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.

New TX Law For HOAs Give Homeowners More Time Before Foreclosure

San Antonio HOA Lawyer Trey Wilson wrote:

Here's a good story from Houston's NPR affiliate, KUHF

Listen to the story here:

Before January 1st, Homeowners Associations were able to foreclose on homes without going through the courts. Now, they have to ask a judge for an expedited order of foreclosure. Homeowners would get an extra 60 days to cover whatever they owe a homeowners association.

Kevin Cloves is a Houston attorney who represents both HOAs and homeowners. He says this will slow the process of taking away homes from people whose HOA debt is just a fraction of the home's value.

"The extra time that's given to the homeowner provides them with an added opportunity to save their property by virtue of maybe coming up with a loan from friends, working out a payment plan with the HOA."

And the new laws do require HOAs to offer payment plans of up to 18 months. Terry Sears is another Houston attorney who specializes in HOA matters. He says while the intent of the new laws is noble, the regulations will cost HOAs more to achieve the same result.

"We're eventually going to get the foreclosure. But now, we have to jump through additional hoops which requires a lawsuit and service fees and court costs. And it drove up the fees exponentially for the entire subdivision, and, in my opinion, unnecessarily so."

The new foreclosure rule is part of a batch of new laws governing HOAs. Some of the regulations took effect last September. They cover everything from flag displays, to where and how residents can collect rainwater for other uses.

Texas Supreme Court Posts New Rules Regarding Foreclosure of HOA Liens

San Antonio HOA Lawyer Trey Wilson wrote:

Today, the Texas Supreme Court posted the final version of its revisions to Texas Rules of Civil Procedure 735 and 736, governing the foreclosure of certain liens, including HOA assessment liens. The Court's full Order is posted here.

The Texas Legislature directed the Supreme Court to enact new rules relating to judicial foreclosures, when it adopted HB 1228 (82nd Leg., R.S.). That Legislation was one of numerous HOA reform bills adopted last session by Texas lawmakers.

The original analysis of the bill provided the following summary of its purpose.

Currently, a property owners' association may foreclose on real property for the property owner's failure to pay association assessments. In many instances, the foreclosed property is encumbered with a first lien that is not disposed of when the foreclosure sale occurs because there is no requirement to notify the lienholder of the foreclosure or the sale. H.B. 1228 sets out provisions relating to notice and providing the lienholder with an opportunity to cure a delinquency before a foreclosure sale.

Stay tuned to this blog for a future post summarizing the new rules and their practical effect.

Notably, the new Rules apply to foreclosures commenced on or after January 1, 2012.

Fourth Court Waters-Down Homeowner's Victory Against HOA

BOTH SIDES SWALLOW THE LION'S SHARE OF THEIR OWN ATTORNEYS' FEES

On December 7, 2011, the Fourth Court of Appeals in San Antonio released its opinion, on rehearing, in a case where a Bexar County jury punished a local HOA and its attorney for pushing too aggressively in its efforts to collect past due assessments. The case received extensive media coverage when the verdict was first rendered in June, 2010.

The suit, Hidden Forest Homeowners Association, Inc. vs. James Hern was originally tried to a jury before Judge Martha Tanner. Following trial, the jury returned a mixed verdict requiring Hern to pay around $946 in past due assessments, plus the HOA's attorneys' fees of $728.00. **Notably, the Association had asked the jury to award attorneys' fees in the amount of $25,000.00** The jury also found that the Hidden Forest HOA engaged in unreasonable collection practices, and violated its own restrictions by attempting to foreclose on Hern's home and take an individual judgment against him. The jury awarded Hern $11,000.00, denied Hidden Forest's request for judicial foreclosure, and ordered the HOA to remove its assessment lien placed on Hern's home.

The HOA filed an appeal seeking to set aside the award to Hern, and the measly award of attorneys' fees to the Association (which approximate less than 5% of the amount sought by the HOA). Upon analyzing the verdict, the appeals court found that the HOA did not breach its covenants, or engage in unreasonable collection practices. Accordingly, Hern's verdict for damages was reversed.

With regard to the collection efforts, the Court did add this proviso:

Although we do not condone Hidden Forest’s refusal to accept Hern’s prepayment and subsequent settlement offers, we cannot say that its collection efforts were harassing or outrageous. Hidden Forest did not repeatedly call Hern or send letters to his home or business.

The Court refused to side with the HOA in its claims that the jury's award of only $728.00 was against the great weight of the evidence, and should be increased to $25,000.00. Despite the fact that the HOA's attorney testified that he personally spent 75 hours on the case (at $250/hr) , his associate spent over twelve hours on the case (at $200/hr), and his legal assistant spent almost 26 hours(at $125/hr), the Fourth Court found that:

the jury was aware of the simplistic nature of Hidden Forest’s case, which merely sought to recover assessments that Hern admitted he had not paid. The amount Hidden Forest sought in attorney’s fees was more than 26 times the amount it recovered due to Hern’s failure to pay assessments. The jury could have rationally determined that 3.78 hours was a reasonable amount of time to expend in legal services for this case (dividing $728 awarded in attorney’s fees by Newton’s hourly rate of $250).

A full copy of the Fourth Court's opinion can be found here.

In the end, it appears that the HOA spent a bunch of time and money to collect an amount that the homeowner was willing to pay all along. Spending attorneys' fees chasing attorneys' fees is never a good ida, especially in the arena of HOA litigation. Not surprisingly, though, local media reports that both sides are claiming victory in this dispute.

San Antonio HOA Sells Disabled Couple's Home

From WOAI.com

Every day is a struggle for Dan and Elaine Lambert. Dan has a traumatic brain injury and is partially paralyzed. He was struck by a train while working for the railroad. Since the accident, he's had two strokes and four heart attacks. Elaine says she went for six or seven weeks with open sores on her legs. She suffers from a disease that causes painful sores and swelling in her legs and has bouts of severe depression.

With their belongings already packed after getting an eviction notice from the new owner, Dan and Elaine each take some of the blame. The couple says the HOA dues were simply not a priority as they dealt with getting through their illnesses. They say certified letters from the HOA's attorney went unopened or thrown out because they thought it was junk mail.

Still, they think the HOA has gone too far. "There's no way in hell this association should do this to retired people or disabled people," Dan told us.

Homeowners' association usually don't do sell homes of those who owe them money. Instead, if you don't pay your dues, the association slaps a lien on your house. That way you have to pay up before you can sell it.

Instead filing a lien and leaving it at that, the Heritage Hills HOA took the unusual step of foreclosing and selling the house. The Lambert's home sold at a public auction on the steps of the Bexar County Courthouse. The house valued at $156,000 sold for only $2,200. That is the amount the Lamberts owed after late fees, attorneys fees and interest were added.

Tom Newton is the HOA attorney who sold the Lambert's home. "I'm not kicking anybody out of their house," he explained to the Trouble Shooters. "What I'm doing is holding them to the obligation they accepted when they bought the property."

Trouble Shooter Brian Collister asked Newton, "[Do] you feel comfortable kicking a disabled family out of their home for a few hundred dollars in HOA fees?"

Newton replied, "I feel comfortable in taking those steps necessary to enforce my client's legal rights, and if that means that ultimately somebody may go through this foreclosure process, it's unfortunate, but it is a consequence of their own making." During all of this, no one with the HOA or its attorney ever picked up the phone and called or came to the Lambert's home. They never simply knocked on the door and tried to talk to them about why they were not paying their fees.

Collister asked Newton about this; "Don't you think if you're going to take their home away from them you should at least go talk to them face to face?"

"No, I don't," Newton answered, "I don't, and I'll tell you there are some people out there who have whatever sort of issues they have. They become violent when you approach them about their shortcomings or failure to abide by their obligations, and I think it is a dangerous situation."

The Lambert's say they're not dangerous or violent. They're just surprised that a homeowners association can go so far because they owe so little. The HOA says it sent the Lamberts certified letters during the three years they did not pay their dues, and they had plenty of opportunities to pay up and keep their house.

Wednesday, the Lamberts sit down with the HOA and the investment company that bought the house. They're going to try and come up with a way where the Lamberts can keep their home. We'll let you know what happens.

San Antonio Homeowners Association Threatens Foreclosure of Military Couple Stationed Overseas from WOAI.com

A San Antonio couple, serving in the military overseas, almost loses their home. Not because they failed to make their mortgage payments, but because they were behind on their homeowners association fees. This military couple was fighting a losing battle, so they asked News 4 Trouble Shooter Jaie Avila for help.

David and Melody Gates admit they fell behind on their homeowners association fees when Melody got sick, but they say when they tried to pay what they owed, the association and its attorney kept sending their checks back and piling on more fees. The couple is stationed at an air force base in Germany.

The Gates say since late last year, they have sent three separate checks to the Westover Crossing Homeowners Association to pay off all the dues they owe for their home. But each time, the checks were returned, because by the time they arrived in the mail, more late fees, and attorneys fees had been added to the total. The attorney for the association refused to accept partial payment.

"Every time they mail it back to me, they tell me I owe them more money," says Melody Gates. "They tell me that I owe them late fees and I also, on top of that, I owe them attorney fees. And I don't understand why a company, knowing that we're so far away, is being so unjust to us."

After six months of this, the Gates' bill grew from $1,100 to more than $1,800.
The homeowners association filed a lien against their home and was threatening foreclosure. So the desperate couple e-mailed the Trouble Shooters.

"I reached out to you, because I don't know what else to do," says Gates. "We have tried very hard to make this bill paid in full."

The Trouble Shooters contacted Spectrum Management, which runs the Westover Crossing Homeowners Association, and its attorney, Tom Newton, Jr., the man who has been sending the Gates' all those intimidating letters. Newton wouldn't comment, but this isn't the first time the Trouble Shooters have come across attorney, Tom Newton.

Last year, Newton, who was working for another homeowners association, foreclosed on an elderly disabled couple, Dan and Elaine lambert, because they hadn't paid $380 in HOA fees. At the time he said he felt justified in foreclosing on struggling homeowners who are only a few hundred dollars behind on their HOA dues.

"I feel comfortable in taking those steps necessary to enforce my client's legal rights," said Newton at the time. "And if that means that ultimately somebody may go through this foreclosure process, it is unfortunate. But it is a consequence of their own making."

Although, he wouldn't talk to us, a few days after we contacted Newton, he and the Westover Crossing Homeowners Association agreed to stop tacking on fees and settled the dispute with the gates for $1,300. Almost $600 less than they had been demanding.

If you fall behind on your HOA fees, they can legally do the same thing to you. Be sure to read your deed restrictions which should explain what kind of notice they have to give you before trying to foreclose. And get them to agree to a re-payment plan in writing, to avoid unexpected fees.


If you feel that you are being harassed or treated unfairly by a Homeowners Association (HOA), contact San Antonio attorney Trey Wilson. Mr. Wilson is an experienced real estate lawyer who routinely represents both individuals under seige by their HOAs, and HOAs with claims agaisnt developers/builders. Trey Wilson was named by Scene in SA Magazine as one of San Antonio's Best real Estate Litigation Attorneys. He may be reached at 210-223-4100 or www.sa-law.com