Inwood
North - the case that started it all
In
1987, the Texas Supreme Court ruled in the landmark case Inwood
North Homeowners Association v. Harris that
community associations did have the right to foreclose upon the lien
established by their respective declaration of covenants, conditions
and restrictions, or otherwise known as, the "deed restrictions."
The lien is a legal mechanism to secure payment of the association's
maintenance assessments which are secured by the property as collateral.
Not only did the Texas Supreme Court say that it was proper for these
community associations to foreclose upon their liens, but the Court
also held that the association's lien was superior
to the homestead rights of the individual homeowner since that homeowner
took title to the property subject to the restrictions already in
place at the time of purchase.
"First in time
wins, when the buyer has notice..."
The
legal principle essentially is this: first in time wins when the buyer
has notice. The homeowner's homestead right would never mature before
the association's lien right because that homeowner has, at a minimum,
"constructive" notice of the existence and content of the
deed restrictions on file for that community or neighborhood. The
legal reasoning goes that a prospective buyer of property should know,
or have reason to know (or discover prior to purchase), any encumbrance
or cloud on a title that is of record in the County where the property
resides. The law won't reward ignorance or buyers who don't exercise
their own due diligence. Bottom
line: execute a
title search before purchasing property, especially property offered
for auction at a Constable's sale.
Foreclosure remains a measure of "last
resort"
Pursuant
to the authority granted to community associations by their deed restrictions
and by judicial decree courtesy of the Texas Supreme Court, community
associations can seek foreclosure of their maintenance assessment
lien as a measure of last resort to recover delinquent maintenance
assessments from their member homeowners. Even though an association
has the legal right to foreclose, the reality is that very few properties
are actually ever foreclosed upon. In fact, the community associations
that NORTH|Law works with routinely offer alternate payment
arrangements to help homeowners discharge their indebtedness to the
association and avoid foreclosure, even
on the day of the sale.
Post-Foreclosure:
the homeowner's Right of Redemption
Even
after the association forecloses on a property to recover its delinquent
maintenance assessments, the Texas Property Code provides a vehicle
for the homeowner to buy back the property within 180 days following
the sale. This provision of the Texas Property Code is known as the
"right of redemption,"
and it can be found in Chapter 209 of the Code, otherwise known as
the Texas Residential Property Owners
Protection Act, or TRPOPA
for short.
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NORTH|Law