Relating to certain residential property interests controlled by certain entities.

Contracts

Critical Amendments Required:

• Sales Agreements: You must insert a mandatory disclosure in all new agreements stating clearly that the purchaser is acquiring an interest in a business entity, not the real property itself.
• Governing Documents (LLC Agreements/Bylaws):
• Strike Transfer Restrictions: Clauses requiring board approval, vetting, or "right of first refusal" for the sale of a member's interest are now void.
• Remove Fee Clauses: Provisions mandating transfer fees, administrative resale fees, or profit-sharing upon resale must be removed.
• Venue Selection: Remove any clauses mandating arbitration or dispute resolution outside of Texas or the U.S. judicial system.

Hiring/Training

• Sales & Leasing Staff: Train staff immediately that they cannot screen or block a member's resale of their interest to a third party.
• Fair Housing Compliance: Because the law subjects Managing Entities to the Texas Fair Housing Act, staff must be trained to treat interest sales with the same anti-discrimination protocols as standard real estate transactions.

Reporting & Record-Keeping

• Audit Trail: Maintain a specific log of all interest transfers proving that $0.00 in transfer fees were collected. This log will be your primary defense against a DTPA claim.
• Disclosure Verification: Retain signed acknowledgments of the new "Entity Interest" disclosure for every transaction.

Fees & Costs

• Revenue Impact: High. Budget for the immediate loss of all transfer fee revenue and resale proceeds sharing. These revenue streams are now illegal.
• Litigation Reserve: Violations fall under the DTPA, carrying treble (3x) damages and attorneys' fees.