Proposed Legislation Would Give Texas HOAs Power to Foreclose Without Court Assistance

San Antonio HOA Lawsuit Attorney Trey Wilson wrote:

Earlier this month, Rep. Kenneth Sheets (Dallas) introduced HB 2928. If passed, this bill would give Texas Homeowners Associations legal authority to foreclose assessment liens (for HOA dues and similar charges) non-judicially (on the courthouse steps) much like a mortgage lender or other lien holder.  Under current law (Texas Property Code Section 209.0092), Texas homeowners associations can only foreclose liens judicially -- by filing a lawsuit and obtaining a judgment. Obviously, lawsuits give property owners more due process (and consequently take longer and are more costly) than do Sheriff's Sales or similar non-judicial foreclosure processes.

The most significant aspect of HB2928 is that it does not require that a Declaration/CCR contain a provision authorizing a private power of sale as a condition of authorizing non-judicial foreclosure in Texas.  Essentially, the law would grant to Texas HOAs a collection remedy that does not independently exist either as a contractual right (CC&Rs are considered contracts in Texas) or as a covenant running with land in an HOA-governed subdivision.

Another troubling aspect of this Bill is that it seems to directly contradict brand-new law (effective January 1, 2012) concerning HOA foreclosures.  As part of the HOA Reform package of laws passed during the 82nd Legislative Session (2011), property owners were expressly granted the right to democratically  determine whether to amend their Declarations (CC&Rs) to prohibit non-judicial foreclosure: Texas Property Code Section 209.0093  is entitled "REMOVAL OR ADOPTION OF FORECLOSURE AUTHORITY," and provides:

" A provision granting a right to foreclose a lien on real property for unpaid amounts due to a property owners' association may be removed from a dedicatory instrument or adopted in a dedicatory instrument by a vote of at least 67 percent of the total votes allocated to property owners in the property owners' association.  Owners holding at least 10 percent of all voting interests in the property owners' association may petition the association and require a special meeting to be called for the purposes of taking a vote for the purposes of this section."

If adopted, HB 2928 would obviate this right of property owners to determine whether or not to authorize foreclosures by their HOA. In my opinion, HB 2928 favors Texas HOAs, at the expense of rights recently granted to homeowners.