Changes to Texas Home Owner Association Laws in 2011 & 2012

In the 82nd Legislative Session, the Texas legislature enacted multiple new laws affecting Home Owner Associations (“HOA”) which trump certain Covenants, Conditions and Restrictions (“CC&R”)and bylaws affecting the property or of HOAs. All property owners and HOA board members should be made aware of as to know their rights and authority. They changes include:

Annual Meetings. HOA boards must call annual owners’ meetings, or the owners may demand one. If the board still doesn’t hold a meeting following the owners’ demand, the owners may form a committee to elect board members. Effective January 1, 2012.

Board Meetings. HOAs must give notice to homeowners of in-person board meetings and must open up these meetings to homeowners (with certain exceptions for executive sessions). Boards may not consider certain issues (e.g., assessment increases, fines, special assessments, etc.) unless homeowners have received notice of the board meeting. Any conflicting provisions in CC&Rs or bylaws are superseded. Effective January 1, 2012.

Board Membership. On or before the 120th day after the date that 75% of lots are sold to owners other than the declarant, at least 1/3 of board members must be elected by the non-declarant owners. Any contrary provisions in CC&Rs (including the length of the development period in connection with board elections) are superseded. Effective January 1, 2012.

Recording Dedicatory Instruments. Along with CC&Rs and amendments, Articles of Formation, bylaws, design guidelines and any rules or policies affecting homeowners must be recorded in the real estate records of the county(ies) in which the property is located. These documents must also be posted on any HOA website maintained by the HOA or its manager. [Patel Hammond PLLC suggests that an HOA record all documents related to the HOA’s policies as any document not recorded is unenforceable.] Effective January 1, 2012.

Homeowner Access to Documents. Every HOA must have policies in place for records production/copying and document retention. If the records production/copying policy is not recorded, the HOA may not charge homeowners for copy fees. Effective January 1, 2012.

Amendments to CC&Rs. Except during the development period, CC&Rs may be amended by a maximum vote of 67% of the total votes allocated to owners. Any higher percentages provided in CC&Rs are effectively reduced to a 67% requirement; any lower percentages provided in CC&Rs still apply. Effective September 1, 2011.

Transfer Fees. Most private transfer fees are prohibited, but there are exceptions for dues, fees, assessments, etc. payable to HOAs, to non-profits or for club memberships. Any existing prohibited transfer fees are valid only if notices are filed by January 31, 2012 and updated every 3 years, and new private transfer fees are void and unenforceable. Effective at the conclusion of the 82nd legislative session.

Voting. Voting may be in person, by proxy, by absentee ballot or by electronic ballot, and all ballots must be in writing and signed (i.e., no secret ballots). Any conflicting provisions in CC&Rs are superseded, and HOAs must implement procedures for voting via absentee ballot and via electronic ballot (i.e., by e-mail, by fax or through a website). [Patel Hammond PLLC suggests that an HOA record this policy with the real property records where the property is located.] Effective September 1, 2011.

Payments. HOAs are restricted in their collection arrangements with third-party collectors and must apply collected payments to assessments, then attorneys’ fees, then fines. HOAs must adopt and record guidelines for alternative payment schedules for homeowners to pay off delinquent assessments and other amounts payable to the HOA. Owners are not liable for payment of collection agent fees unless notice and other requirements are met, and payment plans are available to owners even if the HOA does not record guidelines for a payment plan. [Patel Hammond PLLC suggests that an HOA record this policy with the real property records where the property is located or the claim for such fees will be unenforceable.] Effective September 1, 2011.

Foreclosure on an HOA assessment lien must now be conducted as a judicial foreclosure through the courts, albeit an expedited proceeding, unless the property owner subject to the foreclosure waives judicial foreclosure in writing at the time the foreclosure is sought. Effective September 1, 2011.

Use Restrictions. The Texas laws contain broader allowances for religious door displays, solar panels, roofing, flags and flagpoles and rainwater harvesting barrels. Developers and HOAs must be more flexible in developing design guidelines in these areas and approving builders’ and homeowners’ plans involving these items. Effective dates vary; no later than January 1, 2012.

Resale certificates must contain conspicuous notice language, and the statutory requirements for content have been revised to require that resale certificates include right-of-first-refusals other than those prohibited by statute, the amount and purpose of any special assessment that has been approved before the resale certificate is delivered, lawsuits to which the HOA is a party (except for lawsuits relating to unpaid ad valorem taxes) and a statement of all fees associated with a transfer of ownership, including a description of the fee, to whom the fee is paid and the amount. Effective January 1, 2012.

This news entry is intended to highlight selected HOA/POA-specific laws from the 82nd Texas Legislative Session. It is not comprehensive. Not all new laws that may impact HOA/POAs are included, and for brevity, bracketed laws, most exceptions and many details are omitted. This news entry is intentionally brief to provide a quick list of priority items. It is not intended to replace the advice of competent legal counsel or to address a particular situation.

The information in this document and this blog is for informational purposes only and should not be relied on. Patel Hammond PLLC disclaims any warranty as to accuracy or completeness. Nothing herein creates an attorney-client relationship.