HB 1228 Passed – payments, collections, foreclosures

The 82nd Texas Legislature enacted HB 1228 (here) relating to payments, collections and foreclosures. The governor has yet to make his decision whether to sign it, veto it or let it become law without his signature.  For a listing of the majority of the HOA legislation considered and the status of each bill, go here.

IMPORTANT: This description is NOT intended to be legal advice.  You should review the law yourself or have an attorney review it for you before taking any action.  The law may have changed, may not apply to your HOA, or a court may have altered the meaning of the words.  This website attempts to summarize information concisely which will result in some inaccuracies.  Before investing a lot of money, or risking adverse action by your HOA, you should not merely read what is on any website including this one.  Get fully informed.


The bill begins with reforms to payment plans.  This language is also found in HB 1821 which also passed. The text and a description of that bill can be found here.


This is probably the single most important issue that determines whether homeowners lose their homes to an HOA, and HB 1228 makes some improvement in this area, but does not fully protect homeowners appropriately.

Sec. 209.0063.  PRIORITY OF PAYMENTS.  (a)  Except as   provided by Subsection (b), a payment received by a property owners’ association from the owner shall be applied to the owner’s debt in the following order of priority:

(1)  any delinquent assessment;

(2)  any current assessment;

(3)  any attorney’s fees or third party collection costs incurred by the association associated solely with assessments or any other charge that could provide the basis for   foreclosure;

(4)  any attorney’s fees incurred by the association   that are not subject to Subdivision (3);

(5)  any fines assessed by the association; and

(6)  any other amount owed to the association.

Tex. Prop. Code 209.0063(a) (pending effective date and governor approval)

This language is a clear improvement if you are living in a subdivision with a HOA that is governed by Chapter 209 of the Texas Property Code, and possibly others depending on their governing instruments.  To understand why, you should know that a HOA governed by Chapter 209 cannot foreclose for fines assessed by the association or attorney fees incurred by the association to assess or collect those fines. Tex. Prop. Code 209.009 (current law).  (Condo HOAs subject to Chapter 82 of the Texas Property Code are prohibited from foreclosing on fines by Tex. Prop. Code 82.113(e) .)

So if you give the HOA money, under the language in the bill, the HOA first has to apply it to delinquent assessments, current assessments and any attorney fees.  In the past the HOA might have applied the money to a fine or the attorney fees associated with a fine you might be disputing, which would mean you still would be liable for assessments and attorney fees which the HOA can foreclose on.  The bill essentially prevents foreclosures for fines when coupled with the language in the current 209.009 or 82.113(e) (if either of those provisions apply to your HOA).

Note that the HOA governing documents may also restrict when a foreclosure is authorized and the priority of payments language in the bill will essentially give meaning to that intent because it limits how HOAs apply the money they get to any outstanding accounts.


If, at the time the property owners’ association receives a payment from a property owner, the owner is in default under a payment plan entered into with the association:  (1)  the association is not required to apply the payment in the order of priority specified by Subsection (a); and (2)  in applying the payment, a fine assessed by the association may not be given priority over any other amount owed to the association.

Tex. Prop. Code 209.0063(b) (subject to effective date and governor review).

So the three month window to get caught up using a payment plan is even more critical.  Of course homeowners having trouble with their bills are much more likely to have a situation where they cannot pay their HOA everything the HOA claims is owed.  Instead of allowing a homeowner pay the assessments and the attorney fees first in order to prevent foreclosure as the first part of 209.0063 requires, HOAs, builders and others insisted on eliminating the priority of payments rubric when the homeowner most needs it – and the Legislature enacted what they demanded.  There is simply no logical explanation for this policy other than it gives HOAs the upper hand in these situations.  Still, even with this loophole, the priority of payments is a step forward for Texas homeowners to hopefully be built upon in the future.


Some clear improvements were made in this area as well.

A property owners’ association may not hold an owner liable for fees of a collection agent retained by the property   owners’ association unless the association first provides written   notice to the owner by certified mail, return receipt requested, that: (1)  specifies each delinquent amount and the total   amount of the payment required to make the account current; (2)  describes the options the owner has to avoid   having the account turned over to a collection agent, including information regarding availability of a payment plan through the association; and (3)  provides a period of at least 30 days for the owner to cure the delinquency before further collection action is taken.

Tex. Prop. Code 209.0064(b) (subject to effective date and governor review).

A homeowner is also not liable for collection fees if the HOA pays the collecting agent based on how much is collected (a contingency fee); and to be liable for the fees, the agreement with the HOA must require payment of all fees owed to the collection agent be paid by the HOA. Tex. Prop. Code 209.0064(c).

The agreement between the HOA and the collection agent must not prohibit the homeowner from contacting the HOA board or the management company, and the HOA may not sell or otherwise transfer any interest in the HOA’s accounts receivables (other than for collateral for a loan). Tex. Prop. Code 209.0064(d)-(e).


The bill makes a marked improvement in the law by requiring all HOA foreclosures subject to Chapter 209 to be judicially approved using the expedited foreclosure procedure currently used by lenders to foreclose home equity loans and tax loans (it is not a full blown lawsuit). For a description of the procedure currently in place, see II of article here.  Assuming the procedure stays the same, if a homeowner files a separate lawsuit contesting the right of the HOA to foreclose before the foreclosure order is signed, then the foreclosure case is dismissed.  The bill also allows a homeowner to waive his right to require court approval, if the waiver is obtained after the foreclosure is sought by the HOA, and so long as the waive is not required as a condition of the sale or transfer of the property. Tex. Prop. Code 209.0092 (subject to effective date and governor review).


The bill also allows a vote to be held to eliminate the HOA’s ability to foreclose if 67 percent of the total votes allocated to the property owners in the association agree.  Owners holding at least 10 percent of all the voting interests in the association may petition the HOA to require a vote on such an issue.  Homeowners concerned about foreclosures and abusive HOAs subject to Chapter 209 should consider this option.  Tex. Prop. Code 209.0093 (subject to effective date and governor review).

Posted on June 1, 2011, in Newsroom. Bookmark the permalink. Comments Off on HB 1228 Passed – payments, collections, foreclosures.

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