Disaster for homeowners in the Austin Court of Appeals
March 26, 2022 06:34 Filed in: HOA's
In a case I recently argued in the Austin Court of Appeals, Myers v. Tahitian Village POA, No. 03-21-00105-CV (Tex. App. - Austin Jan. 6, 2022), the court held that when restrictive covenants do not authorize assessments, an HOA board can adopt, impose, and collect assessments without any apparent limit. In a conclusion I find chilling, the court said this:
"[T]he Restrictive Covenants, as amended, deleted a provision that required property owners to pay an annual charge to the POA. The Restrictive Covenants, however, are silent as to the POA’s power to make other assessments. Consequently, the Restrictive Covenants do not prohibit all assessments; the amendment simply removed the provision authorizing the POA to impose an annual charge on the subdivision’s property owners."
In that case, after the homeowners voted in the late 1990's to delete every charge which the HOA was authorized to charge originally, in 2016 a new HOA board came in and wrote new "bylaws" for itself which gave the board the power to charge and collect "assessments." Then the board adopted all sorts of new charges, fees, and fines, some running into the thousands of dollars. The Austin Court of Appeals approved this.
It gets worse. Texas law (Ch. 209 of the Property Code) forbids HOA's from denying homeowners the right to vote in HOA affairs. But that is exactly what the new Myers v. Tahitian Village allowed the HOA to do. The HOA's bylaws purport to forbid any entities (LLC's, corporations, trusts, etc.) from voting, and one of the plaintiffs in the Myers case is an LLC. In fact, many of the owners in the subdivision are entities — there are some 6000 homes there, and many lots are undeveloped. The HOA board voted to adopt bylaws which prevent anyone but natural persons from voting in director elections, thereby disenfranchising potentially hundreds of property owners who might vote to oust the board.
My clients, the homeowners, have asked the Texas Supreme Court to take up the case and reverse it. In the meantime, one can reasonably expect HOA boards to begin adopting all sorts of "rules" and "bylaws" which effectively undo or get around any limitations on board power contained in restrictive covenants. It's a three-alarm fire, and yet, as usual, I fully expect the HOA-Industrial Complex to line up behind it because it generates piles of cash and lifetime-membership-boards, while it appears that no one is going to step up to protect buyers of real property from this calamitous result.
"[T]he Restrictive Covenants, as amended, deleted a provision that required property owners to pay an annual charge to the POA. The Restrictive Covenants, however, are silent as to the POA’s power to make other assessments. Consequently, the Restrictive Covenants do not prohibit all assessments; the amendment simply removed the provision authorizing the POA to impose an annual charge on the subdivision’s property owners."
In that case, after the homeowners voted in the late 1990's to delete every charge which the HOA was authorized to charge originally, in 2016 a new HOA board came in and wrote new "bylaws" for itself which gave the board the power to charge and collect "assessments." Then the board adopted all sorts of new charges, fees, and fines, some running into the thousands of dollars. The Austin Court of Appeals approved this.
It gets worse. Texas law (Ch. 209 of the Property Code) forbids HOA's from denying homeowners the right to vote in HOA affairs. But that is exactly what the new Myers v. Tahitian Village allowed the HOA to do. The HOA's bylaws purport to forbid any entities (LLC's, corporations, trusts, etc.) from voting, and one of the plaintiffs in the Myers case is an LLC. In fact, many of the owners in the subdivision are entities — there are some 6000 homes there, and many lots are undeveloped. The HOA board voted to adopt bylaws which prevent anyone but natural persons from voting in director elections, thereby disenfranchising potentially hundreds of property owners who might vote to oust the board.
My clients, the homeowners, have asked the Texas Supreme Court to take up the case and reverse it. In the meantime, one can reasonably expect HOA boards to begin adopting all sorts of "rules" and "bylaws" which effectively undo or get around any limitations on board power contained in restrictive covenants. It's a three-alarm fire, and yet, as usual, I fully expect the HOA-Industrial Complex to line up behind it because it generates piles of cash and lifetime-membership-boards, while it appears that no one is going to step up to protect buyers of real property from this calamitous result.