HOA’s, Their Operations and Levels of Power

Under the Texas Property Code 209.002(7) a homeowners association is defined as 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 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.

The primary purpose is to help protect the values of the neighborhood within the subdivision by enforcing the rules and restrictions for the subdivision. HOA’s set and collect maintenance fees for the upkeep of the neighborhood. These fees pay for landscaping, maintaining and building recreational facilities, sport fields, parks, streets, sidewalks and just about anything in a subdivision except the house itself. However, the HOA can dictate the size, style, construction, maintenance and use of the property if the restrictions allow for such specific details. When HOA’s take their duties seriously by enforcing the restrictions the overall appearance of the neighborhood should increase each property’s value and the overall value of the subdivision.

The Texas Property Code allows an HOA to load up its Dedicatory Instrument with whatever rules it deems appropriate. The buyer will receive a copy of the Deed Restrictions and other Restrictions pertaining to their subdivision’s HOA when they go to their property closing. The HOA’s operate as a government entity where it has enforcing capabilities. This particular installment of power within the HOA has very often irritated homeowners to the point of taking issues to legislation, or the courts to change, do away with some of the rules and restrictions placed on property owners in a subdivision.

The 2011 Legislative Session made quite a few changes to the power of the HOA’s. House Bill 2761 made law that all HOA’s must establish written policies for requesting, producing, charging copies of HOA records, as well as policies for record maintenance and retention. HOA’s may not hide them, or protect them from disclosure. A homeowner who has requested records from the HOA may sue in JP Court with the additional help of being reimbursed for any attorney fees if he wins the case.

There must be annual meetings open to their members of the subdivision they represent. If the HOA does not do this, a committee may call a special meeting to elect new directors. HOA’s must open their board meetings to members and provide members with sufficient notice of the meetings. It also defines “what is a board meeting”, and allows for electronic meetings. It also defines under what circumstances an HOA may use “executive session” to exclude members from discussion.

Senate Bill 472 provides that an HOA declaration may be amended by a vote of 67% of the association’s members. House Bill 1821 states that HOA’s must record their governing documents in the real property records of the county were they are residing as an HOA. “Get it recorded or it’s useless” is the outcome of this change. If the HOA maintains a website the dedicatory instruments, restrictions and rules, must be available online.

These above Bills also made provisions to change how fees are applied when coming from a delinquent property owner. In the past the HOA might apply the partial payment to attorney fees while the delinquent HOA fees continued to remain delinquent. The Bill amended Chapter 209 of the Property Code to provide an order of application for payment by delinquent homeowners. And House Bill 1228 protects homeowners from obnoxious collections practices such as contingency fees and HOA’s can no longer assign assessment claims, except for loan collateral.

A number of bills were passed that prevent Texas HOA’s from prohibiting or attempting to prohibit certain conduct or activity on the part of the homeowner. These include flying certain flags (U.S., Texas, military branches), displaying political signs, installing rain harvesting systems, displaying religious insignia on the front door, installing certain kinds of roofing shingles that are rain, hurricane, wind resistant, or installing solar panels. Under the new bills an HOA can no longer outright prohibit the above; they can under certain circumstances regulate the conduct of such.

House Bill 2761 allows for any member to run for a seat on an HOA’s Board of Directors. At the same time, HOA’s may not re-appoint members whose terms have expired; instead, those board members would have to run for re-election. These provisions overturn term limits, and spouses being prohibited from serving at the same time.

Under House Bill 1228 the members of an HOA can remove the Associations right or power of foreclosure. This is a huge change. Owners holding at least 10% of all voting interest can petition the association and call for a vote. They need a vote of at least 67% to pass. Equally significant is a procedural change for foreclosures by HOA’s and effectively doing away with non-judicial foreclosures. Now, HOA’s must use “expedited foreclosure” procedures to obtain a court order before they may conduct a foreclosure sale – unless the homeowner waives this right. The Texas Supreme Court is expected to have completion of procedures which will be similar to the Home Equity Loan liens procedures. HOA must give 60 day notice to cure the delinquent recorded liens on the lot. HB 1127 provides protection from active duty military personnel by requiring notification of certain rights under federal law.

Under HB 1821 HOA’s have 10 days from the date of request to issue the resale certificate. Resale certificates are good for a maximum of 60 days. The HOA can charge the purchaser but cannot process the fee until the resale certificate is prepared and delivered to the purchaser.

There is also a change to the TREC Addendum for Property Subject to Mandatory Membership in a Property Owners’ Association. The new addendum allows the parties to decide if the buyer is going to obtain the Subdivision Information or whether the seller will deliver it, as has been the historical method of delivery. The buyer has 3 days after receipt of the addendum to terminate the written offer to purchase. It was a 7 day window to terminate. And, there is now a place for the parties to opt out of requiring the Subdivision Information.

HOA’s rights, rules and authority are always important to the buyer and especially on move-in when they are now the homeowner in the subdivision. The feeling of “having no control over one’s private property” has been limited by the changes in Texas law.