Are you currently living in a Homeowners Association (HOA) in Texas? Are you thinking about moving into one? Maybe you are merely researching the subject. Regardless, it is important to know how these organizations are affecting the people within their communities not only in Texas but throughout the United States.
It is imperative to know that HOA’s rules have governing HOA documents, such as bylaws and Covenants, Conditions, and Restrictions (CC&Rs), that impact real estate investments in Texas because homeowners are forced into abiding by their rules and regulations when living within the community.
As a result, HOAs should be illegal in Texas because they impede on the freedoms and property rights of the homeowner, often in violation of federal laws.
Rather than making the community a better place, they hinder the growth of communities and discriminate in their mandates and selective enforcement.
Understanding HOAs in Texas
Definition and Purpose of HOAs:
- According to Texas law, and HOA is referred to as a property owners’ association (POA). The Tex. Prop. Code § 202.001 states that a POA is “an incorporated or unincorporated association owned by or whose community members consist primarily of the owners of the property covered by the dedicatory instrument and through which the owners, or the board of directors or similar governing body, manage or regulate the residential subdivision, planned unit development, condominium or townhouse regime, or similar planned development.” While there are similar principles that apply, there is a distinction between residential communities for the purposes of legal action. Specifically, HOAs for homeowners in neighborhood subdivisions and HOAs for condominium owners.
- As previously stated, the Texas Property Code refers to HOAs as POAs. The Texas Property Code contains state laws and regulations that govern HOAs. The declaration of CC&Rs state the rights and obligations of HOAs and their members. Dedicatory instruments are primary governing documents that determine an HOA’s existence and outline significant guidelines and HOA covenants.
Historical Context
- Before the 1960s, virtually all single-family residences were managed through local governments. However, this changed because of major corporations entering the housing market and the government being overly intervening in the process. Thus, HOAs became prevalent.
- The type of POA will dictate which Act governs the POA. For instance, the Texas Uniform Condominium Act governs condominium associations, the Texas Cooperative Association Act governs cooperatives, and the Texas Residential Property Owners and Protection Act regulates residential property owners.
The Problems with HOAs in Texas
Abuse of Power and Governance Issues:
- Although the intent of HOA managers may be good-natured, HOA board members, under the guidance of a HOA management company and property manager, have often overstepped their authority. Management companies may relieve the burden of sorting through the various laws and covenants, but they can also be highly influential in how HOA board meetings are run.
- Restrictive covenants can can become legal issues as enforcing rules may infringe on homeowner rights and real property ownership. For instance, restrictive covenants determine how properties within an HOA community can be altered. If the property owner does not abide by these covenants, he may incur fines or legal ramifications. HOA restrictions on matters such as parking, solar panels, fencing, and even the display of religious material are common occurrences.
- The Texas Nonprofit Corporation Act (TNCA) provides a legal framework for HOAs. Typically, an HOA is established through the creation of a Texas nonprofit corporation that has aligned itself with the TNCA. The process is initiated with articles of incorporation. The association members elect a board of directors to govern the nonprofit.
- The Bloomberg article about HOA foreclosure abuse was bone chilling to our team for its exposing a real life example of the potential and actual abuse of power by homeowners association. This story came from Denver, Colorado but it happens here in Texas as well. From Fort Worth to Dallas to Houston, the long arm of the HOA can be felt.
Financial Burdens
o HOA fees in Texas (typically $200-$300 annually) are above the national average ($191 annually). HOAs have the power to charge these fees based on what they deem to be worthy causes. Not only that, an assessment lien can be imposed on homeowners who fail to pay their dues.
o These enforcement mechanisms like fines and fees can be very cumbersome on low-income families, section 8 housing residents, or families who have encountered tragic financial circumstances.
Impact on Property Values and Homeowner Rights
o Despite what some may think, how HOAs handle rule violations and enforcement policies can negatively affect property values. Market values are based on housing market demand. In other words, when a large consumer group of homebuyers does not want to live in an HOA community, this will inevitably reduce the value of the homes within the community. A homeowner might even have to offer a seller concession on any potential sale of the house to accommodate for added expenses and meeting local HOA standards. Not only that, restrictive laws in place could hinder the growth and subsequent increase in value of the homes in a given location.
o Housing discrimination concerns and the Texas Fair Housing Act must also be considered. We must ask, “What types of people groups are these HOAs leaving out of their residential communities?” The answer to the question is important because state statutes and the Texas Fair Housing Act prohibits discrimination based on race, color, national origin, religion, sex, familial status, or disability.
Legal and Ethical Concerns
Lack of Oversight and Accountability:
o One of the major legal and ethical concerns of a planned community within an HOA is their limited oversight under Texas HOA laws and regulations.
o Despite this limited oversight, Texas legislature has nevertheless passed Texas House Bill 614 and HB 886.
Ethical Implications:
o HOAs can sometimes infringe on the freedom of speech and homeownership rights that individuals should have under Texas law like the placement of political signs or simply being able to use your investment as a rental property.
o As previously stated, HOAs whether intended to or not, have the possibility of discriminating against certain people groups. In such a case, it is important to be aware of the Texas Workforce Commission, which enforces fair-housing standards.
The Case for Making HOAs Illegal in Texas
Comparative Analysis of Other State-Level Statues:
o Texas HOA laws include specific rules with higher fees than the typical HOA laws in other states like North Carolina, the option to foreclose on HOA properties if these fees are not paid, and a high amount of disputes over fairly insignificant issues (e.g., lawn care, type of garage door, backyard playgrounds, fencing, satellite dishes, or house paint colors).
o On the other hand, Florida limits HOA fines to $100 per violation, and homeowners have the right to install anything on their property if it is not visible from the front or side of the property. While even these terms are less than ideal, it does reveal the overbearing nature of Texas HOAs.
Community Impact Without HOAs:
o Residential subdivisions and common areas could be managed without an HOA through the creation of nonprofit corporations, government funding, community service projects, or government-backed initiatives.
o Some better alternatives to a typical managed HOA could be creating a self-regulated HOA or a voluntary HOA, which give more freedom to its members or the option to opt out.
Counterarguments and Rebuttals
Arguments in Favor of HOAs:
o Some of the major arguments made by supporters of HOAs are that HOAs help to maintain community standards, protect property values, unify standards, and allow shared amenities.
o Some of the perceived benefits of HOA governance include management of common areas, financial management, financial records, record-keeping of various kinds, rule enforcement of deed restrictions, protected views using restrictions, and fees-use management.
Rebuttals:
o One of the major problems in advocating the community-standards approach can be seen in the diversity of standards. Just because a majority advocates for standards, this does not make the standards unified or justifiable. In other words, these standards can ebb and flow based on the powers within the HOA. To live in such an environment robs the homeowner of freedom that should not be forfeited.
o Typical HOA conflicts include collecting late fees without providing notice, rate increases, and issuing fines without adhering to Texas law requirements.
Alternatives to HOAs
Community-Based Management Models:
o There are many alternatives to HOAs, such as community-based management or reliance on the local government for property maintenance and community affairs. Several decades ago, the government was using its power to manage single family residences using property taxes rather than HOAs.
o There are a variety of ways for property management and maintenance to be handled without the need for an HOA, such as using improvement districts. Improvement districts do not have boards but provide ownership and maintenance services that are paid through a district tax. These taxes are significantly lower than the association assessments.
Government Oversight and Regulation:
o In response to the current HOA climate, there should be increased government regulations, including potential new laws or amendments to existing legislation to protect homeowner rights and mitigate the rule enforcement policy. The dissolution process of HOAs should also be simplified as many HOA rules are unenforceable according to realtor.com.
o Texas Legislature has the power to make a difference, but they must be swayed. For instance, a recent legislative session addressed HOA-related issues. With the implementation of HB 886, HOAs are required to provide a structured opportunity for homeowners to pay their debts.
Should HOAs Be Illegal?
Despite what some may think, HOAs should be illegal in Texas. They impede on the freedoms of the homeowner, and, rather than make a community a better place, they hinder the growth of communities and discriminate in their mandates. Nevertheless, they are extremely difficult to abolish once created, which is a part of the problem.
At Bright Bid Homes, we have completed over 2500 real estate transactions in Texas so its safe to say this is not our first rodeo with properties with HOA rules and without HOA governance. For the most part, the home’s property owners association does work within reason on dispute resolution, but our point is that the bad apples in the bunch cause such harm and disregard for the unknowing residents that abuse of power because a spotlight issue.
To abolish an HOA, its members should seek legal advice. Texas legislature should also simplify the process which would lead to HOAs being abolished at an increased rate. Not only that, but homeowners must also protect their freedoms through seeking the abolishment of HOAs, even if the road is tough.
Advocating for changes in Texas HOA laws and regulations, including reaching out to local representatives and legal advisors, is all a part of the process, and every Texas resident must play their part.
*Disclaimer – This article is intended for informational purposes related to homeowners associations (HOAs) in Texas. It is not intended as legal, financial, or real estate advice. Readers are encouraged to consult with a licensed attorney or real estate professional to address their specific concerns or situations regarding HOA regulations and laws.