Condominium Documents
§ 24.1:1Definition and Creation of a Condominium and Its Owners’ Association
A condominium is a form of real property ownership in which portions of the real property are designated for separate ownership or occupancy (the “units”) and the remainder is designated for common ownership or occupancy solely by the owners of the units. Real property is a condominium only if one or more of the common elements (for use by all the unit owners) are directly owned in undivided interests by the unit owners. Real property is not a condominium if all of the common elements are owned by a legal entity separate from the unit owners, such as a corporation or property owners’ association, even if the separate legal entity is owned by the unit owners. Tex. Prop. Code § 82.003(a)(8).
Condominiums are established through filing, in the real property records of the county in which the property is located, a declaration imposing restrictive covenants on the property comprising the condominium regime. Tex. Prop. Code § 82.051. The declaration must contain statutorily prescribed information. Tex. Prop. Code § 82.055. The declaration defines the boundaries of the units and operates to subdivide the property into separate condominium units and common areas or elements. Tex. Prop. Code § 82.052. It is not uncommon for condominium developers to presell condominium units before construction of the condominium building and thus before the boundaries of the units are defined by an as-built survey. In 2013, the Texas legislature amended the definition in Tex. Prop. Code § 82.003(a)(11) to eliminate the word recorded with reference to the declaration but left section 82.051 (requiring recording to establish a condominium) unchanged.
The provisions of the declaration and bylaws are severable. See Tex. Prop. Code § 82.053. These bylaws are for a condominium owners’ association that will take over management of the condominium regime from the declarant. The declaration also typically includes rules affecting the property and owners in the condominium regime.
A condominium owners’ association for a condominium formed after January 1, 1994, must be a Texas corporation. Tex. Prop. Code § 82.101. These owners’ associations are typically nonprofit corporations, although section 82.101 allows them to be for-profit corporations. The Texas Business Organizations Code provides for the formation of both nonprofit and for-profit corporations. Form 24-3 in this chapter is a certificate of formation for a condominium owners’ association.
The Uniform Condominium Act, chapter 82 of the Texas Property Code, governs all condominiums with declarations recorded on or after January 1, 1994. The Act also applies to condominiums formed before that date if the owners vote to have chapter 82 apply or if a declaration or amendment of declaration recorded before January 1, 1994, states that chapter 82 will apply. See Tex. Prop. Code § 82.002(a). Portions of the Act apply to all condominiums; however, certain rights cannot be limited for owners of condominiums created before 1994. See Tex. Prop. Code § 82.002(b)–(d). Condominiums created before January 1, 1994, are otherwise governed by chapter 81 of the Property Code.
Property Code chapter 202, governing construction and enforcement of restrictive covenants, also applies to condominiums. Section 202.002(a) states that the chapter “applies to all restrictive covenants.” “Restrictive covenant” is defined to mean any covenant, condition, or restriction in a dedicatory instrument, and a “dedicatory instrument” means all governing instruments of planned developments, explicitly including condominiums. See Tex. Prop. Code § 202.001(1), (4). “Dedicatory instrument” as it relates to condominiums is defined in Tex. Prop. Code § 82.003(a)(11–a), which does not specifically require recording. Under chapter 202, however, a dedicatory instrument has no effect until it is recorded in the public records. Tex. Prop. Code § 202.006(b). In many instances, the provisions of the statutes applicable to condominiums differ substantially from those that apply to noncondominium residential subdivisions. See Tex. Prop. Code § 209.003(d).
In addition to provisions in chapter 82 of the Property Code, the Texas Business Organizations Code governs the formation and operation of the condominium owners’ association. See Tex. Bus. Orgs. Code ch. 21 (for-profit corporations), ch. 22 (nonprofit corporations).
Condominium owners’ associations are subject to federal income taxation. They do not qualify as charitable organizations under Internal Revenue Code section 501(c)(3). Associations may qualify for special tax treatment under 26 U.S.C. § 528.
§ 24.1:3Foreclosure of Assessment Lien
An assessment levied by a condominium owners’ association is a personal obligation of the unit owner and is also secured by a continuing lien on the unit, on rents, and on insurance proceeds relating to the unit. See Tex. Prop. Code § 82.113(a). For purposes of this section, “assessment” includes regular and special assessments, dues, fees, late fees, fines, collection costs, attorney’s fees, “and any other amount due to the association by the unit owner or levied against the unit by the association . . . . ” Tex. Prop. Code § 82.113(a). The lien for assessments is created by the recording of the declaration, and no other recordation of a lien or notice of lien is required. Tex. Prop. Code § 82.113(c). The association’s lien for assessments has priority over other liens, except for liens for real property taxes or other governmental assessments, liens recorded before the declaration was recorded, first vendor’s liens or first deed-of-trust liens recorded before the assessment becomes delinquent, and under certain circumstances, liens on improvements. See Tex. Prop. Code § 82.113(b).
By acquiring a unit, an owner grants the association a power of sale. That power of sale is exercised pursuant to Texas Property Code section 51.002 unless the declaration provides otherwise. Tex. Prop. Code § 82.113(d). The association may not foreclose a lien for assessments consisting only of fines. Tex. Prop. Code § 82.113(e). The association may not foreclose during a person’s active military service or nine months thereafter without complying with Tex. Prop. Code § 51.015. A notice of foreclosure sale must include the military service language in Tex. Prop. Code § 51.002(i). The initial communication with the owner to collect delinquent assessments before exercising the right of foreclosure also should include language required under federal and state fair debt collection practices laws. A unit owner may not petition a court to set aside a sale solely because the price at foreclosure was insufficient to fully satisfy the owner’s debt. The association may purchase the unit at foreclosure.
The redemption rights of condominium owners are set out in Tex. Prop. Code § 82.113(g). The Texas Residential Property Owners Protection Act, chapter 209 of the Property Code, does not apply to condominiums. Tex. Prop. Code § 209.003(d). See Duarte v. Disanti, 292 S.W.3d 733, 736 (Tex. App.—Dallas 2009, no pet.) (it was “the legislature’s clear intent to have different redemption rights for residential subdivisions than for condominiums”).
At any time before a nonjudicial foreclosure sale, the unit owner may avoid foreclosure by paying “all amounts due the association.” Tex. Prop. Code § 82.113(j). The association is not prohibited from taking a deed in lieu of foreclosure or from filing suit to recover a money judgment. Tex. Prop. Code § 82.113(i).
If an owner defaults on obligations to the association, the association may notify other lienholders of its intent to foreclose and must notify any holder of a recorded lien or a duly perfected mechanic’s lien if the lienholder has given the association a written request of notification. Tex. Prop. Code § 82.113(h), (m). Foreclosure of a tax lien under chapter 32 of the Texas Tax Code does not discharge the association’s lien for amounts due the association after the date of foreclosure of the tax lien. Tex. Prop. Code § 82.113(l).
§ 24.2General Instructions for Completing Forms
For general information about completing the forms in this chapter, see chapter 3 in this manual. In most forms, the information that the attorney must provide is listed at the beginning of the form. Of course, the attorney may add other specific provisions and references to exhibits and riders at the end of the form.
For general information about designation of parties, addresses, property descriptions, and execution and acknowledgment of documents, see chapter 3.
§ 24.3General Considerations for Declaration
The required contents for a condominium declaration are set out in Tex. Prop. Code § 82.055.
The definition of “assessment” used in the declaration, form 24-1 in this chapter, is based on that used in Tex. Prop. Code § 82.113(a).
The definition of “residential purposes” is derived from Tex. Prop. Code § 82.003(a)(21).
The definition of “common elements” is based on Tex. Prop. Code § 82.003(a)(5). In each condominium, there will likely be portions that should be designated as “limited common elements.” The consequence of such a designation is important, not only to limit use of those elements but also to determine responsibility for their maintenance, repair, or replacement, and the costs thereof. The drafter should carefully review Texas Property Code sections 82.052, 82.058, 82.107, and 82.112(d) when determining which aspects of a condominium should be designated as limited common elements as opposed to common elements.
The declaration defines the plat as including the plans. Property Code section 82.003(a) makes a distinction between plan and plat as follows:
(18) “Plan” means a dimensional drawing that is recordable in the real property records or the condominium plat records and that horizontally and vertically identifies or describes units and common elements that are contained in buildings.
(19) “Plat” means a survey recordable in the real property records or the condominium plat records and containing the information required by Section 82.059. As used in this chapter, “plat” does not have the same meaning as “plat” in Chapter 212 or 232, Local Government Code, or other statutes dealing with municipal or county regulation of property development.
Tex. Prop. Code § 82.003(a)(18), (a)(19).
§ 24.3:2Restrictions on Use, Occupancy, or Alienation
Texas Property Code section 82.055(9) requires a declaration to set out any restrictions on use, occupancy, or alienation of the units. Section C. of the declaration, form 24-1 in this chapter, has examples of use and occupancy restrictions. Because changing the “use restrictions on a unit” in a declaration requires 100 percent of the votes in the association (Tex. Prop. Code § 82.067(e)), it will be difficult if not impossible to amend the use restrictions once the declarant loses control of the condominium regime. The use restrictions thus require careful consideration. Examples of restraints on alienation are provided in paragraph D.8. of form 24-1. The practitioner will need to consider what conditions or activities are to be prohibited. The nature and extent of the limitations will depend on the declarant’s purpose and expectations for the condominium. In addition, lenders may require that restrictions be incorporated to protect their interests and the security of mortgages.
Certain restrictions are prohibited or regulated, including restrictions concerning firearms (Tex. Prop. Code § 202.020); rain barrels and xeriscaping (Tex. Prop. Code § 202.007); solar energy devices (Tex. Prop. Code § 202.010); roof shingles (Tex. Prop. Code § 202.011); flags and flagpoles (Tex. Prop. Code § 202.012); religious items (Tex. Prop. Code § 202.018); standby electric generators (Tex. Prop. Code § 202.019); and speed feedback signs (Tex. Transp. Code § 430.002). The owner or developer must determine whether and to what extent rentals are permitted. Allowing rentals in residential condominiums can adversely affect the ability of owners to obtain mortgages. Some lenders will not finance a condominium loan unless a certain percentage of units in the condominium regime are owner-occupied.
If the declarant wants to restrict or regulate rentals, restricting the units to “residential” use will not suffice. Rental of a property for residential use does not transform the use of the property into a business or commercial use. Tarr v. Timberwood Park Owners Ass’n, 556 S.W.3d 274 (Tex. 2018). Any prohibition against rentals must explicitly be stated in the declaration. Tarr, 556 S.W.3d at 291. The declarant may want to consider not placing rental restrictions in the section of the declaration titled “use restrictions,” given the requirement for approval from “100 percent of the votes in the association” for a change in any “use restrictions.” Tex. Prop. Code § 82.067(e). Careful consideration must also be given to the context in which the phrase “single family” appears in a declaration. The supreme court in Tarr determined that “single family” refers to a type of structure, not who can occupy the property. Tarr, 556 S.W.3d at 287. The declarant therefore may also want to define the term “single family” if used in the declaration.
Unless the declaration prohibits rental of units, condominium owners’ associations or managers may encounter enforcement problems when an owner rents the property to a third party. Insertion of provisions such as the following in the declaration or the association’s rules can minimize these enforcement problems:
•requiring that owners provide tenants with the declaration and rules;
•requiring owners to use rental agreements that impose on tenants the obligation to comply with the dedicatory instruments, with consequences for tenants’ violation of the declaration or rules;
•making owners responsible for any fines or other consequences if tenants violate the declaration or rules; and
•requiring owners to give the association or management information about rentals, including contact information for tenants and copies of the rental agreements (form 24-14 in this chapter can be used for this purpose).
Some declarations prohibit short-term rentals because of the unique problems they pose. “Short-term rental” means the rental of all or part of a residential property for less than thirty consecutive days. Tex. Tax Code §§ 156.001(b), 156.101. Short-term rentals are subject to sales and hotel taxes and, often, additional local ordinances. Promulgating association rules that require owners to comply with all applicable laws, with fines or other consequences in the event the owners do not comply, can provide an association with an enforcement tool in those situations.
§ 24.3:3Units and Common Elements
Texas Property Code sections 82.052 and 82.055(4) allow the declaration to define the boundaries of a unit other than as set forth in paragraphs D.3. and D.4. of the declaration, form 24-1 in this chapter.
The declaration is required to contain a description of limited common elements other than those described in Texas Property Code section 82.052(2) and (4). Tex. Prop. Code § 82.055(6). Examples of limited common elements as set out in the statute include chutes, flues, ducts, wires, bearing walls, and other fixtures partially within and partially outside the designated boundaries of a unit and that serve only that unit. Tex. Prop. Code § 82.052(2). Items such as windows, exterior doors, shutters, awnings, window boxes, doorsteps, porches, balconies, and patios designed to serve a single unit but located outside the unit’s boundaries are also limited common elements. Tex. Prop. Code § 82.052(4). The declaration must also contain a description of property that may be allocated subsequently as limited common elements. Tex. Prop. Code § 82.055(7).
§ 24.3:4Assignment of Association Income
Unless a dedicatory instrument requires a vote of the association members to borrow money or to assign the association’s right to future income or lien rights, Tex. Prop. Code § 82.102(f) gives the association’s board of directors the power to borrow money and assign as collateral for the loan the association’s right to future income and lien rights. If a vote of the members is required, (1) the board can provide for electronic voting, absentee ballot, proxy at a meeting, or written consent, and (2) at least 67 percent of all voting interests must vote in favor of the action, unless a dedicatory instrument provides for a lower threshold.
Form 24-12 in this chapter is a unanimous consent in lieu of a directors’ meeting to approve a loan under Tex. Prop. Code § 82.102(f) after any required members’ vote under section 82.102(g) has approved the loan. Chapter 6 in this manual contains forms and clauses for the promissory note. Form 24-13 is a security agreement and transfer of lien to secure the loan.
§ 24.3:5Assessments and Late Charges
Texas Property Code section 82.112 provides that an expense for maintenance, repair, or replacement of a limited common element must be assessed as if it were a general common element expense except as otherwise provided by the declaration or Tex. Prop. Code § 82.107.
Late charges are governed by Tex. Prop. Code §§ 82.102(a)(12), 82.112(c), 82.117(1). The creation of liens and foreclosure for failure to pay assessments is addressed in Tex. Prop. Code § 82.113. Form 24-15 in this chapter can be used for making an initial demand for payment of delinquent assessments before the association exercises its right to foreclose. That form includes the language required by the federal and state fair debt collection practices laws and the military service language required in the notice of foreclosure under Tex. Prop. Code § 51.002(i). Redemption rights for condominium owners after foreclosure of an association’s lien for assessments are governed by Tex. Prop. Code § 82.113(g).
Among the powers granted to the association by the Uniform Condominium Act is the power to impose charges for use of the common elements. See Tex. Prop. Code § 82.102(a)(11). Paragraph H.2. of the declaration, form 24-1 in this chapter, concerns fees for use of specified common elements and is optional. The purpose of this section is to expressly authorize such charges and to provide a procedure to the association.
The declaration may provide for different allocations of votes on particular specified matters or class voting on specified issues; however, units may not constitute a class merely because they are owned by a declarant. Tex. Prop. Code § 82.057(c), (d).
The formulas used to establish the allocations of interests must be stated in the declaration. See Tex. Prop. Code §§ 82.055(8), (16), 82.057(a), (c). Attention should be given to section 82.057(c), which permits special provisions relating to voting rights.
If any unit is restricted exclusively to residential purposes, the approval of at least 80 percent of the members is required to terminate the condominium under section 82.068(a) of the Texas Property Code.
§ 24.3:7Amendment of Declaration
Tex. Prop. Code § 82.055(11) requires the declaration to contain the method of its amendment. By statute an amendment to a declaration may be made—
1.by written ballot that states the exact wording or substance of the amendment and that specifies the date by which a ballot must be received to be counted;
2.at a meeting of the members of the association after written notice of the meeting has been delivered to an owner of each unit stating that a purpose of the meeting is to consider an amendment to the declaration; or
3.by any method permitted by the declaration.
The drafter may merely reference the two specific methods described in Tex. Prop. Code § 82.067(a) or may include additional methods. Some thought should be given to taking advantage of technological advances in order to accommodate different sizes and types of anticipated membership populations. For example, written ballots might be submitted electronically, rather than only by mail.
The right to create additional units is a development right. See Tex. Prop. Code § 82.003(a)(12)(B). The Uniform Condominium Act requires all condominium declarations to include a statement of the maximum number of units that the declarant reserves the right to create. See Tex. Prop. Code § 82.055(5). If any development right is to be reserved by the declarant, the declaration (form 24-1 in this chapter) will require substantial modification.
§ 24.3:9Special Declarant Rights
Tex. Prop. Code § 82.055(14), (15) requires not only a description of development rights and other special declarant rights but also clear identification of the particular real property to which such rights apply and time limits within which such rights must be exercised. Unless special declarant rights are expressly reserved in the declaration, they do not arise under the Uniform Condominium Act. If development rights are reserved, the declaration (form 24-1 in this chapter) will require substantial modification. See Tex. Prop. Code §§ 82.003(a)(12), (a)(22), 82.055(14). Examples of special declarant rights include:
1.The right to complete or make improvements indicated on the plats and plans. See Tex. Prop. Code §§ 82.003(a)(22)(A), 82.059.
2.The right to maintain sales and other offices and models and condominium advertising signs on the condominium. See Tex. Prop. Code §§ 82.003(a)(22)(D), 82.065.
3.Rights of easement through the common elements for the discharge of declarant’s obligations. See Tex. Prop. Code §§ 82.003(a)(22)(E), 82.066.
4.The right to appoint or remove officers or directors. See Tex. Prop. Code §§ 82.003(a)(22)(F), 82.103(c).
§ 24.4General Considerations for Bylaws
Form 24-4 in this chapter is a proposed set of bylaws for a condominium owners’ association. The form can be modified consistent with applicable law, found primarily in the Texas Business Organizations Code and the Texas Property Code.
The Business Organizations Code provides that bylaws may contain provisions for the “regulation and management” of corporate affairs that are consistent with law and the corporation’s certificate of formation. Tex. Bus. Orgs. Code § 21.057(b) (for-profit corporation), § 22.102(b) (nonprofit corporation).
Section 82.106 of the Property Code mandates that the bylaws contain specified provisions governing the “administration and operation of the condominium.” It also provides for “other matters the association considers desirable, necessary or appropriate” subject to the declaration. Section 81.202 of the Property Code (applying to condominiums formed before January 1, 1994) states that the “bylaws of a condominium regime govern the administration of the buildings that comprise the regime.” Thus, it is not unusual, particularly for associations formed before January 1, 1994, to see provisions in bylaws that go beyond corporate governance.
§ 24.5General Considerations for Rules
Form 24-11 in this chapter can be used in promulgating rules for the condominium owners’ association and the use of any common areas. The rules and penalties for violation (to be inserted in sections A. and B. of the form) will be unique to each condominium regime. The enforcement provisions (contained in section C. of the form) are based on the requirements in section 82.102(d) of the Texas Property Code.
§ 24.6:1Condominium Information Statement
Before offering to the public the sale of any interest in a condominium, a declarant (as well as certain other persons in the business of selling real property) must prepare and provide a condominium information statement to prospective purchasers. Tex. Prop. Code § 82.152. The requirements for the condominium information statement are found in Tex. Prop. Code § 82.153. These include—
1.the name and principal address of the declarant and of the condominium;
2.a general description of the condominium that includes the types and maximum number of units;
3.the minimum and maximum number of additional units that may be included in the condominium;
4.a brief description of any development rights reserved by a declarant and of any conditions relating to those rights;
5.copies of the declaration, articles of incorporation, bylaws, any rules of the association and their amendments, and copies of leases and contracts, other than loan documents, required by the declarant to be signed by purchasers at closing;
6.a projected or pro forma budget for the association for the first fiscal year of the association that conforms to Texas Property Code section 82.153(a)(6) and (b);
7.a general description of each lien, lease, or encumbrance affecting title to the condominium after conveyance by the declarant;
8.a copy of each written warranty provided by the declarant;
9.a description of any unsatisfied judgments against the association and any pending suits to which the association is a party or that are material to the land title and construction of the condominium of which a declarant has actual knowledge;
10.a general description of the insurance coverage provided for the benefit of unit owners; and
11.current or expected fees or charges to be paid by unit owners for the use of the common elements and other facilities related to the condominium.
Form 24-2 in this chapter is based on the above requirements. Special disclosures are required for condominiums located in whole or in part in a municipality with a population of more than 1.9 million. See Tex. Prop. Code § 82.153(a)(12).
§ 24.6:2Management Certificate
Texas Property Code section 82.116 requires a management certificate to be recorded in each county in which the condominium is located. If any changes in information occur, the association is required to file a new management certificate not later than thirty days after the date the association has notice of the change. See Tex. Prop. Code § 82.116(b). In addition, all condominium owners’ associations must record a current management certificate on or before January 1, 2014, or rerecord the current management certificate if the previous recording was done before September 1, 2013. This requirement is to facilitate the county clerks’ indexing of management certificates, which, before September 1, 2013, did not have a clear, statutorily mandated system. Tex. Prop. Code § 82.116(a–1). Thus, a condominium owners’ association should record or rerecord its current management certificates even if it missed the January 1, 2014, deadline. Form 24-5 in this chapter, the management certificate, may be used to comply with these requirements.
§ 24.6:3Resale Certificate and Acknowledgment of Receipt
A unit owner, other than a declarant, who intends to sell a unit must provide a purchaser with a current copy of the declaration, bylaws, any association rules, and a resale certificate. The resale certificate, required under chapter 82 of the Texas Property Code, must be prepared not earlier than three months before the date of delivery. The resale certificate must be issued by the association and contain the disclosures specified in Tex. Prop. Code § 82.157. The resale certificate and other provisions in chapter 207 of the Property Code do not apply to condominiums. Tex. Prop. Code § 207.002(b).
Form 24-6 in this chapter, the resale certificate, may be used to comply with the requirements of Tex. Prop. Code § 82.157.
If the seller fails to deliver to the purchaser copies of the declaration, bylaws, and association rules as required by Tex. Prop. Code § 82.157 before the purchaser executes the contract, or if the contract does not contain an underlined or bold-faced provision acknowledging the purchaser’s receipt of those documents and recommending that the purchaser read the documents before executing the contract, the purchaser has the right to cancel the contract before the sixth day after the date the seller delivers those documents to the purchaser. See Tex. Prop. Code § 82.156. Form 24-8, the acknowledgment of receipt of condominium documents, may be used to document compliance with Tex. Prop. Code § 82.157 or may be modified to use as additional clauses in a sales contract.
An association is required to keep certain records, including information concerning each unit owner. The unit owner, within thirty days after acquiring an interest, must provide—
1.the unit owner’s mailing address, telephone number, and driver’s license number, if any;
2.the name and address of the holder of any lien against the unit and any loan number;
3.the name and telephone number of any person occupying the unit other than the unit owner; and
4.the name, address, and telephone number of any person managing the unit as agent of the unit owner.
This information must be updated no later than thirty days after the date the owner has notice of any change in the required information. Tex. Prop. Code § 82.114(f). Form 24-10 in this chapter, the record of unit, may be used to comply with those requirements.
A person who performs residential property management services for a single-family residential property must be licensed as a broker. Tex. Occ. Code ch. 1101. Among the many acts that can make one a “broker” for purposes of the Occupations Code, and thus requiring the person to be licensed, is “control[ling] the acceptance or deposit of rent from a resident of a single-family residential real property unit,” in expectation of receiving a commission or other valuable consideration. Tex. Occ. Code § 1101.002(1)(A)(x). Control means the authority to either (1) pay for services related to management of the property out of the rent collected, (2) determine where to deposit the rent, or (3) sign checks or withdraw money from a trust account. 22 Tex. Admin. Code § 535.4(h). 22 Tex. Admin. Code § 535.4(i) states that in addition to other types of property, a condominium unit or townhome is a single-family residential real property unit for purposes of 22 Tex. Admin. Code § 535.4(h). An association that hires an unlicensed manager to assist in managing the association’s affairs can use form 24-16 in this chapter to prohibit activities for which a broker’s license is required.
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