HBA-NIK H.B. 3298 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 3298 By: Coleman Land & Resource Management 4/22/1999 Introduced BACKGROUND AND PURPOSE Property owners' associations were first formed in the mid-1800's as a method of performing certain municipal functions funded by an assessment on homeowners in a specified area. Currently, these associations may only enforce existing deed restrictions in a specified area. H.B. 3298 permits property owners' associations to petition to create deed restrictions on property in an area and to reinstate lapsed deed restrictions in an area. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Sections 204.001 and 204.002, Property Code, to include definitions of "unrestricted subdivision," "lapsed restrictions," "Chapter 201 subdivision," "subdivision," "residential real estate subdivision," and "restrictions." Sec. 204.002. APPLICATION. Includes a Chapter 201 subdivision and an unrestricted subdivision in the application of this chapter. Adds the provision that this chapter applies without regard to the prior use of Chapter 201 (Restrictive Covenants Applicable to Certain Subdivisions) to create, modify or extend restriction over a portion of a subdivision. SECTION 2. Amends Section 204.004(c), Government Code, to provide that the property owners' association's (association) board of directors or trustees must be elected or appointed in accordance with the applicable provisions of the restriction, if any, and the association's articles of incorporation or bylaws. SECTION 3. Amends Sections 204.005 through 204.009, Government Code, as follows: Sec. 204.005. New title: CREATION OF, EXTENSION OF, ADDITION TO, OR MODIFICATION OF EXISTING RESTRICTIONS. Provides that an association that circulates a petition must notify all record owners of property in the subdivision in writing of the proposed creation of restrictions or, extension, addition to, or modification of the existing restrictions. Provides that notice may also 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 records of the relevant central appraisal district. Makes conforming changes. Sec. 204.006. CREATION OF PROPERTY OWNERS' ASSOCIATION. Provides that Subsections (a), (b) and (c) do not apply to unrestricted subdivisions or Chapter 201 subdivisions. Provides that for the purpose of creating restrictions in unrestricted subdivisions, an entity is deemed to be a property owners' association with the powers under this chapter (Restrictive Covenants Applicable to Certain Subdivisions) if: the entity is a Texas nonprofit corporation; the articles of incorporation or bylaws of the entity state that the entity is a designated representative of owners of property in the unrestricted subdivision; or a "homeowner association," "community association," "civic association," or "civic club" for the unrestricted subdivision, membership in the entity is open to all owners of property in the unrestricted subdivision, and as of the date the entity exercises rights under this chapter, the entity has membership of owners of at least a certain percentage of the unrestricted subdivision, determined by either number of lots, number of separately owned parcels or square footage, excluding streets and public areas. Makes a conforming change. Sec. 204.007. EFFECT ON LIENHOLDERS. Makes nonsubstantive and conforming changes. Sec. 204.008. METHOD OF ADOPTION. Makes nonsubstantive and conforming changes. Sec. 204.009. TEXAS NONPROFIT CORPORATIONS. Makes a conforming change. SECTION 4. Amends Chapter 204, Government Code, by adding Section 204.012, as follows: Sec. 204.012. REINSTATEMENT OF LAPSED RESTRICTIONS. (a) Authorizes an unrestricted subdivision to reinstate its lapsed restrictions if the enumerated procedures concerning the petition process have been followed. (b) Provides that 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 authorizes another petition committee to be formed. (c) Provides that if the petition is approved, the petition is binding on all properties in the subdivision or section, as applicable. Provides that the provisions of Section 204.005 do not apply to reinstatement of lapsed restrictions. (d) Requires the reinstated restrictions to have an initial term of 10 years and automatic renewals of 10 years each, subject to a vote to amend or terminate the restrictions of the owners of at least 60 percent of the property in the subdivision. (e) Prohibits the restrictions from being modified, other than reinstating the lapsed restrictions for the term set forth in Section 204.012(d), except to remove any illegal or unconstitutional provisions, including those relating to race; to create a formal property owners' association with mandatory membership and equivalent voting rights for each owner, which voting rights may be subject to payment of applicable dues or assessments but without any mandatory assessments; to provide that both use and structures shall be residential; or to clarify any ambiguous provisions as determined by the petition committee. (f) Provides that this subsection also applies to a Chapter 201 subdivision which acted prior to the termination of its former restrictions to extend, modify or create restrictions under Chapter 201, as if the restrictions had lapsed. Requires the restrictions which would have lapsed, but for the Chapter 201 petition, to be the restrictions to be reinstated, not the Chapter 201 petition restrictions. Requires the Chapter 201 petition restrictions to continue in effect, unless provided to the contrary in the petition provided to the contrary in the petition provided for in Section 204.012(a) above. SECTION 5. EMERGENCY. Emergency clause. Effective date: upon passage. The proposed amendments to the Government Code in this bill amend language in the Property Code.