The bills of the 88th Texas Legislative Session are taking shape and early indications are this session will be another with great effect on the property owners association (POA) industry. One bill that is catching the eyes of many from this legislative session is HB 1367, relating to a board member’s violation of certain laws and provisions of the governing documents, and the recall of the board member by a vote of the property owners. Our latest bill spotlight turns to HB 1367 and the implications it could bring to POA boards.
HB 1367 is authored by Cody Vasut of House District 25. If passed, the bill would amend Chapter 209 of the Texas Property Code to add Sections 209.00595 and 209.018.
Sec. 209.00595 would add a recall of a board member provision that property owners could use. Under this section, owners holding at least 20 percent of all voting interests in the POA could petition the association and require a special meeting to be held for the sole purpose of conducting a recall election of a single board member.
In the petition for recall, the owners may not name more than one board member and each owner signing the petition must provide their printed name, residential address and date they signed the petition. Once complete, the petition must be sent by certified mail, return receipt requested, to the POA’s registered agent and to the POA at the address on file in the most recently recorded management certificate.
After receiving the petition, the POA must hold a meeting, no later than the 90th day after receiving the petition, with the sole purpose of the meeting being to hold the recall election. In the election, majority vote will determine the outcome of the vote. Note, the bill does not mention if the vote must be held in person, or if proxy or electronic votes will be allowed. If the majority of votes are for recall of the board member, the board position is immediately vacated and can be filled by the board pursuant to Section 209.00593.
Sec. 209.018 would authorize owners to bring action in JP court against a POA for a violation of the association’s dedicatory instruments or Chapter 209 by a board member acting in his/her official capacity as a board member. The petition would have to be filed in a precinct in which all or part of the property that is governed by the POA is located.
If the JP court finds a violation of Chapter 209 or the POA’s dedicatory instruments by the board member, the JP court may grant one or more of the following remedies.
1. Judgment ordering the POA to immediately remove the board member from the board;
2. Judgment against the POA for damages incurred by the owner resulting from the violation; or
3. Judgment authorizing the owner to deduct the amounts awarded to them under the above judgment (#2), or the judgment mentioned below, from any future regular or special assessments payable to the POA
Sec. 209.018 would also entitle a judgement to the prevailing party for court costs and reasonable attorney’s fees incurred in connection with this action.
Sec. 209.018 would require the owner to send written notice via certified mail, return receipt requested, to the POA on or before the 10th business day before the owner brings action against the POA in JP court. The notice must describe, with sufficient detail, the alleged violation. This law would only apply to violations after this law would take effect.
If passed, HB 1367 could present issues for POAs, particularly for smaller associations. In a worst-case scenario, association business for smaller associations, with possibly only one to a few owners holding 20 percent of all voting interests, could come to a halt with the board having to prepare for recall elections over each position every 90 days until the single owner achieves his or her goal. The cost of these special meetings could be significant. Another issue with HB 1367 is the possibility of owners filing frivolous lawsuits in a JP court, which can be costly to POAs in terms of defense costs and potential increases in insurance premiums.
Stay tuned to RMWBH’s Legislative Updates through our newsletters and webinars where we will provide updates on HB 1367 and other bills affecting POAs throughout the 88th Texas Legislative Session.
