HBA-EVB S.B. 699 76(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 699 By: Carona Business & Industry 4/14/1999 Engrossed BACKGROUND AND PURPOSE In 1839, the Republic of Texas passed the Exemption Act, which was enacted to protect Texas homesteads against foreclosure. Since 1987, property owners' associations have been able to foreclose on property and operate with considerable latitude regarding their powers to modify, extend, or continue restrictions and procedures. While Article 1396-1.01 et seq. (Texas Non-Profit Corporation Act), V.T.C.S., governs property owners' associations, there is no state agency that monitors or regulates violations of the Texas Non-Profit Corporation Act (Act). The only homeowners' remedies provided under the Act require the homeowner to employ a private attorney to pursue a grievance against a property owners' association. S.B. 699 creates rights, obligations, and procedures for property owners and property owners' associations with mandatory membership. S.B. 699 also provides lien, foreclosure, and voting procedures; recordkeeping, information sharing and financial reporting requirements; board and management requirements; purchaser protection; and remedies for violations. 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 Chapter 207, Title 11, Property Code, by adding Chapter 207, as follows: CHAPTER 207. TEXAS PLANNED COMMUNITY ACT SUBCHAPTER A. GENERAL PROVISIONS Sec. 207.001. SHORT TITLE. Authorizes this chapter to be cited as the Texas Planned Community Act. Sec. 207.002. DEFINITIONS. Defines "board," "builder," "declarant," "declaration," "dedicatory instrument," "lienholder," "lot," "member," "owner," "petition," "property owners' association" or "association," "regular assessment," "residential subdivision " or "subdivision," "restrictions," "restrictive covenant," and "special assessment." Sec. 207.003. APPLICABILITY OF CHAPTER. (a) Provides that this chapter applies only to a residential subdivision that is or was subject to restrictions or provisions in a declaration that authorize the property owners' association to collect regular or special assessments on property in the subdivision. (b) Provides that this chapter applies only to a property owners' association that requires or required mandatory membership in the association for all owners of residential property within the subdivision subject to the association's dedicatory instruments. (c) Provides that this chapter applies to a property owners' association regardless of whether the entity is designated as a "homeowners' association," "community association," or similar designation in the restrictions or dedicatory instrument. (d) Provides that this chapter does not apply to a condominium development governed by Chapter 82 (Uniform Condominium Act). SUBCHAPTER B. AMENDMENT AND EXTENSION OF RESTRICTIVE COVENANTS Sec. 207.031. AMENDMENT OR EXTENSION OF EXISTING RESTRICTIONS. (a) Authorizes a property owners' association to circulate and approve a petition relating to an amendment or extension of existing restrictions, subject to the limitations in a dedicatory instrument applicable during a period of declarant control and in addition to the powers and methods provided in an existing dedicatory instrument or the restrictions. Provides that if an existing dedicatory instrument for a residential subdivision contains procedures for modifying, extending, or continuing the restrictions and the procedures require less than 100 percent approval of the property owners in the residential subdivision to modify, extend, or continue the restrictions, the percentage approval required by the restrictions prevails over the percentage required by Subsection (c) or (d). (b) Authorizes the property owners' association for the subdivision to circulate and approve a petition relating to an amendment, extension, or continuation of the restrictions if existing or expired restrictions for a residential subdivision do not contain procedures for modifying, extending, or continuing the restrictions or require 100 percent approval of the property owners at any time in order to modify, extend, or continue the restrictions. Provides that the petition must comply with the limitations or prohibitions in a dedicatory instrument applicable during a period of declarant control. (c) Sets forth that, except as provided by Subsection (a), a petition described by Subsection (a) or (b) is effective if: (1) the petition is approved by the owners, excluding lienholders, purchasers under an executory contract, and owners of mineral interests, of at least 66 percent of the lots in the residential subdivision; (2) the petition does not amend or extend a provision that, under the restrictions, is prohibited from being amended or extended until a certain event occurs; (3) the petition is recorded as a dedicatory instrument in the real property records of the county in which the subdivision is located; and (4) a copy of the recorded petition is provided to all owners of lots in the subdivision. (d) Provides that if a residential subdivision that consists of multiple sections, each with its own restrictions, is represented by a single property owners' association, the approval requirement is satisfied by obtaining approval of at least 66 percent of the owners of lots in each section or 66 percent of the total number of lots in the association's jurisdiction. (e) Provides that, if approved, the petition is binding on all lots in the residential subdivision or section, as applicable. (f) Provides that a property owners' association that circulates a petition must notify all record owners of property in the residential subdivision in writing of the proposed amendment or extension of the existing restrictions. Authorizes notice to be hand-delivered to residents in the subdivision or sent by first class mail to the owner's last known mailing address as reflected in the ownership records maintained by the association. Authorizes the approval of multiple owners of a lot to be reflected by the signature of a single co-owner. (g) Provides that a petition under this section must contain an enumerated information. (h) Requires the property owners' association to hand deliver or send a notice to each owner by first class mail to the owner's last known mailing address according to the association's records not later than the 10th day after the petition expires or is adopted. Provides that the notice must include a copy of the amendment, a statement that the petition was approved or expired, a summary of the effects of the approval if approved, and the effective date of any amendments. (i) Provides that a petition under this section expires on the earlier of the date specified in the petition or one year after the date on which the petition was first put into circulation. (j) Provides that an action to challenge the validity of a dedicatory instrument adopted by a property owners' association under this section must be brought before the first anniversary of the date the dedicatory instrument is recorded. (k) Provides that any lien recorded before a dedicatory instrument is adopted by a property owners' association under this section is subject to the dedicatory instrument at the time the instrument is recorded in the real property records. Sec. 207.032. TEXAS NONPROFIT CORPORATION. Provides that if a property owners' association is a Texas nonprofit corporation, the provisions of the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) apply to the association, except to the extent that the provisions conflict with this chapter. Provides that Sections 207.033 to 207.060 are reserved for expansion. SUBCHAPTER C. MANAGEMENT OF ASSOCIATION Sec. 207.061. POWERS OF PROPERTY OWNERS' ASSOCIATION. (a) Authorizes the governing board of a property owners' association (board), unless otherwise provided by the restrictions or the articles of incorporation or bylaws of the property owners' association, to perform an enumerated series of functions. (b) Authorizes an association board to exercise the powers granted in this section only if a majority of owners who are present in person or by proxy at a general membership meeting of the association vote in favor of granting the powers to the board. Provides that this section does not affect the powers of the association or its board to exercise powers granted by the association's dedicatory instruments or other applicable law. Provides that notice of the meeting must be sent not later than the 30th day before the date of the meeting and provides that it must inform the owner that one of the purposes of the meeting is to consider granting the board powers authorized by statute on the approval of the association membership. (c) Prohibits a dedicatory instrument from being amended to impose restrictions on a declarant that are more restrictive than restrictions on other owners, without the consent of the declarant. (d) Provides that an arbitrary or capricious bylaw or rule of the property owners' association is not enforceable. (e) Provides that the association or its agent must give written notice to the owner by hand delivery or by certified mail, return receipt requested, at the owner's last known address as reflected in the association's records, before a property owners' association is authorized to suspend an owner's right to use a common area or file a suit against an owner, other than a suit to foreclose under an association's lien. _Provides that the notice must describe the violation that is the basis for the suspension action and any unpaid amount due to the association by the owner. _Provides that the notice must state that the owner has the right to request a hearing before a board-appointed committee, or before the board if the board does not appoint a committee, not later than the 10th day after the date the owner receives the notice to discuss and verify facts and resolve the matter in issue. _Provides that the notice must state that the owner has the right to appeal the committee's decision to the board by written notice to the board not later than the 10th day after the date the owner receives notice of the committee's decision, if a hearing is to be held before a committee. _Provides that an owner who requests a hearing under this subsection must submit the request in writing and deliver the request to the association not later than the 10th day after the date the owner receives notice of the suspension action under this subsection or not later than the 10th day after the date the owner receives notice of the committee's decision, as appropriate. _Requires the association to hold a hearing under this subsection not later than the 30th day after the date the board receives the owner's request for a hearing. _Authorizes the owner and the association to make an audio recording of the meeting. _Provides that this subsection does not apply if the association files a suit seeking a temporary restraining order or temporary injunctive relief or files a suit that includes foreclosure as a cause of action. _Authorizes a party to the suit to file a motion to compel mediation, if a suit is filed relating to a matter to which this subsection applies. _Provides that an owner is not liable for attorney's fees incurred by the association relating to a matter described by the notice unless the hearing requested by the owner is held or attempted to be held in good faith by the association within the period prescribed by this section. _Authorizes an owner or property owners' association to use alternative dispute resolution services. (f) Provides that the association must give to the owner, before a property owners' association is authorized to charge an owner for property damage or levy a fine for a violation of the restrictions or the bylaws or rules of the association, written notice that describes, states, and grants an enumerated list of items. (g) Authorizes a property owners' association to collect reimbursement of reasonable attorney's fees and other reasonable costs incurred by the association relating to collecting amounts due the association or enforcing restrictions or the bylaws or rules of the association only if the owner is provided a written notice that attorney's fees and costs will be charged to the owner if the delinquency or violation continues after a date certain. Prohibits attorney's fees that are incurred by the association before the notice is provided to the owner from being charged to the owner. Requires attorney's fees and other costs incurred by the association collected from the owner to be paid directly to the association or its management company or jointly to the association or its management company and the attorney representing the association. Provides that the attorney must furnish to the association an invoice for services provided. Provides that this subsection does not apply to a counterclaim of an association in a lawsuit brought against the association by a property owner. (h) Authorizes the property owners' association to give a copy of the notice required by Subsection (e), (f), or (g) to an occupant of the property, in addition to the notice under Subsections (e), (f), and (g). Provides that the association must give notice of the fine levied or damage charged to the lot owner not later than the 30th day after the date the fine or charge is imposed. (i) Provides that a rule adopted or amended by a board is not effective until the 30th day after the date a copy of the rule is mailed or delivered to the owners, posted in a prominent public place within the area of the property owners' association, or published in a newspaper with general circulation in the area of the association. (j) Authorizes directors to be removed from office as provided by the dedicatory instruments or, if the dedicatory instruments do not provide for the removal of a director, as provided by the Texas Non-Profit Corporation Act (Article 1396-1.01 et seq., V.T.C.S.). Sec. 207.062. ASSESSMENTS. (a) Authorizes an association board to impose and increase regular and special assessments as provided by the dedicatory instruments of the association. (b) Authorizes the increase to be accumulated and assessed in future years if a dedicatory instrument limits annual assessment increases to a fixed percentage or dollar amount. (c) Authorizes a majority of lot owners to set the regular assessments at any amount, regardless of the limits set in the dedicatory instruments, if a dedicatory instrument sets a maximum dollar amount for regular assessments or limits annual increases in regular assessments to a fixed percentage or dollar amount, by voting in person or by proxy at a regular or special meeting of the association membership at which a quorum is present under Subsection (d), or by voting by mail ballot under Subsection (e). (d) Authorizes a vote to set regular assessments at a meeting of the association membership under Subsection (c) to occur only if notice of the proposed increase in regular assessments is included in the notice of the meeting. Prohibits the meeting from being held before the 30th day after the date the notice of the meeting is mailed or hand-delivered to the owners. (e) Authorizes a vote to change an assessment amount by mail ballot under Subsection (c) without an association membership meeting to occur only if all members of the board unanimously support the assessment change and the mail ballot includes a statement indicating the board's unanimous support. Provides that the mail ballot must state the date by which all ballots must be postmarked and mailed to the association. Prohibits the date by which a ballot must be postmarked from being before the 30th day after the date the ballot is mailed to the association membership. Prohibits the ballots from being counted before the seventh day after the required postmark date. Sec. 207.063. ARCHITECTURAL CONTROL COMMITTEE. (a) Provides that this section applies to restrictions providing for the creation and operation of an architectural control committee with the power to approve or deny applications for proposed original construction or the modification of a building, structure, or improvement. Authorizes an association board to serve as an architectural control committee, unless otherwise provided by the dedicatory instruments. (b) Provides that the architectural control authority automatically vests in the association, unless the restrictions applicable to a residential subdivision vest the architectural control authority in the property owners' association on an earlier date, if: (1) the term of the architectural control committee authority expires as prescribed by the restrictions; (2) a residence on the last available residential building site in the subdivision is completed and sold; (3) the person designated as the architectural control committee in the restrictions assigns, in writing, authority to the association; or (4) the declarant, the declarant's designee, or any person named in the dedicatory instrument as the architectural control committee ceases to exercise its authority for more than one year under the restrictions or provisions contained in a dedicatory instrument relating to the architectural control committee. (c) Provides that if the architectural control committee authority is vested in the property owners' association under Subsection (b), the association retains that authority until the restrictions are modified to reflect otherwise or the restrictions are terminated. (d) Authorizes the declarant, the property owners' association, the architectural control committee, or an owner of property subject to a dedicatory instrument to enforce a restrictive covenant that relates to architectural control, construction on a lot, and use restrictions on a lot contained in the dedicatory instrument. Sec. 207.064. MEETINGS. (a) Requires a property owners' association to hold a general meeting of the membership at least once each year. Authorizes a special meeting of the association's membership to be called by the presiding officer of the board, a majority of the board, or at least 10 percent of the property owners who are members of the association, unless a dedicatory instrument provides less restrictive requirements. (b) Provides that meetings of the property owners' association membership and board must be open to property owners, subject to the right of the board to adjourn a board meeting and reconvene in closed executive session to consider actions involving personnel, threatened or pending litigation, contract negotiations, enforcement actions, matters involving the invasion of privacy of individual owners, or matters that are to remain confidential by request of the affected parties and agreement of the board. Provides that the general nature of any business to be considered in executive session must first be announced at the open meeting. (c) Authorizes a board meeting to be held by any method of communication, including electronic and telephonic communication, unless a dedicatory instrument of the property owners' association provides otherwise , if certain enumerated conditions are met, and authorizes the board to act by unanimous written consent of all the directors, without a meeting, if certain other enumerated conditions are met. (d) Provides that notice of a meeting of the property owners' association membership must be given as provided by the bylaws, or, if the bylaws do not provide for notice, provides that notice must be given to each owner in the same manner that notice is given to members of a nonprofit corporation under Section A, Article 2.11, Texas Non-Profit Corporation Act (Article 1396-2.11, V.T.C.S.). (e) Provides that notice of a meeting of the property owners' association board must be given as provided by the bylaws, or, if the bylaws do not provide for notice, provides that notice must be given to each board member in the same manner that notice is given to members of the board of a nonprofit corporation under Section B, Article 2.19, Texas Non-Profit Corporation Act (Article 1396-2.19, V.T.C.S.). (f) Requires a property owners' association, on the written request of a property owner, to inform the owner of the time and place of the next regular or special meeting of the board. Requires the association to promptly obtain the information and disclose it to the owner or inform the owner where the information is authorized to be obtained, if the association representative to whom the request is made does not know the time and place of the meeting. (g) Authorizes rules to be adopted, amended, or repealed by a majority vote of the members voting, if notice of the meeting has specified that one of the purposes of the meeting is to consider the adoption, amendment, or repeal of association rules. Requires the board to call a meeting of the general membership not later than the 30th day after the date the board receives the petition, if the board receives a petition signed by at least 10 percent of all owners requesting a meeting to consider the adoption, amendment, or repeal of association rules. Provides that the notice of the meeting must state that one of the purposes of the meeting is to consider the adoption, amendment, or repeal of association rules. (h) Requires the property owners' association to be liable to the owner under Section 207.130(a), Property Code, if the board knowingly continues to violate this section, after an owner makes a written request to a board for compliance with this section and provides the board with a copy of this section and Section 207.130 (Remedies for Violations), Property Code. Sec. 207.065. VOTING AND PROXIES. (a) Authorizes only one of the owners to vote, if a lot is owned by more than one person. Authorizes the vote allocated to that lot to be cast only in accordance with the owners' unanimous agreement, if more than one of the multiple owners is present, unless the restrictions or the bylaws or articles of incorporation of the property owners' association provide otherwise. Provides that multiple owners are considered to be in unanimous agreement if one of the owners votes and no other owner promptly protests to the person presiding over the meeting. Provides that, if multiple owners of a lot attempt to vote in person or by proxy on behalf of all the owners, the vote will not be counted. (b) Authorizes votes allocated to a lot to be cast under a written proxy executed by a lot owner unless prohibited by the bylaws of the association. Provides that only the proxy with the most recent date is valid, if more than one proxy is submitted for a single lot. Authorizes a lot owner to revoke a proxy under this section by providing written notice of the revocation to the person presiding over the meeting or by attending and voting in person at the meeting. Provides that a proxy is void if it is not dated or if it purports to be revocable without notice. Provides that a proxy terminates 11 months after the date it is executed unless it specifies a shorter or longer period. (c) Provides that cumulative voting is not permitted. (d) Authorizes an owner who arrives at an association meeting after the meeting commences and who is eligible to vote under the dedicatory instruments to cast a vote on all issues considered at the meeting after the owner arrives. Sec. 207.066. ASSOCIATION RECORDS. (a) Requires the property owners' association to keep financial records that are sufficiently detailed to enable an accountant to prepare financial statements that comply with generally accepted accounting principles, and the association to prepare a resale certificate under Section 207.091; a management certificate prepared under Section 207.068 and any amendments to the certificate; the name and mailing address of each property owner; voting records, proxies, and correspondence relating to amendments to the dedicatory instruments for at least four years after the date of the amendment; invoices furnished by an attorney under Section 207.061(g) for at least four years after the date the invoice is furnished; and minutes of meetings of the association and board. (b) Requires the property owners' association to furnish to the owner, on an owner's written request, at the owner's expense, a copy of the restrictions and the bylaws and rules of the association not later than the 10th day after the date the request is received by the association. Authorizes the association to charge a reasonable fee for the documents and the copies and also authorizes the association to pay compensation to whoever prepares or gathers the documents or copies. (c) Provides that an owner, owner's agent, and title insurance company or its agent are not liable to a purchaser for a delay or failure of the property owners' association to provide to the owner copies of documents requested by the owner. Authorizes the owner or the owner's agent or a title company or its agent acting on behalf of the owner to submit a second request for the information, if an association fails to furnish the information required by Subsection (b) within the period prescribed by that subsection. Provides that the second request must be delivered by certified mail, return receipt requested, or by hand delivery with a receipt for delivery. Provides that the association is subject to civil penalties under Section 207.130(a) for failure to timely furnish copies of the documents requested, if the association fails to furnish the information required by Subsection (b) before the seventh day after the date the second request for information is delivered. (d) Authorizes the owner or the owner's agent, including the owner's accountant or attorney, to examine and copy at the owner's expense at any reasonable time and for any proper purpose, the books and records of the property owners' association relevant to that purpose, if an owner makes a written request for copies of documents and states the purpose of the request. (e) Requires the property owners' association to, as a common expense, obtain the accounting services required by this section and by the dedicatory instruments. Requires copies of the reports to be made available to the owners. (f) Requires a declarant to furnish to the property owners' association copies of the information required by Subsection (a) on the date the first lot in the declarant's residential subdivision is sold. Sec. 207.067. FINANCIAL REPORT; AUDIT OR REVIEW. (a) Requires an association to obtain an annual audit or review of the association's financial records by a certified public accountant or public accountant unless, at a general or special membership meeting of the association, the owners who are in attendance in person or by proxy vote against having the audit or review or vote to have the association's records for the fiscal year reviewed by the board or a board-appointed committee. (b) Provides that this section applies regardless of the provisions in a dedicatory instrument regarding audit and review of association financial records. Sec. 207.068. MANAGEMENT CERTIFICATES. (a) Requires a property owners' association to record in each county in which any portion of the residential subdivision is located a management certificate, signed and acknowledged by an officer of the association, stating the name of the subdivision; the name of the association; the recording data for the subdivision; the recording data for the declaration; the mailing address of the association or the name and mailing address of the person managing the association; and other information the association considers appropriate. (b) Requires the property owners' association to record an amended management certificate not later than the 30th day after the date the association has notice of a change in any information in the recorded certificate required by Subsection (a). (c) Provides that the property owners' association and its officers, directors, employees, and agents are not subject to liability to any person for a delay in recording or failure to record a management certificate, unless the delay or failure is wilful or caused by gross negligence. Sec. 207.069. BOARD MEMBER EDUCATION. (a) Prohibits a board member of an association from voting as a board member under the association's dedicatory instruments after the sixth month after the board member first attends a board meeting as an elected board member unless the board member has viewed a videotape or attended a class approved by the attorney general for the purpose of educating board members on their obligations and rights under this chapter and other laws relating to property owners' associations. (b) Provides that the board member must furnish to the association a signed statement to be filed in the association's permanent records listing the name of the videotape and the date the board member viewed the tape or the name and sponsor of the class and the date the board member attended the class, if a board member views a videotape or attends a class described by Subsection (a). (c) Requires the board member's right to vote to be reinstated automatically when the board member complies with this section, if a board member's right to vote has lapsed because the member failed to comply with Subsection (a). SUBCHAPTER D. PROTECTION OF PURCHASERS Sec. 207.091. FURNISHING OF SUBDIVISION INFORMATION. (a) Requires the property owners' association to furnish, not later than the 10th day after the date a written request for subdivision information is received from the owner or the owner's agent or a title company or its agent acting on behalf of the owner, a current copy of the restrictions applying to the subdivision, a current copy of the bylaws and rules of the association, and a resale certificate that complies with Subsection (b). (b) Provides that a resale certificate furnished by the property owners' association under Subsection (a) must contain certain enumerated information. (c) Provides that, unless required by a dedicatory instrument, a property owners' association or its agent is not required to inspect property before furnishing a resale certificate or an update to the resale certificate. (d) Requires the property owners' association to furnish the information required by this section to the person specified in the request for subdivision information. Provides that the association is not required to furnish the information if the request does not specify the name and address of the person to whom the information is to be furnished. (e) Authorizes the property owners' association to furnish the information required by this section by depositing the information in the United States mail, by hand delivering the information, or by an alternate means of delivery specified in the request. (f) Authorizes a property owners' association to charge a reasonable fee to prepare and furnish the information required by this section, including an update of a resale certificate. Sec. 207.092. SECOND REQUEST FOR INFORMATION; AFFIDAVIT OF COMPLIANCE. (a) Authorizes the owner or the owner's agent or a title company or its agent acting on behalf of the owner to submit a second written request for the information, if a property owners' association fails to furnish the information required by Section 207.091 within the period prescribed by that section. Provides that the second request must be delivered by certified mail, return receipt requested, or by hand delivery with a receipt for delivery. (b) Authorizes the owner, if the property owners' association fails to furnish the information required by Section 207.091 before the seventh day after the date the second request for information is delivered, to provide the purchaser under a contract to purchase the owner's property an affidavit stating that the owner or the owner's agent or a title company or its agent acting on behalf of the owner made two written requests as provided by law to the property owners' association for the property information; and that the property owners' association failed to furnish the information within the period prescribed by law. (c) Sets forth that if the owner provides the purchaser with an affidavit described by this section the purchaser, lender, and title company and its agent are not liable for any amounts due and unpaid by the owner to the property owners' association as of the date the owner prepared the affidavit, and any claims by the association that accrued before the date the owner prepared the affidavit. Sets forth, also, that if the owner provides the purchaser with an affidavit described by this section that any property owners' association lien on the property purchased that secures the payment of amounts due and unpaid by the owner as of the date the owner prepared the affidavit automatically terminates as a lien securing payment of those amounts. Sec. 207.093. EFFECT OF RESALE CERTIFICATE; LIABILITY. (a) Prohibits a property owners' association that prepares a resale certificate under Section 207.091 from denying the validity of any statement in the resale certificate. (b) Provides that a purchaser and the purchaser's agent, the owner and the owner's agent, the lender, and the title company and its agent are not liable to the association for the undisclosed amounts due or the undisclosed claim, if the property owners' association fails to disclose any amounts due to the association or a claim by the association existing as of the date the resale certificate was prepared. Provides that the property owners' association lien to secure undisclosed amounts due to the association as of the date the resale certificate was prepared automatically terminates as a lien securing the undisclosed amount. (c) Provides that a resale certificate does not affect the property owners' association's right to recover amounts that become due or claims that arise after the date the resale certificate is prepared, or the property owners' association's lien on property securing the payment of future assessments. (d) Provides that the owner and the owner's agent and the title company and its agent are not liable to the purchaser for the property owners' association's delay in furnishing or failure to furnish the information required by Section 207.091. (e) Sets forth that, except as provided by Section 207.130, the property owners' association is not liable to the owner for the association's delay in furnishing or failure to furnish the information required by Section 207.091. Provides that an officer or agent of the property owners' association is not liable for the association's delay in furnishing or failure to furnish a resale certificate under Section 207.091. SUBCHAPTER E. PROPERTY OWNERS' ASSOCIATION LIEN FOR ASSESSMENTS Sec. 207.121. DEFINITION. Defines "assessment." Sec. 207.122. ESTABLISHMENT OF LIEN. (a) Provides that, unless the restrictions prohibit a lien, an assessment levied by a property owners' association against property is a personal obligation of the lot owner and is secured by a continuing lien on the property and on rent and insurance proceeds received by the lot owner relating to the property. (b) Sets forth that if, on January 1, 2000, a lot is the homestead of the lot owner and is subject to restrictions that do not contain a valid assessment lien against the property, the lien provided by this subchapter does not attach against the property until the lot ceases to be the homestead of the person owning the lot on January 1, 2000. Sec. 207.123. PRIORITY OF LIEN. (a) Provides that, unless otherwise provided in the dedicatory instrument or restrictions, the lien of a property owners' association under this chapter for an assessment has priority over any other lien except for certain enumerated liens. (b) Provides that the priority of liens prescribed by Subsection (a) does not affect the priority of a lien recorded before January 1, 2000. Sec. 207.124. PERFECTION OF LIEN. Provides that a property owners' association's lien for assessments is perfected by the enactment of this chapter or by recording the restrictions if the restrictions are recorded before the enactment of this chapter. Provides that no other recording of a lien or notice of lien is required, unless the restrictions provide otherwise. Sec. 207.125. POWER OF SALE IF NONJUDICIAL FORECLOSURE IS PERMITTED. (a) Provides that a lot owner grants to the property owners' association a power of sale in connection with the association's lien under this subchapter, by acquiring property in a residential subdivision governed by a dedicatory instrument that expressly allows nonjudicial foreclosure. (b) Authorizes the association, by written resolution, to appoint an officer, agent, trustee, or attorney to exercise the power of sale on its behalf, if a dedicatory instrument of a property owners' association expressly allows nonjudicial foreclosure. Sec. 207.126. EXCHANGE OF INFORMATION. (a) Authorizes a holder of a lien recorded against the property to provide the association, at the association's request, information regarding the owner's debt secured by the holder's lien and other relevant information, if a lot owner is delinquent in paying an assessment to a property owners' association. Authorizes the association, at the request of a lienholder, to furnish the lienholder with information about the property and the property owner's obligations to the association. (b) Authorizes the association to notify other lienholders of the default and the association's intent to foreclose its lien, if a lot owner defaults in the owner's monetary obligations to the property owners' association. Requires the association to notify any holder of a recorded lien or perfected mechanic's lien against the property who has given the association a written request for notice of the property owner's default or the association's intent to foreclose. Sec. 207.127. FORECLOSURE OF LIEN. (a) Provides that a property owners' association has the right to foreclose its lien under a dedicatory instrument that was recorded at the time of the purchase of the lot by the property owner or under certain enumerated court orders (b) Provides that the association or its agent must send the owner written notice, by certified mail, return receipt requested, at the last known address as reflected in the association's records, before a property owners' association is authorized to institute foreclosure proceedings against an owner's lot. Authorizes the notice to be sent with any other notice related to the foreclosure proceeding. Provides that the notice must state that: _the owner is authorized to avoid the foreclosure by paying all amounts due before the time of foreclosure; _the owner is authorized to redeem the property before the 91st day after the date the association mails written notice of the sale to the owner under Section 207.128; _to redeem the property, the owner must pay all amounts due, which may be significantly more than the redemption costs before foreclosure as a result of the costs associated with foreclosure and deed transfers after foreclosure; _the owner is authorized within 10 days of receipt of the notice to request in writing a hearing before a board-appointed committee, or before the board if the board does not appoint a committee, to discuss and verify facts and resolve the matter in issue; and _if the owner requests a hearing and if the hearing is before a committee, the owner is authorized to appeal the committee's decision to the board by written notice delivered to the board not later than the 10th day after the date the owner receives notice of the committee's decision. (c) Authorizes an owner to request a hearing before the property owners' association is authorized to institute foreclosure proceedings. Provides that an owner who requests a hearing under Subsection (b) must submit the request in writing to the association representative designated in the notice by hand delivering the request or delivering the request by certified mail, return receipt requested, not later than the 10th day after the date the association delivers or deposits in the mail the notice to the owner under Subsection (b). Requires the association to hold the hearing not later than the 30th day after the date the board receives the owner's request for a hearing. Authorizes the owner and the association to make an audio recording of the meeting. Provides that an owner is not liable for attorney's fees incurred by the association relating to a matter described by the notice in Subsection (b) unless the hearing requested by the owner is held or attempted to be held in good faith by the association within the period described by this section. (d) Authorizes an owner or association to use alternative dispute resolution services. (e) Authorizes a party to the suit to file a motion to compel mediation, if a foreclosure suit is filed. (f) Provides that the association or its agent must send the owner written notice, by certified mail, return receipt requested, before a property owners' association is authorized to institute nonjudicial foreclosure proceedings against an owner's property, that contains a list of enumerated information related to foreclosure. (g) Authorizes the association to foreclose only in the manner the owner elects, if the lot owner notifies the property owners' association or its agent of an election of a foreclosure method under Subsection (f). Authorizes the association to foreclose in any manner available to it under Subsection (a), if notice of election is not provided by the owner in a timely manner. (h) Authorizes a lot owner to avoid foreclosure by paying all amounts due the property owners' association, including foreclosure-related costs incurred by the association, at any time before a foreclosure sale. Provides that an owner is not liable for attorney's fees incurred by the association relating to a foreclosure proceeding unless the hearing requested under Subsection (c) is held or attempted to be held in good faith by the association within the period prescribed by Subsection (c). (i) Authorizes the property owners' association to bid for and purchase the property at the foreclosure sale as a common expense. Authorizes the association to own, lease, encumber, exchange, sell, or convey the property, subject to Section 207.129. (j) Requires the association to refund the excess proceeds to the owner, if the foreclosure sales price exceeds the amount due to the property owners' association. (k) Prohibits a court from setting aside a sale on petition of a lot owner solely because the purchase price at the foreclosure sale is insufficient to fully satisfy the owner's debt. (l) Prohibits a property owners' association from foreclosing a lien for an assessment consisting solely of fines or attorney's fees associated solely with fines. (m) Provides that this section does not prevent an owner from filing an action to enjoin a wrongful foreclosure or an action for damages for wrongful foreclosure by a property owners' association. Sec. 207.128. NOTICE OF FORECLOSURE SALE. (a) Provides that a property owners' association that conducts a foreclosure sale under Section 207.127, must send to the lot owner, by certified mail, return receipt requested, written notice of the sale and of the property owner's right of redemption under Section 207.129 not later than the 30th day after the date of the foreclosure sale. Provides that the foreclosure sale is invalid, if a property owners' association fails to send the notice in a timely manner. (b) Provides that the notice must be sent by certified mail, return receipt requested, to the property owner's last known mailing address, as reflected in the records of the property owners' association. (c) Provides that the association must record an affidavit in the real property records of the county in which the lot is located, stating the date on which the notice was sent and containing a legal description of the lot, not later than the 30th day after the date the association sends the notice required by Subsection (a). Provides that any person is entitled to rely conclusively on the information contained in the recorded affidavit. Provides that the foreclosure is invalid, if the association records its foreclosure deed and fails to record an affidavit in compliance with this subsection. Sec. 207.129. RIGHT OF REDEMPTION AFTER FORECLOSURE. (a) Authorizes the owner of property in a residential subdivision to redeem the property from any purchaser at a sale foreclosing a property owners' association's assessment lien not later than the 90th day after the date the association mails written notice of the sale to the owner under Section 207.128. (b) Prohibits a person who purchases property at a sale foreclosing a property owners' association's assessment lien from transferring ownership of the property to a person other than a redeeming owner during the redemption period. (c) Provides that the owner must, to redeem property purchased by the property owners' association at foreclosure sale, pay to the association the enumerated costs related to foreclosure. (d) Provides that the owner, to redeem property purchased at the foreclosure sale by a person other than the property owners' association, must pay to the association certain amounts due, interest, costs incurred, and unpaid assessments related to foreclosure; and must pay to the person who purchased the property at the foreclosure sale any assessments levied, the purchase price paid, interest, and any reasonable cost incurred by the purchaser. (e) Requires the purchaser of the property at foreclosure to immediately execute and deliver to the owner a deed transferring the property to the redeeming property owner, if a lot owner redeems the property under this section. (f) Provides that if, before the expiration of the redemption period, the redeeming lot owner fails to record the deed from the foreclosing purchaser or fails to record an affidavit stating that the owner has redeemed the property, the owner's right of redemption as against a bona fide purchaser or lender for value expires after the redemption period. (g) Requires all rent and other income collected by the association, if the property owners' association purchases the property at foreclosure, from the date of the foreclosure sale to the date of redemption to be credited toward the amount owed the association under Subsection (c), and if there are excess proceeds, they are required to be refunded to the owner. Requires all rent and other income collected by the purchaser, if a person other than the association purchases the property at foreclosure, from the date of the foreclosure sale to the date of redemption to be credited toward the amount owed the purchaser under Subsection (d), and if there are excess proceeds, those proceeds shall be refunded to the owner. (h) Requires the purchaser to obtain an affidavit from the association or its authorized agent stating that all amounts owed the association under Subsection (d) have been paid, if a person other than the property owners' association is the purchaser at the foreclosure sale, before executing a deed transferring the property to the redeeming owner. Requires the association to provide the purchaser with the affidavit not later than the 10th day after the date the association receives all amounts owed to the association under Subsection (d). Provides that failure of a purchaser to comply with this subsection does not affect the validity of a redemption by a redeeming owner. (i) Provides that the property that is redeemed remains subject to all liens and encumbrances on the property before foreclosure. Provides that any lease entered into by the purchaser of property at a sale foreclosing an assessment lien of a property owners' association is subject to the right of redemption provided by this section and the owner's right to reoccupy the property immediately after the redemption. (j) Requires the association to refund any partial payments to the property owner by mailing payment to the owner's last known address as shown in the association's records not later than the 30th day after the expiration date of the redemption period, if a lot owner makes partial payment of amounts due to the association at any time before the redemption period expires but fails to pay all amounts necessary to redeem the lot before the redemption period expires. Sec. 207.130. REMEDIES FOR VIOLATIONS. (a) Authorizes the owner to seek the enumerated list of legal actions, if a property owners' association fails to furnish a resale certificate requested by an owner under Section 207.091 within the time period prescribed by Section 207.092, or if the association fails to furnish the documents requested by the owner under Section 207.066(b) within the period required by Section 207.066(c), or if the board knowingly continues to violate an open meetings requirement of Section 207.064 after the notice prescribed by Section 207.064(h) has been given to the board. (b) Provides that a property owners' association is liable to an owner for a civil penalty of not more than $1,000 if the association in bad faith files a suit against an owner. (c) Authorizes a property owners' association or a lot owner who is adversely affected by a violation of the dedicatory instruments by the association's board or another owner to seek judicial enforcement of the dedicatory instruments. (d) Authorizes the attorney general to file a suit to enforce this chapter on behalf of the owner. (e) Provides that this chapter does not prohibit a property owners' association or a lot owner from exercising other remedies provided by law. Sec. 207.131. EFFECT OF TAX LIEN FORECLOSURE. Provides that foreclosure of a tax lien under Chapter 32 (Tax Liens and Personal Liability), Tax Code, does not discharge a property owners' association's lien for an assessment under this subchapter or under a dedicatory instrument or restrictions for amounts that become due to the association after the date of foreclosure of the tax lien. SECTION 2. (a) Effective date: January 1, 2000, except that Section 207.069 (Board Member Education), Property Code, as added by this Act, takes effect July 1, 2000. (b) Makes application of Subchapter E, relating to property owners' associations liens for assessments, as added by this Act, prospective. (c) Requires the attorney general to approve videotapes and classes as provided by Section 207.069, Property Code, as added by this Act, on or before July 1, 2000. SECTION 3. Emergency clause.