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.

9-year-old boy’s fort causes a stir with the neighbors -- Austin

Nicholas Aarsvold, 9, built this wooden play fort between two shrubs on a strip of grass that separates his driveway from his neighbor’s. The Summerwood Homeowners Association wants the structure dismantled because it breaks homeowner rules. Nicholas’ mother, Ramona Aarsvold, is refusing to take it down.

Read the full story in the Austin American Statesman:

9-year-old boy’s fort causes a stir with the neighbors

Covenants Restricting Solar Panels Are Unenforceable in Texas

San Antonio HOA Lawyer Trey Wilson wrote:

Solar energy has been used by humans for thousands of years. Scientists have discovered evidence that Greeks and Romans use burning mirrors to light torches for religious purposes as early as the 3rd century B.C.

In 1977 the U.S. Department of Energy launcheed the Solar Energy Research Institute
“National Renewable Energy Laboratory,” a federal facility dedicated to harnessing power from the sun. Fortunately, San Antonio, and our very own CPS Energy are solar industry leaders.

Yet, despite the historic and modern patterns of embracing solar energy, many restrictive covenants in Texas still expressly prohibit the installation of solar panels on homes and business.

I'll admit, solar panels are ugly.
Solar energy is also a somewhat esoteric topic. But, as our population grows solar energy is becoming an essential alternative to traditional energy sources. Thus, it was time that covenants prohibiting solar energy panels were addressed. That is exactly what happended during the last Texas legislative session.

House Bill 362 was adopted on June 17, 2011, and became effective on that day. The Bill __, and provides, in relevant part:

...a property owners’ association may not include or enforce a provision in a dedicatory instrument that prohibits or restricts a property owner from installing a solar energy device.

As usual, there are certain exceptions, and there is a specific definition of "solar energy device." The effect of the law, however, is clear -- to void a provision violating the general prohibition on CCR provisions that ban the installation of a solar energy device and roofing materials that meet certain criteria.

In my opinion as a lawyer with an active HOA litigation practice, the Legislature got this one right, as this was a law whose time had come!

The Great Flag Debate has Largely been Resolved in Texas

San Antonio Homeowners Association Lawyer Trey Wilson wrote:

Over the years, I have received many inquiries from Texas property owners questioning the legality of restrictive covenants prohibiting the display of flags. A surpising number of these types of restrictions exist even here, in Military City, USA (also known as San Antonio, Texas).

In some absurd cases, I have written posts on this blog about HOA Boards that have asked for removal of patriotic, or other non-controversial flags. In one unfortunate instance that I called "Absurdity in Dallas," a north Texas homeowners association demanded that a retired Marine and Viet-Nam vet remove the "Semper Fi" stickers from his vehicle. You can imagine his response, and the firestorm sparked amongst Jarheads, Leathernecks and Devil Dogs everywhere (Once a Marine, ALWAYS a Marine)!

As dumb/stupid/assinine as it sounds, such covenants were historically legal property restrictions in Texas until recently. However, that all changed on June 17, 201, when Governor Perry signed HB 2779 into law.

That legislation -- which is now part of Chapter 202 of the Texas Property Code -- prohibits an HOA from adopting or enforcing any restriction that prohibits an Owner from displaying:

(1) the flag of the United States of America;
(2) the flag of the State of Texas; or
(3) an official or replica flag of any branch of the United States armed forces.

Of course, there are some limitations, but one thing remains true in Texas -- Don't "mess" with our flags or our military!

God Bless Texas, and our troops!

Round Rock family's fight with HOA heads to court - YNN - Your News Now

Round Rock family's fight with HOA heads to court - YNN - Your News Now

San Antonio Residents Fire Back At Homeowners Association and Builder

A group of residents of the West Oaks Estates subdivision in San Antonio, Texas are fighting back against what they believe is an unmeritorious attack by their homeowners association, and the builder/developer who controls the HOA. In a counter-suit filed in Bexar County District Court in San Antonio, Texas, the residents have accused the West Oak Estates HOA, Inc., and McMillin Development of breach of contract, real estate fruad, violations of the covenants, and conversion.

The counter-suit, which was filed in response to a series of suits initiated by the builder and HOA against 19 families who purchased their properties in the subdivision PRIOR TO the time that the builder recorded the covenants/restrictions. In the original suit the HOA and builder seek a judicial declaration that the properties are subject to the declaration of covenants and restrictions("CCRs") and to mandatory membership, despite the fact that the builder dropped the ball in timely filing the CCRs with respect to the residents' particular unit of the subdivision.

In the counter-suit, the residents deny the applicability of the restrictive covenants to their properties. In addition, they have alleged that membership in the HOA is not mandatory for them. In support of that argument, the residents have argued that the law in Texas, and even before Texas or the United States were established, provides that a covenant does not run with the land unless it "touches and concerns the land." It is clear from records recorded with the Bexar County Clerk that the restrictive covenants applicable to the West Oaks Estates HOA were not filed until AFTER each of the Counter-Plaintiffs purchased their properties.

The residents are represented by San Antonio attorney Trey Wilson, who has handled HOA litigation before both on behalf of and against homeowners associations. Wilson maintains that the West Oaks Estates HOA is not a proper Plaintiff in the lawsuit because there is no membership in the HOA by his clients. "Restrictive Covenants are treated by Courts as contracts, and since it is undisputed that my clients are not members of the HOA, there is no contractual privity between them and the HOA which would allow the HOA to bring this suit," said Wilson.

There is currently no trial date in the case.

New York Attorney General's Open Letter About Homeowners Associations -- Though Not Controlling In Texas, Interesting Nonetheless

HOW TO HANDLE PROBLEMS WITH YOUR HOMEOWNERS ASSOCIATION

Members of homeowners associations who are unhappy with how their association is acting (or not acting) often do not know what they can do. This paper is designed to tell such homeowners about some of their rights. In most cases there is no government agency that can help unhappy owners who are having problems with their homeowners association (HOA). The Attorney General's office regulates only the offer and sale of real estate securities (which includes interests in HOAs). It generally does not become involved in owners’ problems with boards of directors after the sponsor is no longer in control of the board. However, this office may be able to help you if the sponsor of the HOA is not keeping the commitments which it
made in the offering plan.

As you may know, a homeowners association is an organization established to govern a private community. Typically it owns and manages some common property for owners of private houses or condominium units. By buying a lot and/or home, an owner automatically becomes a member of the HOA of which it is a part. Before offering to sell memberships, a sponsor must file an offering plan with the Attorney General if sales of individual homes, lots or condo units are involved, unless it is exempted by law or regulation.

Most HOAs are corporations established under the Not-for-Profit Corporation
Law. An HOA is similar to other corporations -- it is governed by a board of directors elected by the members and a set of rules called by-laws. Books and records of financial transactions must be kept, taxes paid, and certain services provided to members. Usually the board has an annual budget prepared to estimate expenses, and then assesses each member a share of the costs.

HOAs vary greatly in the services which they provide. The developer establishes the scope of the association initially by setting out the services and expenses
in the association's budget. The declaration provides the means by which the association can enforce the members' obligations and the by-laws set forth the procedures for running the association. Generally, the developer controls the association at first and relinquishes control to the individual owners some years later.

The primary purpose of the association is to protect and preserve the value of the privately and commonly used property. In furtherance of that goal there may be
restrictions concerning pets; requirements as to fence height; or limitations on the number of cars allowed in the driveways. These rules often conflict with the desires of an individual owner but exist for the general good of the entire community. In addition, the association may have the responsibility to repair and maintain portions of the community, such as roads, roofs, and recreation facilities.
The individual owner in a homeowners association has the opportunity to become involved and participate in the on-going affairs of the community, and the
responsibility to assure that the association's actions conform to the by-laws and
declaration.

Typical Problems

Perhaps your HOA seems dormant -- you never receive notice of meetings, nor are you given financial statements which explain how the assessments you pay are being spent. Perhaps repairs are neglected and snow not removed as quickly as you
expect. Or a nuisance created by your neighbor is allowed to continue. Maybe one owner is allowed to build a deck and another is refused permission to do the same thing. These problems may arise while the association is still under the developer's
control. Be aware that the HOA is an independent body whose functions must not be
merged with the corporate functions of the developer. The developer creates and controls the association initially, but has a duty to protect the investment of the members and to respond to the needs of the association with a sense of fairness and good faith. From the time of the first closing with a member, the developer must abide by the terms of the offering plan, the by-laws of the association and the declaration in the same way that a later independent board must.

Get the Facts

The way to begin dealing with your problems with the board is to understand what rights you have. There are two kinds of research to do.

A. Check the documents for your HOA -- the declaration, certificate of incorporation, and by-laws. Copies of these document should be available from the board of directors or developer; a copy of the declaration and by-laws is in your offering plan.

These documents should include information on:
. what the HOA is responsible for
. how the declaration can be amended (including percentage required)
. how members of the board of directors are elected
. how members of the board can be removed
. the powers and duties of the board of directors
. how annual owner meetings are called
. how special meetings are called
. what remedies exist when a homeowner defaults on his or her obligations including maintenance charges.

B. Look at the Not-for-Profit Corporation Law, the New York State law which
governs the establishment of most homeowners associations. The decisions made by
courts in cases involving the law are the case law which interprets the statute.
The Not-for-Profit Corporation Law (NPCL) is published as volume 37 of McKinney's Consolidated Laws of New York Annotated ("McKinney's") which can be found in law libraries, many lawyers' offices, and in certain public libraries. Included in volume 37 are brief descriptions of case decisions. Important provisions of the NPCL and the sections in which they are found, include the following:

An HOA may have different classes of members. NPCL §601.

By-laws may be adopted, amended or repealed by the members with the appropriate vote, as provided in the by-laws. NPCL §602.

A meeting of the members is to be held annually. NPCL §603.

Members may call special meetings, as authorized in the certificate of
incorporation or by-laws, or if at least 10 percent of the members wish to do
so. NPCL §603.

Directors may be elected at a special meeting. NPCL §604.

Proxies (authorizing another member to vote for you) are permitted subject
to provision in the by laws or certificate of incorporation. NPCL §609.

Members may request that elections be supervised by an inspector. NPCL §610.
The right to vote may be limited by the certificate of incorporation or by-laws.
(For example, there may be no right to vote until the developer gives up
control.) NPCL §612.

Action may be taken on written consent of members without a meeting.
NPCL §614.

Members may demand to see the corporate books and records of accounts, minutes of meetings, and a list of members. NPCL §621.

A derivative action may be brought by five percent or more of the members of the corporation. NPCL §623.

Directors may be removed with or without cause, as determined by the certificate of incorporation and by-laws. NPCL §706.

Unless restricted by the certificate of incorporation or by-laws the board of
directors may take action without holding a meeting if all members of the
board consent in writing to the action. NPCL §708.

Certain actions by a director or officer constitute a conflict of interest, and
may be void or voidable if no disclosure was made. NPCL §715.

Directors and officers must act in good faith and with reasonable diligence,
care and skill. NPCL §717.

Directors and officers may be sued for misconduct. NPCL §720.

Resolving the Problem: First Approach

If the board of directors is not complying with its own certificate of incorporation, declaration or by-laws, you should point this out, in a tactful way, expressing the expectation that the matter will be corrected. Sometimes this is all that is needed to solve a problem. If a simple oral request to an officer of the board fails, you can write a letter. It should be factual, brief and not hostile. Keep copies of any letters that you send, and notes of telephone conversations (the date, time, who called whom, and the gist of the discussion) in case the matter is not quickly resolved. An attempt to influence the board is always more persuasive if it is presented by a significant number of members. If your problem is one that others are affected by, it is worth organizing the other members. If you do, and the attempt to change the situation is not successful, the organized group can always seek to elect new directors at the next annual meeting.

Retaining a Lawyer

If your efforts to resolve your problems with the board fail, you may want to
retain a private lawyer. The Attorney General's office cannot recommend private lawyers. However, a few points may be helpful.

. It is a good idea to select someone with experience in handling HOA problems. You
could begin looking for an attorney by talking with members in your or other HOAs and with attorneys in other specialty areas. If this fails, you may wish to contact a local Bar Association for referrals.

. Some lawyers will not charge for a single initial consultation or will charge only a minimal fee.

. Most lawyers will attempt to resolve any matter through negotiation before considering litigation, as litigation is costly and usually lengthy. Litigating against the board of an HOA, people with whom one lives, can also be very unpleasant.

In Conclusion

If serious problems arise, which the board is not addressing, such as a bank's
threatening to foreclose on a mortgage on the Association’s common property or a
developer's failing to pay common charges on unsold houses or lots, it is important to act swiftly. Often such problems can be resolved, relatively simply, if members organize and act right away. Remember that members of HOA boards are usually other owners who are serving without pay. They generally want to resolve problems and keep peace in the community.

Good luck!

Attorney General of the State of New York