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Subject: only the developer wants/needs the HOA to be incorporated
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JoeB20
(Kansas)

Posts:34


05/26/2019 5:49 PM  
Thanks for the help with the tax questions. Now I have another question – annual corporate paperwork hasn’t been filed for many years. When discussing it, a board member suggested the developers incorporate to avoid risk during construction, but once the developer is gone there isn’t a reason to keep up the corporation, so most HOAs don’t.


Doing a bit of googling, I found this: https://www.dailyrepublic.com/all-dr-news/wires/business/does-a-hoa-need-to-be-incorporated/
(quote from link)
No, I guess an HOA doesn’t technically need to be incorporated.

If the C,C&Rs lay out the existence of the HOA, and each homeowner’s deed requires the homeowner to adhere to the C,C&Rs, then it’s
possible to have a defacto association that operates without the benefit of the corporate structure or protections. But I can’t
imagine why anyone would want to do so.

Without being a corporation, what you’re left with is one big partnership. That means each homeowner is individually liable for
anything the HOA does. If an employee, for example, sues the HOA for back pay or sexual harassment or discrimination, then every
homeowner is equally liable as if they had been the employer. That’s because, just like in any business partnership, they are.
That’s the nature of partnerships. Everybody is responsible for every other partner’s actions.

If I were you I would look closely at the C,C&Rs and see if they don’t require the HOA to be incorporated. My hunch is they do.

If so, ultimately, the homeowners can sue the officers to make them incorporate.
(end of quote)


According to what I'm finding online, we all are likely exposed to liability, and the covanent's statement that we're all freed from liabilty might not be worth anything.

Who's correct?



BTW, our covenants Article 1 Section 1.01 says our HOA is required to be incorporated:
"The "Association" shall be organized as a nonprofit corporation for a perpetual term under the laws of the State of Kansas."
JohnS111
(New York)

Posts:165


05/26/2019 6:03 PM  
Was your HOA ever incorporated, by filing a Certificate of Incorporation or the like with the state?

If so, and if annual or biennial corporate filings and payments weren't made, then either the HOA is just delinquent with them but is still incorporated or, if the lack of filings haven't been made for a really long time, then the HOA has been disincorporated. More likely the first has happened, but you can check the status by going to your state's Secretary of State website and looking up the name of the HOA in the "business search" or similar part of the website and seeing what the website says.

If the HOA was not ever incorporated or now has been disincorporated (however unlikely), then the HOA wouldn't be a partnership or anything. It would be an unincorporated association (basically, the same as a bridge club or poker group--just a group of people who work together on some things, but not a corporation or similar entity) and the HOA documents would, I think, just be a contract among homeowners. I've never dealt with this situation but I would think that in that case, homeowners would be subject to individual liability since there would be no incorporated HOA that would serve as a shield.

If your HOA was ever incorporated, whatever its status now, it can probably be put back into "good standing" by paying all amounts and making some or all of the state filings that weren't made but should have been.

You may have a claim against directors who didn't keep corporate filings and payments current.
JoeB20
(Kansas)

Posts:34


05/26/2019 6:06 PM  
Thanks! I'll try to find records with the state.

I'm pretty sure it was incorporated at one time. I have a copy of the articles of incorporation, bylaws, and covenants.
JoeB20
(Kansas)

Posts:34


05/26/2019 6:17 PM  
I found it:

Business Entity Type: KANSAS NOT FOR PROFIT CORPORATION
Date of Formation in Kansas: 11/06/1980
State of Organization: KS
Current Status: FORFEITED - FAILED TO TIMELY FILE A/R
The Last Annual Report on File: 12/1999
Next Annual Report Due: 06/15/2001
Forfeiture Date: 09/15/2001


So does forfeighted mean disincorporated?
JohnS111
(New York)

Posts:165


05/26/2019 6:19 PM  
https://www.kansas.gov/bess/flow/main?execution=e2s3

I've never heard of "most HOAs" deciding not to remain incorporated. That's silly. That means the individual board members can be sued for anything that the HOA (as an unincorporated association) did, and they'd be liable much more so than if the HOA were incorporated.
JohnS111
(New York)

Posts:165


05/26/2019 6:23 PM  
Sort of; it's a zombie HOA. Dead and not a corporation, but can be revived.

It is no longer a corporation as far as I know, but the back taxes and filings can be handled and the HOA can be reinstated so that it is then a real live corporation. So it's not the same as starting a corporation from scratch.

Any "corporate filing service" can fix this.

If the board knowingly let this happen that's pretty incompetent, or if the HOA's counsel knowingly let this happen that's even worse.

Until it's revived, I'd think that there would be no corporate protection from liability, but I don't know- I've never heard of this kind of thing happening since usually directors have enough sense not to let it happen.

JoeB20
(Kansas)

Posts:34


05/26/2019 6:40 PM  
As I understand it, the corpoaration was for all of "Green Valley Homeowner's Association". The subdivision went in by various stages, and my HOA is "Green Valley 4th". I'm just guessing here, but it appears to me that the developer set up one corporation for all of the "Green Valley" developments, but then established separate HOAs (boards, covanents, etc) for each subdivision.

For example, our's (4th), owns no longer owns any common property, has vitually no expenses, and our dues are $20 a year.
There are a couple pools in other parts of Green Valley. Their dues are much higher dues.

Each subdivision of Green Valley has its own board, covenants, enforcement actions, etc.

The ones with the pools are spending some real money and having real liability. I'm shocked that they don't have a legit corporation (or maybe there was a separate corporation created for them later, they are newer than us).

But regarding GV 4 not being on top of things, that's no surprise.
JohnS111
(New York)

Posts:165


05/26/2019 6:43 PM  
Well now’s the time: you could have a lawyer reincorporate your HOA and make you the sole owner and director, with all powers yours. That would serve those moronic directors right.

But maybe why bother having an HOA in this case? Just disband the board and let it lie.
MelissaP1
(Alabama)

Posts:8184


05/26/2019 7:06 PM  
It sounds like your HOA has what I call a "Mothership". You may have a "Master" HOA of which everyone else is a sub to that. That "Master" HOA may be incorporated. It's hard to tell. You all may fall under this umbrella.

The state is usually where you would know for sure if incorporated or not. HOA's tend to be non-profit but NOT charitable ones. So if your HOA isn't make a profit not much to report.

You can't just decide to disband a HOA by getting rid of it's board. There's more to it than that. So I would ask a real attorney more familiar with corporate or HOA law. You don't need a Real Estate lawyer. They may be able to give the proper advice than someone on the web.

Former HOA President
JoeB20
(Kansas)

Posts:34


05/26/2019 7:15 PM  
Regarding green valley #4 - for 20 years no one cared about because it didn't do anything to upset anyone. There are few residents who don't want it to die, and they've been running the board for a few years.

Then last year they proposed some "updates" to the covenants. Lots of new rules, fines of $50/day $500/month for violations, etc. They are upset about a few houses becoming rentals and they want some teeth in the covenants to stop that trend. They also are upset by some weeds in a few yards.
The changes caused some backlash. Someone (not me) sent a cranky letter questioning many parts of the changes. Now there is a "covenants committee" going through a phase 1 (pruning obsolete stuff) and then a phase 2 (new rules).

I'm on the board and on the covenants commitee - not because I want to be, but to figure out the true situation and how to prevent anything I'll be inconvenienced by later. I do not want to give any rights to do what I want with my property (some of the proposals would inconvenience me), but when I joined the board I didn't necessarily want to kill it. With what I have learned in the last few months I think they are going to get us all sued.

If the HOA wasn't seeking new powers to hassle, I wouldn't care. But I'm thinking a few years from now they'll be interfering with a landlord's income. His lawyer will figure out our HOAs messed up state and offer to kill the HOA rather than fight the rules.

If we ignore the complication of the corporation being for all the green valley subdivisions, I think it would be an easy thing to kill Green Valley 4. GV4 doesn't have that much cash (maybe around $1,000?). So hiring a CPA to fix the taxes, straightening out the corporate status, and doing the required (but never done) annual independent audit would far exceed the available funds. So suing to demand those things be straightened out would require them to assess all the homeowners (almost all of whom are apathetic). Faced with a legal bills, apathy would quickly turn into votes to disband. With 59 houses, 40 signatures are needed to disband - entirely doable with a little legal motivation.


The complication I see to disbanding is that the corp seems to be for all of GV.

With the status forfeited, could a lawyer get my deed refiled without restrictions?

If I could permanently be free of the HOA for a few thousand $, I'd jump at the chance.
JoeB20
(Kansas)

Posts:34


05/26/2019 7:24 PM  
MelissaP1 - I believe it is the "mothership" who's status is forfeited. The Articles of Incorporation we all have is for "Green Valley Homeowners Association" it says nothing of being the 4th edition.


About disolving, the articles states:
The association my be disolved with the ascent given in writing and signed by not less than two-thirds (2/3) of each class of members. Upon disolution of the association, other than incident to a merger or consolidation the assets of the Association shall be dedicated to an appropriate public agency to be used purposes similar to those for which this Association was created. In the event that such dedication is refused acceptance, such assets shall be granted, conveyed, and assigned to any non-profit corporation, association, trust, or other organization devoted to such similar purposes.


In the articles, by-laws, and covenants, that is the only commentary on disolving.

Can a subdivision under the "mother ship" disolve using this process, without disolving the mothership?
MelissaP1
(Alabama)

Posts:8184


05/26/2019 8:25 PM  
What I think that means (I could be wrong as not a lawyer) is that if you were to dissolve, you'd have to be under control of a Management Company. Atleast that is how our HOA dissolution is. If we decided to dissolve then a 3rd party would take over. Which means that you as a homeowner have no rights. Your dues are set to whatever the new owner/MC wants. They don't have to be a non-profit. So your basically paying a business to run your business.

My recommendation is to get your quacks in a row. Stop focusing on dissolution but resolution to your issues. Enforcing of fines and rental restrictions may not be allowed in your state. So even if you make all the efforts to change your documents. The State/Local laws overrule it. It's better to have a fining schedule identifying violation/fine rate. Rental should require that all leases need to include renter's are subject to HOA rules. This way that protects ALL parties involved.

Making "culture" changes is the hardest changes to do. It may be time to do that than try to dissolute your HOA. A HOA is basically a "Club" of which all the owners are members. It isn't a "they or them", it's you and your neighbors. So start focusing on the neighbors...

Former HOA President
JohnS111
(New York)

Posts:165


05/27/2019 3:06 AM  
JoeB20, why not just re-file your deed without restrictions?

The HOA is now not a corporation. Its corporate status was forfeited. It's unclear if the HOA would need to go through the voluntary dissolution process in the governing documents because its charter was involuntarily forfeited. (The voluntary dissolution process in the governing documents is, to be inelegant and offensive in my description, like corporate suicide, but your HOA was murdered.)

If I were you I'd jump at the chance to refile your deed. Talk to the lawyer about doing it and also talk to a title company about doing it.
JoeB20
(Kansas)

Posts:34


05/27/2019 5:37 AM  
@MelissaP1 - I am also not an attorney either (I'm an engineer), but the way I read that section of the articles, is that the first sentence governs deciding to dissolve, and the later sentences govern how to dispose of assets after it has been decided to dissolve (note the second sentence starts with "Upon dissolution..."). Clearly there are restrictions on how to dispose of the assets, but the only asset we have is a checkbook with maybe a thousand dollars in it.

@ JohnS111 "if the HOA's counsel knowingly let this happen that's even worse"
Our HOA has no counsel, no CPA, and no tax consultant. Unless someone wants to delay billing until the HOA can raise money, we probably can't them either.

@J JohnS11 "why not just re-file your deed without restrictions?"
Great idea! Today is a holiday. I was already taking tomorrow off work. I think I'll start by contacting the title company from my home purchase. I'll see what they say.
JohnS111
(New York)

Posts:165


05/27/2019 6:23 AM  
People may balk at refiling your deed without restrictions but I believe that the HOA has no authority to enforce any rule whatsoever since its charter was forfeitures. So the HOA can’t do anything about it if you do refile your deed.
MelissaP1
(Alabama)

Posts:8184


05/27/2019 6:47 AM  
You do understand what a HOA is? It's you and your neighbors. The purpose is basically a "sales tool" to attract potential buyers. So dissolving to get rid of the HOA and then have no restrictions? How is that going to work for your abiltity to sell your houses?

There is a reason for a HOA and how it's run. If it's not running right, then fix the leaks. Your basically saying "I want to dissolve my HOA so I can make different restrictions?". The way to do ALL of this is in your documents. Your HOA does allow you to do this amongst ALL the members. It just takes WORK.

My HOA was a mess when I started. What did I do? I learned the rules and took them to EACH meeting. Anyone asked a question or had a violation? I'd refer to the rules. Did not have to answer right away. Whenever we did respond it was always from the section/paragraph of the rules. Getting back to the rules fixed many of the issues. Educating people about them helped. We were able to make changes and file them.

It is possible to make your HOA better, just have to incorporate the rules and put in the work.

Former HOA President
NpS
(Pennsylvania)

Posts:3364


05/27/2019 6:51 AM  
How exactly do you re-file a deed without restrictions?

I can only assume the the original CC&Rs for the entire development were filed prior to your lot being sold. How does one remove a constraint without going through the steps prescribed?

If you sell you house, is this self-removal something that would need to be disclosed? How would that affect a potential buyer's attitude?

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JoeB20
(Kansas)

Posts:34


05/27/2019 8:34 AM  
JohnS111 - I agree it is very possible they will balk at it, but its worth a try.

MelissaP1 - yes, in theory the HOA is me and my neighbors. In practice, it is a small percentage of my neighbors trying to control the neighborhood.
The HOA nearly disappeared through inaction 7-9 years ago (the one man show who was running it got tired of it and walked away. He said he was done and people could step or let it disappear). I am certain at least 10% want it (that's the board members for the last few years). I am certain that over 10% want it gone. I don't know specifically where the remainder stands, but one of the proponants of the HOA says everyone he talks to is apathetic. I think it is telling that the only people I know in the neighborhood who want the HOA I met because they are on the board. I know of no one who wants it who is not on the board (though obviously I don't interigate everyone I meet). The HOA has no money to do things right, and seem content to ignore liabilities and press on without legal standing (that has worked so far for them). From a personal liability perspective, I have an umbrella insurance policy so I don't need to be afraid.

NpS - As for selling, here is where the two recent additions on our street stand: One said they tried to find a house without an HOA, and this was the best they could do (they want it disbanded). The other, when informed of some of the recent activities said "oh, they want to be *that* kind of HOA". If I manage to get the deed reissued, disclosure requirements are irrelevent when I sell because I will brag about it in the listing.
JohnS111
(New York)

Posts:165


05/27/2019 8:41 AM  
JoeB20, I'm not a real estate lawyer, but I would think that including some kind of official confirmation of the HOA's forfeiture of its charter, as part of the deed documentation that is filed, would be helpful. For example, you could order a "good standing certificate" from the Secretary of State. This is an official document that shows that the HOA is valid and existing. Since it forfeited its charter, the Secretary of State wouldn't give a "good standing certificate", but it would in its place perhaps give a certification that the charter has been forfeited. I would include something like that in your deed filing, as proof that the HOA is "dead" and can't enforce any restrictions against you.
JoeB20
(Kansas)

Posts:34


05/27/2019 8:59 AM  
Thanks for the idea, I just checked online and it says this business entity does not qualify for a certificate of good standing, and to call them for more information. I called, and of course got an answering machine. I'll try again tomorrow. If I can buy an official copy I'll certainly do so.

BTW, I understand you all are not giving official legal advice. I take all internet comments as being for "entertainment purposes only". I very much appreciate the ideas, you are giving me a lot of ideas to research, and good questions to ask when I get to the point of talking to an attorney.

As I get solid information, I'll post back here what I learn (though I expect the process will likely stall for weeks at a time)
NpS
(Pennsylvania)

Posts:3364


05/27/2019 9:05 AM  
Posted By JoeB20 on 05/27/2019 8:34 AM
NpS - As for selling, here is where the two recent additions on our street stand: One said they tried to find a house without an HOA, and this was the best they could do (they want it disbanded). The other, when informed of some of the recent activities said "oh, they want to be *that* kind of HOA". If I manage to get the deed reissued, disclosure requirements are irrelevent when I sell because I will brag about it in the listing.



A bit too cavalier for me. If I was a potential buyer, and you said "oh, you don't have to be concerned about that," I don't think I would make an offer on the house.

In this thread, I see too much discussion about the legitimacy of the corporate entity, and not enough about the covenants that potentially bind your association. Even if the corporation loses status, the restrictions can still bind the owners to each other.

The CC&Rs are restrictions that every purchaser can claim a right to enforce at some time in the future so long as the covenants still apply to the property.

If you have that many people ready to bail on the CC&Rs, then why not go through the formal process of having the appropriate % or owners sign the necessary documents to dissolve?

No matter how you slice it, I think you can run into problems if you attempt to self-remove restrictions. Just my 2 cents.







Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JohnS111
(New York)

Posts:165


05/27/2019 9:16 AM  
JoeB20, the Secretary of State should be able to give you some kind of certification that the charter has been voided.

Nps, once a corporation has forfeited its charter, usually it can't enforce anything against anyone. Perhaps another owner could go after JoeB20, but that's iffy and perhaps unlikely. The HOA itself could not.
JoeB20
(Kansas)

Posts:34


05/27/2019 9:33 AM  
Here is a link to several attorneys commenting on an HOA's ability to enforce when when the corporation is forfeited:
https://www.avvo.com/legal-answers/does-an-hoa--cease-to-exists--following-the-forfei-1800101.html

Note the last response (saying they can't enforce in that situation), which got a thumbs up from another attorney.

That discussion is specific to Texas, so it doesn't help me specifically, but is an interesting datapoint for the general legal principles involved.
NpS
(Pennsylvania)

Posts:3364


05/27/2019 9:55 AM  
Posted By JoeB20 on 05/27/2019 9:33 AM
Here is a link to several attorneys commenting on an HOA's ability to enforce when when the corporation is forfeited:
https://www.avvo.com/legal-answers/does-an-hoa--cease-to-exists--following-the-forfei-1800101.html

Note the last response (saying they can't enforce in that situation), which got a thumbs up from another attorney.

That discussion is specific to Texas, so it doesn't help me specifically, but is an interesting datapoint for the general legal principles involved.



I read the responses. They discuss the other issue - What happens after a corporation loses its corporate status? That's a very different one than the issue you are addressing.

Even if there is no longer a corporation --- There are still restrictions on the use of the land ---

Whatever those restrictions are (which haven't even been mentioned yet in this long thread) --- They are restrictions on the land

Every owner in the development has a right to demand that those restrictions being enforced --- even if they are not being enforced today

If you want to get rid of the restrictions --- Then there is a % requirement --- Get the right number of signatures --- And get rid of any future claims by other owners.

I repeat --- The corporate issue and the restrictions on the land are too different things. Two different things. Two different things.

Don't make the mistake of relying on one to get rid of the other.

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JohnS111
(New York)

Posts:165


05/27/2019 10:09 AM  
I think that the legal issue then is:

If a HOA has forfeited its charter:

* Can the HOA itself enforce restrictions, including, without limitation, restrictions that on land use?

The answer is likely NO.

* Can individual persons who are members of the HOA enforce restrictions?

I would think that the answer is no unless the governing documents give individual members the right to stand in place of the HOA and enforce its rules. I'd be surprised if the HOA had given individual owners rights to do so.

So, original poster: if you want to try to escape restrictions of the HOA, applicable to your deed or otherwise, now's the time.
NpS
(Pennsylvania)

Posts:3364


05/27/2019 10:57 AM  
Posted By JohnS111 on 05/27/2019 10:09 AM
I think that the legal issue then is:

If a HOA has forfeited its charter:

* Can the HOA itself enforce restrictions, including, without limitation, restrictions that on land use?

The answer is likely NO.

* Can individual persons who are members of the HOA enforce restrictions?

I would think that the answer is no unless the governing documents give individual members the right to stand in place of the HOA and enforce its rules. I'd be surprised if the HOA had given individual owners rights to do so.

So, original poster: if you want to try to escape restrictions of the HOA, applicable to your deed or otherwise, now's the time.



Way off base.

I'll try to say this one more time as simply as I can.

1. The Secretary of State has the power to grant and to take away corporate status. Period. The Secretary of State has no power to remove restrictions on land. What happens to the enterprise without corporate status? It still exists, just not as a corporate entity.

2. The land recording office is where claims against land are filed. The CC&Rs (restrictions on the land) were filed at the Recording Office before the OP's title was filed. As such, the CC&Rs have priority over the OP's deed.

3. Thousands of HOAs unintentionally let their corporate status lapse. Does that mean that during the lapse, a homeowner can file something from the Secretary of State's office at the Recording Office that will negate the CC&Rs effect on the land. Wow. That would be lunacy.

4. No matter what you try to do on your own, those CC&Rs will remain a cloud on title (because they predate the deed) unless actually removed by an appropriate recording. From the OP's description, it seems to me that a formal dissolution of the entity itself by an appropriate vote and a filing at the Recorder of Deeds would be the safest way to go because the cloud could be removed that way.

5. Now to your 2 questions - YES, the CC&Rs can still be enforced even if the corporate status is gone (see #1 above). YES, it is possible for a homeowner to take derivative action on behalf of the HOA or to revive the HOA with enough participation from other owners.

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JohnS111
(New York)

Posts:165


05/27/2019 11:04 AM  
Well, NpS (aka Albert Einstein), then tell me who can enforce the restrictions set forth in the documents that affect the land? Neither the HOA itself nor individual owners can. The government won't care.
JoeB20
(Kansas)

Posts:34


05/27/2019 11:05 AM  
The CC&R does say owners can enforce:
The Association, Declarant, or any owner shall have the right to enforce, by any proceeding at law or
in equity, all restrictions, conditions, covenants, reservations, liens, and charges now or hereafter
imposed by the provisions of this Declaration.

I'm trying to select an attorney to get firm answers to lot of questions.
JohnS111
(New York)

Posts:165


05/27/2019 11:06 AM  
And, Albert Einstein, as I know (do you?), to make a derivative action (which is an action on behalf of a corporation) first requires making a demand on a corporation. Only then can an individual proceed with an action on behalf of the corporation.

Here, though, there is no corporation to make a derivative action against, and no corporation on whose behalf an owner can proceed with an action.

So your arguments are as sharp as those of the board member who made the claims in the OP's first post.

So when the corporation is gone, so are its rights.
JohnS111
(New York)

Posts:165


05/27/2019 11:07 AM  
JoeB20, thanks for your post. That definitely changes things.
NpS
(Pennsylvania)

Posts:3364


05/27/2019 11:08 AM  
Posted By JoeB20 on 05/27/2019 11:05 AM
The CC&R does say owners can enforce:
The Association, Declarant, or any owner shall have the right to enforce, by any proceeding at law or
in equity, all restrictions, conditions, covenants, reservations, liens, and charges now or hereafter
imposed by the provisions of this Declaration.

I'm trying to select an attorney to get firm answers to lot of questions.



Joe
To be on the safe side, you might want to talk with a title company about it. Probably won't cost you anything for the conversation.

Best of luck.

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JohnS111
(New York)

Posts:165


05/27/2019 11:10 AM  
JoeB20, I'd say that what you have here is a mess.

With a sharp lawyer, you can probably get out of the restrictions, but it isn't risk free.

NpS, YOUR post is the one that's off-base. If an individual owner can enforce restrictions, it's because of the actual terms of the governing documents, if those are still enforceable, NOT because of the grounds in your post.

Now the question is, "if a charter has been forfeited, do persons other than the corporation who have rights under its governing documents still have them?"
JohnS111
(New York)

Posts:165


05/27/2019 11:17 AM  
And to add:

If forfeiture of a charter of a corporation results in nobody having rights under the corporation's governing documents, then it doesn't matter what's on file with the land registry, and those references to the CC&Rs and the like would be irrelevant.

Only if forfeiture of a charter terminates only the HOA's rights under its governing documents, but not the enforcement rights of a third party, would the CC&R references be relevant.

Also, since the HOA forfeited its charter around 2000, arguably anyone who bought into the HOA-governed properties might not be deemed to be a member of the HOA, and thus unable to enforce the CC&Rs.

I don't know the answers to these questions but it's the analysis that I'd do.
NpS
(Pennsylvania)

Posts:3364


05/27/2019 11:25 AM  
Posted By JohnS111 on 05/27/2019 11:07 AM
JoeB20, thanks for your post. That definitely changes things.



John
Joe's quote is fairly standard boilerplate.
The fact that you think it's something special concerns me, especially if you are going to give people advice.
If I'm not mistaken, you said you were a lawyer. And yet, in most of your posts, you talk about the language in the documents, but you don't seem to have a grasp of the practical implications of what the purpose is. The one doesn't exist without the other.
People buy into HOA's because they want the HOA umbrella to protect them from having a junk yard next door. If they couldn't take action on their own, and the HOA was inoperative, then how would they get relief on a right that was promised to them through the CC&Rs?
I expect that the right to act on one's own is going to be somewhere in the boilerplate language of the CC&Rs in all HOAs. It's common sense.



Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JohnS111
(New York)

Posts:165


05/27/2019 11:31 AM  
NpS:

I've stated many times that I am NOT a real estate lawyer. Plus, it's been made clear that this is NOT legal advice. Only someone without common sense would think otherwise.

You're the one who is not thinking analytically here. In your view, if someone files something with a land registry, even if the person is defunct and has no rights whatsoever, in your view, the filing still matters. You're looking at form over substance and are not thinking logically. So would a racist long-gone property developer who put nonsense in deeds in the 1930s still be able to enforce them? In your view, yes.

Your claims about derivative actions show know knowledge whatsoever of how derivative actions work, or even what they are (they're based on rights derived from a corporation--thus the name).

Your claims also show little knowledge of people buying into HOAs. Plenty of people don't want them but buy into them because the purchase comes subject to them.

Finally, I checked the governing documents for 3 HOAs where I have properties and none of them allow individual members of the HOA to enforce the restrictions.

So you can take your claims of "common sense" and try to get some of that.
JohnS111
(New York)

Posts:165


05/27/2019 11:34 AM  
And, NpS, don't get on a high horse and scream "Off base!" at someone when it's you who hasn't thought fully about the other person's post.

You certainly haven't made a friend due to your jerk statements above. You could have avoided that result by thinking and being more tactful.
JohnS111
(New York)

Posts:165


05/27/2019 11:50 AM  
Also, NpS: you base many of your claims on "common sense".

As you should know, "common sense" to one person is nonsense to another.

What matters for anything legal are the actual words on a page (of a filing, a statute, a contract or the like). Not one person's view of "common sense".

For example, you state why you think people want HOAs--in, of all things, a thread by someone who's trying to get out of being bound by a HOA. Common sense?
JoeB20
(Kansas)

Posts:34


05/27/2019 11:52 AM  
NpS & JohnS111 - I hope neither of you gets annoyed at the other and quits this thread. I have benefited a lot from the debate you two have been having. Thank you!


NpS said a while back: "If you have that many people ready to bail on the CC&Rs, then why not go through the formal process of having the appropriate % or owners sign the necessary documents to dissolve? "

I may, but I don't want to jump to that. There is a large group who are apathetic. That makes them volatile and unpredictable. I'm an engineer. I like to understand all my options, and preferable have multiple paths to get to where I want to be. Then I start down the path with fallback plans.


NpS said: To be on the safe side, you might want to talk with a title company about it. Probably won't cost you anything for the conversation.

I agree. I've also thought the first discussion with them would be free. Tomorrow I'll try calling the title company that handled my closing 11 years ago. I also want to talk to an attorney, which I expect to cost at least couple hundred for the first chat. If the title company agrees to do it, I'll try to contain my surprise, and still talk to an attorney about risks. You all have given a lot to think about (that's why I'm here!), and I want to try my best to cover all the bases.


JoeB20
(Kansas)

Posts:34


05/27/2019 11:54 AM  
Here is my tentative list of questions for an attorney. Hopefully the attorney and I can run through most of them without spending an hour on each, and then have general discussion on options.

Am I missing anything from this list?


1) Confirm we have no protection from liability while the corporation is forfeited (for the board & members)
2) Can I refile my deed/title without conditions since corporation is forfeited? What extra documentation can/should we include beyond what the title company may require (e.g. documenting forfeited status)?
3) If I did get the deed refiled, and the HOA sued, does title insurance paid on the reissuance of the deed cover it? Or does my umbrella insurance?
4) Can HOA enforce articles/by-laws/CC&R while its corporation is forfeited?
5) Since the charter has been forfeited, do persons other than the corporation who were given rights under its governing documents still have them? (i.e. can residents take enforcement action)
6) What legal action can I take to force HOA to clean up taxes, corporate status, etc? Cost? What would that procedure look like? If pursued, this would be a strategy to force the HOA into costs it cannot afford for the purpose of forcing dissolution. Is this a viable strategy?
7) If the articles are for the GV overall, can dissolution be specific to GV4?
8) Specific process for dissolution? One sentence in articles seems to govern, right? It appears that the additional restrictions are for disposing of assets (i.e. just a problem for the board while winding it down, with no impact on the decision to dissolve – right?) What about recording? Then what, refile deed? What about residents who don’t refile deed?
9) Any conflict of interest concerns regarding me trying to dissolve it? (e.g. don’t say anything that could be construed as trying to scare people while taking signatures to dissolve)
10) May I generally assume as long as I do not act maliciously, any liability I incur in this activity will be covered by my umbrella liability insurance?
11) CC&R Section 11.01 says:
Covenants Running With the Land. The covenants and restrictions of this Declaration shall run with and bind the land for a term of twenty (20) years from the date this Declaration is recorded, after which time they shall be automatically extended for successive periods of ten ( 10) years.

>>since the corporation was forfeited when the 20 years passed, did it still automatically extend? (or can we declare it invalid on the grounds it did not extend?)
12) Can anyone (me?) reincorporate the HOA? What would that look like? Is it for all of GV, or just GV4?
13) The HOA cannot directly contact tenants for enforcement actions, true? Can the landlord sue for interference if the HOA does?
14) Since I bought after the HOA corporation was forfeited, must I be a member? Is there an angle of attack here?



JohnS111
(New York)

Posts:165


05/27/2019 11:55 AM  
JoeB20: a lawyer shouldn't charge you for an initial consultation. You're right to think about that, but if a lawyer plans to charge you for an initial conversation, then I'd find another lawyer, and there are plenty of corporate and real estate lawyers around.

Sorry to you for my vents earlier.
JohnS111
(New York)

Posts:165


05/27/2019 11:57 AM  
JoeB20, I just saw your list of questions. They're good. It might be worth checking with the title company first since the title company may be able to answer your questions about the deed filing (such as if you can file a deed with no restrictions, and with an official record from the Secretary of State that the HOA forfeited its charter included). That way, you can have those questions cleared out first and the lawyer wouldn't need to be spend time on them. The lawyer might not know the deed-specific questions anyway.
MelissaP1
(Alabama)

Posts:8184


05/27/2019 12:01 PM  
Nps… It's just going to go out one ear out the other. I agree with you. Unfortunately, being an ethical and professional lawyer doesn't apply to all. As evidence we have seen here... It's best to hope that people don't take advice thinking they've talked to an attorney here. We aren't attorneys nor represents ourselves to be. We are just people who have experience with HOA's. We know it's best to go to a real professional in real life. Just going to help advise you the best options on type, questions to ask, and what to watch out for.

Former HOA President
NpS
(Pennsylvania)

Posts:3364


05/27/2019 12:18 PM  
From PA's Uniform Planned Community Act (UPCA):

§ 5201. Creation of planned community

A planned community may be created pursuant to this subpart only by recording a declaration executed in the same manner as a deed by all persons whose interests in the real estate will be conveyed to unit owners and by every lessor of a lease, the expiration or termination of which will terminate the planned community or reduce its size. ... The declaration must be recorded in every county in which any portion of the planned community is located, must be indexed in the same records as are notarized for the recording of a deed and shall identify each declarant as the grantor and the name of the planned community as grantee.

§ 5220. Termination of planned community

(A) NUMBER OF VOTES REQUIRED.-- ... a planned community may be terminated only by agreement of unit owners of units to which at least 80%, or such larger percentage specified in the declaration, of the votes in the association are allocated. ...

(B) EXECUTION AND RECORDING AGREEMENT AND RATIFICATIONS.-- An agreement to terminate must be evidenced by the execution or ratification of a termination agreement, in the same manner as a deed, by the requisite number of unit owners who are owners of record as of the date preceding the date of recording of the termination agreement. ...

While PA's version might be a bit different than yours, if yours is based on the UPCA, it should be similar.

Two things are notable:

1. Nowhere does it say that these laws only apply to a corporation. It speaks in the language of "all persons" which can mean a corporation or any other entity (like a partnership or cooperative) or an actual person.

2. The only way to create an HOA or to terminate an HOA is with the filing of the appropriate documents "in the same manner as a deed." The requirements are spelled out.

As I have been saying all along, this is a title issue, not a corporate issue.

Joe, you might learn a lot by speaking with a title company.

John, I think Joe is now in a better position to pursue viable and safe options. I have no desire to engage in a pissing contest. I'm done.



Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JohnS111
(New York)

Posts:165


05/27/2019 12:54 PM  
NpS, the original poster is in Kansas. Pennsylvania law does not apply there, and states’ community association laws vary greatly.
JohnS111
(New York)

Posts:165


05/27/2019 12:57 PM  
And, NpS, overlooking the corporate aspects of this- that the HOA forfeited its charter- is overlooking a critical aspect of the analysis. Obviously the fact that the HOA is “void” is important.

JoeB20, please let us know how this turns out.
NpS
(Pennsylvania)

Posts:3364


05/27/2019 1:34 PM  
Joe

As I stated, I was using my state for comparison only (because I am familiar with the contents). I said that if your State's statute's are based on the UPCA, then there is probably similar language. Even if not based on the UPCA, many precepts often apply in other jurisdictions.

Kansas' statute has a different basis. Since it was adopted after your HOA was formed, it might not apply, or a previous statute might apply.

Anyway, here's something you might want to read in prep for your upcoming conversations. It's a nice snapshot.

http://www.kslegresearch.org/KLRD-web/Publications/StateLocalGovt/2018-HB2629-KS-UniformCIC-OwnrsBillofRightsActBckgrnd.pdf

Be sure to read any statements about termination rights. Note also that it talks about HOA's "generally" being non-profit corporations (but at a quick glance, I didn't see any requirement).

Best of luck.

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
RoyalP
(South Carolina)

Posts:770


05/27/2019 1:43 PM  
Joe,

You are confusing incorporation versus 'existence'.

You have Covenants and Restrictions 'attached' to your deed. These 'run with the land'.

Said CCRs reference a HOA.

Most HOAs are incorporated else no 'corporate shield' for their membership.

Even if corporate status is 'lost' the HOA may, or may not, still exist.

Even if the HOA no longer exists the CCRS will remain UNLESS y'all obtain 100% agreement to abolish same from ALL HOMES REFERENCED.

The CCRs themselves will definition of membership in the HOA.

You need COMPETENT legal advice, not internet babbling.
JohnS111
(New York)

Posts:165


05/27/2019 1:50 PM  
RoyalP, we all agree that the CCRs remain. The question is who can enforce them. The HOA likely cannot, due to corporate law issues. It looks like some individuals might be able to. That’s not “babbling”, it’s thinking analytically.
JoeB20
(Kansas)

Posts:34


05/27/2019 2:06 PM  
JohnS111 - yes, I'll update you as I learn more.

NpS - A couple days ago I read the Kansas Homeowners Bill Of Rights, but I had not found that summary doc. Thanks for that, its shorter and more to the point.

RoyalP - the articles of incorporation state that written ascent given by 2/3 of the members can disolve it. I can find no higher threshold required by KS law. Why do you say 100% agreement is required? Am I missing something?
GenoS
(Florida)

Posts:2960


05/27/2019 2:33 PM  
Posted By JohnS111 on 05/27/2019 11:34 AM
And, NpS, don't get on a high horse and scream "Off base!" at someone when it's you who hasn't thought fully about the other person's post.

You certainly haven't made a friend due to your jerk statements above. You could have avoided that result by thinking and being more tactful.

There's only one jerk in this thread.
JohnS111
(New York)

Posts:165


05/27/2019 2:41 PM  
GenoS, I recognized that I went too far, so I gave an apology for venting.
NpS
(Pennsylvania)

Posts:3364


05/27/2019 2:46 PM  
Posted By RoyalP on 05/27/2019 1:43 PM
Joe,

You are confusing incorporation versus 'existence'.

You have Covenants and Restrictions 'attached' to your deed. These 'run with the land'.

Said CCRs reference a HOA.

Most HOAs are incorporated else no 'corporate shield' for their membership.

Even if corporate status is 'lost' the HOA may, or may not, still exist.

Even if the HOA no longer exists the CCRS will remain UNLESS y'all obtain 100% agreement to abolish same from ALL HOMES REFERENCED.

The CCRs themselves will definition of membership in the HOA.

You need COMPETENT legal advice, not internet babbling.



Well said Royal.

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
NpS
(Pennsylvania)

Posts:3364


05/27/2019 2:47 PM  
Posted By NpS on 05/27/2019 2:46 PM
Posted By RoyalP on 05/27/2019 1:43 PM
Joe,

You are confusing incorporation versus 'existence'.

You have Covenants and Restrictions 'attached' to your deed. These 'run with the land'.

Said CCRs reference a HOA.

Most HOAs are incorporated else no 'corporate shield' for their membership.

Even if corporate status is 'lost' the HOA may, or may not, still exist.

Even if the HOA no longer exists the CCRS will remain UNLESS y'all obtain 100% agreement to abolish same from ALL HOMES REFERENCED.

The CCRs themselves will definition of membership in the HOA.

You need COMPETENT legal advice, not internet babbling.



Well said Royal.



Except for the percentage which looks like around 2/3, but not sure.

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
GenoS
(Florida)

Posts:2960


05/27/2019 2:50 PM  
Posted By JohnS111 on 05/27/2019 2:41 PM
GenoS, I recognized that I went too far, so I gave an apology for venting.

It's all good, John. And actually, I was talking about myself!
RoyalP
(South Carolina)

Posts:770


05/27/2019 3:10 PM  
Posted By JoeB20 on 05/27/2019 2:06 PM
JohnS111 - yes, I'll update you as I learn more.

NpS - A couple days ago I read the Kansas Homeowners Bill Of Rights, but I had not found that summary doc. Thanks for that, its shorter and more to the point.

RoyalP - the articles of incorporation state that written ascent given by 2/3 of the members can disolve it. I can find no higher threshold required by KS law. Why do you say 100% agreement is required? Am I missing something?





Dissolving a HOA is a DIFFERENT affair from REMOVING deed restrictions.
RoyalP
(South Carolina)

Posts:770


05/27/2019 3:14 PM  
Posted By JoeB20 on 05/27/2019 2:06 PM
JohnS111 - yes, I'll update you as I learn more.

NpS - A couple days ago I read the Kansas Homeowners Bill Of Rights, but I had not found that summary doc. Thanks for that, its shorter and more to the point.

RoyalP - the articles of incorporation state that written ascent given by 2/3 of the members can disolve it. I can find no higher threshold required by KS law. Why do you say 100% agreement is required? Am I missing something?




The corporation can/may be dissolved.

? The HOA, albeit now non incorporated, remains ?


This a 'law question'.
NpS
(Pennsylvania)

Posts:3364


05/27/2019 6:50 PM  
From Joe's CC&Rs:

The Association, Declarant, or any owner shall have the right to enforce, by any proceeding at law or
in equity, all restrictions, conditions, covenants, reservations, liens, and charges now or hereafter
imposed by the provisions of this Declaration.

From description of Kansas' Statute previously provided:

A declarant, association, unit owner, or any other person subject to UCIOBORA may
bring an action to enforce a right granted or obligation imposed by UCIOBORA, the declaration,
or the bylaws.

Not surprisingly, the two statements are consistent with each other on the right of the individual owner to pursue enforcement. The language in both is wide and sweeping. Not something to take lightly.

Je publie un degagement de toutes responsabilite. Read all posts at your own risk.
JohnS111
(New York)

Posts:165


05/27/2019 7:22 PM  
JoeB20:

If your zombie HOA’s documents and your deed refer to the zombie HOA by name, then only that HOA is relevant for purposes of those documents.

One solution to your situation is for you to quickly incorporate a new entity using the same name as that HOA and to have someone prepare documentation making you the sole director and member of that new HOA with the old HOA’s name.

Then all of the restrictions in those documents will apply, but you will be the only person who can enforce them.

Problem solved. If your neighbors want your neighborhood to be subject to the terms of the zombie HOA’s governing documents, they will need to create a new HOA under a different name and get people voluntarily to join.

Good lawyers think outside the box to achieve results. They aren’t stuck on the terms of old documents; they work with them, creatively, to achieve results.
JohnS111
(New York)

Posts:165


05/27/2019 7:31 PM  
JoeB20:

If I were you I would resign from the board. If you do anything to undermine the HOA then you could be subject to liability in your capacity as director although it’s an odd situation since the HOA is a zombie HOA.
JoeB20
(Kansas)

Posts:34


05/27/2019 8:53 PM  
I assume, perhaps incorrectly, that my umbrella insurance policy would cover any (non-criminal/non-malicious) liability I would have. Do you agree that is adequate protecion in this situation?

I still have all the docs from closing on the house in '08. I went through them this evening. As best as I can tell, I was not provided a copy of any HOA docs (articles, bylaws, CCR) at closing. The only reference I can find is on the title insurance document, where it lists exceptions from coverage. There it lists the expected names and the expected "Book" and "Page" of the records. Those Book/Page match the documents I have received recently from the other board members.

As for your suggestion about forming my own corporation, I checked at the Secretary of State website. It says the name is available and I can reserve it for $30. However, the title work lists not only the name, but also the book/page # on file with the county. If I was to form a corporation reusing the name, my corporation would have different book/page # for its articles of incorporation. So I don't think I could claim it was the same entity. It would be an ornery thing to do, but I don't think it would be any more than a minor inconvenience if the HOA decided to clean up. If you still think this could work, please explain.

I spoke to a neighbor who has family in the real estate business. He's going to check with them on getting some questions answered.
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