Condos: 2015 Legislative Update

The 84^th Texas Legislature made multiple changes to the laws affecting property owners associations.  The majority of the changes impact single family HOAs, but one important change was made to Chapter 82 of the Texas Property Code, or the Texas Uniform Condominium Act (“TUCA”).  Section 82.119 takes effect on September 1, 2015, and represents a major change to construction defect litigation.

 
The new section, entitled Construction Defect Litigation, requires the condo board to take specific steps prior to initiating a lawsuit for construction or design defects of units or common elements.  Specifically, the condo board must obtain an inspection and report from an independent, licensed professional engineer.  Another important aspect is that the condo board must notify all parties that may be subject to a claim that an inspection will be taking place.  The potential parties must be given at least 10 days’ notice, and must be permitted to attend the inspection.  The report must identify the location of the defect, describe the current physical condition, and describe any modifications undertaken by the Association or the homeowners. 

Upon completion, the inspection report must be provided to each party potentially subject to a claim.  To the extent that defects are found, the statute provides for a cure period, allowing the developer, contractor, or subcontractor the opportunity to remedy the defect.

As if the foregoing hurdles were not enough to protect the developers, the condominium board must obtain approval of at least 50% of the total votes in the Association prior to filing suit or initiating an arbitration proceeding.  

I have long recommended that homeowner boards undertake an engineering inspection upon turnover.  This inspection is sometimes referred to as a “turnover inspection”.  This seems especially important given the new requirements of section 82.119.

Legislative Update: Let's Talk About Xeriscaping...

Now that the session of the 83rd Texas Legislature has come to a close, I have begun looking at the various bills that were passed effecting Texas Homeowners' Associations.  During the length of the regular session, approximately 55 bills related to HOAs were introduced.  I will look at a number of the bills that were passed, starting with a bill related to xeriscaping.

First we should discuss what, exactly, is xeriscaping.  Xeriscaping is a style of landscape design that requires little or no irrigation.  The style is frequently found in arid regions.  Xeriscaping is designed to conserve water and protect the environment.  In Texas, this usually means pebbled ground cover, drought-resistant and native plants, and other water-conserving natural turf.

The new law, which was proposed by Sen. Kirk Watson and Rep. Dawnna Dukes of Austin, mandates that Texas homeowners can now xeriscape their properties without being scrutinized by their homeowners association.  HOAs are still permitted to require preliminary plan approval of new xeriscaping plans, but the Association's ability to reject plans including xeriscaping is limited.

Working with an HOA/COA Lawyer Part III: Budgets and Boundaries

This is the final entry of the "Working with an HOA Lawyer" series.  You can find the previous entries in the series in Part I and Part II

Budgets: The Downside of OPM

One of the more difficult tasks as a home owner association or condo owner association board member is to decide priorities and budgets.  You are, after all, spending not just your own dues, but you are also spending dues of non-board members who are represented by the Board but are not themselves often entitled to vote on priorities.  So the issue can be difficult, since you are at times deciding between your own personal priorities and the slightly different priorities of your neighbors.  Obviously listening to the members is important, and very often priorities can be aligned if rationale and reasoning can be communicated.  But sometimes complete disclosure is not possible, particularly in the legal realm.  This can get very tricky, and is the reason why legal budgets are some of the most misunderstood of the building expenses.

In deciding on a legal budget, many properties, to their peril, often only budget what they paid last year, and very often those budgets only include some very minor funds for collection efforts on dues and the occasional declaration/policy enforcement.  In other words, they rarely, if ever, budget for every day dialogue with counsel.  This is a mistake.

When making a legal budget, prudent boards budget for contingencies, and think about legal issues in their reserve planning.  What would your budget look like if there were a major common area construction defect?  What would your legal budget be for advice to avoid problems with consistent and problematic residents?  How would your property afford a lawyer to review your governing documents and to assist to make sure changes to the declaration and/or policies are done correctly and would be supportable under TUCA and survive challenge by a resident?

Now it is admittedly easier to budget for maintenance expenses on a pool, or to build a gazebo, these are things the residents see being completed.  But legal is often spent for the Board to get advice, make sure the Board is doing things correctly, and to make sure the governing documents are structured in accordance with the property's priorities and to increase value.  But good legal advice from experienced counsel familiar with these laws is not inexpensive. But budgets should reflect an understanding that as Board's act, they need to be free to consult the Board's lawyer freely to ensure that bigger issues are avoided.  This is basically "an ounce of prevention is much less expensive than a pound of cure." Lawyers can help avoid future expenses, or repeating the problem if you do it wrong.  Budget for your Board to spend some time with lawyers several times a year and you'll likely avoid bigger issues down the road.  It is tough for your residents to see that value, but it is most certainly there if you choose counsel wisely.

Boundaries: Whose Lawyer Are You?

For many HOA and Condo Association Board Members, they're residents and not necessarily people used to dealing every day with lawyers.  This is one of the reasons we wrote this series.  But one of the biggest issues a lawyer has to deal with, that is often misunderstood by Board Members, is the concept of representation.

Typically, and technically, the lawyer for a property owner's association does not represent the individual members of the board, the developer or the individual owners of the membership interests.  They also don't represent the property management company.  The lawyer for the owners' association represent the association itself.  The owners association, typically a non-profit, will be controlled by a Board and those Board members are typically elected by the membership interest owners (usually in an annual meeting).

Unlike most professional services (realtors, CPA's, business brokers), a lawyer has to be clear as to whom he or she represents.  The concept is foreign to most clients, but it is a very dicey thing for a lawyer to navigate, particularly when corporations are involved.  Corporations have their own distinct interests, apart from their individual owners and apart from their officers and directors.  While it is true that corporations can only act through humans, those humans are seen collectively and not individually.

For example, what may be best for an owners' association is to build a walking trail through the neighborhood.  It will increase amenities, will likely increase property values, and generally show the association's money is going to something all could potentially enjoy.  But it is an expenditure of money, and it has to be adjacent to someone's lawn somewhere.  So individual members of the association (as well as different Board members) may be for or against it for a variety of reasons ("I don't want screaming strollers rolling near my back yard", "I'm 95 years old and I won't be able to use it", "I live too far away from the entrances, it's not worth the money", "This is great! My property is next door and my kids will love it!").  So when the Board asks whether they need to change the declaration to accomplish the goal, it is very important to know that the advice given is from the perspective of the Association as a whole, and not anyone who is "for" or "against" the building of the trail.  Therefore, it is not appropriate for the Board president to say to their association lawyer, "keep this from Hannah, but we're going to build this anyway", or "let's find a way to draft the language so that it goes by my property".  The lawyer represents the interests of the entire association, not the individual membership or Board members, so its directives need to come from the entire Board.  So when the lawyer tells the president in this situation "no", he or she is merely doing their job.

Very frequently the board members individually will ask advice of the lawyer on their own dealings with the association.  And although a lawyer could provide answers generally, and can state the opinion that he or she would provide to the Board on the topic, everyone should know that the association lawyer does not represent that person individually, cannot keep information confidential from the Board, and cannot represent the individual with a dispute with the association.

In other words, don't ask the association's lawyer anything that you wouldn't want the entire Board to know about.  And if you have disputes with the association, you will need your own lawyer that represents only you to deal with those issues.  Sure it may be convenient for you to discuss with a lawyer that is already familiar, but it is not recommended due to the duties that lawyer has to the association.  This is the nature of "conflicts of interest" and is unfortunately the way the Texas bar has developed.  It may not be logical for seven lawyers to be involved in the discussion, but Texas law and its licensing board often require this duplication to make sure everyone has someone representing only their interests.

Now do all lawyers draw the line in the same place? No, and it is pretty tricky to navigate with constantly changing issues and board members.  But a prudent board of directors for an owners' association that knows what is appropriate to discuss and what is not will make the lawyer's job a lot easier.  No lawyer likes to decline providing help, but sometimes it is the requirement of the position.

Working with an HOA Lawyer Part II: Duties and Responsibilities

Coordinating with a Texas HOA/COA lawyer can be tricky.  Keeping costs down is a great goal, but board members often forget that they also have a duty to the members to make sure that things are done correctly, and that costs are not always smaller by ignoring the issue or having cheaper labor do the work. You often would not select the lowest bidder to do your open heart surgery, nor would you want a hospital administrator to do it either.  You similarly should let professionals in the legal arena do the legal work.

What is the difference between the duties of a board member, a lawyer and a property manager on a legal issue? 

The best way to ensure everyone knows their duties is to actually think about this question.  In the legal arena, not unlike any area of maintenance and system design, the best solution is to talk with the legal team about how they believe the duties should be allocated.  If you've hired a law firm with experience in advising in matters of property management, it should come as no surprise that perhaps they've seen duty allocations that work and those that don't.  Relying on that experience for a proposal is a great way to get the issues out in the open.  It should also be reviewed periodically, particularly if there is new property management, a new board or new legal counsel hired.

Specifically, though, the board members, the property manager and the lawyer all have different jobs to do, and some of this depends on the size of the operation.  Large condominiums in downtown areas will often simply have more legal needs than fewer single family units with little or no amenities.  The duties also vary based on the tasks and the risks.  The more likely the action is to be challenged by a member, the more likely you'll need everyone to be in on the discussion of duty allocation to avoid unintended consequences.

Duties of the Board

For the most part, board members should be similar to a board of directors, understanding the big picture, having a feel for the members' wills and desires, watching the finances, thinking long term.  They should be involved in the decision of what law firms and professionals to hire, since the law firm represents the Association and not the property manager or management company.

Duties of Property Management/Management Company v. Lawyers

Depending on the issue, typically the property manager should usually be administrators,  a messenger and facilitator.  Think hospital administrator and not surgeon.  They make sure people get paid, that messages get sent, that invoices are correct, that information is disseminated to the right people, assist in the administrative process, assist in enforcement of decisions, help maintain records, and ensure that meetings are properly scheduled and organized.

But property managers should not be the ones performing the "surgery".  Inexperience by board members (and property managers), and the desire to cut short term costs, often leads to property managers being asked by board members to perform tasks that they are ill equipped to handle.  Property managers are good at administration, but they are not trained as litigators, they don't know what decisions are and are not legally consequential, or whether procedures and decisions are subject to legal challenge.  The number of times a "small change to the documents", or a "quick letter to a resident about a dispute" has turned into thousand of dollars added in litigation has happened more times than many organizations like to admit. 

That said, your lawyers are not your property managers.  It is inefficient to have lawyers attend every board or member meeting that discusses purely private issues (like priority of location of landscaping, or whether money should be used to re-carpet the foyer).  It is equally not cost effective to have them approve every minor communication with members.  But they are still the professionals you're hiring to make sure your long term obligations to the members are appropriate exercised, and that decisions made will be binding and not futile wastes of time.   It should be a bright line rule in your community, particularly if the budgets are large, that all issues relating to a contractual agreement or litigation process (like assessment, foreclosure, settlement, contract negotiation/execution and contract disputes) should be communicated to the lawyer with the lawyer likely running "point".  All issues related to any establishment of new rules or change to the governing documents should be discussed and approved by counsel (if not drafted by them), well in advance of any voting or planned voting of same.  And any questions about procedure or interpretation of existing rules should be discussed with counsel.  There are more, but these are the biggies. 

But basically, board members take the temperature of the members, think strategically and long term, determine goals, and hire the implementers. Property managers assist in communication, implementation, coordination of the execution of the goals. The lawyers help assess the goals from a legal and risk framework, draft or review documents used to implement the goals, and control the legal strategy based on the "business" parameters set by the board.  And if in doubt as to whether the lawyer should be involved, ask them.  And if you don't trust them to ask, find another lawyer.


How should communication with the lawyer be handled?


This is different for different sized associations, and largely depends on the issues involved.   Typically the owners association, for time and convenience, treat lawyers like just another subcontractor being managed by the property manager.  While it is helpful to have property management often involved in decisions and strategy sessions, for a number of reasons treating lawyers like a subcontractor of the property manager is not advisable as a general rule.

One issue involves privilege protection and its potential waiver.  In Owner Associations, the privilege is "owned" by the Association, which means that discussions with lawyers and legal strategy decisions and its protection as privileged communications cannot be intentionally waived by a single board member (unless they are so authorized by a vote of the board).  But the further away the lawyer's communication is with the Association, and the more people not directly involved are included, the less likely the discussions will be privileged from discovery.  This can be a big deal in litigation.

In Texas, the legal communication privilege includes communications with contracted professionals that are not employees, but it is tenuous and can be waived, particularly if the communications are not with on-site management.  This is a complicated area, so lawyers should be consulted for your specific situation, but the safest route of communication to maintain privilege of the legal discussion with legal counsel is one in which the board at a meeting discusses it directly with counsel or sends the information directly to counsel without a go between. 


That being said, not every issue involves a large concern over privilege.  The more frequent concern of having a property manager solely control communications between the lawyer and the board is having the legal issue or solution miscommunicated (in either direction).  Just like a game of "telephone", as the message gets transmitted, it can get altered based on the understanding of the persons in the middle.  Wherever possible, if it is an issue that might involve a lawyer, it is often important enough to convey the instructions directly, and hear the response directly.  If entire attendance at a meeting with a lawyer is not possible/practical, we often suggest that an owner association have a primary point of contact as a "legal liaison".  This is typically the board president, but it does not have to be so.  For example, there are instances where lawyer/owners sit on an owner association board as a director, and they may be better able to transmit the instructions and serve as "translator" for non-lawyer members of the board.  Similar to having someone who understands building maintenance or "numbers" run those committees.

This is not to say that the property manager being involved, say, in the implementation of a new rule passed by the board, or scheduling/organizing the meeting to approve, may be very helpful and advisable.  There are many instances that property management may have information only known because they manage the property and talked to the residents, so this is properly a case-by-case discussion.


But the main point is that your association is paying for the experience, expertise and advice of a lawyer, as a board member you should have the opportunity (and may have the duty/obligation to the members) to hear that advice directly, have your questions answered in real time (to reduce costs), and maintain the privileged nature of those communications as much as possible to minimize the loss of privilege or the likelihood that the legal advice is miscommunicated / the parameters set by the board are miscommunicated to the lawyer.  And that means direct interaction between the board and the lawyer as much as possible.

City of Austin Regulates Short Term Rentals

In early August of 2012, Austin City Council voted 5-2 to pass a new city code regulating short-term rentals (STRs). Under the new ordinance, short-term rentals are defined as any rental term of 30 days or less. The ordinance further breaks STRs into two categories.

 

 

The first category includes only those residential units that are owner-occupied. Under the new ordinance, these owner-occupied units may not operate without first obtaining a license. These units must be rented out in their entirety, with the lease covering the entire dwelling unit. As was true before the new ordinance, hotel occupancy taxes must be paid on these STRs. Finally, these owner-occupied STRs cannot operate without providing the tenants with certain information including the following: (1) name and contact information for a local responsible party;(2)occupancy limits; (3) noise restrictions; (4) parking restrictions; (5) trash collection schedule; and (6) information on burn bans and water restrictions.

 

 

The second category includes STRs of properties that are NOT owner-occupied. This second category of STRs is subject to all of the same regulations as the first, with one notable addition. No more than 3% of single-family homes in any given census tract may be granted licenses to operate as a "Type 2" STR.

Working with an HOA Lawyer Part I: The Hiring Process (Austin Lawyer Tip)

Finding the right lawyer for your Texas owners' association is not always the easiest task, particularly for volunteer Board Members that have little experience with property management.  This post is an attempt to provide a framework, from a lawyer's perspective, of what a board of directors or members should be looking for in an HOA lawyer.

The Lawyer and Areas of Practice

It is important to note, at the outset, that lawyers are not all the same.  The concept of the general practice lawyer that knows everything about every law passed is more of a TV myth than reality.  We've all seen LA Law episodes where the same lawyers handle criminal trials, civil trials, large transactions and divorces.  This is fiction.

Typically, lawyers find core competencies.  These are largely (and roughly) divided between transactional lawyers (who may form businesses, review contracts, advise on business transactions, review real estate title documents, etc.), or litigation lawyers (those that go to court, file lawsuits, advise on disputes or potential disputes).  Some lawyers do both, to be sure, but going to court or not going to court seems to be a dividing line most of the time.

Beyond the court/no court distinction, lawyers also usually gravitate towards "areas of practice".  These are the topic areas, within litigation or transactions, that the lawyer learns at a larger level of detail to attract its clients to their services.  These are things like personal injury, or divorce/family law, or, relevant to you, owners association management.

So in selecting a lawyer, don't just go to any lawyer that advertises.  Understand that there are lawyers that have read the codes and laws related to owners associations, have represented properties in the past, have found solutions to problems similar to yours in the past, and they will have much less error rates than lawyers unfamiliar with the HOA practice area.

So ask questions like, "what other properties do you represent?" or "how often have you dealt with property management issues?" or "are you familiar with the laws associated with property owners associations?"

The HOA Lawyer and Fees

It is not uncommon for this to be the biggest issue on the minds of the members of the Board.  "How much is this going to cost?"

The unfortunate thing about lawyers and fees are that to gain this kind of core competency requires years of schooling, training, practice, repetition and risk.  So working with lawyers is not always inexpensive, depending on the tasks involved.

So what is a reasonable fee?  This will vary greatly based on the level of expertise of the attorney, experience level, the complexity of the legal issue, the level of adversarial relationships involved (it's always expensive to deal with "the crazy neighbor") and responsiveness level that you anticipate.  So, in some ways, you're setting your own reasonableness level to some degree, and sometimes this is set for you by outside forces outside of your control.

Typically lawyers charge for "unknown and uncontrollable" legal issues on an hourly rate.  Although the temptation for an HOA is to contain costs through flat rates, the best firms rarely limit themselves before they analyze the issues involved.  Law firms are still businesses, with overhead, employees, malpractice insurance, general insurance, and office/storage space (and sometimes student loan debt) like other professional services. And their time is their "product inventory".  If they spend all their time working on an issue for you and they aren't compensated for that additional time, they never get that time back to sell to someone else.

So, unless it is a largely administrative task, typically a law firm will want to bill hourly for its efforts.  You will notice that partners are usually billed at higher rates, and associates are billed at lower rates.  When you are having a lawyer work on your file, and you believe it to be a simple or repetitive task, you should probably inquire as to whether an associate can handle your work rather than paying partner rates for these tasks.  Good law firms will typically have more than one lawyer familiar with your organization, governing documents and goals for this very reason. It is not a "slap in the face" for an associate to be working on your cases.  Very often this is a way to make the work more cost effective.

So what are acts done for flat fees?  These are usually things like standard collection letters, filing notices of non-payment of assessments, sending out letters of violations from a form.  But advice on amending your declaration, or handing litigation and disputes are usually not susceptible to flat fees due to the uncertainty of the time commitments before the fact.

Prepared by Austin Attorney Marc Lippincott

Austin Attorney Tip: Working With an HOA Lawyer as a Board Member

When becoming a Board Member of a property association or neighborhood association, most members are volunteers that have never had a similar position before.  This can be a challenging endeavor, particularly since it is an unpaid position (not providing most folks with the time to learn sophisticated property management skills).

Over the next few weeks, LPV will be posting a series of blog entries describing how to work with an HOA lawyer in Texas from a lawyer's point of view.  Understand this is for Board Members and property managers, not a statement of how an individual with a complaint about their HOA should hire a lawyer.  That will be a different series.

This Board Member "Working with an HOA Lawyer" series will be divided into several topic areas, including (but not limited to) attempts at answering the following questions:

1. What lawyer or type of lawyer should our association retain?
2. What practice areas will we likely need to have a lawyer for a neighborhood association?
3. What are reasonable fees and charges for an HOA lawyer?
4. What is the difference between the duties of a board member, a lawyer and a property manager?
5. How should communication with the lawyer be handled?
6. Who should make legal decisions?
7. Should our lawyer attend meetings of the members?
8. Should I ask the HOA lawyer about my personal legal issues?
9. What should I expect for responsiveness of counsel?
10. How should our legal budget be set, and what should it include?


If you have additional question about how to work with a property owners' association lawyer, feel free to post it in comments.

Posted by Austin Attorney Marc Lippincott

Texas Requires All Governing Documents Be Recorded!

As has been widely discussed over the past year, the 82nd Texas Legislature made many changes to the laws affecting property owners' associations (including condominiums and single-family residential HOAs). Perhaps the most important legislative mandate from this session deals with how associations must disseminate their governing documents.

Prior to January 1, 2012, it was required that a property owners association provide copies of any informative documents regarding membership in the association. Additionally, owners must be provided with documents such as the property's Declaration, any Restrictions, Bylaws, Rules and Regulations, and any other documents that help govern the establishment, maintenance, or operation of any property under the association's control.

New Texas legislation requires that all governing documents be recorded with the relevant County's Real Property Records. Pursuant to Texas Property Code Section 202.006, any governing document that is not recorded with the appropriate county by January 1, 2012 will have no force or effect. If you are a property manager or board member, this means that you should check on whether your documents have been appropriately recorded.

New Changes in Texas POA Legislation - Solar Panels

The 82nd Texas Legislature made many changes to the laws affecting property owners’ associations (“POAs” or “Associations”). One such change relates to an individual owner's right to install solar panels on their home in Texas.

Pursuant to Texas Property Code Section 202.010, Property Owners Associations cannot prohibit or restrict an owner from installing a solar energy device onto their property. If such provisions are included within an Association’s bylaws, then those provisions will be considered legally void. There are, however, exceptions to this rule. In those instances, an Association can restrict or prohibit an owner from installing solar panels onto their property if it threatens the public health or safety, violates a law, is not properly installed onto the roof, or it was installed without prior approval from the Association or an affiliated committee.

Posted by Austin Attorney Chloe Love

What Happens to Tenants in Texas When a Property is Sold at Foreclosure Auction?

The Protecting Tenants at Foreclosure Act of 2009 (“PTFA”) is a section of what is popularly called the Helping Families Save their Homes Act of 2009. Specifically, PTFA ensures that tenants who are losing their residence to foreclosure will have a sufficient period of time before being forced to leave their home. If the tenant is living at their home either without a lease or with a lease terminable at will, the immediate successor in interest (the person or entity taking over the property post-foreclosure) must give the tenant at least 90 days notice to vacate the property. If the tenant does have a bona fide lease, the immediate successor in interest must recognize the terms of the original lease. In this case, the tenant cannot be forced out of the property until the original lease expires. If the purchaser is going to use the property as his primary residence, however, the lease can be terminated with a 90-day notice period. These notice periods are designed to be the federal minimum, so they do not trump state laws that provide more time for tenants to vacate the property.


This could affect both Texas property owners associations and Texas property owners in undesirable ways. Most of the time, if there is a property owners association in place, the tenant is going to have a bona fide lease because the POA is generally not going to allow residential leases without written agreement. As a result, it is going to be difficult for the Texas POA to remove a tenant when an owner is not paying his POA dues. Even if foreclosure on the property occurs, it will, at a minimum, be three months before the tenant can be removed. This could mean that the POA will have to go even longer without receiving dues from one of the properties it governs. The Protecting Tenants at Foreclosure Act of 2009 is scheduled to sunset on December 31, 2012.

Amending a Texas Condominium’s Declaration

The procedure for adopting changes to a Texas condominium’s declaration differs depending on the year the condominium’s declaration was recorded. Chapter 81 of the Texas Property Code governs if the declaration was recorded before January 1st of 1994, at which point Texas adopted the Uniform Condominium Act. For properties that recorded their declarations before this Act was adopted, the process for amending the condominium’s declaration is simpler. Section 81.111 states that any amendments to a declaration that was previously recorded with the county clerk must be made at an “apartment owners” meeting. (Under Chapter 81, “apartment” means an enclosed space within a building that has direct exit to a thoroughfare or common space. Today the same parcels of a building would typically be called “condominiums” or “units”.) The amendment needs to be supported by at least 67% of the ownership interest in the condominium.


Chapter 82 of the Texas Property Code, which is the Texas Uniform Condominium Act (“TUCA”), is applicable to any condominium that recorded its declaration with the county clear after January 1st of 1994. According to § 82.002, it also applies if a condominium that recorded its declaration before January 1st of 1994 either puts a provision in its declaration saying that this Act would apply when adopted or if its declaration is amended to say that this Act will apply.


The process to amend a declaration is more involved under Chapter 82. According to § 82.067, support of 67% of the ownership interest is still required, but the amendment can be adopted by written ballot or an owner’s meeting that all owners have been informed of in writing. If an amendment is adopted, it must be recorded in every county where part of the condominium sits.


Section 82.067 also specifies certain amendments that require 100% of the votes. These amendments include, but are not limited to, changing special declarant rights, increasing the number of units, and changing unit use restrictions. Even with 100% owner support, an amendment may not increase or otherwise modify the obligations or rights of a declarant without the declarant’s agreement.


The association’s board must further designate an officer to prepare, execute, record, and certify any amendments made. If the board does not do so, the president of the association may take on the role of officer. The declaration can be amended by the association to allow the board to evict a tenant for not following the association rules, for not paying for damage he caused to the condominium, or for being at least 60 days delinquent on rent payments.


While the Texas Property Code sets specific requirements for amending a condominium’s declaration, it is important to remember that these are not the only rules governing such amendments. Condominiums can place different rules or procedures directly into the declaration itself. If this is the case, the rules set out in the declaration are valid unless they are in direct conflict with the language of the Texas Property Code.


***This article was prepared by Rachel Robinson and edited by Austin Attorney Chloe Love.

Texas Laws Governing Condo Associations

Although condominium associations in Texas are private entities governing developments, this does not mean that they are outside the reach of public law. Of the many rules and regulations that condominium associations must abide by, federal law is the strongest. Regardless of their status as a private entity, associations may not do anything that goes against a federal law, and as federal law changes, so must the practices of condominium associations. All condominium associations must respect laws like the Helping Families Save their Homes Act of 2009, the Fair Housing Act, and the Americans with Disabilities Act.

The next set of governing restrictions comes from Texas state law. Just as Texas associations must abide by federal law, associations cannot take any action that is outside the realm of what is allowed by Texas law. The Texas Property Code, with acts like the Uniform Condominium Act, can directly control what actions condominium associations are allowed to take. Finally, condominium associations are governed by the local ordinances, codes, and regulations of the city or county in which they are located. This means that what is legal is Austin may not be legal in Houston. Because the associations are governed by these laws, it is important that property owners boards stay familiar with the current laws and how they are changing.

Texas Condominium associations are also governed by any documents relating to the property that are properly adopted and recorded with the county real property records. The recorded documents that govern are usually created by the individual developments. These typically include the recorded declarations, CC&R’s, articles of incorporation, and bylaws – in order of superiority. The bylaws must be in line with the articles of incorporation, which must be in line with the declaration, for example. The key to this is that the document that created the development, whether that be a declaration or a CC&R, will always rule (as long as it is within the legal limits set out by public law). These documents created by the developments are recorded with the county and treated as official legal documents, and the condominium associations must give them that level of reverence.

The final, and weakest, governing power on condominium associations are the policies and practices of the condominium association board. When the board makes a rule or implements a policy, it must be respected as long as it complies with all public law and recorded documents.

***This article was prepared by Rachel Robinson and edited by Austin Lawyer Chloe Love.

TUCA: Where do liens come from?

Amongst condo-dwellers and their property management (to a lesser extent, single family home-owners subject to an owners’ association), I frequently hear the phrase, “Let’s just file a lien.” This is often mentioned when an owner and member of the association has failed to make timely payment of their regular monthly assessments. However, “filing a lien” is not really an accurate statement of how the Association should perfect it’s interest in the property.

Under the Texas Uniform Condominium Act (“TUCA”), which applies to all condos in the State of Texas that were formed on or after January 1, 1994, the Association already has a lien against delinquent owners, without the need of any filing. TUCA Section 82.113 provides that an assessment levied by an association against a unit or unit owner is a personal obligation of the unit owner and is secured by a continuing lien on the unit and on rents and insurance proceeds received by the unit owner and relating to the owner’s unit. Emphasis added.
Furthermore, the association’s lien has priority over many other types of liens. Typically, the governing documents for your condominium will echo the statement from §82.113 of TUCA, further stating that a continuing lien in favor of the association exists whenever an owner is delinquent in payment of his/her assessments.

Usually, once I provide this explanation, condo board members follow up with a very good question, “If the lien already exists, why are we filing anything in the real property records?” The answer to that question is simply one of logistics. For sake of explanation, let’s say Bad Neighbor owes the Association $10,000 in past due assessments. Let’s further assume that Bad Neighbor has indicated that he has no intention of ever paying his assessments, because he disagrees with the management decisions that have been made by the Board. If Bad Neighbor then chooses to sell his unit to Innocent Purchaser, there would be nothing to indicate to the innocent purchaser that there are any current amounts owed to the Association. However, if the Association has chosen to file a “Notice of Lien” in the real property records, potential purchasers and title companies will be able to see that Bad Neighbor owes money to the Association. Typically, a title company will require that all liens be cleared before they will issue title insurance, which will likely result in the Association being paid. Therefore, filing a Notice of Lien may just be the lowest-cost method of collection past due assessments. (However, beware of first lien holder foreclosures, as has been discussed previously in this blog)

When might foreclosure of an Texas assessment lien prove useful?

The statutory superiority of the liens under 82.113(b) of Texas Uniform Condominium Act (particularly with regard to first deed of trust liens), significantly takes away from the usefulness of foreclosing on the assessment lien. The thought of the Association acquiring the foreclosed-upon unit also presents significant downsides. Should the Association acquire the Unit in foreclosure, it will then be responsible for paying any tax liabilities, including any that were outstanding at the time of the foreclosure. Additionally, if the Association were to acquire the foreclosed-upon unit subject-to a superior mortgage lien, it will then be “on the hook” for the mortgage’s obligations, including the monthly mortgage payment, and any outstanding payments on the mortgage. If a unit owner is delinquent on their assessments to the Condominium Association, it is a very real possibility that they are also in default on their taxes associated with the unit, as well as on their mortgage.

With those significant detractors, a Condominium Association might be left wondering if there is ever a time where foreclosing upon an assessment lien is useful. However, there are still some situations where foreclosing on the assessment lien can still be worthwhile and valuable tool.

Most obvious is where no first vendor’s lien or first deed of trust lien exists to take superiority over the assessment lien; for example where the unit was acquired with cash, or where the mortgage was acquired, but the mortgagee bank failed to timely file their lien.
It is also worth noting that it is difficult to predict what a property will fetch at sale, and the Association might find a favorable price at auction, and then be able to turn around and market the property again at a price that will more than make up for the outstanding obligations it might have acquired with the unit in foreclosure.

Foreclosure of the assessment lien might also be beneficial not in the collection of unpaid assessments, but with an eye towards ensuring that future assessments are paid. Generally, when a unit has a first-mortgage lien on it, and that unit owner has not paid their assessments, the owner likely is also behind on their mortgage payments, and that mortgagee bank therefore would “take the lead” in seeking foreclosure with their own interests in mind. However, a situation might arise where the unit owner is just barely “scraping by”, and is able to pay their mortgage, but yet cannot (or is unwilling to) pay their assessments. In such a situation it might be beneficial for the Association to “cut their losses”, and usher in a new unit owner through foreclosure that is able to pay those assessments going forward. Should the Association decide to buy the property at sale, the Association would take the unit subject to the first mortgage lien (and its resultant payment obligations month-to-month until the unit is resold), and would not obtain satisfaction of the delinquent assessments, but would hopefully have a new owner in place willing and able to pay the assessments.

Another situation where foreclosure of the assessment lien might be favorable is where the mortgagee bank is unwilling to foreclose, despite the unit owner’s failure to pay on the mortgage, and that unit owner has habitually failed to pay their assessments. Though rare, such a situation might arise (and recently has arisen more often) where the value of the property has greatly diminished since the acquisition of the mortgage, and where interest rates have significantly fallen since the acquisition of the mortgage. In other words, where the homeowner is “underwater”, or “upside down” on their mortgage. If the unit owner is still able to make some payment on the mortgage and/or if they perceive the unit owner as eventually being able to pay the mortgage in the future, it might make more sense from the bank’s perspective to bet on the homeowner paying down the valuable and higher-interest mortgage long-term, then to take on a property now worth significantly less, with a resultant new mortgage that will be worth significantly less (especially given lower interest rates in the wake of the recession). In that instance, by foreclosing on the assessment lien, the Association would either have a new owner hopefully able and willing to pay assessments, or by seeking foreclosure, the mortgagee bank may even step in and pay the back-assessments to keep the unit out of foreclosure, and then seek collection of those amounts out of the mortgagor unit owner.

Overall, while the assessment lien arguably may be more “bark” than “bite”, there are still circumstances where it can still be a useful tool, and a Condominium Association should not rule out turning to foreclosure when the situation is right.

Priority of Texas Assessment Liens

Other than the time, cost and effort required in pursuing foreclosure of the assessment lien, the Texas Uniform Condominium Act, or, TUCA, further limits its usefulness, by statutorily recognizing certain types of liens that are superior to the Texas assessment lien, and therefore are not extinguished by an assessment lien foreclosure. Any Texas condominium unit taken at foreclosure will be taken subject-to any superior liens.

Section 82.113(b) outlines four types of liens that are superior to the assessment lien. As one might expect, liens for property taxes and other governmental assessments are superior to assessment liens related to the Condominium Association, as are liens recorded prior to the filing of the Declaration for the Condominium Association in the real property records.

Most notable of the statutorily superior liens though regards first deed of trust liens, commonly known as mortgages. Pursuant to Texas Property Code Section 82.113(b)(3), an assessment lien is inferior and subordinate to “a first vendor’s lien or first deed of trust lien recorded before the date upon which the assessment sought to be enforced becomes delinquent under the declaration, bylaws, or rules.” So while the process for perfecting a lien under TUCA is essentially effortless and trouble-free, and further relates back to the date of filing of the Declaration (thereby establishing a priority position with respect to subsequent liens), unfortunately, the assessment lien would be inferior to the extent that the underlying assessments became delinquent subsequent to the recordation of the first mortgage lien in the real property records. Given that most unit owners will acquire a unit only through the acquisition of a mortgage, unless a mortgagee fails to properly protect their interests through timely recordation of their lien, delinquent assessments will only arise after the mortgagee (typically a bank or credit union) has already secured their “place-in-line”, and established superiority over the assessment lien.

Interestingly, the “uniform act” upon which TUCA is modeled, created by the National Conference of Commissioners on Uniform State Laws, contained provisions allowing for up to six-months worth of assessments to have “super-priority” even over first deed of trust liens. However, what many regard as a strong banking lobby in Texas was able to prevent that provision of the model act from making it into TUCA.
Similar to the first deed of trust lien, under 82.113(b)(4), liens, such as “mechanics and materialman’s” liens arising from improvements made to the unit are also superior to the assessment lien to the extent that any assessments sought through foreclosure of the lien became delinquent subsequent to the recordation of that lien. However, this subordination to mechanic's and materialman's liens may be eliminated by declaration. So, should a unit owner hire a contractor to make improvements to the unit, and the contractor records the lien, that lien would have superiority over assessments that only became delinquent after the recordation of that contractor’s lien.

Additionally, under 82.113(b)(4) (again, unless the Declaration provides otherwise), an assignment of insurance proceeds on the unit is also superior to assessment liens to the extent that any assessments sought through foreclosure of the lien became delinquent subsequent to the recordation of the insurance assignment.

“Opting out” of the superiority of mechanics and materialman’s liens and insurance assignments through the Declaration is one step a Condominium Association can take to improve the utility of the assessment lien.

Prepared by Austin Lawyer Chloe M. Love

Texas Process of Foreclosing on an Assessment Lien

The statutory framework governing the foreclosure of condominiums resides within Chapter 82 of the Texas Property Code. Pursuant to Section 82.113(d) of TUCA, the process for effectuating the sale of the property through a foreclosure is delineated by Texas Property Code Section 51.002, which is the same statutory provision utilized for foreclosure and power of sale in connection with single family residences. That being said, Section 82.113(d) of TUCA also allows the Condominium Association to amend or alter the procedures set forth by Section 51.002 through its Declaration.

Section 51.002 requires that 20 days notice of foreclosure be given to a unit owner, with opportunity to cure the default giving rise to the foreclosure. Then, upon expiration of the 20-day notice, a “Notice of Sale” must be posted at the county courthouse at least 21 days prior to the sale, thereby alerting the public of when and where the sale is to occur. If there are other lien holders with an interest in the property (for example, a bank holding a mortgage), that lien holder may demand that the Association provide written notice prior to any foreclosure. At any time prior to the sale, the unit owner may halt the foreclosure by paying all amounts then due and owing (Section 82.113(j)). Foreclosure sales must take place on the first Tuesday of each month between 10 am and 4 pm. The Condominium Association may bid on the property at the sale.

If the unit was used as a residence, and the Condominium Association purchases the unit at the sale, the unit owner will still have a 90-day window to “redeem” the property by paying all amounts then due and owing, plus interest on that amount from the date of the sale to the date of the redemption, in addition to reasonable costs and attorneys’ fees incurred in foreclosing the lien (Section 82.113(g)).

After the sale, the former owner may not simply vacate the unit upon the request of the Association, In such instances, a Condominium Association should be prepared to bring a forcible detainer action in a Justice of the Peace Court to evict the unit owner if they or their tenant refuses to vacate.

Liens for Past Due Assessments Owed to Texas Condominium Associations

As one would expect, the statutory provisions giving rise to Texas liens regarding assessments owed to a Condominium Association reside within the Texas Uniform Condominium Act, commonly referred to as “TUCA” (or “too-kuh” if spoken aloud). TUCA may be found in Chapter 82 of the Texas Property Code.

Pursuant to Section 82.113 of the Texas Property Code, assessments owed by a unit owner of a Texas condominium are a “personal obligation of the unit owner and [are] secured by a continuing lien on the unit.” Unless the Declaration of the Condominium Association holds otherwise, the lien exists and is “perfected” upon recordation of the Declaration in the real property records in the relevant county and requires no further recording by the Condominium Association. Of course there must be delinquent assessments before one can have an actionable lien capable of being foreclosed upon, but for purposes of determining when a lien came into existence once a Condominium Association is confronted with a delinquent unit owner, the lien relates back to the date upon which the Declaration was filed in the real property records. Because the lien arises for any delinquent assessments subsequent to the filing of the Declaration of the condominium complex, the lien for any particular unit arises with no effort or cost to the Condominium Association, and the Association need not file the lien in the real property records for it to have a valid and subsisting lien. That being said, the act of filing the lien can be useful in alerting others of the existence of a lien, limiting the unit owner’s ability to sell the unit. Filing of the lien in the real property records can also be a useful tool in prompting payment of the assessment, as some unit owners may be loathe to see their name and reputation tarnished in real property records for “all the world to see.”

Section 82.113 of the Texas Property code also states that “[b]y acquiring a unit, a unit owner grants to the [condominium] association a power-of-sale in connection with the association’s lien.” Section 82.113 further confers on a condominium association the power to foreclose on the lien and effectuate the sale by judicial and non-judicial means. However, pursuant to Section 82.113(e), a condominium association may not foreclose when the amounts owed consist solely of fines.

Prepared by Austin Attorney Chloe Love