81R6826 AJA-F

By: Solomons 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, 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, 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 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 under Chapter 207.

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;

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

(C) any other document that governs the rights, duties, and responsibilities of a property owners' association or the association's members.

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 the property owners' association determines that under the particular circumstances:

(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.

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

Sec. 202.008. ASSOCIATION'S RIGHT OF ENTRY. (a) 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.

(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.

Sec. 202.010. CERTAIN PARKING RESTRICTIONS PROHIBITED. (a) A provision in a dedicatory instrument that restricts or prohibits an owner from parking 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 personal, noncommercial vehicle in the owner's driveway is void as against public policy.

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. 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.

(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) If a member of the property owners' association prevails in an action under this section, the member of the property owners' association is entitled to recover reasonable attorney's fees and court costs.

(d) 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.

(e) Each day a violation continues is not considered a separate violation for purposes of a civil penalty assessment.

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];

(6) [(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;

(7) [(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;

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

(9) 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 [(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 8. Chapter 209, Property Code, is amended by adding Sections 209.0035, 209.0041, 209.0051, 209.0056, 209.0057, 209.0058, 209.0059, 209.00591, and 209.00592 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.

(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) If a member of the property owners' association prevails in an action under this section, the member of the property owners' association is entitled to recover reasonable attorney's fees and court costs.

(d) 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.

(e) Each day a violation continues is not considered a separate violation for purposes of a civil penalty assessment.

Sec. 209.0041. AMENDMENT OF DEDICATORY INSTRUMENTS. (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 dedicatory instrument regardless of the date on which the dedicatory instrument was created.

(c) This section does not apply to the amendment of a dedicatory instrument 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) Each dedicatory instrument and any subsequently enacted dedicatory instruments may be amended only by a vote of 51 percent of the total votes allocated to property owners in the property owners' association.

Sec. 209.0051. OPEN MEETINGS. (a) Each meeting of the board or a committee of a property owners' association shall be open to every member of the association and shall be held in a county in which the property to which the association relates is located.

(b) A property owners' association shall give written notice to every member of the property owners' association of the date, hour, place, and subject of each regular or special meeting of the board or a committee of the property owners' association. The notice must include a written agenda that states in clear and precise language the item or items to be addressed and considered at the meeting and shall be posted:

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

(2) in a conspicuous manner or place reasonably designed to provide notice to the association members.

(c) A property owners' association shall prepare and keep minutes or make a tape recording of each meeting of the board or a committee of the property owners' association. The minutes must:

(1) state the subject of each deliberation; and

(2) indicate each vote, order, decision, or other action taken.

(d) The minutes of the board or a committee meeting of a property owners' association shall be made available for inspection and copying by a member of the property owners' association not later than the seventh day after the date of the meeting.

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. 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:

(1) a county judge;

(2) a county elections administrator; or

(3) 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 10th day after the date of an election or vote, a property owners' association shall file all ballots cast in an election or vote that results in the amendment of a dedicatory instrument of record in the real property records of each county in which the property is located. The results of an election or vote subject to this subsection are not valid until the ballots are filed.

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) A dedicatory instrument may restrict the right of a property owner who has been convicted of a felony or crime involving moral turpitude to run for a position on the board of the property owners' association.

SECTION 9. Section 209.005, Property Code, is amended by amending Subsection (a) and adding Subsections (c) and (d) to read as follows:

(a) On or before the 30th day after the date a property owners' association receives a written request, the [A property owners'] association shall make the books and records of the association, including financial records, [reasonably] available to an owner in accordance with Chapter 552, Government Code [Section B, Article 2.23, Texas Non-Profit Corporation Act (Article 1396-2.23, Vernon's Texas Civil Statutes)].

(c) Except as provided by Subsection (d), if a property owners' association subject to Subsection (a) fails to comply with Subsection (a), 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; or

(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.

(d) An owner who seeks a remedy under Section 209.0035 for a violation of Subsection (a) may not seek a judgment under Subsection (c)(2) or (3).

SECTION 10. 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 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.

(d) 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.

SECTION 11. 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 interest or penalties.

(b) A property owners' association shall allow partial payments 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.

(c) 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.

(d) 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.

(e) 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 interest or penalties.

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 (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 at the time the foreclosure is sought to waive judicial foreclosure under this section.

SECTION 12. 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 13. Chapter 209, Property Code, is amended by adding Sections 209.014 and 209.015 to read as follows:

Sec. 209.014. VOTE ON CERTAIN ASSESSMENTS REQUIRED. (a) A vote of 51 percent of the total votes allocated to owners of property in the property owners' association is required to:

(1) increase by more than 10 percent the amount of regular assessments due annually; or

(2) impose a special assessment.

(b) An action taken by a board of a property owners' association in violation of this section is void.

Sec. 209.015. 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.

SECTION 14. 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 15. Section 202.004(c), Property Code, is repealed.

SECTION 16. (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 202.013 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, 209.0059, 209.00591, and 209.00592(a), Property Code, as added by this Act, apply to a deed restriction enacted before, on, or after the effective date of 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 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 209.010(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 17. 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 18. This Act takes effect January 1, 2010.