By: Eiland H.B. No. 2949
A BILL TO BE ENTITLED
AN ACT
related to insurance, financing, and rights of redemption for
condominium associations.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 82.102, Property Code, is amended to
read as follows:
Sec. 82.102. POWERS OF UNIT OWNERS' ASSOCIATION.
(a) Unless otherwise provided by the declaration, the
association, acting through its board, may:
(1) adopt and amend bylaws;
(2) adopt and amend budgets for revenues,
expenditures, and reserves, and collect assessments for common
expenses from unit owners;
(3) hire and terminate managing agents and other
employees, agents, and independent contractors;
(4) institute, defend, intervene in, settle, or
compromise litigation or administrative proceedings in its own name
on behalf of itself or two or more unit owners on matters affecting
the condominium;
(5) make contracts and incur liabilities relating to
the operation of the condominium;
(6) regulate the use, maintenance, repair,
replacement, modification, and appearance of the condominium;
(7) adopt and amend rules regulating the use,
occupancy, leasing or sale, maintenance, repair, modification, and
appearance of units and common elements, to the extent the
regulated actions affect common elements or other units;
(8) cause additional improvements to be made as a part
of the common elements;
(9) acquire, hold, encumber, and convey in its own
name any right, title, or interest to real or personal property,
including lien rights, except common elements of the condominium;
(10) grant easements, leases, licenses, and
concessions through or over the common elements;
(11) impose and receive payments, fees, or charges for
the use, rental, or operation of the common elements and for
services provided to unit owners;
(12) impose interest and late charges for late
payments of assessments, returned check charges, and, if notice and
an opportunity to be heard are given, reasonable fines for
violations of the declaration, bylaws, and rules of the
association;
(13) adopt and amend rules regulating the collection
of delinquent assessments and the application of payments;
(14) adopt and amend rules regulating the termination
of utility service to a unit, the owner of which is delinquent in
the payment of an assessment that is used, in whole or in part, to
pay the cost of that utility;
(15) impose reasonable charges for preparing,
recording, or copying declaration amendments, resale certificates,
or statements of unpaid assessments;
(16) enter a unit for bona fide emergency purposes
when conditions present an imminent risk of harm or damage to the
common elements, another unit, or the occupants;
(17) assign its right to future income, including the
right to receive common expense assessments, but only to the extent
the declaration, bylaws, articles of incorporation or certificate
of formation so provides;
(18) suspend the voting privileges of or the use of
certain general common elements by an owner delinquent for more
than 30 days in the payment of assessments;
(19) purchase insurance and fidelity bonds it
considers appropriate or necessary;
(20) exercise any other powers conferred by the
declaration or bylaws;
(21) exercise any other powers that may be exercised
in this state by a corporation of the same type as the association;
and
(22) exercise any other powers necessary and proper
for the government and operation of the association.
(b) The declaration may not impose limitations on the power
of the association to deal with the declarant that are more
restrictive than the limitations imposed on the power of the
association to deal with other persons.
(c) To be enforceable, a bylaw or rule of the association
must not be arbitrary or capricious.
(d) Before an association may charge the unit owner for
property damage for which the unit owner is liable or levy a fine
for violation of the declaration, bylaws, or rules, the association
shall give to the unit owner a written notice that:
(1) describes the violation or property damage and
states the amount of the proposed fine or damage charge;
(2) states that not later than the 30th day after the
date of the notice, the unit owner may request a hearing before the
board to contest the fine or damage charge; and
(3) allows the unit owner a reasonable time, by a
specified date, to cure the violation and avoid the fine unless the
unit owner was given notice and a reasonable opportunity to cure a
similar violation within the preceding 12 months.
(e) The association may give a copy of the notice required
by Subsection (d) to an occupant of the unit. The association must
give notice of a levied fine or damage charge to the unit owner not
later than the 30th day after the date of levy.
SECTION 2. Section 82.111, Property Code, is amended to
read as follows:
(a) Beginning not later than the time of the first
conveyance of a unit to a person other than a declarant, the
association shall maintain, to the extent reasonably available:
(1) property insurance on the insurable common
elements insuring against all risks of direct physical loss
commonly insured against, including fire and extended coverage, in
a total amount of at least 80 percent of the replacement cost or
actual cash value of the insured property as of the effective date
and at each renewal date of the policy; and
(2) commercial general liability insurance, including
medical payments insurance, in an amount determined by the board
but not less than any amount specified by the declaration covering
all occurrences commonly insured against for death, bodily injury,
and property damage arising out of or in connection with the use,
ownership, or maintenance of the common elements.
(b) If a building contains units having horizontal
boundaries described in the declaration, the insurance maintained
under Subsection (a)(1), to the extent reasonably available, must
include the units, but need not include improvements and
betterments installed by unit owners.
(c) If the insurance described by Subsections (a) and (b) is
not reasonably available, the association shall cause notice of
that fact to be delivered or mailed to all unit owners and
lienholders. The declaration may require the association to carry
any other insurance, and the association in any event may carry any
other insurance the board considers appropriate to protect the
condominium, the association, or the unit owners. This section
does not affect the right of a holder of a mortgage on a unit to
require a unit owner to acquire insurance in addition to that
provided by the association.
(d) Insurance policies carried under Subsection (a) must
provide that:
(1) each unit owner is an insured person under the
policy with respect to liability arising out of the person's
ownership of an undivided interest in the common elements or
membership in the association;
(2) the insurer waives its right to subrogation under
the policy against a unit owner;
(3) no action or omission of a unit owner, unless
within the scope of the unit owner's authority on behalf of the
association, will void the policy or be a condition to recovery
under the policy; and
(4) if, at the time of a loss under the policy, there
is other insurance in the name of a unit owner covering the same
property covered by the policy, the association's policy provides
primary insurance.
(e) A claim for any loss covered by the policy under
Subsection (a)(1) must be submitted by and adjusted with the
association. The insurance proceeds for that loss shall be payable
to an insurance trustee designated by the association for that
purpose, if the designation of an insurance trustee is considered
by the board to be necessary or desirable, or otherwise to the
association, and not to any unit owner or lienholder.
(f) The insurance trustee or the association shall hold
insurance proceeds in trust for unit owners and lienholders as
their interests may appear. Subject to Subsection (i), the
proceeds paid under a policy must be disbursed first for the repair
or restoration of the damaged common elements and units, and unit
owners and lienholders are not entitled to receive payment of any
portion of the proceeds unless there is a surplus of proceeds after
the property has been completely repaired or restored, or the
condominium is terminated.
(g) An insurance policy issued to the association does not
prevent a unit owner from obtaining insurance for the owner's own
benefit.
(h) The insurer issuing the policy may not cancel or refuse
to renew it less than 30 days after written notice of the proposed
cancellation or nonrenewal has been mailed to the association.
(i) Any portion of the condominium for which insurance is
required that is damaged or destroyed shall be promptly repaired or
replaced by the association unless the condominium is terminated,
repair or replacement would be illegal under any state or local
health or safety statute or ordinance, or at least 80 percent of the
unit owners, including each owner of a unit or assigned limited
common element that will not be rebuilt or repaired, vote to not
rebuild. A vote to not rebuild does not increase an insurer's
liability to loss payment obligation under a policy, and the vote
does not cause a presumption of total loss. The cost of repair or
replacement in excess of the insurance proceeds and reserves is a
common expense. The cost of repairs that are incurred before any
insurance proceeds are available, or within the Association's
deductible, shall be paid as determined by resolution of the Board
of Directors of the Association. However, if the Board of Directors
of the Association has not approved a resolution then these costs
shall be a common expense. If the entire condominium is not
repaired or replaced, any insurance proceeds attributable to the
damaged common elements shall be used to restore the damaged area to
a condition compatible with the remainder of the condominium, the
insurance proceeds attributable to units and limited common
elements that are not rebuilt shall be distributed to the owners of
those units and the owners of the units to which those limited
common elements were assigned, or to their mortgagees, as their
interests may appear, and the remainder of the proceeds shall be
distributed to all the unit owners as their interests may appear.
If the unit owners vote to not rebuild any unit, that unit's
allocated interests shall be automatically reallocated on the vote
as if the unit had been condemned, and the association shall
prepare, execute, and record an amendment to the declaration
reflecting the reallocation. Section 82.068 governs the
distribution of insurance proceeds if the condominium is
terminated.
(j) The provisions of this section may be varied or waived
if all the units in a condominium are restricted to nonresidential
use.
SECTION 3. Section 82.113, Property Code, is amended to
read as follows:
Sec. 82.113. ASSOCIATION'S LIEN FOR ASSESSMENTS. (a) An
assessment levied by the association against a unit or unit owner is
a personal obligation of the unit owner and is secured by a
continuing lien on the unit and on rents and insurance proceeds
received by the unit owner and relating to the owner's unit. In
this section, "assessments" means regular and special assessments,
dues, fees, charges, interest, late fees, fines, collection costs,
attorney's fees, and any other amount due to the association by the
unit owner or levied against the unit by the association, all of
which are enforceable as assessments under this section unless the
declaration provides otherwise.
(b) The association's lien for assessments has priority
over any other lien except:
(1) a lien for real property taxes and other
governmental assessments or charges against the unit unless
otherwise provided by Section 32.05, Tax Code;
(2) a lien or encumbrance recorded before the
declaration is recorded;
(3) a first vendor's lien or first deed of trust lien
recorded before the date on which the assessment sought to be
enforced becomes delinquent under the declaration, bylaws, or
rules; and
(4) unless the declaration provides otherwise, a lien
for construction of improvements to the unit or an assignment of the
right to insurance proceeds on the unit if the lien or assignment is
recorded or duly perfected before the date on which the assessment
sought to be enforced becomes delinquent under the declaration,
bylaws, or rules.
(c) The association's lien for assessments is created by
recordation of the declaration, which constitutes record notice and
perfection of the lien. Unless the declaration provides otherwise,
no other recordation of a lien or notice of lien is required.
(d) By acquiring a unit, a unit owner grants to the
association a power of sale in connection with the association's
lien. By written resolution, a board may appoint, from time to
time, an officer, agent, trustee, or attorney of the association to
exercise the power of sale on behalf of the association. Except as
provided by the declaration, an association shall exercise its
power of sale pursuant to Section 51.002.
(e) The association has the right to foreclose its lien
judicially or by nonjudicial foreclosure pursuant to the power of
sale created by this chapter or the declaration, except that the
association may not foreclose a lien for assessments consisting
solely of fines. Costs of foreclosure may be added to the amount
owed by the unit owner to the association. A unit owner may not
petition a court to set aside a sale solely because the purchase
price at the foreclosure sale was insufficient to fully satisfy the
owner's debt.
(f) The association may bid for and purchase the unit at
foreclosure sale as a common expense. The association may own,
lease, encumber, exchange, sell, or convey a unit.
(g) The owner of a unit [used for residential purposes and]
purchased [by an association] at a foreclosure sale of the
association's lien for assessments may redeem the unit not later
than the 90th day after the date of the foreclosure sale. To redeem
the unit, the owner must pay to the association:
(1) if the association is the purchaser, all amounts
due the association at the time of the foreclosure sale, interest
from the date of foreclosure sale to the date of redemption at the
rate provided by the declaration for delinquent assessments,
reasonable attorney's fees and costs incurred by the association in
foreclosing the lien, any assessment levied against the unit by the
association after the foreclosure sale, and any reasonable cost
incurred by the association as owner of the unit, including costs of
maintenance and leasing.
(2) if a party other than the association is the
purchaser, the redeeming owner shall pay to the party acquiring the
unit at the foreclosure sale the amount bid at the sale, interest
from the date of foreclosure sale to the date of redemption at the
rate of six percent, any assessment paid after the date of the
foreclosure, and any reasonable costs incurred as owner of the
unit, including costs of maintenance and leasing. The redeeming
owner shall also pay to the Association all assessments that are due
as of the date of redemption, and reasonable attorney's fees and
costs incurred by the association in foreclosing the lien.
(h) On redemption, the association or the party acquiring
title at the foreclosure of the association's assessment lien shall
execute a special warranty deed to the redeeming unit owner. The
exercise of the right of redemption is not effective against a
subsequent purchaser or lender for value without notice of the
redemption after the redemption period expires unless the redeeming
unit owner records the deed from the association or an affidavit
stating that the owner has exercised the right of redemption. A
unit that has been redeemed remains subject to all liens and
encumbrances on the unit before foreclosure. All rents and other
income collected from the unit by the association or other party
that acquires title at the foreclosure of the association's
assessment lien from the date of foreclosure sale to the date of
redemption belong to the [association] party purchasing the
property at the foreclosure of the association's assessment lien,
but the rents and income shall be credited against the redemption
amount. [An association] A party purchasing a unit at [a sale
foreclosing its lien] the foreclosure sale of the association's
assessment lien may not transfer ownership of the unit during the
redemption period to a person other than a redeeming owner.
[(h)] (i) If a unit owner defaults in the owner's monetary
obligations to the association, the association may notify other
lien holders of the default and the association's intent to
foreclose its lien. The association shall notify any holder of a
recorded lien or duly perfected mechanic's lien against a unit who
has given the association a written request for notification of the
unit owner's monetary default or the association's intent to
foreclose its lien.
[(i)] (j) This section does not prohibit the association
from taking a deed in lieu of foreclosure or from filing suit to
recover a money judgment for sums that may be secured by the lien.
[(j)] (k) At any time before a nonjudicial foreclosure
sale, a unit owner may avoid foreclosure by paying all amounts due
the association.
[(k)] (l) If, on January 1, 1994, a unit is the homestead of
the unit owner and is subject to a declaration that does not contain
a valid assessment lien against the unit, the lien provided by this
section does not attach against the unit until the unit ceases to be
the homestead of the person owning it on January 1, 1994.
[(l)] (m) Foreclosure of a tax lien attaching against a unit
under Chapter 32, Tax Code, does not discharge the association's
lien for assessments under this section or under a declaration for
amounts becoming due to the association after the date of
foreclosure of the tax lien.
[(m)] (n) If a unit owner is delinquent in payment of
assessments to an association, at the request of the association a
holder of a recorded lien against the unit may provide the
association with information about the unit owner's debt secured by
the holder's lien against the unit and other relevant information.
At the request of a lien holder, the association may furnish the
lien holder with information about the condominium and the unit
owner's obligations to the association.
SECTION 4. This Act takes effect September 1, 2009.