84R5001 LEH-F
By: Creighton S.B. No. 834
A BILL TO BE ENTITLED
AN ACT
relating to procedures required before a condominium association
files a suit or initiates an arbitration proceeding for a defect or
design claim.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter C, Chapter 82, Property Code, is
amended by adding Section 82.119 to read as follows:
Sec. 82.119. PROCEDURES REQUIRED BEFORE FILING SUIT OR
INITIATING ARBITRATION PROCEEDINGS FOR DEFECT OR DESIGN CLAIMS.
(a) In addition to any preconditions to filing suit or initiating
an arbitration proceeding included in the declaration, an
association, before filing suit or initiating an arbitration
proceeding to resolve a claim pertaining to the construction or
design of a unit or the common elements, must:
(1) obtain an inspection and a written independent
third-party report from a licensed professional engineer that:
(A) identifies the specific units or common
elements subject to the claim;
(B) describes the present physical condition of
the units or common elements subject to the claim; and
(C) describes any modifications, maintenance, or
repairs to the units or common elements performed by the unit owners
or the association; and
(2) obtain approval from unit owners holding at least
67 percent of the total votes in the association at a special
meeting called in accordance with the declaration or bylaws, as
applicable.
(b) The independent third-party report required by
Subsection (a)(1):
(1) must be obtained directly by the association
and paid for by the association; and
(2) may not be prepared by a person employed by or
otherwise affiliated with the attorney or law firm that represents
or will represent the association in the claim.
(c) The association must provide written notice of the
inspection to be conducted by the engineer to each party subject to
a claim not later than the 10th day before the date the inspection
occurs. The notice must:
(1) identify the party engaged to prepare the report
required by Subsection (a)(1);
(2) identify the specific units or common elements to
be inspected; and
(3) include the date and time the inspection will
occur.
(d) Each party subject to a claim may attend the inspection
conducted by the engineer, either personally or through an agent.
(e) Before providing the notice of the special meeting under
Subsection (f), an association must:
(1) on completion of the independent third-party
report, provide the report to each unit owner and each party subject
to a claim; and
(2) allow each party subject to a claim at least 90
days after the date of completion of the report to inspect and
correct any condition identified in the report.
(f) Not later than the 30th day before the date the special
meeting described by Subsection (a)(2) is held, the association
must provide each unit owner with written notice of the date, time,
and location of the meeting. The notice must also include:
(1) a description of the nature of the claim, the
relief sought, the anticipated duration of prosecuting the claim,
and the likelihood of success;
(2) a copy of the report required by Subsection
(a)(1);
(3) a copy of the contract or proposed contract
between the association and the attorney selected by the board to
assert or provide assistance with the claim;
(4) a description of the attorney's fees, consultant
fees, expert witness fees, and court costs, whether incurred by the
association directly or for which the association may be liable as a
result of prosecuting the claim;
(5) a summary of the steps previously taken and the
steps proposed to be taken by the association to resolve the claim;
(6) an estimate, prepared by a licensed appraiser, of
the impact on the value of each unit if the claim is prosecuted and
the impact on the value of each unit after resolution of the claim;
(7) an estimate, prepared by a licensed real estate
broker, of the impact on the marketability of each unit if the claim
is prosecuted and the impact on the marketability of each unit while
the claim is prosecuted;
(8) a description of the manner in which the
association proposes to fund the cost of prosecuting the claim; and
(9) an estimate of the impact on the finances of the
association, including the impact on present and projected
reserves, if the association is not the prevailing party in the
claim.
(g) The notice required by Subsection (f) must be prepared
and signed by a person who is not:
(1) the attorney who represents or will represent the
association in the claim;
(2) a member of the law firm of the attorney who
represents or will represent the association in the claim; or
(3) employed by or otherwise affiliated with the law
firm of the attorney who represents or will represent the
association in the claim.
(h) For purposes of the special meeting described by
Subsection (a)(2), a quorum is present throughout the meeting if
persons entitled to cast more than 50 percent of the votes in the
association are present in person at the beginning of the meeting.
(i) The declaration may provide that a claim pertaining to
the construction or design of a unit or the common elements must be
resolved by binding arbitration and may provide for a process by
which the claim is resolved. An amendment to the declaration that
modifies or removes the arbitration requirement or the process
associated with resolution of a claim may not apply retroactively
to a claim regarding the construction or design of units or common
elements based on an alleged act or omission that occurred before
the date of the amendment.
SECTION 2. Section 82.119, Property Code, as added by this
Act, applies only to a claim based on an act or omission that occurs
on or after the effective date of this Act. A claim based on an act
or omission that occurred before the effective date of this Act is
governed by the law applicable to the claim immediately before the
effective date of this Act, and that law is continued in effect for
that purpose.
SECTION 3. This Act takes effect September 1, 2015.