13 Ways SB 1588 Affects Your Texas HOA
The 2021 Texas 87th Legislative Session has closed with new bills that will significantly affect property owner’s associations (POAs/HOAs) governed under Chapter 209 of the Texas Property Code (TPC). These may require adopting a new policy or an amendment to an existing policy of your governing documents.
What is Senate Bill 1588 Texas?
Senate Bill 1588 – Relating to the Powers and Duties of Property Owner’s Associations,
included quite a few changes that will certainly impact the operation of your association and require amendments or adoptions of policies in your governing documents. To help your board navigate the extensive changes, we’ve provided a summary of changes enacted by SB 1588, effective date, what’s new, and recommended action items below.
13 ways SB 1588 will affect your HOA:
Effective Date: December 1, 2021. If no changes are required on the certificate, the filing deadline with TREC will extend to no later than June 1, 2022.
What’s New: Management certificates must now also include:
- Phone number and email address of the manager
- The web address where the CC&Rs are posted (website URL)
- Any resale and transfer fees
- List of any amendments to the declaration
Now, management certificates must be recorded within 30 days after the POA changes any information. POAs must also electronically file certificates with the Texas Real Estate Commission (TREC) no later than the seventh day after recording. Owners will not be liable for attorney’s fees incurred by the POA relating to the collection of assessments or interest if fees accrue during the period a management certificate is not recorded with the county clerk or filed with TREC.
Action item: Modification of management certificate is required. Create a policy to ensure e-filings with TREC are completed no later than seven days after the POA certificate is filed.
What’s New: Directors [board members], their spouses and other members of their household may no longer serve on architectural review committees (ACC/ARC).
If an architectural modification request is denied, the denial must:
- Be provided in writing (includes email)
- Describe the basis for denial
- Must outline the owner’s right to appeal to the board
Owners have 30 days to appeal and the board has 30 days to hold a hearing. POAs must provide notice of the hearing, including date, time, and location, at least 10 days before the hearing date. Both sides (board and owner) have the right to continuance of not more than 10 days.
Both parties permit audio recording, and the board may affirm or reverse the ACC/ARC decision.
Exemption: POAs/HOAs still under declarant control or with 40 or fewer lots are exempt.
Action item: Ensure current board members, their spouses, or someone residing in a board member’s residence is not on the ACC committee. Identify and recruit volunteer replacements if needed.
3. Board Meeting Notice Deadlines & Budget Restrictions – TPC 209.0051
Effective Date: September 1, 2021.
What’s New: Notice of any regular board meeting must now be provided at least 144 hours (6 days) in advance, rather than the current stipulation of 72 hours (3 days) notice. Special meetings must have 72 hours (3 days) of notice provided. These notices can be posted or emailed.
The ability to amend an annual budget by less than ten percent outside of an open meeting has been eliminated. All budget changes must now be voted upon in open sessions during properly noticed meetings.
Action item: May require an amendment to your governing documents or policies to update the new notice requirements.
4. Bids Required for $50k + Service Contracts – TPC 209.0052
Effective Date: September 1, 2021.
What’s New: Service contracts for more than $50,000 require solicitation of bids under an established bidding process determined by the association.
Action item: No immediate action or amendment of governing documents is required. Most large contracts typically undergo a bidding process as part of due diligence and best practices when partnered with a management company. In any case, a bidding process can be determined when services are up for a new contract or rebid.
5. Collections Process Modifications –
TPC 209.0064-65
Effective Date: September 1, 2021.
What’s New: Collections notice letters, or “209” notices, must now also provide an owner with 45 days to cure the delinquency rather than 30 days. Any attorney’s fees incurred must be “reasonable”
Before reporting delinquencies to credit reporting services, POAs/HOAs:
- Must provide notice to the owner, including a detailed report of delinquent charges owed
- Provide an opportunity for a payment plan
- Send a notice to the owner at least 30 days before reporting
- Cannot report disputed charges
- Cannot charge fees for the reporting
Action item: Requires an amendment of your governing documents or policies to reflect the notice requirement changes and credit reporting conditions if applicable.
6. Violation Hearing Procedures – TPC 209.007
Effective Date: September 1, 2021.
What’s New: All covenant violation appeals are now made to the board only. The option to have a committee hear the appeal has been eliminated.
Packets must be sent to the owner at least 10 days before the hearing with the evidence the association intends to introduce. Evidence can include documents, photos, communications, etc. Failure to provide this packet allows the owner the right to a 15-day postponement.
At the hearing, the board will present its case first and the owner will have the chance to give information in response.
Action items: Update the hearing policy in your governing documents to ensure owners receive the evidence packet 10 days before the hearing. Consult with legal counsel on what evidence your board should include. Note that an additional policy regarding the use of private personal information (PPI) of other unit owners may be required if proof like neighbor complaints is utilized as evidence.
7. Rental Rules – TPC 209.016
Effective Date: September 1, 2021.
What’s New: Addition of subsection 209.016(e), which states that an association may obtain the name, mailing address, phone number and email address of each person who will reside at a leased property, as well as the start date and term of the lease.
Subsection 209.016(c) has been repealed, as it allowed personal information mentioned in subsection 309.016(e) to be redacted.
Action item: Establish or update the leasing policy of your association to ensure that the correct information is being collected.
8. Justice Court Jurisdiction – TPC 209.017
Effective Date: September 1, 2021.
What’s New: An owner may now sue a POA/HOA for a violation of Chapter 209 in Justice Court. Note that justice courts in Texas have jurisdiction over civil matters in which the amount in controversy is not more than $20,000.
Action item: Be aware that since bringing a civil suit in justice court can be on matters of less than $20k, more owners may choose to litigate your association for Chapter 209 violations. Be sure to consult with your legal counsel on how to prepare for violation hearings.
9. Religious Displays – TPC 202.018
Effective Date: September 1, 2021
What’s New: Religious items may be displayed anywhere on the owner’s property without size restrictions. Previously, an owner could only display religious items on the entry of the dwelling and size restrictions applied.
However, an association may also adopt/enforce a policy that limits the activity if the display:
- Threatens public health or safety
- Violates a law other than a law prohibiting the display of religious speech
- Contains language, graphics, or any display that is patently offensive for reasons other than its religious content
- Is installed on property owned or maintained by the property owners’ association or on common property
- Violates a setback restriction or is attached to a traffic control device or fire hydrant
Action item: Adopt or amend a Religious Display Policy to reflect these changes and include limits as described. Consult with legal counsel to ensure that language used in your policy and responses to owner inquiries does not provide grounds for potential discrimination.
10. Swimming Pool Enclosures – TPC 202.022
Effective Date: September 1, 2021.
What’s New: A property owner’s association (POA) may not prevent an owner from installing a swimming pool enclosure on the owner’s property that conforms to applicable state or local safety requirements. A POA may enforce rules that govern the appearance of the enclosure; however, a POA cannot prohibit an enclosure that consists of black metal frames with transparent mesh panels.
Action Item: Your association architectural control committee (ACC/ARC) can no longer deny requests for pool enclosures. Suppose your governing documents have no pre-existing policies for pool enclosures. In that case, your association may not need to create a new policy now, as the point is moot if not restricted by architectural guidelines. However, if your governing documents do have rules that limit the appearance of modifications, an amendment may be necessary to stipulate what material and sizes are allowed.
11. Security Devices and Fences – TPC 202.023
Effective Date: September 1, 2021
What’s New: Associations may not prevent owners from installing security measures like cameras, motion detectors, or perimeter fences on the owner’s property. However, associations may prohibit installing these measures in places other than the owner’s property and can regulate the type of fencing.
Exemption: Condominiums and mixed-use POAs are exempt.
Action item: Adopt or update a Security Measures Policy to outline the architectural requirements and application process.
12. Resale Certificate Fees – TPC 207
Effective Date: September 1, 2021
What’s New: POAs may not charge more than $375 for a resale certificate and $75 for an updated resale certificate. In addition, certificates must now be provided within five business days (previously 7) after a second request is sent by certified mail. Failure to deliver the certificate within this time frame will subject the POA to liability for up to $5000 in damages in addition to court costs and attorney fees.
Action item: Adopt or update applicable policies to reflect the changes in delivery times and adjust fees to the $375 and $75 caps if fees are over those numbers.
13. Governing Documents Must be Posted on the Web – TPC 207.006
Effective Date: September 1, 2021
What’s New: POAs with 60+ lots or any POA under contract with a management company must post the current versions of the dedicatory instruments on a website and make them available to its membership.
Action item: POAs/HOAs without a website will need to create a website and post current dedicatory instruments. For associations that already have a website, ensure that the most recent versions of the dedicatory instruments are available to your members at all times.
These thirteen areas reflect the most sweeping changes for Texas HOAs in our recent legislative history. Your association should be moving quickly to address these changes for two reasons. One, because the number and amount of amendments or new policy adoptions are high. Two, because most of the changes need to be in effect by September 1, 2021, to avoid potential Chapter 209 violations.
A good management partner should be aware of these changes in legislation and have already developed a strategic plan to address them in any communities they manage. Your manager and their support teams within the management company, like accounting, will coordinate and work in conjunction with your board and legal counsel to develop new policies, amend existing documents, and create correct notice formats by the September deadline. Your management team should also have the resources, responsiveness, and technology solutions in place to communicate and educate your residents on these legislative changes.
*Disclaimer: Content contained within this news alert provides information on general legal issues and is not intended to provide advice on any specific legal matter or factual situation. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional counsel.
