Are We Subject to Virginia's POA Act if We Have No Common Area?

Started by LindsayJ • 24 replies • 3889 views

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LindsayJ (Virginia)
Posts: 8

Posted:

I live in a small subdivision of 19 lots. There are only 3 houses (and thus 3 homeowners)in the subdivision. There are deed restrictions filed with everyone's deed which state that all parcels have one membership in a Propery Owner's Association. There are no common areas in this subdivision. We do collect fees every year for maintenance of the road (which is a private road involving an easement over each property owner's land). The deed restrictions state that the POA has the authority to levy an annual assessment for the maintenance of the road. Are we subject to Virginia's POA act? Our problem is that we would like to change some of the deed restrictions without jumping through a lot of legal hoops. We only need a majority vote according to the deed restrictions. We have no board of directors and no bylaws. We don't have enough people willing to serve on board in order to create one. Can we change the deed restrictions just by sending out for a vote and obtaining the majority?

SusanW1 (Michigan)
Posts: 5,202

Posted:

Do you have a checking account?
What does it say is the name of your POA?
Do you have signees on the account?

Just curious . . . what deed restrictions did you want to change/

LindsayJ (Virginia)
Posts: 8

Posted:

There is a checking account with the name Woods Creek POA on it. There are two signees-one homeowner and one vacant land owner who do all the road work (one has a dump truck and one has a backhoe). The account is used solely for the purchase of gravel to maintain the road. We have never had a formal meeting of the association. The first few years we lived here the three homeowners actually footed the bill for the road mainenance. We finally had an attorney send out a letter requesting annual payment for road fees. Our deed restrictions are rather vague and now that property seems to be changing hands we want to clarify some of the restrictions (no clear cutting of trees, no mobile homes). We know almost all of the property owners are in agreement and want to make the change as simply as possible. But there's always one thorn in the group. One landowner insists we can't do a thing until we adopt by-laws, elect a BOD, etc etc. I read on a Virginia lawyers website that POAs were only subject to the Virginia POA Act if they met 5 criteria of a development and one was having a common area. We'd really like to just write up the proposed changes and send them to all the property owners to vote on. Life used to be so simple....

JeffP6 (Florida)
Posts: 91

Posted:

is your road not considered your common area since it is maintained by the POA and not say a county?

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Kinda difficult to access your house without a road. (wink)

LindsayJ (Virginia)
Posts: 8

Posted:

I guess I'm hoping (and what I've been reading so far agrees with my hope) that a common area is defined as an area owned by the POA and that members are mandated to pay for its maintenance (and the POA is mandated to maintain it). Our road is not owned by the POA. Property lines go to the middle of the road and there is an easement across each property for the road. There's nothing in our deed restrictions that mandates the maintenance or fees-it just gives the POA authority to levy assessments for the road maintenance. I guess I'm hoping for a loophole here. I can't believe a little subdivision like ours is subject to annual reporting and fees to the Common Interest Community Board. Who's supposed to do that? We don't even have a BOD. Our more immediate concern is just changing the deed restrictions without an act of Congress. I feel like we've opened a can of worms we should have left sitting on the floor.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Lindsay,

You will need to speak to an attorney about the proper way to do this. However, you could disband the Association and have all homeowners enter into a road maintenance agreement. This is effectively what you have now but it was taken one step further by having an Association maintain the road for you. Is there any other services provided by the HOA? Trash/recycling?

Please be aware, that by having a road maintenance agreement vs. an HOA, it will be the responsibility of someone to decide when the road needs maintained. It might also require a neighbor filing legal action against a neighbor if they can't or don't want to pay their share.

LindsayJ (Virginia)
Posts: 8

Posted:

I'm not sure it would help us to disband the POA since we want to beef up the deed restrictions a little bit and would need the members to vote on that. Can we have deed restrictions and give every property owner one vote in any proposed changes without having a POA? The POA is basically inactive except for road maintenance. The two property owners who do the road maintenance are the ones who decide when to do road work and that wouldn't change. There is no trash/recycling or any other services provided by the POA. We are out in a rural area. Since there are so few people that actually have homes and live here the whole thing has been very informal and we'd actually like to keep it that way -we all just want to prevent someone coming in and clear cutting all the trees and plunking down mobile homes (it's happening in a subdivision near us). I guess we need to find an attorney who can tell us if we're exempt from the POA Act and how to proceed.

MaryA1 (Arizona)
Posts: 388

Posted:

Lindsay,

Copied below is the applicability statute from the VA POA. As you can see nothing is mentioned about a requirement for common areas to be deemed subject to the Act.

You state there are 19 lots but only 3 houses. Are all the other lots sold or still owned by the developer? Are you certain the developer is no longer in control?

I would suggest calling a meeting of all the property owners, including those who own unimproved lots. A BOD should be elected to manage the assn. which could consist of as little as 3 members. If it's possible to contact the developer I would suggest doing so to ascertain whether or not bylaws already exist. If not, then the BOD,once elected, should set about to write up a set and have them mailed to all property owners.

You state having a checking account. Who's name is on the account and who collects the yearly assessment if there is no BOD?

BTW, IAW the VA POA (55-515.1), I believe a 2/3 vote is required to amend the CCRs, not just a majority as you state.

MaryA1 (Arizona)
Posts: 388

Posted:

Lindsay,

Sorry I forgot to copy the statute. Here it is:

§ 55-508. Applicability.

A. This chapter shall apply to developments subject to a declaration, as defined herein, initially recorded after January 1, 1959, associations incorporated or otherwise organized after such date, and all subdivisions created under the former Subdivided Land Sales Act (§ 55-336 et seq.). For the purposes of this chapter, as used in the former Subdivided Land Sales Act, the terms:

"Covenants," "deed restrictions," or "other recorded instruments" for the management, regulation and control of a development shall be deemed to correspond with the term "declaration";

"Developer" shall be deemed to correspond with the term "declarant";

"Lot" shall be deemed to correspond with the term "lot"; and

"Subdivision" shall be deemed to correspond with the term "development."

This chapter shall be deemed to supersede the former Subdivided Land Sales Act (§ 55-336 et seq.), and no development shall be established under the latter on or after July 1, 1998. This chapter shall not be construed to affect the validity of any provision of any declaration recorded prior to July 1, 1998; however, any development established prior to the enactment of the former Subdivided Land Sales Act may specifically provide for the applicability of the provisions of this chapter.

This chapter shall not be construed to affect the validity of any provision of any prior declaration; however, to the extent the declaration is silent, the provisions of this chapter shall apply. If any one lot in a development is subject to the provisions of this chapter, all lots in the development shall be subject to the provisions of this chapter notwithstanding the fact that such lots would otherwise be excluded from the provisions of this chapter. Notwithstanding any provisions of this chapter, a declaration may specifically provide for the applicability of the provisions of this chapter. The granting of rights in this chapter shall not be construed to imply that such rights did not exist with respect to any development created in the Commonwealth before July 1, 1989.

B. This chapter shall not apply to the (i) provisions of documents of, (ii) operations of any association governing, or (iii) relationship of a member to any association governing condominiums created pursuant to the Condominium Act (§ 55-79.39 et seq.), cooperatives created pursuant to the Virginia Real Estate Cooperative Act (§ 55-424 et seq.), time-shares created pursuant to the Virginia Real Estate Time-Share Act (§ 55-360 et seq.), or membership campgrounds created pursuant to the Virginia Membership Camping Act (§ 59.1-311 et seq.). This chapter shall not apply to any nonstock, nonprofit, taxable corporation with nonmandatory membership which, as its primary function, makes available golf, ski and other recreational facilities both to its members and the general public.

LindsayJ (Virginia)
Posts: 8

Posted:

Mary, Thanks for plugging in the statute here. I did read them and then found this on a Virginia lawyers blog site:

"The Virginia POA Act does not apply to every subdivision subject to a recorded declaration. It applies only to “developments” (a defined term) subject to a “declaration” (another defined term) initially recorded after January 1, 1959 and to subdivisions created under the former Subdivided Land Sales Act (§ 55-536 et seq.), which is superseded by the POA Act.

The following five elements must be present for a “development”:
1.lots, at least some of which are
2.residential or recreational;
3.common area;
4.automatic membership in an association; and
5.(potential) obligation to pay assessments.

And, a “declaration” must do one or both of the following:
1.impose responsibilities on the association to maintain or operate the common area; and/or
2.give the association authority to impose on lots or their owners a mandatory obligation to pay money in connection with such responsibilities. (I stress “authority” because sometimes an association may have the authority but not have a regular assessment in place.)

So, even if a neighborhood looks like a development and is subject to a recorded declaration, it is not a “development” for purposes of the Property Owners Association Act unless each lot owner is a member of an association, the association has a duty to maintain common area, and the declaration gives the association the power to charge mandatory assessments against the lot owner."

Our deed restrictions state we only need a majority vote but the VPOAA does say we need 2/3. Another reason we're hoping to be exempt. Our subdivision was developed back in the 60s. The lots were all sold off by the developer by the late 80s. For a long time there was only one homeowner up here and he picked up the tab for the road. Finally after two other houses were built we all just sat down and read the deed restrictions and realized the POA could levy an annual assessment. THe problem was we didn't have an active POA so we just had an attorney send out letters to collect and everyone started pitching in. We had to open a checking account just to keep the funds separate from any personal funds. I guess the big question is still whether the road is considered a commmon area. Some subdivisions POAs own the road and are mandated to maintain it. Ours does not. I'm hoping this is our loophole. I'm hoping to find some caselaw or other examples of subdivisions that are exempt. We want to keep life simple!

TimB4 (Tennessee)
Posts: 21,059

Posted:

Lindsay,

In your initial post you said " The deed restrictions state that the POA has the authority to levy an annual assessment for the maintenance of the road"

This indicates to me that the POA is mandatory and that the road is deemed the common area. Unless the Association is professionally managed, the amount for the Common Interest Community Board is not that much (as I'm looking at the paperwork for our development now).

Based on Virginia's formulas and your post your fees are only:

$30 Annual Renewal Fee plus .05% of your last 2010 annual assessments (maxed at $1,000).

If all you have is road maintenance that is being done by two gentlemen who live in the subdivision, I can't believe that it's that much as compared to the legal expenses the Association would incur just to investigate if your development can find a loophole from paying for this.

My Association has 130 lots and a gross annual assessment of $90,900 and are self managed. This makes our cost only $125.45 ($60 renewal and ).

Tim

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By TimB4 on 11/16/2010 9:30 AM
Lindsay,

My Association has 130 lots and a gross annual assessment of $90,900 and are self managed. This makes our cost only $125.45 ($60 renewal and ).

Tim

I hate it when I hit the wrong button and post before finishing.

What I was saying is that our $125.45 for this year is $80 renewal fee and $45.45 for the annual assessment. Since our Association also includes trash service and common area landscaping service in addition to our roads, I would be surprised if your Associations annual fee is any higher.

Since an attorney can be anywhere from $300 - $600 per hour, I'm not really positive it's worth spending the money to try and avoid paying the $125 or so each year.

Tim

LindsayJ (Virginia)
Posts: 8

Posted:

Tim,
Thanks for the response. I think you're right about the expense to Common Interest Community Board being a non-issue. But we've never filed. We've never had a Board with anyone to take responsibility to file. What's the penalty for not filing? I think the CICB has been in existence since 2008. Is that correct? I think our bigger problem is that we're such a small subdivision and no one wants to create a board or deal with filing paperwork every year. We'd have to write bylaws and schedule regualar meetings. No one wants to do that. They want to make this one-time change to our deed restrictions then go back to life as we know it. We may be forced into doing it all by the book but if there's a way around it we're looking for it!

TimB4 (Tennessee)
Posts: 21,059

Posted:

Lindsay,

If you want to amend the covenants, you will need need to file the amended covenants with the county courthouse (if it's not filed, the covenants were not amended). Since your current covenants specify that a POA is responsible for the road maintenance, then I suspect that the POA will have to be the entity that files the amendment.

You stated that the Association already has a checking account. This tells me that at some point the Association should have gotten a tax identification number. Has someone been filing State and Federal taxes on behalf of the Association? If not, it's better to remedy it now rather then later.

If you have a tax id number, I suspect that the POA was also registered with the State at some point. This would indicate that you may already have bylaws. You might even already have Articles of incorporation if the POA was incorporated (not all are).

Who have you been paying assessments to in order to maintain the road? Whomever is cashing the checks on behalf of the Association would be considered it's treasurer (at least as far as the bank is concerned). You might have more of an Association in place than you think.

If you want things to stay how they are, don't change the covenants and hope that the State, etc. doesn't figure out that you have failed to complete paperwork. OR get the association back on track and gather the paperwork and file the documents. Either way, if you wait to be discovered or own up to it now, the Association may have penalties if they failed to file State/Federal tax documents and/or annual reports to the State.

Tim

LindsayJ (Virginia)
Posts: 8

Posted:

Tim,
Ugh. You just pointed out more worms that are going to come out of our can.....The POA does not have a tax ID number and has never filed anything with the state. An attorney sends a letter out every year telling the property owners what they owe for the road maintenance fees (we only collect what we need-there's no reserve and that's proving to be a mistake). The property owners make out their checks to the attorney. The attorney keeps $150 for his efforts then sends a check made out to the Woods Creek POA (the name on the checking account) to one of the property owners who's name is also on the account (there are two property owners on the account) and he makes the deposit. I'm assuming that when the checking account was first opened many years ago they used their SS# for the tax ID number. I know the POA has no tax number. This is an extremely informal neighborhood in a rural area and there are a lot of subdivisions like ours that consist of a few lots with a private road and no other services or ammenities. Maybe in hindsight we should not have used the term POA on the checking account. Would it have made a difference if we had put "Woods Creek Road Maintenance Fund" on the account instead? We're trying to find a freebie attorney to help us out. It's getting stickier by the minute!

MaryA1 (Arizona)
Posts: 388

Posted:

Lindsay,

The only thing that may work is to amend the CCRs deleting the requirement for a POA and mandatory assessments. As Tim stated, this amendment must be recorded with the Co. Recorder. You can continue to use the attorney to collect the assessment each year for the road repairs, or the residents who perform this service could just contact each member to ask for the money. The only problem that may arise would be that one, or some members may not pay the fee and there wouldn't be any legal reason to require them to do so. Regarding the checking account, whether or not there is a POA, a tax ID number should be obtained for the account.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Lindsay,

It could be that your POA is acting like a trust with the lawyer being the trustee. Without reading any documents, it's difficult to offer other options. However, even a trust must file tax paperwork.

TimB4 (Tennessee)
Posts: 21,059

Posted:

You may just want to ask your attorney, or the two who are on the checking account, if the POA is in compliance with all VA laws.

Tim

LindsayJ (Virginia)
Posts: 8

Posted:

Thanks for the input. You guys have really made the wheels start turning. I am thinking the solution may be to create a separate road maintenance agreement. If we can get that signed and recorded we can then ammend the deed restrictions and remove the wording about the POA having the authority to assess for the road fee. No common area = no VPOAA. I don't know if that will work but we'll run it by an attorney. We're supposed to meet with the other homeowners tomorrow to compare notes and decide how to proceed. This is becoming a real education.

MeganG (Virginia)
Posts: 1

Posted:

Lindsay, I know this has been a while, but I wondered if you received attorney feedback about getting around the VAPOOA if you just have a road agreement. Ours is the same thing, although we have an incorporated HOA, but we don't call the easement a common area, so I don't know if we can get around it either since we only collect fees for road maintenance. Would love to know if you found anything out! Thanks!

GenoS (Florida)
Posts: 4,276

Posted:

10-year old thread, Megan.

TimB4 (Tennessee)
Posts: 21,059

Posted:

As others have pointed out, the road is the common area.

In my opinion, yes you are bound to the act.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Dang nab it.

I should have checked on the age of the thread.

GenoS (Florida)
Posts: 4,276

Posted:

Quote:

Posted By TimB4 on 06/29/2020 3:14 AM
Dang nab it.

I should have checked on the age of the thread.

We all get snookered from time to time

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