Can a homeowners association or developer foreclose on a Texas home for unpaid HOA fees even though homestead law protects homes from creditors?

TX AG Opinion GA-0279: Do developer liens beat homestead protection?

Plain-English summary

A Texas state representative asked whether a developer's practice of placing "one-party foreclosable contractual liens" on subdivision land, meaning liens for homeowners' association fees that the developer creates unilaterally before selling the lots, violates the homestead protections in article XVI, section 50 of the Texas Constitution. Texas homestead law generally shields a home from being taken by creditors, with only a short list of constitutional exceptions like purchase-money debt, tax liens, and home-improvement liens. HOA assessment liens are not on that list, so the question was whether they can still be enforced by foreclosure against a homeowner's homestead.

The opinion answered based on two Texas Supreme Court decisions: Inwood North Homeowners' Ass'n, Inc. v. Harris from 1987, and Brooks v. Northglen Ass'n from 2004, which reaffirmed it. Under Inwood, when a subdivision developer files a declaration of covenants and restrictions in the property records before any lot is sold, and that declaration creates a lien to secure future association fees, the lien attaches to the land before a buyer ever acquires homestead rights in it. Because Texas homestead protection cannot undo a lien that already existed on the property, a subsequent purchaser who buys with notice of the recorded declaration takes the property subject to that lien, and the association can foreclose for nonpayment without violating the purchaser's homestead rights. The opinion noted the 2001 Texas Residential Property Owners Protection Act added procedural protections for homeowners, like a right to redeem property after foreclosure, but did not change Inwood's core holding. It also flagged that whether a specific covenant is actually enforceable by foreclosure still depends on the details, since Brooks itself refused to let an association foreclose for late fees the original deed restrictions never mentioned. The opinion declined an invitation in the briefing to reconsider or effectively overrule Inwood, explaining that changing established Texas Supreme Court precedent is not something an attorney general opinion has the authority to do.

Currency note

This opinion was issued in 2004. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Who this opinion affected (as of 2004)

Homeowners in deed-restricted subdivisions: The opinion confirmed that if a developer recorded a covenant lien for association fees before a lot was purchased, that lien could be foreclosed for nonpayment even though the property later became the owner's homestead, so long as the purchaser had notice of the recorded declaration.

Property developers and homeowners associations: The opinion confirmed that recording a declaration of covenants and restrictions with a lien for assessments before selling subdivision lots remained a lawful way to secure fee collection through foreclosure, unaffected by the 2001 Texas Residential Property Owners Protection Act's added procedural protections.

State legislators considering changes to homestead or HOA lien law: The opinion made clear that any policy disagreement with the Inwood rule was a matter for the legislature or the Texas Supreme Court to address, not something the attorney general could resolve by opinion.

Common questions

Can a Texas homeowners association foreclose on someone's home for unpaid assessment fees?
Yes, according to this 2004 opinion, if the developer recorded the covenant creating the lien before the property became the owner's homestead and the purchaser had notice of it in their deed or chain of title, following Inwood North Homeowners' Ass'n, Inc. v. Harris and Brooks v. Northglen Ass'n.

Does Texas homestead law protect a home from every kind of lien?
No. The Texas Constitution lists specific exceptions like purchase-money liens, tax liens, and home-improvement liens, and this opinion explained that a pre-existing developer covenant lien for HOA fees can also be enforced by foreclosure because it attached to the land before homestead rights arose, even though it isn't one of the constitution's named exceptions.

Does every HOA fee, including late fees, get the same foreclosure protection as the base assessment?
Not necessarily. The opinion pointed to Brooks v. Northglen Ass'n, where the Texas Supreme Court refused to allow foreclosure for late fees because the original deed restrictions never gave homeowners notice that late fees could be added, showing that foreclosure eligibility depends on what the specific recorded covenants actually say.

Background and statutory framework

Texas has protected homesteads from forced sale by creditors since 1839, and today that protection sits mainly in article XVI, section 50 of the Texas Constitution and chapter 41 of the Property Code. Section 50 says no mortgage, trust deed, or other lien on a homestead is ever valid unless it secures one of eight specifically listed kinds of debt, covering things like the purchase price, property taxes, certain refinancing, home-improvement costs, and reverse mortgages. HOA assessment liens are not among those eight categories.

The Texas Supreme Court addressed this gap in Inwood North Homeowners' Ass'n, Inc. v. Harris in 1987. There, a subdivision developer had recorded a declaration imposing a covenant to pay maintenance fees on every lot, secured by a lien, before any lots were sold. The court held that a landowner is free to impress land with such a covenant, and because the developer created the lien while it still owned the land, the lien predated any purchaser's homestead rights. Since "[h]omestead rights... may not be construed so as to avoid or destroy pre-existing rights," a homestead claim could not defeat a lien that already existed on the property when the homestead right arose, and the court allowed foreclosure. The 2001 Texas Residential Property Owners Protection Act added new procedural safeguards for homeowners in these communities, including redemption rights after foreclosure, but the opinion noted it left Inwood's core holding intact: a developer may impose an enforceable, foreclosable covenant lien before sale, and a subsequent purchaser with notice is bound by it.

In 2004, the Texas Supreme Court revisited the issue in Brooks v. Northglen Ass'n, reaffirming Inwood's basic rule while also showing its limits. The Brooks court held that because the specific deed restrictions in that case never gave homeowners notice that late fees could be assessed and foreclosed on, that particular remedy was not enforceable, even though the base assessment lien was. Applying this framework, the opinion concluded that a developer's unilateral, pre-sale covenant lien does not violate a subsequent purchaser's constitutional or statutory homestead rights, but whether a specific lien is actually enforceable by foreclosure turns on the particular instruments and notice involved in each case. The opinion also addressed briefing that urged it to reconsider or effectively overturn Inwood as bad policy, responding that the attorney general's constitutional role is to advise on the law as it currently stands, not to legislate or create binding judicial precedent, so any change to the Inwood rule would have to come from the legislature or the Texas Supreme Court itself.

Citations

Statutes:

• Tex. Const. art. XVI, § 50
• Tex. Const. art. XVI, § 50(a)(1)-(8)
• Tex. Const. art. XVI, § 50(c)
• Tex. Const. art. XVI, § 51
• Tex. Const. art. XVI, § 52
• Tex. Const. art. IV, § 22
• Tex. Prop. Code Ann. §§ 41.001-.024 (Vernon 2000 & Supp. 2004-05)
• Tex. Prop. Code Ann. § 41.001(a)-(b) (Vernon Supp. 2004-05)
• Tex. Prop. Code Ann. §§ 209.001-.011 (Vernon Supp. 2004-05)
• Tex. Prop. Code Ann. §§ 209.006-.011 (Vernon Supp. 2004-05)
• Tex. Gov't Code Ann. § 402.042 (Vernon 1998)

Cases:

• Estate of Johnson v. Comm'r, 718 F.2d 1303, 1307 n.13 (5th Cir. 1983)
• Inwood N. Homeowners' Ass'n, Inc. v. Harris, 736 S.W.2d 632, 633 (Tex. 1987)
• Inwood N. Homeowners' Ass'n, Inc. v. Harris, 707 S.W.2d 127, 129 (Tex. App.-Houston [1st Dist.] 1986), rev'd on other grounds, 736 S.W.2d 632 (Tex. 1987)
• United States v. West, 22 F.3d 586, 598 n.33 (5th Cir. 1994)
• Brooks v. Northglen Ass'n, 141 S.W.3d 158, 170 (Tex. 2004)
• Bullock v. Enserch Exploration, Inc., 614 S.W.2d 215, 218, 220 (Tex. Civ. App.-Austin 1981, writ ref'd n.r.e.), cert. denied, 455 U.S. 946 (1982)
• Bass v. Aransas County Indep. Sch. Dist., 389 S.W.2d 165, 176 (Tex. Civ. App.-Corpus Christi 1965, writ ref'd n.r.e.)
• Holmes v. Morales, 924 S.W.2d 920, 924 (Tex. 1996)
• Tex. Att'y Gen. Op. No. GA-0237 (2004)
• Tex. Att'y Gen. LO-97-019

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0279
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2004/ga0279.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS

GREG ABBOTT

December 9, 2004

The Honorable Fred Hill
Chair, Committee on Local Government Ways and Means
Texas House of Representatives
Post Office Box 2910
Austin, Texas 78768-2910

Opinion No. GA-0279

Re: Whether the placement of one-party foreclosable contractual liens on land by a developer that supersede the homestead rights created in article XVI, section 50 of the Texas Constitution violates the Texas Homestead Act (RQ-0236-GA)

Dear Representative Hill:

You have asked a specific question: "Whether the placement of one-party foreclosable contractual liens on the land by the developer that supersede the homestead rights created in Article XVI, Section 50 of the Texas Constitution violate[s] the Texas Homestead Act."[1]

I. Homestead Protection in the Texas Constitution and Statutes

We begin by briefly reviewing Texas homestead protections from forced sale. Texas is credited with enacting the first homestead law in 1839. See Estate of Johnson v. Comm'r, 718 F.2d 1303, 1307 n.13 (5th Cir. 1983) (citing 1839 Laws of the Republic of Texas). Today, Texas' homestead protection from creditors' liens is found principally in article XVI, section 50 of the Texas Constitution and chapter 41 of the Property Code. See Tex. Const. art. XVI, § 50; Tex. Prop. Code Ann. §§ 41.001-.024 (Vernon 2000 & Supp. 2004-05); see also Tex. Const. art. XVI, §§ 51 (defining homestead), 52 (descent and distribution). Article XVI, section 50 not only protects a homestead from forced sale by creditors but provides that "[n]o mortgage, trust deed, or other lien on the homestead shall ever be valid unless it secures a debt described by this section." Tex. Const. art. XVI, § 50(c). Article XVI, section 50 expressly enumerates eight exceptions to homestead protection from forced sale: (1) purchase money security, (2) taxes due on the homestead, (3) certain owelty on partition, (4) refinancing of certain liens, (5) security for improvements, (6) certain circumscribed extensions of credit in the nature of an equity loan, (7) reverse mortgages, and (8) special financing concerning manufactured homes. Id. § 50(a)(1)-(8).

Section 41.001 of the Property Code reiterates exceptions for homestead and burial plots. Tex. Prop. Code Ann. § 41.001(a)-(b) (Vernon Supp. 2004-05) (listing seven of the eight constitutional exceptions). The remainder of chapter 41 concerns homestead issues not pertinent to your inquiry.[2]

II. Inwood North Homeowners' Association, Inc. v. Harris

The Texas Supreme Court addressed in 1987 whether Texas homestead laws preclude foreclosure of a developer's lien for homeowners' association fees and assessments. See generally Inwood N. Homeowners' Ass'n, Inc. v. Harris, 736 S.W.2d 632 (Tex. 1987). In Inwood, a subdivision developer had filed a declaration of restrictions and covenants in local real property records reciting that all lots in the subdivision were impressed with a covenant to pay a maintenance fee or other assessment to a homeowners' association or similar entity, that such covenants run with the land, and that such covenants were secured by a lien. See Inwood, 736 S.W.2d at 633. Individuals who thereafter purchased property in the subdivision received a deed referencing the covenants to pay the fees and the lien against the property to secure payment. See id. The subdivision's homeowners' association sued to recover delinquent maintenance fees from homeowners and sought foreclosure of liens securing the fees. Id. at 634.

The court in Inwood acknowledged that security for homeowners' association fees was not a true vendor's lien, but was instead more in the nature of a contractual lien, not among the express constitutional exceptions to homestead protection. See id. The court observed that "[h]omestead rights, however, may not be construed so as to avoid or destroy pre-existing rights," and that "[i]t has long been held that an encumbrance existing against property cannot be affected by the subsequent impression of the homestead exception on the land." Id. at 635.

The court in Inwood held that an owner is free to impress property with a covenant running with the land, and that a "developer of the subdivision, as owner of all land subject to the [developer's] declaration, is entitled to create liens on his land to secure the payment of assessments." Id. at 634. The court further determined that subsequent purchasers were bound by references in their deeds to the covenants as well as by all instruments in a particular purchaser's chain of title. See id. at 635. Because the developer had placed the restrictions on the land before it became the homestead of the homeowners, the court concluded that "the homeowners were subject to the liens in question and an order of foreclosure would have been proper." Id. at 635-36.

The court in Inwood stated that its decision was reinforced by the legal principle that "[a] homestead right in real property cannot rise any higher than the right, title or interest acquired by the homestead claimant." Id. at 636. The court determined that the purchase of a lot in the subdivision carried with it "as an inherent part of the property interest, the obligation to pay association fees for maintenance and ownership of common facilities and services," along with the concomitant remedy of foreclosure for failure to pay those fees. Id. The court concluded that constitutional homestead rights "will not operate to circumvent an inherent characteristic of the property acquired" and that the homeowners' association was entitled to foreclose its contractual lien on the houses of delinquent homeowners. Id.

III. Post-Inwood Developments

In 2001, the 77th Legislature enacted the Texas Residential Property Owners Protection Act (the "Act"). See Act of May 27, 2001, 77th Leg., R.S., ch. 926, § 1, 2001 Tex. Gen. Laws 1857 (adding chapter 209 to the Property Code, codified at Tex. Prop. Code Ann. §§ 209.001-.011 (Vernon Supp. 2004-05)). The Act was added "to provide guidelines for the operations of [community] associations as well as specific protections for Texas homeowners living in association-managed communities." Senate Comm. on State Affairs, Bill Analysis, Tex. Comm. Substitute S.B. 507, 77th Leg., R.S. (2001) (enrolled version). The Act gives owners of property a number of procedural protections, including the right to redeem property following foreclosure. See Tex. Prop. Code Ann. §§ 209.006-.011 (Vernon Supp. 2004-05). The Act does not, however, change the essential holdings in Inwood that (1) a property owner such as a developer may impress the property with a covenant to pay association maintenance fees, enforceable by foreclosure, by filing a declaration of covenants and restrictions in the deed records, (2) a subsequent purchaser with notice of the declaration in the purchaser's deed and chain of title is bound by the declaration, and (3) the subsequent purchaser's rights that arise upon purchase do not circumvent the remedy of enforcing the covenants by foreclosure.

Recently, the Texas Supreme Court reiterated Inwood's holding:

In Inwood, we considered whether the homestead laws of Texas protect a homeowner against foreclosure for failure to pay homeowners association assessments. As a general rule, a homestead is protected against the debts of those who live in the homestead. However, the deed restrictions for the subdivision included a vendor's lien permitting foreclosure on the homestead for failure to pay the fee assessment. Because the property owner had notice when purchasing the property that a lien attached to the land, we held that foreclosure was permissible.

Brooks v. Northglen Ass'n, 141 S.W.3d 158, 170 (Tex. 2004) (citations omitted). The court applied the holding in Inwood to particular deed restrictions and concluded that because they did not give notice that late fees might be imposed on assessments, such fees were not enforceable by foreclosure. Id. at 170-71.

IV. Discussion

The question, as specifically phrased, is "[w]hether the placement of one-party foreclosable contractual liens on the land by the developer that supersede the homestead rights created in Article XVI, Section 50 of the Texas Constitution violate[s] the Texas Homestead Act." Supplemental Letter, supra note 1, at 1. Although we did not locate the phrase "one-party foreclosable contractual liens" in the constitution, statutes, or case law, we assume you refer to a developer's unilateral action, as in Inwood, of encumbering property by filing a declaration of restrictions and covenants, enforceable by foreclosure. Likewise, by "Texas Homestead Act," we assume you mean homestead protection from forced sale by creditors in the Texas Constitution and the Property Code. See Inwood N. Homeowners' Ass'n, Inc. v. Harris, 707 S.W.2d 127, 129 (Tex. App.-Houston [1st Dist.] 1986) (referring to article XVI, section 50 of the Texas Constitution as the "Homestead Act"), rev'd on other grounds, 736 S.W.2d 632 (Tex. 1987); United States v. West, 22 F.3d 586, 598 n.33 (5th Cir. 1994) (equating the protections in section 41.001 of the Texas Property Code with the "Texas Homestead Act"). Consequently, we address whether a property owner who unilaterally files a declaration of covenants and restrictions, enforceable by foreclosure, violates subsequent purchasers' homestead rights under article XVI, section 50 of the Texas Constitution and section 41.001 of the Property Code.

The Texas Supreme Court in Inwood determined that a developer may encumber real property with a secured covenant running with the land by filing a declaration of restrictions and covenants and that such covenants bind subsequent purchasers with notice. See Inwood, 736 S.W.2d at 635-36. Because the developer's encumbrance came into being before the purchasers acquired constitutional and statutory homestead rights in the property, the lien could be enforced by foreclosure. See id. The court's holding in Inwood, that "[h]omestead rights . . . may not be construed so as to avoid or destroy pre-existing rights," applied to homestead rights whether under the Texas Constitution or chapter 41 of the Property Code. See id. at 635; see also id. at 637 (Mauzy, J., dissenting, noting that "the legislature has tracked the Constitution" in section 41.001(a)-(b) of the Property Code). To answer your question, under Inwood and its progeny, a developer may unilaterally encumber real property with a covenant running with the land, enforceable through foreclosure, without violating the constitutional and statutory homestead rights of subsequent purchasers with notice. Of course, whether particular covenants are enforceable by foreclosure depends on the particular instruments and circumstances involved. See, e.g., Brooks, 141 S.W.3d at 170-71 (holding that because particular deed restrictions did not give notice of certain late fees, foreclosure was an inappropriate remedy for collecting them); Tex. Att'y Gen. Op. No. GA-0237 (2004) at 6-8 (determining that an assessment within the scope of a statutory lien could be enforced by foreclosure only if the lien predated the attachment of a homestead interest); Tex. Att'y Gen. LO-97-019, at 3-4 (determining that a property owners association's right to foreclose on homestead property for certain costs depends on whether the lien for such costs (1) attached to the property prior to the homestead right and (2) resulted from a restriction that runs with the land).

We have received extensive briefing that takes issue with the Texas Supreme Court's analysis and reasoning in Inwood and recommends "'repeal' of the Inwood law."[3] That may be good policy and, as such, would be appropriate for the legislature to address or for the Texas Supreme Court to consider. The attorney general's constitutional duty to render legal advice, however, does not include the authority to legislate or to establish binding judicial precedent. See Tex. Const. art. IV, § 22; Tex. Gov't Code Ann. § 402.042 (Vernon 1998); see also Bullock v. Enserch Exploration, Inc., 614 S.W.2d 215, 218, 220 (Tex. Civ. App.-Austin 1981, writ ref'd n.r.e.) (an attorney general opinion does not have the authority of a statute), cert. denied, 455 U.S. 946 (1982); Bass v. Aransas County Indep. Sch. Dist., 389 S.W.2d 165, 176 (Tex. Civ. App.-Corpus Christi 1965, writ ref'd n.r.e.) (attorney general opinion is not binding judicial precedent). See also Holmes v. Morales, 924 S.W.2d 920, 924 (Tex. 1996) (attorney general opinion is not binding on the courts). Consequently, we may advise only about the current status of the law, which is that the Texas Supreme Court's opinion in Inwood, as recently reaffirmed in Brooks, is dispositive of your question. See Brooks, 141 S.W.3d at 170; Inwood, 736 S.W.2d at 634-36.

SUMMARY

A property owner may encumber real property with a covenant running with the land, which, depending on the particular instruments and circumstances involved, may be enforced by foreclosure without violating subsequent purchasers' constitutional and statutory homestead rights.

Very truly yours,

BARRY R. McBEE
First Assistant Attorney General

DON R. WILLETT
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

William A. Hill
Assistant Attorney General, Opinion Committee

Footnotes

[1] Letter from Honorable Fred Hill, Chair, Committee on Local Government Ways and Means, Texas House of Representatives, to Honorable Greg Abbott, Texas Attorney General (June 9, 2004) [hereinafter Request Letter]; Letter from Honorable Fred Hill, Chair, Committee on Local Government Ways and Means, Texas House of Representatives, to Nancy Fuller, Chair, Opinion Committee, Office of Attorney General (July 19, 2004) [hereinafter Supplemental Letter] (both letters on file with Opinion Committee, also available at http://www.oag.state.tx.us).

[2] See Tex. Prop. Code Ann. §§ 41.002 (Vernon 2000) (defining the extent of urban and rural homesteads), 41.003 (effect of temporary renting), 41.004 (abandonment), 41.005 (designation of homestead), 41.0051 (advertising regarding tax refunds), 41.006 (limitations on certain sales), 41.007 (home improvement contract requirements), 41.008 (federal law conflicts), 41.021 (designation of homestead in aid of judgment), 41.022 (designation procedures), 41.023 (designation by court appointed commissioner), 41.024 (sale of excess).

[3] See Brief from Harvella Jones, Texas Homeowners' Advocate Group, to Nancy Fuller, Chair, Opinion Committee, Office of Attorney General, at 6 (July 20, 2004) (on file with Opinion Committee).