Bill Text: TX HB3347 | 2011-2012 | 82nd Legislature | Comm Sub

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Bill Title: Relating to the operation of property owners' associations.

Sponsorship: Partisan Bill (Democrat 1)

Status: (Introduced - Dead) 2011-05-06 - Considered in Calendars [HB3347 Detail]

Download: Texas-2011-HB3347-Comm_Sub.html

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82R20883 AJA-F
By: Deshotel H.B. No. 3347
Substitute the following for H.B. No. 3347:
By: Quintanilla C.S.H.B. No. 3347

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 82.003(a)(11), Property Code, is amended
to read as follows:
(11) "Declaration" means an [a recorded] instrument,
however denominated, that creates a condominium, and any [recorded]
amendment to that instrument.
SECTION 2. Section 82.102, Property Code, is amended by
amending Subsection (a) and adding Subsection (f) to read as
follows:
(a) Unless otherwise provided by the declaration, the
association, acting through its board, may:
(1) adopt and amend bylaws;
(2) adopt and amend budgets for revenues,
expenditures, and reserves, and collect assessments for common
expenses from unit owners;
(3) hire and terminate managing agents and other
employees, agents, and independent contractors;
(4) institute, defend, intervene in, settle, or
compromise litigation or administrative proceedings in its own name
on behalf of itself or two or more unit owners on matters affecting
the condominium;
(5) make contracts and incur liabilities relating to
the operation of the condominium;
(6) regulate the use, maintenance, repair,
replacement, modification, and appearance of the condominium;
(7) adopt and amend rules regulating the use,
occupancy, leasing or sale, maintenance, repair, modification, and
appearance of units and common elements, to the extent the
regulated actions affect common elements or other units;
(8) cause additional improvements to be made as a part
of the common elements;
(9) acquire, hold, encumber, and convey in its own
name any right, title, or interest to real or personal property,
except common elements of the condominium;
(10) grant easements, leases, licenses, and
concessions through or over the common elements;
(11) impose and receive payments, fees, or charges for
the use, rental, or operation of the common elements and for
services provided to unit owners;
(12) impose interest and late charges for late
payments of assessments, returned check charges, and, if notice and
an opportunity to be heard are given, reasonable fines for
violations of the declaration, bylaws, and rules of the
association;
(13) adopt and amend rules regulating the collection
of delinquent assessments and the application of payments;
(14) adopt and amend rules regulating the termination
of utility service to a unit, the owner of which is delinquent in
the payment of an assessment that is used, in whole or in part, to
pay the cost of that utility;
(15) impose reasonable charges for preparing,
recording, or copying declaration amendments, resale certificates,
or statements of unpaid assessments;
(16) enter a unit for bona fide emergency purposes
when conditions present an imminent risk of harm or damage to the
common elements, another unit, or the occupants;
(17) [assign its right to future income, including the
right to receive common expense assessments, but only to the extent
the declaration so provides;
[(18)] suspend the voting privileges of or the use of
certain general common elements by an owner delinquent for more
than 30 days in the payment of assessments;
(18) [(19)] purchase insurance and fidelity bonds it
considers appropriate or necessary;
(19) [(20)] exercise any other powers conferred by the
declaration or bylaws;
(20) [(21)] exercise any other powers that may be
exercised in this state by a corporation of the same type as the
association; and
(21) [(22)] exercise any other powers necessary and
proper for the government and operation of the association.
(f) The association by resolution of the board of directors
may borrow money unless prohibited by the declaration, certificate
of formation, bylaws, or rules. If the board of directors approves
a resolution under this subsection, the association may assign the
association's right to future income, including the right to
receive common expense assessments and assign the association's
lien rights, as collateral for the loan authorized by the
resolution. The association shall comply with any member approval
requirement in the association's declaration, certificate of
formation, bylaws, or rules for borrowing money, except that not
more than 67 percent of all outstanding votes are required to
approve an authorization to borrow money.
SECTION 3. Sections 82.111(c) and (i), Property Code, are
amended to read as follows:
(c) If the insurance described by Subsections (a) and (b) is
not reasonably available, the association shall cause notice of
that fact to be delivered or mailed to all unit owners and
lienholders. The declaration may require the association to carry
any other insurance, and the association in any event may carry any
other insurance the board considers appropriate to protect the
condominium, the association, or the unit owners. Insurance
policies carried under Subsections (a) and (b) may provide for
deductibles as the board considers appropriate or necessary. This
section does not affect the right of a holder of a mortgage on a unit
to require a unit owner to acquire insurance in addition to that
provided by the association.
(i) Any portion of the condominium for which insurance is
required that is damaged or destroyed shall be promptly repaired or
replaced by the association unless the condominium is terminated,
repair or replacement would be illegal under any state or local
health or safety statute or ordinance, or at least 80 percent of the
unit owners, including each owner of a unit or assigned limited
common element that will not be rebuilt or repaired, vote to not
rebuild. A vote to not rebuild does not increase an insurer's
liability to loss payment obligation under a policy, and the vote
does not cause a presumption of total loss. Costs of repair or
replacement incurred before any insurance proceeds are available
that are within the association's deductible, or that are in excess
of the insurance proceeds and reserves, shall be paid as determined
by resolution of the board of directors of the association, or, if
the board does not approve a resolution, the costs are a common
expense. A resolution regarding payment of costs under this
subsection is considered a dedicatory instrument and must be
recorded in accordance with Section 202.006. [The cost of repair or
replacement in excess of the insurance proceeds and reserves is a
common expense.] If the entire condominium is not repaired or
replaced, any insurance proceeds attributable to the damaged common
elements shall be used to restore the damaged area to a condition
compatible with the remainder of the condominium, the insurance
proceeds attributable to units and limited common elements that are
not rebuilt shall be distributed to the owners of those units and
the owners of the units to which those limited common elements were
assigned, or to their mortgagees, as their interests may appear,
and the remainder of the proceeds shall be distributed to all the
unit owners as their interests may appear. If the unit owners vote
to not rebuild any unit, that unit's allocated interests shall be
automatically reallocated on the vote as if the unit had been
condemned, and the association shall prepare, execute, and record
an amendment to the declaration reflecting the reallocation.
Section 82.068 governs the distribution of insurance proceeds if
the condominium is terminated.
SECTION 4. Section 82.113(g), Property Code, is amended to
read as follows:
(g) The owner of a unit [used for residential purposes and]
purchased [by an association] at a foreclosure sale of the
association's lien for assessments may redeem the unit not later
than the 90th day after the date of the foreclosure sale. If the
association is the purchaser [To redeem the unit], the owner must
pay to the association to redeem the unit all amounts due the
association at the time of the foreclosure sale, interest from the
date of foreclosure sale to the date of redemption at the rate
provided by the declaration for delinquent assessments, reasonable
attorney's fees, and all costs incurred by the association in
foreclosing the lien and in connection with the redemption process,
any assessment levied against the unit by the association after the
foreclosure sale, and any reasonable cost incurred by the
association as owner of the unit, including costs of maintenance,
[and] leasing, mortgage payments, taxes, and insurance. If a party
other than the association is the purchaser of the unit at the
foreclosure sale, the redeeming owner must pay to the purchaser an
amount equal to the amount bid at the sale, interest on the bid
amount computed from the date of the foreclosure sale to the date of
redemption at the rate of six percent, any assessment paid by the
purchaser after the date of foreclosure, and any reasonable costs
incurred by the purchaser as the owner of the unit, including costs
of maintenance, leasing, mortgage payments, taxes, and insurance.
The redeeming owner must also pay to the association all
assessments that are due as of the date of the redemption and
reasonable attorney's fees and all costs incurred by the
association in foreclosing the lien. On redemption, the purchaser
of the unit at the foreclosure sale [association] shall execute a
deed with special warranty to the redeeming unit owner. The
exercise of the right of redemption is not effective against a
subsequent purchaser or lender for value without notice of the
redemption after the redemption period expires unless the redeeming
unit owner records the deed from the purchaser of the unit at the
foreclosure sale [association] or an affidavit stating that the
owner has exercised the right of redemption. A unit that has been
redeemed remains subject to all liens and encumbrances on the unit
before foreclosure. All rents and other income collected from the
unit by the purchaser of the unit at the foreclosure sale
[association] from the date of foreclosure sale to the date of
redemption belong to the purchaser of the unit at the foreclosure
sale [association], but the rents and income shall be credited
against the redemption amount. The purchaser of [An association
purchasing] a unit at a sale foreclosing an association's
assessment [its] lien may not transfer ownership of the unit during
the redemption period to a person other than a redeeming owner.
SECTION 5. Section 202.004, Property Code, is amended by
adding Subsections (d) and (e) to read as follows:
(d) In evaluating an alleged or potential violation of a
restrictive covenant, a property owners' association board or
another person with a right or duty to enforce a dedicatory
instrument may, notwithstanding any provision in a dedicatory
instrument, elect to not enforce the restrictive covenant if the
board or other person, in the board's or other person's reasonable
judgment, determines:
(1) the association's or other person'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 or other
person's resources;
(4) enforcement of the provision is not in the
association's or other person's best interests, based on hardship,
expense, or other reasonable criteria; or
(5) the facts of the particular circumstances, such as
topography of the owner's land or unforeseen circumstances unique
to the particular owner, justify the election to not enforce the
restrictive covenant.
(e) An election to not enforce a restrictive covenant under
Subsection (d) may not be considered a waiver of authority to
enforce any dedicatory instrument provision in the future.
SECTION 6. Section 207.003, Property Code, is amended by
amending Subsections (a), (b), (c), and (f) and adding Subsection
(a-1) to read as follows:
(a) Not later than the 10th business day after the date a
written request for subdivision information is received from an
owner or an[,] owner's agent, a purchaser of property in a
subdivision or the purchaser's agent, or a title insurance company
or its agent acting on behalf of the owner or purchaser, the
property owners' association shall deliver to the owner or the[,]
owner's agent, the purchaser or the purchaser's agent, or the title
insurance company or its agent:
(1) a current copy of the restrictions applying to the
subdivision;
(2) a current copy of the bylaws and rules of the
property owners' association; and
(3) a resale certificate that complies with Subsection
(b).
(a-1) For a request from a purchaser of property in a
subdivision or the purchaser's agent, the property owners'
association may require the purchaser or purchaser's agent to
provide to the association, before the association delivers the
items listed in Subsection (a), reasonable evidence that the
purchaser has a contractual or other right to acquire property in
the subdivision.
(b) A resale certificate under Subsection (a) must:
(1) be in writing;
(2) be issued, signed, and dated by an officer or
authorized agent of the property owners' association; and
(3) contain:
(A) [(1)] a statement of any right of first
refusal, other than a right of first refusal that is prohibited by
statute, and any [or] other restraint contained in the restrictions
or restrictive covenants that restricts the owner's right to
transfer the owner's property;
(B) [(2)] the frequency and amount of any regular
assessments;
(C) [(3)] the amount of any special assessment
that has been approved as of [is due after] the date the resale
certificate is prepared;
(D) [(4)] the total of all amounts due and unpaid
to the property owners' association that are attributable to the
owner's property;
(E) [(5)] capital expenditures, if any, approved
by the property owners' association for the property owners'
association's current fiscal year;
(F) [(6)] the amount of reserves, if any, for
capital expenditures;
(G) [(7)] the property owners' association's
current operating budget and balance sheet;
(H) [(8)] the total of any unsatisfied judgments
against the property owners' association;
(I) [(9)] the style and cause number of any
pending lawsuit in which the property owners' association is a
defendant, other than a lawsuit relating to unpaid property taxes
of an individual member of the association;
(J) [(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;
(K) [(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;
(L) [(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;
(M) [(13)] the amount of any administrative
transfer fee charged by the property owners' association for a
change of ownership of property in the subdivision;
(N) [(14)] the name, mailing address, and
telephone number of the property owners' association's managing
agent, if any; [and]
(O) [(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; and
(P) 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.
(c) A property owners' association may charge a reasonable
fee to assemble, copy, and deliver the information required by this
section and may charge a reasonable fee to prepare and deliver an
update of a resale certificate under Subsection (f). The person
requesting a resale certificate or an update of a resale
certificate is responsible for the payment of any fee charged for
the resale certificate or the update of the certificate.
(f) Not later than the seventh business day after the date a
written request for an update of [to] a resale certificate
delivered under Subsection (a) is received from a person entitled
to request a resale certificate under Subsection (a) [an owner,
owner's agent, or title insurance company or its agent acting on
behalf of the owner], the property owners' association shall
deliver to the requestor [owner, owner's agent, or title insurance
company or its agent] an updated resale certificate that contains
the following information:
(1) if a right of first refusal or other restraint on
sale is contained in the restrictions, a statement of whether the
property owners' association waives the restraint on sale;
(2) the status of any unpaid special assessments,
dues, or other payments attributable to the owner's property; and
(3) any changes to the information provided in the
resale certificate issued under Subsection (a).
SECTION 7. Section 209.002, Property Code, is amended by
amending Subdivisions (3), (5), and (9) and adding Subdivision
(3-a) to read as follows:
(3) "Declarant" means:
(A) any person or group of persons acting in
concert that:
(i) as part of a common promotional plan,
offers to dispose of the person's or group's interest in a
subdivision; and
(ii) files a declaration; and
(B) one or more successors to a person or group
described by Paragraph (A) to whom the person's or group's rights as
a declarant under the declaration are transferred by a written
instrument evidencing the transfer that is recorded in the real
property records of each county in which the declaration is
recorded.
(3-a) "Declaration" means an instrument filed in the
real property records of a county that creates the original
[includes] restrictive covenants for a [governing a residential]
subdivision, as amended or supplemented.
(5) "Lot" means any designated parcel of land [located
in a residential subdivision], including any improvements on the
designated parcel.
(9) "Residential subdivision" or "subdivision" means
a subdivision, planned unit development, townhouse regime, or
similar planned development in which all land has been divided into
two or more lots [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.
SECTION 8. Section 209.003, Property Code, is amended by
amending Subsection (d) and adding Subsection (e) to read as
follows:
(d) This chapter does not apply to a condominium development
governed wholly or partly by Chapter 82.
(e) The following provisions of this chapter do not apply to
a property owners' association that is a mixed use master
association that existed before January 1, 1974, and that does not
have the authority under a dedicatory instrument or other governing
document to impose fines:
(1) Section 209.005;
(2) Section 209.0051;
(3) Section 209.006; and
(4) Section 209.0062.
SECTION 9. Chapter 209, Property Code, is amended by adding
Section 209.0041 to read as follows:
Sec. 209.0041. AMENDMENT OF DECLARATION. (a) This section
applies only to a residential subdivision, or a mixed-use
subdivision that contains residential units, in which property
owners are subject to mandatory regular or special assessments.
(b) This section applies to a declaration regardless of the
date on which the declaration was created.
(c) This section does not apply to the amendment of a
declaration during a development period. For purposes of this
subsection, "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.
(d) Subject to Section 209.013, the declaration and any
subsequently enacted declarations may be amended at any time on a
vote of at least 67 percent of the total votes entitled to be cast
with respect to the declaration amendment. If the declaration
provides a lower percentage, the percentage in the declaration
controls. During the development period, amendments to the
declaration require the joinder of the developer.
(e) This section does not preclude amendment of a
declaration under other statutory authority.
SECTION 10. Section 209.005, Property Code, is amended to
read as follows:
Sec. 209.005. ASSOCIATION RECORDS. (a) Except as provided
by Subsection (b) or Section 209.003, this section applies to all
property owners' associations and controls over other law not
specifically applicable to a property owners' association.
(b) This section does not apply to a property owners'
association that is subject to Chapter 552, Government Code, by
application of Section 552.0036, Government Code.
(c) Notwithstanding a provision in a dedicatory instrument,
a [A] property owners' association shall make the books and records
of the association, including financial records, open to and
reasonably available for examination by [to] an owner, a person
designated in a writing signed by the owner as the owner's agent, or
an owner's attorney or certified public accountant, in accordance
with this section. An owner is entitled to obtain from the
association copies of information contained in the books and
records [Section B, Article 2.23, Texas Non-Profit Corporation Act
(Article 1396-2.23, Vernon's Texas Civil Statutes)].
(d) Except as provided by this subsection, an [(a-1) A
property owners' association described by Section 552.0036(2),
Government Code, shall make the books and records of the
association, including financial records, reasonably available to
any person requesting access to the books or records in accordance
with Chapter 552, Government Code. Subsection (a) does not apply to
a property owners' association to which this subsection applies.
[(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 and are not[;
[(2)] subject to inspection by the owner[;] or
[(3) subject to] production in a legal proceeding. If
a document in an attorney's files and records relating to the
association would be responsive to a legally authorized request to
inspect or copy association documents, the document shall be
produced by using the copy from the attorney's files and records if
the association has not maintained a separate copy of the document.
This subsection does not require production of a document that
constitutes attorney work product or that is privileged as an
attorney-client communication.
(e) An owner or the owner's authorized representative
described by Subsection (c) must submit a written request for
access or information under Subsection (c) by certified mail, with
sufficient detail describing the association's books and records
requested, to the mailing address of the association or authorized
representative as reflected on the most current management
certificate filed under Section 209.004. The request must contain
an election either to inspect the books and records before
obtaining copies or to have the property owners' association
forward copies of the requested books and records and:
(1) if an inspection is requested, the association, on
or before the 10th business day after the date the association
receives the request, shall send written notice of dates during
normal business hours that the owner may inspect the requested
books and records to the extent those books and records are in the
possession, custody, or control of the association; or
(2) if copies of identified books and records are
requested, the association shall, to the extent those books and
records are in the possession, custody, or control of the
association, produce the requested books and records for the
requesting party on or before the 10th business day after the date
the association receives the request, except as otherwise provided
by this section.
(f) If the property owners' association is unable to produce
the books or records requested under Subsection (e) on or before the
10th business day after the date the association receives the
request, the association must provide to the requestor written
notice that:
(1) informs the requestor that the association is
unable to produce the information on or before the 10th business day
after the date the association received the request; and
(2) states a date by which the information will be sent
or made available for inspection to the requesting party that is not
later than the 15th business day after the date notice under this
subsection is given.
(g) If an inspection is requested or required, the
inspection shall take place at a mutually agreed on time during
normal business hours, and the requesting party shall identify the
books and records for the association to copy and forward to the
requesting party.
(h) A property owners' association may produce books and
records requested under this section in hard copy, electronic, or
other format reasonably available to the association.
(i) A property owners' association board must adopt a
records production and copying policy that prescribes the costs the
association will charge for the compilation, production, and
reproduction of information requested under this section. The
prescribed charges may include all reasonable costs of materials,
labor, and overhead, but may not exceed the costs that would be
applicable for an item under 70 T.A.C. Section 70.3. Labor costs
and overhead costs related to inspection of documents may not
exceed 1-1/2 times the applicable amount prescribed by 70 T.A.C.
Section 70.3. The policy required by this subsection must be
recorded as a dedicatory instrument in accordance with Section
202.006. An association may not charge an owner for the
compilation, production, or reproduction of information requested
under this section unless the policy prescribing those costs has
been recorded as required by this subsection. An owner is
responsible for costs related to the compilation, production, and
reproduction of the requested information in the amounts prescribed
by the policy adopted under this subsection. The association may
require advance payment of the estimated costs of compilation,
production, and reproduction of the requested information. If the
estimated costs are lesser or greater than the actual costs, the
association shall submit a final invoice to the owner on or before
the 30th business day after the date the information is delivered to
the requestor. If the final invoice includes additional amounts
due from the owner, the additional amounts, if not reimbursed to the
association before the 30th business day after the date the invoice
is sent to the owner, may be added to the owner's account as an
assessment. If the estimated costs exceeded the final invoice
amount, the owner is entitled to a refund, and the refund shall be
issued to the owner not later than the 30th business day after the
date the invoice is sent to the owner.
(j) A property owners' association must estimate costs
under this section using amounts prescribed by the policy adopted
under Subsection (i).
(k) Except as provided by Subsection (l) and to the extent
the information is provided in meeting minutes, the association is
not required to release or allow inspection of any books or records
that identify the dedicatory instrument violation history of an
individual owner of an association, an owner's personal financial
information, including records of payment or nonpayment of amounts
due the association, an owner's contact information, other than the
owner's address, or information related to an employee of the
association, including personnel files. Information may be
released in an aggregate or summary manner that would not identify
an individual property owner.
(l) The books and records described by Subsection (k) shall
be released or made available for inspection if:
(1) the express written approval of the owner whose
records are the subject of the request for inspection is provided to
the association; or
(2) a court orders the release of the books and records
or orders that the books and records be made available for
inspection.
(m) A property owners' association composed of more than 14
lots shall adopt and comply with a document retention policy that
includes, at a minimum, the following requirements:
(1) certificates of formation, bylaws, restrictive
covenants, and all amendments to the certificates of formation,
bylaws, and covenants shall be retained permanently;
(2) financial books and records shall be retained for
seven years;
(3) account records of current owners shall be
retained for five years;
(4) contracts with a term of one year or more shall be
retained for four years after the expiration of the contract term;
(5) minutes of meetings of the owners and the board
shall be retained for seven years; and
(6) tax returns and audit records shall be retained
for seven years.
(n) A member of a property owners' association who is denied
access to or copies of association books or records to which the
member is entitled under this section may file a petition with the
justice of the peace of a justice precinct in which all or part of
the property that is governed by the association is located
requesting relief in accordance with this subsection. If the
justice of the peace finds that the member is entitled to access to
or copies of the records, the justice of the peace may grant one or
more of the following remedies:
(1) a judgment ordering the property owners'
association to release or allow access to the books or records;
(2) a judgment against the property owners'
association for court costs and attorney's fees incurred in
connection with seeking a remedy under this section; or
(3) a judgment authorizing the owner or the owner's
assignee to deduct the amounts awarded under Subdivision (2) from
any future regular or special assessments payable to the property
owners' association.
(o) If the property owners' association prevails in an
action under Subsection (n), the association is entitled to a
judgment for court costs and attorney's fees incurred by the
association in connection with the action.
(p) On or before the 10th business day before the date a
person brings an action against a property owners' association
under this section, the person must send written notice to the
association of the person's intent to bring the action. The notice
must:
(1) be sent certified mail, return receipt requested,
or delivered by the United States Postal Service with signature
confirmation service; and
(2) describe with sufficient detail the books and
records being requested.
(q) For the purposes of this section, "business day" means a
day other than Saturday, Sunday, or a state or federal holiday.
SECTION 11. Chapter 209, Property Code, is amended by
adding Sections 209.0051, 209.0056, 209.00593, and 209.00594 to
read as follows:
Sec. 209.0051. OPEN BOARD MEETINGS. (a) This section does
not apply to a property owners' association that is subject to
Chapter 551, Government Code, by application of Section 551.0015,
Government Code.
(b) In this section, "board meeting" means a deliberation
between a quorum of the voting board of the property owners'
association, or between a quorum of the voting board and another
person, during which property owners' association business is
considered and the board takes formal action. The term does not
include the gathering of a quorum of the board at a social function
unrelated to the business of the association or the attendance by a
quorum of the board at a regional, state, or national convention,
ceremonial event, or press conference, if formal action is not
taken and any discussion of association business is incidental to
the social function, convention, ceremonial event, or press
conference.
(c) Regular and special board meetings must be open to
owners, subject to the right of the board to adjourn a board meeting
and reconvene in closed executive session to consider actions
involving personnel, pending or threatened litigation, contract
negotiations, enforcement actions, confidential communications
with the association's attorney, matters involving the invasion of
privacy of individual owners, or matters that are to remain
confidential by request of the affected parties and agreement of
the board. Following an executive session, any decision made in the
executive session must be summarized orally and placed in the
minutes, in general terms, without breaching the privacy of
individual owners, violating any privilege, or disclosing
information that was to remain confidential at the request of the
affected parties. The oral summary must include a general
explanation of expenditures approved in executive session.
(c-1) Except for a meeting held by electronic or telephonic
means under Subsection (h), a board meeting must be held in a county
in which all or part of the property in the subdivision is located
or in a county adjacent to that county.
(d) The board shall keep a record of each regular or special
board meeting in the form of written minutes of the meeting. The
board shall make meeting records, including approved minutes,
available to a member for inspection and copying on the member's
written request to the property owners' association's managing
agent at the address appearing on the most recently filed
management certificate or, if there is not a managing agent, to the
board.
(e) Members shall be given notice of the date, hour, place,
and general subject of a regular or special board meeting,
including a general description of any matter to be brought up for
deliberation in executive session. The notice shall be:
(1) mailed to each property owner not later than the
10th day or earlier than the 60th day before the date of the
meeting; or
(2) provided at least 72 hours before the start of the
meeting by:
(A) posting the notice in a conspicuous manner
reasonably designed to provide notice to association members:
(i) in a place located on the association's
common property or, with the property owner's consent, on other
conspicuously located privately owned property within the
subdivision; or
(ii) on any Internet website maintained by
the association or other Internet media; and
(B) sending the notice by e-mail to each owner
who has registered an e-mail address with the association.
(f) It is an owner's duty to keep an updated e-mail address
registered with the property owners' association under Subsection
(e)(2)(B).
(g) If the board recesses a regular or special board meeting
to continue the following regular business day, the board is not
required to post notice of the continued meeting if the recess is
taken in good faith and not to circumvent this section. If a
regular or special board meeting is continued to the following
regular business day, and on that following day the board continues
the meeting to another day, the board shall give notice of the
continuation in at least one manner prescribed by Subsection
(e)(2)(A) within two hours after adjourning the meeting being
continued.
(h) A board may meet by any method of communication,
including electronic and telephonic, without prior notice to owners
under Subsection (e), if each director may hear and be heard by
every other director, or the board may take action by unanimous
written consent to consider routine and administrative matters or a
reasonably unforeseen emergency or urgent necessity that requires
immediate board action. The board may not, without prior notice to
owners under Subsection (e), consider or vote on fines, damage
assessments, initiation of foreclosure actions, initiation of
enforcement actions, excluding temporary restraining orders or
violations involving a threat to health or safety, increases in
assessments, levying of special assessments, appeals from a denial
of architectural control approval, or a suspension of a right of a
particular owner before the owner has an opportunity to attend a
board meeting to present the owner's position, including any
defense, on the issue. Any action taken without notice to owners
under Subsection (e) must be summarized orally, including an
explanation of any known actual or estimated expenditures approved
at the meeting, and documented in the minutes of the next regular or
special board meeting.
(i) This section applies to a meeting of a property owners'
association board during the development period, as defined by
Section 209.0041, only if the meeting is conducted for the purpose
of:
(1) adopting or amending the governing documents,
including declarations, bylaws, rules, and regulations of the
association;
(2) increasing the amount of regular assessments of
the association or adopting or increasing a special assessment;
(3) electing non-developer board members of the
association or establishing a process by which those members are
elected; or
(4) changing the voting rights of members of the
association.
(j) An action taken by a board at a meeting held in violation
of this section is voidable.
Sec. 209.0056. BOARD REPRESENTATION. The declaration may
provide for a period of declarant control of the association during
which period a declarant, or persons designated by the declarant,
may appoint and remove members of the board and the officers of the
association. Regardless of the period of declarant control
prescribed by the declaration, at least one-third of the board
members must be elected by owners other than the declarant on or
before the 120th day after the date on which 75 percent of the lots
that may be created and made subject to the declaration are conveyed
to owners other than a declarant. If the declaration does not
include the number of lots that may be created and made subject to
the declaration, at least one-third of the members of the board must
be elected by owners other than the declarant not later than the
10th anniversary of the date the declaration was recorded.
Sec. 209.00593. VOTING; QUORUM. (a) The voting rights of
an owner may be cast or given:
(1) in person or by proxy at a meeting of the property
owners' association;
(2) by absentee ballot in accordance with this
section;
(3) by any method of representative or delegated
voting provided by a dedicatory instrument; or
(4) by electronic ballot in accordance with this
section.
(b) Ballots, including any written or printed evidence of
any vote cast or given as provided by Subsection (a), must be
preserved until the period for requesting a recount under Section
209.00594 has expired.
(c) An absentee or electronic ballot:
(1) may be counted as an owner present and voting for
the purpose of establishing a quorum only for items appearing on the
ballot;
(2) may be withdrawn by an owner if the owner attends a
meeting at which votes on the ballot items are cast; and
(3) may not be counted, except for quorum purposes, on
the final vote of a proposal if the motion was amended at the
meeting to be different from the exact language on the absentee or
electronic ballot.
(d) A solicitation for votes by absentee or electronic
ballot must include:
(1) an absentee or electronic ballot that contains
each proposed action and provides an opportunity to vote for or
against each proposed action;
(2) instructions for delivery of the completed
absentee or electronic ballot, including the delivery location; and
(3) the following language: "By casting your vote via
absentee or electronic ballot you will forgo the opportunity to
consider and vote on any action from the floor on these proposals,
if a meeting is held. This means that if there are amendments to
these proposals your votes will not be counted on the final vote on
these measures. If you desire to retain this ability, please attend
any meeting in person. You may submit an absentee or electronic
ballot and later choose to attend any meeting in person, in which
case any in-person vote will prevail."
(e) For the purposes of this section, "electronic ballot"
means a ballot:
(1) conveyed in an electronic manner and format
prescribed by the property owners' association board;
(2) for which the identity of the property owner
submitting the ballot can be reasonably established; and
(3) for which the property owner may receive a receipt
of the electronic transmission and receipt of the owner's ballot.
(f) If an electronic ballot is posted on an Internet
website, a notice shall be provided to each owner that contains
instructions on obtaining access to the posting on the website.
(g) The property owners' association board has the sole
authority to prescribe or cause to be prescribed all proxy and
ballot forms.
(h) This section supersedes any contrary provision in a
dedicatory instrument.
(i) Except as provided by Subsection (j) or Section 209.003,
this section applies to all property owners' associations and
controls over any other law not specifically applicable to a
property owners' association.
(j) This section does not apply to a property owners'
association that is subject to Chapter 552, Government Code, by
application of Section 552.0036, Government Code.
Sec. 209.00594. RECOUNT OF VOTES. (a) This section does
not apply to a property owners' association that is subject to
Chapter 552, Government Code, by application of Section 552.0036,
Government Code.
(b) Any owner may, not later than the 15th day after the date
of the meeting at which the election was held, require a recount of
the votes. A demand for a recount must be submitted in writing
either:
(1) by certified mail, return receipt requested, or by
delivery by the United States Postal Service with signature
confirmation service to the association's mailing address on the
latest management certificate filed under Section 209.004; or
(2) in person to the association's managing agent as
reflected on the latest management certificate filed under Section
209.004 or to the address to which absentee and proxy ballots are
mailed.
(c) The property owners' association shall, at the expense
of the owner requesting the recount, retain for the purpose of
performing the recount, the services of a person qualified to
tabulate votes under this subsection. The association shall enter
into a contract for the services of a person who:
(1) is not a member of the association or related to a
member of the association board within the third degree by
consanguinity or affinity, as determined under Chapter 573,
Government Code; and
(2) is:
(A) a current or former:
(i) county judge;
(ii) county elections administrator;
(iii) justice of the peace; or
(iv) county voter registrar; or
(B) a person agreed on by the association and the
persons requesting the recount.
(d) Any recount under Subsection (b) must be performed on or
before the 30th day after the date of receipt of a request and
payment for a recount in accordance with Subsections (b) and (c).
If the recount changes the results of the election, the association
shall reimburse the requesting owner for the cost of the recount.
The association shall provide the results of a recount to the owner
requesting the recount. Any action taken by the board in the period
between the initial election vote tally and the completion of the
recount is not affected by any recount.
SECTION 12. Section 209.006, Property Code, is amended to
read as follows:
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 to enforce a
nonmonetary obligation [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 by
certified mail, return receipt requested.
(b) The notice required by Subsection (a) 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) except as provided by Subsection (d), 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 mailed to the
owner; and
(3) specify the date by which the owner must cure the
violation if the violation is of a curable nature and does not pose
a threat to public health or safety [receives the notice].
(c) 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 if the violation is of a curable nature. A
shorter notice period is permitted in the case of a threat to public
health or safety.
(d) Subsections (a) and (b) do not apply to:
(1) a violation for which the owner has been
previously given notice under this section and the opportunity to
exercise any rights available under this section in the preceding
six months; or
(2) a violation that is not of a curable nature.
(e) If the property owner does not cure the violation in the
time provided by Subsection (c) and does not request a hearing under
Section 209.007 in the time provided by Subsection (b)(2)(B), the
property owners' association may assess the fine and shall provide
notice of the assessment to the owner. If the violation is of a
curable nature and the property owner cures the violation before
the expiration period for cure specified under Subsection (c), any
fine assessed for the violation is void.
(f) For purposes of this section, a violation is considered
a threat to public health or safety if the violation could
materially affect the physical health or safety of an ordinary
resident.
(g) Before a property owners' association may file a suit
against an owner to collect a regular or special assessment or
foreclose the association's lien on the owner's property, the
association or the association's agent must send written notice to
the owner by certified mail, return receipt requested, that:
(1) describes the amount that is due the association
and that must be paid to avoid further collection actions; and
(2) specifies a date not earlier than the 30th day
after the date the notice is sent by which the owner must cure the
delinquency to avoid further collection actions.
SECTION 13. Chapter 209, Property Code, is amended by
adding Sections 209.0061 and 209.0062 to read as follows:
Sec. 209.0061. ASSESSMENT OF FINES. 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 maximum fine amount for a
continuing violation at which point the total fine amount is
capped. A fine may be collected in the same manner as assessments
under the dedicatory instrument.
Sec. 209.0062. ALTERNATIVE PAYMENT SCHEDULE FOR CERTAIN
ASSESSMENTS. (a) This section applies only to a property owners'
association composed of more than 15 lots.
(b) 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 monetary
penalties. For purposes of this section, monetary penalties do not
include reasonable costs associated with administering the payment
plan or interest.
(c) A property owners' association is not required to offer
a payment plan to an owner more than once each year. The minimum
term for a payment plan offered by a property owners' association is
three months. A property owners' association is not required to
allow a payment plan for any amount 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 during the five years following the owner's
default under the previous payment plan.
SECTION 14. Section 209.007(d), Property Code, is amended
to read as follows:
(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. The hearing
provisions of Section 209.006 and this section do not apply if the
association files a suit against an owner to collect a regular or
special assessment or foreclose the association's lien on an
owner's property. If a suit is filed relating to a matter to which
Sections 209.006 and this section [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 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.
SECTION 15. Section 209.009, Property Code, is amended to
read as follows:
Sec. 209.009. FORECLOSURE SALE PROHIBITED IN CERTAIN
CIRCUMSTANCES. 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]
(2) attorney's fees incurred by the association solely
associated with fines assessed by the association; or
(3) amounts added to the owner's account as an
assessment under Section 209.005(i).
SECTION 16. (a) Section 82.111(i), Property Code, as
amended by this Act, applies only to payment of costs incurred and a
resolution regarding payment of costs approved on or after the
effective date of this Act. Payment of costs incurred or a
resolution approved 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 82.113(g), Property Code, as amended by this
Act, applies only to a condominium unit sold at a foreclosure sale
on or after the effective date of this Act. A unit sold at a
foreclosure sale 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.
(c) Sections 207.003 and 209.005, Property Code, as amended
by this Act, apply 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.
(d) Section 209.005(m), Property Code, as added by this Act,
applies only with respect to books and records generated on or after
the effective date of this Act. Books and records generated before
the effective date of this Act are governed by the law in effect
immediately before the effective date of this Act, and that law is
continued in effect for that purpose.
(e) Section 209.0056, Property Code, as added by this Act,
applies only to a property owners' association created on or after
January 1, 2012.
(f) Sections 209.006 and 209.007, Property Code, as amended
by this Act, apply only to an enforcement action initiated by a
property owners' association on or after the effective date of this
Act. An enforcement action initiated 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) Sections 209.0061 and 209.0062, Property Code, as added
by this Act, apply only to an assessment, fine, or other debt that
becomes due on or after the effective date of this Act. An
assessment, fine, 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.
SECTION 17. This Act takes effect January 1, 2012.