Untitled Texas Attorney General Opinion ( 2017 )

KEN PAXTON
ATTORNEY GENERAL OF TEXAS
November 13, 2017
The Honorable Patrick M. Wilson Opinion No. KP-0171
Ellis County and District Attorney
109 South Jackson Re: Whether a Type A general-law
Waxahachie, Texas 75165 municipality may collect dues on behalf of
homeowners associatfons in exchange for
partial payment of the municipality's
accounting expenses (RQ-0163-KP)
Dear Mr. Wilson:
You ask whether a Type A general-law municipality may collect dues on behalf of
homeowners associations ("HOAs") in exchange for partial payment of the municipality's
accounting expenses. 1 The brief attached to your request states that the City of Ovilla (the "City")
is a Type A general-law municipality. Brief at l; see also TEX. Loe. Gov'TCODE §§ 5.001, 6.001.
The brief explains that pursuant to the City's agreements with two HO As, the City's monthly water
utility bill to these HOA members includes a charge for their monthly HOA dues. Brief at 1-2.
The City disburses the dues to the respective HO As, which in return pay the City for a portion of
the City's accounting software maintenance and service costs. Id. at 2. According to the brief, the
"accounting software was not needed for the collection and accounting of water utility bills; it was
purchased exclusively for the purpose of accounting for the collection of HOA member dues." Id.
at 1 n. l. The brief states that the City now questions whether it may lawfully continue to provide
dues collection services to the HOAs. Id. at 2.
We begin by considering the nature of HOA dues. As pertinent here, l:!:n HOA, also known
as a property owners association, is an in.corporated or unincorporated association that
(A) is designated as the representative of the owners of property in
a residential subdivision;
(B) has a membership primarily consisting of the owners of the
property covered by the dedicatory instrument for the residential
subdivision; and
1
See Letter from Honorable Patrick M. Wilson, Ellis Cty. & Dist. Att'y, to Honorable Ken Paxton, Tex. Att'y
. Gen. at I (May 22, 2017) and attached brief from Mr. Ron G. Macfarlane, Jr., on behalf of the City of Ovilla (May 17,
2017), https://www.texasattorneygeneral.gov/opinion/requests-for-opinions-rqs ("Request Letter" and "Brief,"
respectively).
The Honorable Patrick M. Wilson - Page 2 (KP-0171)
(C) manages or regulates the residential subdivision for the benefit
of the owners of property in the residential subdivision.
TEX. PROP. CODE§ 209.002(7); see also id.§ 209.003(a)-(b) (stating that chapter 209 applies only
to a residential subdivision subject to restrictions in a declaration making HQA membership
mandatory and authorizing HOA assessments on property in the subdivision). An HOA's
dedicatory instrument governs "the establishment, maintenance, and operation of a residential
subdivision," and restrictive covenants in the dedicatory instrument obligate property owners to
pay assessments to the HOA. Id. § 209.002(4). A regular assessment, including dues, must be
"designated for use by the [HOA] for the benefit of the reside:p.tial subdivision as provided by"
restrictive covenants in a dedicatory instrument filed in appropriate property records. Id.
§ 209.002(8)-(11). An HOA may use a special assessment, including dues, for certain capital
improvements in or maintenance and improvement of common areas, or "other purposes of the
[HOA] as stated in its articles of incorporation or the dedicatory instrument for the residential
subdivision." Id. § 209.002(12)(C). In sum, the obligation to pay HOA dues derives from a
contractual relationship among private property owners and their representative, the HOA; the
HOA must use dues only for the benefit of the private property owners. See generally Baywood
Estates Prop. Owners Ass 'n, Inc. v. Caolo, 392 S.W.3d 776, 782-84 (Tex. App.-Tyler 2012, no
pet.) (enforcement of HOA assessments through restrictive covenants); Harris Cty. Flood Control
Dist. v. Glenbrook Patiohome Owners Ass 'n, 933 S.W.2d 570, 580 (Tex. App.-Houston [1st
Dist.] 1996, writ denied) (stating that HOA covenants and restrictions are construed according to
the same construction principles applicable to contracts); Boudreaux Civic Ass 'n v. Cox, 882
S.W.2d 543, 547 (Tex. App.-Houston [1st Dist.] 1994, no writ) (stating that restrictive covenants
for property owners to pay a subdivision's maintenance fee are "treated as contracts among the
parties").
Next, we consider the authority of a general-law municipality such as the City. "General-
law municipalities ... are political subdivisions created by the State and, as such, possess those
powers and privileges that the State expressly confers upon them." Tex. Dep 't ofTransp. v. City
ofSunset Valley, 146 S.W.3d 637, 645 (Tex. 2004); TEX. CONST. art. XI,§ 4. A statutory grant of
authority includes implied powers, but only those "as are reasonably necessary to make effective
the powers expressly granted. That is to say, such as are indispensable to the declared objects of
the [municipalities] and the accomplishment of the purposes of [their] creation." Town of
Lakewood Vil!. v. Bizios, 493 S.W.3d 527, 536 (Tex. 2016) (quotation marks omitted). Therefore,
courts "strictly construe general-law municipal authority and [a]ny fair, reasonable, substantial
doubt concerning the existence of power is resolved by the courts against the [municipality], and
the power is denied." Id. (quotation marks omitted).
Chapter 51 of the Local Government Code generally authorizes a governing body of a
municipality to adopt an ordinance ''that: (1) is for the good government, peace, or order of the
municipality or for the trade and commerce of the municipality; and (2) is necessary or proper for
carrying out a power granted by law to the municipality or to an office or department of the
municipality." TEX. Loe. Gov'T CODE§ 51.001. A Type A general-law municipality may adopt
an ordinance "that is necessary for the government, interest, welfare, or good order of the
municipality as a body politic." Id. § 51.012. However, no statute expressly grants a Type A
The Honorable Patrick M. Wilson - Page 3 (KP-0171)
general-law municipality authority to provide debt collection services to a private entity such as
an HOA.
According to the brief, the proponents of the billing practice argue "that collecting dues on
behalf of the HOAs serves the welfare and good order of the municipality because the dues, once
turned over to the HOAs, are used for the maintenance of property which, in tum, maintains and
promotes property values in the City." Brief at 2. However, the City's statutory authority allows
it to adopt ordinances only as "necessary for the government, interest, welfare, or good order of
the municipality as a body politic." TEX. Loe. Gov'TCODE § 51.012 (emphasis added). From the
materials you submitted, it appears that HOA dues are unrelated to the City's provision of utility
services or any other municipal function or purpose, but instead are to be used for the direct benefit
of individual property owners. See Brief at 1-2 & n. l; see also TEX. PROP. CODE § 209 .002(8)
(defining "regular assessment" as a required payment to the HOA "that is designated for use by
the [HOA] for the benefit of the residential subdivision"). A court would likely conclude that a
Type A general-law municipality's authority to enact ordinances does not imply the authority to
collect fees for an HOA, because such authority is not "indispensable" or "necessary for the
government, interest, welfare, or good order of the municipality as a body politic." See TEX. Loe.
Gov'T CODE§ 51.012; Bizios, 493 S.W.3d at 536. 2 Therefore, a Type A general-law municipality
does not possess the authority to collect dues on behalf of an HOA. 3
2 Inother circumstances, this office determined that the general powers of a limited-authority governmental
entity do not impliedly authorize it to collect funds for other parties or for purposes unrelated to the entity's express
powers. Cf Tex. Att'y Gen. Op. Nos. GA-0774 (20 I 0) at 4-5 (determining that school districts are not expressly or
impliedly authorized to process payroll deductions for contributions to political committees); GA-0084 (2003) at 9-
10 (determining that a general-law city was not authorized to collect a fee included in a city's water bill to pay a
volunteer firefighter association); JM-338 (1985) at 1-2 (determining that a fee included in a city utility bill for
maintenance of the police department was an unauthorized tax).
3
Because we conclude that a Type A general-law municipality does not possess express or implied authority
to collect HOA dues, we do not consider a related question, whether the use of municipal resources to directly benefit
private interests constitutes an unconstitutional gift. See TEX. CONST. art. III, § 52(a); see also Tex. Att'y Gen. Op.
No. KP-0035 (2015) at 3 (determining that article III, subsection 52(a) requires that a municipality utilize municipal
resources "only to serve public purposes that are within the municipality's powers, not merely to benefit the public in
general" (citing State ex rel. Grimes Cty. Taxpayers Ass'n v. Tex. Mun. Power Agency, 565 S.W.2d 258, 265 (Tex.
Civ. App.-Houston [1st Dist.] 1978, writ dism'd)).
The Honorable Patrick M. Wilson - Page 4 (KP-0171)
SUMMARY
A Type A general-law municipality does not possess the
authority to collect dues on behalf of a homeowners association.
Very truly yours,
KEN PAXTON
Attorney General of Texas
JEFFREY C. MATEER
First Assistant Attorney General
BRANTLEY STARR
Deputy First Assistant Attorney General
VIRGINIA K. HOELSCHER
Chair, Opinion Committee
WILLIAM A. HILL
Assistant Attorney General, Opinion Committee