82R4984 TJS-D
By: McClendon H.B. No. 2328
A BILL TO BE ENTITLED
AN ACT
relating to the registration, monitoring, and investigation of and
handling of funds by property owners' association boards.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 14.101, Finance Code, is amended to read
as follows:
Sec. 14.101. GENERAL DUTIES OF COMMISSIONER. The
commissioner shall enforce this chapter, Subtitles B and C of Title
4 of this code, [and] Chapter 394 of this code, and Chapters 82 and
209, Property Code, in person or through an assistant commissioner,
examiner, or other employee of the office.
SECTION 2. Section 14.201, Finance Code, is amended to read
as follows:
Sec. 14.201. INVESTIGATION AND ENFORCEMENT AUTHORITY.
Investigative and enforcement authority under this subchapter
applies only to this chapter, Subtitles B and C of Title 4 of this
code, [and] Chapter 394 of this code, and Chapters 82 and 209,
Property Code.
SECTION 3. Section 14.2015(a), Finance Code, is amended to
read as follows:
(a) Except as provided by Subsection (b), information or
material obtained or compiled by the commissioner in relation to an
examination or investigation by the commissioner or the
commissioner's representative of a license holder or registrant
under Subtitle B or C, Title 4, of this code, [or] Chapter 394 of
this code, or Chapter 82 or 209, Property Code, is confidential and
may not be disclosed by the commissioner or an officer or employee
of the Office of Consumer Credit Commissioner, including:
(1) information obtained from a license holder or
registrant under Subtitle B or C, Title 4, of this code, [or]
Chapter 394 of this code, or Chapter 82 or 209, Property Code;
(2) work performed by the commissioner or the
commissioner's representative on information obtained from a
license holder or registrant for the purposes of an examination or
investigation conducted under Subtitle B or C, Title 4, of this
code, [or] Chapter 394 of this code, or Chapter 82 or 209, Property
Code;
(3) a report on an examination or investigation of a
license holder or registrant conducted under Subtitle B or C, Title
4, of this code, [or] Chapter 394 of this code, or Chapter 82 or 209,
Property Code; and
(4) any written communications between the license
holder or registrant, as applicable, and the commissioner or the
commissioner's representative relating to or referencing an
examination or investigation conducted under Subtitle B or C, Title
4, of this code, [or] Chapter 394 of this code, or Chapter 82 or 209,
Property Code.
SECTION 4. Section 14.202(a), Finance Code, is amended to
read as follows:
(a) On receipt of a written complaint or other reasonable
cause to believe that a person is violating a statute listed by
Section 14.201, the commissioner may require the person to furnish
information regarding a specific loan, retail transaction, or
business practice or an assessment, enforcement action,
foreclosure, fine, or other conduct by a condominium unit owners'
association or property owners' association to which the violation
relates.
SECTION 5. Section 82.003, Property Code, is amended by
adding Subdivisions (4-a) and (4-b) to read as follows:
(4-a) "Commission" means the Finance Commission of
Texas.
(4-b) "Commissioner" means the consumer credit
commissioner.
SECTION 6. Subchapter C, Chapter 82, Property Code, is
amended by adding Sections 82.1031, 82.1032, 82.1033, 82.1034, and
82.1035 to read as follows:
Sec. 82.1031. BOARD REGISTRATION REQUIRED. (a) A board of
a unit owners' association may not act on behalf of the association
unless the board is registered with the commissioner as provided by
this section.
(b) An application for registration must contain the
information required to be included in a management certificate
under Section 82.116 and any other information required by the
commission by rule. An applicant shall promptly supplement or
amend an application to report any material mistake or omission or
any actual or expected change in any document or information
contained in the application.
(c) The application must be signed under oath and
accompanied by an initial registration fee in an amount set by the
commission by rule.
(d) The commissioner may deny an application for
registration if:
(1) any board member of the applicant has been
convicted of a crime or found civilly liable for an offense
involving moral turpitude, including forgery, embezzlement,
obtaining money under false pretenses, larceny, extortion,
conspiracy to defraud, or any other similar offense or violation;
or
(2) the commissioner, based on specific evidence,
finds that the application does not warrant the belief that the
board will operate lawfully, fairly, and in accordance with the
purposes of this chapter.
(e) If the commissioner denies an application for
registration under this section, the applicant, not later than the
30th day after the date on which the applicant receives the notice
of denial, may appeal the denial and request a hearing under Chapter
2001, Government Code.
Sec. 82.1032. RENEWAL OF REGISTRATION. A unit owners'
association board must renew the board's registration annually by
filing a report with the commissioner. The report must be in a form
prescribed by the commission by rule and:
(1) be signed under oath;
(2) be filed not less than 30 days or more than 60 days
before the date on which the annual registration expires;
(3) be accompanied by a renewal fee in an amount set by
the commission by rule;
(4) contain a financial statement for the unit owners'
association for the fiscal year preceding the date the report is
filed;
(5) disclose any changes in the information contained
in the registrant's original application for registration or the
preceding renewal report, as applicable;
(6) include evidence of insurance coverage that:
(A) is in an amount equal to the greater of
$250,000 or the highest daily balance in the trust account required
by Section 82.1035 during the six months preceding the date the
report is filed;
(B) insures against the risks of dishonesty,
fraud, theft, and other misconduct on the part of the unit owners'
association or a board member, employee, or agent of the
association;
(C) is issued by an insurance company authorized
to engage in business in this state and rated at least "A" or
equivalent by a nationally recognized rating organization approved
by the commissioner;
(D) has a deductible of not more than $5,000;
(E) is payable for the benefit of the
association, this state, a unit owner, or an individual who is a
resident of this state, as their interests may appear; and
(F) is not subject to cancellation by the
association or the insurer until the 60th day after the date on
which written notice is given to the commissioner;
(7) disclose the total amount of assessments received
by the association during the 12 months preceding the date of the
renewal report from or on behalf of unit owners;
(8) disclose, to the best of the registrant's
knowledge, the gross funds accumulated during the 12 months
preceding the date of the renewal report by the association; and
(9) provide any other information that the
commissioner reasonably requires in order to perform the
commissioner's duty under this section.
Sec. 82.1033. MONITORING AND INVESTIGATION BY
COMMISSIONER. The commissioner shall:
(1) monitor the operations of a unit owners'
association board as appropriate to ensure compliance with this
subchapter; and
(2) receive and investigate complaints against a unit
owners' association board.
Sec. 82.1034. REVOCATION OF REGISTRATION. (a) The
commissioner may revoke the registration of a unit owners'
association board if the commissioner determines that the board has
violated this subchapter. The commissioner shall recite the basis
of the decision in an order revoking the registration.
(b) If the commissioner proposes to revoke a registration,
the unit owners' association board is entitled to a hearing before
the commissioner or a hearings officer, who shall propose a
decision to the commissioner. The commissioner or hearings officer
shall prescribe the time and place of the hearing. The hearing is
governed by Chapter 2001, Government Code.
(c) A unit owners' association board aggrieved by a ruling,
order, or decision of the commissioner is entitled to appeal to a
district court in the county in which the hearing was held. An
appeal under this subsection is governed by Chapter 2001,
Government Code.
Sec. 82.1035. TRUST ACCOUNT. (a) All money paid to a unit
owners' association board by or on behalf of a unit owner pursuant
to an assessment for common expenses is held in trust. Within two
business days after receipt, the board shall deposit the money in a
financial institution in a trust account established for the
benefit of the unit owners. The board shall inform the commissioner
of the name, business address, and telephone number of the
financial institution at which the board maintains a trust account
under this section and the account number of the account.
(b) Money held in trust by a unit owners' association board
is not property of the board or the board's designee.
(c) A unit owners' association board shall:
(1) maintain separate records of account for each unit
owner who pays funds to the unit owners' association pursuant to an
assessment; and
(2) disburse money paid by or on behalf of a unit owner
only to pay for common expenses as provided by the declaration,
articles of incorporation, bylaws, or rules of the association.
(d) A unit owners' association board may not commingle money
in a trust account established for the benefit of unit owners with
money of other persons.
(e) A trust account under this section must at all times
have a cash balance equal to the sum of the balances of each
individual unit owner's account record.
(f) A unit owners' association board shall annually
reconcile a trust account under this section. If the board or the
board's designee has more than one trust account, each trust
account must be individually reconciled.
(g) If a unit owners' association board discovers, or has a
reasonable suspicion of, embezzlement or other unlawful
appropriation of money held in trust, the board immediately shall
notify the commissioner by a method approved by the commission by
rule. Unless the commission by rule provides otherwise, the board
shall notify the commissioner of remedial action that the board
intends to take with regard to the unlawful appropriation or
suspected unlawful appropriation not later than the fifth day after
the date on which the board notifies the commissioner of the
appropriation.
(h) Before transferring a trust account from one financial
institution to another, a unit owners' association board shall
inform the commissioner of the name, business address, and
telephone number of the institution to which the account will be
transferred. As soon as practicable after the transfer of a trust
account under this subsection, the board shall inform the
commissioner of the account number at the transferee institution.
SECTION 7. Section 209.002, Property Code, is amended by
adding Subdivisions (2-a) and (2-b) to read as follows:
(2-a) "Commission" means the Finance Commission of
Texas.
(2-b) "Commissioner" means the consumer credit
commissioner.
SECTION 8. Chapter 209, Property Code, is amended by adding
Sections 209.0041, 209.0042, 209.0043, 209.0044, and 209.0045 to
read as follows:
Sec. 209.0041. BOARD REGISTRATION REQUIRED. (a) A board of
a property owners' association may not act on behalf of the
association unless the board is registered with the commissioner as
provided by this section.
(b) An application for registration must contain the
information required to be included in a management certificate
under Section 209.004 and any other information required by the
commission by rule. An applicant shall promptly supplement or
amend an application to report any material mistake or omission or
any actual or expected change in any document or information
contained in the application.
(c) The application must be signed under oath and
accompanied by an initial registration fee in an amount set by the
commission by rule.
(d) The commissioner may deny an application for
registration if:
(1) any board member of the applicant has been
convicted of a crime or found civilly liable for an offense
involving moral turpitude, including forgery, embezzlement,
obtaining money under false pretenses, larceny, extortion,
conspiracy to defraud, or any other similar offense or violation;
or
(2) the commissioner, based on specific evidence,
finds that the application does not warrant the belief that the
board will operate lawfully, fairly, and in accordance with the
purposes of this chapter.
(e) If the commissioner denies an application for
registration under this section, the applicant, not later than the
30th day after the date on which the applicant receives the notice
of denial, may appeal the denial and request a hearing under Chapter
2001, Government Code.
Sec. 209.0042. RENEWAL OF REGISTRATION. A property owners'
association board must renew the board's registration annually by
filing a report with the commissioner. The report must be in a form
prescribed by the commission by rule and:
(1) be signed under oath;
(2) be filed not less than 30 days or more than 60 days
before the date on which the annual registration expires;
(3) be accompanied by a renewal fee in an amount set by
the commission by rule;
(4) contain a financial statement for the property
owners' association for the fiscal year preceding the date the
renewal report is filed;
(5) disclose any changes in the information contained
in the registrant's original application for registration or the
preceding renewal report, as applicable;
(6) include evidence of insurance coverage that:
(A) is in an amount equal to the greater of
$250,000 or the highest daily balance in the trust account required
by Section 209.0045 during the six months preceding the date the
report is filed;
(B) insures against the risks of dishonesty,
fraud, theft, and other misconduct on the part of the property
owners' association or a board member, employee, or agent of the
association;
(C) is issued by an insurance company authorized
to engage in business in this state and rated at least "A" or
equivalent by a nationally recognized rating organization approved
by the commissioner;
(D) has a deductible of not more than $5,000;
(E) is payable for the benefit of the
association, this state, a property owner, or an individual who is a
resident of this state, as their interests may appear; and
(F) is not subject to cancellation by the
association or the insurer until the 60th day after the date on
which written notice is given to the commissioner;
(7) disclose the total amount of assessments received
by the association during the 12 months preceding the date of the
renewal report from or on behalf of property owners;
(8) disclose, to the best of the registrant's
knowledge, the gross funds accumulated during the 12 months
preceding the date of the renewal report by the association; and
(9) provide any other information that the
commissioner reasonably requires in order to perform the
commissioner's duty under this section.
Sec. 209.0043. MONITORING AND INVESTIGATION BY
COMMISSIONER. The commissioner shall:
(1) monitor the operations of a property owners'
association board as appropriate to ensure compliance with this
chapter; and
(2) receive and investigate complaints against a
property owners' association board.
Sec. 209.0044. REVOCATION OF REGISTRATION. (a) The
commissioner may revoke the registration of a property owners'
association board if the commissioner determines that the board has
violated this chapter. The commissioner shall recite the basis of
the decision in an order revoking the registration.
(b) If the commissioner proposes to revoke a registration,
the property owners' association board is entitled to a hearing
before the commissioner or a hearings officer, who shall propose a
decision to the commissioner. The commissioner or hearings officer
shall prescribe the time and place of the hearing. The hearing is
governed by Chapter 2001, Government Code.
(c) A property owners' association board aggrieved by a
ruling, order, or decision of the commissioner is entitled to
appeal to a district court in the county in which the hearing was
held. An appeal under this subsection is governed by Chapter 2001,
Government Code.
Sec. 209.0045. TRUST ACCOUNT. (a) All money paid to a
property owners' association board by or on behalf of a property
owner pursuant to an assessment for common expenses is held in
trust. Within two business days after receipt, the board shall
deposit the money in a financial institution in a trust account
established for the benefit of the property owners. The board shall
inform the commissioner of the name, business address, and
telephone number of the financial institution at which the board
maintains a trust account under this section and the account number
of the account.
(b) Money held in trust by a property owners' association
board is not property of the board or the board's designee.
(c) A property owners' association board shall:
(1) maintain separate records of account for each
individual owner who pays funds to the property owners' association
pursuant to an assessment; and
(2) disburse money paid by or on behalf of an owner
only to pay for common expenses as provided by the dedicatory
instruments of the association.
(d) A property owners' association board may not commingle
money in a trust account established for the benefit of owners with
money of other persons.
(e) A trust account under this section must at all times
have a cash balance equal to the sum of the balances of each
individual owner's account record.
(f) A property owners' association board shall annually
reconcile a trust account under this section. If the board or the
board's designee has more than one trust account, each trust
account must be individually reconciled.
(g) If a property owners' association board discovers, or
has a reasonable suspicion of, embezzlement or other unlawful
appropriation of money held in trust, the board immediately shall
notify the commissioner by a method approved by the commission by
rule. Unless the commission by rule provides otherwise, the board
shall notify the commissioner of remedial action that the board
intends to take with regard to the unlawful appropriation or
suspected unlawful appropriation not later than the fifth day after
the date on which the board notifies the commissioner of the
appropriation.
(h) Before transferring a trust account from one financial
institution to another, a property owners' association board shall
inform the commissioner of the name, business address, and
telephone number of the institution to which the account will be
transferred. As soon as practicable after the transfer of a trust
account under this subsection, the board shall inform the
commissioner of the account number at the transferee institution.
SECTION 9. (a) The changes in law made by this Act apply to
a unit owners' association or property owners' association
regardless of whether the unit owners' association or property
owners' association was created before, on, or after the effective
date of this Act.
(b) The changes in law made by this Act apply to a unit
owners' association or property owners' association beginning
January 1, 2012.
SECTION 10. This Act takes effect September 1, 2011.