In recent years, the Board of Directors (“Board”) approval process of fines, deed restriction enforcement actions and collection actions has come under greater scrutiny. We have seen an increase in cases where an owner or, in most cases, the owner’s attorney, wants to see the Board’s meeting minutes that contain an entry showing that the Board approved the fine, the deed restriction lawsuit, or the collection lawsuit against the specific owner as required by the Texas Property Code.
Texas Property Code Sec. 209.0051(h) prohibits a Board from levying fines, initiating foreclosure actions or initiating enforcement actions unless done so in the open session of a properly noticed Board meeting.
Accordingly, the Association should be able to produce Board meeting minutes that include an entry in which the Board, in the open session of the Board meeting, approved levying a fine, initiated a foreclosure action or initiated an enforcement action. As Board meeting minutes are Association records and can be viewed by any owner, the Board meeting minute entry(s) should not contain the owner’s name or address. With regard to collection and enforcement actions, we recommend that the Board approval of the action take place when the matter is turned over to the attorney to collect the amount due and/or to pursue the deed restriction violation.
To that end, below is suggested language for standing agenda items and Board meeting minutes entries for fines, collection actions and deed restriction enforcement actions. These agenda items should appear on the Board meeting agenda each month, whether or not the Board believes it will take any action on the agenda item.
- The suggested three (3) standing agenda items are:
FOR FINES (assuming the Association has fining authority in its governing documents)
“The Board will consider and vote on levying fines on owners who have violated, or are violating the Association’s governing documents.”
FOR DEED RESTRICTION VIOLATIONS
“The Board will consider and vote on referring owners who have violated, or are violating the Association’s governing documents over to the Association’s attorney to seek compliance with the governing documents through lawsuit if necessary.”
FOR COLLECTION MATTERS
“The Board will consider and vote on referring owners who are delinquent in the payment of assessments or other charges to the Association over to the attorney to collect such past due amounts through lawsuit and foreclosure if necessary.”
- The suggested Board meeting minute entries are as follows:
FOR FINES (assuming the Association has fining authority in its governing documents)
“A motion was made to fine Account # [insert management company account number] in the amount of $[insert fine amount] for [insert description of violation; for example “failing to remove the inoperable vehicle from public view”], the motion was seconded, voted on and [approved/denied].”
FOR DEED RESTRICTION VIOLATIONS
“A motion was made to turn Account # [insert management company account number] over to the Association’s attorney to pursue the [insert description of violation; for example “failing to remove the inoperable vehicle from public view violation”] through lawsuit if necessary, the motion was seconded, voted on and [approved/denied].”
FOR COLLECTION MATTERS
“A motion was made to turn over all owners with a delinquent balance of over $[insert minimum amount here] to the Association’s attorney to collect the delinquency through lawsuit and foreclosure if necessary, the motion was seconded, voted on and [approved/denied].”
OR
“A motion was made to turn over all owners whoare delinquent in the payment of any portion of the current year’s assessment, a past year’s assessment, or any other charge to the Association’s attorney to collect the delinquency through lawsuit and foreclosure if necessary, the motion was seconded, voted on and [approved/denied].”
OR
“A motion was made to turn Account # [insert management company account number(s)] over to the Association’s attorney to collect the delinquent amounts due on the assessment account of the property through lawsuit and foreclosure if necessary, the motion was seconded, voted on and [approved/denied].”
We also recommend that associations adopt a collection policy which, among other things, includes language authorizing the Board or community manager to turn collection accounts over to the attorney with no further action needed than the adoption of the collection policy in the open session of a properly noticed meeting.
If you have any questions on the steps Boards can take to ensure proper documentation of fines, deed restriction enforcement actions and collection actions is being implemented, please reach out to your association’s attorney for guidance.
