§ 173.002.Scope of Chapter

The scope section, and the exclusion at the end is the part most readers are looking for.

The controversy must be internal. It must be between members of an association or corporation, or between the organisation and its members.

The organisation must qualify in one of two ways.

The first is federal tax exemption. The organisation is exempt from federal income taxes by being listed as an exempt organization under Section 501(c) of the Internal Revenue Code.

The second is Texas nonprofit incorporation, under the Texas Non-Profit Corporation Act or under the nonprofit subchapter of the Business Organizations Code.

Then comes the exclusion, and it is broad. The chapter does not apply to a controversy between members of a property owners’ association, a condominium council of owners, or a condominium unit owners’ association — or between such an organisation and its members.

That carve-out removes the disputes people most often have with a nonprofit corporation. Homeowners’ association disputes over assessments, architectural approvals and enforcement are outside this chapter.

Each excluded body is defined by cross-reference to the Property Code, so the boundary is drawn by that code rather than by this chapter.

The exclusion protects homeowners from a bylaw. Section 173.003(c) makes a bylaw provision an irrevocable agreement by a member to arbitrate, and this section keeps that mechanism away from people whose membership came with buying a house.

What remains is the voluntary association. Trade groups, clubs, churches, charities and professional bodies whose members joined by choice.