Deed restrictions . . . to some the bane of their existence, to others a necessary evil, and to over 65 million American homeowners, the protector of their property values.[1] Originally, deed restrictions were written into deeds when property was first conveyed, sometimes limiting the type of people who could purchase property within a community. Restrictions prohibiting ownership of property based on race, color, religion and national origin are now void by statute.[2] In fact, many local, state, and even national laws now affect the enforceability of deed restrictions. Although deed restrictions are continually evolving, they have become substantive, stand-alone documents dictating what homeowners may or may not do to their properties. In some master planned communities, each section has a unique set of deed restrictions, which may supplement the master set of deed restrictions and are often enforced by a sub-association, creating a complex set of governing documents. Community associations are straddled with the often difficult task of both enforcing and interpreting restrictions.
At some point, most adults will make a conscious decision whether or not to purchase property in a deed-restricted subdivision. This decision may also depend on how actively the deed restrictions in a subdivision are enforced. Unfortunately, over the past few decades community associations have received negative media attention due to over-zealous boards and ill-advised decisions. To ensure legal compliance with laws and encourage the practical application of the restrictions, it has become paramount for practitioners to assist community associations and their representatives with enforcement, interpretation, and compliance.
Assuming the community association is properly created and existing, both restrictions and the law can be laden with traps for the inexperienced enforcer.[3] Community associations should first attempt to gain compliance by initiating a simple enforcement protocol providing for a series of letters to the non-compliant owner. Often, a few friendly reminders may encourage compliance. However, if an owner ignores these requests for compliance, an ill-maintained exterior or unapproved construction could quickly escalate to the need for legal assistance.
Prior to turning to the association’s counsel for enforcement, community associations must send at least one letter with several required disclosures before the association may seek to recover any attorney’s fees incurred during enforcement. Depending on the level of opposition from an owner in response to litigation initiated by an association, the attorney’s fees incurred by an association could be substantial. In order to be entitled to seek the recovery of its attorney’s fees, an association must follow the law. Fortunately, there are several statutes which give community associations the right to recover attorney’s fees for the enforcement of deed restrictions if legal help becomes necessary. However, it is paramount that community associations not fall victim to the intricacies of these statutes.
Section 204.010 of the Texas Property Code provides that an association, acting through the board, may, “if notice and an opportunity to be heard are given, collect reimbursement of actual attorney’s fees and other reasonable costs incurred by the property owners’ association relating to violations of the subdivision’s restrictions or the property owners’ association’s bylaws and rules.”[4] Although the statue makes reference to notice and an opportunity to be heard, this provision fails to provide guidance on the form and details of such notice. This guidance; however, can be found in Section 209.006 of the Texas Property Code, which provides detailed disclosures required to be given to an owner by a community association prior to the recovery of attorney’s fees for deed restriction violations.[5][6]
Section 209.006 also makes a distinction between curable and uncurable violations while laying out the detailed notice procedure. Namely, the association must send the violating owner notice by certified mail[7] outlining the following: (1) a description of the violation; (2) state any amount due the association from the owner; (3) a reasonable period to cure the violation (unless the violation is uncurable as defined by the statute); (4) a right to request a hearing in front of the board (or a committee appointed by the board) to discuss the violation; (5) notice that the owner may have special rights if the owner is serving in active military duty; and (6) specify the date by which the owner must cure the violation (“209 Letter”). The statute requires different disclosures for uncurable violations. Uncurable violations are defined in the statute and recognize the difficultly with mandating a reasonable period to cure for violations that are not of a reoccurring nature such as shooting fireworks or garage sales.
Notice must be sent by certified mail, return receipt requested (CMRRR). The association is not required to ensure the owner actually receives the notice. Since owners routinely fail to either receive CMRRR notice or pick up the notice after initial delivery attempts fail, sending the 209 Letter by regular, first-class mail as well could assist with achieving compliance and ensure actual notice. For urgent or critical issues, the association may choose to also have the notice hand delivered through a courier service.
The 209 Letter should clearly describe the violations. Homeowners often complain that the letter was confusing or unclear often resulting in additional frustrations during an already tense period. Including time and date-stamped pictures of the violations with the 209 Letter also assists with identifying the violation(s) and could protect the association if litigation becomes necessary. Associations must also ensure that the period to cure is reasonable in relation to the violation and should allow owners additional time to correct violations if requested.
If, and when, an owner requests a hearing, the Board must advise the owner about the date, time and location of the hearing no later than ten (10) days before the hearing.[8] The hearing must occur within thirty (30) days of the receipt of the request although postponements may be allowed.[9] If the hearing is in front of a committee as opposed to the board, the owner must be notified of owner’s right to appeal the decision of the committee to the board in the 209 Letter.[10]
Setting up standard protocols for the 209 hearing procedure is critical. In addition, the board or committee should provide a safe and respectful space for the owner to address the violation. The statute explicitly provides that the 209 hearing is “to discuss and verify facts and resolve the matter in issue.” The board should avoid arguing with the owner and take time to deliberate as a board to determine how it should proceed once the hearing is over. A board is not required to render a decision at the hearing, in fact, boards should be encouraged to take the matter under advisement upon the conclusion of the hearing and advise the owner that the board will notify the owner of its decision in a reasonable timeframe thereafter. If the owner elects to involve counsel, the association should consider having its counsel present with the understanding that any attorney’s fees incurred by the association prior to the conclusion of the 209 hearing are not recoverable.[11]
In recent years, community associations have struggled with the cure period when dealing with violations such as shooting fireworks, property damage, or garage sales because these violations cannot logically be given a reasonable period to cure. Recognizing this frustration, in 2015 the legislature attempted to give associations some assistance with this issue. Although an owner is still entitled to request a hearing for the violation, the association is no longer required to give the owner a reasonable period to cure the violation. Therefore, associations can immediately assess fines or suspend common area privileges before the 209 hearing is held. Associations are also not required to specify the date by which the owner must cure the violation if it poses a threat to public health or safety.
An association is not required to give a reasonable period to cure a violation such as a garage sale.
In the same vein as uncurable violations, an owner who is proceeding with unapproved construction or committing some other violation which may result in irreparable injury to the association if it is required to wait thirty (30) days for the owner to request a hearing, an association is not required to send a 209 Letter before filing an application for a temporary restraining order (TRO) or temporary injunction (TI) against an owner for a violation.[12] If the association files suit seeking a TRO or TI, the association will not be precluded from recovering attorneys’ fees for failing to send the 209 Letter. Although some notice, possibly in the form of a cease and desist hand-couriered letter, is still advisable, it is not required. In fact, courts routinely require some sort of pre-suit notice to the defendant prior to granting relief during ex-parte proceedings such as TROs, which, by its nature, is supposed to be an ex parte proceeding.
Associations may not recover attorney’s fees incurred before the conclusion of the 209 hearing or until the expiration of time period given to the owner to request a 209 hearing.[13] It is obvious that the Texas legislature feels it is necessary to protect homeowners in the arena of deed restriction enforcement by requiring associations to employ a protracted and detailed procedure before being entitled to recover attorney’s fees. Community associations should work closely with their attorneys to ensure that the 209 Letter strictly follows the letter of the law. Careless errors in the 209 Letter may cause additional frustrations in the enforcement process and could result in the denial of the recovery of attorney’s fees incurred by the association.
Attorney’s fees may only be recovered in Texas if based on statute. Section 5.006 of the Texas Property Code, Section 38 of the Texas Civil Practice and Remedies Code, as well the deed restrictions all provide the basis for an association’s ability to recover attorney’s fees in a deed restriction enforcement action. Texas Property Code Section 5.006 mandates the recovery of attorney’s fees to the prevailing party who brings a cause of action based on breach of a restrictive covenant.[14] The court may determine the reasonableness of the request by considering factors similar to those set out in Arthur Anderson & Co. v. Perry Equip. Corp., 945 S.W.2d 812 (Tex. 1997) .
In addition, Texas Civil Practice and Remedies Code Section 38.002 provides for the recovery of reasonable attorney’s fees if the claim is based on a written contract. Courts have found that deed restrictions are like contracts, entitling associations to the recovery of attorney’s fees based on Chapter 38.[15] As provided in the following examples of deed restriction language, many deed restrictions entitle associations to the recovery of attorney’s fees for the enforcement of deed restrictions as well.
“In addition to all other remedies that may be available, after giving notice and an opportunity to be heard as may be required by §209 of the Texas Property Code, as same may be amended, the Association has the right to collect attorney’s fees and/or fines as set by the Board from any Owner that is in violation of the Dedicatory Instruments, any applicable Supplemental Amendment or amendments, any Guidelines, or any other rule or regulation promulgated by the Board pursuant to the provisions set forth herein. Said attorney’s fees and fines shall be added to the violating Owner’s Assessment account and shall be secured by the continuing lien on the Lot.”
“If notice and an opportunity to be heard are given as provided by law, the Association is authorized to impose reasonable fines for violations of the provisions of this Declaration, the Builder Guidelines or any Rules and Regulations adopted by the Association or the Architectural Review Committee pursuant to any authority conferred by either of them by the provisions of this Declaration and to collect reimbursement of actual attorney’s fees and other reasonable costs incurred by it relating to violations of the provisions of such documents. Such fines, fees and costs will be added to the Owner’s assessment account, secured by the lien and collected in the manner provided in this Declaration.”
“This Declaration shall run with the Subdivision and shall be binding upon and inure to the benefit of and be enforceable by the Association and each Owner of a Lot in the Subdivision, or any portion thereof, and their respective heirs, legal representatives, successors and assigns. In the event any action to enforce this Declaration is initiated against an Owner or occupant of a Lot by the Association, the Association or other Owner, as the case may be, shall be entitled to the recovery of attorney’s fees from the Owner or occupant of the a Lot who violated this Declaration.”
Often, the attorney’s fees for enforcement are not secured by the association’s lien (last example provided). Unless explicitly secured by the association’s assessment lien in the restrictions, there is no lien for attorney’s fees incurred for deed restriction enforcement. In these instances, it is important to remember that the association may not foreclose the association’s lien comprised of attorney’s fees incurred by the association relating to deed restriction enforcement. Both community association boards and owners incorrectly believe that the association can threaten foreclosure for deed restriction enforcement. Understanding the association’s rights and limitations in deed restriction enforcement will help avoid common problems and missteps in this area.
Recovery of attorney’s fees is vital for a community association’s role in enforcing restrictions. Again, following proper notice provisions should help ensure the association’s authority to recover such fees. The inability of an association to recover these fees will handicap its right to enforce the restrictions, which could ultimately result in decreased property values.
The enforcement of deed restrictions by express right is a powerful and valuable tool in the protection of property values for community associations. Although a community association’s restrictions and governing documents may provide certain express rights to enforce deed restrictions and rules, caution, consistency and proper procedures must be followed to ensure decisions of the board withstand scrutiny and retain their presumption of reasonableness. Being educated and establishing protocol to properly handle enforcement is essential. Unfortunately, board member terms can be short-lived making it crucial for a community association’s legal counsel to advise board members on how best to interpret and enforce their restrictions while using best practices. Community associations continue to grow across Texas and the reasonable enforcement of restrictions will help to protect property values and ensure quality of living continues to increase as well.
[1] Community Associations Institute, About CAI, https://www.caionline.org/AboutCAI/Pages/default.aspx (last visited May 30, 2017)
[2] Tex. Prop. Code §5.026(a)
[3] Many community associations are established as domestic non-profit corporations. However, community associations sometimes find themselves unable to act if their right to transact business has been involuntarily forfeited due to the failure to file annual reports and pay state franchise taxes.
[4] Tex. Prop. Code §204.010 (a) (11) applies only to Harris, Galveston and Montgomery counties.
[5] Tex. Prop. Code §209.006
[6] See Section V of this paper regarding recent case law about the 209 Letter
[7] See Tex. Prop. Code §209.006 (a)
[8] Tex. Prop. Code §209.007
[11] Tex. Prop. Code §209.008 (b)
[12] Tex. Prop. Code §209.007 (d)
[13] Tex. Prop. Code §209.008 (b)
[14] See Anderson v. New Prop. Owners’ Ass’n of Newport, Inc., 122 W.W.3d 387 (Tex. App.—Texarkana 2003, pet. denied); Jim Rutherford Inv., Inc. v. Terramar Beach Comty. Ass’n., 25 S.W.3d 845 (Tex. App.—Houston (14 th Dist.] 2000, pet. denied; Beere v. Duren, 985 W.W.2d 243 (Tex. App.—Beaumont 1999, pet. denied).
