The 2021 Legislative Session saw several changes related to the ability of a property owners’ association to report a delinquent owner’s balance to a credit reporting agency.
Prior to reporting any delinquency of an owner to a credit reporting service, an owner must be sent a notice via certified mail and provided an opportunity to cure the delinquency in accordance with Texas Property Code Section 209.006.[1] This is the same type of notice that must be sent by the association prior to suspending an owner’s right to use a common area, filing suit against an owner (other than a suit seeking delinquent assessments), or levying a fine against an owner. This letter must describe the violation, state any amount due the association, inform the owner of the owner’s right to cure the matter, specify a date by which the matter must be cured, provide for the ability of the owner to obtain a hearing before the board, and notify the owner of the owner’s right to relief under the Servicemembers’ Civil Relief Act. If the owner cures the delinquency during the notice period, then the association may not report the delinquency to the credit reporting service.
In addition to the changes above, the Texas Legislature also created Section 209.0065 of the Texas Property Code, entitled “Credit Reporting Services.” This section places a number of additional requirements on the reporting of a delinquency to a credit reporting service. Most importantly, it expressly states that a property owners’ association may not charge a fee for the reporting of the delinquency to the credit reporting service.
Section 209.0065(a) states that a property owners’ association or its collection agent may not report any delinquent fines, fees, or assessments to a credit reporting service that are the subject of a pending dispute between the owner and the property owners’ association.[2]
Additionally, prior to a property owners’ association reporting the delinquent payment history of a property owner to a credit reporting service, the association must comply with certain notice requirements. The notice must be sent at least 30 business days prior to reporting to a credit reporting service and must be sent via certified mail, hand delivery, electronic delivery, or by other delivery means acceptable between the parties. The notice must include a detailed report of all delinquent charges owed. The owner must be given the opportunity to enter into a payment plan, though this requirement need not be contained in the notice.
Lastly, Section 209.0065(c) makes clear that a property owners’ association may not charge a fee to an individual owner for the reporting of a delinquent payment history of assessments, fines, and fees of property owners within the association’s jurisdiction to a credit reporting service.[3]
Section 209.0065 is only applicable to fines, fees, or assessments that become due after the effective date of this law (September 1, 2021). A fine, fee, or assessment that becomes due before the effective date of the law is governed by the law in effect immediately before the effective date of the law, and that law is continued in effect for that purpose.[4]
Due to the multiple and varied requirements as created by the Texas Legislature related to Credit Reporting Services, and the inability of associations to charge owners for this reporting, it is our firm’s recommendation that associations no longer consider the use of credit reporting services for their collection efforts. Should an association wish to continue using credits reporting services, care should be shown to create a proper written notice that specifically and strictly complies with the requirements of both Section 209.0065(b) and Section 209.006(a) of the Texas Property Code. If you would like our firm’s assistance in drafting a compliant notice, you may reach out to us at Casey@HOALegal.com.
[1] Texas Property Code § 209.006(a)
[2] Texas Property Code § 206.0065(a)
[3] Texas Property Code § 209.0065(c)
[4] Section 25 of SB 1588