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Subject: HOA imposed fees to fund private business
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11/05/2019 6:53 AM  
My community has a golf course that runs through it. The course has no deed restrictions and is not part of the HOA. The course is not financially viable for the owners(who live in the community) and many are lobbying for the HOA to increase the HOA maintenance fees or impose a special maintenance fee on golf course lots with the intent of sending that money to the golf course. Their justification is to protect home values. Is this even legal?


11/05/2019 6:57 AM  
I forgot to mention, this is in Texas.


11/05/2019 8:06 AM  
how would that work tax wise? there are specific restrictions on how HOA money can be spent if you are to keep their tax status. That wouldn't seem to fit in the IRA rules.


11/05/2019 8:16 AM  
BLUF: Your Board doing that is probably not permissible in accordance with your documents.

Typically an HOA can only assess homeowners for facilities that the documents say the HOA is responsible for maintaining or services the HOA is responsible to (or permitted to) provide.

There is further the possibility of assessing all homeowners the same for everything or certain homeowners more depending on facilities that are limited to their use only.

Regardless, this is all spelled out in your HOA documents.

If your HOA documents do not say anything in regard to assessing some/all of the owners for golf course operation/maintenance/repair, then the Board can't just decide that it's the right thing to do and assess the owners. The documents would have to be changed to permit them doing that which would require probably a large % of all owners to agree to that.

Further, blindly collecting and sending money to the golf course is likely a terrible decision without significant financial/budgeting review with golf course owners/operators to ensure a wise investment and ROI versus throwing money down the drain.


11/05/2019 9:32 AM  
Our founding documents make no provision for this. The community fully acknowledges that the current documents would have to be modified. Even if they were ratified by the homeowners I'm unsure how legal this is. A non-profit collecting a mandatory fee under the threat of lien then transferring it to a for profit business.

It's crazy how easily people can be whipped up into a frenzy and be willing to rewrite the rules we all agreed to live by.


11/05/2019 9:48 AM  
There are likely many thing already in your documents that would prevent even the possibility of something like this occurring. Typically, HOAs are to collect only the funds needed for operation and maintenance of what the HOA is responsible for each year and for reserves (no more no less). They are not capital-raising enterprises to fund items/services for which HOA has no actual responsibility. Would need some professional legal assistance though to probably pick at least a few of those out and prove the concept illegal/not doable/not smart.

Again, if the approach to any of this is to do it quickly, rushed, without thorough legal and financial review, and without proven, documented benefit to the entirety of the HOA . . . then the move is unwise to say the least.


11/05/2019 10:56 AM  
You need to investigate this issue more because, quite frankly, it all sounds bizarre!

Your HOA being on a golf course DOES increase values, as does living on a lake.

So ... what cane first? Did the original developer establish the HOA around an already existing golf course? If so, read your CCRs and deed and see if there is some kind of participatory obligation the HOA has.

Also - think if that property gets sold. Your “ view” could be condos instead of courses.



11/05/2019 12:19 PM  
GODD GRIEF Charlie Brown!!!! Almost the same crap is playing out here in Las Vegas. We have a group of homeowners telling a private business what to do with their property. We have a bunch of prissy rich people that are fighting a developer from building more homes on a shuttered golf course. This is playing out at two valley locations.

From what I read in your post, a group of owners wants to assume ownership of a golf course and put that burden on other owners.. Good Night nurse and good luck, It sounds like you're going to be spending a thousand dollars to push a piece of paper across a lawyers desk for a while.. tread lightly.
(South Carolina)


11/05/2019 1:36 PM  

The first thing to ask is what will happen if the golf course is sold? Maybe high rise condos, some with subsidized living units, overlooking your homes.

There are many HOA's built around a golf course where each homeowner is a compulsory "social" member of the golf club at say $40 per month thus enabling the golf course to stay afloat and raise their own property values.


11/05/2019 2:34 PM  
Hi AaronH2, nationwide what is happening with your community and the adjoining golf course happens often: Developers build golf courses, then they build a HOA adjacent to the course. The developer gets top dollar for the HOA houses because the golf course appeals. Buyers do not study the chances of the golf course going under. But developers know that the financial risk of the golf course is hedged because, after a few years, they can always sell the land (typically zoned for residential use). If the golf course sits for several years and is enjoyed to some extent, but then revenues become insufficient, the developers sell the land for a pretty penny to residential housing developers.

Adjacent HOAs fight the shuttering of golf courses all the time. Typically they lose. Land Use law is on the developers' side. The hands of the typical City Council are tied by the law and nearly always have to approve the conversion of golf courses to home developments.

As you noted, the battle whips people into a frenzy. HOA members write op-eds and letters to the editor. They attend City Council meetings in droves. The local papers go ape, covering the emotion.

The old-timers get into a Vietnam war-protesting mode. But this is no Vietnam war. This is business as usual for developers.

I suggest these Texas HOA members who are lobbying to save this golf course get together a $1000 or so and sit down with an experienced land use attorney for an hour. Hopefully the land use attorney will give them a 'Come to Jesus' talk about how much time and energy the HOA members will likely expend in an almost assuredly unwinnable battle.

Since you are in Texas, an additional factor in the decision-making may be the water consumption of a golf course. Homes use less water.

Where I am, I still remember about a decade ago members of HOAs, built next to a financially-ailing golf course, getting all emotional and "battling" to keep a golf course open. Yet another developer bought the golf course, promising the city to keep it open. The developer sold nine holes of the 27 hole course and then put a fortune into the course. He refurbished the clubhouse, tennis courts, fairways, et cetera. The developer had kind of a slick reputation. HE was charming to the adjacent neighbors. A few years later the developer could not make the golf course work financially (doh?). He sold the remaining 18-holes of acreage for top dollar to home building developers.

I wonder if this was his plan all along.

The typical naive American does not understand land use law and nearly every city's push to build, build build (with an occasional nod to the preservation of open space).

Here's a 2005 article from the NY Times that reviews numerous instances of developers buying golf course land, to the dismay of adjoining landowners, and how they are mostly out of luck:


11/05/2019 3:29 PM  
Who cares if it is "legal". That has no real relevance in being so or not. Is it a good or bad idea? Most likely bad. Unless a golf course is a driving force for people to want to move into the HOA houses around it. Otherwise doesn't help with home values at all.

It's not a case of spending money to make money. The owner's buying an unsuccessful golf course? It could change the HOA into a For-Profit HOA instead of a non-profit HOA. Which is possible to do. However, I've not seen overly successfully run golf course by HOA's. The hiring of employees, maintenance, insurances, and other business expenses the "profits" may not cover.

I'd simply say the HOA doesn't need to be in the golfing business to make it survive. It needs to be in it's own upkeeping business to do so.

Former HOA President


11/05/2019 4:55 PM  
Thanks everyone for the input. To clarify, no one wants the HOA to buy the course or for the HOA to exercise any authority over what the land is used for. They want a maintenance fee paid by HOA members and then money transferred to the golf course. I think it’s a stupid idea. First because if the course can’t survive on it own we’re just delaying the failure. In principal I’m against coercing people to pay money to someone else under the guise of “it’s good for your property value”. That’s my decision not the collective’s. I honestly if I owned the course myself I’d develop it or sell to a developer.

So my main question is not how can I stop anyone from doing what they want with the property. But does anyone know if that transfer of money from the HOA to a business is in itself illegal?


11/05/2019 7:10 PM  
Posted By AaronH2 on 11/05/2019 4:55 PM
So my main question is not how can I stop anyone from doing what they want with the property. But does anyone know if that transfer of money from the HOA to a business is in itself illegal?

Having trouble understanding this vague "transfer of money" thing.

What does the HOA get in exchange for the transfer of money? A seat on the Golf Club's BOD. Discounted memberships or greens fees for HOA members. Ownership in the Golf Course. Nothing.

Legality could depend on your answers to that question.

In general, a non-profit can own a for-profit --- but there are strict rules that apply depending on a bunch of factors. Your state might have Prudent Investor rules that apply.

Certainly, your BOD members are fiduciaries. It is their responsibility to provide the details on how this deal is to be structured. A gift of money to prevent conversion --- Are they getting guarantees that it won't be converted if the HOA contributes $X --- If the Club files for bankruptcy, can that guarantee be avoided?

Many open questions. But the first question is -- How is the deal structured?

Sikubali jukumu. Read all posts at your own risk.


11/06/2019 6:30 AM  
The same thing is happening in my state (MN), although HOAs aren't always involved, just neighboring homeowners. There's a course in my town where this is happening, and it happened where I used to live too. I know of a couple of other similar situations nearby as well. There are just too many golf courses out there, especially smaller/older ones, for the demand.

I have to say, I don't understand the reasoning of these homeowners. If it's a private business, then the owner is going to do something else with the land if it's not viable. If they want to live by open space, they should live next to a park or wildlife refuge or something.


11/06/2019 12:21 PM  
Aaron - you say the golf course runs through your community. Is this a gated community, with the HOA responsible for road maintenance, etc. Do the golfers have to enter through an entrance with a guard?
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