89R25891 SCR-D By: Noble, Leach, et al. H.B. No. 4211 Substitute the following for H.B. No. 4211: By: King C.S.H.B. No. 4211 A BILL TO BE ENTITLED AN ACT relating to certain residential property interests controlled by certain entities. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: SECTION 1. Title 12, Property Code, is amended by adding Chapter 223 to read as follows: CHAPTER 223. CERTAIN RESIDENTIAL ARRANGEMENTS CONTROLLED BY BUSINESS ENTITIES SUBCHAPTER A. GENERAL PROVISIONS Sec. 223.001. DEFINITIONS. In this chapter: (1) "Business entity" means a partnership, corporation, joint venture, limited liability company, nonprofit organization, or other business organization or business association, however organized. (2) "Managing entity" means a business entity that owns or controls residential property used in a residential arrangement. (3) "Residential arrangement" means an arrangement in which the purchaser of an interest in a business entity is entitled to exclusive possession of or an interest in residential property owned or controlled by the entity as long as the purchaser holds the interest in the business entity. (4) "Residential property" means the real property or improvements for a dwelling, including a single-family house, duplex, condominium unit, or unit in a multiunit residential structure. Sec. 223.002. APPLICABILITY. This chapter does not apply to a timeshare plan, as defined by Section 221.002. SUBCHAPTER B. REGULATION OF RESIDENTIAL ARRANGEMENTS Sec. 223.101. AGREEMENTS AND RULES; DISPUTE RESOLUTION. (a) An agreement documenting a residential arrangement or for the purchase of an interest in a managing entity must disclose to the purchaser if the agreement is for the purchase of an interest in the entity and not in any residential property. (b) A dispute concerning an agreement described by Subsection (a), a related agreement, or rules governing a residential arrangement or an ownership interest in a managing entity must be brought before a court established under the laws of this state or the United States and must be adjudicated under the laws of this state or the United States. Notwithstanding any other law, any decision relating to a dispute under this subsection issued by an arbitrator, an organization offering alternative dispute resolution services, or any other tribunal other than a court established under the laws of this state or the United States is void and unenforceable. (c) A provision in an agreement that requires a dispute described by Subsection (b) to be governed by a law other than the laws of this state and the United States is void and unenforceable. Sec. 223.102. DISCRIMINATION PROHIBITED. A managing entity may not take an action or refuse to take an action with respect to an interest in the entity in a manner that would be a violation of Chapter 301 if the interest in the entity were an interest in real property, including: (1) restricting the transfer of the interest; (2) imposing requirements to maintain the interest; or (3) refusing to grant an interest in the entity to a bona fide purchaser or investor. Sec. 223.103. TRANSFER OF INTEREST. Notwithstanding any provision in an agreement relating to a residential arrangement, an owner of an interest in a managing entity may transfer the interest without approval from the managing entity. Any restriction in violation of this section or Section 223.102 is void and unenforceable. Sec. 223.104. CERTAIN CHARGES PROHIBITED. A managing entity may not charge a fee for or share in the proceeds of the transfer of an interest in the managing entity from an owner to a subsequent purchaser. SUBCHAPTER C. ENFORCEMENT AND REMEDIES Sec. 223.201. DEFINITIONS. In this subchapter: (1) "Commission" means the Texas Commission on Environmental Quality. (2) "District" means a municipal utility district created under Chapter 54, Water Code. (3) "Governmental entity" includes the following as defined by Section 2254.021, Government Code: (A) a state governmental entity; and (B) a political subdivision. (4) "Public money or benefit" means: (A) state or local funds, grants, or tax incentives or credits; or (B) the issuance of a required construction or development permit. Sec. 223.202. DECEPTIVE TRADE PRACTICE. A violation of this chapter is a deceptive trade practice under Subchapter E, Chapter 17, Business & Commerce Code. Sec. 223.203. ATTORNEY GENERAL ENFORCEMENT ACTION; EFFECT ON PETITION FOR CREATION OF MUNICIPAL UTILITY DISTRICT AND RECEIPT OF PUBLIC MONEY OR BENEFIT. (a) The attorney general may bring an action for declaratory or temporary or permanent injunctive relief to enforce this chapter. The attorney general shall file notice of an action under this section for recording in the real property records of each county where any part of the real property subject to the residential arrangement that is the subject of the action is located. (b) A court may issue an order under this section enjoining a managing entity or a person affiliated with the managing entity from taking action in furtherance of development of or construction on residential property used in a residential arrangement subject to an action under this section, including: (1) filing a petition with the commission for the creation of a district; (2) taking action in connection with a petition for the creation of a district filed before the issuance of the order; or (3) receiving, directly or indirectly, any public money or benefit. (c) On entry of an order under Subsection (b), the attorney general shall: (1) file notice of the order for recording in the real property records described by Subsection (a) and attach a copy of the order as an exhibit; and (2) notify: (A) the commission; and (B) any governmental entity the attorney general determines may provide any public money or benefit to the managing entity or other person that is subject to the injunction imposed by the order. (d) On receiving the notice described by Subsection (c) and until final judgment is entered in the action: (1) the commission shall stay consideration of a petition to create a district consisting of territory that is subject to a residential arrangement that is the subject of the order; and (2) a governmental entity shall cease providing any public money or benefit to the managing entity or other person that is the subject of the injunction imposed by the order. (e) On entry of final judgment in the action, the attorney general shall file notice of the judgment for recording in the real property records described by Subsection (a) and attach a copy of the judgment as an exhibit. (f) The commission shall deny a petition described by Subsection (d)(1) if the judgment entered in the action finds that the residential arrangement violates this chapter. Sec. 223.204. ATTORNEY GENERAL INVESTIGATION AND DISCOVERY; SECRETARY OF STATE INTERROGATORIES AND RECORDS. (a) The attorney general may conduct discovery to investigate a potential action under Section 223.203 or in an action brought under Section 223.203, including by: (1) petitioning for an order authorizing the taking of a deposition under Rule 202, Texas Rules of Civil Procedure; or (2) if the attorney general has reason to believe that a person may be in possession, custody, or control of any documentary material or other evidence or may have any information relevant to an investigation of a suspected violation of this chapter, issuing in writing and serving on the person a civil investigative demand requiring the person to: (A) produce any of the documentary material for inspection and copying; (B) answer in writing any written interrogatories; (C) give oral testimony; or (D) provide any combination of civil investigative demands under Paragraph (A), (B), or (C). (b) The secretary of state shall on request by the attorney general: (1) serve interrogatories on an individual or entity as necessary to determine the ownership or control of a business entity that is the subject of an action by the attorney general under Section 223.203; and (2) provide to the attorney general all records held by the secretary relating to the ownership or control of a business entity that is the subject of an action by the attorney general under Section 223.203. Sec. 223.205. PROHIBITED USE OR RECEIPT OF PUBLIC MONEY OR BENEFIT. On issuance of an order for injunctive relief under Section 223.203 or entry of a judgment finding that a residential arrangement or a managing entity or other person violated this chapter, a governmental entity may not grant, issue, approve, or permit the use of any public money or benefit for residential property used in a residential arrangement subject to the order or judgment. Sec. 223.206. REMEDIES NOT EXCLUSIVE. The remedies provided by this chapter are in addition to any other remedy or procedure provided by state or federal law. SECTION 2. This Act takes effect immediately if it receives a vote of two-thirds of all the members elected to each house, as provided by Section 39, Article III, Texas Constitution. If this Act does not receive the vote necessary for immediate effect, this Act takes effect September 1, 2025.