1	Practical Deed Restriction Management
2	Ralph A. Troiano Ralph Troiano is President of C.I.A. Services, Inc., a professional management company for community associations throughout Harris, Fort Bend, Montgomery, Brazoria and Galveston counties. With 24 years of experience in the trenches, Mr. Troiano has presented numerous seminars on a variety of topics such as "Coping with Disaster", "Finance and Operations", “Strategic Planning", "Practical Deed Restriction Enforcement", "Super Budgeting“, “Risk Management” and "Myths in Management". Prior to establishing C.I.A. Services in 1984, Mr. Troiano worked as an engineer and systems analyst for two major petrochemical companies. He has both bachelors and masters degrees in chemical engineering from MIT and has earned the PCAM designation from Community Associations Institute. His interest in community association management began by serving on the Board of Directors and being an active volunteer in each neighborhood he has lived. He currently also serves as the investment officer for a Fort Bend County Levee Improvement District. C.I.A. Services, Inc. 9800 Centre Parkway, Suite 625 8811 FM 1960 Bypass, Suite 200 Houston, Texas 77036 Humble, Texas 77338 Phone: 713-981-9000 Phone: 281-852-1700 Fax: 713-981-9090 Fax: 281-852-4861 www.ciaservices.com
3	Robert T. Alexander Robert T. Alexander (“Bob”) is an attorney and partner with the law firm of Hoover Slovacek LLP. He is an Honors graduate of the University of Texas at Austin, and he received his law degree from the University of Houston School of Law. He is Board Certified as a Specialist in both Residential Real Estate Law and Commercial Real Estate Law by the Texas Board of Legal Specialization. Bob has represented community associations throughout his entire 27 year career at Hoover Slovacek. His firm is a long-standing member of both CCUCA and CAI, and he has presented numerous seminars over the years on a variety of legal topics for both organizations. He is a past President of CAI. Bob has been involved in legislative issues regarding HOA’s for many years, and he previously served on former State Senator Jon Lindsay’s Attorney Task Force of the Senate Intergovernmental Relations Subcommittee on Property Owners Associations. He currently is serving on the Texas Legislative Action Committee of CAI as it prepares for the 2009 Session of the Texas Legislature.
4	Agenda Objectives of deed restriction management Basis of authority for enforcement The management process The Texas Property Code Handling the tough problems
5	Objectives of deed restriction management Preserve property values “… Declarant desires to adopt a uniform plan of development … for protecting the value and desirability the land … for the benefit of each owner …” Develop a good reputation for the subdivision River Oaks, West University, The Heights, Sharpstown and Montrose and each evoke a different perception even though there are homes of similar age and price in all Create positive attitude and pride among residents Community versus subdivision Reduce crime The broken window syndrome
6	The broken window syndrome William D. Eggers and John O'Leary Policy Review, Fall 1995, Number 74 Excerpt: 'In a 1982 Atlantic Monthly article titled "Broken Windows," James Q. Wilson and George Kelling argued that disorder in a community, if left uncorrected, undercuts residents' own efforts to maintain their homes and neighborhoods and control unruly behavior. "If a window in a building is broken and left unrepaired," they wrote, "all the rest of the windows will soon be broken. . . . One unrepaired window is a signal that no one cares, so breaking more windows costs nothing. . . . Untended property becomes fair game for people out for fun or plunder." 'If disorder goes unchecked, a vicious cycle begins. First, it kindles a fear of crime among residents, who respond by staying behind locked doors. Their involvement in the neighborhood declines; people begin to ignore rowdy and threatening behavior in public. They cease to exercise social regulation over little things like litter on the street, loitering strangers, or truant schoolchildren. When law-abiding eyes stop watching the streets, the social order breaks down and criminals move in. '"Stable neighborhoods can change in a few months to jungles," declare Wilson and Kelling. Disorder also can have dire economic consequences. Shoppers will shun an area they perceive as being "out of control." One study analyzing crime in 30 different areas found that the level of disorder of a neighborhood -- more than such factors as income level, resident turnover, or racial makeup -- was the best indicator of an area's lack of safety.'
7	Preservation of property values In the mid-1980’s the Houston area was hit hard by the recession and many homeowners faced foreclosure. The University of Houston Center for Public Policy conducted a study which showed the effect of active, effective community associations. For the purpose of this study, they included only communities with high foreclosure rates.
8	Basis of authority for enforcement Governing documents Articles of incorporation & bylaws Govern the operation of the community association Covenants, conditions & restrictions (the “deed restrictions”) Govern the use of the land by its owners Policies, procedures, rules & regulations Internal rules of operation for the community association Architectural & deed restriction guidelines Internal interpretation of deed restrictions for uniform enforcement
9	Basis of authority for enforcement (continued) Related laws Federal laws Telecommunications Act Americans with Disabilities Act and other anti-discrimination laws State laws Texas Property Code Uniform Condominium Act Local government ordinances Buildings (zoning, building codes, fire safety) Health & safety (animal control, swimming pools, grass, rodents) Annoyances (noise, lighting, signage, barking dogs) Appearance (junk vehicles, grass heights)
10	The management process Establish clear standards and boundaries Everything is not the association’s responsibility Everything is not the top priority Everything is “shades of gray” Create written guidelines Provides clear interpretations of owner maintenance obligations Provides guidance to owners for planned improvements Provides consistent basis for enforcing deed restrictions Provides consistent basis for evaluating home improvement requests Provides good communication tool for owner
11	The management process (continued) Communicate the standards & expectations Welcome packages Newsletter articles Community signs Set an example Recognize good neighbors Establish a community reputation Establish a management company reputation
12	The management process (continued) Act on deviations from standards Notify the owner and/or tenant of the violation Describe the problem State the expected resolution State the expected timeframe Let them know the next step if there is no action Give a person to contact for questions or problems Follow-up until the violation is resolved Check for changes and send follow-up letters after deadlines or extensions expire if there is no change or special circumstances Use common sense – don’t send painting letters during monsoons Verify owner claims of completion and provide feedback Maintain complete documentation of observations, letters and phone calls in case legal action is necessary – take photos as needed
13	The management process (continued) Never bluff – if you start something, you must finish it Everything you do, or don’t do, teaches residents something – make sure you are teaching the lessons you want If you send a letter and don’t follow-up, residents learn they can ignore future letters If you don’t send a letter on a violation, residents learn that is an acceptable behavior If you uniformly and consistently enforce the deed restrictions, residents will understand violations are not acceptable behavior If all else fails, call attorney and be willing to go all the way Try to avoid because legal resolution is expensive, slow and it creates ill-will with the homeowner You must proceed if there is no other choice because enforcing the deed restrictions is a primary responsibility of the Board
14	Shades of gray: running a business?
15	Violations of “residential use only” Test to determine whether the business use constitutes a violation. The courts look at various factors. See Mills v. Kubena 685 S.W. 2d 395 (Tex. App. -Houston [1^st Dist.] 1985, writ ref’d n.r.e). These factors may be considered on a scale: Factors for Finding of No Violation Factors for Finding of Violation Part-Time Full-Time Not for Profit For Profit Conducted Primarily Conducted Entirely Away from the Residential Premises on the Residential Premises The courts also look at the amount of “inconvenience, annoyance or discomfort to the neighbors” as an additional factor. Mills v. Kubena, supra. Any additional vehicular traffic to and from the home is often considered in connection with this factor.
16	Violations of “residential use only” (continued) The Courts have held the following activities as conducted in these instances constituted a violation of the residential use only language: Day care center Mills v. Kubena, supra Music school in the home Summerlin v. Cox 742 S.W. 2d 344 (Tex. Civ. App. -Eastland 1961, writ ref’d) Retail florist shop Fowler v. Brown 535 S.W. 2d 46 (Tex. Civ. App. - Waco 1976)
17	Texas Property Code Title 11 of the TPC deals with Restrictive Covenants – the 1^st chapter (201) was adopted in 1985 – the most recent chapter (211) was adopted in 2005 Chapter 201 (1985) provides a mechanism for covenants to be extended or modified where the documents don’t already allow Chapter 202 (1987/1999) codifies that covenants “shall be liberally construed to give effect to its purposes and intent” and, in 1999, that governing documents must be filed in the public records Chapter 203 (1987) gives county attorneys the authority to enforce deed restrictions.
18	Texas Property Code (continued) Chapter 204 (1995) a major chapter providing mechanism to create a POA, gives Board broad, basic powers even if not in governing documents, ensures existence of an ACC Chapter 205 (1995/1997) allows a Board alone to amend covenants for the limited purpose of complying with HUD or VA requirements for home loans Chapter 206 (1997) applies to Clear Lake Forest in Houston only and provides a mechanism for them to extend their ability to collect assessments Chapter 207 (1999) implements requirement for associations to provide resale certificates upon request Chapter 208 (1999) deals with covenants related to the preservation of historic neighborhoods
19	Texas Property Code (continued) Chapter 209 (2001) is also known as the Texas Residential Property Owners Protection Act – it does a number of things to protect owners Requires the filing of management certificates Clarifies owner’s access to Association records Provides minimum notice requirements before enforcement action is taken Provides right of a hearing in front of the Board Sets procedure for recovering attorney fees & sets a fee cap Prohibits foreclosure for fines or attorney fees Establishes a procedure handling foreclosures and gives owner a 180 day right of redemption
20	Texas Property Code (continued) Chapter 210 (2005) provides an improved mechanism for extending or modifying covenants and removing discriminatory clauses Chapter 211 (2005) provides a mechanism for modifying covenants when existing documents require a unanimous vote
21	TPC Chapter 209 Application Chapter 209 applies to Mandatory Associations with Mandatory Assessments (Article 209.003) Notice Requirements Opportunity to cure notice (Article 209.008) The association may recover attorneys’ fees and costs incurred only if the owner is provided with written notice that the fees and costs will be charged to the owner’s account if the violation continues after a specific date The attorneys’ fees and costs must be “reasonable” This notice is not required to be sent by certified mail
22	TPC Chapter 209 (continued) The 209 Notice (Article 209.006) The 209 Notice is required prior to filing a deed restriction violation suit, suspending an owner’s right to use a common area, charging an owner for property damage, or levying a fine against an owner (if allowed by the governing documents). To recover fees and costs incurred in connection with any attorney action pertaining to a deed restriction violation (with only a few exceptions), the association must give the notice required by Chapter 209 (“209 Notice”). The 209 Notice must: be given by certified mail, describe the violation, inform the owner that the owner is entitled to a reasonable period to cure the violation (unless the owner was given notice and a reasonable opportunity to cure a similar violation within the preceding six months), inform the owner that the owner may request a hearing under Chapter 209.007 on or before the 30^th day after the date the owner receives the notice.
23	TPC Chapter 209 (continued) Situations exempt from the 209 Notice (Article 209.007 and 209.008) Suit filed by association to obtain temporary restraining order or temporary injunction Counterclaim brought by association in a lawsuit filed against the association If suspending an owner’s right to use a common area (such as the clubhouse or community pool), the association does not need to give a 209 Notice if the violation occurred in a common area and involved an immediate risk of harm to others in the subdivision
24	TPC Chapter 209 (continued) 209 Hearing (Article 209.007) In response to the 209 Notice, the owner may request a hearing before a committee appointed by the Board or before the Board to verify facts and attempt a resolution of the matter (“209 Hearing”). If the hearing is held before a committee, the 209 Notice must state the owner has the right to appeal to the Board. The association shall hold the 209 hearing within 30 days after the receipt of the owner’s request, and must give the owner 10 days notice of the date, time and place of the hearing. The owner or the Board may request a postponement of up to 10 days, or longer by mutual agreement. The owner or the association may make an audio recording of the meeting. There is no similar obligation to allow video recordings. The owner is not liable for any attorneys’ fees incurred before the conclusion of the 209 Hearing or before the expiration of the 209 Notice, as applicable.
25	TPC Chapter 209 (continued) Right to attorney invoices (Article 209.008) Upon written request, the association must provide the owner with copies of attorney invoices for which the association seeks reimbursement of fees and costs Presumably sensitive information can be redacted
26	Handling the tough problems Amending deed restrictions Chronic lawn care problems Non-resident owners and tenants Multiple families in a home Sex offender living in community Group homes Commercial vehicles Lack of enforcement in the past
27	Amending deed restrictions They may not be perfect but can they get the job done? Take advantage of available powers to improve documents Amending Bylaws is generally easier if that is what needs work DRs already provide authority to adopt architectural guidelines TPC chapter 204 supports ability to establish rules & regulations Do not under-estimate the effort, apathy or opposition Success will depend on marketing and shoe leather Figure out what you want and hold community meetings to gain consensus and support before trying to get signatures Have an attorney prepare the legal documents The Board or management company should prepare the marketing documents
28	Chronic lawn care problems Give owner fair warning – be very specific (mow, edge, trim shrubbery, weed beds, prune trees, etc.) Assign a contractor to do the work – get before & after photos Promptly bill the owner for the work What if contractor is turned away? Generally owner will get the message and maintain their yard Refer to City or County if it is a code or health violation Try using JP Court if problem is bad – quick and inexpensive
29	Non-resident owners and tenants Make tenants feel part of the community Include in community activities Send them copies of newsletters Send DR letters to the owner, manager, tenant or all Initial lawn care letter would typically go to tenant only Letters for house painting would typically go to owner only Initial letters for minor maintenance would typically go to both Tenant problems are sometimes easier than owner problems We may have an ally with the landlord A bad tenant may move out voluntarily or be evicted by owner Some rental managers already understand the expectations of a community and management company
30	Multiple families in a home This is generally not an enforceable violation “Single family homes” describes a type of structure and is not an indication of who can live in a house Even if someone is renting out a room (which may be specifically prohibited), that may be difficult to prove and may have no impact on the neighborhood Do not use “multiple families” to enforce morals or prejudices Co-habitation Certain cultures value having multiple generations in a house Define the real problems affecting the neighborhood and try to address them directly Vehicle parking Wild parties
31	Sex offender living in the community Three categories On parole or probation – strict monitoring Completed parole or probation – may have continued monitoring Undetected Past, present and future sex offenders are among us – the ones we know about are the best monitored Keep community informed of the general issue www.txdps.state.tx.us, click Online Services, click Sex Offender Keep children away from identified sex offender home Be aware of activity that is suspicious or enticing to children Contact local law enforcement to report suspicious behavior or activities
32	Group homes Halfway houses, elderly care, disability care Definitely a business but protected by state and federal laws If there are intolerable problems, complain to business owner/manager and regulatory agency
33	Federal & state laws regarding group homes Federal Law which Supersedes State Laws, Ordinances, and Deed Restrictions Fair Housing Amendment Act 42 U.S. C.A. § 3604 (Supp. 1994) The Act makes it unlawful to discriminate in the sale or rental, or to otherwise make unavailable or deny, a dwelling to any buyer or renter because of a handicap. Discrimination includes: a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling. Handicap means a physical or mental impairment which substantially limits ore or more major life activities. Major life activities means functions such as caring for one’s self, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning and working. Physical or mental impairment includes alcoholism and drug addiction, but not addiction caused by current illegal use of a controlled substance.
34	Federal & state laws regarding group homes (continued) State Laws which Supersede the Deed Restrictions Section 202.003 (b) of the Texas Property Code This Section defines a family home as a residential home that meets the definition of and requirements applicable to a family home under the Community Homes for Disabled Persons Location Act. A dedicatory instrument or restrictive covenant may not be construed to prevent the use of the property as a family home. However, any restrictive covenant that applies to property used a a family home shall be liberally construed to give effect to its purposes and intent except to the extent that the construction would restrict the use as a family home.
35	Federal & state laws regarding group homes (continued) Community Homes for Disabled Persons Location Act (Section 123.001, et. seq. of the Texas Human Resources Code) A “person with a disability” is defined as, among other things, a person whose ability to care for himself, perform manual tasks, learn, work, walk, see, hear, speak, or breathe is substantially limited because the person has an orthopedic, visual, speech, or hearing impairment. The Act defines “community home” as providing: (1) Food and shelter; (2) Personal guidance; (3) Care; (4) Habilitation services; and (5) Supervision.
36	"Requirements of the" Requirements of the Community Homes for Disabled Persons Location Act Limitation on Number of Residents – Not more than 6 persons with disabilities and 2 supervisors. Licensing Requirements – Must meet all licensing requirements of either the Texas Department of Mental Health and Mental Retardation or the Texas Department of Human Services. Location Requirement – A community home may not be established within one-half mile of an existing community home.
37	Commercial vehicles Proceed under “vehicles” clause of deed restrictions, if possible DPS can enforce weight limits (low priority) TxDOT is responsible for hazardous loads (low priority) If within a City and an ordinance is violated, police departments will ticket and tow Complain to company named on truck – won’t work if the trucker is an owner/operator Take advantage of section 545.307 of the Transportation Code (1999) regarding overnight parking of commercial motor vehicles in residential subdivisions – allows signs to be placed and law enforcement to ticket or tow – requires a petition from residents
38	Overnight parking of commercial vehicles Applicable Law – Section 545.307 of the Texas Transportation Code Goal – To have signs erected at the entrance to the subdivision Required Procedure – Pass a petition Prohibited Commercial Vehicles – The language includes both semi-tractors and trailers, as well as vehicles intended to transport 16 passengers or more, including the driver; plus other types of vehicles based on factors such as weight, etc. Areas from Which the Vehicles are Prohibited – From parking anywhere within the residential subdivision and from parking on any street adjacent to a residential subdivision and within 1,000 feet of the property line of a residence, school, place of worship, or a park. (The Act was expanded in 2007 to include such streets adjacent to the subdivision.)
39	Overnight parking of commercial vehicles (continued) Applicable Time Period – The commercial vehicles are prohibited from parking on a street in such areas after 10:00 p.m. and before 6:00 a.m. Petition Requirements – The petition must be presented to the applicable county or municipality signed by at least 25% of the owners or tenants of residences in the subdivision. Only one person can sign for each residence, and they must be at least 18 years of age. Contiguous Subdivisions – If the subdivisions have the same developer and the same or similar name, they are considered to be one subdivision, even when separated by a road, stream, greenbelt, or similar barrier. Signs – If the petition passes and the signs are posted, it is a misdemeanor offense to violate the overnight parking prohibition.
40	Overnight parking of commercial vehicles (continued)
41	Lack of enforcement in the past Don’t delay, you have to start sometime The largest challenge will be with learned attitudes of residents and daily visual reminders of what has been acceptable Constantly communicate goals, expectations and process Some types of violations may not be resolvable Likely unresolvable: unacceptable structures Can resolve long term: house colors, fences, roof Easier to resolve: lawn care, trash, maintenance Deal with problems on a case-by-case basis Don’t allow new problems to occur The myths of abandonment, waiver and grandfathering Prioritize violations and make steady progress
42	Has the right to pursue violations been waived? Statistical Analysis Percentage Violations Judicial Finding of Non Waiver Stephenson v. Perlitz 9 % 537 S.W.2d 287 (Tex. Civ. App. - Beaumont 1976, writ ref’d n.r.e.) Zent v. Murrow 16.6 % 476 S.W.2d 875 (Tex. Civ. App. - Austin 1972, no writ) Judicial Finding of Waiver Tanglewood Homes Ass’n. v. Henke 27 % 728 S.W.2d 39 (Tex. App. - Houston[1st Dist.] 1987, writ ref’d n.r.e.)
43	Quotes from relevant Texas statutory law & case law Sharpstown Civic Ass’n v. Pickett, 679 S.W.2d 956 (Tex. 1984): Pickett’s argument, followed to its logical conclusion, would require us to hold, as an example, that use of residential property for the purpose of giving piano lessons for hire, if continued for a sufficient time, would give rise to the right of the owner of that property to convert it to a service station or other equally undesirable use. We find a more reasonable interpretation of the applicable law to be that in order to support a waiver of residential restrictions the proposed use must not be substantially different in its effect on the neighborhood from any prior violation. To put it another way, the prior violation which has been carried on without objection, if insignificant or insubstantial when compared to the proposed or new use, will not support a waiver of the new and greater violation. Tex. Prop. Code § 202.004(a): An exercise of discretionary authority by a property owners’ association or other representative designated by an owner of real property concerning a restrictive covenant is presumed reasonable unless the court determines by a preponderance of the evidence that the exercise of discretionary authority was arbitrary, capricious, or discriminatory.
44	Ken Hoffman January 20, 2008 The Houston Chronicle’s “Zest” Magazine
45	Questions & Answers