TEXAS COMMUNITY ASSOCIATION COLLECTIONS GUIDE

Welcome to Texas

With over 21,000 condos, HOAs, and co-ops, the state of Texas has a large number of common interest realty associations. According to CAI, An estimated 5.9 million Taxes residents live in a community association.

Texas's community association laws apply to all common interest communities created on and after January 1st, 1994. Communities created before that must adopt any regulations from the act.

If any bylaws or declarations from older communities contradict the regulations expressed within the Texas Residential Property Owners Protection Act, they are now void and must adapt to current regulations.

Condos and HOAs are subject to the Texas Residential Property Owners Protection Act (Chapter 209 of the Texas statutes) which provides more specific regulations regarding the management and organization of community associations.

Before you read anything on this page about the laws governing Condo and HOA collections in Texas, make sure you have read the governing documents for your association. The governing documents may be stricter than the state laws, and in those cases, the governing documents take precedence.

As a general rule, neither your management company or board members should attempt to make contact with delinquent homeowners in an attempt to collect the debt, beyond the initial courtesy letters. You need an attorney or a licensed collection agency to collect on your behalf.

Legal Reference Links

How to improce HOA delinquencies

How to Reduce Your Condo/HOA Delinquency Rate

Are you living with the Consequences of nonpaying homeowners? If so, you need a better approach to collections for your community association!

This guide will will give you the same techniques that we use to help our clients reduce delinquencies, all but eliminate bad debt write-offs, and see significant savings on legal fees.

Texas Collection Laws

Texas is a Homestead State but the homestead laws do not apply to lenders and community associations. If you do not pay your mortgage loan or HOA debts you can still have your home foreclosed upon and be evicted.

To understand the laws better for Texas HOAs and condos, please refer to  The Texas Residential Property Owners Protection Act (Title 11, Chapter 209 of the Texas Property Code) which covers HOA activities in the state, while the Uniform Condominium Act (Title 7, Chapter 82 of the Texas Property Code) governs condominiums created after January 1, 1994.

Condominiums created before 1994. (Tex. Prop. Code Ann. § 82.002) also apply. The two sets of laws are similar, but with some differences.

Also, you should be guided by your own governing documents.

Yes, aside from the Federal Fair Debt Collection statutes Texas has its own laws regarding collections. The Deceptive Trade Practices Act (DTPA) is Texas's primary consumer protection statute.  The statute prohibits a list of deceptive trade practices deemed to be false, misleading or deceptive.

The DTPA gives consumers the right to sue for damages.  Consumers who win a suit brought under the DTPA, are entitled to attorney's fees, and if they show the person acted "knowingly," they can receive damages of up to three times their damages. 

Other consumer protections statutes tie in to the DTPA and allow consumers to sue under the DTPA for violation of those other statutes

No, but that does not mean that a management company cannot be in violation of the collection statutes. Collections are heavily regulated and anybody who attempts to collect debts should know what they are doing.

Texas is a tough state regarding the protection of consumer rights in community associations and has many hoops for an association and management company to jump through before action can be taken against a delinquent owner.

More and more community association management firms are being cited for violations of consumer protection statutes.

Before a licensed collection agency can be called in, the following must be done: Sec. 209.0064. THIRD PARTY COLLECTIONS.

(a) In this section, "collection agent" means a debt collector, as defined by Section 803 of the federal Fair Debt Collection Practices Act (15 U.S.C. Section 1692a).

(b) A property owners' association may not hold an owner liable for fees of a collection agent retained by the association unless the association first provides written notice to the owner by certified mail that:

(1) specifies each delinquent amount and the total amount of the payment required to make the account current;

(2) if the association is subject to Section 209.0062 or the association's dedicatory instruments contain a requirement to offer a payment plan, describes the options the owner has to avoid having the account turned over to a collection agent, including information regarding availability of a payment plan through the association; and

(3) provides a period of at least 30 days for the owner to cure the delinquency before further collection action is taken.
(c) The agreement between the property owners' association and the association's collection agent may not prohibit the owner from contacting the association board or the association's managing agent regarding the owner's delinquency.
(d) A property owners' association may not sell or otherwise transfer any interest in the association's accounts receivables for a purpose other than as collateral for a loan.
Added by Acts 2011, 82nd Leg., R.S., Ch. 1282 (H.B. 1228), Sec. 2, eff. January 1, 2012.

An HOA can collect as much as is legally owed to them in fees, violations, special assessments, administrative costs, and legal fees. Yet, before any of that can be done: 
(a) A property owners' association shall record in each county in which any portion of the residential subdivision is located a management certificate, signed and acknowledged by an officer or the managing agent of the association, stating:

  1. The name of the subdivision;
  2. The name of the association;
  3. The recording data for the subdivision;
  4. The recording data for the declaration and its amendments;
  5. The name and mailing address of the association;
  6. The name,mailing address,phone number, and email address of the person managing the association or the association's designated representative; 
  7. The website address of a publicly available website for the association; and
  8. Other information the association considers appropriate.

(b)  Not later than July 1 of each calendar year, a property owners' association currently formed and operating as of August 31, 2021 shall also electronically file a management certificate, or an amended management certificate required under this chapter to the commission. The commission may charge a fee for the electronic filing of a management certificate, or an amended management certificate. A fee adopted by the commission may not exceed the amount charged by a property owners' association for a resale certificate under Chapter 207, Title 11, Property Code.

(b-1)  A property owners' association formed and operating as of September 1, 2021 and after shall also electronically file a management certificate, or an amended management certificate required under this chapter to the commission within 10 calendar days of filing the required management certificate with a county clerk under this chapter. The commission may charge a fee for the electronic filing of a management certificate, or an amended management certificate. A fee adopted by the commission may not exceed the amount charged by a property owners' association for a resale certificate under Chapter 207, Title 11, Property Code.

(c) The county clerk of each county in which a management certificate is filed as required by this section shall record the management certificate in the real property records of the county and index the document as a "Property Owners' Association Management Certificate."

(d) The property owners' association shall record an amended management certificate in each county in which any portion of the residential subdivision is located not later than the 30th day after the date the association has notice of a change in any information in the recorded certificate required by Subsection (a).

(e) Except as provided under Subsections (d) and (e), the property owners' association and its officers, directors, employees, and agents are not subject to liability to any person for a delay in recording or failure to record with a county clerk's office or with the commission a management certificate, unless the delay or failure is willful or caused by gross negligence.

(f) If a property owners' association fails to record a management certificate or an amended management certificate under this section, the seller, the purchaser, lender, or title insurance company or its agent in a transaction involving property in the property owners' association is not liable to the property owners' association for:

  1. Any amount due to the association on the date of a transfer to a bona fide purchaser; and
  2. Any debt to or claim of the association that accrued before the date of a transfer to a bona fide purchaser.
  3. A lien of a property owners' association that fails to file a management certificate or an amended management certificate under this section is unenforceable

As long as money spent is in the budget and/or approved by the board of directors it can be spent on any improvements or maintenance that is required by the association.

An association should always try their very best to to contact a delinquent owner to advise them regarding what is owed. Every owner is entitled to see their ledger and know how much they are owed. An owner may request their ledger at any time and a HOA should be very willing to provide it to them.

Once a property has gone through probate and the court has decided who is the owner, all the past due fees are due and payable to the HOA unless the governing documents have a provision that says the debt rolls over to the association. Going forward, after probate has been settled, the new owner must pay their fair share.

First let us distinguish between a bank foreclosure and an association lien foreclosure. 

A Bank Foreclosure does not require the lender any amount of delinquent assessments. Texas is NOT a super lien state.

Also in the case of Bank foreclosure if the bank brings the property to an auction and there is a surplus, the association has a right to petition the court for the amount that is owed to them from the surplus funds.

Finally, a bank foreclosure does not extinguish the debt that is owed to the association and the association has the right to pursue the old owner in court for a monetary judgment to recover this debt. It may not be a secured debt but it is surely collectible unless the governing documents say that the debt owed to the association rolls over to the membership.

surely collectible unless the governing documents say that the debt owed to the association rolls over to the membership. 

Foreclosure should be the last desperate attempt to recover the association’s money. An HOA should consider a merit based collection agency to recover it’s delinquent money before moving to put people out of their homes. Notices should be given to a delinquent before any action is taken.

The old fashion way is to have the management company send a few courtesy letters to a delinquent owner and then send the file to the attorney for collections. Some boards of directors and managers will tell you that “it has always been done this way” but “the times they are a changing.”  HOAs can add a new link to the “value chain” in its operations by sending delinquent owners to merit based collection agencies who specialize in collections for HOAs and Condos.

The best way to handle collections for HOAs is to engage the owners and be armed with all the information you can acquire. Know the equity in the unit, read and understand the governing documents, find out where the owner is and then begin to engage in the collection efforts.

Once again, this is a very heavily regulated industry so this should be done by professional and licensed companies. Once you engage with an owner and work with them you would be surprised to see that most of them will cooperate and come to the table.

It’s not 2008 where nobody had equity in their properties and were willing to lose them because they had no value. People will pay and for the most part people want to pay. You just have to ask them and work with them.

By post petition assessments we are talking about a bankruptcy and the answer is absolutely yes. The board of directors has a fiduciary duty to collect these assessments and if the individual is not in bankruptcy there is nothing legally stopping them from the collection of delinquent assessments.

The statute of limitations on debt in Texas is four years. This section of the law, introduced in 2019, states that a payment on the debt (or any other activity) does not restart the clock on the statute of limitations.

No. An owner is an owner no matter what state they come from. There is no difference between an out of state owner from a collections perspective.

A HOA and Condo must be a properly registered corporation and up to date on all of their state and federal filings.  If a HOA or condo has not had legally noticed budget meetings that could make collections more difficult so it is important that a community association be properly governed.

There is nothing in the statutes that limit the amount of late fees and one must look to the governing documents to see if the association can charge late fees.

Regarding late interest, if the governing documents are silent the association can charge the maximum allowed by law which is 10%  as of the writing of this document. If the governing documents prescribe a late interest rate then that is the maximum a HOA or Condo can charge, provided it does not exceed 10% per annum.

If the file has not gone to the attorney it is advisable to contact the manager or treasurer of the association to get a copy of the delinquent ledger. Then review the ledger and if you can prove that you made payments that were not applied advise the management company.

If the file has been sent to a collection agency the law requires that the collection agency give the debtor 30 days to dispute the debt and just as mentioned above.

How The Future Collects

Secure Delinquencies

Traditionally a board of directors will have their management company send a delinquent file to an attorney for collections. The question is: Are attorneys collecting or merely foreclosing on your neighbors property? Are you receiving checks from your attorney from delinquent owners or titles to properties that you have to then monetize?

HOA collections should be about recovery, not punishment. At Axela Technologies we keep our eyes on the prize, and our only goal is to recover every cent that is owed to your association, period.

Advanced Technology

Collections is traditionally an outdated industry, relying on phone calls and threats to get the job done. At Axela, we believe that ethical collections is not only possible, but necessary if we are to succeed.

So we have brought our collections operation into the modern age with email, SMS, transparent reporting, and recorded calls our clients can review online. On the back end, our process relies on information gathering and prediction algorithms that help us determine the best way to approach each individual case, making sure we have access to all the facts.

Human Connection

Delinquent homeowners are real people with genuine problems that need to be addressed. We never forget that we are dealing with people’s homes and their very lives. 

Even in this digital age, the value of a real live human being cannot be underestimated. We combine our advanced technology with a human touch to construct a resolution that serves both the homeowner and the association. We do this by engaging them, listening to them, and helping them get on the right track. It’s good for the membership and great for your community association.

Why AXELA?

Axela Technologies provides no cost and no risk collections for community associations using best practice collections strategies, advanced proprietary technology, and highly trained customer service representatives. We are licensed in the state of Florida and compliant with the Fair Debt Collections Practices Act (FDCPA).

We are a specialized collections service which means a great deal in the community association industry. Understanding the nuances of how people fall behind in their maintenance fee payments and how to resolve their issues is a science and an art. At Axela Technologies we have what it takes to “move the needle” and recover 100% of what is owed to the association and the best part is that we are totally merit based. IF WE DON’T RECOVER YOUR MONEY WE DON’T GET PAID. A pretty simple concept but a bold promise at the same time.

Our proprietary software is second to none and we have the ability to keep the management and board of directors informed in real time 24/7. Our system never sleeps. The technology is fantastic and is only equaled by the people who will service your delinquent members and work with them to resolve their delinquency issues.

Schedule A Personalized Walk Through

In your free demonstration of Axela Technologies customer portal, you'll see how the process works for a delinquent owner and the transparency Axela provides into the collection process, with every action from our collections team being logged and documented for your review.