No officers elected and no liability insurance on COS

Our Developer has sent out letters, twice in the past three years, appointing three people as start up board members so that the HOA can be turned over to the home owners. Problem is a majority of people in our development see no reason to elect officers and continue with the HOA. My concern is the fact we have no liability insurance on our common open space deeded to our HOA. One homeowner (I'll call homeowner "X") who does not agree that we need the HOA or liability insurance passed out a memo containing the the following:

Homeowner "X" wrote:
B. To remove ourselves from liability in the open space.
1. We need to post No Trespassing Signs everywhere, photograph them and document date & time of posting.
2. Do not create any attraction for people that live outside our development, such as a playground.

C. If someone gets hurt on our open space:
1. If it is a resident, we essentially are not going to sue
ourselves. That is what someone from our development would be doing should they get hurt and sue the Homeowner's Association.
2. If someone from outside our development gets hurt on our open space, provided it was posted No Trespassing and no "attractions" existed we are fine.

E. Dissolving the HOA: Once the developer turns the HOA over to the homeowners, realizes whoever is designated as the president of the Association will receive a letter from either the County or State once a year asking several questions about our Association.

1. Provided the recipient of that letter crumples it up and throws it away for 8-10 consecutive years our Homeowner's Association will become defunt in the eyes of the County/State.

2. Additionally. we do not have to act as if an Association exists in the meantime.

3. Only 10% of the Homeowner's Association in our county are considered active at this time. (No one wants them but they must be created long enough for the builders to maintain and turn over the open space required by law)

4. We will not all be sent to jail for letting our association go defunct. The State/County couldn't care less.

under addition notes was added: The gist I am getting out of all this is that somewhere along the line a mountain was created out of a mole hill. End of what Homeowner "X" wrote.

what homeowner "X" is referring to is two of us appointed as the start up board want to move forward with electing officers, etc. for the purpose of obtaining liabilitly insurance on the common open space that is deeded to the HOA. A few homeowners want the insurance but without being able to elect officers we can't purchase the insurance.

Does anyone here agree with anything homeowner "X" wrote in the memo.
What are we faced with down the road if we follow the course outlined in numbers (1) and (2) above. I don't agree with (1) and (2) above but being on the side of the minority right now have no idea where to go from here. Any comments or ideas will be appreciated. I hate to see a big lean placed on homes when a homeowner or someone outside the development decides it is well worth it to sue our HOA.
can we legally dissolve the HOA making each homeowner responsible for their share of any law suit(s)? All I see is night mares with court dates and lots of money being shelled out for legal representation that an insurance company would provide for a minimal yearly dues.

Even if a homeowner wanted to sell and get out of Dodge how would they legally list their house without disclosing all this mess to keep it from coming back to haunt them later on?

Sounds like you have a strong group of residents who don't undertand what is going on.

Hold an Information Meeting for all members outlining the steps that will be taken during this hand-over process and what legal responsiblities your group will have. Create a timeline chart. Bring in an outside professional to conduct this meeting.

Good luck.

Harold, We do not have mandatory assessments or dues of any kind at this time.

Well, you either exist or not. You cannot post notices on trees and then deny that there is ownership of the common elements.

What sources does this person X" use as basis for her conclusions?

There are some people who post on this site who are from your state. They may be able to walk you thru the developer transition steps. Read over some of the posts to see what other states require of the builder and management companies.

We have21 acres more or less of forest retention area that was deeded to our HOA as commmon open space. our roadsare maintained by the county, no tot lots, playgrounds, pools, etc. Only liability is this 21 acres of forest retention land that was deeded to our HOA by the developer. Our development is for single family homes no condos, etc.

Harold, The developer never held a meeting, never collected dues and did not see a reason to carry liability insurance on the COS. Under state law, we are a corporation and we do have CC&Rs and by laws and yes they are on file at the court house. We just can't get homeowners to agree that we do have an HOA and it may requires certain things of us.

The deed to our COS reads, in part: "NOW, THEREFORE, THIS DEED WITNESSETH, that for and in consideration of the sum of NO DOLLARS ($0.00) the receipt whereof is hereby acknowledged, the said Grantor does hereby grant and covey unto the said ----HOA Inc, a Maryland corporation, its successors and assigns, forever in fee simple, all those tracts or parcels of land situated in the ----Election District of ---county, State of Maryland, known as Open Space Land, and described as follows:...." So you see, the deed to the COS states we have an HOA and that it is incorporated.

The Developers LTR to us reads in part: As you may or may not be aware, (name of our development) is encumbered by a homeowners association. Somewhere in the process of buying your property, someone would have provided you with the documentation informing you of this. A Declaration of Restrictions is recorded in the County Land Records and should have been provided to you in your settlement papers at closing or sometime prior. The purpose of the association, an established Corporation, is to own the open space area that is located with the subdivision

So back to my question: When no one will address the HOA issue and only two or three homeowners seem to be concerned about the liability of the COS how do we proceed to get insurance coverage when we can't get people to talk about the issues or vote for officers? I would love to believe that homeowner "X" and followers are correct in what they think about not needing insurance. However, becasue they give no source for their views other than HOAs are bad business and they see no reason to acknowledge we have an HOA. I don't have a warm fuzzy feeling about just ignoring the issue and post a few signs. I would appreciate it if someone can lead me to written documentation that states all we need to do is post signs and be done with the HOA because being sued and having to pay out is not likely to happen.

Susan, all lot owners in our HOA must agree to sell or donate the COS. However, neither the county or state wants the land because it is of no use to them.

As of right now, the corporation is in good standing with the state because the developer has been filing our corporate tax papers for us. Not sure if the developer will continute to do so this year or not since they sent the letter saying they are ready to turn the HOA over to us.

Thank you for your input. I agree with every thing you are saying and tried to get this across to the others in our development. The one point you made about what if the person injured can't read or did not see the sign is something I did not think of. Thank you.

Dilly:

I agree with all on here, homeowner "X" is ill informed and following his advice would be foolish. As hoatalk said with 21 acres of common property are you going to post every conceivable space that you could enter on? You have people both big and small that can't read, blind people, people who don't speak english that could conceivably enter this property. Plus, having a no trespassing sign does not release the association or the homeowners from negligence. IF there is a condition that exists on the common property that should have been taken care of but the homeowners neglected you can be in trouble.

Finally, do you really think that one of your own homeonwers wouldn't sue if they got hurt? Lets say someone is on the common property, gets hurt and is now off of work for 6 months, a year, etc...Does anyone really expect them not to sue if there is a justifiable reason? Things change when you are the one that is hurt.

Thank you Brad, No, I do not think that a homeowner would not sue if they or a family memeber got hurt. Why pay 100% when you can sue the HOA and pay a fraction. Then too, if we dissolve the HOA we still have the land issue to deal with but as individual homeowners then. As I mentioned before, I for one don't want to be faced with the court dates and money for a private lawyer if it ever comes to that. However, at the end of the day, how do I get the other homeowners to understand my side and what all of you people who have replied understand. We held a meeting to try and educate/inform people but they were not receptive. They believe Mr. "X".

Hello DillyD, please do not consider this legal advice; I intend this only to be general information. I am a Maryland attorney and I practice in community association law exclusively. Your situation is odd by today's standards. Generally if there are common areas, there is a mandatory assessment obligation. If your board chose to obtain insurance, how would you pay for it? The need for insurance usually goes with the need to insure something-- some asset that needs to be protected. I don't see an asset that needs protection. If there are no assessments, there is no treasury, and therefore no money for a litigant to win in court if he sues the HOA and wins. The common areas according to your comments are encumbered by a declaration of covenants. Assuming the declaration protects the property adequately, the property could be titled in the name of Mickey Mouse with no deleterious efects. The most a winning litigant could get in court would be the common areas (through execution of a judgment lien). But since those common areas are encumbered by covenants, the most the new owner would have is whatever the covenants require. In other words, a new owner would have a piece of property that he legally may have to maintain, with no ability to do anything with. Not a situation most people want. But of course, unless I read the actual covenants of record, I don't really know what they say, and what the rights and obligations of the owner are.

If there is no treasury, then who will file corporate personal property returns and pay the annual filing fees? If no one does, then the corporation's charter will become forfeit in short order. After that, the corporation will cease to exist as a legal entity. (Maryland law even makes it a crime to operate as a corporation after the charter has been forfeited.)

The person arguing against insurance has some points. In Maryland, landowners have no duty to trespassers, other than the duty to not intentionally hurt them by placing dangerous conditions upon the land. I believe this is what your neighbor is talking about.

My electricity just went out so I'll write more later.

If people have REPEATEDLY tried to meet as an organization, and can't conduct business because people don't show up to fulfill the quorum requirement, try this:

Write everyone a letter saying that a group is going to meet because there is important business to vote on: assessing each homeowner a split of property insurance to cover liability for the donated acreage that belongs to the association. (this will serve as Notice of a Special Meeting.)

See who shows up. Even if you don't get a quorum, conduct this meeting and motion to split the insurance fee (for which you have 3 bids on), and bill everyone.

If you don't get a quorum, see if anyone objects to the inquorate meeting. I doubt if anyone will. If so, then you need to go to court to get a judge to help you conduct business. (In most states, a judge will say that anyone who shows up for this kind of meeting constitutes a quorum)

Good luck. In this case, looking a gift horse in the mouth might have been a good idea. Why the developer ever gave you this useless piece of land is suspicious!!

Thank you TorinA for your very informative post.
You bring up a point in that our common area is not really an asset, but IS IT a liability? As you will read below we have no mandatory assessments. The wording used is "if required", from its members for the purpose of maintaining the following real property a ___ acre parcel of land labeled "Common Open Space".

As I responded to Paul earlier, our developer did not collect dues or hold meetings and saw no need for insurance on the common land which is forest retention area with no amenities, just trees and underbrush. However, it does not stop people from our development and outsiders from riding ATVs and hunting on the land. If we wanted to obtain insurance after the development was turned over to us that was our choice to make. When the developer was asked about the need for insurance he basically said what MR. X is now saying.... Just post no-trespassing signs. Let nature take its course with the trees and underbrush. Don't do anything to attract people to the area. No homeowner would sue themselves.

Following is what our By-Laws states under ARTICLE IV DUES AND ASSESSMENTS "1. The Corporation shall collect annual dues and special assessments, if required, from its members for the purpose of maintaining the following real property a ___ acre parcel of land labeled "Common Open Space".

Before we could pay for insurance we would frist have to vote for officers that included a treasurer. Then go from there. After reading your post maybe we do not even need insurance at all. If that be the case then can we legally dissolve the corporation and end the HOA?

Right now the developer is keeping our corporate papers filed. Last time I spoke with his agent I was told there is no fee just one document to sign and return. As of today we are in good standing with the State of MD. Since the developer named three people to our start up BOD what if one of us receives the Corporate return from the state and trashes it like Mr. X said we should do. Will this end our Corporation or just put us into an inactive status. If someone wants to sue us for injury on the open space can a lawyer reactivate the inactive status and have it turned over to a receivership then come after the inactive HOA for back dues, etc.? Is it better to dissolve the Corporation legally? but what would that do for us if we have this land deeded to the HOA and under the restrictions listed below it states: Notwithstanding any thing in these restrictions previously set forth to the contrary, this covenant of these restrictions shall not expire, and shall not be changed without the consent of the County Commissioners of ___County. The County already said they do not want the land so I can't see them letting us take the restrictions about the land out of our documents.

As to placing dangerous conditions upon the land, I heard that someone had put logs across the path to stop the ATV riders. I doubt they did it to intentionally hurt someone but if someone were to not see the logs and have an accident then what? Otherwise, I doubt anyone in the development really knows what the developer, builder and past owners left on the land. Unless some of us agree to walk the area to find out we may never know.

Under our Declaration of Restrictions it addresses our common area as follows: WHEREAS, portions of the property are subject to_County Forest Conservation Regulations and DECLARANT intends to restrict the use or uses of areas identified as Forest Retention Areas on the aforesaid subdivision plats so as to comply with such regulations. NOW, THEREFORE, Witnesseth that the Declarant____, declares that it shall hold the above described lands and premises subject to the following covenants, agreements, conditions, easements, reservations and restrictions which it is hereby agreed shall run with the land and be binding upon the said declarant, its successors and assigns. Notwithstanding any thing in these restrictions previously set forth to the contrary, this covenant of these restrictions shall not expire, and shall not be changed without the consent of the County Commissioners of ___County.

Under Homeowners Association it states in part that lot owners are "Subject to all duties and obligations involved with regard to membership in said corporation, including a covenant to pay any assessment by said corporation for maintenance of open space in the subdivision". Then under Open Space Use and Restrictions it states: "The ASSOCIATION shall enact rules and regulations to protect and maintain the rural character and fragile environmental characteristics of the OPEN SPACE. Each owner shall comply with these rules and regulations applicable to the use and enjoyment of OPEN SPACE" two rules already in the Restrictions are (l) no hunting and (2) no ATV or "dirt bikes" both of which are happening.

Is the county assessing property taxes on this acreage? If so, who is paying it? Your association has no funds. If it isn't being paid, I believe the county could establish a special taxing district to assess each property owner in your HOA for their share of the taxes on that wood. There is no way to be rid of that property, short of moving.
So many HOAs are saddled with retention basins too. Only asset of their HOA. It has absolutely no value because of the covenants attached. Yet cannot be ignored. Wonderful expense our cities are shoving off onto neighborhoods while continuing to collect the same property taxes as the rest of the city pays. Harold

Harold, We pay no property taxes on the acreage. I like your idea of having the county establish a special tax so each property owners in the HOA has to pay their share. Especially if this allows us to get a rider to our homeowners insurance to cover our portion of the open space. However, if what Torin is saying works for us then we have no need to purchase insurance.

I know about the retention basins. We have stormwater management systems. We lucked out because the county did a maintenance agreement with the developer and it passed on to the homeowners. This agreement states: " OWNER shall not dedicate any facilities to any Homeowners's Association until such association is organized and active. OWNER shall provide a list of notarized signatures of all homeowners." I doubt such a list could ever be compiled ( even if we ever do have an active HOA) which is OK by me.

Hi Torin, Correct, this acreage is completely undeveloped and can never be. Our Restrictions state in part: The area shall remain undisturbed except as provided below:
A. Timber harvest conducted under approved forest management plan; B. Removal of dead or diseased trees or shrubs only if they present a health hazard or hazard to the health of the forest; C. Removal of trees for firewood; D. Passive recreational opportunities such as trails, E. Wildlife management under the guidance of a qualified manager; F. Removal of trees or under story to reduce threat of wildfire damage to structures located on said property or lots; G. Removal of noxious or invasive species of plant or weeds.

Other than this acreage our HOA has no others issues to handle. Roads are maintained by the county. We have no playgrounds, no swimming pools no club house nothing just this acreage. Correct, the county handles all issues just like before HOAs.

A few Homeowners that live right next to the acreage have voiced concerns about being disturbed by the noise the ATVers make. Sometimes these children are out as later as 12pm. Of course, the residents who are allowing their children to ride the ATvs are not complaining.

As for the signs two residents said they can obtain all we would ever need for free. I see someone has posted some signs already. I can only assume it was the two residents who could get them for free. As for anything else we may need in the future these two residents voiced the opinion that their is nothing we can not do on our own, and if need be take up a collection to pay for what ever.
This could very well be correct short of a law suit.

So, if I understand this right, the homeowners who placed the logs on the trail did not do us a favor? At our informal meeting I tried to point out that when someone in the community has an idea we need to discuss it as a group. However, that does not happen.

Right now a one thousand dollar libility insurance policy would cost each lot owner $7.50 a year. Small price to pay in my way of thinking. Or if all we need to do is remove the logs and post the No-Trespassing signs then we still need to meet so everyone will be aware of what is going on.

Does your office advertise on this site? How could I get in contact with you?