By: Creighton S.B. No. 834
(In the Senate - Filed February 26, 2015; March 3, 2015,
read first time and referred to Committee on State Affairs;
April 29, 2015, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 9, Nays 0; April 29, 2015,
sent to printer.)
Click here to see the committee vote
COMMITTEE SUBSTITUTE FOR S.B. No. 834 By: Creighton
A BILL TO BE ENTITLED
AN ACT
relating to procedures required before certain condominium
associations file a suit or initiate 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 Sections 82.119 and 82.120 to read as follows:
Sec. 82.119. PROCEDURES FOR FILING SUIT OR INITIATING
ARBITRATION PROCEEDINGS FOR DEFECT OR DESIGN CLAIMS FOR CERTAIN
ASSOCIATIONS. (a) This section does not apply to an association
with less than eight units.
(b) 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 more than
50 percent of the total votes in the association, voting in person
or by proxy as provided by Section 82.110, at a regular, annual, or
special meeting called in accordance with the declaration or
bylaws, as applicable.
(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 (b)(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 (b)(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
(b)(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 by the
association to resolve the claim;
(6) a statement that initiating a lawsuit or
arbitration proceeding to resolve a claim may affect the market
value, marketability, or refinancing of a unit while the claim is
prosecuted; and
(7) a description of the manner in which the
association proposes to fund the cost of prosecuting 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.
Sec. 82.120. BINDING ARBITRATION FOR CERTAIN CLAIMS.
(a) A 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.
(b) 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 filed on or after the effective date of
this Act. A claim filed 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.
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