Article Excerpt
A new law affecting homeowner’s associations just took effect in Texas. Learn more about what this law does and how it might impact you.
Many homeowners in Texas belong to a homeowner’s association, or “HOA.” They are a double-edged sword for homeowners. Nearly every homeowner with experience dealing with their HOA will have some horror stories to tell, but most of them can probably also tell you how being part of an HOA has benefited them.
Most would also agree that HOAs have been in need of reform for some time. Earlier this year, the Texas Legislature passed SB 1588, which revises the laws regulating HOAs. The new law took effect on September 1, 2021. The following is an overview of the changes made by SB 1588 and how they might affect you.
Photo by Phil Roeder from Flickr [Creative Commons]
What is an HOA?
An HOA is exactly what its name suggests. It is an organization composed of all of the homeowners in a subdivision, building, or complex. It oversees the maintenance of common areas and enforces community standards related to what homeowners and residents may build on their properties, how they can decorate their homes, and so on.
» READ MORE: All About HOAs
What does the new HOA law do?
SB 1588 makes numerous changes to existing law to make HOA operations more transparent, improve homeowners’ ability to obtain information and participate in HOA decisions, and restrict various HOA activities.
Photo by Patrick Feller from Flickr [Creative Commons]
Caps on certain fees
When a person buys a home in an HOA, they receive copies of all of the documents that explain the HOA’s authority and establish the rules that they enforce. These documents can be quite substantial. HOA rules, often known as covenants, conditions, and restrictions (CC&Rs), can be hundreds of pages long. An owner may request a new copy of these documents, but the HOA can charge them a fee for this. SB 1588 caps the fee at $375.
One of the most important documents that a homeowner will need if they want to sell their home is the resale certificate, which provides financial information about the HOA and states whether the homeowner is in good standing with the HOA. HOAs now cannot charge more than $75 for this document.
Does this affect me? If you are part of an HOA and want to sell your home, yes.
Public database
SB 1588 requires HOAs to file a “management certificate” with the county clerk identifying who is responsible for managing its operations. The Texas Real Estate Commission (TREC) has until December 1, 2021 to create a publicly-accessible database where HOAs can file these certificates.
How does this affect me? It gives you greater access to information about who is in charge of an HOA.
HOA website requirements
If an HOA has sixty or more properties, or if it has outsourced its day-to-day functions to a management company, SB 1588 requires it to maintain a website that includes its management certificates and a calendar of member meetings.
How does this affect me? It makes large HOA operations more transparent.
Public filings
Membership in an HOA comes as part of buying the home. It is a condition of ownership that is included in the deed or a document attached to the deed, which is filed with the county clerk and part of the public record.
Texas law refers to the documents that establish an HOA’s authority as “dedicatory instruments.” SB 1588 requires HOAs to file all of these documents with the county clerk.
How does this affect me? It improves transparency by making important HOA documents part of the public record.
Credit reporting
HOAs can require members to pay monthly or annual assessments to contribute to common area maintenance. SB 1588 limits their ability to report unpaid assessments to credit reporting agencies. They are now required to provide a homeowner with a detailed report on what they owe, and to offer them a payment plan before anything may go on the homeowner’s credit report.
How does this affect me? It makes it easier to resolve assessment disputes with an HOA before it damages your credit.
Conflicts of interest
An HOA’s architectural review board (ARB) has the authority to approve or reject homeowners’ planned improvements to their own properties. In an effort to cut down on conflicts of interest, SB 1588 revises the procedures that ARBs must use.
How does this affect me? It works to ensure that ARBs make fair decisions.
Photo by IKRAM shaari from Pexels
Access to lease information
Under SB 1588, HOAs can no longer require homeowners who lease their property to hand over copies of lease agreements. They can only request tenants’ contact information and the start and end dates for leases.
How does this affect me? It keeps HOAs out of homeowners’ landlord-tenant relationships.
Bids for large contracts required
HOAs can require members to pay additional assessments for major repairs or improvements. SB 1588 requires them to obtain multiple bids for any job estimated to cost more than $50,000.
How does this affect me? It may reduce the amount you have to pay since HOAs are required to get multiple bids on big neighborhood projects.
Limits on building restrictions
HOAs are notorious for strict enforcement of CC&Rs that limit what homeowners may build or display on their own properties. SB 1588 prohibits HOAs from restricting homeowners from adding certain security and safety measures, or from installing some religious displays.
How does this affect me? It directly addresses one of the biggest complaints homeowners often raise about HOAs.
Notice of meetings
HOAs typically hold an annual meeting for homeowners to address important issues. They can also hold special meetings throughout the year. SB 1588 requires HOAs to give homeowners at least 72 hours’ advance notice of a special meeting.
How does this affect me? It makes it more likely that homeowners will be able to attend meetings and participate in HOA decisions.
Dispute resolution processes
Homeowners elect members to serve in leadership roles. Because of this, it is very difficult for a homeowner to have a court hear a dispute with their HOA. The court will just tell them to elect better leaders. SB 1588 provides additional ways for homeowners to have disputes heard.
How does this affect me? It potentially makes it easier to “fight city hall,” so to speak.
Become a homeowner!
HOAs aren’t often a nuisance. The financial advantage of being a homeowner is nearly always well worth the minor annoyances that can come from them. Get started on your free pre-approvalwith the mortgage lender Texans trust!
