Input on Articles of Incorporation

Started by LuaneH • 22 replies • 2236 views

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LuaneH (Georgia)
Posts: 15

Posted:

I have finally managed to find a copy of our POA Articles of Incorporation. Due to the excellent comments I received on a prior thread I went on a mission to discover whether there was any language in the AIs alluding to mandatory or voluntary membership in the association.

Here's the clause pertaining to membership: "Membership in the corporation shall be open to owners as defined in Article 17B of the abovementioned Second Amendment to Protective Covenants." That amendment spells out property lines, geographic location of the neighborhood, etc.

The "shall be open" seems to imply that membership is on a voluntary basis.

I would appreciate any comments.

Thanks.

SusanW1 (Michigan)
Posts: 5,202

Posted:

No, I disagree. the word "shall" gives permission. It defines who is allowed to be a member.

That does not speak as to whether or not it is mandatory.

Keep looking, but I think the membership is tied into the property.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Luane:

Usually in legal terms “shall” is absolute and “may” is non-absolute. For example:

Shall not apply - Means it absolutely does not apply.

May not apply - Means it may or may not apply depending …

This is how our attorney clarified to me when I had something that was a little confusing regarding the difference between the various wordings.

With what you stated above it in essence would read similar to:

Membership in the corporation WILL be open to owners …

LuaneH (Georgia)
Posts: 15

Posted:

Thank to Susan and Janet!

It still doesn't seem clear, but it's good to see different interpretations. If one said "Membership in the corporation will be open to owners" it says to me the owner would have an option to join or not.

It would be so helpful if associations would try to stick to the most common of layman's terms. Had they just said, "Membership is mandatory", there would be no questions.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Luane how true

... I think attorneys write this stuff so they can be sure to keep their jobs as "interpreters". It would be nice if many items were not so ambiguous.

SusanW1 (Michigan)
Posts: 5,202

Posted:

It's just saying that the corporation members will (shall) be comprised of this certain group, not any other outside group.

RobW (California)
Posts: 279

Posted:

I think you're arriving at a conclusion based on the absence of information. This particular clause is only declaring that owners have the right to be members of the corporation. That's the only subject it's addressing.

You would have to look elsewhere in the document to determine if it declares that owners have the option of refusing or canceling membership.

Rob

JanetB2 (Colorado)
Posts: 4,219

Posted:

I am trying to remember Luane exactly what were you trying to find with regards to your HOA?

LuaneH (Georgia)
Posts: 15

Posted:

I hated to kick up an old conversation, but a section of the Bylaws entitled Members says,“The right or interest of a member shall not terminate except upon the happening of any of the following events – death, resignation, expulsion, dissolution or liquidation of the Corporation.” There are separate headings for the BoD and Officers. Some residents have used this Bylaw to submit resignations.

When I initially posted about it I was advised by the members here to find the AIs and to carefully read (and I most definitely have done so) the covenants and bylaws for the wording 'voluntary' or 'mandatory'. I've found neither term in any of the documents.

The Board contacted an attorney 3 months ago and, so far, has only been told that he is still researching the issue. He did say that "even if they resign they may still have to pay dues." That rather sounds as if he has determined that the language does indeed provide for resignation, but I fail to see how dues can be collected on a non-member of any organization. It's all very confusing and I was curious to know if any other R/HOA had ever been in a similar situation.

I appreciate all the responses. This forum has a wealth of information!

RobW (California)
Posts: 279

Posted:

The problem, as I see it, is that when developers create HOAs, they typically just cobble together boilerplate to satisfy the documentation requirements for getting the development approved. Since they "own" the Association in the beginning, there is no one to challenge whatever inconsistencies there might be in the boilerplate. After the developer sells the last unit, he or she disappears, and the actual homeowners are left to try to make sense of language that may never have made sense in the first place.

Isn't this fun?

Rob

SusanW1 (Michigan)
Posts: 5,202

Posted:

Luane - isn't your HOA the one that has no common areas and the "dues" are for social events?

LuaneH (Georgia)
Posts: 15

Posted:

Yes, Susan, this is the one. The dues are used entirely for flowers for the sick and deceased, welcome gifts for new residents (rare) and an annual or less frequent community dinner. No common areas, nothing to insure, no recreation.

When formed in the late '80s the dues were $75 a year for maintenance of the gravel roads. At some point in the'90s the county acquired the roads, paved and maintain a 40 foot right of way. When that occurred the dues were decreased to $10 a year. Even at $10 the association accrues $490 each year which more than pays for the few social functions. The treasury generally sits at the $3000 mark since there are so few expenses.

The BoD recently increased the dues to $50 and that is what started the disgruntlement.

LuaneH (Georgia)
Posts: 15

Posted:

Rob, I agree totally. Looking through all the documentation for our association one can readily see that it was copied from a standard form. And what you say is precisely what happened - after all the lots were sold the developers vanished.

Throughout the years there has been great lengths of times when a Board did not even exist. Residents sometimes had no idea if an association still existed. When a few residents would decide to get the Board back together actively they would rewrite the covenants grandfathering in any violations. Then another period of inactivity would follow and the pattern repeated.

Ha, fun just doesn't describe it.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Luane ... is there anything in the governing documents that discusses how to dissolve or eliminate the HOA?

Now I understand ... when the HOA was started you maintained gravel roads. Now those are maintained by the local government agency and the current HOA has absolutely no maintenance obligations. What reason did the board provide for increasing the dues?

SusanW1 (Michigan)
Posts: 5,202

Posted:

What "perks" are there for being a member? This seems like a social club that has members living in a certain subdivision, but not an HOA.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Luane:

If your POA is incorporated as a Non-Profit Corporation here is the statute, subchapter, and article regarding dissolution:

State Statute website: http://www.lexisnexis.com/hottopics/gacode/

TITLE 14. CORPORATIONS, PARTNERSHIPS, AND ASSOCIATIONS
CHAPTER 3. NONPROFIT CORPORATIONS
ARTICLE 14. DISSOLUTION
PART 1. VOLUNTARY DISSOLUTION

Then all the statutes are as follows:

§ 14-3-1401. Dissolution by incorporators or initial directors
§ 14-3-1402. Proposal of dissolution and approval thereof
§ 14-3-1403. Plan of dissolution
§ 14-3-1404. Notice of intent to dissolve
§ 14-3-1404.1. Publication of notice of intent to dissolve
§ 14-3-1405. Revocation of dissolution proceedings
§ 14-3-1406. Effect of notice of intent to dissolve
§ 14-3-1407. Disposition of known claims against corporation
§ 14-3-1408. Request for presentation of claims; enforcement of claims; when claims barred
§ 14-3-1409. Articles of dissolution
§ 14-3-1409.1. Claims pending prior to dissolution of a corporation
§ 14-3-1410. Revival of corporation after dissolution by expiration of period of duration

The POA ordinances are as follows:

TITLE 44. PROPERTY
CHAPTER 3. REGULATION OF SPECIALIZED LAND TRANSACTIONS
ARTICLE 6. PROPERTY OWNERS' ASSOCIATIONS

Then different statutes follow ….

The problem I see with your POA is there is no maintenance of common items for the benefit of all homeowners. Therefore, there is a potential issue with legally being able to assess and collect money. The following are some definitions from Georgia POA statutes:

(2) "Common area" means all real and personal property submitted to the declaration which is owned or leased by the association for common use and enjoyment of the members.

(3) "Common expenses" means all expenditures lawfully made or incurred by or on behalf of the association together with all funds lawfully assessed for the creation and maintenance of reserves pursuant to the provisions of the instrument.

This could be something your POA should check with an attorney regarding and possibly discuss with an attorney to dissolve the POA. I only say this because from what you have stated it appears that your POA has no in essence legal common areas or expenses.

ElbyJ
Posts: 29

Posted:

I have heard the term "Articles of Incorporation" used before in several thread and used by the legal department for our management agent. Are "Articles of Incorporation" mandatory for all HOA's, regardless of the state? Our HOA does not have such a document.

Thanks

LuaneH (Georgia)
Posts: 15

Posted:

Janet,

When the BoD announced the dues increase in November the only change was "to pay for maintenance of road shoulders and ditches." Residents took exception to that reasoning since the county maintains a 40 foot right of way which includes the shoulders and ditches. Property taxes pay for this maintenance. Although the county does not mow the shoulders every few weeks during growing season, they are very good about responding to calls when needed. The majority of the residents will take care of the right of way in front of their property if it begins to look a bit unkempt.

I did bring up dissolution at a Board meeting last year, but was promptly told no.

Frankly, I see no justification for the dues increase, but I was outvoted. There is more than enough monies in the treasury to pay for flowers as needed.

LuaneH (Georgia)
Posts: 15

Posted:

Susan,

There aren't any perks and the dues increase has caused a lot of anger. Even the flower program doesn't work properly as someone must inform a board member if a resident is ill or has lost a loved one in order to be sent flowers. The message fails to get through too frequently because so many residents aren't talking to one another or don't know one another.

In this case the HOA is proving to be far more trouble than it is worth.

I've lived in two other HOAs that worked very well. One of the neighborhoods offered a pool, tennis, walking trails, clubhouse, pond for $27 per month. The other provided water from a common well (filtered, pumped) for $150 per year. For residents to be happy and involved there must be a payoff of some kind.

SusanW1 (Michigan)
Posts: 5,202

Posted:

It seems that this board has decided it wants additional landscaping services done on the side of the roads to keep the place looking nice. You can ask if that is in the "purpose" statement stated in your original documents.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Elby:

Check your Secretary of State website and there should be somewhere you can search for non-profit organizations. Put the name of your subdivision and if they have a non-profit “Articles of Incorporation” it should appear on the Secretary of State site search.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Luane:

Who told you no … the board? All the homeowners could ban together regarding this issue, if desired. I would have to look again at the statutes. The board also needs to keep in mind they have fiduciary duty towards all the homeowners, an HOA is not a social club but a non-profit organization put in place to pay for maintenance of common areas.

Many attorneys if you call and ask a quick question like this may give you an answer at no charge as to whether or not assessments can be charged for an HOA which has no common areas to maintain.

It just seems to me you have a few who are enjoying collecting a few dollars and utilizing everyone for a social club, as you no longer have common areas to maintain. If you have no legal common areas owned or to maintain then collecting assessments could potentially not be legal, but this would be something to potentially ask an attorney.

ElbyJ
Posts: 29

Posted:

Janet -- thanks much. I will check out the site. Elby

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