Having become popular in the 1960s, homeowners’ associations (HOAs) are reported to have been developed to keep certain elements out of suburban neighborhoods. Business Insider claims that these groups were created to prohibit or at least limit black residents from moving into certain neighborhoods. While coming from racist roots, the idea of HOAs has continued, and actually expanded, through the years. It is virtually impossible to locate a suburban neighborhood in a major metropolitan area that is not subject to an HOA.
Through the years, HOAs have developed contracts with the homeowners that expand the authority of the HOA. This has happened to the extent that HOAs have become mini-governing authorities with rules and penalties that rival city ordinances and state statutes. Violations of HOA rules can be penalized with fines that are due and payable to the HOA. If the fines are not paid, the HOA can then place a lien on the homeowner’s property, akin to a failure to pay a tax liability to the city or county.
Becoming more emboldened by court victories upholding their ability to fine homeowners for violations of their rules, HOAs seemingly became more absurd in the rules they would enforce. HOAs have developed rules regarding the parking of certain vehicles within neighborhoods, as well as rules regarding the appearance of properties. They also have the authority to determine what lighting displays are appropriate at what times of the year, as well as what items may be displayed in a way to be visible from the public roadway.
Many HOAs have come under figurative fire for disallowing the presentation of the United States flag within their neighborhood. Despite being declared unpatriotic by many, the HOA rules have remained.
On June 18, 2021, though, the Texas Legislature began an effort o restrict the hold HOAs have over their residents. The passage of SB 1588 provided restrictions on HOAs that allows more freedoms to residents of these neighborhoods in doing with their property as they wish. The provisions of the new law take effect in just over a month on September 1, 2022.
Here are some of the items contained within the new law:
· Homeowners, where allowed by Law and Ordinance, will be allowed to fence their property as they see fit. HOAs can no longer restrict fencing that may allow for more privacy on the homeowner’s property.
· Homeowners will be able to provide themselves with more security by installing pool fencing and security cameras without interference from the HOA.
· Homeowners will be able to enjoy their First Amendment Right to express themselves spiritually and evangelize to others through the display of religious items on their property.
· Budget amendments made by the HOA are subject to open and public meeting rules and disclosures.
· HOAs can no longer provide contracts in excess of $50,000 without providing a bid process, allowing for more input by HOA membership (homeowners) over the need and process.
· Membership on an HOA’s Architectural Review Committee is restricted, like the above provision, to prevent nepotism or other discriminatory practices.
· Additional requirements have been placed on HOAs in reporting delinquent HOA fee payments to allow for more time for the homeowner to clear the delinquency and to provide additional documentation prior to such reporting.
Many consider these a step in the right direction to return the spirit of property ownership back to homeowners, they also state that there is more work to do.
Builders who have developed neighborhoods have also taken the opportunity to form HOAs for those neighborhoods, with membership as part of the condition of the sale of the houses there. They have done this on the premise of making sure that the neighborhood meets their vision of how the area should look and keeping homeowners from substantially changing this vision. In many of these cases, the builders maintain a controlling interest in the HOA through the voting structure of the organization. The builders hold either a 51% or 50%+1 (one more vote than the total number of votes of the homeowners) share of the overall vote in order to prevent themselves from being overruled by a vote of the people actually living or owning property in the neighborhood.
With over 21,000 HOAs in the state, a Texas homeowner has a better than half chance of being in a neighborhood overseen by an HOA. According to iProperty Management, 53% of all homeowners live in HOA communities. iProperty estimates an average of 22 new HOAs formed each day.
Some suspect that the builders have been using the HOAs to supplement their coffers, particularly beginning at the time that it was reported that lumber costs were increasing. Residents and homeowners began reporting in various media, particularly on neighborhood social media pages, that the HOAs were taking a more proactive effort to locate and identify by-law violations that may generate fines payable to the HOA. In neighborhoods where the HOAs had previously reported acting reactively to reports of violations, HOA personnel are now observed driving around neighborhoods and taking photos of suspected violations. The frequency of the stops made by this personnel indicates that the action is being taken proactively instead of in response to reports by other residents or homeowners.
While the HOA is “on paper” operated separately from the builders’ other operations, it is possible that the builders and HOAs work together to provide funding for future projects, either with or without the actual homeowners’ knowledge. Similarly, the builder or developer may use HOA operating funds in an effort to recoup their expenses in developing the neighborhood and the HOA itself. Some of these agreements are developed even before the first home of the neighborhood is built, with the builder “on paper” providing the HOA with funding to be paid back later. To make the payments to the builder from the HOA, the HOA must generate enough revenue through HOA fees and fines. When the economy takes a turn that the homeowners will protest an increase in the membership fees, then the HOA must find another way to generate revenue, generally through fines for what many consider trivial violations.
Particularly in an economy like the current one where experts are warning of a true recession, HOAs are becoming concerned about raising their fees to meet their paper obligations to the builders and are therefore taking other measures to get money from the homeowners.
The steps taken by SB 1158, to rein in HOA activities are considered a start for homeowners to be able to more effectively manage the HOAs of which they are a part. While many consider that there is still a lot of work to be done in this effort, this new law, going into effect on September 1, provides homeowners with more control and points in that direction.
The State of Texas has developed a guide for homeowners and HOAs alike regarding the nuances of HOAs. This can be found here: https://guides.sll.texas.gov/property-owners-associations.