Many new subdivisions that are being built in Texas today contain restrictive covenants that require mandatory membership in the Property Owners Association (POA).These restrictive covenants give the POA the right to collect membership dues and other assessments for maintaining common areas. Typically, these restrictive covenants also give the POA control over architectural decisions concerning the homes located in the subdivision and allow for imposition of fines for failing to comply with the POA ‘s rules and regulations. But what happens when you lose your job or suffer from some other financial crises, such as a divorce, and you are having trouble making ends meet and the POA notifies you that your home is being foreclosed on for failing to pay your membership dues to the POA. To address the problems with POA run amuck, Texas has passed the Residential Property Owners Protection Act which is contained in Chapter 209 of the Texas Property Code.
Chapter 209 of the Texas Property Code applies only to a residential subdivision that is subject to restrictions or provisions in a declaration that authorize the POA to collect regular or special assessments on all or a majority of the property in the subdivision and applies only to a POA that requires mandatory membership in the association for all or a majority of the owners of residential property within the subdivision.
Sections 209.009 through 209.011 regulate the POA’s foreclosure rights. A POA may not foreclose a POA ‘s assessment lien if the debt securing the lien consists solely of fines assessed by the association or attorney’s fees incurred by the association solely in connection with the fines assessed by the association.
A POA that conducts a foreclosure sale of an owner’s lot must send to the lot owner and to each lienholder of record, not later than the 30th day after the date of the foreclosure sale, a written notice stating the date and time the sale occurred and inform the lot owner and each lienholder of the right to redeem the property. The notice must be sent by certified mail, return receipt requested, to:
- the lot owner’s last known mailing address, as reflected in the records of the property owners’ association;
- the address of each holder of a lien on the property subject to foreclosure evidenced by the most recent deed of trust filed of record in the real property records of the county in which the property is located; and
- the address of each transferee or assignee of a deed of trust who has provided notice to the POA of such assignment or transfer.
The owner of property in a residential subdivision or a lienholder of record may redeem the property from any purchaser at a sale foreclosing a POA’s assessment lien not later than 180 days after the date the association mails written notice of the sale to the owner and the lienholder. A person who purchases property at a sale foreclosing a POA ‘s assessment lien may not transfer ownership of the property to a person other than a redeeming lot owner during the redemption period.
To redeem property purchased by the POA at the foreclosure sale, the lot owner or lienholder must pay to the association all amounts due the association at the time of the foreclosure sale; interest from the date of the foreclosure sale to the date of redemption on all amounts owed the association; costs incurred by the association in foreclosing the lien and conveying the property to the lot owner, including reasonable attorney’s fees; any assessment levied against the property by the association after the date of the foreclosure sale; any reasonable costs incurred by the association, including mortgage payments and costs of repair, maintenance, and leasing of the property; and the purchase price paid by the association at the foreclosure sale less any amounts due the association that were satisfied out of foreclosure sale proceeds.
If, before the expiration of the redemption period, the redeeming lot owner or lienholder fails to record the deed from the foreclosing purchaser or fails to record an affidavit stating that the lot owner or lienholder has redeemed the property, the lot owner’s or lienholder’s right of redemption as against a bona fide purchaser or lender for value expires after the redemption period.
If the POA purchases the property at foreclosure, all rent and other income collected by the association from the date of the foreclosure sale to the date of redemption shall be credited toward the amount owed the association, and if there are excess proceeds, they shall be refunded to the lot owner. Property that is redeemed remains subject to all liens and encumbrances on the property before foreclosure.
After the redemption period expires without a redemption of the property, the POA or third party foreclosure purchaser must record an affidavit in the real property records of the county in which the property is located stating that the lot owner or a lienholder did not redeem the property during the redemption period or any extended redemption period.
At the Law Office of Stephen O’Rear, P.C we help people who have disputes with their Property Owners’ Association.