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A BILL TO BE ENTITLED
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AN ACT
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relating to the registration, monitoring, and investigation of and |
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handling of funds by property owners' association boards. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Section 14.101, Finance Code, is amended to read |
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as follows: |
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Sec. 14.101. GENERAL DUTIES OF COMMISSIONER. The |
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commissioner shall enforce this chapter, Subtitles B and C of Title |
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4 of this code, [and] Chapter 394 of this code, and Chapters 82 and |
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209, Property Code, in person or through an assistant commissioner, |
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examiner, or other employee of the office. |
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SECTION 2. Section 14.201, Finance Code, is amended to read |
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as follows: |
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Sec. 14.201. INVESTIGATION AND ENFORCEMENT AUTHORITY. |
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Investigative and enforcement authority under this subchapter |
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applies only to this chapter, Subtitles B and C of Title 4 of this |
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code, [and] Chapter 394 of this code, and Chapters 82 and 209, |
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Property Code. |
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SECTION 3. Section 14.2015(a), Finance Code, is amended to |
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read as follows: |
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(a) Except as provided by Subsection (b), information or |
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material obtained or compiled by the commissioner in relation to an |
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examination or investigation by the commissioner or the |
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commissioner's representative of a license holder or registrant |
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under Subtitle B or C, Title 4, of this code, [or] Chapter 394 of |
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this code, or Chapter 82 or 209, Property Code, is confidential and |
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may not be disclosed by the commissioner or an officer or employee |
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of the Office of Consumer Credit Commissioner, including: |
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(1) information obtained from a license holder or |
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registrant under Subtitle B or C, Title 4, of this code, [or] |
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Chapter 394 of this code, or Chapter 82 or 209, Property Code; |
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(2) work performed by the commissioner or the |
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commissioner's representative on information obtained from a |
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license holder or registrant for the purposes of an examination or |
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investigation conducted under Subtitle B or C, Title 4, of this |
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code, [or] Chapter 394 of this code, or Chapter 82 or 209, Property |
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Code; |
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(3) a report on an examination or investigation of a |
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license holder or registrant conducted under Subtitle B or C, Title |
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4, of this code, [or] Chapter 394 of this code, or Chapter 82 or 209, |
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Property Code; and |
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(4) any written communications between the license |
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holder or registrant, as applicable, and the commissioner or the |
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commissioner's representative relating to or referencing an |
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examination or investigation conducted under Subtitle B or C, Title |
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4, of this code, [or] Chapter 394 of this code, or Chapter 82 or 209, |
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Property Code. |
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SECTION 4. Section 14.202(a), Finance Code, is amended to |
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read as follows: |
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(a) On receipt of a written complaint or other reasonable |
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cause to believe that a person is violating a statute listed by |
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Section 14.201, the commissioner may require the person to furnish |
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information regarding a specific loan, retail transaction, or |
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business practice or an assessment, enforcement action, |
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foreclosure, fine, or other conduct by a condominium unit owners' |
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association or property owners' association to which the violation |
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relates. |
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SECTION 5. Section 82.003, Property Code, is amended by |
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adding Subdivisions (4-a) and (4-b) to read as follows: |
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(4-a) "Commission" means the Finance Commission of |
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Texas. |
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(4-b) "Commissioner" means the consumer credit |
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commissioner. |
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SECTION 6. Subchapter C, Chapter 82, Property Code, is |
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amended by adding Sections 82.1031, 82.1032, 82.1033, 82.1034, and |
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82.1035 to read as follows: |
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Sec. 82.1031. BOARD REGISTRATION REQUIRED. (a) A board of |
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a unit owners' association may not act on behalf of the association |
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unless the board is registered with the commissioner as provided by |
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this section. |
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(b) An application for registration must contain the |
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information required to be included in a management certificate |
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under Section 82.116 and any other information required by the |
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commission by rule. An applicant shall promptly supplement or |
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|
amend an application to report any material mistake or omission or |
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|
any actual or expected change in any document or information |
|
|
contained in the application. |
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(c) The application must be signed under oath and |
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accompanied by an initial registration fee in an amount set by the |
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commission by rule. |
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(d) The commissioner may deny an application for |
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registration if: |
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(1) any board member of the applicant has been |
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convicted of a crime or found civilly liable for an offense |
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|
involving moral turpitude, including forgery, embezzlement, |
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obtaining money under false pretenses, larceny, extortion, |
|
|
conspiracy to defraud, or any other similar offense or violation; |
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or |
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(2) the commissioner, based on specific evidence, |
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|
finds that the application does not warrant the belief that the |
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board will operate lawfully, fairly, and in accordance with the |
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purposes of this chapter. |
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(e) If the commissioner denies an application for |
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registration under this section, the applicant, not later than the |
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30th day after the date on which the applicant receives the notice |
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|
of denial, may appeal the denial and request a hearing under Chapter |
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2001, Government Code. |
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Sec. 82.1032. RENEWAL OF REGISTRATION. A unit owners' |
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association board must renew the board's registration annually by |
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filing a report with the commissioner. The report must be in a form |
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|
prescribed by the commission by rule and: |
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(1) be signed under oath; |
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(2) be filed not less than 30 days or more than 60 days |
|
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before the date on which the annual registration expires; |
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(3) be accompanied by a renewal fee in an amount set by |
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|
the commission by rule; |
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(4) contain a financial statement for the unit owners' |
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association for the fiscal year preceding the date the report is |
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filed; |
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(5) disclose any changes in the information contained |
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|
in the registrant's original application for registration or the |
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preceding renewal report, as applicable; |
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(6) include evidence of insurance coverage that: |
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(A) is in an amount equal to the greater of |
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$250,000 or the highest daily balance in the trust account required |
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by Section 82.1035 during the six months preceding the date the |
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report is filed; |
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(B) insures against the risks of dishonesty, |
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fraud, theft, and other misconduct on the part of the unit owners' |
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association or a board member, employee, or agent of the |
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association; |
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(C) is issued by an insurance company authorized |
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to engage in business in this state and rated at least "A" or |
|
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equivalent by a nationally recognized rating organization approved |
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by the commissioner; |
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(D) has a deductible of not more than $5,000; |
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(E) is payable for the benefit of the |
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association, this state, a unit owner, or an individual who is a |
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resident of this state, as their interests may appear; and |
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(F) is not subject to cancellation by the |
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association or the insurer until the 60th day after the date on |
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which written notice is given to the commissioner; |
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(7) disclose the total amount of assessments received |
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by the association during the 12 months preceding the date of the |
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renewal report from or on behalf of unit owners; |
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(8) disclose, to the best of the registrant's |
|
|
knowledge, the gross funds accumulated during the 12 months |
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preceding the date of the renewal report by the association; and |
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(9) provide any other information that the |
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|
commissioner reasonably requires in order to perform the |
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commissioner's duty under this section. |
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Sec. 82.1033. MONITORING AND INVESTIGATION BY |
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COMMISSIONER. The commissioner shall: |
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(1) monitor the operations of a unit owners' |
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association board as appropriate to ensure compliance with this |
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|
subchapter; and |
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(2) receive and investigate complaints against a unit |
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|
owners' association board. |
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Sec. 82.1034. REVOCATION OF REGISTRATION. (a) The |
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commissioner may revoke the registration of a unit owners' |
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|
association board if the commissioner determines that the board has |
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|
violated this subchapter. The commissioner shall recite the basis |
|
|
of the decision in an order revoking the registration. |
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(b) If the commissioner proposes to revoke a registration, |
|
|
the unit owners' association board is entitled to a hearing before |
|
|
the commissioner or a hearings officer, who shall propose a |
|
|
decision to the commissioner. The commissioner or hearings officer |
|
|
shall prescribe the time and place of the hearing. The hearing is |
|
|
governed by Chapter 2001, Government Code. |
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|
(c) A unit owners' association board aggrieved by a ruling, |
|
|
order, or decision of the commissioner is entitled to appeal to a |
|
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district court in the county in which the hearing was held. An |
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appeal under this subsection is governed by Chapter 2001, |
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|
Government Code. |
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Sec. 82.1035. TRUST ACCOUNT. (a) All money paid to a unit |
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owners' association board by or on behalf of a unit owner pursuant |
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|
to an assessment for common expenses is held in trust. Within two |
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|
business days after receipt, the board shall deposit the money in a |
|
|
financial institution in a trust account established for the |
|
|
benefit of the unit owners. The board shall inform the commissioner |
|
|
of the name, business address, and telephone number of the |
|
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financial institution at which the board maintains a trust account |
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under this section and the account number of the account. |
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(b) Money held in trust by a unit owners' association board |
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|
is not property of the board or the board's designee. |
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(c) A unit owners' association board shall: |
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(1) maintain separate records of account for each unit |
|
|
owner who pays funds to the unit owners' association pursuant to an |
|
|
assessment; and |
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(2) disburse money paid by or on behalf of a unit owner |
|
|
only to pay for common expenses as provided by the declaration, |
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|
articles of incorporation, bylaws, or rules of the association. |
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|
(d) A unit owners' association board may not commingle money |
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|
in a trust account established for the benefit of unit owners with |
|
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money of other persons. |
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(e) A trust account under this section must at all times |
|
|
have a cash balance equal to the sum of the balances of each |
|
|
individual unit owner's account record. |
|
|
(f) A unit owners' association board shall annually |
|
|
reconcile a trust account under this section. If the board or the |
|
|
board's designee has more than one trust account, each trust |
|
|
account must be individually reconciled. |
|
|
(g) If a unit owners' association board discovers, or has a |
|
|
reasonable suspicion of, embezzlement or other unlawful |
|
|
appropriation of money held in trust, the board immediately shall |
|
|
notify the commissioner by a method approved by the commission by |
|
|
rule. Unless the commission by rule provides otherwise, the board |
|
|
shall notify the commissioner of remedial action that the board |
|
|
intends to take with regard to the unlawful appropriation or |
|
|
suspected unlawful appropriation not later than the fifth day after |
|
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the date on which the board notifies the commissioner of the |
|
|
appropriation. |
|
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(h) Before transferring a trust account from one financial |
|
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institution to another, a unit owners' association board shall |
|
|
inform the commissioner of the name, business address, and |
|
|
telephone number of the institution to which the account will be |
|
|
transferred. As soon as practicable after the transfer of a trust |
|
|
account under this subsection, the board shall inform the |
|
|
commissioner of the account number at the transferee institution. |
|
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SECTION 7. Section 209.002, Property Code, is amended by |
|
|
adding Subdivisions (2-a) and (2-b) to read as follows: |
|
|
(2-a) "Commission" means the Finance Commission of |
|
|
Texas. |
|
|
(2-b) "Commissioner" means the consumer credit |
|
|
commissioner. |
|
|
SECTION 8. Chapter 209, Property Code, is amended by adding |
|
|
Sections 209.0041, 209.0042, 209.0043, 209.0044, and 209.0045 to |
|
|
read as follows: |
|
|
Sec. 209.0041. BOARD REGISTRATION REQUIRED. (a) A board of |
|
|
a property owners' association may not act on behalf of the |
|
|
association unless the board is registered with the commissioner as |
|
|
provided by this section. |
|
|
(b) An application for registration must contain the |
|
|
information required to be included in a management certificate |
|
|
under Section 209.004 and any other information required by the |
|
|
commission by rule. An applicant shall promptly supplement or |
|
|
amend an application to report any material mistake or omission or |
|
|
any actual or expected change in any document or information |
|
|
contained in the application. |
|
|
(c) The application must be signed under oath and |
|
|
accompanied by an initial registration fee in an amount set by the |
|
|
commission by rule. |
|
|
(d) The commissioner may deny an application for |
|
|
registration if: |
|
|
(1) any board member of the applicant has been |
|
|
convicted of a crime or found civilly liable for an offense |
|
|
involving moral turpitude, including forgery, embezzlement, |
|
|
obtaining money under false pretenses, larceny, extortion, |
|
|
conspiracy to defraud, or any other similar offense or violation; |
|
|
or |
|
|
(2) the commissioner, based on specific evidence, |
|
|
finds that the application does not warrant the belief that the |
|
|
board will operate lawfully, fairly, and in accordance with the |
|
|
purposes of this chapter. |
|
|
(e) If the commissioner denies an application for |
|
|
registration under this section, the applicant, not later than the |
|
|
30th day after the date on which the applicant receives the notice |
|
|
of denial, may appeal the denial and request a hearing under Chapter |
|
|
2001, Government Code. |
|
|
Sec. 209.0042. RENEWAL OF REGISTRATION. A property owners' |
|
|
association board must renew the board's registration annually by |
|
|
filing a report with the commissioner. The report must be in a form |
|
|
prescribed by the commission by rule and: |
|
|
(1) be signed under oath; |
|
|
(2) be filed not less than 30 days or more than 60 days |
|
|
before the date on which the annual registration expires; |
|
|
(3) be accompanied by a renewal fee in an amount set by |
|
|
the commission by rule; |
|
|
(4) contain a financial statement for the property |
|
|
owners' association for the fiscal year preceding the date the |
|
|
renewal report is filed; |
|
|
(5) disclose any changes in the information contained |
|
|
in the registrant's original application for registration or the |
|
|
preceding renewal report, as applicable; |
|
|
(6) include evidence of insurance coverage that: |
|
|
(A) is in an amount equal to the greater of |
|
|
$250,000 or the highest daily balance in the trust account required |
|
|
by Section 209.0045 during the six months preceding the date the |
|
|
report is filed; |
|
|
(B) insures against the risks of dishonesty, |
|
|
fraud, theft, and other misconduct on the part of the property |
|
|
owners' association or a board member, employee, or agent of the |
|
|
association; |
|
|
(C) is issued by an insurance company authorized |
|
|
to engage in business in this state and rated at least "A" or |
|
|
equivalent by a nationally recognized rating organization approved |
|
|
by the commissioner; |
|
|
(D) has a deductible of not more than $5,000; |
|
|
(E) is payable for the benefit of the |
|
|
association, this state, a property owner, or an individual who is a |
|
|
resident of this state, as their interests may appear; and |
|
|
(F) is not subject to cancellation by the |
|
|
association or the insurer until the 60th day after the date on |
|
|
which written notice is given to the commissioner; |
|
|
(7) disclose the total amount of assessments received |
|
|
by the association during the 12 months preceding the date of the |
|
|
renewal report from or on behalf of property owners; |
|
|
(8) disclose, to the best of the registrant's |
|
|
knowledge, the gross funds accumulated during the 12 months |
|
|
preceding the date of the renewal report by the association; and |
|
|
(9) provide any other information that the |
|
|
commissioner reasonably requires in order to perform the |
|
|
commissioner's duty under this section. |
|
|
Sec. 209.0043. MONITORING AND INVESTIGATION BY |
|
|
COMMISSIONER. The commissioner shall: |
|
|
(1) monitor the operations of a property owners' |
|
|
association board as appropriate to ensure compliance with this |
|
|
chapter; and |
|
|
(2) receive and investigate complaints against a |
|
|
property owners' association board. |
|
|
Sec. 209.0044. REVOCATION OF REGISTRATION. (a) The |
|
|
commissioner may revoke the registration of a property owners' |
|
|
association board if the commissioner determines that the board has |
|
|
violated this chapter. The commissioner shall recite the basis of |
|
|
the decision in an order revoking the registration. |
|
|
(b) If the commissioner proposes to revoke a registration, |
|
|
the property owners' association board is entitled to a hearing |
|
|
before the commissioner or a hearings officer, who shall propose a |
|
|
decision to the commissioner. The commissioner or hearings officer |
|
|
shall prescribe the time and place of the hearing. The hearing is |
|
|
governed by Chapter 2001, Government Code. |
|
|
(c) A property owners' association board aggrieved by a |
|
|
ruling, order, or decision of the commissioner is entitled to |
|
|
appeal to a district court in the county in which the hearing was |
|
|
held. An appeal under this subsection is governed by Chapter 2001, |
|
|
Government Code. |
|
|
Sec. 209.0045. TRUST ACCOUNT. (a) All money paid to a |
|
|
property owners' association board by or on behalf of a property |
|
|
owner pursuant to an assessment for common expenses is held in |
|
|
trust. Within two business days after receipt, the board shall |
|
|
deposit the money in a financial institution in a trust account |
|
|
established for the benefit of the property owners. The board shall |
|
|
inform the commissioner of the name, business address, and |
|
|
telephone number of the financial institution at which the board |
|
|
maintains a trust account under this section and the account number |
|
|
of the account. |
|
|
(b) Money held in trust by a property owners' association |
|
|
board is not property of the board or the board's designee. |
|
|
(c) A property owners' association board shall: |
|
|
(1) maintain separate records of account for each |
|
|
individual owner who pays funds to the property owners' association |
|
|
pursuant to an assessment; and |
|
|
(2) disburse money paid by or on behalf of an owner |
|
|
only to pay for common expenses as provided by the dedicatory |
|
|
instruments of the association. |
|
|
(d) A property owners' association board may not commingle |
|
|
money in a trust account established for the benefit of owners with |
|
|
money of other persons. |
|
|
(e) A trust account under this section must at all times |
|
|
have a cash balance equal to the sum of the balances of each |
|
|
individual owner's account record. |
|
|
(f) A property owners' association board shall annually |
|
|
reconcile a trust account under this section. If the board or the |
|
|
board's designee has more than one trust account, each trust |
|
|
account must be individually reconciled. |
|
|
(g) If a property owners' association board discovers, or |
|
|
has a reasonable suspicion of, embezzlement or other unlawful |
|
|
appropriation of money held in trust, the board immediately shall |
|
|
notify the commissioner by a method approved by the commission by |
|
|
rule. Unless the commission by rule provides otherwise, the board |
|
|
shall notify the commissioner of remedial action that the board |
|
|
intends to take with regard to the unlawful appropriation or |
|
|
suspected unlawful appropriation not later than the fifth day after |
|
|
the date on which the board notifies the commissioner of the |
|
|
appropriation. |
|
|
(h) Before transferring a trust account from one financial |
|
|
institution to another, a property owners' association board shall |
|
|
inform the commissioner of the name, business address, and |
|
|
telephone number of the institution to which the account will be |
|
|
transferred. As soon as practicable after the transfer of a trust |
|
|
account under this subsection, the board shall inform the |
|
|
commissioner of the account number at the transferee institution. |
|
|
SECTION 9. (a) The changes in law made by this Act apply to |
|
|
a unit owners' association or property owners' association |
|
|
regardless of whether the unit owners' association or property |
|
|
owners' association was created before, on, or after the effective |
|
|
date of this Act. |
|
|
(b) The changes in law made by this Act apply to a unit |
|
|
owners' association or property owners' association beginning |
|
|
January 1, 2012. |
|
|
SECTION 10. This Act takes effect September 1, 2011. |