Montebello HOA Documents: What to Read First and What to Ask

Which Montebello document do you read first, and why?

Read the declaration first, and read its amendments as part of it rather than after it. Section 82.055 makes the declaration the only document that must carry a description of the boundaries of each unit, including its identifying number, an allocation to each unit of its allocated interests, any restrictions on use, occupancy or alienation, and the method of amending the declaration. The same section requires a plat or plan, or the recording data for one already recorded, and a statement of the association's obligation to rebuild or repair after a casualty.

Section 82.053 is the second reason. Where there is a conflict between the provisions of the declaration and the bylaws, the declaration prevails, except to the extent the declaration is inconsistent with the statute. A reading order built the other way round can leave you relying on a bylaw the declaration overrides.

The bylaws come second because they govern the administration and operation of the condominium. Section 82.106 requires them to set the number of board members and the titles of the officers, the qualifications, powers, duties and terms of office, the manner of electing and removing a board member or officer, the powers the board or an officer may delegate to a managing agent, the method of amending the bylaws, and the manner of notice of meetings. The rules follow the bylaws, because they sit under them.

Then the money, in the order the law produces it. Under Section 82.112, after an initial assessment by an association, assessments must be made at least annually and must be based on a budget adopted at least annually, so a current operating budget exists to be read. Section 82.114 then requires the association to annually obtain an independent audit of the records as a common expense, with copies made available to the unit owners. The reserve figures come next, from the resale certificate, then the insurance summary attached to it, and the minutes last.

One check makes the whole reading worth doing: whether the copy in your hands is the current one. Section 82.070 stops an association or a board from meeting to adopt a change to the declaration, articles of incorporation, bylaws or rules unless each owner has been given a document showing the specific change, and that document has to be given to each owner after the twentieth day but before the tenth day preceding the meeting. It counts as given on the date of personal delivery shown by a receipt the owner signed, or on the postmark date of a properly addressed, postage-paid mailing, so what matters is the sending rather than the reading.

What is a resale certificate required to contain?

Section 82.157 requires a resale certificate issued by the association to contain the association's current operating budget and fourteen numbered statements. Treat that list as a checklist, because a blank left unfilled is a question nobody has answered.

Eight of the statements are financial: any right of first refusal or other restraint in the declaration that restricts the right to transfer a unit; the amount of the periodic common expense assessment, and the unpaid common expenses or special assessments currently due and payable from the selling owner; other unpaid fees or amounts the selling owner owes the association; capital expenditures approved for the next 12 months; the amount of reserves for capital expenditures, and any part of those reserves designated for a specified project; unsatisfied judgments against the association; the nature of any pending suits against it; and the insurance coverage provided for the benefit of unit owners.

The rest are disclosures and identifiers: whether the board has knowledge that alterations or improvements to the unit or to its assigned limited common elements violate the declaration, bylaws or rules; whether the board has received notice from a governmental authority about violations of health or building codes; the remaining term of any leasehold estate affecting the condominium and the provisions governing an extension or renewal; the name, mailing address and telephone number of the association's managing agent, if any; the current operating budget and balance sheet; and every fee payable on a transfer of ownership, each described, with the payee and the amount.

The promulgated certificate form sets those statutory items out as lettered blanks and names three required attachments: the operating budget, the insurance summary and the balance sheet. Its own face prints the notice that the certificate must be prepared no more than three months before the date it is delivered to the buyer.

Read the delinquency line closely, because reliance on it has weight. Under the same section, a purchaser, lender, or title insurer who relies on a resale certificate is not liable for any debt or claim the certificate does not disclose, and an association may not deny the validity of any statement in it. Where a properly executed certificate understates the delinquent sums the selling owner owes, the buyer is not liable for delinquencies unpaid on the date the certificate was prepared that exceed the total it states. What a certificate leaves alone is the association's right to recover debts or claims that arise or become due after the date it was prepared, and its lien securing future assessments.

Section 82.113 is why an unpaid balance is more than an administrative line. Assessments there mean regular and special assessments, dues, fees, charges, interest, late fees, fines, collection costs, attorney's fees and any other amount due to the association, all of them enforceable as assessments unless the declaration provides otherwise, a personal obligation of the unit owner and secured by a continuing lien created by recordation of the declaration. At any time before a nonjudicial foreclosure sale, an owner may avoid foreclosure by paying all amounts due the association.

How long does the association have to produce one, and what can it charge?

Ten days, and up to $375. Section 82.157 requires the association to furnish the selling owner or the owner's agent a resale certificate, signed and dated by an officer or authorized agent, within ten days after the date it receives a written request from a unit owner, and it allows a reasonable and necessary fee, not to exceed $375, to furnish one.

A second clock runs alongside the first. The certificate must have been prepared not earlier than three months before the date it is delivered to the purchaser, so one ordered long before a contract goes stale and has to be reordered. Asking for it at the point you decide to sell, rather than when a buyer asks, leaves room for both clocks.

The records behind it are meant to be ready. Section 82.114 requires the association to keep detailed financial records that comply with generally accepted accounting principles and that are sufficiently detailed to enable the association to prepare a resale certificate under Section 82.157.

Where the ten-day period passes without a certificate, or without some item required in it, the statute gives the seller a substitute. The owner may provide the purchaser with a sworn affidavit signed by the owner, stating that the owner requested information from the association about its financial condition as the section requires, and that the association did not timely provide the certificate or the information required in it.

What can you ask for beyond the certificate, and how do you ask?

The books and records, under Section 82.1141. Notwithstanding a provision in a dedicatory instrument, the association has to make its books and records, financial records included, open and reasonably available for examination by a unit owner, or by a person the owner designates in a signed writing as agent, attorney or certified public accountant, and the owner is entitled to copies of the information in them.

The mechanics are specific and worth following exactly. Send the request by certified mail, with enough detail to describe the records you want, to the mailing address of the association or its authorized representative as reflected on the most current management certificate. The request has to contain an election either to inspect the books and records before obtaining copies or to have the association forward copies.

Then the clock runs, over whatever is in the association's hands. If you asked to inspect, the association sends written notice of dates during normal business hours on or before the tenth business day after it receives the request. If you asked for copies, it produces them on or before the tenth business day. Each of those duties reaches the books and records to the extent they are in the possession, custody or control of the association. If it cannot produce in time, it has to tell you so in writing and state a date by which the records will be sent or made available for inspection, no later than the fifteenth business day after that notice is given. A business day here is a day other than Saturday, Sunday, or a state or federal holiday.

Cost has a precondition. The board must adopt a records production and copying policy prescribing the costs it will charge for compilation, production and reproduction, and it may not charge an owner for that work unless the policy has been recorded.

Some material stays back. Except as Subsection (k) of that section provides, and to the extent it appears in meeting minutes, the association is not required to release an individual owner's violation history, an owner's personal financial information including records of payment or nonpayment of amounts due, an owner's contact information or address, or information related to an employee, including personnel files. Read that subsection before you accept a refusal, because it carries a carve-out this page does not set out.

An association composed of eight or more units also has to adopt and comply with a document retention policy, so ask for that too: governing documents and their amendments kept permanently, financial books and records seven years, account records of current owners five years, contracts with a term of a year or more four years after the term expires, minutes of owner and board meetings seven years, and tax returns and audit records seven years.

Minutes sit last in the reading order. Meetings of the association and board must be open to unit owners, subject to the board's right to reconvene in closed executive session on personnel, pending litigation, contract negotiations, enforcement actions, matters involving the invasion of privacy of individual owners, and matters kept confidential by request and board agreement, and the general nature of that business has to be announced at the open meeting first. Where the minutes have not caught up, a written request obliges the association to tell you the time and place of the next regular or special board meeting.

Which of these documents can you read without asking anyone?

The management certificate, and through it the recording data for the declaration. Section 82.116 requires an association to record a management certificate in each county in which any portion of the condominium is located, and the county clerk records it in the real property records and indexes it as a Condominium Association Management Certificate.

It has to state the name of the condominium and of the association, the location of the condominium, the recording data for the declaration and any amendments, the association's mailing address, the name, mailing address, telephone number and e-mail address of any management company, the website address of any site on which the dedicatory instruments are available under Section 82.1142, and the amount and description of each fee charged to a seller or a buyer on a transfer.

It is filed centrally as well. The association has to file the certificate, or an amended certificate, electronically with the Texas Real Estate Commission not later than the seventh day after filing it for recording, and the commission collects those filings to make the data accessible to the public. An amended certificate is due within thirty days after the association has notice of a change in the recorded information. A consequence is attached: an owner is not liable for attorney's fees the association incurs collecting a delinquent assessment, or interest accruing on it, during a period when the certificate is not recorded with a county clerk or filed with the commission.

The newer rule points at a second place to look. Section 82.1142 applies to the association of a condominium composed of at least 60 units, and to any association that has contracted with a management company, and it requires the current version of the association's dedicatory instruments filed in the county deed records to be available on a website maintained by the association or a management company and accessible to association members. Montebello has 98 homes, so the size threshold in that section is met, and whether a members' site exists here is a fair question to put to the board.

What questions do these documents leave open?

Four of them, and the statute points at where each answer comes from. The first is who pays when the association's insurance responds. Under Section 82.111, where the association's policy covers the loss and the cost to repair damage to a unit or common element exceeds the applicable deductible, the dedicatory instruments determine payment for the cost of the association's deductible and costs incurred before insurance proceeds are available. Where they are silent, the board decides by resolution, and if the board approves no resolution, the costs are a common expense. A resolution of that kind counts as a dedicatory instrument and has to be recorded in each location where the declaration is recorded, so ask whether one exists.

The second is what the association's policy reaches inside a home. Where a building contains units having horizontal boundaries described in the declaration, the insurance the association maintains must include the units to the extent reasonably available, and it need not include improvements and betterments installed by unit owners. That single sentence decides which policy answers for a finished kitchen.

The third is reserves. Section 82.112 says a declaration may allow the accumulation of reserve funds for an unspecified period to provide for any anticipated expense of the condominium, which makes reserves a permission in Texas rather than a requirement, and the resale certificate reports reserves for capital expenditures if any exist.

The fourth is an old clause that may have lapsed. Section 82.0675 makes a provision of a declaration or recorded contract requiring owners to maintain a membership in a specified private club invalid after the tenth anniversary of the date it was recorded or renewed, unless it was renewed after the ninth anniversary in the manner the declaration or recorded contract provides for amending the declaration or recorded contract, and the text of the renewed provision was filed in the real property records of each county where the condominium is located. An owners' association may not enact or renew such a provision as a bylaw.

A buyer's lender then asks a different set of questions. Fannie Mae's selling guide is what one buyer of mortgage loans requires before it will buy a loan, not law. It treats a project as needing critical repairs where repairs or replacements significantly affect safety, soundness, structural integrity or habitability, or the project's financial viability or marketability, and it names unfunded repairs costing more than $10,000 per unit that should be undertaken within the next 12 months as one example, which by its own terms does not include repairs made by the unit owner or repairs funded through a special assessment. Items it says to consider include sea walls, elevators, waterproofing, stairwells, balconies, foundation, electrical systems, parking structures and other load-bearing structures.

For a special assessment, current or planned, the lender has to establish its purpose, when it was approved, whether it is planned or already being executed, the original amount and the remaining amount to be collected, and the expected date it will be paid in full. Where a structural or mechanical inspection was completed within three years of the lender's project review, the lender reads the report, which cannot indicate that critical repairs are needed, that evacuation orders are in effect, or that regulatory actions are required. The documentation it accepts includes board meeting minutes, engineer reports, inspection reports, reserve studies, and lists of necessary repairs or special assessments from the association or its management company.

A full review reads the budget and the delinquency picture against stated thresholds: no more than 15 percent of the units 60 days or more past due on common expense assessments, the same ceiling on each special assessment, and a projected budget that includes line items pertinent to the project type and provides for the funding of replacement reserves for capital expenditures and deferred maintenance. Separate guidance asks whether the association's fidelity or crime policy includes coverage for the acts of any management agent, whether the working and reserve accounts are separate with access controls, whether the bank sends monthly statements directly to the association, and whether two board members sign checks written on the reserve account.

When in a sale do these documents have to change hands?

Before a contract is signed. Section 82.157 requires a selling owner other than a declarant, before executing a contract or conveying the unit, to furnish the purchaser a current copy of the declaration, the bylaws, any association rules, and a resale certificate prepared within the three months before it is delivered.

Section 82.156 is what happens when they arrive later than that. Where the purchaser has not received the declaration, bylaws and rules before executing a contract of sale, or the contract has no underlined or bold-print provision acknowledging receipt and recommending that the purchaser read them before signing, the purchaser may cancel the contract before the sixth day after the date the purchaser receives those documents. Where the purchaser has not received a resale certificate before executing a contract of sale, the same six-day right runs from receipt of the certificate or from the purchaser's waiver under Section 82.157, whichever occurs first. Cancellation is by hand-delivered written notice or by certified mail, return receipt requested, inside the cancellation period, and it is without penalty: payments made before cancellation must be refunded. A selling owner may not require a purchaser to close until the declaration, bylaws and any rules have been given.

TREC's promulgated Residential Condominium Contract (Resale) carries the same sequence in blanks the parties fill in. One box records that the buyer already has the declaration, bylaws and rules. The alternative gives the seller a stated number of days after the effective date to deliver them at the seller's expense, and gives the buyer seven days from receipt to terminate by written notice with the earnest money refunded. The certificate provision works the same way, requires a form promulgated by TREC or required by the parties, and requires the certificate to be prepared at the seller's expense no more than three months before delivery, carrying at least what Section 82.157 requires. A third box records the seller's affidavit that the association did not provide a certificate, with both parties waiving the requirement to furnish one. The contract keeps the buyer's statutory right to terminate alive alongside its own.

Two more provisions bear on timing. Where the documents reveal a right of refusal under which the association or a member may buy the property, the effective date moves to the date the buyer receives the association's certification that the seller complied and that everyone who could exercise the right has not done so or has waived it, and if that certification does not arrive within the number of days the parties wrote in, or the right is exercised, the contract terminates and the earnest money is refunded. The termination option, granted for the fee the parties name, gives the buyer an unrestricted right to terminate within a stated number of days after the effective date, and that period is the reading time most buyers actually use.

What can this page not tell you?

Six things sit outside what the statutes and forms above settle.

Montebello's own declaration is the recorded instrument itself, and the county's index entry gives its recording data rather than its wording, so ordering the instrument is a separate step.

What the association holds in reserve, what it has assessed specially, what its insurance deductible is and what its accounts show all come from the association, through a resale certificate and a records request.

Whether the association employs a managing company appears on the management certificate, which has to carry a management company's name, mailing address, telephone number and e-mail address, rather than on an index entry.

Whether this association maintains a members' website under the 2025 rule is a question for the board, and the website address of any such site belongs on the recorded certificate.

Your own home's periodic common expense assessment and its unpaid balance are on your own resale certificate, which only the association issues.

The ceilings and deadlines above come from statutes the legislature has amended before, so read the current text of a section before relying on a figure next year.