StanM (Florida)
Posts: 34
Posts: 34
Posted:
What are the procedures for dissolving an HOA? Is it possible under Florida Law?
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HOA Dissolution
Started by StanM • 8 replies • 2202 views
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MaryA1 (Arizona)
Posts: 7,043
Posts: 7,043
Posted:
Stan,
I briefly looked thru statute 720 and didn't see anything, but I may be wrong -- I don't live in FL so am not real familiar with state statutes. You may also want to check out the state's non profit statutes. In AZ, HOAs must abide by the HOA specific statutes and also the nonprofit corp. act.
However, this should be addressed in your gov. docs. Look for an article on "termination" or "dissolution". This generally requires quite a large % vote of the members -- 75% and up to even 100%. If you have amenities and common areas, the board must adopt a plan of dissolution indicating to whom these assets will be distributed to after all creditors have been paid. At least this is the requirement in AZ.
I briefly looked thru statute 720 and didn't see anything, but I may be wrong -- I don't live in FL so am not real familiar with state statutes. You may also want to check out the state's non profit statutes. In AZ, HOAs must abide by the HOA specific statutes and also the nonprofit corp. act.
However, this should be addressed in your gov. docs. Look for an article on "termination" or "dissolution". This generally requires quite a large % vote of the members -- 75% and up to even 100%. If you have amenities and common areas, the board must adopt a plan of dissolution indicating to whom these assets will be distributed to after all creditors have been paid. At least this is the requirement in AZ.
KirkW1 (Texas)
Posts: 1,665
Posts: 1,665
Posted:
I would specifically look in the "Articles of Incorporation." They should list what happens should the corporation dissolve.
BrianB (California)
Posts: 2,820
Posts: 2,820
Posted:
does your HOA own any common property?
What will you do with it? Keep in mind, it is likely zoned in perpetuity exactly as it is now.
Answer that question first, before you worry about dissolving an HOA.
What will you do with it? Keep in mind, it is likely zoned in perpetuity exactly as it is now.
Answer that question first, before you worry about dissolving an HOA.
KirkW1 (Texas)
Posts: 1,665
Posts: 1,665
Posted:
There are plenty of places where HOAs can be readily dissolved and I don't think it our place to advise people to not try. In some cases the HOA should be dissolved. There are people here who are in organizations where it is a struggle to find five (or even three) people who are interested in having the organization.
HOAs are intended to be for the neighborhood (and the people therein). IF the people in the neighborhood do not want an HOA, then they have every reason to dissolve their organization. And dissolution is much better then simply ignoring it. If you don't take the full steps, then the organization can raise its head in a very ugly way down the road when nobody recalls there even being one. A single person can collect a few "harmless" signatures, put themselves on the BOD and start raising all kinds of havoc which is only appreciated by the one or two people causing it.
The starting place is in the Articles of Incorporation. You should also consult with an attorney to ensure that the organization is really disbanded. You need to think of what to do with the assets. I would recommend disposal prior to the final act of dissolution. For instance, my HOA's articles state that the assets will be passed to another HOA. But there is nothing to prevent us from giving and/or selling all assets to the organization of choice while still in existence. We could liquidate all assets and donate said funds to say an organization benefiting the Police. Then when there are no real assets the last few dollars go to the chosen HOA.
HOAs are intended to be for the neighborhood (and the people therein). IF the people in the neighborhood do not want an HOA, then they have every reason to dissolve their organization. And dissolution is much better then simply ignoring it. If you don't take the full steps, then the organization can raise its head in a very ugly way down the road when nobody recalls there even being one. A single person can collect a few "harmless" signatures, put themselves on the BOD and start raising all kinds of havoc which is only appreciated by the one or two people causing it.
The starting place is in the Articles of Incorporation. You should also consult with an attorney to ensure that the organization is really disbanded. You need to think of what to do with the assets. I would recommend disposal prior to the final act of dissolution. For instance, my HOA's articles state that the assets will be passed to another HOA. But there is nothing to prevent us from giving and/or selling all assets to the organization of choice while still in existence. We could liquidate all assets and donate said funds to say an organization benefiting the Police. Then when there are no real assets the last few dollars go to the chosen HOA.
GeorgerwilliamsW (Indiana)
Posts: 975
Posts: 975
Posted:
I think Kirk,Brian and Mary have covered the major points here. It is a good discussion.
From a larger perspective, it shows a real weakness in homeowners association law. A related question is what happens if the association files for bankruptcy?
I can see a situation in which the association, itself, is dissolved and a new corporate entity takes over management and ownership of common elements, with the ability to require annual payments from the homeowners. About the only thing that would be changed is the right or ability to enforce covenants or to set rules and regulations.
A related instance of just this happening took place five years ago in Hoosierland. A hybrid homeowners association declared bankruptcy and was taken over by a profit making real estate investment
corporation. Where once there was a waiting list to get in and market values were extremely high, there is a 15 percent vacancy rate,and units are selling at 40 percent of the market value they had just a year ago. The problem is that monthly fees under the new owners tripled, while services and maintenance went down.
Homeowners associations are still a great experiment in private self government. There are lots of unknowns, and lots of unresolved challenges.
From a larger perspective, it shows a real weakness in homeowners association law. A related question is what happens if the association files for bankruptcy?
I can see a situation in which the association, itself, is dissolved and a new corporate entity takes over management and ownership of common elements, with the ability to require annual payments from the homeowners. About the only thing that would be changed is the right or ability to enforce covenants or to set rules and regulations.
A related instance of just this happening took place five years ago in Hoosierland. A hybrid homeowners association declared bankruptcy and was taken over by a profit making real estate investment
corporation. Where once there was a waiting list to get in and market values were extremely high, there is a 15 percent vacancy rate,and units are selling at 40 percent of the market value they had just a year ago. The problem is that monthly fees under the new owners tripled, while services and maintenance went down.
Homeowners associations are still a great experiment in private self government. There are lots of unknowns, and lots of unresolved challenges.
MaryA1 (Arizona)
Posts: 7,043
Posts: 7,043
Posted:
If the HOA is filing for bankruptcy it would be much better to petition for a judicial dissolution. The AZ nonprofit corp statutes outline the procedure to be followed. "The court may dissolve a corp in a proceeding by a creditor if it is established that either: 1) the creditor's claim has been reduced to a judgment, the execution ont he judgment has been returned unsatisfied and the corp is insolventt. 2) the corp has admitted in writing that the creditor's claim is due and owing and the corp is insolvent." In a judicial dissolution, the court appoints a receiver who is authorized to transact the business of the corp. The court ". . .shall describe the powers and duties of the receiver in its appointing order, which may be amended from time to time." IMO, this would be a much better route to take than the takeover described by George.
GeorgerwilliamsW (Indiana)
Posts: 975
Posts: 975
Posted:
Quote:
Posted By MaryA1 on 09/01/2008 6:56 AM
If the HOA is filing for bankruptcy it would be much better to petition for a judicial dissolution. The AZ nonprofit corp statutes outline the procedure to be followed. "The court may dissolve a corp in a proceeding by a creditor if it is established that either: 1) the creditor's claim has been reduced to a judgment, the execution ont he judgment has been returned unsatisfied and the corp is insolventt. 2) the corp has admitted in writing that the creditor's claim is due and owing and the corp is insolvent." In a judicial dissolution, the court appoints a receiver who is authorized to transact the business of the corp. The court ". . .shall describe the powers and duties of the receiver in its appointing order, which may be amended from time to time." IMO, this would be a much better route to take than the takeover described by George.
If the HOA is filing for bankruptcy it would be much better to petition for a judicial dissolution. The AZ nonprofit corp statutes outline the procedure to be followed. "The court may dissolve a corp in a proceeding by a creditor if it is established that either: 1) the creditor's claim has been reduced to a judgment, the execution ont he judgment has been returned unsatisfied and the corp is insolventt. 2) the corp has admitted in writing that the creditor's claim is due and owing and the corp is insolvent." In a judicial dissolution, the court appoints a receiver who is authorized to transact the business of the corp. The court ". . .shall describe the powers and duties of the receiver in its appointing order, which may be amended from time to time." IMO, this would be a much better route to take than the takeover described by George.
GlenL (Ohio)
Posts: 5,491
Posts: 5,491
Posted:
Just as a side note, dissolution isn't just for HOA's; some residents of a small city that is well over 100 years old near me just attempted to dissolve it. They were upset that the city council was considering a 1% payroll tax and attempted to gather signatures to put a measure on the November ballot to dissolve the city and return it to the two townships from which it was formed. They were however unsuccessful in obtaining the necessary signatures so for now the city will remain in business.
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