HBA-EVB C.S.S.B. 699 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 699 By: Carona Business & Industry 5/15/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE In 1839, the Republic of Texas passed the Exemption Act, which was enacted to protect Texas homesteads against foreclosure. Since 1987, property owners' associations have been able to foreclose on property and operate with considerable latitude regarding their powers to modify, extend, or continue restrictions and procedures. While Article 1396-1.01 et seq., V.T.C.S.(Texas Non-Profit Corporation Act), governs property owners' associations, there is no state agency that monitors or regulates violations of the Texas Non-Profit Corporation Act (Act). The only homeowners' remedies provided under the Act require the homeowner to employ a private attorney to pursue a grievance against a property owners' association. C.S.S.B. 699 creates rights, obligations, and procedures for property owners and property owners' associations with mandatory membership. C.S.S.B. 699 also provides lien, foreclosure, and voting procedures; recordkeeping, information sharing and financial reporting requirements; board and management requirements; purchaser protection; and remedies for violations. 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, Chapter 207, Property Code, by adding Chapter 207, as follows: CHAPTER 207. TEXAS PLANNED COMMUNITY ACT SUBCHAPTER A. GENERAL PROVISIONS Section 207.001. SHORT TITLE. Authorizes this chapter to be cited as the Texas Planned Community Act. Section 207.002. DEFINITIONS. Defines "assessment," "board," "builder," "declarant," "declaration," "dedicatory instrument," "lienholder," "lot," "member," "owner," "petition," "property owners' association" or "association," "regular assessment," "residential subdivision " or "subdivision," "restrictions," "restrictive covenant," "special assessment," and "title insurance company." Section 207.003. APPLICABILITY OF CHAPTER. (a) Provides that this chapter applies only to a residential subdivision that is or was subject to restrictions or provisions in a declaration that authorize the property owners' association to collect regular or special assessments on all or a majority of the property in the subdivision. (b) Provides that this chapter applies only to a property owners' association that requires mandatory membership in the association for all or a majority of the owners of residential property within the subdivision subject to the association's dedicatory instruments. (c) Provides that this chapter applies to a property owners' association regardless of whether the entity is designated as a "homeowners' association," "community association," or similar designation in the restrictions or dedicatory instrument. (d) Provides that this chapter does not apply to a condominium development governed by Chapter 82 (Uniform Condominium Act). SUBCHAPTER B. AMENDMENT AND EXTENSION OF RESTRICTIVE COVENANTS Section 207.031. AMENDMENT OR EXTENSION OF EXISTING RESTRICTIONS. (a) Authorizes the board of a property owners' association to circulate a petition relating to an amendment or extension of existing restrictions, subject to the limitations in a dedicatory instrument applicable during a period of declarant control and in addition to the powers and methods provided in an existing dedicatory instrument or the restrictions. Provides that a property owners' association is not required to comply with Chapter 201 (Restrictive Covenants Applicable to Certain Subdivisions), Property Code, in amending or extending restrictions under this chapter. Prohibits a property owners' association from circulating a petition that does not comply with certain limitations or prohibitions in the dedicatory instrument, or proposes to amend or extend restrictions before the occurrence of a certain event. (b) Provides that a petition under this section must contain certain enumerated information. (c) Provides that a petition under this section expires on the earlier of the date specified in the petition or the first anniversary of the date the petition is first circulated. (d) Requires the property owners' association to mail a copy of the petition by firstclass mail to each owner at the owner's last known mailing address according to the association's records, not later than the 10th day after the date the board votes to circulate a petition. Prohibits the board members and any representative of the board from soliciting approval of the petition door-to-door before the 10th day after the date the petition is mailed to each owner under this subsection. (e) Provides that a petition is approved if at least two-thirds of the record lot owners sign a written acknowledgment approving the petition if the existing restrictions do not contain procedures for modifying, extending, or continuing the restrictions or require 100 percent approval of the record lot owners, or the record lot owners in the number required by existing restrictions for approval of a petition sign a written acknowledgment approving the petition. (f) Authorizes a single co-owner to approve a petition or revoke an approval, and authorizes an owner to revoke an approval at any time before the petition is approved by sending written notice of the revocation to the address specified in the petition for submitting responses. (g) Provides that if a residential subdivision that consists of multiple sections, each with its own restrictions, is represented by a single property owners' association, the approval requirement under Subsection (e)(1) is satisfied by obtaining approval of at least twothirds of the owners of lots in each section or two-thirds of the total number of lots in the association's jurisdiction. (h) Provides that, if approved, the petition is binding on all lots in the residential subdivision or section, as applicable. (i) Provides that the property owners' association must, not later than the 30th day after the date the petition is approved or expires, record the approved petition as a dedicatory instrument in the real property records of the county in which the subdivision is located; and send a notice to each owner by hand delivery or first-class mail at the owner's last known mailing address as reflected in the association's records that includes certain information. (j) Provides that an action to challenge the validity of a restriction adopted by a property owners' association under this section must be brought before the second anniversary of the date the restriction is recorded. Section 207.032. TEXAS NONPROFIT CORPORATION. Provides that if a property owners' association is a Texas nonprofit corporation, the provisions of Article 1396-1.01 et seq., V.T.C.S (Texas Non-Profit Corporation Act) apply to the association, except to the extent that the provisions conflict with this chapter. SUBCHAPTER C. MANAGEMENT OF ASSOCIATION Section 207.061. POWERS OF PROPERTY OWNERS' ASSOCIATION. (a) Authorizes the governing board of a property owners' association (board), unless otherwise provided by the restrictions or the articles of incorporation or bylaws of the property owners' association, to perform an enumerated series of functions. (b) Provides that this section, except as provided by Section 207.062, does not affect the powers of the association or its board to exercise powers granted by the association's dedicatory instruments or other applicable law and does not affect any specific limitations on the powers of the association or its board. Provides that an express grant of power without any limitation on that power is not a limitation of power. (c) Prohibits a dedicatory instrument from being amended to impose restrictions on a declarant that are more restrictive than restrictions on other owners, without the consent of the declarant. (d) Provides that the association or its agent must give written notice to the owner by hand delivery or by certified mail, return receipt requested, at the owner's last known address as reflected in the association's records, before a property owners' association is authorized to suspend an owner's right to use a common area, file a suit against an owner, other than a suit to foreclose under an association's lien, charge an owner for property damage, or levy a fine for a violation of the restrictions or bylaws or rules of the association. _Provides that the notice must describe the violation or property damage that is the basis for the suspension action, charge, or fine and state any amount due to the association by the owner. _Sets forth that the association must provide the property owner a reasonable period to cure the violation and avoid the fine or suspension unless the owner was given notice and a reasonable opportunity to cure a similar violation within the preceding 12 months. _Sets forth that the notice must specify that right and the date by which the violation must be cured to avoid the fine or suspension, if the property owner is entitled to an opportunity to cure the violation. _Provides that the notice must state that the owner has the right to submit a written request for a hearing to discuss and verify facts and resolve the matter in issue before a board-appointed committee, or before the board if the board does not appoint a committee, not later than the 20th day after the date the association delivers the notice or deposits the notice in the mail. _Provides that the notice must state that the owner has the right to appeal the committee's decision to the board by written notice to the board not later than the 10th day after the date the owner receives notice of the committee's decision or deposits the notice in the mail, if a hearing is to be held before a committee. _Requires the association to hold a hearing under this subsection not later than the 30th day after the date the board receives the owner's request for a hearing and requires the association to notify the owner of the date, time, and place of the hearing not later than the 10th day before the date of the hearing. _Authorizes the board or the owner to request a postponement, and, if requested, requires a postponement to be granted for a period of not more than 10 days. _Authorizes the additional postponements to be granted by agreement of the parties. _Authorizes the owner or association to make an audio recording of the meeting. _Provides that this subsection does not apply if the association files a suit seeking a temporary restraining order or temporary injunctive relief or files a suite that includes foreclosure as a cause of action. _Authorizes a party to the suit to file a motion to compel mediation. _Provides that this subsection does not apply to a temporary suspension of a person's right to use common areas if the temporary suspension is the result of a violation that occurred in a common area and involved a significant and immediate risk of harm to others in the subdivision. _Provides that the temporary suspension is effective until the board makes a final determination on the suspension action after following the procedures prescribed by this subsection. _Provides that an owner is not liable for attorney's fees incurred by the association relating to a matter described by the notice if the attorney's fees are incurred before the conclusion of a hearing or, if the owner does not request a hearing, before the date by which the owner must request a hearing under this subsection. _Provides that the owner's presence is not required to hold a hearing under this subsection. _Authorizes an owner or property owners' association to use alternative dispute resolution services. (e) Authorizes a property owners' association to collect reimbursement of reasonable attorney's fees and other reasonable costs incurred by the association relating to collecting amounts, including damages, due the association for enforcing restrictions or the bylaws or rules of the association only if the owner is provided a written notice that the attorney's fees and costs will be charged to the owner if the delinquency or violation continues after a date certain. _Provides that in an action to which Subsection (d) applies, reimbursement of attorney's fees are limited as provided by that subsection. _Requires attorney's fees and other costs incurred by the association collected from the owner to be paid directly to the association or its management company or jointly to the association or its management company and the attorney representing the association. _Requires the association, on written request from the owner, to provide copies of invoices for attorney's fees and other costs relating to the matter for which the association seeks reimbursement of fees and costs. _Provides that the notice provisions of this subsection do not apply to a counterclaim of an association in a lawsuit brought against the association by a property owner. (f) Authorizes the property owners' association to give a copy of the notice required by Subsection (d) to an occupant of the property, in addition to the notice under Subsection (d). Provides that the association must give notice of the fine levied or damage charged to the lot owner not later than the 30th day after the date the fine or charge is imposed. (g) Provides that a rule adopted or amended by a board is not effective until the 30th day after the date a copy of the rule is mailed or delivered to the owners, posted in a prominent public place within the area of the property owners' association, or published in a newspaper with general circulation in the area of the association. Provides that an emergency rule adopted to protect the health and safety of residents of the subdivision is effective immediately after notification is given to the owners. (h) Provides that the restrictions governing the subdivision, to the extent of any conflict, prevail over any provision in the articles of incorporation, bylaws, or rules of the property owners' association. (i) Authorizes directors to be removed from office as provided by the dedicatory instruments or, if the dedicatory instruments do not provide for the removal of a director, as provided by Article 1396-1.01 et seq., V.T.C.S. Section 207.062. ASSESSMENTS. (a) Authorizes an association board to impose and increase regular and special assessments as provided by the dedicatory instruments of the association. (b) Authorizes a majority of lot owners voting under this subsection to set the regular assessments at any amount, regardless of the limits set in the dedicatory instruments, if the restrictions set a maximum dollar amount for regular assessments, by voting in person or by proxy at a regular or special meeting of the association membership at which a quorum is present under Subsection (c), or by voting by mail ballot under Subsection (d). (c) Authorizes a vote to set regular assessments at a meeting of the association membership under Subsection (b) to occur only if notice of the proposed increase in regular assessments is included in the notice of the meeting. Prohibits the meeting from being held before the 30th day after the date the notice of the meeting is mailed or hand-delivered to the owners. (d) Authorizes a vote to change an assessment amount by mail ballot under Subsection (b) to occur only if all members of the board unanimously support the assessment change and the mail ballot includes a statement indicating the board's unanimous support. Provides that the mail ballot must state the date by which all ballots must be postmarked and mailed to the association. Prohibits the date by which a ballot must be postmarked from being before the 30th day after the date the ballot is mailed to the association membership. Prohibits the ballots from being counted before the seventh day after the required postmark date. (e) Authorizes a regular assessment to be increased to any amount by the vote of at least two-thirds of all lot owners, if the restrictions limit increases in the annual regular assessments to a specific percentage or dollar amount. Provides that the voting procedures provided by Subsection (b) apply to this subsection. Section 207.063. ARCHITECTURAL CONTROL COMMITTEE. (a) Provides that this section applies to restrictions providing for the creation and operation of an architectural control committee with the power to approve or deny applications for proposed original construction or the modification of a building, structure, or improvement. Authorizes an association board to serve as an architectural control committee, unless otherwise provided by the dedicatory instruments. (b) Provides that the architectural control authority automatically vests in the association, unless the restrictions applicable to a residential subdivision vest the architectural control authority in the property owners' association on an earlier date, if: (1) the term of the architectural control committee authority expires as prescribed by the restrictions; (2) a residence on the last available residential building site in the subdivision is completed and sold; (3) the person designated as the architectural control committee in the restrictions assigns, in writing, authority to the association; or (4) the declarant, the declarant's designee, or any person named in the dedicatory instrument as the architectural control committee ceases to exercise its authority for more than one year under the restrictions or provisions contained in a dedicatory instrument relating to the architectural control committee. (c) Provides that if the architectural control committee authority is vested in the property owners' association under Subsection (b), the association retains that authority until the restrictions are modified to reflect otherwise or the restrictions are terminated. (d) Authorizes the declarant, the property owners' association, the architectural control committee, or an owner of property subject to a dedicatory instrument to enforce a restrictive covenant that relates to architectural control, construction on a lot, and use restrictions on a lot contained in the dedicatory instrument. Section 207.064. MEETINGS. (a) Requires a property owners' association to hold a general meeting of the membership at least once each year. Authorizes a special meeting of the association's membership to be called by the presiding officer of the board, a majority of the board, or at least 10 percent of the property owners who are members of the association, unless a dedicatory instrument provides less restrictive requirements. (b) Provides that meetings of the property owners' association membership and board must be open to property owners, subject to the right of the board to adjourn a board meeting and reconvene in closed executive session to consider actions involving personnel, threatened or pending litigation, contract negotiations, enforcement actions, matters involving the invasion of privacy of individual owners, or matters that are to remain confidential by request of the affected parties and agreement of the board. Provides that the general nature of any business to be considered in executive session must first be announced at the open meeting. (c) Authorizes a board meeting to be held by any method of communication, including electronic and telephonic communication, unless a dedicatory instrument of the property owners' association provides otherwise, if certain enumerated conditions are met, and authorizes the board to act by unanimous written consent of all the directors, without a meeting, if certain other enumerated conditions are met. (d) Provides that notice of a meeting of the property owners' association membership must be given as provided by the bylaws, or, if the bylaws do not provide for notice, provides that notice must be given to each owner in the same manner that notice is given to members of a nonprofit corporation under Section A, Article 2.11, Article 1396-2.11, V.T.C.S.,(Texas Non-Profit Corporation Act). (e) Provides that notice of a meeting of the property owners' association board must be given as provided by the bylaws, or, if the bylaws do not provide for notice, provides that notice must be given to each board member in the same manner that notice is given to members of the board of a nonprofit corporation under Section B, Article 2.19, Article 1396-2.19, V.T.C.S., (Texas Non-Profit Corporation Act). (f) Requires a property owners' association, on the written request of a property owner, to inform the owner of the time and place of the next regular or special meeting of the board. Requires the association to promptly obtain the information and disclose it to the owner or inform the owner where the information is authorized to be obtained, if the association representative to whom the request is made does not know the time and place of the meeting. (g) Authorizes rules to be adopted, amended, or repealed by a majority vote of the members voting after any period of declarant control under the dedicatory instruments has ceased, if notice of the board meeting, has specified that one of the purposes of the meeting is to consider the adoption, amendment, or repeal of association rules. Requires the board to call a meeting of the general membership not later than the 30th day after the date the board receives the petition, if the board receives a petition signed by at least 10 percent of all owners requesting a meeting to consider the adoption, amendment, or repeal of association rules. Provides that the notice of the meeting must state that one of the purposes of the meeting is to consider the adoption, amendment, or repeal of association rules. (h) Requires the property owners' association to be liable, if an owner makes a written request to a board for compliance with this section, to the owner as provided by Section 207.128, Property Code, if the board knowingly continues to violate this section. Section 207.065. VOTING AND PROXIES. (a) Authorizes only one of the owners to vote, if a lot is owned by more than one person. Authorizes the vote allocated to that lot to be cast only in accordance with the owners' unanimous agreement, if more than one of the multiple owners is present, unless the restrictions or the bylaws or articles of incorporation of the property owners' association provide otherwise. Provides that multiple owners are considered to be in unanimous agreement if one of the owners votes and no other owner promptly protests to the person presiding over the meeting. Provides that, if multiple owners of a lot attempt to vote in person or by proxy on behalf of all the owners, the vote will not be counted. (b) Authorizes votes allocated to a lot to be cast under a written proxy executed by a lot owner unless prohibited by the bylaws of the association. Provides that only the proxy with the most recent date is valid, if more than one proxy is submitted for a single lot. Authorizes a lot owner to revoke a proxy under this section by providing written notice of the revocation to the person presiding over the meeting or by attending and voting in person at the meeting. Provides that a proxy is void if it is not dated or if it purports to be revocable without notice. Provides that a proxy terminates 11 months after the date it is executed unless it specifies a shorter or longer period. (c) Provides that cumulative voting is not permitted. (d) Authorizes an owner who arrives at an association meeting after the meeting commences and who is eligible to vote under the dedicatory instruments to cast a vote on all issues considered at the meeting after the owner arrives. Section 207.066. ASSOCIATION RECORDS. (a) Requires the property owners' association to keep financial records that are sufficiently detailed to enable an accountant to prepare financial statements that comply with generally accepted accounting principles, and the association to prepare a resale certificate under Section 207.091; a management certificate prepared under Section 207.068 and any amendments to the certificate; the name and mailing address of each property owner; voting records, proxies, and correspondence relating to amendments to the dedicatory instruments for at least four years after the date of the amendment; invoices furnished for attorney's fees and other costs under Section 207.061(e) for at least four years after the date the invoice is furnished; and minutes of meetings of the association and board. (b) Requires the property owners' association to furnish to the owner, on an owner's written request, at the owner's expense, a copy of the restrictions and the bylaws and rules of the association not later than the 10th day after the date the request is received by the association. Authorizes the association to charge a reasonable fee for the documents and the copies and also authorizes the association to pay compensation to whoever prepares or gathers the documents or copies. (c) Provides that an owner, owner's agent, and title insurance company or its agent are not liable to a purchaser for a delay or failure of the property owners' association to provide to the owner copies of documents requested by the owner. Authorizes the owner or the owner's agent or a title insurance company or its agent acting on behalf of the owner to submit a second request for the information, if an association fails to furnish the information required by Subsection (b) within the period prescribed by that subsection. Provides that the second request must be delivered by certified mail, return receipt requested, or by hand delivery with a receipt for delivery. Provides that the association is subject to civil penalties under Section 207.128 for failure to timely furnish copies of the documents requested, if the association fails to furnish the information required by Subsection (b) before the seventh day after the date the second request for information is delivered. (d) Authorizes the owner or the owner's agent, including the owner's accountant or attorney, to examine and copy at the owner's expense at any reasonable time and for any proper purpose, the books and records of the property owners' association relevant to that purpose, if an owner makes a written request for copies of documents and states the purpose of the request. (e) Requires the property owners' association to, as a common expense, to obtain the accounting services required by Section 207.067 and by the dedicatory instruments. Requires copies of the reports to be made available to the owners. (f) Requires a declarant to furnish to the property owners' association copies of the information required by Subsection (b) on the date the first lot in the declarant's residential subdivision is sold. Section 207.067. FINANCIAL REPORT; AUDIT OR REVIEW. (a) Requires an association to obtain an annual audit or review of the association's financial records by a certified public accountant or public accountant unless, at a general or special membership meeting of the association, the owners who are in attendance in person or by proxy vote against having the audit or review or vote to have the association's records for the fiscal year reviewed by the board or a board-appointed committee. (b) Provides that this section applies regardless of the provisions in a dedicatory instrument regarding audit and review of association financial records. (c) Provides that during a period of declarant control, consent of the declarant is required to waive the requirement for an audit or review prescribed by the dedicatory instruments. Section 207.068. MANAGEMENT CERTIFICATES. (a) Requires a property owners' association to record in each county in which any portion of the residential subdivision is located a management certificate, signed and acknowledged by an officer of the association, stating the name of the subdivision; the name of the association; the recording data for the subdivision; the recording data for the declaration; the mailing address of the association or the name and mailing address of the person managing the association; and other information the association considers appropriate. (b) Requires the property owners' association to record an amended management certificate not later than the 30th day after the date the association has notice of a change in any information in the recorded certificate required by Subsection (a). (c) Provides that the property owners' association and its officers, directors, employees, and agents are not subject to liability to any person for a delay in recording or failure to record a management certificate, unless the delay or failure is wilful or caused by gross negligence. Section 207.069. BOARD MEMBER EDUCATION. (a) Prohibits a board member of an association from voting as a board member under the association's dedicatory instruments after the sixth month after the board member first attends a board meeting as an elected board member unless the board member has viewed a videotape or attended a class approved by the attorney general for the purpose of educating board members on their obligations and rights under this chapter and other laws relating to property owners' associations. (b) Provides that the board member must furnish to the association a signed statement to be filed in the association's permanent records listing the name of the videotape and the date the board member viewed the tape or the name and sponsor of the class and the date the board member attended the class, if a board member views a videotape or attends a class described by Subsection (a). (c) Requires the board member's right to vote to be reinstated automatically when the board member complies with this section, if a board member's right to vote has lapsed because the member failed to comply with Subsection (a). SUBCHAPTER D. PROTECTION OF PURCHASERS Section 207.091. FURNISHING OF SUBDIVISION INFORMATION. (a) Requires the property owners' association to deliver to the owner or the owner's agent or the title insurance company or its agent, not later than the 10th day after the date a written request for subdivision information is received from an owner, the owner's agent, or a title company or its agent acting on behalf of the owner a current copy of the restrictions applying to the subdivision, a current copy of the bylaws and rules of the association, and a resale certificate that complies with Subsection (b). (b) Provides that a resale certificate furnished by the property owners' association under Subsection (a) must contain certain enumerated information. (c) Authorizes a property owners' association to charge a reasonable fee to assemble, copy, and deliver the information required by this section, and prepare and deliver an update of a resale certificate. (d) Requires the property owners' association to deliver the information required by Subsection (a) to the person specified in the written request. Provides that the written request must specify the person to whom and location to which the information must be sent. Authorizes the association to deliver the information required by Subsection (a) and any update to a resale certificate by mail, hand delivery, or alternative delivery means as specified in the written request. (e) Provides that, unless required by the dedicatory instrument, a property owners' association or its agent is not required to inspect property before issuing a resale certificate or an update to a resale certificate. Section 207.092. SECOND REQUEST FOR INFORMATION; AFFIDAVIT OF COMPLIANCE. (a) Authorizes the owner, the owner's agent, or a title insurance company or its agent acting on behalf of the owner to submit a second written request for the information, if a property owners' association fails to furnish the information as provided by Section 207.091. Provides that the request must be delivered by certified mail, return receipt requested, or by hand delivery with a receipt for delivery. (b) Authorizes the owner, if the property owners' association fails to deliver the information required by Section 207.091 before the seventh day after the date the second request for information is mailed or delivered, to pursue the remedies provided by Section 207.128(c), or provide the purchaser under a contract to purchase the owner's property an affidavit stating that the owner, the owner's agent, or a title insurance company or its agent acting on behalf of the owner made two written requests as provided by this subchapter to the property owners' association for the information described by Section 207.091; and that the property owners' association failed to timely provide the information. (c) Sets forth that if the owner provides the purchaser under contract to purchase the owner's property with an affidavit described by Subsection (b)(2) the purchaser, lender, and title company and its agent are not liable to the association for any money due and unpaid by the owner to the property owners' association on the date the affidavit was prepared, and any other debt to the association that accrued before the date the affidavit was prepared. Sets forth, also, that if the owner provides the purchaser with an affidavit described by this section that any property owners' association lien to secure amounts due to the association on the date the affidavit was prepared automatically terminates. Section 207.093. EFFECT OF RESALE CERTIFICATE; LIABILITY. (a) Prohibits a property owners' association from denying the validity of any statement in a resale certificate. Provides that the property owners' association lien to secure undisclosed amounts due to the association on the date the resale certificate is prepared automatically terminates as a lien securing the undisclosed amount. Provides that the purchaser, purchaser's agent, owner, owner's agent, lender, and title insurance company and its agent are not liable for any debt or claim existing on the date a resale certificate was prepared if the debt or claim is not disclosed in the resale certificate. (b) Provides that a resale certificate does not affect the property owners' association's right to recover amounts that become due or claims that arise after the date the resale certificate is prepared, or the property owners' association's lien on property securing the payment of future assessments. (c) Provides that the owner, the owner's agent, and the title insurance company and its agent are not liable to the purchaser for the property owners' association's delay in delivering or failure to deliver the information required by Section 207.091. (d) Sets forth that, except as provided by Section 207.128, the property owners' association is not liable to the owner for the association's delay in delivering or failure to deliver the information required by Section 207.091. Provides that an officer or agent of the property owners' association is not liable for the association's delay in delivering or failure to deliver a resale certificate under Section 207.091. SUBCHAPTER E. PROPERTY OWNERS' ASSOCIATION LIEN FOR ASSESSMENTS Section 207.121. OWNER'S PERSONAL OBLIGATION; ASSOCIATION LIEN REQUIREMENTS. (a) Provides that a lot owner is not personally liable for assessments that accrue before title to the lot is transferred to the lot owner or after title to the lot is transferred from the lot owner to another person. Provides that a lot owner is personally liable for association assessments that accrue during the period the owner holds title to the lot, unless otherwise provided in the dedicatory instruments. (b) Provides that a property owners' association has a lien against an owner's lot and is authorized to foreclose the lien only if the association is granted that authority in the restrictions. Provides that unless otherwise provided in the restrictions, on the date the owner acquires title to the lot, any lien of the association existing under the restrictions secures accrued and unpaid assessments on or after the date the owner acquires title to the lot. Section 207.122. PERFECTION OF ASSOCIATION LIEN. Provides that a property owners' association's lien for assessments is perfected by recording the instructions in the real property records of the county in which the property subject to the restrictions is located. Provides that no other recording of a lien or notice of lien is required to perfect the lien, unless the restrictions provide otherwise. Section 207.123. POWER OF SALE IF NONJUDICIAL FORECLOSURE IS PERMITTED. (a) Provides that a lot owner grants to the property owners' association a power of sale in connection with the foreclosure of the association's lien by acquiring property in a residential subdivision governed by a dedicatory instrument that expressly allows nonjudicial foreclosure or foreclosure under a deed of trust. (b) Authorizes the association, by written resolution, to appoint an officer, agent, trustee, or attorney to exercise the power of sale on its behalf, if a dedicatory instrument of a property owners' association expressly allows nonjudicial foreclosure or foreclosure under a deed of trust. Section 207.124. EXCHANGE OF INFORMATION. (a) Authorizes a holder of a lien recorded against the property to provide the association, at the association's request, information regarding the owner's debt secured by the holder's lien and other relevant information, if a lot owner is delinquent in paying an assessment to a property owners' association. Authorizes the association, at the request of a lienholder, to furnish the lienholder with information about the property and the property owner's obligations to the association. (b) Authorizes the association to notify other lienholders of the default and the association's intent to foreclose its lien, if a lot owner defaults in the owner's monetary obligations to the property owners' association. Requires the association to notify any holder of a recorded lien or perfected mechanic's lien against the property who has given the association a written request for notice of the property owner's default or the association's intent to foreclose. Section 207.125. FORECLOSURE OF LIEN. (a) Provides that a property owners' association has the right to foreclose its lien on a lot under a dedicatory instrument that provides for a lien, grants authority to foreclose the lien, and was recorded at the time the owner acquired title to the lot; or a court order foreclosing the lien. (b) Provides that the association or its agent must send the owner written notice, by certified mail, return receipt requested, at the last known address as reflected in the association's records and at the address of the owner as reflected in the records of the appraisal district for the county in which the lot is located, before a property owners' association is authorized to institute foreclosure proceedings against an owner's lot. Provides that the notice must include a copy of this subchapter and state that: _the owner is authorized to avoid the foreclosure by paying all amounts due before the time of the foreclosure _the owner is authorized to redeem the property before the 91st day after the date the association mails written notice of the sale to the owner under Section 207.127; _to redeem the property, the owner must pay all amounts due, which may be significantly more than the redemption costs before foreclosure as a result of the costs associated with foreclosure and deed transfers after foreclosure; _the owner is authorized within 20 days after the date the association delivers the notice or deposits the notice in the mail, unless a hearing was held or requested by the owner under Subsection (c) relating to the amounts that are the basis for the foreclosure, to request in writing a hearing before a board-appointed committee, or before the board if the board does not appoint a committee, to discuss and verify facts and resolve the matter in issue; and _if the owner requests a hearing under Subdivision (4) and if the hearing is before a committee, the owner is authorized to appeal the committee's decision to the board by written notice delivered to the board not later than the 10th day after the date the association delivers the notice of the committee's decision or deposits the notice in the mail. (c) Authorizes an owner to request a hearing before the property owners' association is authorized to institute foreclosure proceedings. Provides that an owner who requests a hearing under Subsection (b) must submit the request in writing to the association representative designated in the notice by hand delivering the request or delivering the request by certified mail, return receipt requested, not later than the 20th day after the date the association delivers or deposits in the mail the notice to the owner under Subsection (b). Requires the hearing to be held not later than the 30th day after the date the board receives the owner's request for a hearing. Authorizes the board or the owner to request a postponement, and if requested, requires a postponement to be granted for a period of not more than 10 days. Authorizes additional postponements to be granted by agreement of the parties. Authorizes the owner or the association to make an audio recording of the meeting. Provides that an owner is not liable for attorney's fees incurred by the association relating to a matter described by the notice in Subsection (b) if the attorney's fees are incurred before the conclusion of the hearing or, if the owner does not request a hearing, before the date by which the owner must request a hearing under this subsection. Provides that an owner's presence is not required to hold a hearing under this subsection. (d) Authorizes an owner or association to use alternative dispute resolution services. (e) Authorizes a party to the suit to file a motion to compel mediation, if a foreclosure suit is filed. (f) Authorizes a lot owner to avoid foreclosure by paying all amounts due the property owners' association, including foreclosure-related costs incurred by the association, at any time before a foreclosure sale. Provides that an owner is not liable for attorney's fees incurred by the association relating to a foreclosure proceeding if the attorney's fees are incurred before the conclusion of the hearing requested under Subsection (c) or, if the owner does not request a hearing, before the date by which the owner must request a hearing under Subsection (c). (g) Authorizes the property owners' association to bid for and purchase the property at the foreclosure sale as a common expense. Authorizes the association to own, lease, encumber, exchange, sell, or convey the property, subject to Section 207.127. (h) Requires the association to refund the excess proceeds to the owner, if the foreclosure sales price exceeds the amount due to the property owners' association. (i) Prohibits a court from setting aside a sale on petition of a lot owner solely because the purchase price at the foreclosure sale is insufficient to fully satisfy the owner's debt. (j) Prohibits a property owners' association from foreclosing a lien for an assessment consisting solely of fines or attorney's fees associated solely with fines. (k) Provides that this section does not prevent an owner from filing an action to enjoin a wrongful foreclosure or an action for damages for wrongful foreclosure by a property owners' association. Section 207.126. NOTICE AFTER FORECLOSURE SALE. (a) Provides that a property owners' association that conducts a foreclosure sale of an owner's lot must send to the lot owner, by certified mail, return receipt requested, written notice of the sale and of the property owner's right of redemption under Section 207.127 not later than the 30th day after the date of the foreclosure sale. (b) Provides that the notice must be sent by certified mail, return receipt requested, to the property owner's last known mailing address, as reflected in the records of the property owners' association. (c) Provides that the association must record an affidavit in the real property records of the county in which the lot is located, stating the date on which the notice was sent and containing a legal description of the lot, not later than the 30th day after the date the association sends the notice required by Subsection (a). Provides that any person is entitled to rely conclusively on the information contained in the recorded affidavit. Section 207.127. RIGHT OF REDEMPTION AFTER FORECLOSURE. (a) Authorizes the owner of property in a residential subdivision to redeem the property from any purchaser at a sale foreclosing a property owners' association's assessment lien not later than the 90th day after the date the association mails written notice of the sale to the owner under Section 207.126. (b) Prohibits a person who purchases property at a sale foreclosing a property owners' association's assessment lien from transferring ownership of the property to a person other than a redeeming owner during the redemption period. (c) Provides that the owner must, to redeem property purchased by the property owners' association at foreclosure sale, pay to the association the enumerated costs related to foreclosure. (d) Provides that the owner, to redeem property purchased at the foreclosure sale by a person other than the property owners' association, must pay to the association certain amounts due, interest, costs incurred, and unpaid assessments related to foreclosure; and must pay to the person who purchased the property at the foreclosure sale any assessments levied, the purchase price paid, interest, and any reasonable cost incurred by the purchaser. (e) Requires the purchaser of the property at foreclosure to immediately execute and deliver to the owner a deed transferring the property to the redeeming property owner, if a lot owner redeems the property under this section. (f) Provides that if, before the expiration of the redemption period, the redeeming lot owner fails to record the deed from the foreclosing purchaser or fails to record an affidavit stating that the owner has redeemed the property, the owner's right of redemption as against a bona fide purchaser or lender for value expires after the redemption period. (g) Requires all rent and other income collected by the association, if the property owners' association purchases the property at foreclosure, from the date of the foreclosure sale to the date of redemption to be credited toward the amount owed the association under Subsection (c), and if there are excess proceeds, they are required to be refunded to the owner. Requires all rent and other income collected by the purchaser, if a person other than the association purchases the property at foreclosure, from the date of the foreclosure sale to the date of redemption to be credited toward the amount owed the purchaser under Subsection (d), and if there are excess proceeds, those proceeds shall be refunded to the owner. (h) Requires the purchaser to obtain an affidavit from the association or its authorized agent stating that all amounts owed the association under Subsection (d) have been paid, if a person other than the property owners' association is the purchaser at the foreclosure sale, before executing a deed transferring the property to the redeeming owner. Requires the association to provide the purchaser with the affidavit not later than the 10th day after the date the association receives all amounts owed to the association under Subsection (d). Provides that failure of a purchaser to comply with this subsection does not affect the validity of a redemption by a redeeming owner. (i) Provides that the property that is redeemed remains subject to all liens and encumbrances on the property before foreclosure. Provides that any lease entered into by the purchaser of property at a sale foreclosing an assessment lien of a property owners' association is subject to the right of redemption provided by this section and the owner's right to reoccupy the property immediately after the redemption. (j) Requires the association to refund any partial payments to the property owner by mailing payment to the owner's last known address as shown in the association's records not later than the 30th day after the expiration date of the redemption period, if a lot owner makes partial payment of amounts due to the association at any time before the redemption period expires but fails to pay all amounts necessary to redeem the lot before the redemption period expires. (k) Provides that the lot owner's right of redemption is extended until the 10th day after the date the association and any third party foreclosure purchaser provides written notice to the owner of the amounts that must be paid to redeem the lot, if a lot owner sends a written request to redeem the lot on or before the last day of the redemption period. (l) Requires the association or third party foreclosure purchaser to record an affidavit in the real property records of the county in which the lot is located stating that the owner did not redeem the lot during the redemption period or any extended redemption period, after the redemption period and any extended redemption period under Subsection (k) expires. Section 207.128. REMEDIES FOR ASSOCIATION VIOLATIONS. (a) Provides that a property owners' association is liable, except as provided by Subsection (b), to an owner if the owner notifies the association in writing of an alleged material violation of this chapter and the association fails to comply with this chapter before the 31st day after the date the owner provides notice under this subsection. (b) Provides that the property owners' association is liable to the owner if the association fails to furnish a certain resale certificate requested by an owner, the association fails to furnish certain documents requested by the owner, or if the board knowingly continues to violate certain open meetings requirements after certain notice has been given to the board. (c) Entitles the owner to certain remedies, including a certain court order or certain judgments, if the association is liable to the owner under Subsection (a) or (b). (d) Entitles the owner only to the remedies described under Subsections (c)(2)- (4), if the association is liable to the owner under Subsection (a) and the association is unable to comply with this chapter within the 30-day period prescribed by Subsection (a). (e) Authorizes an owner, in addition to the remedies provided by remedies provided by Subsection (c), to recover a civil penalty of not more than $1,000 from the association if the association in bad faith files a suit against an owner. (f) Authorizes a property owners' association or a lot owner who is adversely affected by a violation of the dedicatory instruments by the association's board or another owner to seek judicial enforcement of the dedicatory instruments. (g) Authorizes the attorney general to file a suit to enforce this chapter on behalf of the owner. (h) Provides that this chapter does not prohibit a property owners' association or a lot owner from exercising other remedies provided by law. Section 207.129. EFFECT OF TAX LIEN FORECLOSURE. Provides that foreclosure of a tax lien under Chapter 32 (Tax Liens and Personal Liability), Tax Code, does not discharge a property owners' association's lien for an assessment under this subchapter or under a dedicatory instrument or restrictions for amounts that become due to the association after the date of foreclosure of the tax lien. SECTION 2. Amends Chapter 204, Property Code, by adding Section 204.012, as follows: Section 204.012. EFFECT OF REPEAL OF LAW. (a) Provides that an extension of, addition to, or modification of restrictions or a dedicatory instrument adopted in reliance on this chapter as this chapter existed immediately before January 1, 2000, is not affected by the repeal of Sections 204.003, 204.005, 204.007, 204.008, 204.009, 204.010, and 204.011. (b) Provides that a petition to extend, add to, or modify restrictions that is first placed into circulation before January 1, 2000, is not affected by the repeal of the sections described by Subsection (a) if: _before January 1, 2000, at least 10 owners have approved the petition; _the approval of the number of lot owners required to approve the extension, addition, or modification is obtained before January 1, 2001; and _the approved petition is recorded in the real property records of the county in which the affected property is located on or before February 1, 2001. SECTION 3. Amends Subchapter A, Chapter 5, Property Code, by adding Section 5.012, as follows: Section 5.012. NOTICE OF OBLIGATIONS RELATED TO MEMBERSHIP IN PROPERTY OWNERS' ASSOCIATION. (a) Requires a seller of residential real property that is subject to membership in a property owners' association and that comprises not more than one dwelling unit located in this state to give to the purchaser of the property a written notice that reads substantially similar to the specified notice. (b) Requires the seller to deliver the notice to the purchaser before the date the executory contract binds the purchaser to purchase the property. Authorizes the notice to be given separately. authorizes the title of the notice prescribed by this section, the references to the street address and date in the notice, ad the purchaser's signature on the notice to be omitted, if the notice is included as part of the executory contract or another notice. (c) Provides that the section does not apply to certain enumerated transfers. (d) Authorizes the purchaser, if an executory contract is entered into without the seller providing the notice required by this section, to terminate the contract for any reason within the earlier of seven days after the date the purchaser receives the notice, or the date the transfer occurs as provided by the executory contract. (e) Provides that the purchaser's right to terminate the executory contract under Subsection (d) is the purchaser's exclusive remedy for the seller's failure to provide the notice required by this section. SECTION 4. Repealer: Sections 204.003 (Provisions of Restrictive Covenants Prevail in Certain Circumstances), 204.005 (Extension of, Addition to, or Modification of Existing Restrictions), 204.007 (Effect on Lienholders), 204.008 (Method of Adoption), 204.009 (Texas Nonprofit Corporations), 204.010 (Powers of Property Owners' Association), and 204.011 (Architectural Control Committee), Property Code. SECTION 5. (a) Effective date: January 1, 2000, except that Section 207.069 (Board Member Education), Property Code, as added by this Act, takes effect July 1, 2000. (b) Makes application of Subchapter E, Chapter 207, Property Code, as added by this Act, prospective. (c) Requires the attorney general to establish procedures for approving and begin approving videotapes and classes, as provided by Section 207.069, Property Code, as added by this Act, on or before July 1, 2000. (d) Makes application of Section 5.012, Property Code, as added by this Act, prospective to an executory contract that is binding on a seller and purchaser beginning January 1, 2000. SECTION 6. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 699 differs from the original, as follows: CHAPTER 207. TEXAS PLANNED COMMUNITY ACT SUBCHAPTER A. GENERAL PROVISIONS The substitute differs from the original in SECTION 1 (proposed Section 207.002, Property Code) by: defining "assessment" and "title insurance company;" redefining "lot," to include any improvements on the designated parcel; redefining "residential subdivision" or "subdivision" to mean a planned development in which all land is subject to restrictions that limit a majority of the land subject to the dedicatory instruments, excluding streets, common areas, and public areas, rather than streets and public areas, to residential use for single-family homes, townhomes, or duplexes only, rather than residential use only. The substitute differs from the original in SECTION 1 (proposed Section 207.003, Property Code) by providing that this chapter applies only to a residential subdivision that is or was subject to restrictions or provisions in a declaration that authorize the property owners' association to collect regular or special assessments on all or a majority of the property, rather than on property, in the subdivision. The substitute further differs from the original by providing that this chapter applies only to a property owners' association that requires, rather than requires or required, mandatory membership in the association for all or a majority of the owners, rather than all owners, of residential property within the subdivision subject to the association's dedicatory instruments. SUBCHAPTER B. AMENDMENT AND EXTENSION OF RESTRICTIVE COVENANTS The substitute differs from the original in SECTION 1 (proposed Section 207.031(a), Property Code) by authorizing the board of a property owners' association, rather than a property owners' association, to circulate, rather than circulate and approve, a petition relating to an amendment or extension of existing restrictions, subject to the limitations in a dedicatory instrument applicable during a period of declarant control and in addition to the powers and methods provided in an existing dedicatory instrument or the restrictions. The substitute differs from the original by providing that a property owners' association is not required to comply with Chapter 201 (Restrictive Covenants Applicable to Certain Subdivisions), Property Code, in amending or extending restrictions under this chapter. The substitute also differs from the original by prohibiting a property owners' association from circulating a petition that does not comply with certain limitations or prohibitions in the dedicatory instrument, or proposes to amend or extend restrictions before the occurrence of a certain event. The substitute differs from the original by deleting the provision that if an existing dedicatory instrument for a residential subdivision contains procedures for modifying, extending, or continuing the restrictions and the procedures require less than 100 percent approval of the property owners in the residential subdivision to modify, extend, or continue the restrictions, the percentage approval required by the restrictions prevails over the percentage required by Subsection (c) or (d). The substitute differs from the original in SECTION 1 (proposed Section 207.031(b), Property Code) by deleting Section 207.031(b) of the original, which authorized the property owners' association for the subdivision to circulate and approve a petition relating to an amendment, extension, or continuation of the restrictions if existing or expired restrictions for a residential subdivision do not contain procedures for modifying, extending, or continuing the restrictions or require 100 percent approval of the property owners at any time in order to modify, extend, or continue the restrictions. The original Section 207.031(b) also provided that the petition must comply with the limitations or prohibitions in a dedicatory instrument applicable during a period of declarant control. The substitute further differs from the original by redesignating proposed Section 207.031(g) of the original bill as Section 207.031(b) of the substitute. The new Section 207.031(b) provides that a petition under this section must contain certain enumerated information, including: _a copy of the proposed language for the amendment or extension, rather than a copy of the proposed amendment language; _a summary of the anticipated effect of the amendment or extension, rather than amendments; _the date the board first voted to place the petition into circulation, rather than the date the petition was first placed in circulation; _the telephone number to call to obtain answers to questions relating to the petition or proposed amendment or extension, rather than the name and telephone number of a person designated by the property owners' association to answer questions about the petition and proposed amendments; _the address to which a response must be sent, rather than is to be sent; and _the date on which the amendment or extension, rather than amendments, will become effective. The substitute differs from the original by deleting proposed Section 207.031(c), Property Code, of the original, which set forth that, except as provided by Subsection (a), a petition described by Subsection (a) or (b) is effective if: _the petition is approved by the owners, excluding lienholders, purchasers under an executory contract, and owners of mineral interests, of at least 66 percent of the lots in the residential subdivision; _the petition does not amend or extend a provision that, under the restrictions, is prohibited from being amended or extended until a certain event occurs; _the petition is recorded as a dedicatory instrument in the real property records of the county in which the subdivision is located; and _a copy of the recorded petition is provided to all owners of lots in the subdivision. The substitute differs from the original by redesignating proposed Section 207.031(i) of the original bill as Section 207.031(c) of the substitute, which provides that a petition under this section expires on the earlier of the date specified in the petition or the first anniversary of the date the petition is first circulated. Makes nonsubstantive changes. The substitute differs from the original by adding a new Section 207.031(d), which requires the property owners' association to mail a copy of the petition by first-class mail to each owner at the owner's last known mailing address according to the association's records, not later than the 10th day after the date the board votes to circulate a petition. The substitute also differs from the original by prohibiting the board members and any representative of the board from soliciting approval of the petition door-to-door before the 10th day after the date the petition is mailed to each owner under this subsection. The substitute differs from the original by adding a new Section 207.031(e), which provides that a petition is approved if at least two-thirds of the record lot owners sign a written acknowledgment approving the petition if the existing restrictions do not contain procedures for modifying, extending, or continuing the restrictions or require 100 percent approval of the record lot owners, or the record lot owners in the number required by existing restrictions for approval of a petition sign a written acknowledgment approving the petition. The substitute differs from the original by deleting proposed Section 207.031(f) of the original, which provided that a property owners' association that circulates a petition must notify all record owners of property in the residential subdivision in writing of the proposed amendment or extension of the existing restrictions; authorized notice to be hand-delivered to residents in the subdivision or sent by first class mail to the owner's last known mailing address as reflected in the ownership records maintained by the association; and authorized the approval of multiple owners of a lot to be reflected by the signature of a single co-owner. The substitute also differs from the original by adding a new Section 207.031(f), which authorizes a single co-owner to approve a petition or revoke an approval, and authorizes an owner to revoke an approval at any time before the petition is approved by sending written notice of the revocation to the address specified in the petition for submitting responses. The substitute differs from the original by redesignating proposed Section 207.031(d) of the original bill as Section 207.031(g) of the substitute, which provides that if a residential subdivision that consists of multiple sections, each with its own restrictions, is represented by a single property owners' association, the approval requirement under Subsection (e)(1), rather than approval requirement, is satisfied by obtaining approval of at least two-thirds, rather than 66 percent, of the owners of lots in each section or two-thirds of the total number of lots in the association's jurisdiction. Makes conforming and nonsubstantive changes. The substitute differs from the original by redesignating proposed Section 207.031(e) of the original bill as Section 207.031(h) of the substitute, which provides that, if approved, the petition is binding on all lots in the residential subdivision or section, as applicable. The substitute differs from the original by deleting proposed Section 207.031(h) of the original, which required the property owners' association to hand deliver or send a notice to each owner by first class mail to the owner's last known mailing address according to the association's records not later than the 10th day after the petition expires or is adopted; and provided that the notice must include a copy of the amendment, a statement that the petition was approved or expired, a summary of the effects of the approval if approved, and the effective date of any amendments. The substitute differs from the original by adding a new Section 207.031(i), which provides that the property owners' association must, not later than the 30th day after the date the petition is approved or expires, record the approved petition as a dedicatory instrument in the real property records of the county in which the subdivision is located; and send a notice to each owner by hand delivery or firstclass mail at the owner's last known mailing address as reflected in the association's records that includes certain information. The substitute differs from the original in Section 207.031(j), by providing that an action to challenge the validity of a restriction, rather than dedicatory instrument, adopted by a property owners' association under this section must be brought before the second, rather than first, anniversary of the date the restriction, rather than dedicatory instrument, is recorded. The substitute differs from the original by deleting proposed Section 207.031(k) of the original bill, which provided that any lien recorded before a dedicatory instrument is adopted by a property owners' association under this section is subject to the dedicatory instrument at the time the instrument is recorded in the real property records. SUBCHAPTER C. MANAGEMENT OF ASSOCIATION The substitute differs from the original in proposed Section 207.061, Property Code, by authorizing the governing board of a property owners' association (board), unless otherwise provided by the restrictions or the articles of incorporation or bylaws of the property owners' association, to perform an enumerated series of functions, including: _collecting from property owners regular assessments or special assessments authorized by the association for common expenses, rather than regular assessments or special assessments for common expenses from property owners; and _imposing reasonable fines for a violation of the restrictions or the bylaws or rules of the association if the fines are approved by a majority of the members of the association and notice, rather than if notice, and an opportunity to be heard are provided under Subsection (d), rather than Subsection (e). The substitute differs from the original in proposed Section 207.061(b), Property Code, by providing that this section, except as provided by Section 207.062, does not affect the powers of the association or its board to exercise powers granted by the association's dedicatory instruments or other applicable law and does not affect any specific limitations on the powers of the association or its board, rather than this section does not affect the powers of the association or its board to exercise powers granted by the association's dedicatory instruments or other applicable law. The substitute also differs from the original by providing that an express grant of power without any limitation on that power is not a limitation of power. The substitute differs further from the original in proposed Section 207.061(b) by removing text that authorized an association board to exercise the powers granted in this section only if a majority of owners who are present in person or by proxy at a general membership meeting of the association vote in favor of granting the powers to the board; and provided that notice of the meeting must be sent not later than the 30th day before the date of the meeting and provided that it must inform the owner that one of the purposes of the meeting is to consider granting the board powers authorized by statute on the approval of the association membership. The substitute differs from the original by deleting proposed Section 207.061(d), which provided that an arbitrary or capricious bylaw or rule of the property owners' association is not enforceable. The substitute also differs from the original by redesignating proposed Section 207.061(e) of the original as Section 207.061(d) of the substitute. The substitute differs from the original in Section 207.061(d) of the substitute (Section 207.061(e) of the original) by providing that the association or its agent must give written notice to the owner by hand delivery or by certified mail, return receipt requested, at the owner's last known address as reflected in the association's records, before a property owners' association is authorized to suspend an owner's right to use a common area, file a suit against an owner, other than a suit to foreclose under an association's lien, charge an owner for property damage, or levy a fine for a violation of the restrictions or bylaws or rules of the association, rather than suspend an owner's right to use a common area or file a suit against an owner, other than a suit to foreclose under an association's lien. The substitute also differs from the original in Section 207.061(d) of the substitute by providing that the notice must describe the violation or property damage, rather than violation, that is the basis for the suspension action, charge, or fine and state any amount, rather than suspension action and any unpaid amount, due to the association by the owner. The substitute differs from the original in Section 207.061(d) of the substitute by adding new text that sets forth that the association must provide the property owner a reasonable period to cure the violation and avoid the fine or suspension unless the owner was given notice and a reasonable opportunity to cure a similar violation within the preceding 12 months; and sets forth that the notice must specify that right and the date by which the violation must be cured to avoid the fine or suspension, if the property owner is entitled to an opportunity to cure the violation. The substitute differs from the original in Section 207.061(d) of the substitute by providing that the notice must state that the owner has the right to submit a written request for a hearing to discuss and verify facts and resolve the matter in issue, rather than to request a hearing, before a board-appointed committee, or before the board if the board does not appoint a committee, not later than the 20th, rather than 10th, day after the date the association delivers the notice or deposits the notice in the mail, rather than the owner receives the notice to discuss and verify facts and resolve the matter in issue. The substitute further differs from the original in Section 207.061(d) of the substitute by providing that the notice must state that the owner has the right to appeal the committee's decision to the board by written notice to the board not later than the 10th day after the date the association delivers the notice of the committee's decision or deposits the notice in the mail, rather than the 10th day after the date the owner receives notice of the committee's decision, if a hearing is to be held before a committee. The substitute differs from the original by deleting a provision found in Section 207.061(e) of the original, which provided that an owner who requests a hearing under this subsection must submit the request in writing and deliver the request to the association not later than the 10th day after the date the owner receives notice of the suspension action under this subsection or not later than the 10th day after the date the owner receives notice of the committee's decision, as appropriate. The substitute also differs from the original in Section 207.061(d) of the substitute by adding the requirement that the association notify the owner of the date, time, and place of the hearing not later than the 10th day before the date of the hearing. The substitute also differs from the original by authorizing the board or the owner to request a postponement, and, if requested, requires a postponement to be granted for a period of not more than 10 days; and authorizes the additional postponements to be granted by agreement of the parties. The substitute differs from the original by adding new text to Section 207.061(d) of the substitute, which provides that this subsection does not apply to a temporary suspension of a person's right to use common areas if the temporary suspension is the result of a violation that occurred in a common area and involved a significant and immediate risk of harm to others in the subdivision; and provides that the temporary suspension is effective until the board makes a final determination on the suspension action after following the procedures prescribed by this subsection. The substitute also differs from the original in Section 207.061(d) of the substitute by providing that an owner is not liable for attorney's fees incurred by the association relating to a matter described by the notice if the attorney's fees are incurred before the conclusion of a hearing or, if the owner does not request a hearing, before the date by which the owner must request a hearing under this subsection; rather than unless the hearing requested by the owner is held or attempted to be held in good faith by the association within the period prescribed by this section. The substitute also differs from the original in Section 207.061(d) of the substitute by adding new text, which provides that the owner's presence is not required to hold a hearing under this subsection. The substitute differs from the original by redesignating Section 207.061(g) of the original as Section 207.061(e) of the substitute. Section 207.061(e) of the substitute differs from Section 207.061(g) of the original, as follows: The substitute differs from the original by authorizing a property owners' association to collect reimbursement of reasonable attorney's fees and other reasonable costs incurred by the association relating to collecting amounts, including damages, rather than amounts, due the association. The substitute differs from the original by adding new text that provides that in an action to which Subsection (d) applies, reimbursement of attorney's fees are limited as provided by that subsection; requires the association, on written request from the owner, to provide copies of invoices for attorney's fees and other costs relating to the matter for which the association seeks reimbursement of fees and costs; and provides that the notice provisions of this subsection do not apply to a counterclaim of an association in a lawsuit brought against the association by a property owner. The substitute differs from the original by deleting provisions that prohibited attorney's fees that are incurred by the association before the notice is provided to the owner from being charged to the owner; provided that the attorney must furnish to the association an invoice for services provided; and provided that this subsection does not apply to a counterclaim of an association in a lawsuit brought against the association by a property owner. The substitute differs from the original by deleting Section 207.061(f) of the original, which provided that the association must give to the owner, before a property owners' association is authorized to charge an owner for property damage or levy a fine for a violation of the restrictions or the bylaws or rules of the association, written notice that describes, states, and grants an enumerated list of items. The substitute differs from the original by redesignating Section 207.061(h) of the original as Section 207.061(f) of the substitute. The substitute differs from the original by authorizing the property owners' association to give a copy of the notice required by Subsection (d), rather than Subsection (e), (f), or (g), to an occupant of the property, in addition to the notice under Subsection (d), rather than Subsections (e), (f), and (g). The substitute differs from the original by redesignating Section 207.061(i) of the original as Section 207.061(g) of the substitute. The substitute differs from the original by adding new text to Section 207.061(g) of the substitute, which provides that an emergency rule adopted to protect the health and safety of residents of the subdivision is effective immediately after notification is given to the owners. The substitute differs from the original by adding a new Section 207.061(h), which provides that the restrictions governing the subdivision, to the extent of any conflict, prevail over any provision in the articles of incorporation, bylaws, or rules of the property owners' association. The substitute differs from the original by redesignating Section 207.061(j) of the original as Section 207.061(i) of the substitute. The substitute differs from the original in proposed Section 207.062, Property Code, by deleting Subsection (b) of the original which authorized the increase to be accumulated and assessed in future years if a dedicatory instrument limits annual assessment increases to a fixed percentage or dollar amount. The substitute redesignates Subsections (c) through (e) of the original as Subsections (b) through (d) of the substitute to make conforming changes. The substitute differs from the original in Subsection (b) by authorizing a majority of lot owners voting under this subsection, rather than a majority of lot owners, to set the regular assessments at any amount, regardless of the limits set in the dedicatory instruments, if the restrictions set, rather than a dedicatory instrument sets, a maximum dollar amount for regular assessments, rather than regular assessments or limits annual increases in regular assessments to a fixed percentage or dollar amount, by voting in person or by proxy at a regular or special meeting of the association membership at which a quorum is present under Subsection (c), rather than Subsection (d), or by voting by mail ballot under Subsection (d), rather than Subsection (e). The substitute differs from the original in Subsection (c) by making a conforming change. The substitute differs from the original in Subsection (d) by making a conforming change. The substitute differs from the original by adding a new Subsection (e) which authorizes a regular assessment to be increased to any amount by the vote of at least two-thirds of all lot owners, if the restrictions limit increases in the annual regular assessments to a specific percentage or dollar amount. The substitute also provides that the voting procedures provided by Subsection (b) apply to this subsection. The substitute differs from the original in proposed Section 207.064(g), Property Code, by authorizing rules to be adopted, amended, or repealed by a majority vote of the members voting after any period of declarant control under the dedicatory instruments has ceased, rather than members voting, if notice of the board meeting, rather than meeting, has specified that one of the purposes of the meeting is to consider the adoption, amendment, or repeal of association rules. The substitute differs from the original in proposed Section 207.064(h), Property Code, by requiring the property owners' association to be liable to the owner as provided by Section 207.128, rather than under 207.130(a), Property Code, if the board knowingly continues to violate this section; rather than continues to violate this section after an owner makes a written request to a board for compliance with this section and provides the board with a copy of this section and Section 207.130 (Remedies for Violations), Property Code. The substitute differs from the original in proposed Section 207.066(a), Property Code, by requiring the property owners' association to keep invoices furnished for attorney's fees and other costs, rather than invoices furnished by an attorney, under Section 207.061(g), for at least four years after the date the invoice is furnished. The substitute differs from the original in proposed Section 207.066(c), Property Code, by authorizing the owner or the owner's agent or a title insurance, rather than title, company or its agent acting on behalf of the owner to submit a second request for the information, if an association fails to furnish the information required by Subsection (b) within the period prescribed by that subsection. Makes a conforming change. The substitute differs from the original in proposed Section 207.066(e), Property Code, by requiring the property owners' association to, as a common expense, obtain the accounting services required by Section 207.067 and by the dedicatory instruments, rather than this section. The substitute differs from the original in proposed Section 207.066(f), Property Code, by requiring a declarant to furnish to the property owners' association copies of the information required by Subsection (b), rather than Subsection (a), on the date the first lot in the declarant's residential subdivision is sold. The substitute differs from the original in proposed Section 207.067, Property Code, by adding a new Subsection (c), to provide that during a period of declarant control, consent of the declarant is required to waive the requirement for an audit or review prescribed by the dedicatory instruments. SUBCHAPTER D. PROTECTION OF PURCHASERS The substitute differs from the original in proposed Section 207.091(a), Property Code, by requiring the property owners' association to deliver to the owner or the owner's agent or the title insurance company or its agent, rather than furnish, not later than the 10th day after the date a written request for subdivision information is received from an owner, the owner's agent, or a title company or its agent acting on behalf of the owner, rather than the owner or the owner's agent or a title company or its agent acting on behalf of the owner, a current copy of the restrictions applying to the subdivision, a current copy of the bylaws and rules of the association, and a resale certificate that complies with Subsection (b). The substitute differs from the original in proposed Section 207.091(b), Property Code, by providing that a resale certificate furnished by the property owners' association under Subsection (a) must contain certain enumerated information, including: _a statement of any right of first refusal or other restraint in the restrictions that limits the owner's right to transfer the owner's property, rather than the lot; _a description of any conditions on the owner's property that the association board has actual knowledge are in violation of the subdivision restrictions or the bylaws or rules of the association, rather than in violation of the restrictions, bylaws, and rules; and _a certain summary or copy of certain notices existing on the date the certificate is prepared, rather than furnished. Makes conforming and nonsubstantive changes. The substitute differs from the original in proposed Section 207.091(c), Property Code, by redesignating Subsection (f) of the original as Subsection (c) of the substitute. The substitute also differs from the original by authorizing a property owners' association to charge a reasonable fee to assemble, copy, and deliver, rather than prepare and furnish, the information required by this section, and prepare and deliver, rather than including, an update of a resale certificate. Makes conforming and nonsubstantive changes. The substitute differs from the original in proposed Section 207.091(d), Property Code, by requiring the property owners' association to deliver the information required by Subsection (a), rather than this section, to the person specified in the written request, rather than request for subdivision information. The substitute differs from the original by providing that the written request must specify the person to whom and location to which the information must be sent. The substitute differs from the original by deleting the provision that sets forth that the association is not required to furnish the information if the request does not specify the name and address of the person to whom the information is to be furnished. The substitute also differs from the original by redesignating Subsection (e) of the original as part of Subsection (d) of the substitute, which authorizes the association to deliver the information required by Subsection (a) and any update to a resale certificate by mail, hand delivery, or alternative delivery means as specified in the written request. Makes conforming and nonsubstantive changes. The substitute differs from the original by redesignating Section 207.091(c) of the original as Section 207.091(e) of the substitute, and making conforming and nonsubstantive changes. The substitute differs from the original by deleting proposed Section 207.091(e) of the original bill, which authorized the property owners' association to furnish the information required by this section by depositing the information in the United States mail, by hand delivering the information, or by an alternate means of delivery specified in the request. The substitute differs from the original in Section 207.092(a), Property Code, by providing that the request, rather than second request, must be mailed by certified mail, return receipt requested, or by hand delivery with a receipt for delivery. Makes conforming and nonsubstantive changes. The substitute differs from the original in Section 207.092(b), Property Code, by authorizing the owner, if the property owners' association fails to deliver the information required by Section 207.091 before the seventh day after the date the second request for information is mailed or delivered, to pursue the remedies provided by Section 207.128(c), or provide the purchaser under a contract to purchase the owner's property an affidavit stating that the owner, the owner's agent, or a title insurance company or its agent acting on behalf of the owner made two written requests as provided by this subchapter, rather than law, to the property owners' association for the information described by Section 207.091, rather than property information; and that the property owners' association failed to timely provide the information, rather than furnish the information within the period prescribed by law. Makes conforming and nonsubstantive changes. The substitute differs from the original in Section 207.092(c), Property Code, by setting forth that if the owner provides the purchaser under contract to purchase the owner's property, rather than purchaser, with an affidavit described by Subsection (b)(2), rather than this section, the purchaser, lender, and title insurance company or its agent are not liable to the association, rather than not liable, for any money, rather than amounts, due and unpaid by the owner to the property owners' association on the date the affidavit was prepared, rather than the date the owner prepared the affidavit, and any other debt to, rather than claims by, the association that accrued before the date the affidavit was prepared. The substitute also differs from the original in Section 207.092(c), Property Code, by setting forth, that if the owner provides the purchaser with an affidavit described by this section that any property owners' association lien to secure amounts due to the association on the date the affidavit was prepared automatically terminates; rather than on the property purchased that secures the payment of amounts due and unpaid by the owner as of the date the owner prepared the affidavit automatically terminates as a lien securing payment of those amounts. The substitute differs from the original in proposed Section 207.093, Property Code, by prohibiting a property owners' association from denying the validity of any statement in a resale certificate, rather than prohibiting a property owners' association that prepares a resale certificate under Section 207.091 from denying the validity of any statement in the resale certificate. Redesignates text from Subsection (b) of the original to Subsection (a) of the substitute that: _provides that the property owners' association lien to secure undisclosed amounts due to the association on the date the resale certificate is prepared automatically terminates as a lien securing the undisclosed amount; and _provides that the purchaser, purchaser's agent, owner, owner's agent, lender, and title insurance company and its agent are not liable for any debt or claim existing on the date a resale certificate was prepared if the debt or claim is not disclosed in the resale certificate; Makes conforming and nonsubstantive changes. SUBCHAPTER E. PROPERTY OWNERS' ASSOCIATION LIEN FOR ASSESSMENTS The substitute differs from the original by adding a new Section 207.121, Property Code, as follows: Section 207.121. OWNER'S PERSONAL OBLIGATION; ASSOCIATION LIEN REQUIREMENTS. (a) Provides that a lot owner is not personally liable for assessments that accrue before title to the lot is transferred to the lot owner or after title to the lot is transferred from the lot owner to another person. Provides that a lot owner is personally liable for association assessments that accrue during the period the owner holds title to the lot, unless otherwise provided in the dedicatory instruments. (b) Provides that a property owners' association has a lien against an owner's lot and is authorized to foreclose the lien only if the association is granted that authority in the restrictions. Provides that unless otherwise provided in the restrictions, on the date the owner acquires title to the lot, any lien of the association existing under the restrictions secures accrued and unpaid assessments on or after the date the owner acquires title to the lot. The substitute differs from the original by deleting proposed Sections 207.121 through 207.123 of the original, which defined assessment, provided for the establishment of lien, and priority of lien, respectively. The substitute differs from the original by redesignating proposed Sections 207.124 through 207.131, Property Code, of the original as Sections 207.122 through 207.129, Property Code, of the substitute. The substitute differs from the original by amending proposed Section 207.122, Property Code, of the substitute, as follows: Section 207.122. New title: PERFECTION OF ASSOCIATION LIEN. Provides that a property owners' association's lien for assessments is perfected by recording the instructions in the real property records of the county in which the property subject to the restrictions is located, rather than by the enactment of this chapter or by recording the restrictions if the restrictions are recorded before the enactment of this chapter. Provides that no other recording of a lien or notice of lien is required to perfect the lien, rather than required, unless the restrictions provide otherwise. The substitute differs from the original in proposed Section 207.123, Property Code, by providing that a lot owner grants to the property owners' association a power of sale in connection with the foreclosure of the association's lien, rather than the association's lien under this subchapter, by acquiring property in a residential subdivision governed by a dedicatory instrument that expressly allows nonjudicial foreclosure or foreclosure under a deed of trust. The substitute differs from the original in proposed Section 207.125(a), Property Code, by providing that a property owners' association has the right to foreclose its lien on a lot under a dedicatory instrument that provides for a lien, grants authority to foreclose the lien, and was recorded at the time the owner acquired title to the lot, or a court order foreclosing the lien; rather than was recorded at the time of the purchase of the lot by the property owner or under certain enumerated court orders. The substitute differs from the original in proposed Section 207.125(b), Property Code, by providing that the association or its agent must send the owner written notice at the address of the owner as reflected in the records of the appraisal district for the county in which the lot is located, before a property owners' association is authorized to institute foreclosure proceedings against an owner's lot. Provides that the notice must include a copy of this subchapter and state, rather than just state, that: _the owner is authorized to redeem the property before the 91st day after the date the association mails written notice of the sale to the owner under Section 207.127, rather than 207.128; _the owner is authorized within 20 days after the date the association delivers the notice or deposits the notice in the mail, unless a hearing was held or requested by the owner under Subsection (c) relating to the amounts that are the basis for the foreclosure, to request in writing a hearing before a board-appointed committee, or before the board if the board does not appoint a committee; rather than within 10 days of receipt of the notice to request in writing a hearing before a board-appointed committee, or before the board if the board does not appoint a committee, to discuss and verify facts and resolve the matter in issue; and _if the owner requests a hearing and if the hearing is before a committee, the owner is authorized to appeal the committee's decision to the board by written notice delivered to the board not later than the 10th day after the date the association delivers the notice of the committee's decision or deposits the notice in the mail, rather than the owner receives notice of the committee's decision. The substitute differs from the original in proposed Sections 207.125(c), Property Code, as follows: (c) Authorizes an owner to request a hearing before the property owners' association is authorized to institute foreclosure proceedings. Provides that an owner who requests a hearing under Subsection (b) must submit the request in writing to the association representative designated in the notice by hand delivering the request or delivering the request by certified mail, return receipt requested, not later than the 20th, rather than 10th, day after the date the association delivers or deposits in the mail the notice to the owner under Subsection (b). Requires the hearing to be held not later than the 30th day after the date the board receives the owner's request for a hearing. Authorizes the board or the owner to request a postponement, and if requested, requires a postponement to be granted for a period of not more than 10 days. Authorizes additional postponements to be granted by agreement of the parties. Authorizes the owner or, rather than and, the association to make an audio recording of the meeting. Provides that an owner is not liable for attorney's fees incurred by the association relating to a matter described by the notice in Subsection (b) if the attorney's fees are incurred before the conclusion of the hearing or, if the owner does not request a hearing, before the date by which the owner must request a hearing under this subsection; rather than unless the hearing requested by the owner is held or attempted to be held in good faith by the association within the period described by this section. Provides that an owner's presence is not required to hold a hearing under this subsection. The substitute differs from the original by deleting Subsection (f) of the original, which provided that the association or its agent must send the owner written notice, by certified mail, return receipt requested, before a property owners' association is authorized to institute nonjudicial foreclosure proceedings against an owner's property, that contains a list of enumerated information related to foreclosure. The substitute differs from the original by deleting Subsection (g) of the original, which authorized the association to foreclose only in the manner the owner elects, if the lot owner notifies the property owners' association or its agent of an election of a foreclosure method under Subsection (f); and authorized the association to foreclose in any manner available to it under Subsection (a), if notice of election is not provided by the owner in a timely manner. The substitute further differs from the original in proposed Section 207.125, by redesignating Subsections (h) through (m) of the original bill as Subsections (f) through (k) of the substitute. The substitute differs from the original in Subsection (f) by providing that an owner is not liable for attorney's fees incurred by the association relating to a foreclosure proceeding if they are incurred before the conclusion of the hearing under Subsection (c) or, if the owner does not request a hearing, before the date by which the owner must request a hearing under subsection (c); rather than unless the hearing is held or attempted to be held in good faith by the association within the period prescribed by subsection (c). The substitute differs from the original in Subsection (g) by making a conforming change. The substitute differs from the original in proposed Section 207.126 of the substitute, by changing the title from "Notice of Foreclosure Sale" to "Notice After Foreclosure Sale;" by deleting text that provides that the foreclosure sale is invalid, if a property owners' association fails to send the notice in a timely manner; and making conforming and nonsubstantive changes. The substitute differs from the original in proposed Section 207.127, Property Code, by making conforming changes and adding Subsections (k) and (l) as follows: (k) Provides that the lot owner's right of redemption is extended until the 10th day after the date the association and any third party foreclosure purchaser provides written notice to the owner of the amounts that must be paid to redeem the lot, if a lot owner sends a written request to redeem the lot on or before the last day of the redemption period. (l) Requires the association or third party foreclosure purchaser to record an affidavit in the real property records of the county in which the lot is located stating that the owner did not redeem the lot during the redemption period or any extended redemption period, after the redemption period and any extended redemption period under Subsection (k) expires. The substitute differs from the original in proposed Section 207.128, by changing the title to "Remedies for Association Violations" rather than "Remedies for Violations." The substitute also differs from the original by creating new Subsections (b) and (c) from text in Subsection (a) of the original, adding new Subsections (a) and (d), and redesignating Subsections (b) through (e) of the original as Subsections (e) through (h) of the substitute. The substitute differs from the original by adding a new Subsection (a), which provides that a property owners' association is liable, except as provided by Subsection (b), to an owner if the owner notifies the association in writing of an alleged material violation of this chapter and the association fails to comply with this chapter before the 31st day after the date the owner provides notice under this subsection. The substitute differs from the original in Subsection (b) by providing that the property owners' association is liable to the owner if the association fails to furnish a certain resale certificate requested by an owner, the association fails to furnish certain documents requested by the owner, or if the board knowingly continues to violate a certain open meetings requirement after certain notice has been given to the board. The substitute differs from the original in Subsection (c) by entitling the owner to certain remedies, including a court order directing the property owners' association to comply with this chapter, if the association is liable to the owner under Subsection (a) or (b). Makes conforming and nonsubstantive changes. The substitute differs from the original by adding a new Subsection (d), which entitles the owner only to the remedies described under Subsections (c)(2) through (4), if the association is liable to the owner under Subsection (a) and the association is unable to comply with this chapter within the 30-day period prescribed by Subsection (a). The substitute differs from the original by adding a new SECTION 2, which amends Chapter 204, Property Code, by adding Section 204.012, as follows: Section 204.012. EFFECT OF REPEAL OF LAW. (a) Provides that an extension of, addition to, or modification of restrictions or a dedicatory instrument adopted in reliance on this chapter as this chapter existed immediately before January 1, 2000, is not affected by the repeal of Sections 204.003, 204.005, 204.007, 204.008, 204.009, 204.010, and 204.011. (b) Provides that a petition to extend, add to, or modify restrictions that is first placed into circulation before January 1, 2000, is not affected by the repeal of the sections described by Subsection (a) if: _before January 1, 2000, at least 10 owners have approved the petition; _the approval of the number of lot owners required to approve the extension, addition, or modification is obtained before January 1, 2001; and _the approved petition is recorded in the real property records of the county in which the affected property is located on or before February 1, 2001. The substitute differs from the original by adding a new SECTION 3, which amends Subchapter A, Chapter 5, Property Code, by adding Section 5.012, as follows: Section 5.012. NOTICE OF OBLIGATIONS RELATED TO MEMBERSHIP IN PROPERTY OWNERS' ASSOCIATION. Requires a seller of residential real property that is subject to membership in a property owners' association and that comprises not more than one dwelling unit located in this state to give to the purchaser of the property a written notice that reads substantially similar to the specified notice. The substitute differs from the original by adding a new SECTION 4, which repeals Sections 204.003 (Provisions of Restrictive Covenants Prevail in Certain Circumstances), 204.005 (Extension of, Addition to, or Modification of Existing Restrictions), 204.007 (Effect on Lienholders), 204.008 (Method of Adoption), 204.009 (Texas Nonprofit Corporations), 204.010 (Powers of Property Owners' Association), and 204.011 (Architectural Control Committee), Property Code. The substitute differs from the original bill in SECTION 5, by redesignating SECTION 2 of the original bill as SECTION 5 of the substitute; requiring the attorney general to establish procedures for approving and begin approving videotapes and classes, rather than approving videotapes and classes, as provided by Section 207.069, Property Code, as added by this Act, on or before July 1, 2000; and adding new Subsection (d), which makes application of Section 5.012, Property Code, as added by this Act, prospective with respect to an executory contract that is binding on a seller and purchaser beginning January 1, 2000. The substitute differs from the original by redesignating SECTION 3 (emergency clause) of the original bill as SECTION 6 of the substitute.