HOA that was never registered with PA as HOA

1) We settled on house back in 2007 with the understanding that there was an HOA

2) When a 30 houses were sold the builder was to turn the HOA over to the "board". (typical)

3) During the period that the builder was in charge of the HOA he did not plow roads and fulfill his agreed upon obligation to the Borough, the Township and the homeowners in this so-called association.

3) We have since found out the builder might be going into bankruptsy.

4) We also have found that the builder had not registered the HOA with the State of Pennsyvania as he should have. This means the HOA is not a legal endity.

5) Some of the 30 residence have not paid any dues, some have paid a few dues and one had paid $600. These funds have of course been placed into an escrow account.

6) All homes are single family 3-5 bedroom homes, the only common ground is a sign on a brick wall at the entrance to the developement and there is 'no' activities center

5) The Borough had to go to an undisclosed place to have the builder legally turn over the roads and sewer to it. This means that the common areas are covered for snow removal and sewer/water problems by the Borough.

7) We have two probems: a)some want to reinstate and make the HOA legal (cost it appears would be limitless ($10,000 and up)) b) some want to dissolve the remnents of the HOA and leave it as a dorment entity or at most a a club (with 'no dues' and 'no power'.

8) Has anyone out there heard of such problems and what were some of the solutions to the problems, if any.

Hi Bill:

Welcome to HOATalk.

Can you clarify please … You stated “with your understanding there was an HOA”, so did you receive copies of the Declaration of CCR’s and any other governing documents when you purchased? Also, check your Warranty Deed copy received after closing and see whether or not any Declaration / Covenants are noted as being attached to the property.

Here are some links and info from your state statutes:

PA Uniform Planned Community Act: http://www.pacondolaw.com/statutes_upca2.html

5201. Creation of planned community: http://www.pacondolaw.com/upca/upca5201.html

A planned community may be created pursuant to this subpart only by recording a declaration executed in the same manner as a deed by all persons whose interests in the real estate will be conveyed to unit owners and by every lessor of a lease, the expiration or termination of which will terminate the planned community or reduce its size. If the lessor is the Commonwealth, a municipal government or any agency of either, the lessor need not execute the declaration if it has previously given written notice of its filing and agreed to be bound by the provisions of this subpart, in which case the declaration shall be executed by the lessee in possession of the subject property. The declaration must be recorded in every county in which any portion of the planned community is located, must be indexed in the same records as are notarized for the recording of a deed and shall identify each declarant as the grantor and the name of the planned community as grantee.

Before discussing potential reinstatement or termination options, first try to insure whether you are legally bound by any documents.

Hi Bill:

I have a similar situation in Arizona. The declaration states that there will be a non-profit incorporated association but, being an idiot, the developer incorporated it as a for-profit business corporation. During his time in control he filed various annual reports with the state claiming that he personally (and not his real estate company) owned a controlling interest and that the corporation issued stock (which a non-profit cannot do).

I have not seen any case law precisely on this point, although I am sure something similar must exist. Based on other case law I have read, I believe that if the declarant promises an incorporated non-profit association and fails to deliver on his promise that all bets are off regarding the association. By that, I mean that if the declarant breached his own contract and failed to deliver what he promised, then a group of homeowners cannot create a new non-profit corporation and force the rest of the owners to join.

My belief is that the declarant has one shot at getting it right. In the situation I described above, the developer chose to write his own Articles of Incorporation without consulting an attorney. Having had some prior experiences with persons who call themselves "developers," I find that most of them know little to nothing about the law and care little to nothing about the consequences of disregarding the law as they feel the law never applies to them.

My advice to you is to see what documents, if any, were recorded or filed as required and take copies of those to an attorney specializing in either real estate or HOA law.

Bill,

When you say the Association wasn't registered, do you mean the CC&Rs were not filed with the county or that the Association was not incorporated under PA law?

Bill - are you on the board?

What is the attorney beging asked to do?

How is his fee being paid?

Are you stating the developer is still in charge? Is the current Board developer controlled or did homeowner's elect? How many total lots/homes vs. how many built and sold?