Covenant Clearinghouse, LLC v. Kush and Krishna, LLC
Harris · TX · Texas Court of Appeals, Fourteenth District (Houston)
Member win · fines
What happened
A 2009 developer declaration recorded in Harris County imposed a 1% private transfer/reconveyance fee through 2110. In 2012 Covenant Clearinghouse LLC filed a Property Code § 5.203 notice of private transfer fee obligation but did not refile as required. When Kush and Krishna, LLC sold in 2017 it escrowed $36,000 rather than pay CCH, then sought a declaration that the fee was void for missed refiling. CCH argued notice duties did not apply because it had never 'received' a fee. The trial court granted Kush summary judgment; the Fourteenth Court of Appeals affirmed, holding claimants of pre-2011 private transfer fees must file and periodically refile § 5.203 notices, and failure to refile voided the obligation under § 5.203(f).
What the court (or agency) held
Label note: defendant is a private-transfer-fee payee/clearinghouse under a developer covenant, not an HOA board. The Fourteenth Court of Appeals held that a person who claims the right to receive a pre-2011 private transfer fee must file and periodically refile Property Code § 5.203 notices. Because Covenant Clearinghouse failed to refile after its 2012 notice, the fee obligation became void under § 5.203(f). The court affirmed summary judgment releasing $36,000 in escrowed fees to the seller.
Why this matters for members
Texas private transfer fees created before the 2011 ban survive only if statutory notice and refiling duties are met. Missed refiling can void the fee and free escrowed amounts to the seller.
What the member did
Escrowed the disputed fee, sued for a declaration that the private transfer fee was void for noncompliance with § 5.203, and obtained summary judgment affirmed on appeal.
Questions for the board
- Do any recorded private transfer fee covenants still affect closings in our community?
- If a clearinghouse claims a fee, has it filed and refiled § 5.203 notices?
- How should disputed transfer fees be escrowed pending validity review?
Questions for a lawyer
- Is this private transfer fee void under § 5.203 for missed notice/refiling?
- Who is the 'payee' obligated to file notices?
- What declaratory path releases escrowed transfer-fee funds?
Citation
Covenant Clearinghouse, LLC v. Kush and Krishna, LLC, 607 S.W.3d 855 (Tex. App.—Houston [14th Dist.] 2020, pet. denied); No. 14-19-00302-CV (2020-08-18). Texas Court of Appeals, Fourteenth District (Houston). Outcome chip: member_win. Flags: not-hoa-board. Source: https://caselaw.findlaw.com/court/tx-court-of-appeals/2082207.html
_General information, not legal advice. Outcomes turn on facts and current law._
General information, not legal advice. Outcomes turn on facts and current law.