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Subject: Managing a proposal to dissolve the HOA
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JeffS31
(Virginia)

Posts:38


11/19/2020 3:29 PM  
For the sake of brevity I am not giving a lot of background on this, but can add it if it would be helpful.

I am a board member. We have one homeowner (in a single-family HOA with 56 lots) who has told the board that he proposes to dissolve the HOA.

Our by-laws have the following provisions:

1. The Association may be dissolved with the assent given in writing and signed by at least two-thirds (2/3) of the votes of each class of Members.

Notes: The association was established with Class A and Class B members. The Class B members are, in essence, the builder before the HOA was turned over to the homeowners. At that time, the Class A members had 1 vote per lot and the Class B members had 3 votes per lot. There are no longer any Class B members. The interpretation of this clause by the board is that the word "votes" is for purposes of defining the number of eligible votes of all members, not a number of votes actually cast. Therefore for dissolution to pass, we consider that there must be a "yes" vote cast by at least 2/3 of all homeowners (not 2/3 of whoever shows up for a meeting or casts a vote). Therefore 38 "assents" would be required to dissolve. We have not yet asked a lawyer about this wording.

This provision does not require that a meeting be conducted to take a vote, only "assent given in writing and signed."

The following is also in the by-laws:

2. Section 2. Special Meetings. Special meetings of the Members may be called at any time by the President, the Board of Directors, or upon written request of Members who are entitled to vote at
least one-fourth (1/4) of all of the votes of either class of Members.

In response to this homeowner the board has declined to call a special meeting for several reasons: 1) The proposal was not raised until shortly after our annual meeting in October, where it could have been put on the agenda for discussion 2) This homeowner did make this suggestion briefly during discussion of another matter at the annual meeting, and there were no comments on it 3) The proposal is not really a proposal at all but only an expression of a desire to dissolve; it does not describe a plan for executing dissolution, nor describe the benefits or costs of doing so, and 4) the board judges that dissolution is not in the interests of the homeowners.

Notwithstanding the board's position, if the homeowner could muster 13 other homeowners to request a special meeting, then we would be obliged to conduct the meeting. We do not think there is any other support for this, but surprises happen.

We want to be transparent and responsive to homeowner concerns but we believe that the board is not obligated to go down every rabbit hole that every homeowner brings up.

Is the board acting properly in responding to the homeowner that the board does not support the proposal, the board will take no further action on the request, and that the homeowner is free to collaborate with like-minded homeowners and the board will take any action required by the by-laws?
GenoS
(Florida)

Posts:4158


11/19/2020 3:42 PM  
Posted By JeffS31 on 11/19/2020 3:29 PM
For the sake of brevity I am not giving a lot of background on this, but can add it if it would be helpful.

I am a board member. We have one homeowner (in a single-family HOA with 56 lots) who has told the board that he proposes to dissolve the HOA.

Our by-laws have the following provisions:

1. The Association may be dissolved with the assent given in writing and signed by at least two-thirds (2/3) of the votes of each class of Members.

Notes: The association was established with Class A and Class B members. The Class B members are, in essence, the builder before the HOA was turned over to the homeowners. At that time, the Class A members had 1 vote per lot and the Class B members had 3 votes per lot. There are no longer any Class B members. The interpretation of this clause by the board is that the word "votes" is for purposes of defining the number of eligible votes of all members, not a number of votes actually cast. Therefore for dissolution to pass, we consider that there must be a "yes" vote cast by at least 2/3 of all homeowners (not 2/3 of whoever shows up for a meeting or casts a vote). Therefore 38 "assents" would be required to dissolve. We have not yet asked a lawyer about this wording.

This provision does not require that a meeting be conducted to take a vote, only "assent given in writing and signed."

So far so good. In my HOA 90% of all members must assent to dissolution of the HOA. 2/3 seems awfully low for such a momentous change.





Posted By JeffS31 on 11/19/2020 3:29 PM
The following is also in the by-laws:

2. Section 2. Special Meetings. Special meetings of the Members may be called at any time by the President, the Board of Directors, or upon written request of Members who are entitled to vote at least one-fourth (1/4) of all of the votes of either class of Members.

In response to this homeowner the board has declined to call a special meeting for several reasons: 1) The proposal was not raised until shortly after our annual meeting in October, where it could have been put on the agenda for discussion 2) This homeowner did make this suggestion briefly during discussion of another matter at the annual meeting, and there were no comments on it 3) The proposal is not really a proposal at all but only an expression of a desire to dissolve; it does not describe a plan for executing dissolution, nor describe the benefits or costs of doing so, and 4) the board judges that dissolution is not in the interests of the homeowners.

That's fine. Nothing compels the board to convene a Special Meeting of Members unless and until 1/4 of all homeowners join together to call for one.



Posted By JeffS31 on 11/19/2020 3:29 PM
Notwithstanding the board's position, if the homeowner could muster 13 other homeowners to request a special meeting, then we would be obliged to conduct the meeting. We do not think there is any other support for this, but surprises happen.

We want to be transparent and responsive to homeowner concerns but we believe that the board is not obligated to go down every rabbit hole that every homeowner brings up.

Is the board acting properly in responding to the homeowner that the board does not support the proposal, the board will take no further action on the request, and that the homeowner is free to collaborate with like-minded homeowners and the board will take any action required by the by-laws?

If that's the board's position then stick by it.

Your bylaws require 25% of all homeowners to call for a Special Meeting, not one.
SheliaH
(Indiana)

Posts:3577


11/19/2020 3:47 PM  
If the homeowner wants to dissolve the association, let him do the homework. What will That entail, how much would it cost, what will be done with the common areas - and can be done up with enough support to push this through?

If he wants it dissolved, he needs to be prepared to provide all that information and if he can't or refuses to, simply state this is a major issue and he needs to be willing to do the research because the is too busy running the association. You and your colleagues have a life, and homeowners should remember that. You find out pretty quit whose willing to roll up their sleeves and work as opposed to yapping for the hell of it.

Ultimately, the homeowners make the final call, so it's ok to decline to hold a special meeting. The homeowner can petition his neighbors to sign a petition to call a meeting (check your documents to see how that's done). If he gets the signatures, the board will have to hold the meeting and at that time you can make your argument as to why this isn't as easy as he thinks it is. The homeowner can make his argument and you'll see what happens from there.
AugustinD


Posts:4421


11/19/2020 5:08 PM  
Posted By JeffS31 on 11/19/2020 3:29 PM
Is the board acting properly in responding to the homeowner that the board does not support the proposal, the board will take no further action on the request, and that the homeowner is free to collaborate with like-minded homeowners and the board will take any action required by the by-laws?
I assume the Owner has actually asked the Board to call a Special Meeting for the purpose of discussing dissolution. If so, then the above is not quite the response that I would recommend. Instead, I suggest the Board respond with, "Dear Mr. ____, Per your letter of November ___, 2020, the Board declines your invitation to call a Special Meeting for the purpose of discussing dissolution of the HOA. Sincerely, Board of Directors

Why so curt? Because if the Board thinks dissolution and discussion of dissolution is not in the HOA's best interests, then as SheliaH said, the Board should not be helping this owner with his homework until it has a lawful obligation to do so. If this Owner figures out how to get a Special Meeting called via petition yada of 25% of owners, fine. Only on receipt of such a petition is the Board lawfully obliged to set up this Special Meeting. Meanwhile this Owner is on his own.
DouglasK1
(Florida)

Posts:1542


11/19/2020 5:28 PM  
Posted By JeffS31 on 11/19/2020 3:29 PM
For the sake of brevity I am not giving a lot of background on this, but can add it if it would be helpful.

1. The Association may be dissolved with the assent given in writing and signed by at least two-thirds (2/3) of the votes of each class of Members.

Notes: The association was established with Class A and Class B members. The Class B members are, in essence, the builder before the HOA was turned over to the homeowners. At that time, the Class A members had 1 vote per lot and the Class B members had 3 votes per lot. There are no longer any Class B members. The interpretation of this clause by the board is that the word "votes" is for purposes of defining the number of eligible votes of all members, not a number of votes actually cast. Therefore for dissolution to pass, we consider that there must be a "yes" vote cast by at least 2/3 of all homeowners (not 2/3 of whoever shows up for a meeting or casts a vote). Therefore 38 "assents" would be required to dissolve. We have not yet asked a lawyer about this wording.




I agree with the board that this would require 2/3 of the entire voting interest of the association, not 2/3 of attendees to a meeting. I think the wording is pretty clear on this.

Escaped former treasurer and director of a self managed association.
TimB4
(Virginia)

Posts:17026


11/19/2020 5:36 PM  
Keep in mind that the HOA is actually two things.

The HOA that is created by the deed restrictions (aka Delecartion of Covenants)
and
the HOA corporation that is created by the State and governed by the Bylaws (aka HOA, Inc.)

Dissolving the Corporation simply removes protections provided by a corporate shield (there are unincorporated HOAs), such as any legal action would be filed against each individual owner within the development as dissolving the corporation does not dissolve the actual HOA or removes the responsibilities or need to provide services outlined in the Covenants.


To dissolve the corporation is as simple as failing to file annual reports to the State Corporation commission (administratively dissolved) or by the asserative vote outlined in your Bylaws.

However, to dissolve the HOA requires a lot more work:

1) Transfer of Common areas (sold, donated to an entity that will maintain - perhaps the City/County with a special tax district)
2) Dissolving contracts that are in place to provide service (trash/recycling, common area maintenance, snow removal for example)
3) Achieving 2/3 vote by the membership to amend the Declaration of Covenants to dissolve or limit the responsibilities of the HOA


Good luck with all of that.
GeorgeS21
(Florida)

Posts:3411


11/19/2020 5:47 PM  
While a letter is reasonable, as Augustin provides language, it is a kindness I would not provide.

I would simply ignore the owner proposing this. I would ensure the Board did not feel they were bound to reply. And, that there is nothing requiring them to discuss it further.
JeffS31
(Virginia)

Posts:38


11/19/2020 6:20 PM  
This proposal was submitted by email. (The board has it's own email address that is a distribution list to board members.) It was a long rambling email full of pseudo-legal language but clear that he was proposing dissolution.

We gave a terse response saying we do not support it and would take no further action.

He responded with an equally long and equally rambling email. We responded with a two-liner then he came back with another epic. My suggestion to the board was that we said what we have to say and let him stew in his own juices.

For some reason, in the last couple of months no matter how we respond he keeps coming back with more long emails. It's like he's baiting us, because he never does anything to actually move his cause forward. I can't tell if he's trolling us on purpose or if he's a little unbalanced.
JeffS31
(Virginia)

Posts:38


11/19/2020 6:21 PM  
Posted By JeffS31 on 11/19/2020 6:20 PM
it's




its
AugustinD


Posts:4421


11/19/2020 6:35 PM  
Posted By JeffS31 on 11/19/2020 6:20 PM
This proposal was submitted by email. (The board has it's own email address that is a distribution list to board members.) It was a long rambling email full of pseudo-legal language but clear that he was proposing dissolution.

We gave a terse response saying we do not support it and would take no further action.

He responded with an equally long and equally rambling email. We responded with a two-liner then he came back with another epic. My suggestion to the board was that we said what we have to say and let him stew in his own juices.

For some reason, in the last couple of months no matter how we respond he keeps coming back with more long emails. It's like he's baiting us, because he never does anything to actually move his cause forward. I can't tell if he's trolling us on purpose or if he's a little unbalanced.
I think there's no reasoning with someone like this. You all did the best you could under the circumstances. It's time to ignore his emails on the subject.
MelissaP1
(Alabama)

Posts:9716


11/19/2020 7:16 PM  
After my initial laughter and picking myself off the floor... I have to agree to just respond with "Do the research". Apparently hasn't read any documents nor gets the concept of what an HOA is/does. Our HOA if you read the documents it can ONLY be dissolved if we owners agree to turn it over to a management company. A fact you may want to point out means no owner has voting rights nor can set the dues.

You can keep explaining the ramifications of not having a HOA but it's just going to fall on deaf ears. They are not reasonable person so you can't reason. So don't try. Just listen and move on.

Former HOA President
CathyA3
(Ohio)

Posts:1368


11/20/2020 5:45 AM  
Posted By GeorgeS21 on 11/19/2020 5:47 PM
While a letter is reasonable, as Augustin provides language, it is a kindness I would not provide.

I would simply ignore the owner proposing this. I would ensure the Board did not feel they were bound to reply. And, that there is nothing requiring them to discuss it further.





Yup. Never stop an opponent when he's in the middle of making a mistake.

As Tim noted, there are two steps to this: dissolving the corporation and removing the deed restrictions. Doing the first without the second puts everyone's personal assets at risk since they will then become personally liable for an legal action taken against the association.

If I were on the board, I'd give Activist Homeowner enough rope to hang himself but keep my ears to the ground to see if he's gaining any traction. If needed, I'd recommend that the board start an education campaign about what could happen if the community votes to approve this. Lay it on 'em, because there are likely to be enough uninformed owners that a 2/3 affirmative vote could be achievable (eg. they think that private streets and other common areas would magically be maintained by the city/township/etc. if they went ahead with this).
DavidF22
(New York)

Posts:73


11/20/2020 7:34 AM  
I'm not an attorney or an expert on this specific situation, but I believe here in New York, the first step would be to eliminate the Board and have the Association go into receivership. I can't imagine anyone could sell their home in such a situation. Plus, what do you do with the common land and amenities?

This all sounds frivolous to me. I would tell the homeowner to sell and go find a single home on a single property, where he could be President of his own HOA.
JeffS31
(Virginia)

Posts:38


11/20/2020 8:12 AM  
Posted By CathyA3 on 11/20/2020 5:45 AM
If needed, I'd recommend that the board start an education campaign about what could happen if the community votes to approve this. Lay it on 'em, because there are likely to be enough uninformed owners that a 2/3 affirmative vote could be achievable (eg. they think that private streets and other common areas would magically be maintained by the city/township/etc. if they went ahead with this).


That is the board's thinking also, if this goes anywhere at all.

BTW we have common land areas but no private streets, parking, or structures. By-laws state that common areas would revert to local government, presuming they would accept it.
JeffS31
(Virginia)

Posts:38


11/20/2020 8:17 AM  
I omitted the background in my first post but you may find this interesting.

Some of you may have seen my post earlier this year about homeowners who are proposing to drop the word "Plantation" from our HOA name. At the annual meeting this particular guy ranted about that and said if you really want to do something meaningful then you should just dissolve the HOA because HOAs have a history of being established to block non-whites from buying homes. Nobody rose to agree with him. We thought he was being rhetorical but after the meeting he continued to push this with the board, as described earlier.
DavidF22
(New York)

Posts:73


11/20/2020 8:20 AM  
Posted By JeffS31 on 11/20/2020 8:12 AM
Posted By CathyA3 on 11/20/2020 5:45 AM
If needed, I'd recommend that the board start an education campaign about what could happen if the community votes to approve this. Lay it on 'em, because there are likely to be enough uninformed owners that a 2/3 affirmative vote could be achievable (eg. they think that private streets and other common areas would magically be maintained by the city/township/etc. if they went ahead with this).


That is the board's thinking also, if this goes anywhere at all.

BTW we have common land areas but no private streets, parking, or structures. By-laws state that common areas would revert to local government, presuming they would accept it.





Any time I've talked to HOA directors in recent years, regarding roads or other common areas that should really be maintained by the municipality, they say that the town fathers fight tooth and nail not to accept the responsibility, even where the HOA members are already paying full local taxes to cover the maintenance. Since many cities and towns are now cash-strapped due to the pandemic, I would think such a handover would be even tougher now.
ChrisE8
(New York)

Posts:225


11/20/2020 8:36 AM  
Posted By JeffS31 on 11/20/2020 8:17 AM
I omitted the background in my first post but you may find this interesting.

Some of you may have seen my post earlier this year about homeowners who are proposing to drop the word "Plantation" from our HOA name. At the annual meeting this particular guy ranted about that and said if you really want to do something meaningful then you should just dissolve the HOA because HOAs have a history of being established to block non-whites from buying homes. Nobody rose to agree with him. We thought he was being rhetorical but after the meeting he continued to push this with the board, as described earlier.




It's just one person. Let him make a motion to dissolve the HOA. Sounds like it wouldn't go far. Then ignore him.

I believe that 3 creditors who are owed >$16k by the HOA could force it into involuntary Chapter 7 bankruptcy and seek to dissolve it that way, but even that's not assured.
CathyA3
(Ohio)

Posts:1368


11/20/2020 8:46 AM  
Posted By DavidF22 on 11/20/2020 8:20 AM
Posted By JeffS31 on 11/20/2020 8:12 AM
Posted By CathyA3 on 11/20/2020 5:45 AM
If needed, I'd recommend that the board start an education campaign about what could happen if the community votes to approve this. Lay it on 'em, because there are likely to be enough uninformed owners that a 2/3 affirmative vote could be achievable (eg. they think that private streets and other common areas would magically be maintained by the city/township/etc. if they went ahead with this).


That is the board's thinking also, if this goes anywhere at all.

BTW we have common land areas but no private streets, parking, or structures. By-laws state that common areas would revert to local government, presuming they would accept it.


Any time I've talked to HOA directors in recent years, regarding roads or other common areas that should really be maintained by the municipality, they say that the town fathers fight tooth and nail not to accept the responsibility, even where the HOA members are already paying full local taxes to cover the maintenance. Since many cities and towns are now cash-strapped due to the pandemic, I would think such a handover would be even tougher now.




One reason HOAs have such broad support is that costs of things like infrastructure maintenance are offloaded onto private citizens. In order to have the local municipality to take over common areas, the residents would have to demonstrate that it's in the best interests of the municipality to do so, which is very unlikely. And as you noted, the pandemic is likely making an already well-established trend even worse since tax revenues are falling.
AugustinD


Posts:4421


11/20/2020 9:04 AM  
Posted By JeffS31 on 11/20/2020 8:17 AM
Some of you may have seen my post earlier this year about homeowners who are proposing to drop the word "Plantation" from our HOA name. At the annual meeting this particular guy ranted about that and said if you really want to do something meaningful then you should just dissolve the HOA because HOAs have a history of being established to block non-whites from buying homes.
I do not think this is accurate. It's true that, in the first half of the 1900s, developers bought land and wrote "restrictive covenants" to apply to the land. These restrictive covenants typically messed over big time Black folks, Jewish folks, Catholics, "ethnics" et cetera. But back then, HOAs did not exist. For crying out loud, HOA statutes did not exist. I think even the idea of a HOA being incorporated, with all the corporate statutes applying, did not even exist. From the Washington Post, October 21, 2020:

"In the first half of the 20th century, developers built neighborhoods with restrictive covenants to shape their demographics. The covenants were institutionalized by the Federal Housing Administration, created in 1934, which offered loans to neighborhoods with covenants under more favorable terms. The banking industry followed the practice, creating redlining maps that perpetuated unfair lending even after covenants were outlawed."

Around the 1950s, HOAs took root. I have doubts that the unlawfully discriminatory restrictive covenants still on the books today are in "HOA Declarations" in great numbers. Rather, I think these unlawful restrictive covenants existed before HOAs existed. Per the WaPo Oct 21, 2020 article, these non-HOA restrictive covenants are still present (without legal force) in great numbers.

Posted By JeffS31 on 11/20/2020 8:17 AM
Nobody rose to agree with him. We thought he was being rhetorical but after the meeting he continued to push this with the board, as described earlier.
I think it is a bad idea to conflate the issue of (1) an Owner wanting to dissolve a HOA; with (2) an Owner wanting to change the name of the HOA. I do not care if this Owner is one in the same person. The Board should insist that these issues are separate. The stance on (1) (soap opera to a large extent) should be unrelated to the stance on (2) (not soap opera, AFAIC).

This is sort of a gossip-y thread IMO. If people want to vent, then FWIW I get it and encourage it within reason. But practically speaking, I regret the issue of racially-discriminatory restrictions (and perhaps HOA names) is being brought up here in a discussion of terminating a HOA.


JeffS31
(Virginia)

Posts:38


11/20/2020 9:23 AM  
Posted By AugustinD on 11/20/2020 9:04 AM

This is sort of a gossip-y thread IMO. If people want to vent, then FWIW I get it and encourage it within reason. But practically speaking, I regret the issue of racially-discriminatory restrictions (and perhaps HOA names) is being brought up here in a discussion of terminating a HOA.


The only reason I bring this up is to shed light on why this homeowner brought this up in the first place.

I am not writing here to vent, I am trying to get a sense of just how much effort the board owes a single homeowner who is proposing something that we find on its face unacceptable. I am trying to find the balance between treating all homeowner concerns seriously vs. getting caught in a pointless quagmire. I am sincerely interested in how other boards treat this sort of thing.
JohnC46
(South Carolina)

Posts:10130


11/20/2020 9:31 AM  
Jeff

You are letting one "cuckoo" run the show. Until he commences some type of action, ignore him. If you feel the need to reply just say: The BOD is in receipt of your Email.

I read your post it will take 2/3rds of all owner voting yes to dissolve the HOA.
ChrisE8
(New York)

Posts:225


11/20/2020 9:46 AM  
Posted By JeffS31 on 11/20/2020 9:23 AM
Posted By AugustinD on 11/20/2020 9:04 AM

how much effort the board owes a single homeowner who is proposing something that we find on its face unacceptable.




The board owes him NOTHING other than to treat any formal motion or the like by him in accordance with the bylaws and state law and to treat him like any other owner.

If he wants to dissolve the HOA, then let him convince a director to make a motion to do so at a board meeting, or let him put something on the agenda at an owner meeting, if he follows any relevant provisions of the bylaws to properly do so.

Unless and until he follows the bylaws and puts something up for a vote at a meeting, then the board owes him nothing.
AugustinD


Posts:4421


11/20/2020 9:57 AM  
Posted By JeffS31 on 11/20/2020 9:23 AM

The only reason I bring this up is to shed light on why this homeowner brought this up in the first place.

I am not writing here to vent, I am trying to get a sense of just how much effort the board owes a single homeowner who is proposing something that we find on its face unacceptable. I am trying to find the balance between treating all homeowner concerns seriously vs. getting caught in a pointless quagmire. I am sincerely interested in how other boards treat this sort of thing.
I understand. Your reasons make sense. "But for the grace of {god / the goodness in all people}, there go I."
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