HBA-ATS S.B. 434 76(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 434 By: Brown Business & Industry 4/19/1999 Engrossed BACKGROUND AND PURPOSE In the past decade, the number of property owners' associations in Texas has increased. Because these associations assess dues and fees to their members in exchange for services provided to the community of homeowners, prospective buyers need to be aware of the obligations they may incur before they buy a home. Although the Texas Real Estate Commission provides that addendum and resale certificates may be used in transactions involving the sale of property subject to mandatory assessment in a property owners' association, some associations do not complete the certificate. Without a certificate, many buyers would not be aware of pertinent information. S.B. 434 establishes a new chapter in the Property Code that applies to a subdivision whose property owners' association is entitled to levy regular or special assessments that are secured by a continuing lien on property in the subdivision. The association is required to give an owner, by the 10th day after the association receives the owner's written request, a resale certificate, and current copies of the restrictive covenants applying to the subdivision and of the bylaws and rules of the association. If an association fails to provide the certificate, an owner is authorized to seek legal remedies. 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 Title 11, Property Code, by adding Chapter 207, as follows: CHAPTER 207. DISCLOSURE OF INFORMATION BY PROPERTY OWNERS' ASSOCIATIONS Sec. 207.001. DEFINITIONS. Defines "restrictions," "dedicatory instrument," "property owners' association," "restrictive covenant," "owner," "regular assessment," "special assessment," "resale certificate," and "subdivision." Sec. 207.002. APPLICABILITY. Provides that Chapter 207 applies to a subdivision whose property owners' association (association) is entitled to levy regular or special assessments. Sec. 207.003. DELIVERY OF SUBDIVISION INFORMATION TO OWNER. (a) Requires an association to give an owner, an owner's agent, or a title insurer or its agent, by the 10th day after the association receives the written request from one of those parties, a resale certificate (certificate) that complies with Subsection (b), and current copies of the restrictive covenants applying to the subdivision and of the bylaws and rules of the association. (b) Requires a certificate to state the following information: _a statement of any right of first refusal or other restraint contained in the restrictions or restrictive covenants that restricts the owner's right to transfer the owner's property; _the frequency and amount of any regular assessments; _the amount of any special assessment that is due after the date the resale certificate is prepared; _the total of all amounts due and unpaid to the association that are attributable to the owner's property; _capital expenditures, if any, approved by the association for its current fiscal year; _the amount of reserves, if any, for capital expenditures; _the association's current operating budget and balance sheet; _the total of any unsatisfied judgments against the association; _the style and cause number of any pending lawsuit in which the association is a defendant; _a copy of a certificate of insurance showing the association's property and liability insurance relating to the common areas and common facilities; _a description of any conditions on the owner's property that the association's board has actual knowledge are in violation of the restrictions applying to the subdivision or the bylaws or rules of the association; _a summary or copy of notices received by the association from any governmental authority regarding health or housing code violations existing on the preparation date of the certificate relating to the owner's property or any common areas or common facilities owned or leased by the association; _the amount of any administrative transfer fee charged by the association for a change of ownership of property in the subdivision; _the name, mailing address, and telephone number of the association's managing agent, if any; and _a statement indicating whether the restrictions allow foreclosure of an association's lien on the owner's property for failure to pay assessments. (c) Authorizes an association to charge a fee to assemble, copy, and deliver information required by this section. Authorizes an association to charge a fee to prepare and deliver an update of a certificate. (d) Requires the association to deliver information required by Subsection (a) to the person specified in the written request. Provides that a request that does not specify to whom and where the request information is to be sent, is not effective. Authorizes the association to deliver the information and any update to the certificate by mail, handdelivery, or alternative delivery means specified in the request. (e) Provides that neither an association nor its agent is required to inspect a property before issuing a certificate or an update to a certificate, unless required by a dedicatory agreement. Sec. 207.004. OWNER'S REMEDIES FOR FAILURE BY PROPERTY OWNERS' ASSOCIATION TO TIMELY DELIVER INFORMATION. (a) Authorizes an owner, an owner's agent, or a title insurer or its agent, to submit a second request for the information required by Section 207.003 that the association failed to provide in a timely manner. (b) Authorizes an owner, if an association fails to provide the required information by the seventh day after it receives the second request, to seek a court order directing the association to furnish the required information, a judgment against the association for a maximum amount of $500, for court costs and attorney's fees, or a judgment authorizing the owner or the owner's assignee to deduct the amount awarded as damages or court costs and attorney's fees from any future regular or special assessments payable to the association. Authorizes an owner, if an association fails to provide the required information by the seventh day after it receives the second request, to provide a buyer under contract to purchase the owner's property an affidavit that states that two written requests for the required information were made and that the association did not timely respond. (c) Sets forth that, if the owner gives the buyer under contract to purchase the owner's property the affidavit, a buyer, lender, or title insurer or its agent is not liable to the association for certain monies and debts due to the association. Requires the automatic termination, if the owner gives the buyer under contract to purchase the owner's property the affidavit, of the association's lien to secure the amounts due to the association on the owner's property. Sec. 207.005. EFFECT OF RESALE CERTIFICATION; LIABILITY. (a) Prohibits an association from denying the validity of any statement in the certificate. Requires the automatic termination of the association's lien to secure undisclosed amounts due to the association on the date the certificate is prepared. Provides that a purchaser, a purchaser's agent, owner, owner's agent, lender, and title insurer are not liable for any debt or claim existing on the preparation date of the certificate that is not disclosed in the certificate. (b) Provides that a certificate does not affect the right of an association to recover debts or claims that arise or become due after the date the certificate is prepared, or a lien on a property securing payment of future assessments held by the association. (c) Provides that the owner's agent and the title insurer and its agent are not liable to a buyer for any delay or failure in the association's delivery of information required by Section 207.003. (d) Provides that the association is not liable to an owner selling property for failure of, or untimely delivery of information required by Section 207.003, except as provided by Section 207.004. Provides that an officer or agent of the association is not liable for untimely furnishment of a certificate. SECTION 2. Effective date: September 1, 1999. SECTION 3. Emergency clause.