I recently read an article by Abby Lee that was in the May 2012 Texas Realtor® Magazine. She is the associate council for the Texas Association of Realtors. She discusses changes going on within homeowner associations and there have been some changes to the laws that govern the associations. I think anyone living with an HOA will benefit from the article, so I have highlighted some of her points below.
I had no idea that almost 5MM Texans live in neighborhoods with homeowners associations (HOAs). Abby explained that it means that nearly 20% of all Texans’ property rights may be affected by HOA rules. Did you know that last session, the Texas Legislature passed several bills designed to better balance the interests of property owners and HOAs? These laws change how homeowners associations are governed, what HOA’s can and cannot do regarding penalties and foreclosures, and provide more rights to property owners regarding use of their property. Abby summarized the changes in her article:
Elections, meetings, and directors
Open board meetings. Generally, board meetings must be open to owners, subject to the right of the board to adjourn and reconvene in a closed executive session to consider certain statutorily defined issues (which then must be summarized orally and placed in the minutes).
Board meeting minutes. HOA boards must keep written minutes as a record of each regular and special meeting and give owners access to those approved minutes.
Meeting notice. Boards must give owners notice of upcoming meetings, including the date, hour, place, and general subject matter of issues to be discussed, as well as those to be discussed in executive session.
Amount of notice. If notice of a meeting is mailed, it must be given at least 10 days but no more than 60 days in advance. If notice is being conspicuously posted (i.e., placed in a common area or on a website) and being emailed to all owners, at least 72 hours advance notice is allowed.
No secret ballots. Secret ballots are prohibited. Any vote cast in an election or vote by an owner must be in writing and signed by the owner, unless it is an uncontested election or electronic ballot.
Recount procedures. HOAs must conduct a recount of an election vote if a recount is requested by an owner within 15 days after the election. The recount must be performed by a person qualified to tabulate votes.
Owner voting rights. Owners may not be disqualified from voting for any reason.
Director qualifications. All owners may run for the HOA board. Any rule that restricts such a right is void, unless the board receives governmental evidence that a director has been convicted of certain crimes, in which case the director is automatically removed and ineligible to serve again.
Electronic and absentee ballots. Electronic and absentee ballots are valid if they meet certain requirements.
Director appointment. When a director’s term expires, he must stand for re-election. Vacancies may be filled by appointment, but only for the remainder of the term, and then directors must be elected.
Election vote tabulators. Only election vote tabulators are allowed access to ballots. This would include people such as current or former judges or an individual agreed on by both parties who is not also an owner or related to an owner.
Annual meetings and elections. HOAs must hold annual meetings. If they fail to do so, owners may demand such a meeting. If this is unsuccessful, owners may call an election meeting.
Records and documents
Recording requirements. A governing document (e.g., bylaws and rules) will not be effective unless it is recorded with the county. This means that if the HOA fails to record bylaws, for instance, they cannot be enforced against an owner.*
Website posting. A homeowners association’s governing documents must be posted on its publicly accessible website, if there is one.
Declaration amendment. Declarations can only be amended by a vote of 67% of the owners, unless stated differently in the declaration itself.
Open records. HOAs must make the books and records of the association open to an owner. This must include a procedure for requesting, producing, and charging for records, as well as a plan for records retention.
Records retention. HOAs with more than 14 lots must adopt a records-retention policy that consists of the following categories and retention periods:
• Financial records, minutes, and tax returns and audits must be retained for seven years, identifying each category respectively.
• Account records of current owners must be kept for five years.
• A contract for terms of a least one year or more must be retained for four years after the expiration of the contract.
• Governing documents must be retained permanently.
Assessments, liens, and foreclosures
Payment-plan guidelines. HOAs with more than 14 lots have mandated guidelines and also require owner payment plans. These must be recorded with the county.
Application of payments. When an owner makes a payment to the homeowners association, the HOA shall apply that money to the owner’s debt in a specific order. It begins with delinquent and current assessments and is followed by attorney’s fees and fines.
Copy-charge foreclosure. An HOA cannot foreclose on an owner’s property solely for charges relating to records production.
Junior-lienholder notice. Prior notice of an HOA foreclosure must be sent to junior lienholders, allowing for a 60-day opportunity to cure.
Judicial foreclosure. Non-judicial HOA foreclosures are now prohibited. To foreclose, HOAs must use “expedited foreclosure” procedures to obtain a court order.
Foreclosure amendment. A provision granting a right to foreclose in HOA rules can be added or removed by the owners with at least a 67% approval.
Lien notices. This confirms that HOA lien notices and similar instruments affect title to property.
Home sales and resales
Transfer fees. Certain types of transfer fees are prohibited (mostly private transfer fees). However, there are some exceptions. For instance, resale-certificate fees are specifically excepted.*
Resale certificates. Many new requirements and time frames for resale certificates have been established.
5 things HOAs can no longer prevent owners from doing:
• Install a solar-energy device on the property, but this right can be limited.*
• Install and use rain-harvesting devices, subject to certain aesthetic and architectural requirements.*
• Display certain religious items on the entry of the property, subject to the association’s right to place some parameters on displays.*
• Install roof shingles that are wind and/or hail resistant, energy efficient, or solar generating, if the quality and appearance are comparable to the subdivision standards.*
• Fly the U.S., Texas, or a branch of the U.S. armed forces flag, but the HOA may regulate the size, number, or location of flagpoles.
Not so fast—Please note that different rules apply during a period of declarant, or developer, control.
