Uniform Condominium Act Chapter 82

Why is it important for me to know which chapter of Texas Real Estate Code governs the actions of the Board of Directors for Sea Gull?  What's the big deal?

 

It is important for you to know which statutes apply to the association In order to protect your investment as well as better understand the rights and responsibilities of the board and owners.
 

What do you mean; protect my investment? 

 

There is no fiduciary requirement of the board to make decisions in the best interest of you, the owner.  Furthermore, the board can put your investment at financial risk by a lack of financial transparency, failing to establish and maintain proper reserves for contingencies (hurricanes), and approving capital projects that encumber the owners with unnecessary debt.

 

Which statute is Sea Gull currently governed by?

 

Sea Gull Condominiums is governed by Chapter 81 of the Texas Real Estate Code which has fewer protections for owners while providing the board greater flexibility to conduct business. 

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Can you explain further the board's ability to conduct business under the current guidelines and how that affects me, the owner?

Currently the members of the board are not held personally liable for their decisions.  Furthermore, the board is not required to establish financial safeguards, is not prohibited from engaging in self-dealing, and is not required to be as transparent as possible with owners about finances, operations, and decision-making processes.

 

What are the different requirements under Chapter 82 vs 81?

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Chapter 82 of the Texas Property Code has several requirements that are different from Chapter 81, including:
 

• Supermajority voting requirement: Chapter 82 requires a supermajority vote of owners (67%) to approve certain types of capital projects. Chapter 81 only requires a simple majority vote (50%+1). This means that it would be more difficult for a homeowners association to approve a capital project that is not in the best interests of all owners if Chapter 82 is in place.

• Financial safeguards: Chapter 82 requires homeowners associations to establish financial safeguards to protect owners from financial harm. Chapter 81 does not have this requirement. This could have prevented homeowners associations from making decisions that put owners at financial risk, such as approving a capital project that is too expensive or that is not necessary.

• Self-dealing: Chapter 82 prohibits board members from engaging in self-dealing. Chapter 81 does not have this requirement. This could have prevented board members from making decisions that benefited themselves or their families at the expense of other owners.

• Transparency: Chapter 82 requires homeowners associations to be more transparent with owners about their finances, operations, and decision-making process. Chapter 81 does not have this requirement. This could have prevented homeowners associations from making decisions in secret or without the knowledge of owners.

• Communication: Chapter 82 requires homeowners associations to communicate with owners in a clearer and more concise manner. Chapter 81 does not have this requirement. This could have prevented homeowners associations from communicating with owners in a way that is confusing or difficult to understand.

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What are some examples of how Chapter 82 would alter the conduct of the board?

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• The recent capital project would have required more transparency on cost, timeline, and contingency planning prior to adoption.  What happens if there are cost overruns?  Will the board make another assessment?  What are your potential liabilities?

• There would be a clear explanation of where your monthly assessment dollars are going and how they are spent.  Are you subsidizing the resort as a full time resident?  

• There would be more detailed communication to the owners and dialogue between the board and owners.  When will you find out when your unit will be inaccessible and for how long?  Would you like to see the agenda prior to board meetings?  Have you submitted questions to the board and never received a response? 

• You would have confidence that the board used a methodology to establish adequate financial reserves because you would have participated.  How much is the reserve bank account and when was it last accessed?  Are there requirements and notifications when the reserve fund is accessed?

• The board would not be able to make decisions in secret or without owner knowledge.  Are you comfortable with the "executive" decisions that have been made?

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Are board members personally liable under both Chapters?

 

No, board members are not personally liable under both chapters. Chapter 81 does not allow for board members to be held personally liable for the debts or obligations of the owners association. However, Chapter 82 does allow for board members to be held personally liable for damages if they violate the law.

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Can board members be penalized for self dealing under Chapter 82 vs 81?

 

Yes, board members can be penalized for self dealing under Chapter 82 but not under Chapter 81. Chapter 82 prohibits board members from engaging in self-dealing, and if they violate this prohibition, they may be removed from the board, fined, or even held personally liable for damages. Chapter 81 does not have any provisions prohibiting self-dealing by board members.

 

How would Chapter 82 benefit full time residents?

 

First, the supermajority voting requirement would make it more difficult for an association to approve a capital project that is not in the best interests of full time residents. 
 

Second, the financial safeguards requirement would help to protect full time residents from financial harm if their association is unable to pay for repairs or maintenance. 
 

Third, the self-dealing prohibition would help to prevent board members from taking advantage of their position to enrich themselves at the expense of full time residents. 
 

Fourth, the transparency requirement would help full time residents to be more aware of what is going on with their homeowners association. This is important for full time residents, who are more likely to be involved in the decision-making process.

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Why would a board not want to adopt Chapter 82

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• The supermajority voting requirement: The supermajority voting requirement means that a capital project must be approved by 67% of the owners in order to be adopted. This is a higher threshold than the simple majority voting requirement that is used in most homeowners associations. This could make it more difficult to approve capital projects that are in the best interests of the community, especially if there is a small group of owners who are opposed to the project.

• The financial safeguards requirement: The financial safeguards requirement means that associations must have a plan in place to deal with unexpected expenses. This could include things like having a reserve fund, obtaining insurance, or borrowing money. This requirement could be seen as unnecessary and burdensome by some boards, especially if the association has a good financial history.

• The self-dealing prohibition: The self-dealing prohibition means that board members cannot vote to approve contracts with companies that they own, or from using their position to enrich themselves in other ways. This requirement could prevent board members from making decisions that are in the best interests of the community, especially if they have a financial interest in the outcome of the decision.

• The transparency requirement: The transparency requirement means that homeowners associations must keep owners informed about their finances, operations, and decision-making process. This could be seen as intrusive and unnecessary by some boards, especially if they believe that they are already doing a good job of communicating with owners.

• The communication requirement: The communication requirement means that homeowners associations must communicate with owners in a clear and concise manner. This could be seen as burdensome and unnecessary by some boards, especially if they believe that they are already doing a good job of communicating with owners.

 

What are some additional reasons boards have cited to avoid adoption of Chapter 82?

 

• The board may feel that Chapter 82 gives too much power to owners, and that it will make it difficult for the board to make decisions that are in the best interests of the community.

• The board may feel that Chapter 82 is too expensive to comply with, and that it will place an undue burden on the association.

• The board may feel that Chapter 82 is unnecessary, and that their association is already well-run and transparent.