By Dick H. Gregg, III
Aside from redistricting, one of the hottest topics in Austin this legislative session is a property owner association’s right to foreclose.
Champions subdivision fueled the debate by foreclosing on property owned by an 82-year-old widow during the legislative session. Politicians are grandstanding, trying to stop all property association foreclosures, declaring them unfair. The media is leading the bandwagon, selling lots of newspapers and fueling the debate more.
Currently, Texas law allows a property owner association to foreclose on an owner’s real estate for non-payment of assessments. This right to foreclose includes against a homestead. Just ask Ms. Blevins. She failed to pay her assessments in the amount of $800 plus legal fees and her homestead was auctioned. Is this fair? At first blush, maybe it does not appear so, and if you listen to the news, the stations don’t think so, either. But what happens if the foreclosure right is stripped from property owners associations? Either your assessments will rise to pay for your neighbors’ refusal to pay theirs, or the services provided by your association will decrease. Pick your poison.
You may ask, what are the services of a property owners association? In Clear Lake, we are blessed with great neighborhoods. You will find enticing common facilities in the subdivisions like swimming pools, parks, landscaping and entrance signs, perimeter fences, pavilions, playground equipment, greenbelts, tree-lined hiking and biking trails, basketball courts and tennis courts, just to name a few. The association dues are spent to maintain these amenities. And they are expensive to maintain.
What else does an association provide? It pays for the property management company and legal services for enforcement of the restrictions. It is important to enforce the restrictions to maintain high property values. For many of us, our homestead is the single most important investment we make in our lifetime. And we want to protect its value.
Deed Restrictions protect property. If your neighbor decides he is going to run a furniture store out of his home in your subdivision, your association will enforce the restriction prohibiting commercial activities in the subdivision. If your neighbor decides to paint the exterior of his home flamingo pink, your association will enforce the restriction prohibiting unapproved bright colors. If your neighbor decides to store his boat in the driveway for a month, the association will enforce the restriction prohibiting the storing of boats in public view. If your neighbor decides not to cut his grass for two months during the summer, the association will enforce the covenant requiring the owner to keep his property in a neat and attractive manner. If your neighbor decides to leave four of his trashcans at the curb for the entire week, your association will seek to enforce the restriction prohibiting trash or rubbish stored in public view. Each of these examples is a common restriction enforced almost every day in Clear Lake. And it benefits you. Would you buy a home when you know the next door neighbor is keeping inventory in his garage, or has painted a house neon chartreuse, or permanently stores a Boston Whaler in his front yard, or refuses to cut his grass, or stores trash in the front yard? I don’t think so, but if you would, a vigorously enforced deed restricted neighborhood is not for you.
If you are in favor of protecting the investment you have made in your real property and you want to keep your assessments from rising exponentially, let your State Senator and Representative know in the next few days. If you do not, the votes they cast will directly affect your pocketbook.
A right of redemption is a concept that is both pro-owner and pro-association without directly affecting your pocketbook. This right allows a real property owner whose property has been taken via foreclosure an opportunity to buy the property back. Senate Bill 507 filed by Senator John Carona has been passed by both the Senate and the House, and is now in a conference committee to work out the differences between the two chambers’ versions. It is one of the only bills under consideration affecting property owner associations that realistically has time to pass before the session ends at the end of May. And it may not make it either if the onerous amendments submitted by Houston area Representatives are not removed by the conference committee members.
This bill in its original version allowed a 90 day right of redemption. Numerous floor amendments were attached to the bill prior to it being referred to committee. One floor amendment extended the right of redemption to two years. Other amendments were just plain political jockeying...imposing a 2 year moratorium on association foreclosures, requiring associations to pay retroactively for the equity lost at foreclosure, implementing complicated foreclosure minimum bids, and requiring in person visits by Board members.
Whether the right of redemption is 90 days or two years or somewhere in between, let your legislators know that you support the right of redemption concept and that you do not support the other floor amendments, which would bankrupt associations. If you’re not sure who your State Senator and Representative are, go to www.capitol.state.tx.us and click on “Who Represents Me” at the top of the left column.
The right of redemption would allow others like Ms. Blevins to buy their home back after it foreclosed. And property owner associations still have a tool to assure a steady stream of income to provide services to protect your investment and maintain and even increase amenities in Clear Lake that we enjoy so much.
Dick H. Gregg, III is an attorney in Clear Lake at the law firm of Gregg & Gregg, P.C. He practices property owner association law in Galveston, Harris, and Fort Bend Counties. He also is the President of Middlebrook Community Association and serves on the Association of Clear Lake Communities.
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