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INTRODUCED
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HOUSE COMMITTEE
SUBSTITUTE
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No
equivalent provision, but see SECTION 3, Section 82.1032 and Section
82.1033, Property Code, below.
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SECTION 1. Subchapter C,
Chapter 82, Property Code, is amended by adding Section 82.1031 to read as
follows:
Sec. 82.1031. FIDELITY
BOND OR INSURANCE REQUIREMENT. The board of a unit owners' association of
20 units or more shall obtain and maintain a fidelity bond or fidelity
insurance that covers losses resulting from dishonest or fraudulent acts.
The board must maintain the bond or insurance in force for all officers,
directors, and employees of the association and all other persons handling
or responsible for funds administered by the board. The coverage must be not
less than a sum equal to three months' aggregate assessments on all units
plus reserve funds. The governing documents of the association may provide
for higher limits of coverage.
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No
equivalent provision, but see SECTION 4, Section 209.0043 and Section
209.0044, Property Code, below.
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SECTION 2. Chapter 209,
Property Code, is amended by adding Section 209.00595 to read as follows:
Sec. 209.00595. FIDELITY
BOND OR INSURANCE REQUIREMENT. The board of a property owners' association
of 20 lots or more shall obtain and maintain a fidelity bond or fidelity
insurance that covers losses resulting from dishonest or fraudulent acts.
The board must maintain the bond or insurance in force for all officers,
directors, and employees of the association and all other persons handling
or responsible for funds administered by the board. The coverage must be
not less than a sum equal to three months' aggregate assessments on all
lots plus reserve funds. The governing documents of the association may
provide for higher limits of coverage.
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SECTION 1. Subtitle A, Title
7, Local Government Code, is amended by adding Chapter 230 to read as
follows:
CHAPTER 230. MUNICIPAL
REGULATION OF PROPERTY OWNERS' ASSOCIATIONS AND UNIT OWNERS' ASSOCIATIONS
Sec. 230.001.
DEFINITIONS. In this chapter:
(1)
"Association" means a property owners' association or unit
owners' association.
(2) "Property
owners' association" has the meaning assigned by Section 202.001,
Property Code.
(3) "Unit owners'
association" means an association organized under Section 82.101,
Property Code.
Sec. 230.002. REGULATORY
AUTHORITY. (a) Except as provided by this chapter, and notwithstanding any
other law, a municipality may regulate the conduct of an association that
manages property located wholly or partly in the municipality or the
municipality's extraterritorial jurisdiction, with respect to matters of
municipal concern, including matters relating to land use, health and
safety, sanitation, infrastructure, and law enforcement.
(b) A municipality may require
an association to which this chapter applies to register with the
municipality in the form and manner determined by the municipality by
ordinance.
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No
equivalent provision.
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SECTION 2. Subtitle B, Title
7, Local Government Code, is amended by adding Chapter 237 to read as
follows:
CHAPTER 237. COUNTY
REGULATION OF PROPERTY OWNERS' ASSOCIATIONS AND UNIT OWNERS' ASSOCIATIONS
Sec. 237.001.
DEFINITIONS. In this chapter:
(1)
"Association" means a property owners' association or unit
owners' association.
(2) "Property
owners' association" has the meaning assigned by Section 202.001,
Property Code.
(3) "Unit owners'
association" means an association organized under Section 82.101,
Property Code.
Sec. 237.002. REGULATORY
AUTHORITY. (a) Except as provided by this chapter, and notwithstanding any
other law, a county may regulate the conduct of an association that manages
property wholly located in the unincorporated areas of the county with
respect to matters of county concern, including matters relating to land
use, health and safety, sanitation, infrastructure, and law enforcement.
(b) A county may require
an association to which this chapter applies to register with the county in
the form and manner determined by the county.
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No
equivalent provision.
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SECTION 3. Subchapter C,
Chapter 82, Property Code, is amended by adding Sections 82.1031, 82.1032,
82.1033, 82.1034, and 82.1035 to read as follows:
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No
equivalent provision.
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Sec. 82.1031. TRUST
ACCOUNTS. (a) All money paid to a unit owners' association board by or on
behalf of a unit owner pursuant to an assessment or fee collected for
common purpose expenditures is held in trust. Within two business days
after receipt, the board shall deposit the money in a financial institution
in one or more trust accounts established for the benefit of the unit
owners. The board shall maintain its operating expense accounts separately
from trust accounts maintained for capital expenditures and other common
purposes.
(b) Money held in trust
by a unit owners' association board is not property of the board or the
board's designee.
(c) A unit owners'
association board shall segregate funds held for the benefit of unit owners
from operating funds held on deposit for use by the board, as follows:
(1) maintain separate
records of account for each unit owner who pays funds to the unit owners'
association pursuant to an assessment or common purpose expenditure; and
(2) disburse money paid
by or on behalf of a unit owner only to pay for assessments or fees
collected for common purpose expenditures as provided by the declaration,
articles of incorporation, bylaws, or rules of the association.
(d) A unit owners'
association board may not commingle money in a trust account established
for the benefit of unit owners with operating funds of the board or money
of other persons or business entities.
(e) A trust account under
this section must at all times have a cash balance equal to if not greater
than the sum of the balances of each individual unit owner's account
record.
(f) A unit owners'
association board shall reconcile a trust account annually under this
section. If the board or the board's designee has more than one trust
account, each trust account must be reconciled separately.
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No
equivalent provision.
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Sec. 82.1032. BOND
REQUIREMENT. (a) A person may not be a member of a unit owners'
association board unless the person has obtained and maintains in force a
surety bond issued by a surety company authorized to do business in this
state as prescribed by this section. A copy of the bond currently in effect
must be filed contemporaneously with the secretary of state.
(b) The bond must be in
favor of:
(1) any person who is
damaged by a violation of this chapter; and
(2) this state for the
benefit of any person who is damaged by a violation of this chapter.
(c) For a board member
with access to or custody of unit owners' association funds, the bond must
be in the minimum amount of:
(1) $50,000, if the
association is composed of 14 units or fewer;
(2) $100,000, if the
association is composed of more than 14 units but not more than 100 units;
(3) $250,000, if the
association is composed of more than 100 units but not more than 250 units;
and
(4) $500,000, if the
association is composed of more than 250 units.
(d) For a board member
who does not have access to or custody of unit owners' association funds,
the bond must be in the minimum amount of $25,000.
(e) A person who is an
agent, employee, or contractor of a unit owners' association board shall
obtain a bond described by this section for the minimum amounts specified
in subsection (c) of this Section, if the person:
(1) has access to or
custody of unit owners' association funds; and
(2) is not required by
other law to obtain a bond in order to engage in activities described by
this subsection.
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No
equivalent provision, but see SECTION 1 above.
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Sec. 82.1033. INSURANCE
REQUIREMENT. A unit owners' association board shall obtain and maintain
insurance as required by Section 82.1031 during the six months preceding the
date the renewal report is filed that:
(1) provides for single
limits of at least $250,000 and aggregate limits of at least $500,000,
unless the highest daily balance in the trust account exceeds the
aggregate policy limits, in which event the insurance limits would need to
correspond to the higher amount;
(2) insures against the
risks of dishonesty, fraud, theft, and other misconduct on the part of the
unit owners' association or a board member, employee, or agent of the
association;
(3) 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;
(4) has a deductible of
not more than $5,000; and
(5) is payable for the
benefit of the association, this state, a unit owner, or an individual who
is a resident of this state, as their interests may appear.
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No
equivalent provision, but see SECTION 1 above.
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Sec. 82.1034. OVERSIGHT
BY ATTORNEY GENERAL. (a) The attorney general shall:
(1) monitor the
operations of a unit owners' association board, as appropriate and within
the available resources of the attorney general's office, to ensure
compliance with this subchapter; and
(2) receive and
investigate complaints against a unit owners' association board related to
the fiduciary responsibilities of the board.
(b) At the request of the
attorney general, a property owners' association board shall:
(1) inform the attorney
general 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;
(2) produce evidence of
current insurance coverage;
(3) produce evidence of
current surety bond coverage.
(c) Failure by the board
or its agents to comply with such a request may result in injunctive relief
under this enactment.
(d) 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 attorney general by a method approved by the
attorney general by rule. Unless the attorney general by rule provides
otherwise, the board shall notify the attorney general 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 attorney general of the appropriation
in question.
(e) After notice and
opportunity for a hearing, the attorney general may require, on an ongoing
basis, that a property owners' association board, before transferring a
trust account from one financial institution to another, inform the
attorney general of the name, business address, and telephone number of the
institution to which the account will be transferred, and as soon as
practicable after the transfer, the account number at the transferee
institution.
(f) The attorney general
may adopt rules as necessary or appropriate to enforce Sections 82.1031,
82.1032, 82.1033, 82.1034, and 82.1035.
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No
equivalent provision.
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Sec. 82.1035. INJUNCTIVE
OR DECLARATORY RELIEF; PROVIDING PENALTIES. (a) The attorney general may
institute an action for injunctive or declaratory relief to restrain a
violation of Section 82.1031, 82.1032, 82.1033, 82.1034, and 82.1035.
(b) In addition to
instituting an action for injunctive or declaratory relief under Subsection
(a), the attorney general may institute an action for civil penalties
against a property owners' association and its agents for a violation of
Section 82.1031, 82.1032, 82.1033, 82.1034, and 82.1035. A civil penalty
assessed under this section may not exceed:
(1) $20,000 per
violation; and
(2) if the act or
practice that is the subject of the proceeding was calculated to acquire or
deprive money or other property from an owner who was 65 years of age or
older when the act or practice occurred, an additional amount of not more
than $250,000.
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No
equivalent provision.
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SECTION 4. Chapter 209,
Property Code, is amended by adding Sections 209.0042, 209.0043, 209.0044,
209.0045, and 209.0046 to read as follows:
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No
equivalent provision.
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Sec. 209.0042. TRUST
ACCOUNTS. (a) All money paid to a property owners' association board by or
on behalf of a property owner pursuant to an assessment or fee collected
for common purpose expenditures is held in trust. Within two business days
after receipt, the board shall deposit the money in a financial institution
in one or more trust accounts established for the benefit of the property
owners. The board shall maintain its operating expense accounts separately
from trust accounts maintained for capital expenditures and for common
purposes.
(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 segregate funds held for the benefit of unit owners
from operating funds held on deposit for use by the board, as follows:
(1) maintain separate
records of account for each individual owner who pays funds to the property
owners' association pursuant to an assessment or fee collected for common
purpose expenditures; and
(2) disburse money paid
by or on behalf of an owner only to pay for common purpose expenditures as
provided by the dedicatory instruments of the association.
(d) A property owners'
association board may not commingle money held in a trust account
established for the benefit of owners with operating funds of the board or
money of other persons or business entities.
(e) A trust account under
this section must at all times have a cash balance equal to if not greater
than the sum of the balances of each individual owner's account record.
(f) A property owners'
association board shall reconcile a trust account annually under this
section. If the board or the board's designee has more than one trust
account, each trust account must be reconciled separately.
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No
equivalent provision.
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Sec. 209.0043. BOND
REQUIREMENT. (a) A person may not be a member of a property owners'
association board unless the person has obtained and maintains in force a
surety bond issued by a surety company authorized to do business in this
state as prescribed by this section. A copy of the bond currently in effect
must be filed contemporaneously with the secretary of state.
(b) The bond must be in
favor of:
(1) any person who is
damaged by a violation of this chapter; and
(2) this state for the
benefit of any person who is damaged by a violation of this chapter.
(c) For a board member
with access to or custody of property owners' association funds, the bond
must be in the minimum amount of:
(1) $50,000, if the
association is composed of 14 units or fewer;
(2) $100,000, if the
association is composed of more than 14 units but not more than 100 units;
(3) $250,000, if the
association is composed of more than 100 units but not more than 250 units;
and
(4) $500,000, if the
association is composed of more than 250 units.
(d) For a board member
who does not have access to or custody of property owners' association
funds, the bond must be in the amount of $25,000.
(e) A person who is an
agent, employee, or contractor of a property owners' association board
shall obtain a bond described by this section for the minimum amounts
specified in subsection (c) of this Section, if the person:
(1) has access to or
custody of property owners' association funds; and
(2) is not required by
other law to obtain a bond in order to engage in activities described by
this subsection.
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No
equivalent provision, but see SECTION 2 above.
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Sec. 209.0044. INSURANCE
REQUIREMENT. A property owners' association board shall obtain and
maintain insurance as required by Section 209.0042 during the six months
preceding the date the renewal report is filed, that:
(1) provides for single
limits of at least $250,000 and aggregate limits of at least $500,000,
unless the highest daily balance in the trust account exceeds the aggregate
policy limits, in which event the insurance limits would need to correspond
to the higher amount;
(2) 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;
(3) 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;
(4) has a deductible of
not more than $5,000; and
(5) 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.
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No
equivalent provision, but see SECTION 2 above.
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Sec. 209.0045. OVERSIGHT
BY ATTORNEY GENERAL. (a) The attorney general shall:
(1) monitor the
operations of a property owners' association board, as appropriate and
within the available resources of the attorney general's office, to ensure
compliance with this chapter; and
(2) receive and
investigate complaints against a property owners' association board related
to the fiduciary responsibilities of the board.
(b) At the request of the
attorney general, a property owners' association board shall:
(1) inform the attorney
general 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;
(2) produce evidence of
current insurance coverage;
(3) produce evidence of
current surety bond coverage.
(c) Failure by the board
or its agents to comply with such a request may result in injunctive relief
under this enactment.
(d) 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 attorney general by a method approved by the
attorney general by rule. Unless the attorney general by rule provides
otherwise, the board shall notify the attorney general 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 attorney general of the appropriation
in question.
(e) After notice and
opportunity for a hearing, the attorney general may require, on an ongoing
basis, that a property owners' association board, before transferring a
trust account from one financial institution to another, inform the
attorney general of the name, business address, and telephone number of the
institution to which the account will be transferred, and as soon as
practicable after the transfer, the account number at the transferee
institution.
(f) The attorney general
may adopt rules as necessary or appropriate to enforce Sections 209.0042-209.0046.
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No
equivalent provision.
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Sec. 209.0046. INJUNCTIVE
OR DECLARATORY RELIEF; PROVIDING PENALTIES. (a) The attorney general may
institute an action for injunctive or declaratory relief to restrain a
violation of Section 209.0042, 209.0043, 209.0044, or 209.0045.
(b) In addition to
instituting an action for injunctive or declaratory relief under Subsection
(a), the attorney general may institute an action for civil penalties
against a property owners' association and its agents for a violation of
Section 209.0042, 209.0043, 209.0044, or 209.0045. A civil penalty
assessed under this section may not exceed:
(1) $20,000 per
violation; and
(2) if the act or
practice that is the subject of the proceeding was calculated to acquire or
deprive money or other property from an owner who was 65 years of age or
older when the act or practice occurred, an additional amount of not more
than $250,000.
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No
equivalent provision.
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SECTION 5. Section 17,
Business and Commerce Code, is amended to read as follows:
Sec. 17.46. DECEPTIVE TRADE
PRACTICES UNLAWFUL. (a) False, misleading, or deceptive acts or practices
in the conduct of any trade or commerce are hereby declared unlawful and
are subject to action by the consumer protection division under Sections
17.47, 17.58, 17.60, and 17.61 of this code and Chapters 82 and 209,
Property Code.
Sec. 17.47. RESTRAINING
ORDERS. (a) Whenever the consumer protection division has reason to
believe that any person is engaging in, has engaged in, or is about to engage
in any act or practice declared to be unlawful by this subchapter or
Chapters 82 and 209, Property Code, and that proceedings would be in
the public interest, the division may bring an action in the name of the
state against the person to restrain by temporary restraining order,
temporary injunction, or permanent injunction the use of such method, act,
or practice.
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No
equivalent provision.
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SECTION 6. The remedies made
available to an association member under this enactment shall be in
addition to and not in lieu of other remedies available under other
applicable laws or the constitution of this state or of the United States.
The oversight authority granted to the Attorney General under this
enactment is not to be construed as an administrative prerequisite to the
pursuit by an association member of any other rights and remedies available
to an association member either at law or in equity.
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No
equivalent provision.
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SECTION 7. 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.
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No
equivalent provision.
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SECTION 8. The provisions of
this Act take effect September 1, 2013; provided,
however, that the provisions relating to oversight by the office of the
attorney general take effect January 1, 2014.
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SECTION 3. This Act takes
effect September 1, 2013.
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