Restrictive Covenants and Property Owners’ Associations
“Restrictive covenant” means “any covenant, condition, or restriction contained in a dedicatory instrument, whether mandatory, prohibitive, permissive, or administrative.” Tex. Prop. Code § 202.001(4). A restrictive covenant is a private way to regulate or control the use of real property by contract. This type of regulation and control is based on the fundamental “right of parties to contract with relation to property as they see fit, provided they do not contravene public policy and their contracts are not otherwise illegal.” Curlee v. Walker, 244 S.W. 497, 498 (1922). Restrictive covenants are subject to general common-law rules of contracts. Pilarcik v. Emmons, 966 S.W.2d 474, 478 (Tex. 1998).
Under common law, restrictive covenants can be adopted as part of a general plan for the development of a tract of land to make it more attractive for residential or commercial purposes by reason of the covenants imposed on each of the separate lots sold. The development plan that includes restrictive covenants forms an inducement to each purchaser to buy a lot in the development, and it may be assumed that the purchaser pays an enhanced price for the property purchased. The development plan, including restrictive covenants, enters into and becomes a part of the consideration for the purchase of a lot. The purchaser of a lot submits to a burden on his own land because a like burden imposed on his neighbor’s lot will be beneficial to both lots. The covenant or agreement between the original owner and each purchaser is therefore mutual. Curlee, 244 S.W. at 498.
The most common reason for imposing restrictive covenants on property is to enhance the value of the property as part of a development scheme. For example, by subdividing property on the edge of a town that is zoned for agriculture into separate smaller lots, and by imposing restrictive covenants so the purchasers of the lots know how the use of nearby lots will be restricted, the value of the property as a whole will be substantially enhanced. A development project subject to restrictive covenants can be for residential use only, commercial use only, or a combination of the two. The forms in this chapter are for residential projects only.
Based on the common-law rules and the statutory definitions, restrictive covenants can be imposed or applied to property in a variety of ways. One of the most common ways to impose restrictive covenants on property is for the owner of the land to file with the county clerk a document known as a declaration, which describes the restrictive covenants to which the property is subject. A declaration regarding property is similar to the declaration of a living trust. Both documents declare that certain described property will be owned by the owner subject to the described covenants.
The filing of the declaration on real property with the county clerk is constructive notice to the public that the property described in the declaration is subject to the restrictive covenants stated. Once a declaration of restrictive covenants is filed regarding the described property, the covenants are continuing obligations for the use of the property from that time forward, through each sale of the property, until canceled or modified by the owner. These ongoing restrictions on the use of land are called “covenants running with the land.” Purchasers are charged with notice of the terms of deeds that form an essential link in their chain of ownership and with knowledge of the provisions and contents of other recorded instruments. Cooksey v. Sinder, 682 S.W.2d 252, 253 (Tex. 1984).
A restrictive covenant is a contract subject to the same rules of construction and interpretation as any other contract. Davis v. Canyon Creek Estates Homeowners Ass’n, 350 S.W.3d 301, 313 (Tex. App.—San Antonio 2011, pet. denied). Once restrictive covenants are imposed on a property, they are contractual obligations among all future owners of subdivided parts of the property. An owner’s noncompliance with a restrictive covenant is a breach of contract as to all the other owners of lots subdivided from the same property to which the declaration applies. Therefore, each owner has a right to enforce the restrictive covenants in a development or sub-division by filing suit against an owner who violates a restrictive covenant. Anderson v. New Property Owners’ Ass’n of Newport, 122 S.W.3d 378, 384 (Tex. App.—Texarkana 2003, pet. denied). However, placing the burden on individual owners for the enforcement of restrictive covenants, while generally allowed by common law and by the terms of declarations, is not usually practical.
§ 23.1:2Declarations and Other Dedicatory Instruments
“Dedicatory instrument” means—
each document governing the establishment, maintenance, or operation of a residential subdivision, planned unit development, condominium or townhouse regime, or any similar planned development. The term includes a declaration or similar instrument subjecting real property to:
(A)restrictive covenants, bylaws, or similar instruments governing the administration or operation of a property owners’ association;
(B)properly adopted rules and regulations of the property owners’ association; or
(C)all lawful amendments to the covenants, bylaws, instruments, rules, or regulations.
To be effective, a dedicatory instrument—whether from a property owners’ association or an original declarant—must be filed in the real property records of each county in which the property to which the dedicatory instruments relate is located. Tex. Prop. Code § 202.006. This requirement covers bylaws or similar instruments governing the administration or operation of a property owners’ association, properly adopted rules and regulations of the property owners’ association, and all lawful amendments to the covenants, bylaws, instruments, rules, or regulations.
A provision for amendment of a declaration cannot require a vote of more than 67 percent of the total votes of members of the property owners’ association entitled to vote on the proposed amendment. Tex. Prop. Code § 209.0041. If the declaration contains a lower percentage, the percentage in the declaration controls. Tex. Prop. Code § 209.0041. If the declaration is silent as to voting rights for an amendment, the declaration may be amended by a vote of owners owning 67 percent of the lots subject to the declaration. Tex. Prop. Code § 209.0041. Section 209.0041 prevails over any conflicting provisions in title 11 of the Texas Property Code. See, however, Property Code section 201.006 concerning the requirements for a petition to amend restrictions, with significantly different requirements. Tex. Prop. Code § 201.006.
§ 23.1:3Limitations of Covenants and Restrictions
The Telecommunications Act of 1996 protects the rights of property owners to use satellite dishes. See 47 U.S.C. §§ 151–341. With a few exceptions, any homeowner may install a satellite dish of a size of one meter or smaller in diameter. While property owners’ associations may encourage that dishes be placed as inconspicuously as possible, the dish must be allowed to be placed where it may receive a usable signal. Additionally, many property owners’ associations have restrictive covenants prohibiting a homeowner from installing an OTA (Over-the-Air) rooftop antenna. These restrictions are not enforceable, except in some instances. For example, the antenna may be installed at any location unless it imposes on common property. Also, the antenna must be of a design to receive local, not long-distance, signals and must not extend any higher than twelve feet above the top roofline of the home, unless an exception is granted by the property owners’ association due to extenuating terrestrial interference. See the Federal Communications Commission Rule, available at www.fcc.gov/media/over-air-reception-devices-rule.
Federal and state fair housing acts will limit certain types of residential restrictions concerning age and occupancy limitations. See section 2.97 in this manual.
With some exceptions noted in the statute, a provision in a dedicatory instrument is void and unenforceable if it prohibits or restricts a property owner from (1) implementing measures promoting solid-waste composting of vegetation, including grass clippings, leaves, or brush, or leaving grass clippings uncollected on grass; (2) installing rain barrels or a rainwater harvesting system; (3) implementing efficient irrigation systems, including underground drip or other drip systems; or (4) using drought-resistant landscaping or water-conserving natural turf. Tex. Prop. Code § 202.007.
A property owners’ association is limited on how it can enforce restrictions of political signs in a subdivision. Tex. Prop. Code § 202.009.
With certain exceptions listed in the statute, a provision in a dedicatory instrument that prohibits or restricts a property owner from installing a solar energy device is void. Tex. Prop. Code § 202.010.
With certain specified exceptions, a property owners’ association is prohibited from adopting or enforcing a restrictive covenant limiting the display of the American flag beyond those limitations to time, place, and manner necessary to protect a substantial interest of the association. Freedom to Display the American Flag Act of 2005, Pub. L. No. 109-243, 120 Stat. 572 (2006) (found at 4 U.S.C. § 5 note). Tex. Prop. Code § 202.012 limits the ability of a property owners’ association to prohibit or regulate flagpoles and flag displays.
Restrictions requiring wood shingle roofs are void. Tex. Prop. Code § 5.025. A property owners’ association may not include or enforce a provision in a dedicatory instrument that prohibits or restricts a property owner who is otherwise authorized to install shingles on the roof of the owner’s property from installing shingles that meet the specifications listed in the statute. Tex. Prop. Code § 202.011.
With specified exceptions, a property owners’ association may not enforce or adopt a restrictive covenant that prohibits a property owner or resident from displaying or affixing on the owner’s or resident’s property or dwelling one or more religious items, the display of which is motivated by the owner’s or resident’s sincere religious belief. Tex. Prop. Code § 202.018.
A property owners’ association is limited on the extent to which it can adopt and enforce restrictions on standby electric generators. Tex. Prop. Code § 202.019.
A property owners’ association is prevented from including or enforcing a provision in a dedicatory instrument that limits a person from lawfully possessing, transporting, or storing a firearm, any part of a firearm, or firearm ammunition, or from lawfully discharging a firearm. Tex. Prop. Code § 202.020.
A property owners’ association is prevented from restricting a minor from the occasional sale of lemonade or other nonalcoholic beverages. Tex. Prop. Code § 202.020.
A property owners’ association may not include or enforce a provision in a dedicatory instrument that prohibits, restricts, or has the effect of prohibiting or restricting any person who is otherwise authorized from lawfully possessing, transporting, or storing a firearm, any part of a firearm, or firearm ammunition, as well as the otherwise lawful discharge of a firearm. Tex. Prop. Code § 202.021.
A property owners’ association may not adopt or enforce a provision in a dedicatory instrument that prohibits or restricts a property owner from installing on the property owner’s property a swimming pool enclosure that conforms to applicable state or local safety requirements. The association may adopt and enforce a provision in a dedicatory instrument establishing limitations related to the appearance of a swimming pool enclosure, including limitations establishing permissible colors for a swimming pool enclosure, provided that the provision does not prohibit a swimming pool enclosure that is black in color and consists of transparent mesh set in metal frames. Tex. Prop. Code § 202.022.
A property owners’ association may not adopt or enforce a restrictive covenant that prevents a property owner from building or installing security measures, including but not limited to a security camera, motion detector, or perimeter fence on the property owner’s property. A property owners’ association may prohibit the installation of a security camera by a property owner in a place other than the property owner’s private property. A property owners’ association may regulate the type of fencing that a property owner may install. Tex. Prop. Code § 202.023.
§ 23.2Property Owners’ Association
A property owners’ association, which is composed of all owners of lots in a subdivision or development, enforces restrictive covenants on behalf of the association and all the owners who are in compliance. A property owners’ association means—
an incorporated or unincorporated association owned by or whose members consist primarily of the owners of the property covered by the dedicatory instrument and through which the owners, or the board of directors or similar governing body, manage or regulate the residential subdivision, planned unit development, condominium or townhouse regime, or similar planned development.
If the practitioner uses a nonprofit association as the governing entity, members and management of the nonprofit association are shielded from personal liability under Tex. Bus. Orgs. Code § 22.221.
Property owners’ associations are regulated by federal, state, and local law, and they are subject to federal income taxation. They typically 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. Texas Property Code chapter 202 applies to all restrictive covenants and property owners’ associations. Chapter 209 of the Property Code applies to all residential property owners’ associations subject to a declaration that authorizes the property owners’ association to collect regular or special assessments on all or a majority of the property in the subdivision. A property owners’ association may not collect a regular assessment, as defined by Tex. Prop. Code § 209.002, if the dedicatory instrument authorizing the collection of the regular assessment is not filed as required by Tex. Prop. Code § 202.006(a). Certain provisions of these chapters do not apply to a property owners’ association that is subject to Texas Government Code chapter 552. See Tex. Gov’t Code § 552.0036. Property Code chapter 209 does not apply to condominiums governed by chapter 82 of the Property Code. See Tex. Prop. Code § 209.003(d).
Certain chapters of the Property Code have specific requirements not applicable generally to property owners’ associations in counties having defined characteristics. To determine if these specific requirements apply, see chapters 201, 203, 204, 205, 206, 208, 210, 211, 212 and 215 of the Property Code.
The Texas Residential Property Owners Protection Act is chapter 209 of the Property Code. It applies to residential subdivisions (other than condominiums governed by Tex. Prop. Code ch. 82) that are subject to restrictive covenants authorizing a property owners’ association to collect regular or special assessments and requiring mandatory membership in the association. Tex. Prop. Code § 209.003. A “residential subdivision” or “subdivision” is defined as—
a subdivision, planned unit development, townhouse regime, or similar planned development in which all land has been divided into two or more parts and is subject to restrictions that—
(A)limit a majority of the land subject to the dedicatory instruments, excluding streets, common areas, and public areas, to residential use for single-family homes, townhomes, or duplexes only;
(B)are recorded in the real property records of the county in which the residential subdivision is located; and
(C)require membership in a property owners’ association that has authority to impose regular or special assessments on the property in the subdivision.
In addition, the Property Code affords certain rights to property owners’ associations in cities or counties that meet various specified minimum population requirements to amend, extend, or supplement deed restrictions and to establish assessment lien mechanisms. Tex. Prop. Code chs. 201, 204–206.
A property owners’ association must record a management certificate in each county in which any portion of the residential subdivision is located and must record an amended management certificate within thirty days of the amendment. Tex. Prop. Code § 209.004. See form 23-7 in this chapter. After December 1, 2021, any management certificate or amendment to a management certificate recorded must also be electronically filed with the Texas Real Estate Commission not later than seven days after the recording. For those management certificates or amendments to management certificates recorded on or before December 1, 2021, the property owners’ association has until June 1, 2022, to electronically file the management certificate or the amendment to the management certificate with the Texas Real Estate Commission. See www.hoa.texas.gov/ for more information on filing requirements with the Texas Real Estate Commission. If a property owners’ association is composed of at least sixty lots or has contracted with a management company, it must make the current version of all dedicatory instruments available on an Internet website. Tex. Prop. Code § 207.006.
Despite any contrary provision in a dedicatory instrument or in other laws not specifically applicable to a property owners’ association, a property owners’ association must make the books and records of the association, including financial records, open to and reasonably available for examination and copying by an owner or a person designated in a writing signed by the owner as the owner’s agent, attorney, or certified public accountant. Tex. Prop. Code § 209.005(a), (c).
The procedure for an owner to examine and copy an association’s records is set out in Tex. Prop. Code § 209.005. In addition, the property owners’ association must adopt a records production and copying policy that prescribes the costs the association will charge for the compilation, production, and reproduction of requested records. That policy must be recorded in the real property records. The association cannot assess any charges if they are not recorded. Tex. Prop. Code § 209.005(i). See form 23-12 for an example of a records production and copying policy.
A property owners’ association composed of more than fourteen lots must also adopt and comply with a document retention policy meeting certain defined requirements. Tex. Prop. Code § 209.005(m). The documentation retention policy must be recorded as a dedicatory instrument. Tex. Prop. Code § 209.005(i).
§ 23.2:1Governance of Property Owners’ Associations
The governance of property owners’ associations, including meetings and voting procedures for members, is subject to common-law rules, the terms of the dedicatory instruments, the Texas Business Organizations Code, and the Texas Property Code.
Mandatory, statutory provisions about members voting apply to property owners’ associations and supersede contrary provisions in a dedicatory instrument. See Tex. Prop. Code §§ 209.0057–.0059, 209.00592–.00594.
The board of directors of a property owners’ association must call an annual meeting of the members. If a board does not call an annual meeting of the association members, any owner may demand that a meeting of the association members be called not later than the thirtieth day after the date of the owner’s demand. See Tex. Prop. Code § 209.014.
Mandatory, statutory provisions for board of director qualifications and meetings apply to property owners’ associations and supersede contrary provisions in a dedicatory instrument. See Tex. Prop. Code §§ 209.0051, 209.00591. Regular and special board meetings must be open to owners, subject to the right of the board to adjourn a board meeting and reconvene in closed executive session to consider certain specified matters. Members must be given notice of the date, hour, place, and general subject of a regular or special board meeting, including a general description of any matter to be brought up for deliberation in executive session. The notice shall be—
(1)mailed to each property owner not later than the 10th day or earlier than the 60th day before the date of the meeting; or
(2)provided at least 144 hours before the start of a regular board meeting and at least 72 hours before the start of a special board meeting.
Tex. Prop. Code § 209.0051(e).
Written minutes of the meetings must be kept and made available to owners. Members must be given notice of the date, hour, place, and general subject of a regular or special board meeting, including a general description of any matter to be brought up for deliberation in executive session. See Tex. Prop. Code § 209.0051.
There are mandatory and permissive statutory provisions for how a property owners’ association gives notice to owners and the content of the notice. These provisions vary depending on factors such as type and location of meetings, action taken or to be taken with or without a meeting, voting methods, use of electronic communication, and size of the association. See, e.g., Tex. Prop. Code §§ 209.0042, 209.0051, 209.0056, 209.00593, 209.006.
§ 23.2:2Enforcement of Covenants and Rules and Collection of Assessments
Before a property owners’ association may suspend an owner’s right to use a common area, file a suit against an owner other than a suit to collect a regular or special assessment or foreclose under an association’s lien, charge an owner for property damage, or levy a fine for a violation of the restrictions or bylaws or rules of the association, the association or its agent must give written notice to the owner by certified mail with certain required information. Tex. Prop. Code § 209.006. Additionally, a property owners’ association must file the dedicatory instrument authorizing the collection of the regular assessment as required by Tex. Prop. Code § 202.006(a) before it can collect a regular assessment. A reasonable time for the owner to cure a violation must be given if the violation is curable and does not materially affect the health or safety of an ordinary resident. Tex. Prop. Code § 209.006. The statute contains examples of curable and uncurable violations.
If the owner is entitled to an opportunity to cure the violation, the owner has the right to submit a written request for a hearing to discuss and verify facts and resolve the matter in issue before the board. At least ten days before the association holds the hearing, the association must give the owner a packet containing all documents, photographs, and communications relating to the matter the association intends to introduce at the hearing. If the association does not provide the packet at least ten days before the hearing, the owner is entitled to an automatic fifteen-day postponement of the hearing. During a hearing, a member of the board or the association’s designated representative must first present the association’s case against the owner. An owner or the owner’s designated representative is entitled to present the owner’s information and issues relevant to the appeal or dispute. Tex. Prop. Code § 209.007.
A property owners’ association may not hold an owner liable for fees of a collection agent retained by the property owners’ association unless the association first provides written notice with required information to the owner by certified mail. Tex. Prop. Code § 209.0064. Specifically, a property owners’ association may not hold an owner liable for the fees of a collection agent unless the association first provides notice to the owner by certified mail that—
1.specifies each delinquent amount and the total amount required to be paid to make the account current;
2.if the association is required to offer a payment plan pursuant to Tex. Prop. Code § 209.0062 or the dedicatory instruments, describes options available to avoid having the account turned over to the collection agent, including the availability of a payment plan; and
3.provides a period of at least forty-five days for the owner to cure the delinquency before further collection action is taken.
A property owners’ association may collect from an owner reimbursement of reasonable attorney’s fees and other reasonable costs incurred relating to collecting amounts due to the association for enforcing restrictions or the bylaws or rules of the association only if the owner is provided a written notice that attorney’s fees and costs will be charged to the owner if the delinquency or violation continues after a date certain. Tex. Prop. Code § 209.008.
A property owners’ association or the association’s collection agent may not report any delinquent fines, fees, or assessments to a credit reporting service that are the subject of a pending dispute between the owner and the property owners’ association. A property owners’ association may report the delinquent payment history of assessments, fines, and fees of property owners within its jurisdiction to a credit reporting service only if—
1.at least thirty business days before reporting to a credit reporting service, the association sends, via certified mail, hand delivery, electronic delivery, or other delivery means acceptable between the parties, a detailed report of all delinquent charges owed and
2.the property owner has been given the opportunity to enter into a payment plan.
A property owners’ association may not charge a fee to individual property owners for reporting delinquent payment histories of assessments, fines, and fees of property owners within the association’s jurisdiction to a credit reporting service. Tex. Prop. Code § 209.0065.
A property owners’ association composed of more than fourteen lots must adopt reasonable guidelines to establish an alternative payment schedule by which an owner may make partial payments to the property owners’ association for delinquent regular or special assessments or any other amount owed to the association without accruing additional monetary penalties. The guidelines must allow at least three months to pay the assessment. The guidelines are not considered a dedicatory instrument but must be recorded in the real property records. Tex. Prop. Code § 209.0062.
A property owners’ association whose dedicatory instruments grant a right to foreclose on assessment liens is deemed to have any power of sale required to exercise the foreclosure right under Tex. Prop. Code § 209.0092. The Texas Residential Property Owners Protection Act regulates the foreclosure of an assessment lien and provides a right of redemption after foreclosure. See Tex. Prop. Code §§ 209.009–.011. Generally, judicial foreclosure of an owner’s lot is required, and nonjudicial foreclosure is not allowed, unless the owner waives the right to require a judicial foreclosure after default. Tex. Prop. Code § 209.0092. A judicial foreclosure required by Tex. Prop. Code § 209.0092 must be conducted according to Texas Rules of Civil Procedure 735 and 736. Tex. Prop. Code § 209.0092(b). See Tex. R. Civ. P. 735, 736.
A property owners’ association may not conduct a nonjudicial foreclosure or commence a judicial foreclosure action related to the association’s assessment lien on an owner’s lot unless the association provides written notice to any holder of an inferior or subordinate deed-of-trust lien of record on the lot of (1) the total amount of the delinquency giving rise to the foreclosure and (2) the lienholder’s opportunity to cure the delinquency before the sixty-first day after the receipt of the notice. The notice must be sent by certified mail to the address for the inferior or subordinate lienholder shown in the deed records relating to the lot. Tex. Prop. Code § 209.0091.
Not later than the thirtieth day after a judicial or nonjudicial foreclosure sale of an owner’s lot, a property owners’ association must send to the lot owner, each lienholder of record according to the most recently filed deed of trust, and any transferee or assignee of that deed of trust, a written notice stating the date and time the sale occurred and informing them of the right of the lot owner and lienholder to redeem the lot under section 209.011 of the Texas Property Code. Tex. Prop. Code § 209.010–.011. See form23-19 in this chapter for an example of a notice.
Not later than the thirtieth day after the property owners’ association sends notice under Tex. Prop. Code § 209.010, the association must record an affidavit under Tex. Prop. Code § 209.010(c) in the real property records where the property is located, stating the date on which notice was sent and containing a legal description of the lot foreclosed. See form 23-18 for an example of an affidavit. If the lot owner or lienholder sends a written request to redeem the property before the expiration of the redemption period, the redemption period is extended until the tenth day after the date the association and any third-party purchaser at the foreclosure provides written notice to the redeeming party of the amounts that must be paid to redeem the property. Tex. Prop. Code § 209.011(m).
If the redemption period (including any extensions) expires without redemption of the property, the association or third-party foreclosure purchaser must record an affidavit in the real property records in which the property is located, stating that the lot owner or lienholder did not redeem the property. Tex. Prop. Code § 209.011(n). See form 23-20 for an example of an affidavit.
An owner of property in a subdivision may bring an action for a violation of Property Code chapter 209 against the property owners’ association of the subdivision in the justice court of a precinct in which all or part of the subdivision is located. Tex. Prop. Code § 209.017.
Texas Property Code chapter 207 applies to residential subdivisions with a property owners’ association that is entitled to levy regular or special assessments. Tex. Prop. Code §§ 207.001(6), 207.002. Within ten business days after a written request, a residential property owners’ association is required to deliver a resale certificate to the requesting owner, title company, purchaser, or their respective agents. The resale certificate must be prepared no earlier than the sixtieth day before it is delivered and must include specific information about the property and the subdivision as a whole. Tex. Prop. Code § 207.003. See form 23-10 in this chapter for an example of a resale certificate. The property owners’ association may require evidence of the requester’s authority to order a resale certificate and payment of a fee, not to exceed $375, for providing the resale certificate. A property owners’ association may charge a reasonable and necessary fee, not to exceed $75, to prepare and deliver an update of a resale certificate. Tex. Prop. Code § 207.003.
If a property owners’ association fails to deliver the information required under section 207.003 before the fifth business day after the second request for the information was mailed by certified mail, return receipt requested, or hand delivered, evidenced by receipt, the owner may seek any combination of the following:
(A)a court order directing the property owners’ association to furnish the required information;
(B)a judgment against the property owners’ association for not more than $5,000;
(C)a judgment against the property owners’ association for court costs and reasonable attorney’s fees; or
(D)a judgment authorizing the owner or the owner’s assignee to deduct the amounts awarded under Paragraphs (B) and (C) from any future regular or special assessments payable to the property owners’ association[.]
Tex. Prop. Code § 207.004(a), (b)(1).
The owner may also elect to provide an affidavit to a buyer under contract to purchase the owner’s property that states that the owner, the owner’s agent, or a title insurance company or its agent acting on behalf of the owner made, in accordance with chapter 202 of the Texas Property Code, two written requests to the property owners’ association for the information described in Texas Property Code section 207.003 and that the association did not timely provide the information. Tex. Prop. Code § 207.004(b)(2).
§ 23.3Instructions for Completing Declaration of Restrictive Covenants and Other Dedicatory Instruments
See chapter 3 in this manual for general information about designations of parties, addresses, property descriptions, and execution and acknowledgment of documents.
§ 23.3:2Scope of Declaration of Restrictive Covenants
Form 23-1 in this chapter is drafted for use with a single-family residential subdivision whose owners are members of a property owners’ association, and form 23-2 is drafted for use with a residential subdivision that does not include a property owners’ association.
The use and activities in section C. of forms 23-1 (the declaration of restrictive covenants for a subdivision with a property owners’ association) and 23-2 (the declaration for a subdivision without a property owners’ association) in this chapter should be tailored to address a declarant’s desired permitted use of the property and prohibited activities, or those that a declarant wants to regulate on the property. The forms list as examples various activities typically prohibited in subdivisions restricted to residential use.
A declaration usually restricts the types of buildings that can be constructed on a lot in the subdivision. Such restrictions can include the size, construction materials, location on the lot, and so forth. The declaration also usually restricts how the lot owner can use the buildings and the lot. The drafter must be specific with the restrictions for buildings and use. For example, restricting buildings to only single-family residences does not limit a building to use by only a single family. Nor does restricting single-family residence buildings to use for only residence purposes limit a building to use by only a single family. Tarr v. Timberwood Park Owners Ass’n, 556 S.W.3d 274 (Tex. 2018).
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 23-21 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.
§ 23.3:4Construction and Maintenance Standards
The construction and maintenance standards in section D. of forms 23-1 and 23-2 in this chapter should be tailored to address a declarant’s desired construction and maintenance standards for the property. In addition, several construction options need to be selected by a declarant in section D. of both declarations, such as maximum height restrictions, minimum floor area, time to complete repairs or for rebuilding of improvements, and time to complete installation of landscaping.
Section E. of form 23-1 in this chapter includes a property owners’ association that has two classes of membership. Class A members are all property owners except the declarant, and each Class A member has one vote. The declarant is designated a Class B member with special voting rights as specified in the bylaws of the association. Paragraph E.3.b. of form 23-1 allows a declarant to select the date on which Class B member rights are to be converted to Class A member rights.
§ 23.3:6Architectural Control Committee
Section F. of form 23-1 in this chapter includes an architectural control committee (ACC) established to assist the association in ensuring that permitted improvements and landscaping conform to the dedicatory instruments. A declarant must select the number of members comprising the ACC and the number of days that a property owner or the ACC has to act on various matters brought before the ACC.
If a property owners’ association consists of more than forty lots and it is not the development period or any period in which the declarant (1) appoints a majority of the members of the architectural review authority, (2) otherwise controls the appointment of the architectural review authority, or (3) has the right to veto or modify a decision of the architectural review authority, a person may not be appointed or elected to serve on the architectural review authority if the person is (1) a current board member, (2) a current board member’s spouse, or (3) a person residing in a current board member’s household. Tex. Prop. Code § 209.00505. Additionally, a decision by the architectural review authority denying an application or request by an owner for the construction of improvements in the subdivision may be appealed to the board. A written notice of the denial must be provided to the owner by certified mail, hand delivery, or electronic delivery.
The notice must describe the basis for the denial in reasonable detail and changes, if any, to the application or improvements required as a condition to approval and inform the owner of its right to request a hearing before the board of directors of the property owners’ association on or before the thirtieth day after the date the notice was mailed to the owner.
The board must hold the hearing requested by an owner not later than the thirtieth day after the date the board receives the owner’s request for a hearing. The board must notify the owner of the date, time, and place of the hearing not later than the tenth day before the date of the hearing. Only one hearing is required. Tex. Prop. Code § 209.00505.
During a hearing, the board or the designated representative of the property owners’ association and the owner or the owner’s designated representative will each be provided the opportunity to discuss, verify facts, and resolve the denial of the owner’s application or request for the construction of improvements, and the changes, if any, requested by the architectural review authority in the notice provided to the owner.
The board or the owner may request a postponement. If requested, a postponement shall be granted for a period of not more than ten days. Additional postponements may be granted by agreement of the parties.
The property owners’ association or the owner may make an audio recording of the meeting.
The board may affirm, modify, or reverse, in whole or in part, any decision of the architectural review authority as consistent with the subdivision’s declaration.
Section G. of form 23-1 in this chapter authorizes the association to impose and collect regular and special assessments, and a lien is created on each owner’s property to secure an owner’s payment of the assessments. The amount of the initial regular assessment, the timing for payment of regular assessments, and the manner in which the owners approve special assessments all need to be completed in this section.
If a declarant desires to impose a late charge or interest on delinquent assessments, the amount and interest rate should be completed in section H. of form 23-1 in this chapter.
§ 23.3:9Dedication or Conveyance of Common Areas
Paragraph I.1.d. of form 23-1 in this chapter requires a declarant to select the number of votes necessary to dedicate or convey common areas owned by the association.
Paragraph J. of form 23-1 in this chapter and paragraph E. of form 23-2 both allow a developer to select the period of time the restrictive covenants will remain in effect and, if the restrictive covenants terminate on a specific date, how the property owners may continue the restrictive covenants.
§ 23.3:11Annexation of Additional Property
Paragraph J. of form 23-1 in this chapter and paragraph E. of form 23-2 both allow for annexation of additional property into the declaration. A declarant needs to determine the percentage of owners needed to annex additional property into the declaration.
Form 23-4 in this chapter is a set of bylaws for the property owners’ association. The bylaws can be adapted to either an unincorporated association or a corporation. If the property owners’ association is an unincorporated nonprofit association, consult chapter 252 of the Texas Business Organizations Code. For a nonprofit corporation, consult chapter 22 of the Business Organizations Code.
Form 23-5 in this chapter is a form that can be used in promulgating rules for the property 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), promulgated by the association, will be unique to each subdivision. The enforcement provisions (contained in section C. of the form) are based on the requirements in section 209.006 of the Texas Property Code.
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 require 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 23-22 in this chapter to prohibit activities for which a broker’s license is required.
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