The 2021 Texas Legislative Session has come to an end and a few changes are coming for planned communities. Compared to the 2019 Legislative Session, 2021 was more active with approximately thirty bills filed that would have had some effect on the administration of Texas planned communities. In the end, four meaningful bills passed (five if you count a bill with duplicate language). Fortunately, for developers, there are no major changes to how we structure communities for our clients, or any meaningful dilution of declarant rights to develop, operate, market, and sell lots or condominium units.
Below is a brief summary of each bill with a few observations on sections of each bill, and what steps should be considered related to existing or future governance systems, and association operations in order to ensure compliance with the new laws. A caveat first. These bills are "fresh" and one is somewhat complex. It will take time to see how practitioners will interpret them over time and what best practices will result therefrom.
Senate Bill 318 (by Huffman (R); District 17, Houston)
Effective September 1, 2021
CONDOMINIUMS ONLY: RECORDS AND DOCUMENT RETENTION
Change to Chapter 82 of the Texas Property Code
During the 2019 Legislative session, Senator Huffman filed Senate Bill 639, which would have conformed condominiums to the same voting rules, board eligibility standards, open board meeting requirements, and records production requirements applicable to non-condominium associations under Chapter 209 of the Texas Property Code. If passed, Senate Bill 639 would have been problematic for condominiums since the new requirements could have made it more difficult for consumers to obtain home loans and/or mortgage insurance. The bill did not advance.
In 2021, Senator Huffman filed Senate Bill 318, removing the problematic provisions of the 2019 bill, but retaining the same records production requirements already applicable to non-condominium associations. In substantive effect, on September 1, 2021, both non-condominium and condominium associations will have to comply with the same procedures and timelines when responding to an owner's request for association records. Since these "new" requirements for condominiums have been in effect for noncondominiums since 2012, compliance should not be overly burdensome. One change for condominiums that does not apply to non-condominiums, relates to the remedy should the association fail to provide records in accordance with the new law. For condominiums, if a member is denied access, and a court awards court costs and attorney's fees to the member, the member is not permitted to deduct the award from condominium association dues.
There are, however, two new requirements that will have to be implemented before September 1, 2021:
Requirement 1: All condominium associations will be required to adopt a records production and copying policy, which includes the costs for production of the records. Costs are limited to the costs for copying public information, which may be found in Title 1, Texas Administrative Code, Section 70.3, and may not exceed the actual costs incurred by the association. This policy will be similar to the policy required to be adopted by a non-condominium association (since the requirements are the same). The records production and copying policy must be recorded in the county records where the regime is located
Requirement 2: If the condominium association has eight or more units, the association will have to adopt and comply with a document retention policy. This policy will be similar to the policy required to be adopted by a non-condominium association (since the requirements are the same). Though not expressly stated, we believe that the document retention policy must be recorded in the county records where the regime is located.
Senate Bill 581 (by Hancock (R): District 9; Taylor (R): District 11; West (D): District 23)
Effective Immediately
CONDOMINIUMS (KIND OF) AND NON-CONDOMINIUMS: RELIGIOUS DISPLAYS
Change to Chapter 202 of the Texas Property Code
Senate Bill 581 is essentially a "rinse and repeat" of similar bills that have been filed over the past few sessions, each of which sought to provide homeowners more flexibility to display religious signs or other religious content outside or on their home. The prior bills, for a number of reasons not necessarily related to their content, never passed. That has changed. Those of you reading this who have followed this issue may recall that in 2011 the Legislature did pass a bill that provided some flexibility, allowing owners to display a religious item to the entry door of their home, but allowing the association to limit the item to 25 square inches. 25 inches is now "infinity and beyond" and not just limited to the entry of a residence.
You may have to beef up your knowledge of constitutional rights as they relate to religious freedom and what constitutes a sincere religious belief when evaluating whether a sign can be regulated by the association, but there are a few carve-outs in Senate Bill 581 that might help. Some of these carve-outs were in the prior law, but they are repeated here with underlined text showing what was changed in Senate Bill 581 and our commentary enclosed by brackets. Namely, you can prohibit a sign or display that: (1) threatens the public health or safety; (2) violates a law other than a law prohibiting the display of religious speech [meaning that if there is another law prohibiting the display of religious items the association cannot prohibit because of that law]; (3) contains language, graphics, or any display that is patently offensive to a passerby for reasons other than its religious content; (4) is installed on property: (A) owned or maintained by the property owners' association [CONDO AND MAYBE NON-CONDO CARVE-OUT]; or (B) owned in common by members of the property owners' association [CONDO CARVE-OUT]; (5) violates any applicable building line, right-of-way, setback, or easement; or (6) is attached to a traffic control device, street lamp, fire hydrant, or utility sign, pole, or fixture.
What does this mean?
What does this mean for governance?
If your declaration includes the typical post-2011 (25 square inches allowed) language, it no longer applies. We don't believe you need to go back and amend to remove language limiting religious displays to conform to the law since...it's the law. Just be aware that you cannot limit to 25 square inches. For pre-2011 declarations and new ones, most likely there will be a prohibition against signs (or improvements which is defined broadly enough to cover signs) unless approved by the architectural review authority. Just be aware that you have your parameters for a denial. Despite commentary we have seen to the contrary, don't panic! Best practices when confronted with new changes like this take time to develop. In the meantime,
we recommend you consult with counsel when confronting the new paradigm and please don't try and write a policy on sincere religious beliefs!
When structuring governance systems, we do think it is worth thinking about what is characterized as general common elements versus a unit (since a unit is not owned in common and religious signs would be allowed on units), and how association maintenance is defined relative to the unit, home, or yard space, and running those thoughts through the prism of Senate Bill 581.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
