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SECTION 1. Subchapter C,
Chapter 82, Property Code, is amended by adding Section 82.119 to read as follows:
Sec. 82.119. PROCEDURES
REQUIRED BEFORE FILING SUIT OR INITIATING ARBITRATION PROCEEDINGS FOR
DEFECT OR DESIGN CLAIMS.
(a) In addition to any
preconditions to filing suit or initiating an arbitration proceeding
included in the declaration, an association, before filing suit or
initiating an arbitration proceeding to resolve a claim pertaining to the
construction or design of a unit or the common elements, must:
(1) obtain an inspection
and a written independent third-party report from a licensed professional
engineer that:
(A) identifies the
specific units or common elements subject to the claim;
(B) describes the present
physical condition of the units or common elements subject to the claim;
and
(C) describes any
modifications, maintenance, or repairs to the units or common elements
performed by the unit owners or the association; and
(2) obtain approval from
unit owners holding at least 67 percent of the total votes in the
association at a special meeting called in accordance with the declaration
or bylaws, as applicable.
(b) The independent
third-party report required by Subsection (a)(1):
(1) must be obtained
directly by the association and paid for by the association; and
(2) may not be prepared
by a person employed by or otherwise affiliated with the attorney or law
firm that represents or will represent the association in the claim.
(c) The association must
provide written notice of the inspection to be conducted by the engineer to
each party subject to a claim not later than the 10th day before the date
the inspection occurs. The notice must:
(1) identify the party
engaged to prepare the report required by Subsection (a)(1);
(2) identify the specific
units or common elements to be inspected; and
(3) include the date and
time the inspection will occur.
(d) Each party subject to
a claim may attend the inspection conducted by the engineer, either
personally or through an agent.
(e) Before providing the
notice of the special meeting under Subsection (f), an association must:
(1) on completion of the
independent third-party report, provide the report to each unit owner and
each party subject to a claim; and
(2) allow each party
subject to a claim at least 90 days after the date of completion of the
report to inspect and correct any condition identified in the report.
(f) Not later than the
30th day before the date the special meeting described by Subsection (a)(2)
is held, the association must provide each unit owner with written notice
of the date, time, and location of the meeting. The notice must also
include:
(1) a description of the
nature of the claim, the relief sought, the anticipated duration of
prosecuting the claim, and the likelihood of success;
(2) a copy of the report
required by Subsection (a)(1);
(3) a copy of the
contract or proposed contract between the association and the attorney
selected by the board to assert or provide assistance with the claim;
(4) a description of the
attorney's fees, consultant fees, expert witness fees, and court costs,
whether incurred by the association directly or for which the association
may be liable as a result of prosecuting the claim;
(5) a summary of the
steps previously taken and the steps
proposed to be taken by the association to resolve the claim;
(6) an estimate, prepared by a licensed appraiser, of the impact
on the value of each unit if the claim is prosecuted and the impact on the
value of each unit after resolution of the claim;
(7) an estimate, prepared by a licensed real estate broker, of the
impact on the marketability of each unit if the claim is prosecuted and the
impact on the marketability of each unit while the claim is prosecuted;
(8) a description of the
manner in which the association proposes to fund the cost of prosecuting
the claim; and
(9) an estimate of the impact on the finances of the association,
including the impact on present and projected reserves, if the association
is not the prevailing party in the claim.
(g) The notice required
by Subsection (f) must be prepared and signed by a person who is not:
(1) the attorney who
represents or will represent the association in the claim;
(2) a member of the law
firm of the attorney who represents or will represent the association in
the claim; or
(3) employed by or
otherwise affiliated with the law firm of the attorney who represents or
will represent the association in the claim.
(h) For purposes of the special meeting described by Subsection
(a)(2), a quorum is present throughout the meeting if persons entitled to
cast more than 50 percent of the votes in the association are present in
person at the beginning of the meeting.
(i) The declaration may
provide that a claim pertaining to the construction or design of a unit or
the common elements must be resolved by binding arbitration and may provide
for a process by which the claim is resolved.
An amendment to the
declaration that modifies or removes the arbitration requirement or the
process associated with resolution of a claim may not apply retroactively
to a claim regarding the construction or design of units or common elements
based on an alleged act or omission that occurred before the date of the
amendment.
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SECTION 1. Subchapter C,
Chapter 82, Property Code, is amended by adding Sections 82.119 and 82.120
to read as follows:
Sec. 82.119. PROCEDURES
FOR FILING SUIT OR INITIATING ARBITRATION PROCEEDINGS FOR DEFECT OR DESIGN
CLAIMS FOR CERTAIN ASSOCIATIONS. (a) This
section does not apply to an association with less than eight units.
(b) In addition to any
preconditions to filing suit or initiating an arbitration proceeding
included in the declaration, an association, before filing suit or
initiating an arbitration proceeding to resolve a claim pertaining to the
construction or design of a unit or the common elements, must:
(1) obtain an inspection
and a written independent third-party report from a licensed professional
engineer that:
(A) identifies the
specific units or common elements subject to the claim;
(B) describes the present
physical condition of the units or common elements subject to the claim;
and
(C) describes any
modifications, maintenance, or repairs to the units or common elements
performed by the unit owners or the association; and
(2) obtain approval from
unit owners holding at least 67 percent of the total votes in the
association, voting in person or by proxy
as provided by Section 82.110, at a special meeting called in
accordance with the declaration or bylaws, as applicable.
(c) The independent
third-party report required by Subsection (b)(1):
(1) must be obtained
directly by the association and paid for by the association; and
(2) may not be prepared
by a person employed by or otherwise affiliated with the attorney or law
firm that represents or will represent the association in the claim.
(d) The association must
provide written notice of the inspection to be conducted by the engineer to
each party subject to a claim not later than the 10th day before the date
the inspection occurs. The notice must:
(1) identify the party
engaged to prepare the report required by Subsection (b)(1);
(2) identify the specific
units or common elements to be inspected; and
(3) include the date and
time the inspection will occur.
(e) Each party subject to
a claim may attend the inspection conducted by the engineer, either personally
or through an agent.
(f) Before providing the
notice of the special meeting under Subsection (g), an association must:
(1) on completion of the
independent third-party report, provide the report to each unit owner and
each party subject to a claim; and
(2) allow each party
subject to a claim at least 90 days after the date of completion of the
report to inspect and correct any condition identified in the report.
(g) Not later than the
30th day before the date the special meeting described by Subsection (b)(2)
is held, the association must provide each unit owner with written notice
of the date, time, and location of the meeting. The notice must also
include:
(1) a description of the
nature of the claim, the relief sought, the anticipated duration of
prosecuting the claim, and the likelihood of success;
(2) a copy of the report
required by Subsection (b)(1);
(3) a copy of the
contract or proposed contract between the association and the attorney
selected by the board to assert or provide assistance with the claim;
(4) a description of the
attorney's fees, consultant fees, expert witness fees, and court costs,
whether incurred by the association directly or for which the association
may be liable as a result of prosecuting the claim;
(5) a summary of the
steps previously taken by the association to resolve the claim;
(6) a statement that initiating a lawsuit or arbitration
proceeding to resolve a claim may affect the market value, marketability,
or refinancing of a unit while the claim is prosecuted; and
(7) a description of the
manner in which the association proposes to fund the cost of prosecuting
the claim.
(h) The notice required
by Subsection (g) must be prepared and signed by a person who is not:
(1) the attorney who
represents or will represent the association in the claim;
(2) a member of the law
firm of the attorney who represents or will represent the association in
the claim; or
(3) employed by or
otherwise affiliated with the law firm of the attorney who represents or
will represent the association in the claim.
Sec. 82.120. BINDING
ARBITRATION FOR CERTAIN CLAIMS.
(a) A declaration may
provide that a claim pertaining to the construction or design of a unit or
the common elements must be resolved by binding arbitration and may provide
for a process by which the claim is resolved.
(b) An amendment to the
declaration that modifies or removes the arbitration requirement or the
process associated with resolution of a claim may not apply retroactively
to a claim regarding the construction or design of units or common elements
based on an alleged act or omission that occurred before the date of the
amendment.
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