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Subject: Can the HOA sell unused property?
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DennisG7
(Georgia)

Posts:99


02/19/2019 7:12 AM  
It's been a couple of years since I posted but I am in search of any help on how the HOA can sell some property we own. Here's some background. Our HOA is located in Cobb County, GA. We have 189 homeowners/properties. When the developer purchased the land it included a parcel of about 11.6 acres that was located at the far western end of the development. This parcel cannot be accessed unless one travels outside of the developed area and drives about 2 miles to get to GA Hwy 92. From there one can park and walk onto the 11-acre parcel, which is a primarily wooded property with no structures and no developed amenities. I have lived here since 2002, a year after the first homes were built. The property is included in the land that the developer deeded to the HOA years ago. The deed does not specify the use of the land. On the plat, it is listed as "OPEN AREA". The property has never been used for any purpose and most HOA members are not even aware that we own this property. The property is zoned R-30, single-family homes.
In 2014 the HOA BOD approved a study to be done regarding the property and what options the HOA had regarding use or disposition of it. I was one of the three people that worked on the study which was presented to the BOD in Oct. 2014. The study discussed possible uses and options including the sale of the land. In 2014, the county had provided us an assessment of its value which was about $725,000. Our study included a "Pathway to selling" document which addressed, in general terms, what we felt needed to be done in order to sell it. After the presentation of the study which included the assessment, maps, surveys, photos and other pertinent documents the study team was somewhat amazed that the results of the study was never presented to the HOA membership and since 2014 nothing was ever done...until last week.
A new BOD asked me to outline the results of the study for them during a BOD meeting last week. (I should point out that the BOD had been given 2 complete copies of the study in 2014. A "Master" copy was retained by the study group. In 2016 the incoming HOA President and new BOD asked for the study as they had never seen it. The last copy, the Master copy, was provided to the BOD. Nothing was done after we gave the BOD the study.
Now the new BOD is asking questions about the study. Last week, when I presented them with a verbal outline of what was in the study they indicated that our HOA attorney had said that we could not sell the property, which now may be worth about $1,000,000. unless we get a 100% approval from all homeowners and all mortgage holders. In other words, we would need a vote of 398 to 0 in order to sell it. He claims the property is for the use and enjoyment of all property owners and requires 100% agreement before it can be sold. This appears to me to be a mountain we can't climb.
I have sent the BOD a letter saying that I felt the intent within the CC&R related to common improved property which had been developed for the recreational use and entertainment of homeowners. This property was intended for housing and the developer opted not to develop it because of costs and access, thus it has remained there, unused and inaccessible.
I have also suggested that the language in the CC&R may be unconstitutional. I can understand the sale being put to a vote but I'm not familiar with any procedure that requires a 100% yes vote.
The language in the CC&R can be found at www.oakwindhoa.com. (Sorry I tried to attach it but the file is too big.) The attorney is using Section 5 as his basis for a 100% affirmative vote.
So I'm looking for any help to persuade the BOD to consider selling the land and putting the proceeds into the Reserve Fund. Unless we can overcome the opinion of the HOA attorney I fear we will have this land forever and never derive any benefit from it
Thanks for your input and comments.
DennisG7
JohnC46
(South Carolina)

Posts:8867


02/19/2019 8:26 AM  
Dennis

It seems to me the place to begin is obtain another legal opinion and if different, pursue it. If the same, drop it.
AugustinD


Posts:2045


02/19/2019 8:32 AM  
Posted By DennisG7 on 02/19/2019 7:12 AM
Last week, when I presented them with a verbal outline of what was in the study they indicated that our HOA attorney had said that we could not sell the property, which now may be worth about $1,000,000. unless we get a 100% approval from all homeowners and all mortgage holders. In other words, we would need a vote of 398 to 0 in order to sell it. He claims the property is for the use and enjoyment of all property owners and requires 100% agreement before it can be sold. This appears to me to be a mountain we can't climb.
I have sent the BOD a letter saying that I felt the intent within the CC&R related to common improved property which had been developed for the recreational use and entertainment of homeowners. This property was intended for housing and the developer opted not to develop it because of costs and access, thus it has remained there, unused and inaccessible.
I have also suggested that the language in the CC&R may be unconstitutional. I can understand the sale being put to a vote but I'm not familiar with any procedure that requires a 100% yes vote.


-- Nationwide it is not uncommon for covenants to require 100% consent of the owners before doing xyz.


-- It looks like the HOA attorney is referring to Article 5.4 of the CC&Rs. It appears to me your HOA attorney is correct. Though I would add on that not only must all members approve this; but also all mortgage holders (banks et cetera) of lots in your HOA must consent. Also if you are thinking the Board could do this lawfully without the approval of all the members, then I think not. The Bylaws do not list 'selling land' as a power of the board.

-- Unlike you, I think your chances of obtaining unanimous consent of the owners are pretty good. Wave that money in front of their eyes; dot the i's and cross the t's for a legal vote; set a year's deadline for submitting the vote; go door to door;and you could win. One of my former HOAs needed 1000+ members to vote in the affirmative to amend the governing documents. The HOA succeeded in winning the amendment in less than six months, using a huge campaign.

-- But getting all the mortgage holders' consent sounds intimidating. If you want to pursue this sale, then maybe start asking around on this point.

-- If you want to try to be underhanded, you could ask the board to just do it, based on your reasoning. Maybe none of the HOA members will challenge it in court. Maybe they will see all the money and view the land as not essential to their happiness. At my former HOA, the Board did sell a acreage to the City. Some members objected, loudly, as this was in violation of the covenants. But no one brought suit. Maybe because the City then maintained the land nicely, as park space for people to recreate, mostly. It saved the HOA money in maintenance costs.

-- You say there is no benefit to this 11.6 acres. Barring more information, I cannot agree. "Open space" refers to land that is allowed to stay undeveloped and wild. "Open space" is a big deal nationwide. Generally speaking, laws are on the books to help preserve it. Many a non-profit has as part of its mission the preservation of "open space." Are you sure it would be okay with everyone to have, say, a massive second development take place on this land (if zoning allows)? Or do they like the view this 11.6 acres affords?

-- As for prior boards ignoring your committee's hard work and its study: I see this a lot. It's rude. Then again, being on the board is a huge volunteer commitment that few will undertake. If a board does not dot every i and cross every t, I might cut them some slack. Depends on the issue.

-- I appreciate all the detail.

-- Some are going to call you out for naming the HOA. It's against the rules here. I do not like the rule, but this site costs nothing to use, so I cannot complain.
RoyalP


Posts:0


02/19/2019 8:37 AM  
see: 10.1 (e)

sale of common property requires a 2/3 affirmative vote of ALL owners (not merely of a quorum)

? can your attorney not read ?
AugustinD


Posts:2045


02/19/2019 8:46 AM  
CCR Section 10.1(e) is not referring to a sale of property. "Dedicate or transfer" means gifting the property to a government agency (city, county, or federal) for its ownership or use et cetera.
AugustinD


Posts:2045


02/19/2019 8:59 AM  
Another somewhat underhanded end run is to amend the CC&Rs. Section 11.6 says 2/3rds of the lot owners can amend. (Ignore the part about Declarant consent. The Declarant is legally out of the picture.) The amendment could get rid of the part about mortgage holders consent. It could change the required vote given in Section 5.4 to, say, a simple majority of all those present, in person or by proxy, at a special meeting called for this purpose, with say no quorum requirement.

No guarantees that this end run is legal. I think I have seen case law saying 100% means 100%. Where 100% is required, it typically is referring to a particularly important matter. The courts might say amending a 100% requirement via a 2/3rds majority is unfair.

Also check Georgia statutes 44-3-220 through 44-3-235, "Property Owners' Associations," to see if there are other possible 'end runs.' Though I bet the OP has already.
SheliaH
(Indiana)

Posts:2761


02/19/2019 9:37 AM  
We had a similar situation in my community, although the size of the land is a lot smaller – between 3-5 acres. For years, it’s just sat there acting as a type of litter magnet and once upon a time, a homeless guy lived in the middle of it until we (and the police) finally chased him off. About three years before I left the board, we did get an offer from two developers to buy it, as they wanted to put in a type of dollar store there.

Long story short, we didn’t sell it because getting all the homeowners to agree would have been a challenge all by itself (for the reasons you mentioned, with out of state buyers, mortgage holders, etc.) Some of us were also concerned about the increase in traffic because the land runs along the back of a strip mall and is next to a fast food restaurant, plus the city was talking about putting in sidewalks (which did occur), and possible opposition from the neighborhood association (which we belong to), for the same reasons.

There would also be haggling over price, getting the land appraised, possible tax implications, and on and on. We held a special homeowners meeting where the developers came to present their case, and based on the Q & A session, the board concluded very few people were that enthusiastic about this sale, so the matter was dropped.

So….it’s OK to show the benefit to the reserves if you were to sell, but there’s more at stake here than providing a bump in reserves and getting all the homeowners to agree. Before you get to that point, you’d have to think about some of the issues I listed above and what might go in there if you sell (if it’s something you don’t like, you might be SOL once the money changes hands). You’ll then have to convince your neighbors (not just the board) to push for selling the land and you’d better be ready with a response to their questions and concerns.

You had a study committee review this some years ago, so I don’t know if you have to do that over again, although another appraisal of the land might be useful to see if the land value has increased a bit or a lot. You could also talk to a few realtors and see if there’s even a market for that amount of land and how it’s been developed, especially in your area. Also ask about other types of buyers – you might not want to sell to a developer who will bill more houses on it, but how about a church or the parks department?

Another idea – if you can’t find a buyer, would the community itself be interested in developing it into some sort of recreational area for the homeowners, having things like picnic areas, walking trails and community gardens? THAT could be the subject of a special homeowner’s meeting and then you could recruit homeowners and charter a committee to explore the possibility.

TimB4
(Virginia)

Posts:16550


02/19/2019 9:42 AM  
You are going to have to read your Declaration of Covenants to see who has authority to sell.
If silent, it's likely best to get a membership vote.
I would think that the membership vote would be the same amount required to change the covenants.
GeorgeS21
(Florida)

Posts:1469


02/19/2019 9:55 AM  
Hmmm .... big payoff and big politics and big legal.

I might quietly canvas the neighborhood to see if there was relatively unanimous support for selling the property.

Questions:
- are the proceeds taxable?
- if taxable, what would the basis be?
- if sold, would the proceeds be flowed into the reserve account as offset?
- if sold, would the proceeds be simply divided amongst the owners of records?
- can the proceeds be transferred to the current owners of record by the HOA?
RoyalP


Posts:0


02/19/2019 10:29 AM  
Posted By RoyalP on 02/19/2019 8:37 AM
see: 10.1 (e)

sale of common property requires a 2/3 affirmative vote of ALL owners (not merely of a quorum)

? can your attorney not read ?




ps. 5.4 refers to PARTITION and/or DIVISION, not to 'sale of'




seems to be a contradiction in the CCRs




AugustinD


Posts:2045


02/19/2019 10:50 AM  
Posted By RoyalP on 02/19/2019 10:29 AM
<5.4 refers to PARTITION and/or DIVISION, not to 'sale of'


In legal jargon, "partition" includes "sale." In particular, it can refer to a sale where the proceeds are divided among all the owners of the land.
RoyalP


Posts:0


02/19/2019 6:45 PM  
Posted By AugustinD on 02/19/2019 10:50 AM
Posted By RoyalP on 02/19/2019 10:29 AM
<5.4 refers to PARTITION and/or DIVISION, not to 'sale of'


In legal jargon, "partition" includes "sale." In particular, it can refer to a sale where the proceeds are divided among all the owners of the land.




i accept your definition

? have you read 10.1 (e) ?


seems there is a contradiction in the OP's 'docs' ?


ps. this HOA nightmare of BS is a gift which just keeps on giving and giving
AugustinD


Posts:2045


02/20/2019 6:33 AM  
Posted By RoyalP on 02/19/2019 6:45 PM
have you read 10.1 (e) ?


See above for my response re 10.1(e). It is n/a.
RoyalP


Posts:0


02/20/2019 7:29 AM  
aaah so


"I can see clearly now, the dawn has come ....."



ScottP11
(Texas)

Posts:5


02/21/2019 4:35 PM  
My Hoa has a parcel of land that is currently a drainage easement. The Hoa would like to repurpose this land as a park and build a hiking trail. Would the hoa need approval from mortgages to modify the land to become a park? This modification could change the value of homes, possibly negatively with the extra traffic and noise the park brings.
GeorgeS21
(Florida)

Posts:1469


02/21/2019 4:37 PM  
Scott,

You probably should start a new thread.
KellyM3
(North Carolina)

Posts:1433


02/21/2019 6:43 PM  
Dennis,

I agree w/ your attorney after reviewing section 5.4 of your covenants.

IF that acreage is, in fact, official common area, then you would absolutely need every homeowner AND their mortgage holder (bank) to approve the sale of that land. By virtue of selling it, you'd need to "partition" it to separate from the remaining common area.

Covenants and by-laws are often very restrictive in order to guarantee historic stability for the community. It's not unconstitutional. It's the agreement you signed when you entered that neighborhood. Yes, it's possible to change the standard but very very unlikely and could cost as much as the land value to properly administer a petition effort, especially in chasing the banks.

Move onto to more constructive pursuits is the recommendation but your point is taken on the land value and the fact the land is unused.

NOTE: This is personal opinion and not legal advice. Hire a lawyer for official feedback....but I think you'd get the same answer. Besides, the HOA attorney has no "skin" in the issue.
DennisG7
(Georgia)

Posts:99


11/26/2019 9:22 AM  
It's been a few months since my thread started and I recently reviewed the great input and wanted to thank all of you. This issue is not dead but a few points of clarification:

1. The 11+ acres of land owned by the HOA is actually shown on the county property maps as a street address. It was intended to be additional acreage for residential homes but there was no direct, easy access to it so the land was never developed. I don't it recall it being officially listed as common grounds. It is a forest with some wetlands. About 7-8 acres looks to be buildable.
2. The property is connected to the HOA but you can't get to it without driving out of the HOA and going about 1 1/2 miles. It's only access is from a GA State Highway which can only be reached by driving on a couple county/state roads.
3. I indicated it was of no real use to the HOA as when a study was done about 5 years ago one of the proposals was to "develop" the property. Since all direct access can only be done by leaving the HOA residential areas it seemed to be cost prohibitive to develop it using HOA funds.
4. One possible consideration was to donate it to the county/state for a recreational area. Public safety building, etc. No financial benefit to the HOA if we did it. A question also if we just donated it??
5. The area is zoned R-30 (Single family homes). Since it was intended for homes the current zoning is still R-30.
6. Recently the state contacted us about the widening of the HWY to 4 lanes from 2 lanes. Work had started on the same HWY about 5-6 miles away. The plan is to widen this area in a couple more years. Doing this will require the state to purchase a portion of the property along the current highway. IF THE HOA CANNOT SELL THE PROPERTY DUE TO THE CC&R THEN IT SEEMS IT CAN'T NEGOTIATE A SALE TO THE STATE EITHER. THAT MEANS THE STATE WOULD ACQUIRE IT BY EMINENT DOMAIN AT A MUCH LOWER COST!! Not good for us.
7. An upcoming HOA meeting in a few weeks has got members ticked off because they are announcing a significant dues increase. They also just raised dues 11 months ago. People are screaming about the new increase. Seems to me that selling unused property would solve the problem. Funds can go into reserve fund?
8. Changing the CC&R was recognized in our original report. Making some changes to it and the By Laws was put forward with a prediction that to do this and then get the property sold would probably take about 2 years or so. Of course our report NEVER was made public to the members. We were somewhat surprised. New BOD members contacted us and asked for a copy of the report and for us to brief them on how we thought this might proceed. They had heard of the study but apparently no copies survived the regime change and I gave them a copy of what we had kept safe. It's being looked at.
That addresses a lot of what has been mentioned in this thread.

I doubt any homeowner would really object to the sale. You can't even see the property and where any residential construction would be done is far from our HOA. A "wetlands" area is between us and the buildable area. Our proposal also protected that area from construction and acted as a barrier.

This project may never get done. Years from now I envision the surrounding areas built up and the 11 acres still sitting there. Such is life.
Again thanks to all for your input.
Dennis G7

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