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Bill Number: TX77RSB 507
Date: 05-08-2001
HOUSE COMMITTEE SUBSTITUTE
A BILL TO BE ENTITLED
AN ACT relating to residential subdivisions
that require membership in a property owners' association.
BE IT ENACTED BY THE LEGISLATURE OF THE
STATE OF TEXAS:
SECTION 1. Title 11, Property
Code, is amended by adding Chapter 209 to read as follows:
CHAPTER 209.
TEXAS RESIDENTIAL PROPERTY OWNERS PROTECTION
ACT
Sec. 209.001. SHORT TITLE.
This chapter may be cited as the Texas Residential Property Owners Protection
Act.
Sec. 209.002. DEFINITIONS.
In this chapter:
(1) "Assessment" means a regular
assessment, special assessment, or other amount a property owner is required
to pay a property owners' association under the dedicatory instrument or
by law.
(2) "Board" means the governing
body of a property owners' association.
(3) "Declaration" means an instrument
filed in the real property records of a county that includes restrictive
covenants governing a residential subdivision.
(4) "Dedicatory instrument" means
each governing instrument covering the establishment, maintenance, and
operation of a residential subdivision. The term includes restrictions
or similar instruments subjecting property to restrictive covenants,
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bylaws, or similar instruments governing
the administration or operation of a property owners' association, to properly
adopted rules and regulations of the property owners' association, and
to all lawful amendments to the covenants, bylaws, rules, or regulations.
(5) "Lot" means any designated parcel
of land located in a residential subdivision, including any improvements
on the designated parcel.
(6) "Owner" means a person who holds
record title to property in a residential subdivision and includes the
personal representative of a person who holds record title to property
in a residential subdivision.
(7) "Property owners' association"
or "association" means an incorporated or unincorporated association that:
(A) is designated as the representative
of the owners of property in a residential subdivision;
(B) has a membership primarily consisting
of the owners of the property covered by the dedicatory instrument for
the residential subdivision; and
(C) manages or regulates the residential
subdivision for the benefit of the owners of property in the residential
subdivision.
(8) "Regular assessment" means an
assessment, a charge, a fee, or dues that each owner of property within
a residential subdivision is required to pay to the property owners' association
on a regular basis and that is designated for use by the property owners'
association for the benefit of the residential
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subdivision as provided by the restrictions.
(9) "Residential subdivision" or
"subdivision" means subdivision, planned unit development, townhouse regime,
or similar planned development in which all land has been divided into
two or more parts and is subject to restrictions that:
(A) limit a majority of the land
subject to the dedicatory instruments, excluding streets, common areas,
and public areas, to residential use for single-family homes, townhomes,
or duplexes only;
(B) are recorded in the real property
records of the county in which the residential subdivision is located;
and
(C) require membership in a property
owners' association that has authority to impose regular or special assessments
on the property in the subdivision.
(10) "Restrictions" means one or
more restrictive covenants contained or incorporated by reference in a
properly recorded map, plat, replat, declaration, or other instrument filed
in the real property records or map or plat records. The term includes
any amendment or extension of the restrictions.
(11) "Restrictive covenant" means
any covenant, condition, or restriction contained in a dedicatory instrument,
whether mandatory, prohibitive, permissive, or administrative.
(12) "Special assessment" means
an assessment, a charge, a fee, or dues, other than a regular assessment,
that each owner of property located in a residential subdivision is required
to pay to the property owners' association, according to procedures required
by the dedicatory instruments, for:
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(A) defraying, in whole or in part,
the cost, whether incurred before or after the assessment, of any construction
or reconstruction, unexpected repair, or replacement of a capital improvement
in common areas owned by the property owners' association, including the
necessary fixtures and personal property related to the common areas;
(B) maintenance and improvement
of common areas owned by the property owners' association; or
(C) other purposes of the property
owners' association as stated in its articles of incorporation or the dedicatory
instrument for the residential subdivision.
Sec. 209.003. APPLICABILITY
OF CHAPTER.
(a) This chapter applies only to
a residential subdivision that is subject to restrictions or provisions
in a declaration that authorize the property owners' association to collect
regular or special assessments on all or a majority of the property in
the subdivision.
(b) This chapter applies only to
a property owners' association that requires mandatory membership in the
association for all or a majority of the owners of residential property
within the subdivision subject to the association's dedicatory instruments.
(c) This chapter applies to a residential
property owners' association regardless of whether the entity is designated
as a "homeowners' association," "community association," or similar designation
in the restrictions or dedicatory instrument.
(d) This chapter does not apply
to a condominium development
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governed by Chapter 82.
Sec. 209.004. MANAGEMENT CERTIFICATES.
(a) A property owners' association
shall record in each county in which any portion of the residential subdivision
is located a management certificate, signed and acknowledged by an officer
or the managing agent of the association, stating:
(1) the name of the subdivision;
(2) the name of the association;
(3) the recording data for the subdivision;
(4) the recording data for the declaration;
(5) the mailing address of the association
or the name and mailing address of the person managing the association;
and
(6) other information the association
considers appropriate.
(b) The property owners' association
shall record an amended management certificate not later than the 30th
day after the date the association has notice of a change in any information
in the recorded certificate required by Subsection (a).
(c) The property owners' association
and its officers, directors, employees, and agents are not subject to liability
to any person for a delay in recording or failure to record a management
certificate, unless the delay or failure is wilful or caused by gross negligence.
Sec. 209.005. ASSOCIATION
RECORDS.
(a) A property owners' association
shall make the books and records of the association, including financial
records, reasonably available to an owner in accordance with Section B,
Article 2.23, Texas Non-Profit
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Corporation Act (Article 1396-2.23, Vernon's
Texas Civil Statutes).
(b) An attorney's files and records
relating to the association, excluding invoices requested by an owner under
Section 209.008(d), are not:
(1) records of the association;
(2) subject to inspection by the
owner; or
(3) subject to production in a legal
proceeding.
Sec. 209.006. NOTICE REQUIRED
BEFORE ENFORCEMENT ACTION.
(a) Before a property owners' association
may suspend an owner's right to use a common area, file a suit against
an owner other than a suit to collect a regular or special assessment or
foreclose under an association's lien, charge an owner for property damage,
or levy a fine for a violation of the restrictions or bylaws or rules of
the association, the association or its agent must give written notice
to the owner.
(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 12 months; and
(B) may request a hearing under
Section 209.007 on or before the 30th day after the date the owner receives
the notice.
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Sec. 209.007. HEARING BEFORE
BOARD; ALTERNATIVE DISPUTE RESOLUTION.
(a) If the owner is entitled to
an opportunity to cure the violation, the owner has the right to submit
a written request for a hearing to discuss and verify facts and resolve
the matter in issue before a committee appointed by the board of the property
owners' association or before the board if the board does not appoint a
committee.
(b) If a hearing is to be held before
a committee, the notice prescribed by Section 209.006 must state that the
owner has the right to appeal the committee's decision to the board by
written notice to the board.
(c) The association shall hold a
hearing under this section not later than the 30th day after the
date the board receives the owner's request for a hearing and shall notify
the owner of the date, time, and place of the hearing not later than the
10th day before the date of the hearing. The board or the owner may
request a postponement, and, if requested, a postponement shall be granted
for a period of not more than 10 days. Additional postponements may
be granted by agreement of the parties. The owner or the association
may make an audio recording of the meeting.
(d) The notice and hearing provisions
of Section 209.006 and this section do not apply if the association files
a suit seeking a temporary restraining order or temporary injunctive relief
or files a suit that includes foreclosure as a cause of action. If
a suit is filed relating to a matter to which those sections apply, a party
to the suit may file a motion to compel mediation. The notice and
hearing provisions of Section 209.006 and this section
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do not apply to a temporary suspension
of a person's right to use common areas if the temporary suspension is
the result of a violation that occurred in a common area and involved a
significant and immediate risk of harm to others in the subdivision.
The temporary suspension is effective until the board makes a final determination
on the suspension action after following the procedures prescribed by this
section.
(e) An owner or property owners'
association may use alternative dispute resolution services.
Sec. 209.008. ATTORNEY'S FEES.
(a) A property owners' association
may collect reimbursement of reasonable attorney's fees and other reasonable
costs incurred by the association relating to collecting amounts, including
damages, due the association for enforcing restrictions or the bylaws or
rules of the association only if the owner is provided a written notice
that attorney's fees and costs will be charged to the owner if the delinquency
or violation continues after a date certain.
(b) An owner is not liable for attorney's
fees incurred by the association relating to a matter described by the
notice under Section 209.006 if the attorney's fees are incurred before
the conclusion of the hearing under Section 209.007 or, if the owner does
not request a hearing under that section, before the date by which the
owner must request a hearing. The owner's presence is not required
to hold a hearing under Section 209.007.
(c) All attorney's fees, costs,
and other amounts collected from an owner shall be deposited into an account
maintained at a financial institution in the name of the association or
its
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managing agent. Only members of
the association's board or its managing agent or employees of its managing
agent may be signatories on the account.
(d) On written request from the
owner, the association shall provide copies of invoices for attorney's
fees and other costs relating only to the matter for which the association
seeks reimbursement of fees and costs.
(e) The notice provisions of Subsection
(a) do not apply to a counterclaim of an association in a lawsuit brought
against the association by a property owner.
(f) The amount of attorney's fees
that a property owners' association may include in an indebtedness covered
by a property owners' association's assessment lien is limited to the greater
of:
(1) one-third of the amount of all
actual costs and assessments, excluding attorney's fees, plus interest
and court costs, if those amounts are permitted to be included by law or
by the restrictive covenants governing the property; or
(2) $2,500.
(g) Subsection (f) does not prevent
a property owners' association from recovering or collecting attorney's
fees in excess of the amounts prescribed by Subsection (f) by other means
provided by law.
Sec. 209.009. FORECLOSURE SALE
PROHIBITED IN CERTAINCIRCUMSTANCES.
A property owners' association may not
foreclose a property owners' association's assessment lien if the debt
securing the lien consists solely of:
(1) fines assessed by the association;
or
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(2) attorney's fees incurred by
the association solely associated with fines assessed by the association.
Sec. 209.010. NOTICE AFTER
FORECLOSURE SALE.
(a) A property owners' association
that conducts a foreclosure sale of an owner's lot must send to the lot
owner, by certified mail, return receipt requested, not later than the
30th day after the date of the foreclosure sale 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.
(b) The notice must be sent by certified
mail, return receipt requested, to the property owner's last known mailing
address, as reflected in the records of the property owners' association.
(c) Not later than the 30th day
after the date the association sends the notice required by Subsection
(a), the association must record an affidavit in the real property records
of the county in which the lot is located, stating the date on which the
notice was sent and containing a legal description of the lot. Any
person is entitled to rely conclusively on the information contained in
the recorded affidavit.
(d) The notice requirements of this
section also apply to the sale of an owner's lot by a sheriff or constable
conducted as provided by a judgment obtained by the property owners' association.
Sec. 209.011. RIGHT OF REDEMPTION
AFTER FORECLOSURE.
(a) A property owners' association
or other person who purchases property at a sale foreclosing a property
owners' association's assessment
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lien must commence and prosecute a forcible
entry and detainer action under Chapter 24 to recover possession of the
property.
(b) The owner of property in a residential
subdivision may redeem the property from any purchaser at a sale foreclosing
a property owners' association's assessment lien not later than the earlier
of:
(1) the 90th day after the date
the owner is served with citation in a forcible entry and detainer action;
or
(2) the second anniversary of the
date of the foreclosure sale.
(c) A person who purchases property
at a sale foreclosing a property owners' association's assessment lien
may not transfer ownership of the property to a person other than a redeeming
lot owner during the redemption period.
(d) To redeem property purchased
by the property owners' association at the foreclosure sale, the lot owner
must pay to the association:
(1) all amounts due the association
at the time of the foreclosure sale;
(2) interest from the date of the
foreclosure sale to the date of redemption on all amounts owed the association
at the rate stated in the dedicatory instruments for delinquent assessments
or, if no rate is stated, at an annual interest rate of
10 percent;
(3) costs incurred by the association
in foreclosing the lien and conveying the property to the redeeming lot
owner, including reasonable attorney's fees;
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(4) any assessment levied against
the property by the association after the date of the foreclosure sale;
(5) any reasonable cost incurred
by the association, including mortgage payments and costs of repair, maintenance,
and leasing of the property; and
(6) the purchase price paid by the
association at the foreclosure sale less any amounts due the association
under Subdivision (1) that were satisfied out of foreclosure sale proceeds.
(e) To redeem property purchased
at the foreclosure sale by a person other than the property owners' association,
the lot owner:
(1) must pay to the association:
(A) all amounts due the association
at the time of the foreclosure sale less the foreclosure sales price received
by the association from the purchaser;
(B) interest from the date of the
foreclosure sale through the date of redemption on all amounts owed the
association at the rate stated in the dedicatory instruments for delinquent
assessments or, if no rate is stated, at an annual interest rate of 10
percent;
(C) costs incurred by the association
in foreclosing the lien and conveying the property to the redeeming lot
owner, including reasonable attorney's fees;
(D) any unpaid assessments levied
against the property by the association after the date of the foreclosure
sale; and
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(E) taxable costs incurred in a
proceeding brought under Subsection (a); and
(2) must pay to the person who purchased
the property at the foreclosure sale:
(A) any assessments levied against
the property by the association after the date of the foreclosure sale
and paid by the purchaser;
(B) the purchase price paid by the
purchaser at the foreclosure sale;
(C) the amount of the deed recording
fee;
(D) the amount paid by the purchaser
as ad valorem taxes, penalties, and interest on the property after the
date of the foreclosure sale;
(E) taxable costs incurred in a
proceeding brought under Subsection (a); and
(F) a redemption premium of 25 percent
of the aggregate total of the amount paid under Paragraphs (A)-(E).
(f) If a lot owner redeems the property
under this section, the purchaser of the property at foreclosure shall
immediately execute and deliver to the owner a deed transferring the property
to the redeeming lot owner. If a purchaser fails to comply with this
section, the lot owner may file a cause of action against the purchaser
and may recover reasonable attorney's fees from the purchaser if the lot
owner is the prevailing party in the action.
(g) If, before the expiration of
the redemption period, the redeeming lot owner fails to record the deed
from the foreclosing purchaser or fails to record an affidavit stating
that the lot
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owner has redeemed the property, the lot
owner's right of redemption as against a bona fide purchaser or lender
for value expires after the redemption period.
(h) The purchaser of the property
at the foreclosure sale or a person to whom the person who purchased the
property at the foreclosure sale transferred the property may presume conclusively
that the lot owner did not redeem the property unless the lot owner files
in the real property records of the county in which the property is located:
(1) a deed from the purchaser of
the property at the foreclosure sale; or
(2) an affidavit that:
(A) states that the lot owner has
redeemed the property; and
(B) contains a legal description
of the property.
(i) If the property owners' association
purchases the property at foreclosure, all rent and other income collected
by the association from the date of the foreclosure sale to the date of
redemption shall be credited toward the amount owed the association under
Subsection (d), and if there are excess proceeds, they shall be refunded
to the lot owner. If a person other than the association purchases
the property at foreclosure, all rent and other income collected by the
purchaser from the date of the foreclosure sale to the date of redemption
shall be credited toward the amount owed the purchaser under Subsection
(e), and if there are excess proceeds, those proceeds shall be refunded
to the lot
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owner.
(j) If a person other than the property
owners' association is the purchaser at the foreclosure sale, before executing
a deed transferring the property to the redeeming lot owner, the purchaser
shall obtain an affidavit from the association or its authorized agent
stating that all amounts owed the association under Subsection (e) have
been paid. The association shall provide the purchaser with the affidavit
not later than the 10th day after the date the association receives all
amounts owed to the association under Subsection (e). Failure of
a purchaser to comply with this subsection does not affect the validity
of a redemption by a redeeming lot owner.
(k) Property that is redeemed remains
subject to all liens and encumbrances on the property before foreclosure.
Any lease entered into by the purchaser of property at a sale foreclosing
an assessment lien of a property owners' association is subject to the
right of redemption provided by this section and the lot owner's right
to reoccupy the property immediately after the redemption.
(l) If a lot owner makes partial
payment of amounts due the association at any time before the redemption
period expires but fails to pay all amounts necessary to redeem the property
before the redemption period expires, the association shall refund any
partial payments to the lot owner by mailing payment to the owner's last
known address as shown in the association's records not later than the
30th day after the expiration date of the redemption period.
(m) If a lot owner sends by certified
mail, return receipt
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requested, a written request to redeem
the property on or before the last day of the redemption period, the lot
owner's right of redemption is extended until the 10th day after the date
the association and any third party foreclosure purchaser provides written
notice to the lot owner of the amounts that must be paid to redeem the
property.
(n) After the redemption period
and any extended redemption period provided by Subsection (m) expires,
the association or third party foreclosure purchaser shall record an affidavit
in the real property records of the county in which the property is located
stating that the lot owner did not redeem the property during the redemption
period or any extended redemption period.
(o) The association or the person
who purchased the property at the foreclosure sale may file an affidavit
in the real property records of the county in which the property is located
that states the date the citation was served under Subsection (b)(1) and
contains a legal description of the property. Any person may rely
conclusively on the information contained in the affidavit.
(p) The rights of a lot owner under
this section also apply if the sale of the lot owner's property is conducted
by a constable or sheriff as provided by a judgment obtained by the property
owners' association.
Sec. 209.012.
POWERS OF PROPERTY OWNERS' ASSOCIATION.
In addition to other powers granted by
law, a property owners' association subject to this chapter may:
(1) impose fines on property owners
for littering within the subdivision;
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(2) prohibit property owners from
keeping animals on property within the subdivision that disrupt the quiet
enjoyment of other property owners within the subdivision;
(3) impose fines on property owners
for keeping animals prohibited by the restrictions governing the subdivision
on property within the subdivision; and
(4) remove or authorize the removal
of an animal described by Subdivision (2) or (3) from property within the
subdivision.
SECTION 2. This Act takes effect January 1, 2002. |
