HBA-ATS H.B. 2224 76(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 2224 By: Solomons Business & Industry 6/4/1999 Enrolled BACKGROUND AND PURPOSE A purchaser of a home may be unaware that the seller is a member of a homeowners' association and that the purchase of the home obligates the seller to be a member of the association. Even if a purchaser is aware of this fact, the purchaser may not be aware of the extent of the restrictions governing the maintenance and use of the property and of the responsibilties associated with membership in the association. H.B. 2224 requires a seller of residential real property that is subject to membership in a property owners' association to give to the purchaser, before the date the executory contract binds the purchaser, a written notice that informs the purchaser of the restrictions and obligations associated with a purchase of this kind of home. If the contract is entered into without the seller providing the required notice, the purchaser is authorized to terminate the contract for any reason within the earlier of seven days after the purchaser receives the notice or the date the transfer occurs as provided by the contract. This right to terminate the executory contract is the purchaser's exclusive remedy for the seller's failure to provide the required notice. A property owners' association is required to file the dedicatory instrument in the real property records of each county in which the property to which the dedicatory instrument relates is located. Under this bill, the above requirements do not apply to a transfer of property: under a court order or foreclosure sale; by a trustee in bankruptcy; to a mortgagee by a mortgagor or successor in interest or to a beneficiary of a deed of trust by a trustor or successor in interest; by a mortgagee or a beneficiary under a deed of trust who has acquired the land at a sale conducted under a power of sale under a deed of trust or a sale under a court-ordered foreclosure or has acquired the land by a deed in lieu of foreclosure; by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust; from one co-owner to another co-owner of an undivided interest in the real property; to a spouse or a person in the lineal line of consanguinity of the seller; to or from a governmental entity; of only a mineral interest, leasehold interest, or security interest; or of a real property interest in a condominium. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter A, Chapter 5, Property Code, by adding Section 5.012, as follows: Sec. 5.012. NOTICE OF OBLIGATIONS RELATED TO MEMBERSHIP IN PROPERTY OWNERS' ASSOCIATION. (a) Requires a seller of residential real property that is subject to membership in a property owners' association and that comprises not more than one dwelling unit located in this state to give to the purchaser a written notice. Sets forth the required form for the notice, which informs the purchaser of the restrictions and obligations associated with a purchase of a home that is subject to membership in a property owners' association. (b) Requires the seller to deliver the required notice to the purchaser before the date the executory contract binds the purchaser. Authorizes the notice to be given separately, as part of the contract during negotiations, or as part of any other notice the seller delivers to the purchaser. Authorizes the omission of certain information if the notice is included as part of the executory contract or another notice. (c) Provides that Section 5.012 does not apply to a transfer of property: _under a court order or foreclosure sale; _by a trustee in bankruptcy; _to a mortgagee by a mortgagor or successor in interest or to a beneficiary of a deed of trust by a trustor or successor in interest; _by a mortgagee or a beneficiary under a deed of trust who has acquired the land at a sale conducted under a power of sale under a deed of trust or a sale under a court-ordered foreclosure or has acquired the land by a deed in lieu of foreclosure; _by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust; _from one co-owner to another co-owner of an undivided interest in the real property; _to a spouse or a person in the lineal line of consanguinity of the seller; _to or from a governmental entity; _of only a mineral interest, leasehold interest, or security interest; or _of a real property interest in a condominium. (d) Authorizes the purchaser to terminate an executory contract, if the contract is entered into without the seller providing the required notice, for any reason within the earlier of seven days after the purchaser receives the notice or the date the transfer occurs as provided by the executory contract. (e) Provides that the purchaser's right to terminate the executory contract is the purchaser's exclusive remedy for the seller's failure to provide the required notice. SECTION 2. Amends Chapter 202, Property Code, by adding Section 202.006, as follows: Sec. 202.006. PUBLIC RECORDS. Requires a property owners' association to file the dedicatory instrument in the real property records of each county in which the property to which the dedicatory instrument relates is located. SECTION 3. Effective date: September 1, 1999, except for Section 5.012, Property Code, which takes effect January 1, 2000. Makes application of Section 5.012 prospective, beginning January 1, 2000. SECTION 4. Requires each property owners' association to present for recording with the county clerk each dedicatory instrument governing the association that has not been previously recorded in the real property records of the county by January 1, 2000. SECTION 5. Emergency clause.