COVID-19 has forced local and national governments across the world to adopt emergency actions to combat the growing pandemic. Government action in the United States is no different. Congress has passed emergency action on family leave and payroll protection loans. Local governments have instituted shelter-in-place or stay home orders, and the term “essential employee” has entered the lexicon of everyday life. While some of these actions have altered our daily activities, none has greatly affected the way Texas communities operate. This could be changing soon because of a recent bill that passed the House of Representatives.
Before we discuss the bill, we want to briefly discuss what it means to be a property owners association (POA) in Texas.
What is a POA?
POAs are non-profit organizations made up of owners and residents in a single community. These associations can be master-planned communities, townhome complexes, high-rise condominium buildings and more. In Texas, POAs are subject to the Texas Nonprofit Corporations Act.
POAs operate and provide services to community members by collecting assessments from the owners and residents on either an annual, semi-annual, quarterly or monthly basis.
Throughout the COVID-19 pandemic, we have recommended that POAs continue their collections processes while considering hardship exceptions for owners directly affected by COVID-19. This is because POAs rely on the payment of assessments for the various duties and obligations it must perform to serve its owners and residents.
When assessments are not paid or collection action is not consistently instituted, the POA’s available funds decrease. The decrease forces the association into two options. One, the association can draw from its reserve, which creates its own set of issues, or two, it begins reducing services it is obligated to provide. This can then create a domino effect where services continue to deteriorate, and more owners refuse to pay due to the lack of services received for the funds paid.
The proposed law in Congress threatens to upend the way POAs continue their collections process and could force POAs to take drastic measures to protect their financial futures.
On Friday, May 15, the House passed H.R. 6800, a $3 trillion dollar funding bill known as the HEROES Act, to serve as a second round of relief for the ongoing COVID-19 pandemic. The bill is highlighted by a second round of $1,200 stimulus checks and $1 trillion in funding for state and local governments but buried inside of the massive 1,815-page bill is a section that could greatly affect the financial health of POAs.
Sec. 110402 titled “Restriction on Collections of Consumer Debt During a National Disaster or Emergency” would amend the Federal Fair Debt Collections Practices Act (FDCPA) to prohibit the collection of debt beginning on the date the bill is signed into law and ending 120 days after the President declares an end to the national emergency relating to the COVID-19 pandemic.
The prohibitions on debt collectors in this bill include:
(1) IN GENERAL.—Notwithstanding any other provision of law, no debt collector may, during a covered period—
(A) enforce a security interest securing a debt through repossession, limitation of use, or foreclosure;
(B) take or threaten to take any action to deprive an individual of their liberty as a result of nonpayment of or nonappearance at any hearing relating to an obligation owed by a consumer;
(C) collect any debt, by way of garnishment, attachment, assignment, deduction, offset, or other seizure, from—
(i) wages, income, benefits, bank, prepaid or other asset accounts; or
(ii) any assets of, or other amounts due to, a consumer;
(D) commence or continue an action to evict a consumer from real or personal property for nonpayment;
(E) disconnect or terminate service from a utility service, including electricity, natural gas, telecommunications or broadband, water, or sewer, for nonpayment; or
(F) threaten to take any of the foregoing actions.
Contact Your Representatives and Senators
If allowed to become law, the HEROES Act will be financially devastating to all Texas POAs. While Republican members of the Senate have stated they do not plan to move on this bill, Congress can act quickly. It is not too late to have your voice heard. Reach out to your district representative and Senators. A complete list of the Texas delegation to Congress with information on how to contact their offices can be found here.
If action is taken on either of these bills, we will update you via your email and through our blog posts. To ensure you receive the latest updates on action taken by Congress, subscribe to our blog updates today.