Homeowners associations in Texas must understand the HOA disclosure documents. These documents are crucial in fostering transparency and safeguarding the association’s reputation. They provide buyers with all the necessary information about the HOA before making one of their biggest investments.
What are HOA Disclosure Documents?
The HOA disclosure documents are a set of materials the association gives to buyers, sellers, or current owners. These documents outline the rules, structure, financial details, and conditions of the community. Most of these are required during the resale of a home, although some also apply to initial sales or rental situations.
The disclosure documents help buyers understand what it means to live in a homeowners association. They demonstrate the financial health of the association and outline the rules that accompany HOA membership. This includes details about fees, violations, amenities, architectural standards, and other relevant information.
Disclosure packets can vary slightly between condominium associations and single-family homeowner associations. Still, the purpose remains the same. They promote transparency, allowing buyers to make informed decisions.
Are HOA Disclosure Documents Required in Texas?
Yes, disclosure documents are required in the state of Texas. Texas law sets out precise HOA disclosure requirements for associations. These laws appear in both the Texas Property Code Chapter 207 and Chapter 82, depending on the type of community.
For single-family homeowner associations, Section 207.003 of the Texas Property Code requires an HOA to provide resale certificates and other documents upon written request from an owner or their agent. This includes:
- Declaration of covenants
- Bylaws
- Rules and regulations
- Financial documents
- Resale certificates
For condominiums, Section 82.157 of the Texas Uniform Condominium Act applies. It requires the association to provide resale certificates that include financial and legal disclosures about the unit and the association.
In both cases, associations must respond within 10 business days. Failing to meet these deadlines or refusing to provide disclosures can result in legal issues and financial penalties.
Additionally, Section 5.008 of the Texas Property Code requires sellers to disclose their knowledge of any HOA fees or assessments. Section 5.012 further requires sellers to provide written notice of the HOA to the purchaser. The exact section gives an example of the notice.
What Should the HOA Disclosure Packet Include?
A complete HOA disclosure packet in Texas should include the following:
- Resale Certificate. This is a summary of key association details. It provides fee amounts, unpaid balances, reserve funds, lawsuits, violations, and insurance coverage.
- Declaration of Covenants, Conditions, and Restrictions (CC&Rs). These are the governing documents that establish the HOA and outline the rights and responsibilities of homeowners.
- Articles of Incorporation. This outlines the legal formation of the HOA as a nonprofit organization.
- Bylaws. These explain how the board operates, including elections, meetings, officer roles, and decision-making procedures.
- Rules and Regulations. This includes the day-to-day operational policies that affect homeowners, such as parking rules, pet limits, or holiday decor.
- Budget and Financials. Associations must include current budgets, balance sheets, income statements, and information about reserves.
- Insurance Summary. Buyers need to know what insurance the HOA holds and what they must cover on their own.
- Assessment Schedule and History. A breakdown of current dues, special assessments, and how they’ve changed over the years.
- Violation History. Buyers should know of any current or past violations on the property they intend to purchase.
- Pending or Past Litigation. This section alerts buyers to lawsuits involving the HOA, particularly those that may impact finances or operations.
Why HOA Disclosure Documents are Important to Buyers
With HOA disclosures, buyers can avoid unwanted surprises after they close on a home. These documents reveal the association’s financial health, any planned fee increases, and any ongoing community disputes.
Disclosures enable buyers to review the restrictions and determine if the lifestyle aligns with their needs. If a buyer wants to park an RV, install solar panels, or run a business from home, the disclosures will indicate whether these actions are permitted.
Disclosures also protect buyers from inheriting financial or legal issues tied to the unit. If a violation exists or there are any unpaid dues, buyers can request that the seller settle these issues before closing. They can even negotiate financially.
When buyers have complete information, they make more confident and informed decisions. This leads to smoother transactions and fewer disputes after the sale.
Who Prepares the HOA Disclosure Documents?
The HOA board or its managing agent is typically responsible for preparing the disclosure documents. In self-managed communities, board members usually handle this process directly. On the other hand, professionally managed communities often rely on their management company.
The process involves collecting, updating, and compiling all necessary documents. The HOA board must make sure that all information in the HOA disclosure documents is current and accurate. This involves verifying financial data and checking for outstanding violations.
It is a good idea for HOAs to designate a specific contact person for disclosure requests. This way, the association can streamline the process and avoid going over the deadline.
Who Pays for HOA Disclosure Documents?
In most cases, the seller is responsible for paying the cost of providing HOA disclosure documents. Texas law allows associations to charge a fee for preparing and delivering these documents.
Under Texas Property Code Section 207.003, the fee must be reasonable. As of the most recent update, the Texas Real Estate Commission caps this fee at $375 for a resale certificate. If the association provides the documents electronically, they may also charge a separate fee of up to $75 for delivery of subdivision documents.
The HOA must publish these fees on the association’s website or make them publicly available. If the fee exceeds the legal limit or the HOA fails to disclose these fees properly, the HOA may face penalties or must refund the surplus charge.
What to Do When HOA Refuses to Provide Disclosure Documents
If an HOA in Texas fails to give HOA disclosure documents, the seller or their agent should first send a written reminder to the board or management company. It is important to include a copy of the original request and note the legal deadline of 10 business days.
If the HOA still does not respond, the seller may report the issue to the Texas Real Estate Commission or seek legal assistance. Under Section 207.003, courts may require the association to pay damages or attorney’s fees if the refusal causes harm.
In some cases, title companies or closing attorneys may delay or cancel the transaction if the HOA fails to provide the disclosure documents. This means that sellers and buyers assume a significant amount of risk if the HOA fails to cooperate.
Given the potential legal and financial consequences, HOA boards should take all disclosure requests seriously. Board members should respond and act in a timely and professional way at all times.
Professional Assistance
Clearly, HOA disclosure documents in Texas protect both buyers and sellers, as well as the association itself. If board members are struggling to keep up with disclosure requests, it is advisable to hire a professional to assist the board with these matters.
Preferred Association Management Company offers exceptional HOA management services to communities in Central Texas. Call us today at 512-918-8100 or contact us online to learn more!
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