Texas HOA laws regarding payment of assessments and collection fees
The Texas legislature enacted many new laws affecting homeowners' associations (HOAs) during its 2011 session. Some of these new laws provide help for homeowners who are behind in their association dues. HOAs are now required to offer payment plans and to allocate a homeowner's payments first to assessments that can be a basis for foreclosure. They also limit a homeowner's liability for collection fees. Here is an overview of these laws. A College Station, Texas real estate attorney can provide you with further details about these and all the new laws affecting HOAs.
A HOA composed of more than 14 lots must adopt guidelines for payment plans for property owners who are delinquent so that they can make partial payments without accruing additional monetary penalties. However, the HOA can charge a fee for administering the plan and interest.
The minimum term for a payment plan is three months and the maximum is 18 months from the date of the homeowner's request. The payment plan must be filed with the real property records.
An HOA is not required to enter into a payment plan with an owner who failed to honor the terms of a previous payment plan if the default occurred during the previous two years.
Allocation of payments
An HOA must apply payments it receives from a homeowner to the homeowner's balance in the following order:
(1) Delinquent assessments.
(2) Current assessment.
(3) Attorney's fees or third party collection costs incurred by the HOA in connection with assessments or any other charge that could provide the basis for foreclosure.
(4) Other attorney's fees incurred by the association.
(5) Fines assessed by the association.
(6) Other amounts owed to the association.
This rule is significant because HOAs cannot foreclose for delinquent fines or attorney fees incurred to assess or collect those fines. Before this change was enacted, HOAs could apply a homeowner's payment to first to fines (even to disputed fines) or attorney fees connected with those fines leaving unpaid the assessments and attorney fees that could provide a basis for foreclosure.
However, the HOA is not required to follow the priority rule when property owners are in default under a payment plan.
Homeowner's liability for collection fees
An HOA may not hold a property owner liable for fees of a collection agent it has hired unless it first provides written notice to the owner by certified mail, return receipt requested, that:
- Specifies each delinquent amount and the total amount of the payment required to make the account current;
- Describes the options the owner has to avoid having the account turned over to a collection agent, including the availability of a payment plan; and
- Provides at least 30 days for the owner to cure the delinquency before further collection action is taken.
The owner is not liable for collection fees unless the agreement between the HOA and the collection agent requires the HOA to pay all of the agent's fees. An owner is also not liable for a collection agent's fees if the HOA pays the agent a contingent fee (a fee based on the amount collected).
Contact a College Station, Texas real estate attorney
Whether you are a homeowner, developer, HOA director, or HOA manager, a College Station, Texas real estate attorney at the Peterson Law Group can advise you on how the HOA reform laws affect you. Call us at 979-703-7014 or 936-337-4681 for a consultation.