Stack 2: Costs & Taxes · 4 min read
Packing notes
- The seller must give you a notice that membership in the association is mandatory.
- The association must deliver the resale certificate within 10 business days of a proper request.
- Texas law limits HOA bans on solar devices, flags and some other items.
Many Austin-area homes, especially in newer subdivisions in the suburbs, come with a property owners’ association. Membership is not optional once you buy, and the association’s rules and dues become part of the cost of owning. Texas law gives buyers a set of documents to review before closing and gives owners some protections afterward. Here is what to look for.
The membership notice
Under Section 5.012 of the Texas Property Code, a seller of a home that is subject to membership in a property owners’ association must give the buyer a written notice. Its wording is set by law and begins plainly: as a purchaser of property in the community, you are obligated to be a member of the association, and the restrictive covenants governing the use and occupancy of the property are recorded in the county’s real property records.
If the seller does not give the notice before the contract is signed, the statute lets the buyer terminate the contract for any reason within the earlier of seven days after receiving the notice or the date of closing. That right is the buyer’s exclusive remedy for a missing notice, so it is worth knowing about.
The resale certificate
The most useful document is the resale certificate. Under Section 207.003, within 10 business days after a written request from the owner, the buyer or a title company, with proof of the requester’s authority, the association must deliver a current copy of the subdivision’s restrictions, its bylaws and rules, and a resale certificate prepared no more than 60 days before it is delivered. The certificate must state, among other things:
- Any right of first refusal or other restriction on transferring the property.
- The frequency and amount of regular assessments.
- Any special assessment approved and still due.
- Amounts the current owner owes the association.
- Capital expenditures approved for the current fiscal year.
- The amount of reserves for capital expenditures.
Tip: Read the resale certificate during your option period. A large special assessment or thin reserves can mean a big bill soon after you move in.
Rules online
Section 207.006 requires an association with at least 60 lots, or one that uses a management company, to post its current dedicatory instruments filed in the county deed records on a website available to its members. Ask the seller or the management company for the link early, so you can read the restrictions on fences, paint colors, parking, rentals and additions before you commit.
Enforcement and hearings
Chapter 209 of the Property Code, the Texas Residential Property Owners Protection Act, governs how most associations enforce their rules. It includes requirements for notice before enforcement action, a hearing before the board, open board meetings, access to association records and limits on foreclosure. Section 209.0092 requires a court process for most association foreclosures.
Payment plans
If you ever fall behind on dues, Section 209.0062 requires an association with more than 14 lots to adopt guidelines for an alternative payment schedule, allowing partial payments on delinquent assessments without additional monetary penalties. The minimum term is three months, and an association is not required to allow a plan longer than 18 months.
What an HOA cannot fully ban
Chapter 202 limits what restrictive covenants may do. It contains separate sections on solar energy devices, certain roofing materials, flag display, religious items, standby electric generators, swimming pool enclosures and security measures, among others. The details vary by section: in many cases the association may regulate placement or appearance but may not prohibit the item outright. Section 202.008 also limits fines during a residential water restriction.
Architectural review
Many associations require approval before you change the outside of the house. Chapter 209 includes rules for architectural review authorities, including who may serve on them. If you plan a fence, a pool, solar panels or an addition, read the approval process and how long it takes before you buy, because a project you were counting on may need the committee’s sign-off first.
Rentals and land use
If you might rent the home out later, read the leasing rules. Section 209.016 deals with how associations regulate residential leases. Rules on short-term rentals in particular can differ between subdivisions, so check the restrictions rather than assuming.
Budgeting for the association
| Cost | Where to find it |
|---|---|
| Regular assessments | Resale certificate |
| Special assessments already approved | Resale certificate |
| Transfer or resale certificate fees | Ask the association and the title company |
| Future increases | Budget and reserves on the resale certificate |
Association dues are only part of the cost of owning in a newer subdivision. Some are also in municipal utility districts with their own tax; Round Rock, Cedar Park or Pflugerville? Comparing Austin’s Big Northern Suburbs explains how to check. For the other costs you will see at closing, read Closing Costs in Texas: Title Insurance, Lender Fees and What to Expect, and for the order of the whole purchase, Buying a Home in Austin, Step by Step: From First Budget to Keys.
Questions to ask before you offer
- How much are the dues, and how often have they gone up?
- Is there a special assessment approved or under discussion?
- What do the restrictions say about fences, sheds, paint and parking?
- Are there leasing limits?
- Where are the association’s rules posted online?