Powers of Property Owners Association

November 23, 2007

By AHRC News Services

The following bill became Law in Texas under Governor George W. Bush

PROPERTY CODE

CHAPTER 204. POWERS OF PROPERTY OWNERS' ASSOCIATION RELATING TO
RESTRICTIVE COVENANTS IN CERTAIN SUBDIVISIONS


§ 204.001. DEFINITIONS. In this chapter:
(1) "Restrictions," "residential real estate
subdivision," "subdivision," "owner," "real property records," and
"lienholder" have the meanings assigned by Section 201.003.
(2) "Dedicatory instrument," "petition," and
"restrictive covenant" have the meanings assigned by Section
202.001.
(3) "Regular assessment" means an assessment, charge,
fee, or dues that each owner of property within a subdivision is
required to pay to the property owners' association on a regular
basis and that are to be used by the association for the benefit of
the subdivision in accordance with the original, extended, added,
or modified restrictions.
(4) "Special assessment" means an assessment, charge,
fee, or dues that each owner of property within a subdivision is
required to pay to the property owners' association, after a vote of
the membership, for the purpose of paying for the costs of capital
improvements to the common areas that are incurred or will be
incurred by the association during the fiscal year. A special
assessment may be assessed before or after the association incurs
the capital improvement costs.

Added by Acts 1995, 74th Leg., ch. 1040, § 2, eff. Aug. 28, 1995.


§ 204.002. APPLICATION. (a) This chapter applies only to
a residential real estate subdivision, excluding a condominium
development governed by Title 7, Property Code, that is located in
whole or in part:
(1) in a county with a population of 2.8 million or
more;
(2) in a county with a population of 250,000 or more
that is adjacent to the Gulf of Mexico and that is adjacent to a
county having a population of 2. 8 million or more; or
(3) in a county with a population of 275,000 or more
that:
(A) is adjacent to a county with a population of
3.3 million or more; and
(B) contains part of a national forest.
(b) This chapter applies to a restriction regardless of its
effective date.
(c) This chapter does not apply to portions of a subdivision
that are zoned for or that contain a commercial structure, an
industrial structure, an apartment complex, or a condominium
development governed by Title 7, Property Code. For purposes of
this subsection, "apartment complex" means two or more dwellings in
one or more buildings that are owned by the same owner, located on
the same lot or tract, and managed by the same owner, agent, or
management company.

Added by Acts 1995, 74th Leg., ch. 1040, § 2, eff. Aug. 28, 1995.
Amended by Acts 2003, 78th Leg., ch. 547, § 1, eff. Sept. 1,
2003; Acts 2005, 79th Leg., ch. 1078, § 1, eff. Sept. 1, 2005.


§ 204.003. PROVISIONS OF RESTRICTIVE COVENANTS PREVAIL IN
CERTAIN CIRCUMSTANCES. An express designation in a document
creating restrictions applicable to a residential real estate
subdivision that provides for the extension of, addition to, or
modification of existing restrictions by a designated number of
owners of real property in the subdivision prevails over the
provisions of this chapter.

Added by Acts 1995, 74th Leg., ch. 1040, § 2, eff. Aug. 28, 1995.


§ 204.004. PROPERTY OWNERS' ASSOCIATION. (a) A property
owners' association is a designated representative of the owners of
property in a subdivision and may be referred to as a "homeowners
association," "community association," "civic association," "civic
club," "association," "committee," or similar term contained in the
restrictions. The membership of the association consists of the
owners of property within the subdivision.
(b) The association must be nonprofit and may be
incorporated as a Texas nonprofit corporation. An unincorporated
association may incorporate under the Texas Non-Profit Corporation
Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes).
(c) The association's board of directors or trustees must be
elected or appointed in accordance with the applicable provisions
of the restrictions and the association's articles of incorporation
or bylaws.

Added by Acts 1995, 74th Leg., ch. 1040, § 2, eff. Aug. 28, 1995.


§ 204.005. EXTENSION OF, ADDITION TO, OR MODIFICATION OF
EXISTING RESTRICTIONS. (a) A property owners' association has
authority to approve and circulate a petition relating to the
extension of, addition to, or modification of existing
restrictions. A property owners' association is not required to
comply with Sections 201.009-201.012.
(b) A petition to extend, add to, or modify existing
restrictions approved and circulated by a property owners'
association is effective if:
(1) the petition is approved by the owners, excluding
lienholders, contract purchasers, and the owners of mineral
interests, of at least 75 percent of the real property in the
subdivision or a smaller percentage required by the original
dedicatory instrument; and
(2) the petition is filed as a dedicatory instrument
with the county clerk of the county in which the subdivision is
located.
(c) If a subdivision consisting of multiple sections, each
with its own restrictions, is represented by a single property
owners' association, the approval requirement may be satisfied by
obtaining approval of at least 75 percent of the owners on a
section-by-section basis or of the total number of properties in
the property owners' association's jurisdiction.
(d) If approved, the petition is binding on all properties
in the subdivision or section, as applicable.
(e) A property owners' association that circulates a
petition must notify all record owners of property in the
subdivision in writing of the proposed extension, addition to, or
modification of the existing restrictions. Notice may be
hand-delivered to residences within the subdivision or sent by
regular mail to the owner's last known mailing address as reflected
in the ownership records maintained by the property owners'
association. The approval of multiple owners of a property may be
reflected by the signature of a single co-owner.

Added by Acts 1995, 74th Leg., ch. 1040, § 2, eff. Aug. 28, 1995.


§ 204.006. CREATION OF PROPERTY OWNERS' ASSOCIATION. (a)
If existing restrictions applicable to a subdivision do not provide
for a property owners' association and require approval of more
than 60 percent of the owners to add to or modify the original
dedicating instrument, a petition to add to or modify the existing
restrictions for the sole purpose of creating and operating a
property owners' association with mandatory membership, mandatory
regular or special assessments, and equivalent voting rights for
each of the owners in the subdivision is effective if:
(1) a petition committee has been formed as prescribed
by Section 201.005;
(2) the petition is approved by the owners, excluding
lienholders, contract purchasers, and the owners of mineral
interests, of at least 60 percent of the real property in the
subdivision; and
(3) the procedure employed in the circulation and
approval of the petition to add to or amend the existing
restrictions for the specified purpose complies with the
requirements of this chapter.
(b) If the circulated petition is not approved by the
required percentage of owners within one year of the creation of the
petition committee, the petition is void and another petition
committee may be formed.
(c) If the petition is approved, the petition is binding on
all properties in the subdivision or section, as applicable.

Added by Acts 1995, 74th Leg., ch. 1040, § 2, eff. Aug. 28, 1995.


§ 204.007. EFFECT ON LIENHOLDERS. (a) Extensions of,
additions to, or modifications of restrictions under this chapter
are binding on a lienholder, excluding restrictions relating to
regular or special assessment increases if the assessment is not
subordinated to purchase money or home improvement liens.
(b) If the assessment lien of the property owners'
association is subordinate to purchase money or home improvement
liens, the lienholder is not entitled to notice of the proposed
dedicatory instrument and the lienholder is bound by the instrument
if the instrument is approved. If the assessment lien is not
subordinated, a lienholder who is not a signatory to the dedicatory
instrument and whose lien was established before the effective date
of the dedicatory instrument is not bound by the portion of the
dedicatory instrument that increases the amount of the regular or
special assessment during any period of ownership by the
lienholder.
(c) A person who acquires title to the property at a
foreclosure sale or by deed from a foreclosing lienholder is bound
by the assessment increase.

Added by Acts 1995, 74th Leg., ch. 1040, § 2, eff. Aug. 28, 1995.


§ 204.008. METHOD OF ADOPTION. An extension, addition
to, or modification of restrictions proposed by a property owners'
association may be adopted:
(1) by a written ballot that states the substance of
the amendment and specifies the date by which a ballot must be
received to be counted;
(2) at a meeting of the members represented by the
property owners' association if written notice of the meeting
stating the purpose of the meeting is delivered to each owner of
property in the subdivision;
(3) by door-to-door circulation of a petition by the
property owners' association or a person authorized by the property
owners' association;
(4) by a method permitted by the existing
restrictions; or
(5) by a combination of the methods described by this
section.

Added by Acts 1995, 74th Leg., ch. 1040, § 2, eff. Aug. 28, 1995.


§ 204.009. TEXAS NONPROFIT CORPORATIONS. (a) If the
property owners' association is referenced in the existing,
extended, added to, or modified restrictions as a Texas nonprofit
corporation, the instrument contemplates the interaction of a
nonprofit corporation, its articles of incorporation, and its
bylaws.
(b) The property owners' association has the powers and
shall promote the purposes enumerated in the articles of
incorporation and bylaws. These powers and purposes necessarily
modify the express provisions of the restrictions to include the
referenced powers and purposes.

Added by Acts 1995, 74th Leg., ch. 1040, § 2, eff. Aug. 28, 1995.


§ 204.010. POWERS OF PROPERTY OWNERS' ASSOCIATION. (a)
Unless otherwise provided by the restrictions or the association's
articles of incorporation or bylaws, the property owners'
association, acting through its board of directors or trustees,
may:
(1) adopt and amend bylaws;
(2) adopt and amend budgets for revenues,
expenditures, and reserves and collect regular assessments or
special assessments for common expenses from property owners;
(3) hire and terminate managing agents and other
employees, agents, and independent contractors;
(4) institute, defend, intervene in, settle, or
compromise litigation or administrative proceedings on matters
affecting the subdivision;
(5) make contracts and incur liabilities relating to
the operation of the subdivision and the property owners'
association;
(6) regulate the use, maintenance, repair,
replacement, modification, and appearance of the subdivision;
(7) make additional improvements to be included as a
part of the common area;
(8) grant easements, leases, licenses, and
concessions through or over the common area;
(9) impose and receive payments, fees, or charges for
the use, rental, or operation of the common area and for services
provided to property owners;
(10) impose interest, late charges, and, if
applicable, returned check charges for late payments of regular
assessments or special assessments;
(11) if notice and an opportunity to be heard are
given, collect reimbursement of actual attorney's fees and other
reasonable costs incurred by the property owners' association
relating to violations of the subdivision's restrictions or the
property owners' association's bylaws and rules;
(12) charge costs to an owner's assessment account and
collect the costs in any manner provided in the restrictions for the
collection of assessments;
(13) adopt and amend rules regulating the collection
of delinquent assessments and the application of payments;
(14) impose reasonable charges for preparing,
recording, or copying amendments to the restrictions, resale
certificates, or statements of unpaid assessments;
(15) purchase insurance and fidelity bonds, including
directors' and officers' liability insurance, that the board
considers appropriate or necessary;
(16) if the restrictions allow for an annual increase
in the maximum regular assessment without a vote of the membership,
assess the increase annually or accumulate and assess the increase
after a number of years;
(17) subject to the requirements of the Texas
Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
Texas Civil Statutes) and by majority vote of its board of
directors, indemnify a director or officer of the property owners'
association who was, is, or may be made a named defendant or
respondent in a proceeding because the person is or was a director;
(18) if the restrictions vest the architectural
control authority in the property owners' association or if the
authority is vested in the property owners' association under
Section 204.011:
(A) implement written architectural control
guidelines for its own use or record the guidelines in the real
property records of the applicable county; and
(B) modify the guidelines as the needs of the
subdivision change;
(19) exercise other powers conferred by the
restrictions, its articles of incorporation, or its bylaws;
(20) exercise other powers that may be exercised in
this state by a corporation of the same type as the property owners'
association; and
(21) exercise other powers necessary and proper for
the governance and operation of the property owners' association.
(b) Powers enumerated by this section are in addition to any
other powers granted to a property owners' association by this
chapter or other law.

Added by Acts 1995, 74th Leg., ch. 1040, § 2, eff. Aug. 28, 1995.


§ 204.011. ARCHITECTURAL CONTROL COMMITTEE. (a) 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
modification of a building, structure, or improvement.
(b) Unless the restrictions applicable to a residential
real estate subdivision vest the architectural control committee
authority in the property owners' association before either of the
following events, the architectural control committee authority
automatically vests in the property owners' association when:
(1) the term of the architectural control committee
authority expires as prescribed by the restrictions;
(2) a residence on the last available building site is
completed and sold;
(3) the person or entity designated as the
architectural control committee in the restrictions assigns, in
writing, authority to the property owners' association; or
(4) an assignee of the original holder abandons its
authority for more than one year.
(c) If the architectural control committee authority is
transferred to the property owners' association, the authority is
vested in the property owners' association until:
(1) the restrictions are modified to reflect
otherwise;
(2) the restrictions are terminated; or
(3) the property owners' association ceases to exist.

Added by Acts 1995, 74th Leg., ch. 1040, § 2, eff. Aug. 28, 1995.

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