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December 31, 2006

Below is a link to the entire December 2006 Interim Report from the Senate Committee on Intergovernmental Relations. You will leave this website and go to a page on the Texas Senate website. Scroll down the page to find a link to the "Senate Committee on Intergovernmental Relations Interim Report to the 80th Legislature" which will open a .pdf file.

http://www.senate.state.tx.us/75r/Senate/commit/c520/c520.htm

Texas Homeowners for HOA Reform, Inc. is encouraged by the IGR Committee's recommendations. Below is the exact charge and the Committee's Recommendations as contained in the Interim Report.

Charge Five

Examine and make recommendations relating to the appropriateness and advisability of adopting the "Texas Uniform Planned Community Act," as published by the State Bar of Texas Subcommittee on Property Owners Associations, as the enabling statute to establish a comprehensive and uniform framework for the creation and operation of residential planned communities.

Recommendations

Because disagreements about TUPCA remain numerous and fundamental, the committee cannot recommend its adoption at this time. However, efforts to find common ground among the interested parties did yield some fruit. Accordingly, the committee makes the following recommendations:

5.1. Perhaps the most bedrock principle to be established or reinforced by the legislature in the property association context is the idea of notice - buyers should know exactly what they are joining when they become members of an association when buying a home. Therefore, the committee recommends that the provision of resale certificates to prospective home buyers be mandatory. Such certificates should be made available a reasonable amount of time before the purchase (i.e., not at closing) and should include information related to the number and nature of lawsuits involving the association (this will give potential buyers an idea as to whether the association is involved in a relatively high percentage of foreclosures for a subdivision of its size), as well as information detailing any deed restrictions in place.

Concern has been expressed regarding the cost of a resale certificate. This could be addressed by capping the amount charged for a certificate as a percentage of the purchase price of the home (e.g., for a $300,000 home, a cap of 1/8 of 1 percent would set a maximum charge for a resale certificate at $375.00, 1/4 at $750.00, etc.). Additionally, the cost for an updated resale certificate could be capped at a percentage of the cost of the original certificate if issued within a certain number of days of the original. This paragraph serves only to raise the issue and suggest responses - the committee makes no specific recommendation with respect to the cost of resale certificates.

5.2. An association should be able to amend its declaration by a vote of two-thirds of its homeowners (some older associations' documents list fees more appropriate to the mid-1970's, but updating them is made difficult by provisions requiring 90 percent homeowner approval - not 90 percent of those voting in an election, but 90 percent of all homes). This is consistent with the Uniform Condominium Act.

5.3. The legislature should require associations to offer payment plans for those behind on their assessments, fines, etc., upon a showing by the homeowner of a substantial change in personal circumstance (e.g., job loss, serious illness).

5.4. The legislature should enact a homeowner payment prioritization schedule (see Appendix C-3). This is intended to prevent circumvention of existing law prohibiting foreclosure based on unpaid fines or attorneys fees.

5.5. Homeowners should be protected from the possibly endless accumulation of fines for a continuing violation. This could be accomplished by adopting language such as that proposed in Section 83.154 of the draft TUPCA statute. It reads as follows:

Sec. 83.154. PROTECTION FROM FINES. (a) A fine levied by the association must be reasonable in light of the nature, frequency, and effect of the violation. 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 is capped.

(b) Before an owner is liable for a fine levied by the association for a violation of a governing document, the association must give the owner a written notice stating that the owner may avoid the proposed fine by curing the violation within a reasonable period, for which a date certain is specified, unless the owner was given notice and a reasonable opportunity to cure a similar violation within the preceding 12 months.

(c) If a lot occupant other than the owner violates the governing documents, the association, in addition to exercising any of the association's powers against the owner, may levy fines directly against the nonowner occupant in the same manner as provided for owners.

(d) The association must give notice of a levied fine to the owner not later than the 30th day after the date of levy.

5.6. Subdivision plats and marketing materials should be required to clearly show the location at which utility infrastructure will be built and to specifically identify amenities which must be built.

5.7. The need for association members to have access to information about the enforcement practices of their board should be balanced with the privacy interests of individual homeowners by requiring association records of assessments, fines, foreclosures, etc. to be made available in redacted form.

5.8. An association's ability to exercise a "right of refusal" to purchase property within a subdivision should be eliminated. House Bill 222, filed on November 14, 2006, proposes doing so by adding the following section to the Property Code:

Sec. 5.027. Right of Refusal to Purchase Property by Property Owners ' Association. To the extent that a restriction in a deed, declaration or dedicatory instrument applicable to a residential property reserves the right of refusal to a property, the restriction is void. This section applies to a property owners ' association or condominium owners ' association that is entitled to levy regular or special assessments.

5.9. Homeowners should have the option to choose judicial or non-judicial foreclosure. Judicial foreclosure is likely to be more expensive, but some homeowners will feel more comfortable having such a significant dispute resolved by a court.

5.10. The legislature should examine title problems which arise with respect to common areas when a declarant/developer goes bankrupt or simply abandons a project before completion.

If such a developer is unwilling to transfer title to a designated common area, the remaining property owners may be left with an empty field or even a pile of rocks where a park or pool was to have been built. Without a way to gain title, little if anything can be done to remedy the situation. The committee simply raises this issue, as no solution is apparent as of this writing. Perhaps a judicial procedure could be created in statute by which a POA could be granted title if certain conditions were met.

5.11. To ensure confidence in contested elections, an association could be required to retain a disinterested party to count votes. This could be predicated upon a request by a certain percentage of its members.