HOAs and Contracts

Today, we’re going to delve into Section 209.0052 of the Texas Property Code. This section specifically discusses the conditions under which an HOA can enter into a contract with a current board member, their relatives, or a company in which they have a significant financial interest. Let’s break it down together.

Firstly, note that subsection (a) exempts contracts entered into during the “development period.” The development period typically refers to a time when the property developer still maintains control of the HOA board.

Now, onto subsection (b). This part can seem intimidating with its legalese, but it’s essentially all about fairness and preventing conflicts of interest. If an HOA wishes to enter into a contract with a board member, their relative, or a company in which the said parties have a 51% or more financial interest, there are stringent requirements to ensure a level playing field.

  1. At least two other bids for the contract from parties unconnected with the board member or relative must be received by the association. This is to ensure that the HOA is not giving preferential treatment to insiders and is still considering other options.
  2. The board member involved cannot have access to other bids, participate in discussions about the contract, or vote on its award. These measures are designed to prevent any undue influence on the process.
  3. Full disclosure is required regarding any relationships or interests concerning the proposed contract. A majority of disinterested board members must authorize the contract, confirming that they are acting in good faith and with ordinary care.
  4. Finally, the board must certify by resolution that all these requirements have been met. This certification provides a layer of assurance that the process was followed correctly.

Subsection (c) adds another layer of consideration. If the proposed services cost more than $50,000, the association must solicit bids or proposals using a pre-established bid process. This regulation ensures that for significant expenditures, the association adheres to a fair and open process.

In conclusion, while it may seem complicated, Section 209.0052 is about ensuring fairness and transparency in HOA contracts, particularly when potential conflicts of interest arise. Remember, it’s always important to consult with a knowledgeable HOA attorney to understand the specifics as they apply to your situation.

Stay tuned for more enlightening discussions on the Texas Property Code in our next posts. And remember, when it comes to HOA law, Manning & Meyers is an excellent resource for your legal needs.

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