POAs Benefit from Bush's new Bankruptcy Bill

Community Associations are marking their calendars for October 17th, 2005: that's the day that President Bush's Bankruptcy Abuse Prevention and Consumer Protection Act largely goes into effect. This bill basically makes it more difficult for homeowners to escape financial obligations as members of their respective community associations and allows for easier collection of debts by the associations.

The bill contains four main provisions which will benefit the community associations: (1) assessments and fees accumulated prior to a bankruptcy filing are still the responsibility of the homeowner and must be paid regardless if the property has been abandoned (under the old law, abandonment released the homeowner from liability for the accumulated debts); (2) credit counseling, finance educational courses and other administrative hurdles will make it tougher for homeowners to use bankruptcy as a financial escape hatch; (3) more bankruptcies will be treated as Chapter 13 reorganizations, thereby granting community associations a better chance to collect past due amounts; and (4) homestead protection has been limited in most cases to $125,000.00, and applies even in states where a broader homestead protection exists.

For a more in-depth examination of this bill, see the article posted here. Thanks to the Community Association Management Insider and Laura White Brandow and Jim Judge who authored this article.

79th TX Legislature Aims at POAs and shoots... blanks

All of this hullabaloo for a political sign provision? At least that's what the folks in Austin would have us believe as they trumpet a victory against Property Owner Associations (POAs) for House Bill 873 -- a provision allowing homeowners the right to display political signs in their yards and the only significant piece of legislation to survive both houses of Congress to become law. For the vast remainder of proposed legislation targeting POAs, about 105 bills in all, the current legislative session came to a unproductive, albeit frantic, end.

The good news for POAs: with significant lobbying support from the CAI Texas Legislative Action Committee (TLAC), potentially harmful bills were amended or killed altogether. CAI lobbyists drafted more than 30 bill substitutes and amendments in addition to attending numerous public committee hearings and meetings. This is indeed an achievement in light of the "horror stories" advanced by several lawmakers regarding foreclosure of homes -- a battle cry often used to rally a largely uninformed congressional assembly to vote for anti-POA bills based on emotion rather than logic.

And now for the bad news: the 79th TX Legislature was by far the most active in terms of anti-POA bills drafted and considered for enactment. These bills have the effect of allowing owners who violate their deed restrictions to continue doing so while restricting the POA's ability to enforce the rules. Law-abiding dues-paying owners share in the burden of this enterprise because unpaid assessments and fees incurred by the POA are borne by its paying members as a distributed cost, resulting in higher overall dues. As indicated above, many of the legislators voting for these bills are only doing so based on emotion or from a general undercurrent of anti-POA sentiment raised by a few angry constituents. Future sessions of Congress should be no different in that there are a few representatives and senators who keep the "torch lit" against POAs and vow to see their bills pass as law. But for now, POAs can enjoy a well-earned break from dodging political bullets and reflect on what could have been a very bad legislative session.

Bills of Importance that passed:
HB 638 - TX Property code Chapter 201 expanded to more counties adjacent to Harris County regarding ability to form POAs and extend or renew deed restrictions per the provision.

HB 873 - Limited political signage is now permitted to be displayed in a homeowner's yard. Since this is a departure from most POA's deed restrictions, each POA is urged to review its dedicatory instruments and draft or amend the signage rule(s) accordingly.

HB 1631 - Process for amending Declarations changed from a unanimous voting requirement to a two-thirds voting requirement for certain subdivisions in affected counties.

HB 1690 - Condominium association liability for nuisances.

SB 200 - Gated-access safety measure extended to residential subdivisions (from its origin in gated apartment communities).

SB 1018 - Allows a POA or petition committee to circulate a petition to alter deed restrictions in affected counties with a two-thirds voting requirement for passage of any amendment.

Bills of Importance that didn't pass:
HB 246 - Neighborhood Police Force

HB 927 - Homestead Exempted from Foreclosure

HB 1446 - Application of Debt Payments to POA (see identical Senate bill SB 244)

HB 1465 - POA Towing Consent

HB 2215 - POA Foreclosures, Application of Debt Payments, Bilingual Form notice. By far the most harmful bill (together with SB 244) of the session. This bill would have forced payment plans, restricted legal fee collections until payment plan option is offered, mandated judicial foreclosure, lengthened right of redemption period to two years, required bilingual forms of notice for all homeowner correspondence. This bill was left in Senate committee.

HB 2426 - The "Brown Lawn" water conservation bill. This bill would have allowed homeowners to maintain their lots in a "natural or native vegetative state" as a water-conservation measure. Counter-productive to POA restrictions governing community aesthetics.

SB 244 - A Bill similar to HB 2215 in that it would institute a payment application hierarchy for debt owed to a POA by a homeowner. This would have severely limited the POA's ability to levy and collect debts incurred as a result of homeowner delinquency. This bill narrowly escaped passage because a point of order was raised (a procedural defect committed by Congress) which delayed its vote by the general assembly of the House of Representatives.

You can view the text of any of these bills (or any of the more than 5,000 authored by the legislature during this past session) by clicking here.

**Special thanks goes to Connie Heyer, attorney and lobbyist for CAI, for her contributions to this report regarding the summation, analysis and impact of the bills presented above.**