This paper is a summary of certain community association legislation that was passed in the 87th Texas Legislative Session. This is not a summary of all legislation that may impact your community. It does include summaries of laws that we believe are most important. We are also intentionally NOT offering our specific concerns and/or suspected negative effects which some of these new bills may cause. We do NOT want to provide a road map for any future litigation against communities or their boards.
This paper is not intended to provide legal opinions or substitute for the advice of legal counsel. The information contained herein encompasses proprietary and confidential information of Riddle & Williams, P.C. and shall not be used, disclosed or reproduced, in whole or in part, for any purpose, and the information contained herein shall not be furnished to others without the prior written consent of Riddle & Williams, P.C.
Changes Affecting Both Condominium Associations and Property Owners Associations
1. Religious Displays. (SB 581 & SB 1588).
Two separate Senate bills were passed that will impact how communities and condos can regulate religious displays. Other than the effective date for the two bills, the bills are virtually identical. Section 202.018 of the Texas Property Code regarding religious item displays is amended to allow religious displays largely anywhere on an individual’s property (rather than just the entryway) and removes the size limitations. It does allow associations to prohibit religious items on property owned or maintained by the association, owned in common by the owners (such as Common Elements in condominiums), located in easements or setbacks, or on traffic lights, street lights, fire hydrants, and utility signs/poles/fixtures. The effect of this change could be significant, particularly for POAs. Owners can now install a variety of religious items on their property with very limited restrictions on those items, including large Christmas decorations/displays. Additionally, the bills repealed the subsection which authorized associations to remove an item displayed in violation of an enforceable restriction. Now, associations must rely upon the powers contained in their governing documents alone to enforce their restrictions on religious displays. (Effective May 31, 2021). R&W’s suggestion: Discuss any possible enforcement action involving religious displays/holiday decorations with legal counsel first. Also, consider amending your governing documents to fill in any gaps in restrictions or enforcement capabilities.
2. Operation of Golf Carts. (HB 1281).
The amendment to Section 551.403 of the Texas Transportation Code added a new subsection (b) which expressly permits the operation of a golf cart in a residential subdivision without a license plate if the speed limit is not more than 35 mph. For most communities, this bill will have little effect other than to prevent associations from requiring that golf carts have license plates if they are operated in the community. (Effective June 15, 2021).
3. Carrying of Firearms. (HB 1927).
The new Firearm Carry Act of 2021 makes sweeping changes to the laws affecting the carrying of firearms. For our purposes, the changes to Section 30.05 of the Texas Penal Code have the most impact on communities. Previously, the statute authorized communities to post signage indicating that concealed handguns were prohibited on the property under Section 30.06 and/or that openly carried handguns were prohibited on the property under Section 30.07 of the Texas Penal Code. This bill amends Section 30.05 to allow for signage that firearms (in general) are prohibited on the property. (Effective on September 1, 2021). R&W suggestion: If you have 30.06 and/or 30.07 signs, consult with your legal counsel about whether additional signage or a single sign under 30.05 may be needed.
4. Removal of Discriminatory Provisions. (SB 30).
The new Section 5.0261 of the Texas Property Code grants the owner of an interest in real property affected by a recorded instrument which contains a “discriminatory provision” to have the provision removed through a filing with the clerk of a district court in the county in which the instrument is recorded. The new section also provides the suggested language for such a filing. There is no requirement for a hearing, and the court may rule ex parte. If the court fails to rule within 15 days after the motion is filed, it is deemed granted. Courts are also prohibited from charging any filing fees for these types of motions. The court ultimately issues findings of fact and conclusions of law which are then recorded by the county. “Discriminatory provision” is defined by reference to Section 5.026(a) of the Texas Property Code. That section generally defines a discriminatory provision as a provision which “prohibits the use by or the sale, lease, or transfer [of real property] to a person because of race, color, religion, or national origin.” For most communities, this bill will have little effect. A “discriminatory provision” is already unenforceable under Section 5.026(a) of the Texas Property Code, so this bill merely gives a property owner the right to formally have that provision removed by the county. (Effective September 1, 2021).
5. Effect of Unrecorded Dedicatory Instrument on Assessment Collections. (SB 1588).
Section 202.006 of the Texas Property Code currently provides that all dedicatory instruments must be recorded, or they have no effect. This bill adds Section 202.006(c), which prohibits an association from collecting a regular assessment if the dedicatory instrument authorizing the collection of that assessment is not recorded. However, the bill also defines “regular assessment” by reference to Section 209.002 of the Texas Property Code, which only applies to POAs. For this reason, it is unclear if this change was only intended to apply to POAs, or if it was also intended to apply to condominiums. We believe the effect of this amendment should be relatively limited. But, if you have concerns about the impact this new law will have on your community, contact your attorney for guidance. (Effective September 1, 2021).
6. Swimming Pool Enclosures. (SB 1588).
There is a new Section 202.022 of the Texas Property Code governing swimming pool enclosures. It provides that associations cannot prohibit an owner from installing a swimming pool enclosure on the owner’s property if it conforms to governmental requirements. However, the section does allow associations to enforce restrictions that relate to the appearance of the enclosure, including permissible colors, except that an association cannot prohibit an enclosure that is black with transparent mesh set in metal frames. Associations must now permit black enclosures consisting of transparent mesh in metal frames, which may not otherwise meet an association’s fence restrictions. (Effective September 1, 2021).
7. COVID-19 LIABILITY. (SB 6).
Various sections of the Texas Civil Practice and Remedies Code have been amended to help shield parties from liability in connection with the COVID-19 pandemic. With respect to communities, there is a new Chapter 148 of the Texas Civil Practice and Remedies Code entitled “Liability During Pandemic Emergency.” Section 148.003 provides that a person is not liable for injury or death caused by exposing an individual to a pandemic disease during a pandemic emergency except in limited circumstances. To establish liability, the claimant would generally need to prove that the person either knowingly failed to warn the injured party of or cure a condition that was likely to result in exposure to the disease OR failed to implement government-promulgated protocols intended to reduce the risk of exposure. The claimant also must prove, through scientific evidence, that the above was the cause in fact of the injured party contracting the disease. The claimant must also provide certain reports from experts within 120 days of the defendant filing an answer, and the defendant has an opportunity to object to the sufficiency of the report. While this does not eliminate all potential liability for pandemic-related claims, it certainly may help shield associations from liability since parties must clear certain hurdles to establish a valid claim. We still recommend releases and written warnings related to use of a community’s pool or other amenities. (Effective immediately).
Changes Affecting Condominium Associations Only
1. Production of Records. (SB 318).
This bill amends Chapter 82 of the Texas Property Code (the Texas Uniform Condominium Act). Accordingly, this bill only affects condominium associations, but does apply retroactively to pre-1994 condominiums. The bill amends Section 82.114(b) to state that the records of the association are available for production in accordance with Section 82.1141. The bill adds new Section 82.1141, which establishes procedures for records requests. This new Section is virtually identical to Section 209.005 of the Texas Property Code, which is applicable to associations governing planned unit developments. As such, SB 318 makes the records production procedures virtually identical for both condominiums and planned unit developments. The only noteworthy differences between Section 82.1141 and Section 209.005 are that a condominium association composed of eight (8) or more units must adopt a document retention policy (rather than an association composed of 14 or more lots). As with Section 209.005, condominiums must adopt and record a records production and copying policy to charge owners for such costs. Additionally, we suspect there is a typographical error in Section 82.1141(j) that defines which records need not be produced. Specifically, Section 82.1141(j) provides that the Association need not produce, among other things, a unit owner’s contact information or a unit owner’s address (unlike Section 209.005 which allows for the withholding of contact information other than the owner’s address). Nevertheless, the language is clear and will be enforced as written, so unlike property owners associations, condominium associations will not need to produce any contact information for a unit owner. This bill makes drastic changes to how condominium associations produce records. However, for management companies that manage both condominium associations and associations for planned unit developments, this bill may make it easier to ensure compliance with the law since the production procedures are now universal. The bill also adds protection for certain information that should otherwise remain private such as an owner’s violation history or account history, as the Texas Uniform Condominium Act did not previously protect these types of records. (Effective September 1, 2021). R&W suggestion: Have your legal counsel prepare the required new document policies.
2. Mechanic’s and Materialmen’s Liens. (HB 2237).
The biggest change from this amendment to Section 3503.051(3) of the Texas Insurance Code is that it clarifies that a mechanic’s lien extends to the improvements themselves, rather than the house and land. This bill is an attempt to clarify that a mechanic’s lien can attach to a multiunit structure including a condominium. There have often been questions as to whether and how mechanic’s liens are valid when filed in connection with work on the common elements. The amendments made by HB 2237 provide that the lien attaches against the improvements (including the common elements), although the bill fails to address how the lien is foreclosed when the lien is against commonly owned improvements. The bill also changes the definition of “Residence” to constitute real property and improvements in a unit in a multiunit structure “in which title to the individual units is transferred to the owners under a condominium or cooperative system.” The bill also makes various small changes to the procedure to file a mechanic’s lien, including the notices required prior to filing a lien. In addition, the bill changes the definition of “notice of claim” to include the amended sections of Chapter 53 the Texas Property Code discussed below. Various definitions in Section 53.001 of the Texas Property Code were amended. The one important change is in the definition of “labor” to include not only labor used in direct performance of the work, but also professional services used in preparation of the work of a design, drawing, specifications, etc. (Effective January 1, 2022).
Changes Affecting Property Owners Associations Only
1. Justice Court Lawsuits for Violations of Chapter 209. (SB 1588).
A new Section 209.017 of the Texas Property Code is added, which permits owners to bring an action for a violation of Chapter 209 of the Texas Property Code against associations in justice court. This could have a significant impact. Importantly, express authority to file in justice courts may be seen as an invitation to file lawsuits against Texas communities. This could also lead to an increase in your community’s legal fees as well as an increase in insurance premiums. (Effective September 1, 2021).
2. Architectural Review. (SB 1588).
There is a new Section 209.00505 of the Texas Property Code that addresses architectural review in communities. It prohibits a person from serving on an architectural review authority if the person is on the board, is the spouse of a board member, or resides with a board member. An architectural review authority must give written notice of any denial to an owner, with the denial notice including: (i) the reasons for the denial; and (ii) changes, if any, to the application required as a condition for approval. This section also provides that a decision by an architectural review authority may be appealed to the board and specifies what must be included in the denial notice, including informing an owner of his/her right to an appeal. In a hearing on an appeal before a Board, a Board and owner (or their representatives) each have an opportunity to “discuss, verify facts, and resolve the denial.” Much like hearings before a Board on violation matters, a hearing may be recorded and either party may request a postponement. Section 209.00505(i) does provide that a board may affirm, modify, or reverse a decision of the architectural review authority. This section does not apply if the community has 40 or fewer lots and does not apply during the development period or any period where the declarant either appoints the architectural review authority or has the right to veto a decision of the architectural review authority. This change could be rather significant. It formalizes challenges of architectural decisions, and grants owners an absolute right to appeal decisions to a board. It also prohibits board members, their spouses, and anyone residing with them from also serving on the architectural committee, which is a common procedure for many communities. Associations may find it difficult to obtain enough volunteers to fill both the board and the architectural committee. (Effective September 1, 2021).
3. Resale Certificate Fees. (SB 1588).
First, the word “necessary” is added to Section 207.003(c) of the Texas Property Code, which authorizes associations to charge a reasonable and now also “necessary” fee for providing resale certificates and updates. More importantly, this bill caps the fees which can be charged at $375 for a resale certificate and $75 for an update. Simply stated, we are concerned about any fees being capped by the legislative body of any state. We think the free market should drive fees and costs. (Effective September 1, 2021).
4. Resale Certificate Delivery Timeline. (SB 1588).
Section 207.004(b) of the Texas Property Code was amended to shorten the time period in which an association must deliver a resale certificate from 7 days to 5 days, measured from the date of mailing of the second request for a resale certificate. It also increased the maximum penalty for failing to timely deliver a resale certificate from not more than $500 to not more than $5,000. The amendment also added the word “reasonable” with respect to an owner’s claim for recovery of attorney’s fees in connection with a claim of failure to timely provide a resale certificate. This is a potentially significant penalty for failing to timely provide a resale certificate. Associations must be diligent in providing these certificates timely and tracking all requests for certificates. (Effective September 1, 2021).
5. Association Websites. (SB 1588).
Section 207.006 of the Texas Property Code is amended to require that associations post the current version of the dedicatory instruments on a website maintained by the association or management and made available to members. Previously, associations were only required to post the dedicatory instruments online if there was an association website maintained by the association or management. This section only applies to either (i) an association for a subdivision containing at least 60 lots, OR (ii) an association that has contracted with a management company. This may not impact the associations that already have websites as most of those already contain the governing documents. However, for those associations that do not currently maintain a website and fall within the statutory parameters, they will now be required to have one. (Effective September 1, 2021).
6. Management Certificates. (SB 1588).
The requirements for management certificates have changed through an amendment to Section 209.004 of the Texas Property Code. The recording data for the declaration now must include all amendments. The certificate must list a phone number and email address for the person managing the association, the address of the association’s website, and the amount of any fees charged in connection with a “property transfer” in the subdivision. Associations must record an amended management certificate with this new information in the county or counties where the subdivision is located on or before September 1, 2021. Additionally, the management certificate must be recorded with the Texas Real Estate Commission, which will be discussed below. Lastly, Section 209.004 is amended to provide that owners are not liable for interest or attorney’s fees relating to collections that are incurred or accrue during the period in which the required management certificate is not recorded with the county or electronically filed with TREC. If the required management certificate is not recorded, an owner is not liable for any attorney’s fees or interest relating to the collection of assessments until the certificate is filed. This places more burden on preparing the certificate. Associations and management companies will need to be careful that all amendments are included. Associations must update their management certificates to include this additional information and record their certificates with TREC once the process to do so has been established (with TREC having a deadline of December 1, 2021), but such recording must occur not later than June 1, 2022. (Effective December 1, 2021). R&W suggestion: Make sure to identify all amendments in your certificate. You may even need a title examiner to locate any missing amendments. It is unclear what effect, if any, there is for an amendment that is omitted from the management certificate. Record with your county by September 1, 2021 and TREC by June 1, 2022.
7. Hearings on Enforcement Matters. (SB 1588).
Section 209.007 of the Texas Property Code is amended to provide that a hearing on an enforcement matter may only be before the board and not a committee appointed by the board. It also requires that the association first present its case regarding the violation, and then the owner may present the owner’s own information and issues regarding the dispute. The association also must provide the owner with all the evidence/documentation it intends to introduce at the hearing at least 10 days before the hearing; if the association fails to do so, the owner is entitled to an automatic 15-day postponement of the hearing. Boards now must take a much more active role in the hearing process by essentially treating this like a mini trial with the association providing evidence in advance and then presenting its case before the owner presents his/hers. The time and cost to prepare for and conduct these hearings will increase. (Effective September 1, 2021). R&W suggestion: For complicated issues, you may want legal counsel to prepare the documentation for the hearing and/or to participate at the hearing.
8. Leasing Information. (SB 1588).
Section 209.016 of the Texas Property Code, which governs restrictions on leases, is amended to clarify that nothing in the section prohibits a restriction on occupancy or leasing. It also adds a new subsection (e) which expressly authorizes associations to request contact information for rental applicants and the commencement date and term of the lease. Section 209.016 was also amended to repeal the subsection which stated that, if a copy of the lease is required by the association, any sensitive personal information (social security number, driver’s license number, and credit card number) may be redacted. It is unclear exactly what effect this amendment will have. (Effective September 1, 2021).
9. Security Measures. (SB 1588 & HB 3571).
There is a new Section 202.023 of the Texas Property Code regarding “security measures.” However, this section states that it does not apply to condominiums or to a master mixed-use property owners’ association governed by Chapter 215 (Las Colinas Master). Section 202.023 provides that an association may not enforce a covenant that prevents an owner from installing security measures, including a security camera, motion detector, or perimeter fence. However, an association may still prohibit the installation of cameras in an area other than the owner’s property and may regulate the type of fencing that may be installed. We are generally in favor of associations allowing owners to install devices that provide additional security. However, we are concerned that an association can only prohibit cameras on property other than the owner’s property. In theory, an owner could install a camera that invades his/her neighbor’s perceived privacy, and an association can take no action, such as a camera that records directly in a neighbor’s window or in the neighbor’s backyard. (Effective immediately).
10. Definition of “Management Company.” (SB 1588).
The definitions section of Chapter 209 of the Texas Property Code is amended by adding Section 209.002(5-a) thereto, which defines “management company” as a “person or entity established or contracted to provide management or administrative services” for an association. This definition is also referenced in an amendment to Section 207.001 of the Texas Property Code. It is currently unclear what effect, if any, this change may have on POAs and the management companies that manage them. (Effective September 1, 2021).
11. Notice of Board Meetings. (SB 1588).
Section 209.0051 of the Texas Property Code, which governs board meetings, is amended to require that notice of board meetings given by posting and email must be given 144 hours in advance of regular meetings and 72 hours in advance of special meetings (rather than 72 hours for all board meetings). It also expands the topics that must be discussed and voted on at an open meeting to include any vote on an annual budget or amendment of an annual budget, rather than only those which involve an increase of more than 10%. Note, the notice required for a special meeting of the board has not changed, and these are the meetings that are generally not planned for and usually must be held on short notice. (Effective September 1, 2021).
12. Contracts: Soliciting Bids. (SB 1588).
Section 209.0052(c) of the Texas Property Code is added to require that, for any contract that will cost more than $50,000, an association must solicit bids or proposals. Additionally, an association must utilize a bid process established by the Association. It is unclear if this bid process must be contained in some type of written resolution or policy, and whether it must be recorded. It is unclear if this also applies to renewals of annual contracts. There is also no carve-out for an emergency, which could prove problematic. (Effective September 1, 2021). R&W suggestion: Consider preparing and recording your bid process with the county.
13. Reporting Delinquencies to Credit Reporting Services. (SB 1588).
Section 209.006(a) of the Texas Property Code, regarding the notice required prior to enforcement action, is amended to require that notice prior to reporting an owner’s delinquency to a credit reporting service. For associations that do not report delinquencies to credit reporting services, this will not impact them. For those associations and management companies who do, they will need to change their procedures to follow this notice procedure. Additionally, a new Section 209.0065 is added to govern credit reporting services. It provides that associations may not report a delinquency to a credit reporting service if the delinquency is the subject of a pending dispute between the owner and the association. Prior to reporting a delinquency, the association also must send a report of all delinquent charges to the owner by certified mail, hand delivery, electronic delivery, or other method “acceptable between the parties” at least 30 days before doing so, and the association must give the owner an opportunity to enter into a payment plan. Lastly, this section prohibits an association from charging a fee for reporting the delinquent payment history to a credit reporting service. For those associations and management companies who report to credit reporting services, they will need to change their procedures to follow this notice procedure. Because associations cannot charge a fee for such reporting, associations may need to consider whether to keep this practice. (Effective September 1, 2021).
14. “Reasonable” Attorney’s Fees and Charges. (SB 1588).
The word “reasonable” is added to Section 209.0063(a) of the Texas Property Code, which governs the application of payments, providing that payments are to be applied only to reasonable attorney’s fees, collection costs, fines, and other amounts owed to an association. It is unclear what effect, if any, this addition of the word “reasonable” may have. (Effective September 1, 2021).
15. Fees of Collection Agents. (SB 1588).
Section 209.0064(b) of the Texas Property Code is amended to provide that owners are not liable for fees of a collection agent until the required notice is sent and the owner has at least 45 days to cure the delinquency (rather than the 30 days in the prior version of the Section). This effect will be somewhat limited except that the collections process will have an additional 15 days added to it. (Effective September 1, 2021).
16. Use of Adjacent Lots. (SB 1588).
Section 209.015(c) of the Texas Property Code, which addresses the use of adjacent lots by an owner, contains a minor amendment that replaces the phrase “architectural committee” with “architectural review authority as defined by Section 209.00505(a).” This appears to have no practical effect other than to track the definition of “architectural review authority” found elsewhere in Chapter 209. (Effective September 1, 2021).
17. Amendments to Declarations. (HB 1659).
Section 209.0041 of the Texas Property Code was amended to add Subsection (d-1) which provides that the declaration amendment procedures in that Section do not apply if the subdivision contains commercial property, industrial property, an apartment complex, or a condominium. For most communities, this bill will have no effect. However, for mixed-use or mixed-density communities, those associations can no longer rely upon the amendment standard in Section 209.0041(h), which generally creates a lower amendment threshold for declarations than the declarations themselves. (Effective immediately).