Foreclosures by Property Owner Associations Now Subject to Judicial Approval
January 10, 2012
The 2011 Texas Legislature enacted several statutes related to the operation and administration of property owner associations in Texas. One significant legislative change is the requirement that, beginning as of Jan. 1, 2012, a property owner association may not foreclose on an assessment lien unless the association first obtains a court order authorizing the foreclosure.
A property owner association generally makes assessments on property in a subdivision so that it is able to pay for and maintain the common amenities in the subdivision. Assessment liens are often imposed on the real property at the time of its initial development in order to secure payment of these assessments. Homeowners purchase their property subject to these assessment liens.
Prior to this recent change in the law, when a property owner failed to pay his assessment, an association could foreclose its lien by non-judicial foreclosure. This foreclosure could occur without the requirement for court approval, in the same manner as a mortgage or deed of trust. The Texas Legislature imposed the requirement of judicial foreclosure for assessment liens in order to protect homeowners from perceived injustices occurring under the non-judicial foreclosure system.
As required by the statute, the Texas Supreme Court has adopted special rules for courts to expedite handling of foreclosure proceedings brought by property owner associations. However, it will now be more time consuming and costly for an association to enforce its rights to collect assessments.