HOAs in Texas - Structure and Laws FAQ

Q: How are HOAs in Texas Formed and Structured?

A: Texas associations are administered by a board of directors elected by homeowners per the association's declaration of covenants ("declaration") and bylaws.

If provided in the declaration, the developer can appoint board members. At the same time, if the community remains in the development phase but not longer than 120 days after 75% of homes in the community have been sold to an owner other than the developer or a commercial home-builder.

An HOA's board appoints officers to carry out the board's duties and powers and otherwise act on the association's behalf. Officers and directors have a fiduciary relationship with members and the HOA. They must, therefore, act reasonably within the association's and members' best interests and avoid self-dealing or conflicts of interest.

Duties and powers of an HOA's board, granted under the TPC (Texas Property Code) and the community's declaration, include enforcing covenants, adopting budgets, assessing and collecting member fees, appointing agents to act on the association's behalf, maintaining commons areas, and acting on behalf of the association in legal matters. An HOA board is also empowered to adopt rules for the administration of the community.

An HOA's corporate structure is governed by its articles of incorporation, a legal document prepared when the association organizes as a corporation and registers with the Texas Secretary of State. Eligibility criteria and duration of terms for officers and board members are usually outlined in the declaration, bylaws, or articles of incorporation. It is common practice for most communities to provide for annual terms.

An association's declaration is recorded with the county land records of the county in which the HOA is located. A declaration is technically ineffective until it is filed in the land records.

Along with describing the duties and powers of the board and officers, a declaration sets forth the association's restrictions and covenants, how HOA voting and elections occur, the process for calculating and collecting assessments, and any limits on the powers of the board or association.

Lot owners and any occupants of homes within an association are legally bound to comply with the restrictions and covenants stated in the declaration.

HOA boards are empowered to impose penalties or take legal action to correct violations, and individual lot owners may also bring compliance actions against non-compliant owners.

HOA members have a right to vote on certain association matters, including the election of board members and the adoption or amendment of covenants. Voting generally occurs at member meetings, which must be held at least annually.

Notice of member meetings must be provided to all members ten to fifty days in advance. Suppose a declaration allows voting outside member meetings (by written, electronic, or absentee ballot, for instance). In that case, notice must be provided at least twenty days before the ballot submission deadline. Members must be allowed to vote via absentee ballot or proxy, should they choose.

All member votes must be recorded in writing if the vote pertains to the election or removal of a board member, an amendment to a declaration, or a regular assessment increase or special assessment. Only the person responsible for counting votes may be allowed access to ballots.

Board meetings must be open to all members, except that special executive meetings may be closed to discuss litigation, negotiations, personnel matters, and confidential member information. The board must create and retain minutes of all board meetings.

A board cannot consider or vote on important matters outside of an open board meeting, including fines, foreclosure actions, assessment increases, suspension of member rights, annual budget approval, capital improvements, and officer appointments.

Q: Where do HOAs get their Authority?

A: A Texas association's authority is primarily derived from its declaration of covenants, articles of incorporation, bylaws, and the Texas Property Code.

The declaration is essentially a contract between all community members under which homeowners agree to comply with certain covenants and restrictions and pay assessments to maintain common areas.

By purchasing a home within an association community, the homeowner is deemed to have accepted the terms and obligations of the declaration if it is properly recorded.

In most cases, home purchasers are provided with a copy of the association's declaration and bylaws before or at closing. Because the declaration is recorded in the county land records, purchasers are also deemed to have "constructive notice" of the covenants at the time of purchase so that there is an "implied covenant" to comply with the community's rules, even if the purchaser does not actually receive a copy of the declaration and affirmatively consent to the covenants.

Q: Does Texas Law Place Budget Restrictions on Associations?

A: In interpreting association powers, Texas courts afford substantial deference to an HOA's declaration, bylaws, and articles of incorporation. Associations are generally empowered to exercise any powers by the association's governing documents (subject to express statutory limitations). Restrictive covenants are interpreted liberally to give effect to their purpose and intent.

Texas law prevents associations from enforcing certain designated restrictions. Prohibited restrictions include composting, collecting rainwater, irrigation systems, and water-conserving turf, though associations can impose reasonable requirements or standards. Texas HOAs are also limited in how much they can regulate political signs and solar panels.

All association actions and governing documents must comply with applicable federal laws, including the FHA and ADA. An association's governing documents may further restrict the board's powers.

The fiduciary duty of board members and officers requires that they act in good faith, in the best interests of the association and its members, and exercise ordinary prudence in carrying out their powers.

An association cannot enter into a contract with a board member or relative of a board member unless the board accepts other bids on the contract, the board member does not discuss or vote on the bids, and the other board members approve the contract after disclosure of any material facts.

Board members are also answerable to homeowners through elections at annual member meetings per voting procedures outlined in the declaration or bylaws.

Texas law prohibits HOAs from restricting a member's right to vote in board elections or run for a position on the board. An association's declaration may also provide a mechanism for removing officers and directors.

Property management companies acting as "debt collectors" are generally prohibited by the FDCPA from publicizing member information relating to assessments. Sensitive identifying information about members may be protected by other state and federal laws protecting confidential information. Confidential member information is expressly excluded from the records available for member review.

Q: What Budget Requirements Does Texas Law Place on Associations?

A: Texas law empowers associations to adopt and amend budgets for funding common expenses through member assessments. Annual budgets and budget amendments that increase the budget by more than ten percent may only be considered and voted upon by a board at an open meeting for which notice has been provided to members.

Specific standards and methods for adopting budgets and calculating assessments are typically outlined in an association's declaration, bylaws, and/or articles of incorporation, and the board must comply with those requirements.

Q: Can Members of Texas Homeowners Associations Remove Board Members?

A: Texas's HOA statutes do not provide a general mechanism for removing or recalling board members, though the law acknowledges the possibility of removal.

Many associations include procedures for removing derelict or overbearing board members by member vote within their declarations or bylaws. Votes relating to the proposed removal of a board member must be taken by written ballot signed by the voting members.

In the specific instance that an HOA board is presented with written evidence from a law-enforcement database demonstrating that a board member was convicted of a felony or crime involving moral turpitude within the past 20 years, the board member is automatically removed by operation of law.

Q: How Does a Texas Association Amend its Governing Documents?

A: Texas law requires amendment of HOA declarations via a member vote. A proposed amendment must be outlined in a petition circulated by the association to all members for review.

Voting can be conducted via written ballot, at a member meeting, via circulation of a door-to-door petition, or a combination resulting in sufficient member approval.

Declaration amendments generally require approval by 67 percent of eligible property owners unless the declaration prescribes a lower percentage.

An amendment of a restriction requires the approval of at least 75 percent of members unless the declaration sets a lower percentage and becomes binding on all properties upon recording.

A board of directors, acting on behalf of the association, is empowered to amend an HOA's bylaws, with any such amendment to occur according to the amendment procedure outlined in the association's declaration or existing bylaws.

An amendment to a condo association's declaration also requires approval by member vote, with a two-thirds majority needed unless the declaration specifies a more significant majority.