| It is a pleasure for the Firm and its attorneys to help clients by responding to hundreds of legal questions every week. We are pleased to share with you some of the more Frequently Asked Questions. |
The Frequently Asked Questions and other materials included on Holt & Young, P.C.’s website are intended for informational purposes only and do not constitute legal advice. You should not act upon information contained on this website without first engaging legal counsel.
What subject matter is discussed in the Association’s primary governing documents?
The 3 primary governing documents for most Associations include the Declaration, Bylaws, and Articles of Incorporation. The following subject matter is discussed in these documents:
The 3 primary governing documents for most Associations include the Declaration, Bylaws, and Articles of Incorporation. The following subject matter is discussed in these documents:
1. Declaration – the Declaration is the initial document along with the subdivision plat that provides for the creation of a subdivision. A normal Declaration includes:
a) a description of land included in the subdivision; b) the name of the Association;
c) establishes assessments and provides how assessments are to be calculated;
d) deed restrictions setting forth what may be constructed, where construction may occur, and the permitted use of land described in the subdivision plat;
e) creates an Architectural Control Committee and empowers it;
f) establishes the types of Membership allowed by the Association; and
g) provides an easement permitting use of the common areas by all owners.
2. Bylaws – the Bylaws set forth management and procedural rules for the Association. A normal set of By-Laws will include:
a) procedures for noticing and conducting annual and special meetings of the members;
b) basic rules related to voting, quorum requirements and using proxies at meetings of the members;
c) procedures for noticing and conducting board meetings; and
d) powers and duties granted to directors and officers of the Association.
3. Articles of Incorporation – the Articles of Incorporation (titled Certificate of Formation for recently formed associations) are filed with the State of Texas and create the Association. The Articles of Incorporation include:
a) the official name of the Association;
b) the corporate address;
c) the name and number of the initial directors of the Association; and
d) describe the basic powers given to the Association.
What protections from personal liability are there for a Board of Director?
The primary protection is the Directors and Officers insurance policy maintained by most Associations. Additionally, directors and officers are protected from liability for certain acts by the Texas Charitable Immunity and Liability Act. This law makes a volunteer immune from liability for any act resulting in death, injury or damage as long as the volunteer was acting within his/her duties or functions in the organization and the act was not intentional, willfully negligent, or done with conscious indifference or reckless disregard for the safety of others.
The primary protection is the Directors and Officers insurance policy maintained by most Associations. Additionally, directors and officers are protected from liability for certain acts by the Texas Charitable Immunity and Liability Act. This law makes a volunteer immune from liability for any act resulting in death, injury or damage as long as the volunteer was acting within his/her duties or functions in the organization and the act was not intentional, willfully negligent, or done with conscious indifference or reckless disregard for the safety of others.
What type of business is the board of directors permitted to conduct in an executive session?
The type of business that a board may convene an executive session to consider are matters involving personnel, pending litigation, contract negotiations, enforcement actions, matters involving the invasion of privacy of individual unit owners, or matters that are to remain confidential by request of the affected parties and agreement of the board.
The type of business that a board may convene an executive session to consider are matters involving personnel, pending litigation, contract negotiations, enforcement actions, matters involving the invasion of privacy of individual unit owners, or matters that are to remain confidential by request of the affected parties and agreement of the board.
What happens if a mortgage company forecloses its lien on property in a subdivision or condominium?
A mortgage company foreclosure typically extinguishes through the date of the mortgage foreclosure the Association’s lien rights in monies owed to it by a property owner. This occurs because the vast majority of Declarations provide that the Association’s lien is subordinate or inferior to the lien of a first mortgage. Although a mortgage foreclosure typically extinguishes the Association’s lien rights, the property owner remains personally liable to the Association for his/her past-due obligation.
A mortgage company foreclosure typically extinguishes through the date of the mortgage foreclosure the Association’s lien rights in monies owed to it by a property owner. This occurs because the vast majority of Declarations provide that the Association’s lien is subordinate or inferior to the lien of a first mortgage. Although a mortgage foreclosure typically extinguishes the Association’s lien rights, the property owner remains personally liable to the Association for his/her past-due obligation.
What options are available to the Association when an owner refuses to correct a deed restriction violation?
Deed restriction violation matters should be addressed on a case by case basis, but the options that may be considered include:
Deed restriction violation matters should be addressed on a case by case basis, but the options that may be considered include:
a) many Associations are authorized to assess fines;
b) the Association may file a lawsuit seeking a court order that requires a violating owner to correct his/her deed restriction violation;
c) most Associations are authorized to hire a contractor to cure deed restriction violations related to a lot’s appearance, such as forced mows; and
d) most Associations are authorized to suspend a violating owner’s right to vote and use common areas.
Can the Association assess fines?
Many Associations have the legal authority to assess fines. However, in order to assess a fine the Declaration for the subdivision must provide such authority.
Many Associations have the legal authority to assess fines. However, in order to assess a fine the Declaration for the subdivision must provide such authority.
Is the Association permitted to have a vehicle towed?
The only permissible way to tow a vehicle in Texas is to comply with the regulations of the Texas Transportation Code. The Association’s governing documents cannot provide alternate authority. Most Associations with private streets are able to initiate the towing of vehicles. Subdivisions with public streets are unable to tow vehicles from the street.
The only permissible way to tow a vehicle in Texas is to comply with the regulations of the Texas Transportation Code. The Association’s governing documents cannot provide alternate authority. Most Associations with private streets are able to initiate the towing of vehicles. Subdivisions with public streets are unable to tow vehicles from the street.
What should an Association do when a county taxing entity sues a property owner for delinquent taxes and names the Association in the lawsuit?
If the Association is served with a lawsuit filed by a taxing entity, it is advisable to send the lawsuit to the Association’s attorney to confirm that a response to the lawsuit is not required. When a taxing entity files a lawsuit to collect delinquent taxes it typically sues the delinquent property owner and all lienholders, including the Association. If the lawsuit and citation properly state that the Association is being sued "In Rem Only", then the taxing entity is not seeking a money judgment against the Association and no response is required by the Association. In this circumstance, the taxing entity is following the required procedure to establish its superior lien on the property.
If the Association is served with a lawsuit filed by a taxing entity, it is advisable to send the lawsuit to the Association’s attorney to confirm that a response to the lawsuit is not required. When a taxing entity files a lawsuit to collect delinquent taxes it typically sues the delinquent property owner and all lienholders, including the Association. If the lawsuit and citation properly state that the Association is being sued "In Rem Only", then the taxing entity is not seeking a money judgment against the Association and no response is required by the Association. In this circumstance, the taxing entity is following the required procedure to establish its superior lien on the property.
Can the Association charge back legal fees and costs to the property owner?
Almost all Associations can charge back legal fees and costs to the property owner incurred when collecting delinquent assessments and enforcing deed restrictions. Legal fees and costs incurred in connection with collecting maintenance assessments are typically secured by a lien on property in the subdivision. However, legal fees and costs incurred when enforcing deed restrictions are typically not secured by a lien on property in the subdivision.
Almost all Associations can charge back legal fees and costs to the property owner incurred when collecting delinquent assessments and enforcing deed restrictions. Legal fees and costs incurred in connection with collecting maintenance assessments are typically secured by a lien on property in the subdivision. However, legal fees and costs incurred when enforcing deed restrictions are typically not secured by a lien on property in the subdivision.
What governing documents should the Association record with the county clerk?
All of the Association’s governing documents should be filed with the county clerk. The Declaration is always recorded with the County Clerk, but the Association should also record its Bylaws, Articles of Incorporation or Certificate of Formation, Architectural Guidelines, Rules and Regulations, Management Certificate, and Policy Resolutions, along with any amendments or supplements to these documents.
All of the Association’s governing documents should be filed with the county clerk. The Declaration is always recorded with the County Clerk, but the Association should also record its Bylaws, Articles of Incorporation or Certificate of Formation, Architectural Guidelines, Rules and Regulations, Management Certificate, and Policy Resolutions, along with any amendments or supplements to these documents.
Is the Association permitted to pass Rules and Regulations?
Associations may always pass rules and regulations that apply to common areas. However, in order to pass rules or regulations that apply to owner lots or units, the Declaration for the Association must provide such authority. Many Declarations do provide this authority.
Associations may always pass rules and regulations that apply to common areas. However, in order to pass rules or regulations that apply to owner lots or units, the Declaration for the Association must provide such authority. Many Declarations do provide this authority.
May Rules and Regulations expand upon the provisions in the Declaration?
Rules and Regulations may clarify or interpret existing governing document provisions, but they may not conflict with the governing documents and they may not add matters that are completely beyond the provisions of the existing governing documents.
Rules and Regulations may clarify or interpret existing governing document provisions, but they may not conflict with the governing documents and they may not add matters that are completely beyond the provisions of the existing governing documents.
Who should sign the Association’s Management Certificate?
The Association Manager traditionally signs the Management Certificate. However, either the Association Manager or an Officer of the Association may sign it.
The Association Manager traditionally signs the Management Certificate. However, either the Association Manager or an Officer of the Association may sign it.
Will a mortgage company provide to an Association the total balance due on a property owner’s mortgage?
Not normally. Due to consumer protection laws, most mortgage lenders will not discuss the mortgage balance or related information with anyone other than the person obligated to pay the mortgage.
Not normally. Due to consumer protection laws, most mortgage lenders will not discuss the mortgage balance or related information with anyone other than the person obligated to pay the mortgage.
Can the Association permit one property owner access to another property owner’s account or delinquency information?
Not normally. Only when a request is made that satisfies each element of the statutory right to review the books and records of the Association may a property owner gain access to another property owner’s account or delinquency information.
Not normally. Only when a request is made that satisfies each element of the statutory right to review the books and records of the Association may a property owner gain access to another property owner’s account or delinquency information.
Is an Association subject to the Open Meeting Act?
No. The language of the Open Meetings Act is frequently misinterpreted. It only applies to Associations that base maintenance assessments on the appraised value of lots, and it is very rare for an Association to calculate assessments in this manner.
No. The language of the Open Meetings Act is frequently misinterpreted. It only applies to Associations that base maintenance assessments on the appraised value of lots, and it is very rare for an Association to calculate assessments in this manner.
What is the statute of limitations to pursue a delinquent assessment?
Four years. A lawsuit must be filed within four years from the date a charge becomes due and owing.
Four years. A lawsuit must be filed within four years from the date a charge becomes due and owing.
What is the statute of limitations to pursue a deed restriction violation?
There are many factors specific to each deed restriction violation that require a case by case determination of when the statute of limitations may run on a deed restriction violation.
There are many factors specific to each deed restriction violation that require a case by case determination of when the statute of limitations may run on a deed restriction violation.
Should the Association accept a partial payment or a payment with a notation in the memo?
Frequently such payments can be accepted; however, the content of the specific notation and status of the property owner’s account determine whether or not a particular payment can be accepted. Therefore, it is advisable to consult with the Association’s attorney prior to accepting such a payment.
Frequently such payments can be accepted; however, the content of the specific notation and status of the property owner’s account determine whether or not a particular payment can be accepted. Therefore, it is advisable to consult with the Association’s attorney prior to accepting such a payment.
What document shows ownership of a property?
The only document that reliably shows ownership of a property is the Deed. Sources such as the Appraisal District and other databases can provide helpful information, but ultimately cannot be relied upon.
The only document that reliably shows ownership of a property is the Deed. Sources such as the Appraisal District and other databases can provide helpful information, but ultimately cannot be relied upon.
Does the mortgage company own the property until the mortgage is paid off?
The mortgage company does not own the property. However, it has a lien on the property to secure payment of its loan to the property owner.
The mortgage company does not own the property. However, it has a lien on the property to secure payment of its loan to the property owner.
What is a foreclosure?
Foreclosure occurs when an Association exercises its lien rights to cause property in the subdivision to be sold at a public auction for the purpose of satisfying an unpaid debt.
Foreclosure occurs when an Association exercises its lien rights to cause property in the subdivision to be sold at a public auction for the purpose of satisfying an unpaid debt.
What is an Appointment of Trustee?
An Appointment of Trustee is a document typically signed by the board president that designates a person to conduct a foreclosure sale and grants to the designated person the power held by an Association to foreclose on a property.
An Appointment of Trustee is a document typically signed by the board president that designates a person to conduct a foreclosure sale and grants to the designated person the power held by an Association to foreclose on a property.
What is the difference between judicial and non-judicial foreclosure?
Judicial Foreclosure occurs when the Association files a lawsuit against a property owner for the purpose of obtaining a court order allowing property in the subdivision to be sold at public auction to satisfy an unpaid debt. The public auction (known as the foreclosure sale) is conducted by the county constable.
Judicial Foreclosure occurs when the Association files a lawsuit against a property owner for the purpose of obtaining a court order allowing property in the subdivision to be sold at public auction to satisfy an unpaid debt. The public auction (known as the foreclosure sale) is conducted by the county constable.
Non-Judicial Foreclosure occurs when the Association appoints a Trustee (usually its attorney) to sell property in the subdivision at a public auction for the purpose of satisfying an unpaid debt. Non-Judicial Foreclosure does not involve filing a lawsuit, but the Association must provide lawful notice to the property owner prior to selling property at a public auction.
When can non-judicial foreclosure be used by an Association?
Whether non-judicial foreclosure is an option for a homeowner association usually rest on whether the Declaration specifically provides a "power of sale" to the Association in connection with its lien rights. If the Declaration does not provide a "power of sale" to the Association, then it is advisable for the Association to proceed with judicial foreclosure. Almost all condominiums have the ability to conduct non-judicial foreclosures.
Whether non-judicial foreclosure is an option for a homeowner association usually rest on whether the Declaration specifically provides a "power of sale" to the Association in connection with its lien rights. If the Declaration does not provide a "power of sale" to the Association, then it is advisable for the Association to proceed with judicial foreclosure. Almost all condominiums have the ability to conduct non-judicial foreclosures.
Do you recommend using judicial or non-judicial foreclosure?
We recommend using non-judicial foreclosure when it is available because it is more economical, less time consuming, and the Association can control the foreclosure process.
We recommend using non-judicial foreclosure when it is available because it is more economical, less time consuming, and the Association can control the foreclosure process.
What are the benefits of using non-judicial foreclosure vs. judicial foreclosure?
Non-judicial foreclosure takes less time and is less expensive than judicial foreclosure because a non-judicial foreclosure does not involve the court system, which can be costly and time consuming. However, judicial foreclosure is viewed as less risky than non-judicial foreclosure because the process is ordered and approved by a court of law.
Non-judicial foreclosure takes less time and is less expensive than judicial foreclosure because a non-judicial foreclosure does not involve the court system, which can be costly and time consuming. However, judicial foreclosure is viewed as less risky than non-judicial foreclosure because the process is ordered and approved by a court of law.
Can a property owner get his/her property back after it is foreclosed upon?
Yes, when a homeowner association forecloses upon a property, the property owner has 180 days to re-establish ownership (known as "right of redemption") from the date the homeowner association sends the property owner notice that the foreclosure sale occurred. When a condominium association forecloses upon a property, the property owner has 90 days to re-establish ownership (known as "right of redemption") from the date of the foreclosure sale. The right of redemption only exist for condominiums when the condominium unit is purchased at the foreclosure sale by the condominium association.
Yes, when a homeowner association forecloses upon a property, the property owner has 180 days to re-establish ownership (known as "right of redemption") from the date the homeowner association sends the property owner notice that the foreclosure sale occurred. When a condominium association forecloses upon a property, the property owner has 90 days to re-establish ownership (known as "right of redemption") from the date of the foreclosure sale. The right of redemption only exist for condominiums when the condominium unit is purchased at the foreclosure sale by the condominium association.
How is a mortgage company impacted by a foreclosure sale conducted by the Association?
Typically, a mortgage company is not impacted by a foreclosure sale conducted by an Association. The vast majority of Declarations provide that the Association’s lien is subordinate or inferior to the lien of a first mortgage. Therefore, the mortgage company can fully protect its interest at any time by foreclosing its lien on the property for non-payment.
Typically, a mortgage company is not impacted by a foreclosure sale conducted by an Association. The vast majority of Declarations provide that the Association’s lien is subordinate or inferior to the lien of a first mortgage. Therefore, the mortgage company can fully protect its interest at any time by foreclosing its lien on the property for non-payment.
Is the Association required to pay the property owner’s mortgage if the Association takes ownership of property through a foreclosure sale?
The Association is not required to pay the property owner’s mortgage if it takes ownership of property through a foreclosure sale because the mortgage is a contract solely between the former property owner and his/her lender. The Association simply owns the property subject to the mortgage lien, and the mortgage lender may protect its interest by foreclosing upon its lien.
The Association is not required to pay the property owner’s mortgage if it takes ownership of property through a foreclosure sale because the mortgage is a contract solely between the former property owner and his/her lender. The Association simply owns the property subject to the mortgage lien, and the mortgage lender may protect its interest by foreclosing upon its lien.
Does a bankruptcy extinguish an assessment debt owed to the Association?
Not normally. However, a bankruptcy typically delays payment to the Association.
Not normally. However, a bankruptcy typically delays payment to the Association.
How does a Chapter 13 bankruptcy work?
A Chapter 13 bankruptcy is the most common type of bankruptcy involving Association delinquencies. A Chapter 13 bankruptcy provides for payment of the Association’s debt within a structured payment plan set up by the Bankruptcy Court. The payment plan usually last five years. The one circumstance in which a Chapter 13 will extinguish an assessment debt is where a property owner owes more on their mortgage than the value of their home. A Chapter 13 bankruptcy will extinguish fees and costs related to deed restriction violations, as well as fines if these charges are not secured by the Declaration’s assessment lien.
A Chapter 13 bankruptcy is the most common type of bankruptcy involving Association delinquencies. A Chapter 13 bankruptcy provides for payment of the Association’s debt within a structured payment plan set up by the Bankruptcy Court. The payment plan usually last five years. The one circumstance in which a Chapter 13 will extinguish an assessment debt is where a property owner owes more on their mortgage than the value of their home. A Chapter 13 bankruptcy will extinguish fees and costs related to deed restriction violations, as well as fines if these charges are not secured by the Declaration’s assessment lien.
How does a Chapter 7 bankruptcy work?
A Chapter 7 bankruptcy is a short-term bankruptcy that usually last 4 to 8 months. It does not extinguish the Association’s debt unless the owner owes more on their mortgage than the value of their home. A Chapter 7 bankruptcy will extinguish fees and costs related to deed restriction violations, as well as fines if these charges are not secured the Declaration’s assessment lien.
A Chapter 7 bankruptcy is a short-term bankruptcy that usually last 4 to 8 months. It does not extinguish the Association’s debt unless the owner owes more on their mortgage than the value of their home. A Chapter 7 bankruptcy will extinguish fees and costs related to deed restriction violations, as well as fines if these charges are not secured the Declaration’s assessment lien.
What communications may an Association have with an owner that is in bankruptcy?
The Association should not make a demand for payment to a person in bankruptcy. Once an Association is notified that an owner is in bankruptcy, it should refer the matter to its attorney.
The Association should not make a demand for payment to a person in bankruptcy. Once an Association is notified that an owner is in bankruptcy, it should refer the matter to its attorney.
What can be done to collect assessments that become delinquent while a bankruptcy is pending?
The most efficient step to obtain payment for assessments that become delinquent during a bankruptcy is to communicate with the owner’s bankruptcy attorney for the purpose of having the new delinquency included in the bankruptcy plan payments. If these attempts are not successful, the only formal method for collecting new unpaid assessments is to file a Motion for Relief from Stay with the bankruptcy court requesting the court’s permission to pursue normal collection efforts such as foreclosure. Motions for Relief from Stay are inefficient because the cost to pursue the Motion cannot be recovered in full. Depending on the type and stage of the bankruptcy, sometimes the best solution is to wait until the bankruptcy is closed.
The most efficient step to obtain payment for assessments that become delinquent during a bankruptcy is to communicate with the owner’s bankruptcy attorney for the purpose of having the new delinquency included in the bankruptcy plan payments. If these attempts are not successful, the only formal method for collecting new unpaid assessments is to file a Motion for Relief from Stay with the bankruptcy court requesting the court’s permission to pursue normal collection efforts such as foreclosure. Motions for Relief from Stay are inefficient because the cost to pursue the Motion cannot be recovered in full. Depending on the type and stage of the bankruptcy, sometimes the best solution is to wait until the bankruptcy is closed.
What is the difference between a dismissed bankruptcy and a discharged bankruptcy?
A dismissed bankruptcy is a failed bankruptcy. When a bankruptcy is dismissed by the bankruptcy court, the Association may proceed in the normal fashion with collecting the full balance due from the property owner. A discharged bankruptcy is one that was successfully completed by the property owner. When a property owner is discharged by the bankruptcy court, the Association should consult with its attorney to determine if or how any debt owed to the Association by the property owner has been altered.
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A dismissed bankruptcy is a failed bankruptcy. When a bankruptcy is dismissed by the bankruptcy court, the Association may proceed in the normal fashion with collecting the full balance due from the property owner. A discharged bankruptcy is one that was successfully completed by the property owner. When a property owner is discharged by the bankruptcy court, the Association should consult with its attorney to determine if or how any debt owed to the Association by the property owner has been altered.
