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.
Texas Condo Lawyers
Austin Texas Condo and HOA Lawyers
Showing posts with label Texas Condominiums. Show all posts
Showing posts with label Texas Condominiums. Show all posts
Tuesday, June 21, 2011
Monday, January 24, 2011
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
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
Subscribe to:
Posts (Atom)