The Honorable Patrick M. Wilson Ellis County and District Attorney 109 South Jackson Waxahachie, Texas 75165

DearMr. Wilson: 

## KEN PAXTON ATTORNEY GENERAL OF TEXAS

November 13, 2017

OpinionNo. KP-0171
Re: Whether a Type A general-law municipality may collect dues on behalf of homeowners associatfons in exchange for partial payment of the municipality's accounting expenses (RQ-0163-KP)

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 briefattachedto yourrequest states thatthe City ofOvilla (the "City") is a TypeA general-lawmunicipality. Briefat l;see also TEX. Loe. Gov'TCODE §§ 5.001, 6.001. Thebriefexplainsthatpursuantto the City'sagreements withtwo HOAs, the City'smonthlywater utility bill to these HOA members includes a charge for their monthly HOA dues. Briefat 1-2. The City disburses the dues tothe respective HOAs, which in return paythe City for a portion of the City's accounting software maintenance and service costs. Id. at 2. Accordingto the brief, the "accounting software was notneededfor the collection and accounting ofwaterutility bills; itwas purchased exclusivelyfor the purpose ofaccounting for the collectionofHOAmember dues." 

### Id. at 1n.l. Thebriefstates that the City nowquestions whether it may lawfully continue to provide dues collection services to the HOAs. 

### Id. at 2. We beginby consideringthenature ofHOA dues. As pertinenthere, l:!:n HOA, also known as a property owners association, is an in.corporated orunincorporated association that (A) is designated as the representative ofthe owners ofproperty 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 Letterfrom Honorable Patrick M. Wilson, Ellis Cty. & Dist. Att'y, to Honorable Ken Paxton, Tex. Att'y

. Gen. at I (May 22, 2017) and attachedbrieffrom Mr. Ron G. Macfarlane, Jr., on behalfofthe City ofOvilla(May 17,

2017), https://www.texasattorneygeneral.gov/opinion/requests-for-opinions-rqs ("Request Letter" and "Brief," respectively).The Honorable Patrick M. Wilson

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(C) manages or regulates the residential subdivision for the benefit ofthe owners ofproperty in the residential subdivision. TEX. PROP. CODE§ 209.002(7); see also id.§ 209.003(a)-(b) (statingthat chapter209 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 ofthe 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 ofcommon areas, or "other purposes ofthe [HOA] as stated in its articles ofincorporation 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 ofthe private property owners. See generallyBaywood Estates Prop. OwnersAss 'n, Inc. v. Caolo, 392 S.W.3d 776, 782-84 (Tex. App.-Tyler 2012, no pet.) (enforcement ofHOAassessments throughrestrictive covenants); Harris Cty. FloodControl 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 [1stDist.] 1994, no writ) (statingthatrestrictive covenants for property owners to pay a subdivision's maintenance fee are "treated as contracts among the parties"). Next, we consider the authority ofa general-lawmunicipality such as the City. "Generallaw 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 of Sunset 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) (quotationmarks omitted). Therefore, courts "strictly construe general-law municipal authority and [a]ny fair, reasonable, substantial doubt concerning the existence ofpower is resolved by the courts against the [municipality], and the poweris denied." Id. (quotation marks omitted). Chapter 51 ofthe 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 ofthe municipality orfor the trade and commerce ofthe municipality; and (2) is necessary orproperfor carrying out a power granted by law to the municipality or to an office or department of the municipality." TEX. Loe. Gov'TCODE§ 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

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general-law municipality authority to provide debt collection services to a private entity such as an HOA. Accordingto the brief, the proponents ofthe billingpractice argue "thatcollecting dues on behalfofthe HOAs serves the welfare and good order ofthe municipality because the dues, once turned over to the HOAs, are used for the maintenance ofproperty which, in tum, maintains and promotes property values in the City." Briefat 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 municipalityasa bodypolitic." 

### 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 ofutility services or any othermunicipal function orpurpose, butinstead are to beusedforthe directbenefit ofindividual property owners. See 

### Briefat 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 ofthe 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 ofthe municipality as abody politic." See 

### TEX. Loe. Gov'TCODE§ 51.012; Bizios, 

### 493 S.W.3d at 536.2 

### Therefore, a Type A general-lawmunicipality does not possess the authority to collect dues on behalfofan HOA.3

2In other circumstances, this office determined that the general powers ofa 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. CfTex. Att'y Gen. Op. Nos. GA-0774 (20I0) 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 ofthe police department was an unauthorized tax).
3Because we conclude that a Type A general-law municipality does notpossess express or implied authority to collect HOA dues, we do not consider a related question, whetherthe use ofmunicipal 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 "onlyto serve public purposes that are within the municipality's powers, not merelyto benefit the public in general" (citing State ex rel. Grimes Cty. Taxpayers Ass'n v. Tex. Mun. PowerAgency, 565 S.W.2d 258, 265 (Tex. Civ. App.-Houston [1st Dist.] 1978, writ dism'd)).

### The Honorable Patrick M. Wilson

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### SUMMARY
A Type A general-law municipality does not possess the authority to collect dues onbehalfofa homeowners association.

JEFFREY C. MATEER First Assistant Attorney General BRANTLEY STARR Deputy First Assistant Attorney General VIRGINIA K. HOELSCHER Chair, Opinion Committee WILLIAM A. HILL Very truly yours,

KEN PAXTON Attorney General ofTexas

Assistant Attorney General, Opinion Committee