PROPERTY OWNERS ASSOCIATION LITIGATION AND DISPUTE … · property dispute resolution practices to these problems, a discussion of relevant case law and legislation peculiar to property

PROPERTY OWNERS ASSOCIATION LITIGATION AND DISPUTE RESOLUTION

[Or, Legal Resolution of Neighborhood Food Fights]

ROSEMARY B. JACKSONLaw Office of Rosemary B. Jackson

One Riverwalk Place700 North St. Mary’s Street, Suite 1000

San Antonio, Texas 78205

State Bar of Texas26th ANNUAL ADVANCED REAL ESTATE LAW COURSE

July 8-10, 2004San Antonio

CHAPTER 32

ROSEMARY BAMBERGER JACKSONOne Riverwalk Place, Suite 1000

700 North St. Mary’s StreetSan Antonio, Texas 78205Telephone: (210) 277-1800

Telefacsimile (210) [email protected]

BIOGRAPHICAL INFORMATION

Educational Background:Bachelor of Arts, magna cum laude; The Ohio State University, Columbus, Ohio 1977Juris Doctor, Saint Mary’s University School of Law, San Antonio, Texas 1981

Memberships and Offices:

State Bar of Texas 1982-present; Texas College of Real Estate Attorneys 1996-present; State Bar of TexasSubcommittee on Property Owners Associations; Real Estate, Probate and Trust Laws Sections of the StateBar of Texas 1992-present; San Antonio Real Estate Lawyers Discussion Group 1994-present; PastPresident: San Antonio Chapter of Community Associations Institute 1991-1992; Past Chairperson: TexasLegislative Action Committee of the Community Associations Institute

Professional Credentials:Board Certified Residential Real Estate Law, Texas Board of Legal Specialization 1990

Legal Authorship:Property Owner’s Associations Selected Issues; Advanced Real Estate Drafting Course 1994

Master Restrictive Covenants and Homeowners Associations; Advanced Real Estate Drafting Course 1997

Co-Author: A Primer for Representing Condominium and Property Owners Associations with SharonReuler; Advanced Real Estate Drafting Course 1998

Drafting for Premises Liability; Advanced Real Estate Drafting Course 1999

Premises Liability Issues; Advanced Real Estate Law Course 2000

Co-Author: A Primer for Representing Condominium and Property Owners Associations (v.2) with Sharon Reuler; Advanced Real Estate Law Course 2001

Property Code Chapter 209 - Implementing the New Law; Advanced Real Estate Law Course2002

Property Owners Association Litigation and Dispute Resolution Chapter 32

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TABLE OF CONTENTS

I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. SCOPE OF DISCUSSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

III. PERTINENT STATUTES (“STATE LAW”) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

IV. TERMS AND DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2A. Subdivisions: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2B. Condominiums: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2C. Dedicatory Instruments: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

V. COLLECTION OF MAINTENANCE ASSESSMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2A. Creation of Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

1. Subdivisions: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22. Condominiums: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. Personal Obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2C. Lien For Assessments Secured By Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3D. Homestead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3E. Judicial Foreclosure of the Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

1. Judicial Foreclosure: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3a. Final judgment: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3b. Execution upon other property: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. Jurisdiction: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3a. Remedies not simultaneous: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3b. Necessary parties: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

3. Execution on Judgment and Order of Sale: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44. Prior Federal Tax Liens: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45. Right of Redemption by Owner: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

F. Deficiency After Sale and Action for Determination of Fair Market Value: . . . . . . . . . . . . . . . . . . . . . . . 5G. Statutes Of Which To Be Aware In Collection Of Maintenance Assessments . . . . . . . . . . . . . . . . . . . . . . 5

1. Usury: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5a. Late Charges: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6b. Not Interest: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2. 15 U.s.c. 1692, et Seq (1977), Fair Debt Collection Practices Act: . . . . . . . . . . . . . . . . . . . . . . . . . . 6a. Application: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6b. Required Recitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6c. Disclosure statement: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6d. Proof of debt: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6e. Partial Payments: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6f. Penalties: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3. Texas Fair Debt Collection Practices Act - Tex. Rev. Civ. Stat. Art. 5069-11.01, et Seq. (Vernon 1973) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7a. Application: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7b. No requisite recitations: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7c. Penalties: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7d. Assessments as Consumer Debts: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

VI. ASSOCIATION RECORDS: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

VII. RESALE CERTIFICATES: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

VIII. ENFORCEMENT OF RESTRICTIVE COVENANTS AND RULES AND REGULATIONS . . . . . . . . . . . . 7A. Notice Required Before Enforcement Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7


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1. Subdivisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72. Condominiums: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

IX. TEX. PROP. CODE CHAPTER 202 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8A. Rules of Construction: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8B. Authority to Enforce: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9C. Amendments to Dedicatory Instruments - Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1. Right: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92. Under Texas Condominium Act: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93. Under TUCA: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

D. Affidavits of Non-compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9E. Self-Help . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9F. Statutory Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9G. Limitation of Actions: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10H. Architectural Control: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10I. Mandatory Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

1. Competing Interests and Balanced Equities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102. EX PARTE Relief: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

J. Civ. Prac. & Rem. Code Ann. § 37.001 et seq. - Declaratory Judgments . . . . . . . . . . . . . . . . . . . . . . . . . 111. Determination of Validity: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112. Standing: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113. Counterclaim: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

K. Defenses To Enforcement: Waiver, Abandonment and Laches/Estoppel . . . . . . . . . . . . . . . . . . . . . . . . . 111. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

a. Elements and burden of proof: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11b. Other violations: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

2. Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12a. Elements and burden of proof: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12b. Change of conditions: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

3. Laches/estoppel: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12a. Elements of laches: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12b. Elements of estoppel: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

L. DEFENDING PROPERTY OWNERS ASSOCIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121. Identify the defendant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122. File a Claim with the Association’s Insurance Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123. Director and Officer Liability: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124. Premises Liability: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

a. Insurance Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14b. Exterior Lighting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14c. Golf Course Communities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14d. Security Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14e. Swimming Pools. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

M. Texas Non-profit Corporation Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151. General Standards for Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152. Standards for Directors and Officers under TUCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

N. Attorney’s Fees - Everyone’s Favorite Topic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151. Texas Property Code § 5.006 Attorney’s Fees In Breach of Restrictive Covenant Action . . . . . . . . 15

a. Prevailing Party: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15b. Determination of Attorney’s Fees: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

2. Texas Property Code Section 209.008: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153. Attorney’s Fees Under TUCA: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164. Declaratory Judgment Actions: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

O. ALTERNATIVE DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161. ADR Statute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162. Enforcement of Agreement: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16


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3. Practical Considerations: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164. Authority of Board to Settle Disputes: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175. When the Association Is the Defendant: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

X. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

APPENDIX B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

APPENDIX C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23


1

PROPERTY OWNERS ASSOCIATIONL I T I G A T I O N A N D D I S P U T ERESOLUTION

[Or, Legal Resolution of Neighborhood Food Fights]

I. INTRODUCTIONThis article is limited to issues pertaining to

mandatory property owners associations as opposed tovoluntary or “neighborhood” associations. It is devotedto the most common areas the property ownersassociation practitioner encounters in litigation andmediation forums: collection of maintenanceassessments, disputes between associations and owners,owners and owners, associations and developers, andassociations and third parties, interpretation ofassociation documents, and enforcement andenhancement of restrictive covenants. This article seeksto identify problems peculiar to property ownersassociations, application of usual and customary realproperty dispute resolution practices to these problems,a discussion of relevant case law and legislation peculiarto property owners association practice, and to discusssome lessons learned from anecdotal experiences.

This article refers to platted groupings of detachedsingle family fee simple owned houses and planned unitdevelopments as “subdivisions” and condominiumregimes in whatever form “condominiums.” Both areincluded in the context of “property ownersassociations.”

II. SCOPE OF DISCUSSIONThe proliferation of property owner’s association

litigation has captured the attention of many Texaspoliticians who have, all too often, perceived associationpowers as too broad and thus, subject to abuse. Owners,regardless of how irresponsibly ill-informed they may beabout their rights and obligations when purchasing ahome within a property owners association, may beperceived as underdogs. Having no other recourse, theytake their complaints to their legislative representative tomake their cause public. The result has been a plethoraof bills introduced in piecemeal fashion, which hascreated redundancies and inconsistencies in the body ofassociation law as a whole. In the context of litigation,this legislation has created a minefield.

Property owners association disputes raise somenovel issues, and many Courts are at a loss as to how todispose of these cases. Often judges perceive them astrivial and a waste of the Court’s time. But to a board ofdirectors no issue is too small when the homeowners areexpecting answers. These boards are hapless volunteerswhose position is thankless and demanding. Often,property owners associations resort to professional

management to aid them in the task of running anassociation, which has become a major industry. Evenso, the responsibility put upon the board of directors isdaunting. Few understand the Court system and areoverwhelmed when having to appear before a judge andjury to provide testimony.

Many jurisdictions now have a mandatoryAlternative Dispute Resolution process before a casegoes to trial. Property owners association cases are wellsuited for this forum. In the majority of these cases (aswith almost every other), no party goes away happy, butit is an effective tool for settling disputes.

III. PERTINENT STATUTES (“STATE LAW”)The existence of a property owners association

begins with “dedicatory instruments” i.e. Articles ofIncorporation, by-laws, restrictive covenants (oftencalled a “declaration”), and rules and regulations, all ofwhich must now be recorded in the official publicrecords of the county or counties in which the property islocated pursuant to Texas Property Code § 202.006.

The business organization of a property ownersassociation is commonly a non-profit corporation, butneed not be incorporated. The existing body of law togovern the operation of the incorporated property ownersassociation is the Texas Non-Profit Corporation Act(Tex. Rev. Civ. Stat. Ann., arts. 1396-1.01 et seq.[Vernon 1995]). However, Chapter 22 of the BusinessOrganizations Code will supersede this statute effectiveJanuary 1, 2006, and Chapter 252 of the BusinessOrganizations Code will govern unincorporated non-profit Associations, replacing the Texas UniformUnincorporated Nonprofit Association Act (Tex. Rev.Civ. Stat. Ann., arts. 1396-70.01 et seq. [Vernon 1995]).

Texas Property Code Chapters 81 and 82 are thesources of creation and regulation of condominiums inTexas.

Chapters 202 through 209 of the Texas PropertyCode apply to subdivisions, although some of thesestatutes are “bracketed” (i.e. they apply only to countieswith qualifying populations. Originally, these“bracketed” chapters were intended to apply to HarrisCounty and surroundings, but with a growth spurt inBexar and other counties, other areas of the State have“grown” into these statutes.

The most significant addition to the body of lawgoverning property owners associations is TexasProperty Code Chapter 209 or the Texas ResidentialProperty Owners Protection Act, effective January 1,2002. It imposes numerous conditions precedent and dueprocess requirements before initiating litigation, chargingfines and attorney’s fees except in certain situations.


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IV. TERMS AND DEFINITIONS A. Subdivisions:

Throughout the Texas Property Code, certain termsare used repetitively, but defined differently. Althoughthey do not necessarily conflict, these variations raisequestions concerning application.

These terms include:

1. ?Dedicatory instruments” and “declaration”defined in §§ 202.001(1) and 209.002(3)-(4).

2. ?Assessment,” “regular assessment” and“special assessment” defined in §§204.001(3)-(4), 206.001(4), and 209.002(1),(8)and (12).

3. ?Property owners associations” and“community associations” defined in §§202.001(2), 206.001(1) and 209.002(7) whichare intended to be used interchangeably.

4. ?Restrictive covenant” and “restrictions”defined in §§202.001(4), 203.002, 204.001(1),206.001(1), and 209.002(10)-(11).

5. “Petition” defined in §§202.001(3), and“petition committee” is described in§204.006.

B. Condominiums:

1. The ?Texas Condominium Act” is set forth asTexas Property Code, Chapter 81 (Vernon1984), and applies to condominiums createdbefore January 1, 1994.

2. ?TUCA” or the Texas Uniform CondominiumAct, Texas Property Code Chapter 82, becameeffective January 1, 1994, but is not identicalto the version promulgated by the NationalConference of Commissioners on UniformState Laws. § 82.113 of TUCA identifiescertain retroactive provisions; those provisionsapply to all condominium regimes regardlessof when created.

C. Dedicatory Instruments:In this article I use the terms “dedicatory

instrument,” “declaration,” and “project documents”interchangeably, unless otherwise specified.

It is important to interface the project documentswith State Law when determining remedies availablewhen a situation leading to litigation or subject tochallenge. Some documents contain more stringentrequirements than the statutes and should be followedand not overlooked in favor of the provisions of StateLaw. For example, the documents may require a longernotice period than a statute with regard to a hearingbefore enforcement litigation may ensue; in which case,the longer period should be followed. If there is a

conflict between the statute and the documents or anambiguity, let common sense prevail by following bothcourses simultaneously.

V. COLLECTION OF MAINTENANCEASSESSMENTS

A. Creation of Obligation1. Subdivisions:

In Inwood North Homeowners Association, Inc. v.Harris, 736 S.W. 2d 632 (Texas 1987) the Courtrecognized the obligation of a property owner to paymaintenance assessments mandated by a declaration as acovenant running with the land. The decisioncharacterized the assessment lien as a contract to beenforced if it is apparent from the language that theparties intended to create a lien. Id. at 633. Thus,maintenance assessment obligations are simultaneouslycovenants running with the land, and contracts, with allthat dual existence implies.

Now, Chapters 204, 206, 207, and 209 of the TexasProperty Code recognize the obligation of homeownersin subdivisions to pay regular and special assessmentsunder a declaration or by law.

2. Condominiums:Texas Condominium Act § 81.204 creates the

obligation to pay maintenance assessments forcondominium regimes created before January 1, 1994.TUCA expressly grants a lien for maintenanceassessments to a property owners association andprovides specific remedies for foreclosure of the lien.TUCA § 82.113.

The duty of condominium unit owners to paymaintenance assessments created by declaration orstatute is not contingent upon the fulfilment of anyobligation of a property owner’s association to repaircommon elements. Pooser v. Lovett Square Townhomes,702 S.W. 2d 226 (Tex. App. - Houston [1st District]1985, writ ref’d n.r.e.). Owners cannot holdmaintenance assessment payments hostage untilobtaining desired repairs, ‘though they often attempt thisploy.

Usually, a condominium assessment is imposed ona percentage basis determined by the percentage of anindividual unit to the whole,.calculated by the squarefootage set forth in the condominium declaration. Somecondominium regimes, however, charge equalassessments to each unit regardless of size.

B. Personal ObligationTUCA and most declarations impose a personal

obligation of an owner of a condominium unit or lotwithin a subdivision to pay maintenance assessments,and many association practitioners prefer to enforce thepersonal obligation rather than the lien because it may be

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accomplished in courts of lower monetary jurisdiction.The personal obligation to pay survives the sale of thecondominium unit or lot to a third-party and isdischargeable in bankruptcy, but the lien against theproperty is not.

C. Lien For Assessments Secured By PropertyA lien for maintenance assessments correctly

created by a dedicatory instrument and/or TUCA is acontinuing lien upon the homeowner’s property, and aproperty owners association need take no further step toperfect a claim of lien upon a delinquency of payment ofmaintenance assessments unless the declarationspecifically requires an affidavit of lien or similarinstrument be recorded in the real property records.Although not technically required, as a practical matter,an affidavit provides notice to a title insurer that there isan outstanding obligation, which will prevent aconveyance of the property until the assessment is paid.Further, the recording of such an affidavit has the effectof and dispenses with the necessity of filing a lis pendens(which is inappropriate because the property ownersassociation is not disputing title to the property), orsimilar instrument if the condominium unit or lotbecomes the subject of a judicial foreclosure application.

Some declarations provide that a subsequentpurchaser does not take subject to the lien formaintenance assessments of the seller, but in the absenceof such a provision a conveyance of the condominiumunit or lot does not extinguish the lien for maintenanceassessments.

D. HomesteadThe Texas Supreme Court in Inwood North settled

the constitutional issues concerning whether thehomestead laws of Texas protect the homeowners againstforeclosure for their failure to pay maintenanceassessments. In Inwood, the Court held that if the liensfor maintenance assessments for the purpose of repairingand improving common areas and recreational facilitiesof a subdivision were contracted for before thehomeowner took possession of the property, thehomeowner is not protected against foreclosure forfailure to pay maintenance assessments by Texashomestead laws. Supra at 633. A right, such as a lien,may prevail over a homestead claim if such right existsbefore the land becomes homestead. Johnson v. FirstSouthern Properties, Inc., 687 S.W. 2d 399 (Tex. App. -Houston [14th District] 1985, writ ref’d n.r.e.).

§82.113(k) of TUCA provides, however:

If on January 1, 1994, a unit is the homesteadof the unit owner and is subject to a declarationthat does not contain a valid assessment lienagainst the unit, the lien provided by this

section does not attach against the unit until theunit ceases to be the homestead of the personowning it on January 1, 1994.

E. Judicial Foreclosure of the Lien1. Judicial Foreclosure:

Most subdivision declarations do not provide anextra-judicial remedy of foreclosure of maintenanceassessment liens, or the provision is so poorly draftedthat a non-judicial sale pursuant to the provision wouldbe subject to challenge; and, although TUCA § 82.113(d)- (e) grants a power of sale and the authority tocondominium associations to foreclose their liens non-judicially, there are advantages to applying to the districtcourt for a judicial foreclosure of the lien.

a. Final judgment: The matter is fully litigated and all offsets,

counterclaims, validity of the lien; and

b. Execution upon other property: If the proceeds from the sale of the property are

insufficient, the sheriff or constable is to take the balanceremaining unpaid out of any other property of thedefendant, as in the case of an ordinary execution. Tex.R. Civ. P. 309.

2. Jurisdiction:An application to judicially foreclose the lien must

be filed in the District Court which has exclusivejurisdiction to enforce liens on real property by virtue ofTex. Const. art. V, § 8 and Tex. Gov’t. Code Ann. §24.007 (Vernon 1988), unless the proceeding is incidentto an estate, in which case, probate courts havejurisdiction to execute foreclosure orders, per Tex. Prob.Code Ann. § 5A (Vernon 1985).

a. Remedies not simultaneous: Judicial and non-judicial foreclosures cannot be

maintained simultaneously, and a non-judicialforeclosure sale conducted while a judicial foreclosure ispending is void. Jackson v. The Praetorians, 83 S.W. 2d740 (Tex. App. -- Dallas 1935, no writ ); City Nat’lBank of Corpus Christi v. Morgan, 29 S.W. 2d 923 (Tex.App. -- San Antonio 1929, writ dism’d). However, anon-judicial foreclosure may be conducted while a suiton the debt is pending.

b. Necessary parties:The necessary parties are the property owners

association and the record title owner(s) at the time thesuit is filed. Some declarations provide that the debt isnot assumed by a subsequent purchaser, but in theabsence of such a provision, a subsequent purchasertakes subject to an existing lien for maintenance






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assessments, and must be a party or the judicialforeclosure will not affect the subsequent purchaser’sright to the property. Senior lienholders need not benotified nor made a party to the suit. Lewis vs.Williams, 294 S.W. 2d 131 (Tex. App. -- Texarkana [6thDist.] 1956, no writ). Junior lienholders are necessaryparties, but rarely exist. Tenants are not necessaryparties, as their interest is subject to the declaration. Stroup v. Rutherford, 238 S.W. 2d 612 (Tex. App. --Amarillo 1951, writ ref’d n.r.e.).

(i) Certain Notification Requirements: Some dedicatory instruments purport to impose a

duty to notify superior lien holders of a contemplatedforeclosure as a condition precedent to the exercise ofthis right. Foreclosure of an assessment lien does notextinguish a purchase money mortgage lien, and becausethere is no contractual relationship between themortgagee and the association, it obligate a propertyowners association to make mortgage payments.Therefore, the purported duty to notify superior lienholders prior to foreclosure is invalid and superfluous.Senior liens stay in place after the assessment lienforeclosure, and must somehow be satisfied or themortgagor will enforce its rights under the deed of trustinstrument. Often, a property owners association willexercise its foreclosure power for the sole purpose ofevicting a non-paying homeowner who becomes aburden on the association’s fiscal status.

3. Execution on Judgment and Order of Sale: An execution issued on a judgment must include an

order of sale, particularly describe the property to besold, and direct the sheriff to seize and sell the property.Once the judgment is final, a Writ of Execution and/orOrder of Sale is issued, upon request, by the DistrictClerk’s office and forwarded to the sheriff for posting.Tex. R. Civ. P. 631, 632. Thereafter, the sheriff notifiesthe attorney for the property owners association of thedate of the sale, which is always on the first Tuesday ofthe month following the publishing of the notice once aweek for three consecutive weeks in some newspaperpublished in the county. Tex. R. Civ. P. 646A, 647. Thecost of publishing varies with the length of the notice.

4. Prior Federal Tax Liens: A notice should be sent to the Internal Revenue

Service at least 25 days prior to the sheriff’s sale in theevent the property against which the property ownersassociation has its order of sale is subject to a federal taxlien which was recorded more than 30 days prior to thesale. 26 U.S.C.A. § 7425 (b) and c).

(A) IRS NOTICEThe notice should be sent certified mail return

receipt requested to the IRS District Director in thedistrict in which the property is located.

(B) REQUIREMENTS: Treas. Reg, § 301.7425-3(d) lists the requirements

the notice must contain, and are included in Appendix“A.”

(C) IRS REDEMPTION: Even with proper notice given, the IRS has a

statutory right of redemption for a period of 120 daysafter the execution sale. 26 U.S.C.A. § 7425 (d) (1),Treas. Reg. § 301.6325-1(b)(2).

5. Right of Redemption by Owner:There is now a right of redemption by owners who

have lost their property through assessment lienforeclosures. The process is peculiar to this type of sale,and does not parallel that of tax sale redemptions or anyother post-foreclosure remedy. Careful attention to theseunique timetables is essential to minimize exposure ofthe property owners association for damages as a resultof non-compliance.

(A) SUBDIVISIONS: A right of redemption after foreclosure of an

assessment lien was created by Texas Property Code §209.011. The owner must exercise his or her right nolater than 180 days after the notice of the sale is sent bythe property owners association.

(1) If the property is purchased by the propertyowners association at the sale, in order toredeem, an owner must pay:

(a) all amounts due to the association at thetime of the sale;

(b) interest from the date of the sale asprescribed by the documents or 10percent;

(c) costs incurred, including costs of the sale,costs to re-convey title and attorney’sfees;

(d) assessments incurred since the date of thesale;

(e) mortgage payments, maintenance costs,and leasing costs (if any) incurred by theassociation;

(f) the purchase price paid by the associationless proceeds from the sale.




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(2) If the property is purchased by a third party atthe sale, in order to redeem, an owner mustpay:

(a) all amounts due to the property ownersassociation at the time of the sale less theforeclosure sales price received from thepurchaser;

(b) interest from the date of the sale asprescribed by the documents or 10percent;

(c) cost incurred by the property ownersassociation, including costs of the sale,costs to re-convey title and attorney’sfees;

(d) any unpaid assessments levied against theproperty by the property ownersassociation since the date of the sale; and

(e) taxable costs incurred for any forcibleentry and detainer action.

(3) The redeeming owner must also pay to thepurchaser:

(a) any assessment levied against theproperty by the association after the dateof the foreclosure sale;

(b) the purchase price paid by the purchaserat the foreclosure sale;

(c) the amount of the deed recording fee;(d) the amount paid by the purchaser as ad

valorem taxes, penalties and interest onthe property after the date of theforeclosure sale; and

(e) taxable costs incurred for any forcibleentry and detainer action.

Basically, whether a property owners association or athird party is the purchaser at the sale, they must be madewhole to honor the redemption requirements.Conversely, all income received must be credited to thedebt owned by the redeeming owner. All other debts anliens remain in the property after redemption and remainthe obligation of the redeeming owner. Any partialpayments made to the property owners association whichare not sufficient to redeem the property before theredemption period expires, must be refunded by mail tothe owner’s last address shown on the association’srecords, no later than the 30th day after the redemptionperiod.

There are redemption extension periods of 10 daysupon written notice by the owner.

The property owners association or third party whopurchased the property at the foreclosures sale must filean affidavit in the real property records stating that the

owner did not redeem the property during the redemptionperiod, or any extension period. A bona fide purchaserfor value may rely on the information contained in theaffidavit.

(B) CONDOMINIUMS: If the property owners association purchases a

condominium unit at sale, TUCA grants thecondominium unit owner the right of redemption for aperiod of 90 days after the date of the sale. To redeemthe owner must pay to the property owners association allamounts due at the time of the sale, interest from the dateof the sale to the date of redemption at the rate providedin the declaration for delinquent assessments, reasonableattorney’s fees and costs incurred by the property ownersassociation in foreclosing the lien, any assessmentslevied against the unit after the foreclosure sale, and anyreasonable cost incurred by the property ownersassociation as owner of the unit, including costs ofmaintenance and leasing. A property ownersassociation cannot transfer the condominium unit duringthe redemption period to a person other than a redeemingowner. TUCA § 82.113 (g).

Review all financial ledgers of the property ownersassociation regarding the delinquent account. Many oftheir accounting practices may inadvertently violate theirdocuments, which can be fatal to a sale which ischallenged.

F. Deficiency After Sale and Action forDetermination of Fair Market Value: Property sold at a sale under a judgment foreclosing

a lien and ordering a sale or non-judicial foreclosure aresubject to the provisions of Tex. Prop. Code Ann. §§51.003 and 51.004, which apply when the bidding priceis less than the unpaid balance of the indebtedness,resulting in a deficiency.

Within 90 days of the date of sale under a courtjudgment or within two years of a non-judicialforeclosure sale, the person obligated on the indebtednessmay bring an action in the district court for adetermination of the fair market value of the property asof the date of the foreclosure sale. Tex. Prop. Code Ann.§ 51.003 (a) (Vernon 1993) and § 51.004 (b) (Vernon1991).

G. Statutes Of Which To Be Aware In Collection OfMaintenance Assessments

1. Usury: Tex. Rev. Civ. Stat. Ann. art. 5069-1.0l - 1.02

(Vernon 1967). Almost every declaration provides for some form of

late charges for delinquent maintenance assessments.


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a. Late Charges:As of this writing, usury laws do not apply to late

charges collected by property owners associationresulting from overdue assessments on condominium forproportionate share of various common expensesincurred in maintaining the property, since the latecharge was not for ?use or forbearance or detention” ofassociation’s funds within meaning of usury statute. Forusury to apply, there must be an overcharge by a lenderfor use, forbearance, or detention of lender’s money.?Use” of money provision referred to in the usury statuteis that which is contracted for when a loan is made.?Forbearance” within the meaning of the statute occurswhen there is a debt due or is to become due, and theparties agree to extend the time for payment.?Detention” of money arises within the meaning of thestatute when a debt has become due and the debtor haswithheld payment without a new contract giving him theright. Because usury must be founded on an overchargeby a lender for the use, forbearance or detention of alender’s money, the definition of detention necessarilyrequires a lending transaction between the partiesthemselves. Tygrett v. University GardensHomeowner’s Association, 687 S.W. 2d 481 (Tex. App.-- Dallas 1985, writ ref’d n.r.e.).

b. Not Interest:A property owners association may charge interest

at the rate of ten percent because it is provided for in theDeclaration, and the ten percent rate of interest chargeddoes not violate the constitutional prohibition on interestin excess of six percent where no rate is agreed upon. Alate charge imposed on a subdivision assessment is apenalty for failing to timely pay an assessment and is notcompensation for the use or forbearance of money andthus is not interest. Lee v. Braeburn Valley West CivicAssociation, 794 S.W. 2d 44 (Tex. App. -- Eastland1990, cert. denied). 2. 15 U.s.c. 1692, et Seq (1977), Fair Debt Collection

Practices Act: a. Application:

This federal legislation applies to professionalmanagement agents and attorneys employed to collectdelinquent maintenance assessments.

b. Required Recitations: § 1692g of the Act requires certain recitations to be

made in initial and subsequent communications with anowner in connection with an attempt to collect delinquentmaintenance assessments. The required recitations areattached as Appendix “B.”

c. Disclosure statement:Further, § 1692e.(10) requires that all

communications contain a disclosure statement in allcommunications to made to collect a debt or to obtaininformation about a consumer, that the debt collector isattempting to collect a debt and that any informationobtained will be used for that purpose. Suggestedlanguage is as follows:

Because you have not responded to its requestsfor payment, the Association has turnedcollection of your delinquency over to me.Please be advised that unless you dispute thevalidity of this debt, or any portion of it, within30 days after receiving this notice, I willassume the debt to be valid. If, within that 30-day period, you notify me in writing that youdispute all or any part of the debt, I will obtainand mail to you verification of the debt. If thedebt is founded on a judgment, a copy of thejudgment will be mailed to you as verification.Upon your written request within the 30-dayperiod, I will provide you with the name andaddress of the original creditor, if differentfrom the current creditor. Please be furtheradvised that this firm is attempting to collect adebt and any information obtained will be usedfor that purpose.

Be careful that when sending notice of foreclosure,whether judicial or non-judicial, that you include only thefinal sentence of this communication; otherwise, it maybe construed that the homeowner has thirty days beyondthe date of the posted sale date to dispute theindebtedness.

d. Proof of debt: If an affidavit has been recorded on the delinquent

owner’s property it should be referred to in the initialcommunication and a copy enclosed. It also is prudent toinclude a copy of the provisions of the declaration thatcreate the lien for maintenance assessments and imposethe personal obligation of the owner to pay.

e. Partial Payments: If the owner makes a partial payment, and directs

that the payment be made to satisfy a specified portion ofthe debt, the attorney must apply it to the debt in themanner which it was directed. § 1692h.

f. Penalties: An individual who brings an action for violation of

this statute is entitled to his actual damages, punitivedamages not to exceed $1,000.00, and attorney’s fees andcosts, and the Federal Courts have exclusive jurisdiction




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over these cases. There is a separate penalty for classaction violations. §1692i (a)(1) - (2)(A)(B).

3. Texas Fair Debt Collection Practices Act - Tex.Rev. Civ. Stat. Art. 5069-11.01, et Seq. (Vernon1973)

a. Application: This statute prohibits a debt collector, or any person

attempting to collect a debt on their own behalf, fromusing threats or coercion, harassment, abuse, unfair orunconscionable means, fraudulent, deceptive, ormisleading representations, a deceptive credit bureauname, and/or repeatedly and continuously using anindependent debt collector who engages in acts orpractices prohibited by the Act.

b. No requisite recitations: There are no required recitations in communications

to debtors under this statute.

c. Penalties: A violation of the act is a Class C Misdemeanor, and

a consumer can seek injunctive relief and be awardedattorney’s fees. Also, the attorney general’s office mayenforce the Act against a violator for injunctive relief.

d. Assessments as Consumer Debts:Cases deciding that Property owners association fees

are consumer debts include: Newman v. Boehm,Pearlstein & Bright, Ltd., also Riter v. Moss &Bloomberg, Ltd., Nos. 96-2839 and 96-2841, 1997 WL375341 (7th Cir. July 2, 1997); Thies v. The Law Officesof William A. Wyman and Champs/The Kelly Group,Case. No. 97-0734, (S.D.Cal. July 23, 1997).

Cases deciding that Property owners association feesare not consumer debts include: Bryan v. Clayton, No.96-2406 (Fla.App.-5th Dist. May 9, 1997) Vosatka v.Wolin-Levin, Inc., No. 94C4129, 1995 WL 443950(N.D.Ill. July 21, 1995); Azar v. Hayter, 874 F.Supp.1314 (N.D.Fla. 1995); Nance v. Petty, Livingston,Dawson & Devening, 881 F.Supp.223 (W.D.Va. 1994);Archer v. Beasley, No.90-2576(CSF), 1991 WL 34889(D.N.J. Mar. 5, 1991).

One recent non-property owners association case isworth mentioning. The 7th Circuit -- which ruled againstthe attorney in Newman v. Boehm -- used another case tore-write an attorney's initial demand letter, thus providingsafe harbor language for use in the 7th Circuit. SeeBartlett v. Heibl, No. 97-1946, 1997 WL 616675 (7thCir. Wis.) to be reported at 128 F.3d 497.

VI. ASSOCIATION RECORDS:The Texas Non-Profit Corporation Act § 1369-

23(B) and Texas Property Code §§ 82.114 and 209.005require disclosure of corporate records to members of a

property owners association, except the Non-ProfitCorporation Act requires an owner to submit a requestin writing stating a proper purpose for his or her inquiry.Attorney’s files as property owners association recordsare protected from disclosure as a backlash from thedecision of Burton v. Cravey, 759 S.W.2d 160 (Tex.App.- Houston [1st Dist.] 1988). Therefore, an owner isnot entitled to inspect the files of an attorney representinga property owners association.

VII. RESALE CERTIFICATES:These are disclosure documents required to be given

by a property owners association in connection withproperty conveyances, as required by TUCA §82.116 andby Chapter 207 of the Texas Property Code. Thesedisclosures have become fodder for lawsuits bypurchasers who contract buyer’s remorse. They areprovided usually on a printed form promulgated by theReal Estate Commission or professional managementagencies, and prepared by a board member or managingagent who consider the information de rigueur. Anadditional pitfall is that the preparer may charge a fee forthe service, which brings them under the Deceptive TradePractices - Consumer Protection Act, or so it seems.Even though your property owners association client mayconsider your review of these certificates an unnecessaryexpense, it is an ounce of prevention for a pound of cure.Especially because they require disclosure of pendinglitigation, of which the preparer may be unaware orunable to adequately describe, or worse, may result in awaiver of privilege, it is by far the better course forCounsel to prepare, or at least review and approve resalecertificates.

VIII. ENFORCEMENT OF RESTRICTIVEC O V E N A N T S A N D R U L E S A N DREGULATIONS

A. Notice Required Before Enforcement Action 1. Subdivisions

Texas Property Code §209.006 does not apply toproceedings and actions to collect general and specialassessments. It does apply to any action taken by aproperty owners association to enforce a restriction orrule, or for reimbursement for property damage tocommon areas.

Most dedicatory instruments contain provisions forsuspension of voting rights or use of amenities forowners who have violated restrictive covenants or rulesand regulations. In the past, this was often a practicewithout a resolution of the board of directors or other dueprocess formality. Owners suffered egregiousembarrassment when trying to take their children or guestto a common area pool, or attend and annual meeting tovote for a new Board of Directors or other issues whichimpacted the enjoyment of their residences. To make

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matters worse (from the perspective of the owner),associations sought reimbursement of their attorney’sfees, and if their dedicatory instruments allowed,imposing fines for enforcing the restrictions withoutnotice to the owner.

Under § 209.006, this section, before a propertyowners association may suspend an owner’s rights, orfile suit for enforcement, the association must givewritten notice by mail, return receipt requested, whichcontains the following:

(A) A description of the violation or propertydamage that is the basis for the suspensionaction or fine and state any amount due theProperty owners association from the owner;and

(B) inform the owner that the owner:

(i) is entitled to a reasonable period to curethe violation and avoid the fine orsuspension unless the owner is givennotice and a reasonable opportunity tocure a similar violation within thepreceding six months; and

(ii) may request a hearing under Section209.007 on or before the 30th day after theowner receives the notice.

A committee may be appointed to hear a discussion andverification of the facts of the alleged violation andresolve the issue. If the board elects not to appoint acommittee, the board may preside over the hearing. If nocommittee is appointed, the notice must state that theowner has a right to appeal the committee’s findings tothe Board of Directors.

This provision does not apply to suits seekinginjunctive relief involving an immediate risk or harm toothers in the subdivision or foreclosure for delinquentassessments and either party may request ADR in thesecases.

Unfortunately, some practitioners are using theinjunctive relief exception to the notice and hearing as aeasy out, throwing in a request for injunctive relief wherenot truly warranted, merely to avoid the requirements of§§ 209.006 and 209.007. Judges don’t like this.

If the owner takes the option to refuse the hearingand/or cure the violation, the association may enforcewithout the restraints of this statute. Should the owneravail him or herself of these due process requirements,the practitioner should take care that proper notice of thehearing be conducted under the notice provisions of theby-laws regarding special meetings of the board ofdirectors and that a quorum of the is present, to avoid anychallenge to the legality of the proceedings.

The board must hold the hearing no later than the30th day after the it receives the owner’s request, andnotify the owner of the date, time, and place no later thanthe 10th day before the hearing. Any postponements mustbe granted for a period of no longer than 10 days. Thehearings may be audio recorded without the consent ofeither party. If the stakes are high enough, it may beprudent to have the recording done by a Court Reporter.

If suit is filed by the Property owners associationwithout following the due process requirement, theowner may abate the action and compel mediation, unlessthe suit is brought to suspend the owner’s right to use thecommon facilities because of a violation which occurredin a common area which involved significant harm toothers in the subdivision.

2. Condominiums:Under the Texas Condominium Act or TUCA, there

are no prerequisites to filing suit for violations ofrestrictions; however condominium associations do nothave inherent power to fine owners and residents forviolations of rules. The authority to fine must be foundin the project documents. Since 1994, every Texascondominium has had statutory authority to adoptpolicies and procedures for levying fines for violations ofits rules, subject to a statutory requirement of notice andhearing. In adopting fining policies and procedures, theassociation should consider the following:

(1) The amount and frequency of the fine shouldbe reasonable in light of the violation. Someviolations warrant higher fines than others.Some fines should be per occurrence, othersper day or per month.

(2) Before levying a fine, the violator must begiven notice of the violation, an opportunity tocure the violation, and an opportunity to beheard before the board or committee. TUCArequires that the violator be given a thirty-dayperiod in which to request a hearing.

(3) Fines should not be allowed to accumulateindefinitely. The board should determine amaximum amount of fine that will be permittedto accrue. If fines are not effective in curingthe violation, the association must seek adifferent route.

(4) The owner should be given periodic notices ofthe amount owing for unpaid fines. Do notassume that the owner knows he is being fined.

IX. TEX. PROP. CODE CHAPTER 202A. Rules of Construction: Liberal Construction vs. Strict Construction: Prior to 1987, restrictive covenants on land were not

favored by Texas Courts, and were strictly construed


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against the grantor who placed the restrictions on theland in favor of its free use. Effective June, 1987, thelegislature passed Texas Property Code § 202.003,which applies to all restrictive covenants, regardless ofthe date on which they were created, and changed therules of construction so that thereafter, a restrictivecovenant be liberally construed to give effect to itspurpose and intent.

Texas has a number of cases that help (or hurt, asthe case may be) with the interpretation of projectdocuments. The matter was confused in Wilmoth v.Wilcox, 734 S.W.2d 656 (Tex. 1987) which held thatcovenants restricting the free use of property are to bestrictly construed. Perceiving a conflict with PropertyCode §202.003, in Candlelight Hills Civic Association,Inc. v. Goodwin, 763 S.W. 2d 474 (Tex. App.--Houston[14th District] 1988, writ denied) the Court held that arestrictive covenant should not be hedged about withstrict construction, but given liberal construction in orderto carry out its evident purpose. Thereafter, anotherHouston appellate court decided in AshcreekHomeowner’s Association, Inc. v. Smith, (Tex. App.--Houston [1st District], 1995, n.w.h.) that there was nomeaningful distinction between the statute and the oldrule of construction.

B. Authority to Enforce: Property owners associations are given the authority

to initiate, defend, and intervene in litigation or anadministrative proceeding affecting the enforcement of arestrictive covenant or the protection, preservation oroperation of the property covered by a dedicatoryinstrument by § 202.004(b).

Under § 202.004(a), an exercise of discretionaryauthority by a property owners association in enforcinga restrictive covenant is presumed reasonable unless thecourt determines by a preponderance of the evidence thatthe exercise of authority was arbitrary, capricious ordiscriminatory.

C. Amendments to Dedicatory Instruments -Enforceability

1. Right:An amendment process, and amended restrictive

covenants are enforceable if they are passed inaccordance with that process. In order for a subsequentinstrument to amend an original restrictive covenant, theinstrument creating the original restriction must establishboth the right to amend such restriction and the methodof amendment. Scoville v. Springpark HomeownersAss’n, 784 S.W. 2d 498 (Civ. App. -- Dallas 1990, nowrit). City of Pasadena v. Gennedy, 1st Court of Appeals- Houston, Dec. 8, 2003, 01-02-00324-CV. DyegardLand Partnership v. Hoover, 2nd Court of Appeals,January 11, 2001, 2-99-361-CV.

2. Under Texas Condominium Act: §81.111 provides that after a condominium

declaration is recorded with the county clerk, thedeclaration may not be amended except at a meeting ofthe apartment owners at which the amendment isapproved by the holders of at least 67 percent of theownership interests in the condominium.

Amendment of a condominium declaration is notarbitrary or capricious in that the condominium owners,at the time of the purchase of their units, knew or shouldhave known that they bought subject to all provisions ofthe declaration, one of which was the right to amend thedeclaration. Board of Directors of By The Sea Councilv. Sondock, 644 S.W. 2d 774 (Tex. App. -- CorpusChristi 1982, no writ). Evidence supported a finding thatthe proposed amendment of a condominium declarationreceived the consent of more than 66 2/3% of theapartment owners, even though consent forms fromowners were obtained after the date of the annualmeeting. Id.

3. Under TUCA: §82.067 of TUCA governs amendment to

condominium dedicatory instruments recorded afterJanuary 1, 1994.

D. Affidavits of Non-complianceAn effective tool which the property owner’s

association may utilize in addition to litigation, or if theviolation is not material and substantial, is an affidavit ofnon-compliance with a restrictive covenant which isexecuted by an officer of the property owners associationand recorded in the real property records.

Normally such an instrument will be treated as atitle defect by a title insurer and by a mortgage lender,and will generally preclude a conveyance of the propertyby the non-complying owner to a purchaser until theviolation is rectified and the affidavit released by theproperty owners association.

E. Self-HelpMany association documents include self-help

provisions; i.e. the property owners association may takesteps to cure an owner’s violation and charge the cost asa special assessment. In this day and age, however, theassociation attorney should advise the board of thedangers of exercising this right and taking safetyprecautions before attempting to do so. I have hadexperience with owners pulling guns on contractors hiredto cure violations.

F. Statutory DamagesThe property owners association may recover an

award of statutory damages for violation of a restrictivecovenant under Texas Property Code § 202.004(c) of up






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to $200.00 pre day of the violation. Such an award issubject to the sound discretion of the Court.

G. Limitation of Actions: Actions to enforce restrictive covenants are

controlled by four-year statute of limitations which ismeasured from the date of discovery of the violation.Buzbee v. Castlewood Civic Club, 737 S.W. 2d 366(Tex. Civ App. -- Houston [14th Dist.] 1987, no writ.),however laches may be asserted as a defense to anenforcement action, which is further discussed infra.

H. Architectural Control: Generally, the declaration creates an entity charged

with the responsibility for reviewing plans submitted byowners or builders for approval before a residence isconstructed or an alteration made to an existing structure,and conducting investigations of violations. Thesecommittees are commonly called the ArchitecturalReview Committee or Architectural Control Committeeand are given broad discretionary power to determinewhether or not a plan for a proposed residence, alterationor improvement will be approved.

In order to avoid an inconsistent application of thecovenant enforcement, and to ensure that there will be acontinuity of application when the membership of theCommittee changes, the best policy is to develop ahandbook of guidelines for the Committee with thestandards of design for the community and adopt aformal master plan which sets forth an official generalscheme. The property owners association shoulddisseminate this material to each owner in thecommunity, and, if possible, to purchasers at or beforeclosing.

In Gettysburg Homeowners Association, Inc. v.Olson, 768 S.W. 2d 369 (Tex. App. -- Houston [14thDist.] 1989, no writ), the Court held that such a provisionwas not enforceable in its application by the propertyowners association to approve the plans of only ?customhomes”, and found that the Committee exercised itsauthority in an arbitrary or capricious manner in view ofconflicting testimony defining ?custom home”.

Conversely, in Johnson, et al. v. Rayco, Inc., st al,No. 90-CI-07443 (Dist. Ct. of Bexar County, 166thJudicial Dist. of Texas, May 23, 1990) a San AntonioDistrict Court upheld the enforcement of the followingcovenant: ?The committee shall have the express power,authority and discretion to disapprove any plans andspecifications submitted hereunder due to theirsimilarities with plans and specifications for otherexisting or proposed structures, it being the intent hereofto discourage repetition of design and so called <tracthousing’ appearance.”

To enforce a covenant requiring property owners tosubmit property plans for approval, it is not essential that

there be prima facie proof of implementation of generalplan or scheme if the property owners deed recited thatit was accepted subject to any and all restrictions ofrecord affecting the property, and there is no evidence tosupport a finding that the provision is applied moreonerously to some owners than others. Rosas v. Bursey,724 S.W. 2d 402 (Tex. App. -- Fort Worth 1986, nowrit). Village of Pheasant Run Homeowners Association,Inc. V. Kastor, 14th Court of Appeals - Houston, May 19,2001, 14-99-01208-CV.

I. Mandatory Injunctive Relief1. Competing Interests and Balanced Equities:

In restrictive covenant enforcement cases the courtshave looked to competing interests and balanced equities,but have not required property owners association toshow irreparable harm or actual damages. Where thereis a distinct or substantial breach of a restrictive covenantshown, the party seeking to enforce the covenant isentitled to injunctive relief even though there is no proofof actual damages or irreparable harm. Gennels v. NorthWoodland Hills Community Ass’n., 563 S.W. 2d 334 (Tex.App. -- Houston [1st Dist.] 1978, no writ).

Courts weigh the equities of the property ownersassociation against the equities favoring the owneragainst whom the covenant is sought to be enforced.Disproportionate harm to the owner must be ofconsiderable magnitude to justify a refusal to enforcerestrictive covenants. Gennels, Id.

A temporary injunction is a proper method ofmaintaining status quo while the applicability of therestrictive covenant is finally determined and the trialcourt did not abuse its discretion in requiring the removalof an antenna pending final hearing of an application forpermanent mandatory injunction. Gennels, Id. The factthat one landowner may suffer a greater injury due to theenforcement of a restrictive covenant does not compelrefusal to enforce the restriction and the granting ofmandatory injunction ordering removal of anonconforming structure is a proper way to enforce adeed restriction. Radney v. Clear Lake ForestCommunity Association, Inc., 681 S.W. 2d 191 (Tex.Civ. App. -- Houston [14th Dist.] 1984, ref. n.r.e.)

The cost to remove and relocate a mobile home wasfound to be less than the total losses in market value thatthe other lot owners would suffer. Gigowski v. Russell,718 S.W. 2d 16 (Tex. App. -- Tyler 1986, ref. n.r.e.). A trial court is not only empowered, but required, tobalance rights and equities between homeowner andproperty owners association. Woodland Trails NorthCom. Imp. v. Grider, 656 S.W. 2d 919 (Tex. App --Houston [1st Dist.] 1983, ref. n.r.e.). In Giles v.Cardenas, 697 S.W. 2d 422 (Tex. App. -- Houston [4thDist.] 1985, ref. n.r.e.) the Court ordered anonconforming fence removed. In Radney, supra. the










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Court ordered a second story be removed from a garage,and in Rosas, supra. the Court ordered the removal of anentire residence which violated a restrictive covenantrequiring a structure to be completed within ninety days.

2. EX PARTE Relief: Ex parte relief may be granted by the Court, for

example, if there is a restriction concerning the numberpersons permitted to use a recreational facility.

J. Civ. Prac. & Rem. Code Ann. § 37.001 et seq. -Declaratory Judgments

1. Determination of Validity: If a party is seeking determination of the validity,

applicability, or enforceability of a restrictive covenant,a suit for declaratory judgment is the appropriate means.Candlelight Hills Civic Ass’n v. Goodwin, 763 S.W. 2d474 (Tex. App. -- Houston [14th Dist.} 1988, cert.denied); Tanglewood Homes Ass’n, Inc. v. Henke, 728S.W. 2d 39 (Tex. App. -- Houston [1st Dist.] 1987, writref’d n.r.e.).

2. Standing:A plea in abatement may be used to challenge

standing in a suit for declaratory judgment. Develo-Cepts, Inc. v. City of Galveston, 668 S.W.2d 790, 793(Tex.App.–Houston [14th Dist.] 1984, no writ). Standingis an issue that can be raised at any time. Tex Ass’n ofBusiness v. Air Control Bd., 852 S.W.2d 440, 444 (Tex.1993). The test for standing requires that there be a realcontroversy between parties, which will actually bedetermined by judicial determination sought. Nootise,Ltd. v. Williamson County Appraisal District, 925S.W.2d 659, 661 (Tex.1996). Without a breach of legalright belonging to the plaintiff, no cause of action canaccrue to his benefit. Noble v. Marcus, 533 s.w.2D 923,927 (Tex.1976).

A plaintiff lacks standing to individually bring acause of action against a property owners association ifhe or she has asserted causes of action that belong to theAssociation or all of the co-owners, if it alleges damagesto common area owned jointly with/or to the associationitself and that the individual members of the corporationsimilarly situated have been damaged as a result of theassociation’s breaches of duties. Therefore, an individualowner’s interest does not grant him or her the right torecover individually for damages to the association. Myerv. Cuevas, No. 04-02-00759-CV 2003 WL 22011300(Tex.App.–San Antonio Aug 27, 2003, no pet.); Scott v.Williams, 607 S.W.2d 267 (Tex.App.–Texarkana 1980,writ ref’d n.r.e.). Simpson v. Afton Oaks Civic Club,Inc., 6th Court of Appeals - Texarkana, Sept. 10, 2003,06-02-00102-CV.

3. Counterclaim:A suit under the Declaratory Judgment Act cannot

be used as a counterclaim if there is pending at the timesuit is filed, another cause between the same parties inwhich the same issues maybe adjudicated, solely as anavenue to obtain attorney’s fees. Heritage Life Ins. Co.v. Heritage Group Holding Corp., 751 S.W. 2d 229 (Tex.App. -- Dallas 1988, cert. denied). See also: Furr v.Hall, 553 S.W. 2d 666 (Tex. App. -- Amarillo 1977, writref’d n.r.e.).

K. Defenses To Enforcement: Waiver,Abandonment and Laches/EstoppelGenerally, a property owner has the burden to use

reasonable diligence to determine whether anyrestrictions are still in force before deliberatelydisregarding them Stergios v. Forest Place Homeowners’Ass’n, 651 S.W. 2d 396 (Tex. App. -- Houston [5thDist.] 1983, writ ref’d n.r.e.). Ordinarily, unless arestriction is removed either by agreement of allinterested property owners or by declaratory judgment,restrictive covenants are not removed Schoenhals v.Close, 451 S.W. 2d 597 (Tex. App. -- Amarillo 1970, nowrit).

1. Waivera. Elements and burden of proof:

To establish waiver, the nonconforming propertyowner must prove that violations then existing are sogreat as to lead the mind of the ?average man” toreasonably conclude that the restriction in question hasbeen abandoned and its enforcement waived. Among thefactors to be considered are the number, nature andseverity of the then-existing violations, any prior acts ofenforcement of the restriction, and whether it is stillpossible to realize to a substantial degree the benefitsintended through the covenant J.J. Finkelstein, et at. v.Southampton Civic Club, 675 S.W. 2d 271 (Tex. App. --Houston [1st Dist.] 1984, writ ref’d n.r.e.); Seureau v.Tanglewood Homes Ass’n, Inc., 694 S.W. 2d 119 (Tex.App. -- Houston [14 Dist.] 1985, writ ref’d n.r.e.).

The failure of a property owners association or otherparty attempting enforcement of a restrictive covenantwill not preclude obtaining an injunction when the otherviolations were not substantial. Seuruau, Id.

If other violations of a restrictive covenant do notmaterially affect enjoyment of the property of others,there has been no waiver of that restrictive covenant. Cameron v. McDonnell, 659 S.W. 2d 911 (Tex. App. --Corpus Christi 1983, no writ); Seureau, supra. If theprior violation which existed without objection wasinsignificant or insubstantial when compared to theproposed new use, a waiver is not established.Sharpstown Civic Association, Inc. v. Pickett, et al., 679S.W. 2d 956 (Tex. 1984).




















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Waiver consists of an intentional relinquishment ofa known right or intentional conduct inconsistent withclaiming it. Furr, supra. The defendant has the burden ofproving such defense. Giles, supra.

b. Other violations: However, once a nonconforming use has existed for

a period of time, the covenant is waived as to that use,but it will not support a waiver of a new and greaterviolation. Sharpstown, supra.

Minor and trivial violations of the architecturalscheme do not constitute a waiver of a property ownersassociation of their right to enforce a restrictive covenant.Delaporte v. Preston Square, Inc., 680 S.W. 2d 562 (Tex.App. --Dallas 1984, no writ).

2. Abandonmenta. Elements and burden of proof:

To establish abandonment of a restrictive covenant,a party must prove that the violations are so great as tolead the mind of the average man to reasonably concludethat the restriction in question has been abandoned.Tanglewood, supra.

b. Change of conditions: A trial court may refuse to enforce deed restrictions

if there has been such a change of conditions in arestricted area or surrounding it that it is no longerpossible to secure, in a substantial degree, the benefitsought to be realized through the covenant. Traeger v.Lorenz, 749 S.W 2d 249 (Tex. App. -- San Antonio1988, no writ).

3. Laches/estoppel:a. Elements of laches:

Laches is an affirmative defense consisting ofunreasonable delay in asserting legal or equitable right,and good-faith change of position by another to hisdetriment because of such delay. Stergios, supra. Theparty asserting the defense of laches has burden ofproving both elements. Id. When a cause of actioncomes within any specific provisions of statute oflimitations, the equitable defense of laches does notapply unless extraordinary circumstances exist. Buzbee,supra.

b. Elements of estoppel: Estoppel is the effect of the voluntary conduct of a

party whereby he is absolutely precluded, both at law andin equity, from asserting rights which might perhapsotherwise have existed, as against another person whohas in good faith relied upon such conduct, and has beenled thereby to change his position to his detriment, andwho on his part acquires some corresponding right.Finkelstein, supra. Estoppel, like laches, includes

element of change of position in reliance on the conductof other parties. Stergios, supra.

Note: There are a few cases which indicate that acovenant can be ?rejuvenated” once it has been violated:Applicability of a covenant is renewed once the violationof it ceases. Finkelstein, supra. If a violation of arestrictive covenant ceases, the covenant will once morebecome effective and will bar any future violations.Schoenhals, supra.

L. DEFENDING PROPERTY OWNERSASSOCIATIONSWhen an incorporated property owners association

gets served through its registered agent, you may want toaccept service if the associations’ registered agent is notcurrent (which frequently happens). Often boardmembers and managers are sued individually.Regardless, make sure to answer the suit as soon aspossible so that a default judgment is not taken.

1. Identify the defendant.One of your first tasks if to determine whether the

party being sued is your client and whether you areauthorized to represent the defendant in the litigation.The named defendants may be the property ownersassociation, the board of directors, individual directors,the manager or management company, the architecturalcontrol committee, a combination, or all of the above.

2. File a Claim with the Association’s InsuranceAgent. Immediately notify the association’s insurance agent

of the suit, accompanied by a copy of the pleadingsFailure to timely notify the insurer may result in a lack ofcoverage or cancellation of or failure to renew theassociation’s policy. For a number of reasons, yourclient may hesitate to, refuse to, or fail to notify itsinsurer, but they must. The insurance company willevaluate the claim and make a decision about coverage,or, in the interim, defend the association under a“reservation of rights.” They may assign it to a defensefirm attorney with whom they have a contract forservices or request that you take over the defense of thecase. Regardless of the insurer’s choice of counsel, makesure to monitor your client's defense. Insurance defensecounsel (no slight intended) are usually conditioned totake direction from the entity which signs their paycheck,and may not understand association issues. They oftenneed your expertise in this area, or, a counterclaim maybe necessary, for which they are not authorized or paid toprepare.

3. Director and Officer Liability:The Texas Civil Practice and Remedies Code §§

84.003 and 84.004 create an exemption or immunity for



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property owners associations, and their officers anddirectors, from civil liability for any act or omissionresulting in death, damage, or injury if the volunteer wasacting in good faith and in the course and scope of hisduties or functions within the organization. Called theCharitable Immunity and Liability Act, it was passedbecause the legislature recognized a need for “robust,active, bona fide, and well supported charitableorganizations” in Texas. The concern was for thewillingness of volunteers to offer their services if therewas a perception of personal liability arising out of theirservices to these organizations and problems in obtainingaffordable liability insurance for the organizations, theiremployees and volunteers.

The statute applies to any organization exempt fromfederal income tax under 26 U.S.C.A. §§501(c)(3),501(c)(4) and 528(c), Internal Revenue Code of 1986,including property owners associations, residential realestate management companies and timeshareassociations.

A volunteer who is serving as an officer or directorof a property owners association is immune from civilliability for any act or omission resulting in death,damage or injury if he was acting in the course and scopeof his duties or functions within the organization.

The exemption is only afforded to volunteers andnot the association itself. In any civil action broughtagainst a property owners association for damages basedon an act or omission by its employees or volunteers,liability is limited to monetary damages in a maximumamount of $500,000.00 for each injured person,$1,000,000.00 for each single occurrence of bodily injuryor death, and $100,000.00 for each single occurrence forinjury or destruction of property. It does not apply to anact or omission that is intentionally, wilfully or wantonlynegligent, or done with conscience indifference orreckless disregard for the safety of others or anassociation which does not have liability insurancecoverage. The insurance requirements are set forth in thestatute.

4. Premises Liability:As a general rule, with regard to any unreasonably

dangerous condition, a Property owners association incontrol of land has a duty to remedy the condition, or, ifmaking the condition safe is not feasible, to adequatelywarn of it. The key word is “adequately.” Someconditions may be so hazardous or unexpected that nowarning will be considered adequate. In othercircumstances, warnings may be perfectly reasonable,expected, and standardized – such as regulationswimming pool depth markings. (Texas Department ofHealth Standards for Public Swimming Pool and Spa,October 1, 1999). The absence of such routine warningmay lead to liability. It is doubtful that any attempt to

warn of third party criminal conduct could be consideredto be effective to relieve a property owners association ofliability for premises security negligence. While thispaper is not intended to be a treatise on premise security,generally speaking, the level of threat determines thelevel of response. And, although recent Texas SupremeCourt authority calls this principle into question, merelybecause there has not been an occurrence of the type inquestion before on the premises in the past, the existenceof criminal activity on the property gives rise to theforeseeability of greater and worse occurrences in thefuture. Timberwalk Apartments Partners, Inc. et al v.Cain, 41 Tex. Sup. Ct. J. 1138 (Tex. 1998). For example,a condominium complex or planned unit developmentmay have never experienced an occurrence of a sexualassault, but a significant incidence of burglaries or autotheft should lead any reasonable property owner toanticipate that it is merely a matter of time until there isa violent crime on the property. Property crime is anindicator of personal crime.

In order to avoid imposition of a duty to protectowners and their guests from criminal attack,condominium declarations and subdivision restrictionsshould emphasize that the association does not assumethe role of protector or provider of security services. Acondominium declaration or subdivision restrictions maycontain a provision where an expenditure for the highcost of security measures must be voted upon andapproved by at least a majority of the members. Further,there may be included an exculpatory clause in thedocuments disclaiming liability for a condominiumassociation because the unit owners, rather than theassociation, own the common areas.

Property owners associations should try to spreadthe risks and the work in protecting against premisesliability. Most insurance carriers perform an annualinspection of the property. Accompany them, and get acopy of the report.

Many properties have cell phone towers, watertanks, lift stations, and other infrastructure installationsowned and maintained by others. Make sure such thirdparties are doing their fair share, and get copies of theirreports; if inadequate, complain. Garbage men can act asadditional eyes and ears. Have your clients meet them,and make a point of talking to them.

Condominiums and gated communities share manyof the same problems and many of the same advantage inmaintaining premises security. Access control is moreeasily facilitated, and security functions are more easilyaccomplished.

There is no property harder to monitor than a wide-open, traditional “neighborhood” with multiple points ofingress and egress. Security in such a neighborhood maybe limited to patrols and local law enforcement.Management should take advantage of neighborhood


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watch programs organized by the police. Effective use ofsurveillance can still be accomplished at pools, clubhouses, and other recreational facilities.

These properties often also have alleys, which are agreat security risk; by their very nature, alleys areintended to conceal what goes on in them. Specialattention should be paid to them. If no longer used fortrash collection, management may want to considergating the alleys. a. Insurance Provisions.

Inadequate insurance provisions in condominiumand homeowners association documents are among thegreatest pitfalls for the drafter. §82.111(a)(2) of TUCA,applicable to all condominiums, requires condominiumproperty owners associations to maintain commercialgeneral liability insurance, to the extent reasonablyavailable. There are no statutory requirements for otherProperty owners association to maintain general liabilityinsurance.

b. Exterior Lighting. Restrictive covenants regarding exterior lighting

involve issues regarding premises security andarchitectural standards of uniformity within the restrictedcommunity. In California, a court upheld the right of theindividual to have adequate exterior lighting, andimposed a duty upon a Property owners association toensure the adequate protection of residents. Troy v.Village Green Condominium Project, 149 Cal App 3d145 (1983). While this is not the current law in Texas,consideration of potential liability should be taken intoaccount.

c. Golf Course Communities. Warnings of the dangers of errant golf balls and

other hazards relating to the sport of golf, including,pesticides, watering and landscaping and viewimpairment should be incorporated into club membershipand golf course community documents. If the developerof the golf course and the residential community are orwill at some point become the same person or entity,project documents should include disclaimers with regardto the continued existence, ownership or operation of thegolf course.

d. Security Services. According to the controlling Texas case, a property

owners association’s liability for the conduct of asecurity service provider depends on whether thesecurity service is an independent contractor. Ross v.Texas One Partnership, 796 S.W.2d 206 (Tex. App.--Dallas 1990), writ denied per curiam, 806 S.W.2d 222(Tex. 1991).

Property Owners Associations are often called uponto provide security services because the owners perceivethemselves to be safer with than without. Associationsare hard pressed to ignore these requests, but potentialliability for providing these services becomes an issue.In Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195 (Tex.1995), the Supreme Court held that an agent of aproperty owners association was not liable for criminalacts of third parties, even though the agent had the powerto elect the majority of the association’s board ofdirectors, because the agent did not control the boardmembers’ votes on security issues.

Engagement of professional security services for anassociation is a double-edged sword. By providing thisservice, an association undertakes the arguable positionof protecting the property against criminal acts, and/orthat the services were provided because of the propertyowners association’s knowledge of prior criminalactivity. The problem is compounded by the currentstatus of the security services industry which frequentlyavails itself of untrained or unscreened employees whomay create or misjudge potentially dangerous situations.

Nevertheless, security services are a practicalnecessity for some properties. In these cases, counselshould ensure that contracts for security services aredrafted as carefully as possible, and that disclaimerlanguage regarding the provision of security services isincluded in governing documents, formally drafted rules,and community bulletins and newsletters.

All related documents should contain conspicuousdisclaimers of the property owners association’sobligation to provide security services and theeffectiveness of the services provided. Disclaimersshould also contain a release from liability for negligenthiring of security services providers, and the functioningof mechanical gates and other security devices.

Further protection should be sought in the contractbetween the association and the security servicesprovider imposing a high standard of supervision andqualifications of personnel. The contract should requirethe provider to be licenses and to maintain public liabilityinsurance with an appropriate amount of coverage. Theproperty owners association should be named as anadditional insured.

The Texas Tort Claims Act does not apply to thewrongful acts or omissions of an officer commissionedby the Department of Public Safety if the officer was noton active duty at the time the act, omission, or negligenceoccurred (Tex. Civ. Prac. & Rem. Code §101.065).Therefore, if off-duty police officers are hired forsecurity purposes, a person injured because of thenegligence of the officer has no state court recourseagainst the municipality hiring the officer. Anyoneinjured by an off-duty police officer is likely to sue the

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Property owners association and/or the private securityservice provider.

Putting owners on notice of the limitation and dutyto provide security services, including but not limited touniform guards and entrance gates should be conspicuousin the project documents. If a property ownersassociation has no duty to provide security yet does, ithas a duty to act in a reasonable manner.

e. Swimming Pools. Chapter 727 of the Texas Health and Safety Code

(“Texas Poolyard Enclosure Statute”) and the TexasDepartment of Health Standards for Public SwimmingPools and Spas apply to swimming pools owned andoperated by property owners associations, and regulateswimming pool depth markings, equipment, and designand construction of enclosures, including fences, gates,locks, doors, windows and window fixtures. Violationsmay be prosecuted by an owner, tenant, governmentalagency or any person. Prevailing parties are entitled toinjunctive relief, actual damages, punitive damages, andattorney’s fees. Also, there are automatic penalties forproperty owners associations that fail to comply.

Compliance cannot be waived, but property ownersassociations may include other safeguards andprotections in the rules regarding use of a pool andadjacent facilities.

M. Texas Non-profit Corporation Act1. General Standards for Directors.

Directors are required to discharge their duties in (1)good faith; (2) with ordinary care, and; (3) in a mannerthe director reasonably believes to be in the best interestsof the corporation. This duty applies to members ofcommittees as well. Directors may in good faith rely oninformation, reports, opinions, or statements, includingfinancial statements and data that were prepared orpresented by officers or employees of the corporation,legal counsel, public accountants, or others reasonablybelieved by the director to be a competent expert, andcommittees of the board of directors of which the directoris not a member. Tex. Rev. Civ. Stat. Ann. art. 1369-2.28(Vernon 1993).

A director is not liable to the corporation, anymember, or any other person for any action taken if thedirector acted in compliance with the standard set forthin the Act. A person seeking to establish liability of adirector must prove the director did not act with the careof an ordinary prudent person in a like position under thecircumstances.

For the purposes of the Act, a director is not actingin good faith if the he or she has knowledge concerninga matter in question that makes reliance otherwisepermitted unwarranted. The comments state that goodfaith is subjective, however, the Court will look to

objective facts and circumstances to determine whetherthe good faith requirement is met, and look to thedirector’s state of mind to see if it evidenced honesty andfaithfulness to the director’s duties and obligations, orwhether there was an intent to take advantage of thecorporation.

2. Standards for Directors and Officers under TUCA:§ 82.103 of TUCA applies a good-faith judgment

standard while mandating that each officer or member ofthe board is liable as a fiduciary to the unit owners for theofficer’s or member’s acts or omissions.

N. Attorney’s Fees - Everyone’s Favorite Topic1. Texas Property Code § 5.006 Attorney’s Fees In

Breach of Restrictive Covenant Actiona. Prevailing Party:

In an action based on breach of a restrictivecovenant pertaining to real property, the court shall allowto a prevailing party who asserted the action reasonableattorney’s fees in addition to the party’s cost and claim.Tex. Prop. Code Ann. § 5.006(a) (Vernon 1983).Defendants who successfully defended cause of action inwhich plaintiff’s sought to enforce restrictive covenantsbut who did not ?assert” and prevail in an action forbreach of a restrictive covenant, were not entitled torecover attorney’s fees. Meyerland CommunityImprovement Association v. Belilove, 624 S.W. 2d 620(Tex. App. -- Houston [14th Dist.] 1981, writ ref’dn.r.e.). Where plaintiffs proved breaches of restrictivecovenants as alleged, trial court’s award of attorney’sfees against defendants was allowable. Giles, supra.Trial court has great latitude in fixing attorney fees,subject to review for abuse of discretion. FonmeadowProperty Owners v. Franklin, 817 S.W. 2d 104 (Tex.App. -- Houston [1st Dist.] 1991, no writ). Anderson v.New Property Owners Association of Newport, Inc., 6th

Court of Appeals - Texarkana, Dec. 22, 2003 - 06-02-00152-CV.

b. Determination of Attorney’s Fees:To determine reasonable attorney’s fees, the court

shall consider:

(1) the time and labor required;(2) the novelty and difficulty of the questions;(3) the expertise, reputation, and ability of the

attorney; and(4) any other factor.

2. Texas Property Code Section 209.008:In order for a property owners association to charge

an owner with attorney’s fees for enforcement of thecovenants, written notice must be given to the owner that




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they will be charged if the violation is not cured beforea certain date.

This section was enacted as an attempt tocircumvent associations from incurring legal expenseunbeknownst to an owner who violates the restrictivecovenants, and surprising them with the bill even afterthe violation was cured.

No attorney’s fees may be charged to an ownerbefore the hearing is held under Section 209.006.

Any attorney’s fees and costs collected from anowner must be deposited in a financial institution in thename of the Property owners association or its managingagent, and only the Board or its agent may be signatorieson the account. This precludes attorneys from depositingowners funds in his or her operating or IOLTA accounts,and withdrawing their fees from the proceeds. Uponwritten request, the owner is entitled to see the attorney’sinvoices pertaining to their account.

(1) Cap on attorney’s fees in foreclosure actions

(A) Non-judicial foreclosure

(i) If the Property owners association’sdocuments provide for a power ofsale to foreclose an owner’s propertyextra-judicially, the amount of theProperty owners association’s lienfor attorney’s fees is the greater ofone-third of the actual assessmentsand costs due plus interest and courtcosts; or

(ii) $2,500.00.

Peculiarly, the cap on attorney’s fees does not prohibit aproperty owners association from filing suit to collectany remaining balance on the attorney’s fees.

3. Attorney’s Fees Under TUCA:Attorney’s fees incurred in the collection of

maintenance assessments are now included in the lien formaintenance assessments of condominium regimesregardless of when created. TUCA § 82.113 (a).

In TUCA § 82.161(b) provides that a prevailingparty in an action to enforce the declaration, by-laws orrules is entitled to reasonable attorney’s fees and costsfrom the non-prevailing party.

4. Declaratory Judgment Actions:In some cases property owners associations seeking

to enforce a restrictive covenant against an owner inviolation will bring the action under the DeclaratoryJudgment Act asking the Court for a determination thatthe owner is in violation of the restrictive covenants. As§ 37.009 provides for a discretionary award by the Court

of attorney’s fees and costs, if the property ownersassociation loses the case it could theoretically berequired to pay the violating owner’s attorney fees andcosts. No case has ever so held. Attorney’s fees underDeclaratory Judgment Act are not, however, limited tothe prevailing party. Tanglewood, supra. Therefore,even if the property owners association wins the suit, itcould be ordered to pay attorney’s fees and costs of theopposing party.

O. ALTERNATIVE DISPUTE RESOLUTION1. ADR Statute

Section 154.071 of the ADR statute states in part:

(A) if the parties reach a settlement and execute awritten agreement disposing of the dispute, theagreement is enforceable in the same manneras any written contract.

(B) the Court in its discretion may incorporate theterms of an agreement in the Court’s finaldecree disposing of the case.

2. Enforcement of Agreement:Make sure that any actions which must be taken to

effect the settlement are given strict deadlines. Once anagreement is reached, it becomes a contract and must beenforced by initiating another suit, bringing thepractitioner back to square one. In the case of Mantas v.the Fifth Court of Appeals, 925 S.W.2d 656 (Tex. 1996),the Texas Supreme Court held that the enforcement of adisputed settlement agreement, even if reached at Courtordered mediation, must be determined in a breach ofcontract cause of action under normal rules of pleadingand evidence.

3. Practical Considerations:When choosing a mediator for ADR of a property

owners association dispute, one often does not have achoice. Often the Court will select the mediator and signan order accordingly. However, if the selection isbetween the parties, it is best to choose someone who hassome familiarity with these cases. You can contact eachperson on the list of qualified mediators and ask what hisor her experience is in this field, stressing that theunderstanding of the basic issues is integral. Also, oneshould be careful that the mediator is disinterested. In arecent case a retired judge was selected to mediate a casewho had sued her own association and had even lobbiedfor reforms in the legislature The parties were unaware ofthis and it was not disclosed. This person shall remainnameless.

Some mediators request that each party submit amemorandum of the case and a copy of the pleadings ata reasonable time prior to the event. Even if this is notrequired, I find it extremely helpful to brief the issues



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and include pertinent case law with my submission.Also, it is essential to “woodshed” the clients before themediation takes place, so that they know what to expectand are not unpleasantly surprised to discover that in themediation process nobody “wins.”

It is also imperative to learn what the what theclients’ expectations are; if they are legally or factuallyinsupportable, or just plain unreasonable, you had knowthat before mediation, and disabuse them of their notions.

Property owners association litigation is alwaysemotional and generates personal animosity between theparties and often divides the board of directors onopinions. Client control is imperative, but sometimesimpossible.

When a memorandum of settlement is drafted, keepas many future contingencies in mind as possible. Thesepeople have to continue to live together and after theshock of the settlement has worn off, the after affects canbe volatile and often dangerous. Do not be surprised ifboard members resign, are removed, or sell their homes.

4. Authority of Board to Settle Disputes:As with any other case, the parties present must

have authority to settle. In property owners associationcases this can be extremely difficult because a quorum ofthe board must be present, and because they arevolunteers they often resent having to miss work ormaking family care arrangements. Many expect theirprofessional management to attend and make the finaldecision regarding settlement, but this is not advisable orbinding. Often times board members who commit toattend will fail to show, stating that if a solution isreached the board may vote on it at a later date. Thisdefeats the purpose of the mediation and wasteseveryone’s time.

5. When the Association Is the Defendant:If the property owners association is the defendant

in the case, or there is a counterclaim pending, theassociation’s insurance defense counsel and the adjustershould be present. They hold the purse strings and canmake the client aware of coverage and liability issuequestions which will arise during the course of theproceeding.

X. CONCLUSIONLitigation is not for everyone, especially in the

context of property owners association law. However,some cases can be very challenging, and many are of the“first impression” variety. Property owners associationclients will inevitably ask how long a case will take, andwhat the cost will be. There is no way to predict. I haveseen cases cease at the Justice of the Peace or go all theway to the Texas Supreme Court or the Fifth Circuit

Court of Appeals. The undersigned once upon a time wasinvolved in a case that went through seven (7) courts.

Many board members are concerned about liabilityif they fail to act by taking an owner to Court. Oftenowners will prolong a case because of a principle. As weall know, principles can be very expensive and draining.

The best any lawyer can do for a property ownersassociation client is to let common sense prevail(although common sense is not very common). Often,the greatest service a lawyer can provide to a client is toshow him he is being a damn fool.

The intended purpose of the statutory damageprovision of Texas Property Code §202.004(c) was toprovide incentive to property owners associations topursue meritorious claims. In reality, however, except ina default judgment situation, Courts are loathe to awardmore than nominal damages. Some are even reluctant toaward attorney’s fees even when they are mandatory.

This is compounded by the anti-property ownersassociation backlash which we are now experiencing inthe legislature. The citadel is crumbling with eachsession.

There is declining interest in owners serving asboard members. After bitter experiences in litigation,serving the community is no longer so attractive.

Having said all of that, I still believe that propertyowners associations serve a necessary function of privategovernment. When representing a property ownersassociation client in litigation, stress to the Judge andjury the negative result of an adverse finding against areasonable case brought before them. Make certain thatthey see the big picture, and allow them to stand in theshoes of the association. Remind them that the localgovernments are not going to step in to have theirneighbors remove the pink flamingoes from their frontyard, or take down their Christmas decorations in July.


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APPENDIX A

Contents of notice of sale required by 26 U.S.C. 7425 (1977), and U.S. TREAS. REG § 301-3(d):

(d) With respect to a notice of sale described in paragraph (a) and (c) of this section, the noticewill be considered adequate if it contains the information described in paragraph (d)(1), (i), (ii),(iii), and (iv) of this section. -

(i) The name and address of the person submitting the notice of sale;

(ii) A copy of each notice of Federal Tax Lien (Form 668) affecting the property to be sold, orthe following information as shown on each such Notice of Federal Tax Lien -

(A) The Internal revenue district named thereon,

(B) The name and address of the taxpayer, and

(C) The date and place of the filing of the notice;

(iii) With respect to the property to be sold, the following information -

(A) A detailed description, including location, affected by the notice (in the case of real property, thestreet address, city, and State and the legal description contained in the title or deed to the property and,if available, a copy of the abstract of title),

(B) The date, time, place, and terms of the proposed sale of the property, and

(iv) The approximate amount of the principal obligation, including interest, secured by the lien soughtto be enforced and a description of the other expenses (such as legal expenses, selling costs, etc.) whichmay be charged against the sale proceeds.


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APPENDIX B

Notice of debt; contents required by 15 U.S.C. 1692 (1977), FAIR DEBT COLLECTION PRACTICES ACT:

(a) Within five days after the initial communication with a consumer in connection with thecollection of any debt, a debt collector shall, unless the following information is contained inthe initial communication or the consumer has paid the debt, send the debtor a written noticecontaining -

(1) the amount of the debt;

(2) the name of the creditor to whom the debt is owed;

(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputesthe validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debtcollector;

(4) a statement that if the consumer notifies the debt collector in writing within the thirty dayperiod that the debt, or any portion thereof, is disputed, the debt collector will obtainverification of the debt or a copy of a judgment against the consumer and a copy of suchverification or judgment will be mailed to the consumer by the debt collector; and

(5) a statement that, upon the consumer’s written request within the thirty-day period, the debtcollector will provide the consumer with the name and address of the original creditor, ifdifferent form the current creditor.

Disputed debts

(b) If the consumer notified the debt collector in writing within the thirty-day period describedin subsection (a) of this section that the debt, or any portion thereof, is disputed, or that theconsumer requests the name and address of the original creditor, the debt collector shall ceasecollection of the debt, or any disputed portion thereof, until the debt collector obtainsverification of the debt or a copy of a judgment, or the name and address of the original creditor,and a copy of such verification or judgment, or name and address of the original creditor, ismailed to the consumer by the debt collector.

Admission of liability

(c) The failure of a consumer to dispute the validity of a debt under this section may not beconstrued by any court as an admission of liability by the consumer.

(Pub.L. 90-321, Title VIII, § 809, as added Pub.L. 95-109, Sept. 20, 1977, 91 Stat. 879)


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APPENDIX C

RECENT TEXAS CASES CONCERNING PROPERTY OWNERS ASSOCIATIONS

Affirmative Defenses

Alma Investments and Bahia Mar Maintenance Association v. Bahia Mar Co-Owners Association, 999 S.W.2d 820 (Tex.App.-- Corpus Christi 1999, cert. denied)

Amendment

Samms v. Autumn Run Community Association, Inc., 23 S.W.3d 398 (Tex. App.-- Houston [1st District] 2000, cert.denied)

Assessment Collection

Hodas v. Scenic Oaks Property Association, 21 S.W.3d 524 (Tex. App.-- San Antonio 2000,cert. denied)

Assessment Increase

Ostrowski v. Ivanhoe Property Owners Improvement Association, Inc., 38 S.W.3d 248 (Tex. App.-- Texarkana 2001,cert. denied)

Attorney’s Fees

Brooks v. Northglen Association, 1 S.W.3d 915 (Tex. App.-- Beaumont 1999, no writ)Gorman v. Countrywood Property Owners Association, 1 S.W.3d 915 (Tex. App. – Beaumont 1999, cert. denied)

Construction

Ostrowski v. Ivanhoe Property Owners Improvement Association, Inc., 76 S.W.3d 162 (Tex. App.-- Texarkana 2001,cert. denied)

Declaratory Judgment Actions - Necessary Parties

Dahl v. Hartman, 14 S.W.3d 434 (Tex. App.-- Houston [14th District] 2000, cert. denied)

Injunctive Relief

Bankler v. Vale, 75 S.W.3d 29 (Tex. App. – San Antonio 2001, no writ)

Judicial Foreclosure by Default Judgment

Cottonwood Valley Home Owners Association v. Hudson, 75 S.W.3d 601 (Tex. App.-- Eastland 2002, no writ)

Jury Charge

Riddick v. Quail Harbor Condominium Association, Inc., 7 S.W.3d 663 (Tex. App.-- Houston [14th District] 1999, nowrit)Cimarron Country Property Owners Association v. Keen., 117 S.W.3d 509 (Tex. App.-- Beaumont 2003)

Mandatory Property Owners Association - Creation under Texas Property Code














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Simpson v. Afton Oaks Civic Club, Inc., 117 S.W.3d 480 (Tex. App.-- Texarkana 2003)

Satellite Dishes

Daly v. River Oaks Council of C-Owners, 59 S.W. 3d 416 (Tex. App.--Houston [1st District] 2001, no writ)

Theme Developments

Air Park-Dallas Zonong Committee v. Crow-Billingsley Airpark, Ltd., 38 S.W.3d 248 (Tex. App.-- Texarkana 2003)




Documents

PROPERTY OWNERS ASSOCIATION LITIGATION AND DISPUTE … · property dispute resolution practices to these problems, a discussion of relevant case law and legislation peculiar to property