One year ago, the POA industry was met with upheaval. The Texas Legislature had just passed a rash of new laws bringing massive changes to the way several facets of our communities operated. Now, one year later, we take a look at the major changes the 87th Texas Legislative Session brought to the POA industry and how the industry has responded.
SB 1588
The biggest impact produced by the 87th Texas Legislative Session came from Senate Bill 1588. SB 1588 was an omnibus bill that grew over the last few days of the session to encompass changes affecting all aspects of POA governance. We detail the larger aspects of SB 1588 below but highlight other impacts the bill caused.
A cause for initial questions when the bill was passed were Sections 3 and 4 of SB 1588. Section 3 added Section 202.022 to the Texas Property Code prohibiting the enforcement of restrictions against swimming pool enclosures. Section 4 added Section 202.023 to the Texas Property Code allowing homeowners to place security measures, such as security cameras and perimeter fencing around their home, including the front yard. While Section 202.022 has been straightforward, swimming pool enclosures are permitted, but the POA is allowed to regulate the type of materials used unless the enclosure is black in color and made of transparent material set in black metal frames. Section 202.023 is still unclear one year later. A specific type of fencing that constitutes a perimeter fence is not defined, but 202.023(c)(2) states a POA is not prohibited from regulating the type of fencing a property owner may install. Opinions will differ on what exactly constitutes a security perimeter fence, what types of material the fence should be and what the height of the fence will be until either the Legislature or a court better defines these parameters.
Other changes included changing the cap on fees for resale certificates and the time period for delivering the certificate to the owner, requiring single-family POAs over 60 lots to have a website to host the dedicatory instruments and changing the notice period for regular board meetings from 72 hours to 144 hours before the meeting. Notice for special board meetings was not changed, so special board meetings may still be noticed at least 72 hours prior to the meeting.
Religious Displays
The first major change brought by SB 1588 we will look back on is the law changes around religious displays. The bill prohibited POAs from adopting or enforcing restrictions that would prohibit an owner from displaying or affixing a sincere religious display on the property or dwelling. Before the bill, the law limited the display to a certain size at the entryway of the home. In the year since the law passed, uncertainty still abounds. We are unaware of any major instances of a POA disagreeing with a homeowner on what the homeowner is calling a religious display. Until a case of a POA filing a lawsuit, in regards to a religious display, against a homeowner goes through the courts or the legislature further modifies the law, questions will continue to remain about what constitutes a religious display and does a 30ft statue overstep the intent of the law?
ACC
The topic that RMWBH attorneys continue to receive the most questions on one year later involves the changes to the ACC process. SB 1588 added Sec. 209.00505 to the Texas Property Code. This new section requires single-family associations with over 40 lots and not under developer control to establish an ACC committee that is separate from the board of directors. The new section also prohibits a person from serving on an ACC committee 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. Since the law passed, we have received the same question from numerous associations where either volunteerism is low or the community is just above the threshold for number of required lots – can the management company serve as the ACC? The answer is yes, so long as it is not allowing the board to make the initial decision.
SB 1588 has also instituted an appeals process for the owner. An owner is permitted to appeal a decision by the ACC to the board in the event of a denial. A notice of denial must be provided to the owner meeting the requirements therein and the board must hold the hearing within 30 days after the date the board receives the owner’s request for a hearing. A notice must be sent to the owner providing the date, time and place of the hearing not later than 10 days before the date of the hearing (only one hearing is required). During the hearing, the board (or designated representative) and the owner are provided an opportunity to discuss, verify facts and resolve the denial by the ACC. Both the board and owner are permitted to postpone for a period of not more than 10 days. Audio recording is permitted by both parties.
Since the law was introduced, we have been receiving the same couple of questions from many managers and board members – can the Board overturn an approval by the ACC committee and in the event of an appeal, does the hearing have to follow the same requirements as the 209 hearing?
First, the Board cannot overturn an approval by the ACC. The statute gives the ACC committee the authority to respond to all ACC applications. The Board can only overturn a denial by the ACC committee in a hearing requested by the owner. While not required to follow the 209 hearing process, which we will detail more below, it is good practice for the Board to follow the structure to ensure the hearing abides by the requirements of the statute listed above, and show the POA has a clear process in place with the increased ACC-related lawsuits being filed by homeowners.
209 Hearings
In addition to the ACC changes, SB 1588 also brought changes to the 209 hearing process. The 209 hearing is now more like a mini-trial. Sec. 209.007 was amended to provide that, not later than 10 days prior to the hearing, the POA must deliver a packet to the owner containing its evidence it will introduce at the hearing (photos, documents, communications, etc.). If the evidence is not provided, an owner is automatically entitled to a 15-day postponement. During the hearing, the board must present its case first, and then the owner is entitled to present his/her case. A year later the process has been straight forward for POAs to adopt and few issues have occurred.
Management Certificates
Last month, we went into detail on the requirements brought by SB 1588 for POAs to file their management certificates with TREC. As a reminder, the deadline is June 1, 2022. If your POA has not filed its management certificate with TREC, you need to do so as quickly as possible. POAs do face penalties for not filing their certificate. Reach out to your legal counsel or management company if you have questions on the process.
With all of the changes brought by SB 1588, the legislature commissioned a study on its impacts and will soon receive an interim report detailing the impacts SB 1588 has had. When the report is released, we will provide more information in a future update.
Looking Ahead
It’s hard to believe but one year after the prior legislative session concluded, and just as we were all getting accustomed to the law changes SB 1588 brought to us, it is time to prepare for the next legislative session. Bill filing for the 88th Texas Legislative Session is quickly approaching, and lawmakers are already discussing bills that will begin to be filed in November. In order to avoid another SB 1588 like bill and the vast industry altering impacts, POAs should be interacting with their legislator now. To learn more on how to get involved, download a copy of our 5 Tips to Have Your Voice Heard by Your Texas Legislator Infographic. Being involved today will help make the POA industry better for everyone tomorrow.
