or other standard electronic format:

(i) to the mailing address of the requestor; or

(ii) if the requesting party does not provide a mailing address, to the address of the requestor's property in the subdivision; or

(2) a hard-copy format:

(A) delivered to the mailing address of the requestor; or

(B) if the requesting party does not provide a mailing address:

(i) mailed to the address of the requestor's property in the subdivision; or

(ii) made available at a location not more than 50 miles from the boundary of the county in which the requestor's property is located.

(k) This section does not require a property owners' association to staff a building described by Subsection (d).

(l) A property owners' association may charge an owner for copies of the requested information in an amount that reasonably includes all costs related to reproducing the information, including costs of materials, labor, and overhead.

(m) Any information maintained by the association that is released under this section may not identify an individual member of an association or an individual's personal financial information. Information may be released in an aggregate manner that would not identify an individual property owner.

(n) A property owners' association shall keep all records as to changes to the dedicatory instruments in perpetuity and shall maintain records related to financial matters of the association, including assessments, fines, foreclosures, and enforcement actions for at least seven years.

(o) A member of a property owners' association who is denied access to or copies of association books or records to which the member is entitled under this section may file a petition with the justice of the peace of a justice precinct in which all or part of the property that is governed by the association is located, requesting relief in accordance with this subsection. If the justice of the peace finds that the member is entitled to access to or copies of the records, the justice of the peace shall order the association to:

(1) provide the access or copies requested by the member; and

(2) pay the court costs and the member's reasonable attorney's fees and court costs.

(p) For the purposes of this section, "business day" means a day other than Saturday, Sunday, or a state or federal holiday.

SECTION 10. Chapter 209, Property Code, is amended by adding Sections 209.0051, 209.0056, 209.0057, 209.0058, 209.0059, 209.00591, 209.00592, and 209.00593 to read as follows:

Sec. 209.0051. OPEN BOARD MEETINGS. (a) This section does not apply to a property owners' association that is subject to Chapter 551, Government Code, by application of Section 551.0015.

(b) In this section, "board meeting" means a deliberation between a quorum of the voting board of the property owners' association, or between a quorum of the voting board and another person, during which property owners' association business or policy over which the board has responsibility is discussed or considered, or during which the board takes formal action. The term does not include the gathering of a quorum of the board at a social function unrelated to the business of the association, or the attendance by a quorum of the board at a regional, state, or national convention or workshop, ceremonial event, or press conference, if formal action is not taken and any discussion of association business is incidental to the social function, convention, workshop, ceremonial event, or press conference.

(c) Except as provided by this subsection, a meeting of the property owners' association board or a committee or subcommittee of the board is open to members of the property owners' association and shall be held in a county in which all or part of the property governed by the association is located.

(d) The board shall keep a record of each regular, emergency, or special board meeting in the form of written minutes or an audio recording of the meeting. A record of a meeting must state the subject of each deliberation and indicate each vote, order, decision, or other action taken by the board. The board shall make meeting records available to a member for inspection and copying on the member's written request to the board or the board's representative.

(e) The board shall give members notice of the date, hour, place, and subject of a regular or special board meeting, including a general description of any matters to be brought up for deliberation in executive session. The notice shall be posted:

(1) at least 72 hours before the start of the meeting; and

(2) in a conspicuous manner reasonably designed to provide notice to association members:

(A) in a place located on the association's common property; or

(B) on any Internet website maintained by the association.

(f) If the board recesses a regular or special board meeting to continue the following regular business day, the board is not required to post notice of the continued meeting if the recess is taken in good faith and not to circumvent this section. If a regular or special board meeting is continued to the following regular business day, and on that following day the board continues the meeting to another day, the board shall give written notice as required by this section of the meeting continued to that other day.

(g) If at a regular, emergency, or special meeting, a member makes an inquiry regarding a subject for which notice has not been given as required by this section, the notice provisions of this section do not apply to:

(1) a statement by the board of specific factual information given in response to the inquiry; or

(2) a recitation of existing policy in response to the inquiry.

(h) Any deliberation of or decision relating to the subject of an inquiry made under Subsection (g) shall be limited to a proposal to place the subject on the agenda for a subsequent board meeting.

(i) In the event of an emergency or urgent necessity that requires immediate board action, the board may meet in an emergency board meeting to address a reasonably unforeseeable situation. Notice for an emergency board meeting may be given in the manner prescribed by Subsection (e) at least two hours before the emergency session is convened and must clearly identify the emergency or urgent necessity for which the notice is given. A board in an emergency meeting may not consider fines, foreclosures, enforcement actions, increases in assessments, or any other foreseeable business or policy over which the board has responsibility. Any action taken in an emergency session must be ratified by a vote of the board at their next regular board meeting.

(j) Before the board calls an executive session, the board shall convene in a regular or special board meeting for which notice has been given as provided by this section. During that board meeting, the presiding director may call an executive session by announcing that an executive session will be held to deliberate a matter described by Subsection (k) and identifying the specific subdivision of Subsection (k) under which the executive session will be held.

(k) A board of a property owners' association may meet in executive session, to which the members do not have access, to deliberate:

(1) anticipated or pending litigation, settlement offers, or interpretations of the law with the association's legal counsel;

(2) complaints or charges against a board member or a representative of the property owners' association;

(3) a payment plan under Section 209.0062;

(4) a foreclosure under Chapter 51; or

(5) an enforcement action against a member of the association.

Sec. 209.0056. NOTICE OF ELECTION OR ASSOCIATION VOTE. On or before the 30th day before the date an election or vote is held by a property owners' association, the association shall give each owner of property in the property owners' association written notice of the election or vote.

Sec. 209.0057. TABULATION OF VOTES. (a) This section does not apply to a property owners' association if:

(1) membership in the property owners' association is mandatory for owners or for a defined class of owners of private real property in a defined geographic area in a county with a population of 2.8 million or more or in a county adjacent to a county with a population of 2.8 million or more;

(2) the property owners' association has the power to make mandatory special assessments for capital improvements or mandatory regular assessments; and

(3) the amount of the mandatory special or regular assessments is or has ever been based wholly or partly on the value at which the state or a local governmental body assesses the property for purposes of ad valorem taxation under Section 20, Article VIII, Texas Constitution.

(b) To tabulate the votes in any matter subject to a vote of the members of a mandatory property owners' association, the association shall enter into a contract for the services of a person who is not a member of the association or related to a member of the association board within the third degree by consanguinity or affinity, as determined under Chapter 573, Government Code, and who is:

(1) a county judge;

(2) a county elections administrator;

(3) a justice of the peace; or

(4) a county voter registrar.

Sec. 209.0058. BALLOTS. (a) Any vote cast in an election or vote by a member of a property owners' association must be in writing and signed by the member.

(b) Not later than the 20th day after the date of an election or vote, a property owners' association shall deposit in the county clerk's office of each county in which the association's declaration is recorded all ballots cast in an election or vote that results in the amendment of a dedicatory instrument.

(c) Ballots deposited with a county clerk under this section are subject to public inspection.

(d) A county clerk shall retain ballots deposited with the clerk under this section until the fourth anniversary of the date the ballots are deposited.

(e) A county clerk may not charge a fee for the deposit of ballots under this section.

(f) The results of an election or vote subject to this section are not valid until the ballots are deposited with the county clerk as provided by this section.

Sec. 209.0059. RIGHT TO VOTE. A provision in a dedicatory instrument that would disqualify a property owner from voting in an association election of board members or on any matter concerning the rights or responsibilities of the owner is void.

Sec. 209.00591. PROXY VOTING. A provision in any dedicatory instrument that provides for a proxy vote in any matter subject to a vote of the members of the property owners' association is void.

Sec. 209.00592. BOARD MEMBERSHIP. (a) Except as provided by Subsection (b), a provision in a dedicatory instrument that restricts a property owner's right to run for a position on the board of the property owners' association is void.

(b) If a board is presented with written, documented evidence from a database or other record maintained by a governmental law enforcement authority that a board member has been convicted of a felony or crime involving moral turpitude, the board member is immediately ineligible to serve on the board of the property owners' association, automatically considered removed from the board, and prohibited from future service on the board.

Sec. 209.00593. VOTING. (a) The voting rights of an owner may be cast or given:

(1) in person at a meeting of the property owners' association;

(2) by absentee ballot in accordance with this section; or

(3) by electronic ballot in accordance with this section.

(b) An absentee or electronic ballot:

(1) may be counted as an owner present and voting for the purpose of establishing a quorum only for items appearing on the ballot;

(2) may not be counted, even if properly delivered, if the owner attends the meeting to vote in person, so that any vote cast at a meeting by a property owner supersedes any vote submitted by absentee or electronic ballot previously submitted for that proposal; and

(3) may not be counted on the final vote of a proposal if the motion was amended at the meeting to be different from the exact language on the absentee or electronic ballot.

(c) A solicitation for votes by absentee ballot must include:

(1) an absentee ballot that contains each proposed action and provides an opportunity to vote for or against each proposed action;

(2) instructions for delivery of the completed absentee ballot, including the delivery location; and

(3) the following language: "By casting your vote via absentee ballot you will forego the opportunity to consider and vote on any action from the floor on these proposals. This means that if there are amendments to these proposals your votes will not be counted on the final vote on these measures. If you desire to retain this ability, please attend the meeting in person.".

(d) For the purposes of this section, "electronic ballot" means a ballot:

(1) given by:

(A) electronic mail;

(B) facsimile; or

(C) posting on an Internet website;

(2) for which the identity of the property owner submitting the ballot can be confirmed; and

(3) for which the property owner may receive a receipt of the electronic transmission and receipt of the owner's ballot.

(e) If an electronic ballot is posted on an Internet website, a notice of the posting shall be sent to each owner that contains instructions on obtaining access to the posting on the website.

SECTION 11. Section 209.006, Property Code, is amended by amending Subsection (b) and adding Subsections (c), (d), (e), (f), (g), (h), (i), (j), and (k) 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) except as provided by Subsection (d), 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;

(3) specify the date by which the owner must cure the violation if the violation is of a curable nature and does not pose a threat to public health or safety;

(4) specify the dollar amount of any fine the association seeks to levy;

(5) specify each provision of the dedicatory instrument the owner is alleged to have violated; and

(6) be sent by certified mail, return receipt 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 [receives the notice].

(c) The date specified in the notice under Subsection (b)(3) must provide a reasonable period of at least 30 days for the owner to cure the violation if the violation is of a curable nature and does not pose a threat to public health or safety.

(d) Subsections (a) and (b) do not apply to a violation for which the owner has been previously given notice under this section and the opportunity to exercise any rights available under this section in the preceding six months.

(e) If the property owner does not cure the violation in the time provided under Subsection (c), the property owners' association may assess the fine and shall provide notice of the assessment to the owner. If the property owner disputes the violation, the owner may challenge the fine by providing, within the time prescribed by Subsection (f), written notice to the property owners' association of the challenge accompanied by a statement of the grounds on which the owner believes the owner is not in violation and citations of the dedicatory instrument for each violation alleged. If the property owner cures the violation before the expiration period for cure specified under Subsection (c), any fine assessed for the violation is void.

(f) If the property owner contests the violation on or before the 30th day after the date the owner receives a notice of an assessment of a fine but does not cure the violation within the same 30-day period, the property owners' association must file suit to uphold and enforce the fine in a justice court or small claims court not later than the 60th day after the expiration of the 30-day period. The complaint must list each violation and be accompanied by citation of the dedicatory instrument for each violation. If the property owners' association does not file suit within the time prescribed by this subsection, the association's right to collect the fine is considered waived.

(g) Not later than the 30th day after the date a suit is filed under Subsection (f), the court shall hold an evidentiary hearing on the matter. The parties are not entitled to any discovery.

(h) At the evidentiary hearing, the property owners' association has the burden of proving by a preponderance of the evidence that the property owner has violated a restrictive covenant.

(i) The court shall determine whether a violation has occurred and if so, whether the fine for the violation is reasonable considering the type, duration, and severity of the violation.

(j) If the court finds that the position taken by either party is groundless or made in bad faith, the court may award the prevailing party its attorney's fees.

(k) For purposes of this section, a violation is considered a threat to public health or safety if the violation materially affects the physical health or safety of an ordinary resident.

SECTION 12. Chapter 209, Property Code, is amended by adding Sections 209.0061, 209.0062, 209.0063, 209.0064, and 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 and frequency of the violation and the effect of the violation on the subdivision as a whole. If the association allows fines for a continuing violation to accumulate against a lot or an owner, the association must establish a reasonable 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.

(c) If the property owners' association assesses a fine against a nonowner occupant under this section, the notice provisions of Section 209.006 and the hearing provisions of Section 209.007 apply to the nonowner occupant in the same manner as those provisions apply to an owner.

Sec. 209.0062. ALTERNATIVE PAYMENT SCHEDULE FOR CERTAIN ASSESSMENTS. (a) A property owners' association shall adopt reasonable 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 without accruing additional monetary penalties. For purposes of this section, monetary penalties do not include reasonable costs associated with administering the payment plan or interest.

(b) For any approved special assessment in an amount greater than the equivalent of the sum of all regular assessments payable in the year the special assessment is approved, a property owners' association shall allow partial payments of the special assessment for 12 months unless the property owner requests a shorter payment period in writing at the time the property owner requests an alternative payment plan. A property owners' association may offer a reasonable discount for an owner making a one-time lump sum payment of the special assessment.

(c) For any approved special assessment in an amount greater than the equivalent of one-half the sum of all regular assessments payable in the year the special assessment is approved, a property owners' association shall allow partial payments of the special assessment for six months unless the property owner requests a shorter payment period in writing at the time the property owner requests an alternative payment plan. A property owners' association may offer a reasonable discount to an owner making a one-time lump sum payment of the special assessment.

(d) A property owners' association is not required to allow a payment plan for any amount 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 during the five years following an owner's default under a previous payment plan.

(e) A 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.

(f) A property owners' association's failure to file as required by this section the association's guidelines in the real property records of each county in which the subdivision is located does not prohibit a property owner from receiving an alternative payment schedule by which the owner may make partial payments to the property owners' association for delinquent regular or special assessments or any other amount owed to the association without accruing additional monetary penalties, as defined by Subsection (a).

Sec. 209.0063. PRIORITY OF PAYMENTS. Unless otherwise provided in writing by the property owner at the time payment is made, 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 or any other charge that could provide the basis for foreclosure;

(4) any fines assessed by the association;

(5) any attorney's fees incurred by the association that are not subject to Subdivision (3); 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 (c), a property owners' association may not foreclose a property owners' association assessment lien unless the association first obtains a court order in an application for expedited foreclosure under the rules adopted by the supreme court under Subsection (b).

(b) The supreme court, as an exercise of the court's authority under Section 74.024, Government Code, shall adopt rules establishing expedited foreclosure proceedings for use by a property owners' association in foreclosing an assessment lien of the association. The rules adopted under this subsection must be substantially similar to the rules adopted by the supreme court under Section 50(r), Article XVI, Texas Constitution.

(c) Expedited foreclosure is not required under this section 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 under this section. A waiver under this subsection may not be required as a condition of the transfer of title to real property.

SECTION 13. Section 209.010(a), 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 14. Chapter 209, Property Code, is amended by adding Sections 209.014 and 209.015 to read as follows:

Sec. 209.014. BOARD POWERS. Bylaws adopted by the board of a property owners' association may not expand the powers of the association beyond those powers specifically granted in the declaration. To the extent of any conflict between the bylaws and any declaration, the declaration prevails.

Sec. 209.015. RESTRICTIONS ON OWNERSHIP VOID. A property owners' association may not include or enforce a provision in a dedicatory instrument that restricts the number of properties within the subdivision that an individual may own.

SECTION 15. Section 211.002(a), 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 16. Section 202.004(c), Property Code, is repealed.

SECTION 17. (a) Section 5.006(a), Property Code, as amended by this Act, and the repeal by this Act of Section 202.004(c), 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 202.015 and 209.0035, Property Code, as added by this Act, apply only to a cause of action that accrues on or after the effective date of this Act. A cause of action that accrues 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.

(d) Section 202.006, Property Code, as amended by this Act, and Sections 202.008, 202.010, 202.011, 202.012, 202.014, 209.0059, 209.00591, 209.00592(a), and 209.015, Property Code, as added by this Act, apply to a provision in a dedicatory instrument or a restrictive covenant enacted before, on, or after the effective date of this Act, except that any action taken before the effective date of this Act based on an unfiled dedicatory instrument is not invalidated by Section 202.006, Property Code, as amended by this Act.

(e) Section 209.005, Property Code, as amended by this Act, applies only to a request for information received by a property owners' association on or after the effective date of this Act. A request for information 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.

(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 a foreclosure sale that occurs after January 1, 2010. A foreclosure sale that occurs on or before January 1, 2010, 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.

(i) Section 209.010(a), Property Code, as amended by this Act, applies only to a foreclosure sale conducted on or after the effective date of this Act. A foreclosure sale conducted 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.

SECTION 18. Not later than January 1, 2010, each property owners' association shall present for recording with the county clerk as prescribed by Section 202.006, Property Code, as amended by this Act, each dedicatory instrument governing the association that has not been previously recorded in the real property records of the county.

SECTION 19. Not later than January 1, 2010, the Supreme Court of Texas shall adopt rules of civil procedure under Section 209.0091, Property Code, as added by this Act.

SECTION 20. This Act takes effect January 1, 2010.