2023 Texas Legislative Update: Issues Affecting Real Estate Entitlement and Development
House Bill 14 (by Harris (R), House District 8, Palestine, Anderson County, Texas)
Effective September 1, 2023
THIRD-PARTY REVIEW OF PLATS, PLANS, PERMITS AND INSPECTIONS
HB 14 adds a new Chapter 247 to the Texas Local Government Code allowing third party review or inspection of development documents, including plans, plats, permits, and related applications, as well as improvements.
When can you use a third-party reviewer or inspector?
If the regulatory authority fails to issue an approval, conditional approval or disapproval within 15 days after the date required by the Texas Local Government Code, a third-party reviewer or inspector may be used in lieu of the reviewer or inspector utilized by the regulatory authority. For example, Section 212.009 of the Texas Local Government Code requires municipal authorities to approve, conditionally approve or disapprove plats or plans within 30 days. If no approval, conditional approval or disapproval is issued by the regulatory approval within 30 days, a third-party review or inspection may occur 15 days thereafter.
Who may review applications for approval (plans, plats, permits and related applications)?
- A person employed by the regulatory authority to review development documents;
- A person employed by another political subdivision to review development documents; or
- An engineer licensed in Texas (excluding the applicant for the permit or a person whose work is the subject of the application).
Who may perform inspections?
- A person certified to inspect buildings by the International Code Council;
- A person employed by the regulatory authority as a building inspector;
- A person employed by another political subdivision to perform building; or
- An engineer licensed in Texas (excluding the applicant for the permit or a person whose work is the subject of the application).
The third-party reviewer or inspector is required to provide the results of the review or inspection to the regulatory authority within 15 days after completion of the review or inspection, in a notice format that may be specified by the regulatory authority.
HB 14 also provides an appeal process whereby the applicant may appeal the decision made by the regulatory authority to conditionally approve or disapprove a development document or a decision regarding an inspection made by a regulatory authority or third-party reviewer. If the governing body does not affirm the decision within 60 days of the filing of the appeal, the development document or the inspection is approved or waived, as applicable.
What You Need to Know: HB 14 has the potential to accelerate permit review and inspections by allowing developers to overcome delays occasioned by understaffed or over-tasked city and county development and building inspection departments. The appeal process should constrain a city or county from issuing blanket denials as a means to overcome the intent of HB 14. How cities or counties may blunt the impact of HB 14 remains to be seen, but the clear intent is to allow third-party review and inspections if the city or county cannot respond to application or requests for inspection on a timely basis. Yet to be determined is how third-party reviewers and inspectors will respond to HB 14. Will third-party engineers or licensed inspectors willingly serve as agent for purposes of regulatory review and approval, what fees will be charged for this service, what form will third-party review of a plat, for example, take, and will the industry be able to accommodate this additional work and deliver their reports or inspections on a timely basis.
Senate Bill 2038 (by Bettencourt (R), Senate District 7, West Harris County, Texas)
Effective September 1, 2023
DE-ANNEXATION BILL
Pursuant to the 1963 Municipal Annexation Act, also known as Chapter 43 of the Texas Local Government Code, home-rule municipalities in Texas may take the following actions:
- fix the boundaries of the municipality;
- extend the boundaries of the municipality and annex area adjacent to the municipality; and
- exchange area with other municipalities.
This power to annex areas within a city’s extra-territorial jurisdiction has been the subject of controversy in Texas for many decades. While the Legislature made a significant change to the Act in the 2019 Legislative Session1, Texas lawmakers took an unprecedented step again in the 2023 Legislative Session, effectively neutering a law that has stood for over half a century.
Senate Bill 2038, first introduced by Senator Bettencourt, allows a resident of an area in a municipality’s extraterritorial jurisdiction to file a petition with the municipality in accordance with the new Subchapters D, E, and F of Chapter 42 of the Texas Local Government Code, added by this bill, for the area to be released from the extraterritorial jurisdiction.
In order to de-annex by petition only, the petition must include signatures of the owner or owner of the majority in value of an area consisting of one or more parcels of land in a municipality’s extraterritorial jurisdiction. This means that the owner of a single tract of land, may effect removal of their tract from the municipality’s extraterritorial jurisdiction.
Once a petition representing the majority in value is received, the municipality must immediately de-annex the area in the petition. Failure to act within 45 days results in automatic de-annexation by operation of law – no further action by the municipality is required.
In addition to the petition pathway to de-annexation, an area may be de-annexed if at least 5% of the owners of an area sign a petition, an election is held, and the majority of owners votes for de-annexation. Upon receipt of the petition with 5% of the owners’ signatures, the municipality must hold the election or it may voluntarily release the area specified in the petition for election.
The bill creates an interesting dilemma for developers. If a developer de-annexes, for example, but later needs to obtain electricity, water or wastewater from a city, the city may be slow to provide services in de-annexed areas. However, it should be noted that de-annexation does not affect a city’s obligation to serve if the city has a CCN, but the speed with which a city provides those services may be affected by an owner’s election to de-annex.
This could have far-reaching consequences on development generally, since cities typically plan for water and wastewater development far into the future. It remains to be seen how the creation of pockets within a growing city where utilities are not provided might potentially pose problems for utility access generally.
In addition to the utility access issue, if a developer were to solve the problem by creating a district and developing its own utility infrastructure, the city or county might still be needed to approve the creation of the district. A developer might find itself in a fight with the jurisdiction that just approved de-annexation, potentially inadvertently placing power over development back into the hands of cities and/or counties because these developments would be reliant on the jurisdiction’s approval.
What You Need to Know: Potentially anyone – from a single-family home owner to a developer – may choose to de-annex property out of a home-rule city’s extra-territorial jurisdiction, and the city must comply with a request to de-annex if a majority requests it. De-annexation should not be a knee-jerk decision for developers, however, but should be part of a larger strategy that takes into account not only land use, regulatory costs, and governmental oversight, but also focuses on the developer’s ability, or inability, to provide utility service to its de-annexed communities both now and in the future.
House Bill 2127 (By Burrows (R), House District 83, Lubbock, Crosby County, Texas)
Effective September 1, 2023
STATE PREEMPTION
Change to Chapter 1 of the Texas Property Code (and additional changes described below)
Representative Burrows filed House Bill 2127 limiting the rulemaking authority of municipalities and counties. This bill prohibits a municipality or county from adopting or enforcing ordinances or rules on a field which is fully addressed or “occupied” by the Texas Property Code, unless expressly authorized by statute. A similar preemption provision was also added to the Agriculture Code, Business & Commerce Code, Finance Code, Insurance Code, Labor Code, Natural Resources Code, and Occupations Code. The bill adds Sec. 51.002 to the Texas Local Government Code, allowing a municipality to adopt an ordinance or rule only if the ordinance is consistent with State law. Whether or not a field is occupied by the Texas Property Code (or other applicable code) will be a question played out in the courts over time. But the bill does include one example of preemption by expressly stating the Texas Property Code occupies the field pertaining to evictions or notices to vacate.
The bill also establishes a cause of action for a person to take legal action against a municipality or county that adopts or enforces an ordinance in violation of this law.
What You Need to Know: This bill limits the rulemaking authority of municipalities and counties, but lacks specifics on which fields are occupied and how broadly this bill will be interpreted and applied. For example, Chapter 82 of the Texas Property Code, the Uniform Condominium Act, regulates condominium developments and specifies the information required to be included on condominium plat and plans. Many counties have adopted additional subdivision regulations for condominiums, requiring developers to go through the subdivision and platting process for a condominium development. This bill could be interpreted to prohibit counties from enforcing certain subdivision regulations on condominium projects. The implications of this bill remain to be seen, but may prove to be far reaching.
Note that the City of Houston, in The City of Houston v. The State of Texas, has filed suit in the Travis County District Court challenging the constitutionality of HB 2127.
House Bill 3697 (by Wilson (R), House District 20, Williamson County, Texas)
Effective September 1, 2023
Change to Chapter 232 of the Texas Local Government Code
Subdivision regulation and requirements for plat approval across Texas’ 254 counties vary greatly. HB 3697 attempts to streamline the approval process, cultivate consistent requirements within and among counties, and promote a sense of settled expectation throughout the state for future development.
The bill defines when a subdivision plat is considered filed as the date the applicant submits the subdivision plat (along with a completed plat application and any required plat application fees) to the applicable county authority. This is helpful, as certain deadlines imposed depend on the date that plat application is filed. It also grants to the county the ability to delegate the authority to approve, approve with conditions, or disapprove a plat, seemingly in lock-step with the impetus behind HB 14.
Moreover, HB 3697 is intended to increase efficiency in the approval process by removing certain obstructions created by county action or inaction. Section 232.001(h) prohibits counties from tacking on any additional analysis, study, document, or agreement requirement for plats, development permits, or subdivisions of land that are not explicitly required by State law. Section 232.0033(c) now prevents a county from refusing to review a plat application or approve a plat simply because the application failed to identify a travel corridor—with the exception of those corridors arising from an agreement between TxDOT and the applicable county. Additionally, HB 3697 grants applicants the right to appeal plat disapprovals and allows applicants who successfully compel a county authority to recognize plat approval in court—following a county’s failure to do so in accordance with Chapter 232—to recover the reasonable attorney’s fees and court costs incurred in bringing such an action.
Importantly, HB 3697 mandates that a commissioners court issue a written list of all documentation and information required to be submitted with a plat application, and the commissioners court must post and continuously maintain the most current version of such list on a county’s website.
These changes are intended to speed up the approval process by clarifying and emphasizing deadlines, allowing counties to divvy out work when overloaded, smooth out some of the variability of process between counties, and provide public notice on platting requirements.
What You Need to Know: Counties may no longer require additional reports, studies or agreements as a condition to plat approval unless expressly required by state law. Counties must post all documentation and information required for a plat application to their websites between September 1, 2023 and no later than January 1, 2024. Also be aware of the following new rights under Chapter 232: (1) a right to appeal to the commissioners court’s or court’s designee if a plat is disapproved; and (2) a right to recover attorney’s fees and court costs after bringing an action under Section 232.0025(i)(3).
House Bill 3699 (by Wilson (R), House District 20, Williamson County, Texas)
Effective September 1, 2023
Change to Chapter 212 of the Texas Local Government Code
HB 3699 mimics the changes implemented by HB 3697 but amends Chapter 212 of the Texas Local Government Code, which concerns municipal rather than county regulation of subdivisions and plat approval. There are a few notable differences between HB 3699 and HB 3697, namely:
- HB 3699 grants the governing body of a municipality the authority to adopt reasonable specifications relating to the construction of streets and the drainage for such streets within a subdivision; provided, however, these specifications are adopted by ordinance and published in a newspaper of general circulation in the municipality.
- Though Chapter 232 already included a provision requiring counties to issue a written list of required information for plat application, it did not require such list to be posted publicly until HB 3697 above. Chapter 212, however, did not include either requirement. This bill (i) mandates that municipalities adopt and make available to the public a complete, written list of all information required to be submitted with a plat, and (ii) governs where such list shall be posted.
- Likewise, Chapter 232 already included a provision allowing an owner of a tract to bring an action in the applicable district court for a writ of mandamus if the relevant authority failed or refused to approve a plat that otherwise meets the requirements of the law. Chapter 212 did not. This bill grants the owner of a tract the right to bring an action to compel a municipality to approve owner’s plat by issuing the approval documentation, and like HB 3697, requires that such owner recover attorney’s fees and court costs if they prevail.
- HB 3699 specifically prohibits a municipal authority from requiring the dedication of land within a subdivision for a future street or alley that is (i) not intended by the owner of the tract; and (ii) not included, funded, and approved in a capital improvement plan or a similar plan adopted by the applicable county or the State of Texas.
What You Need to Know: As with HB 3697, HB 3639 should expedite the plat approval processes and will give Texans notice of plat approval requirements.
[1] In 2019, HB 347 was passed, which eliminated forced annexation in Texas altogether, requiring a vote of the residents of an area to be annexed to pass in favor of annexation by a majority.
Contacts:
Mark Grobmyer | 512.370.2844 | mgrobmyer@winstead.com
Will Smith | 512.370.2893 | wsmith@winstead.com
Jenny Forgey | 512.370.2863 | jforgey@winstead.com
Garrett Bell | 512.370.2848 | gbell@winstead.com
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