HOA wanting to do business under another name

Started by RalphH2 • 11 replies • 2842 views

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RalphH2 (Arizona)
Posts: 12

Posted:

An HOA in Arizona wants do business and advertise using a new name. Our community signage will also be change to the new name. The decision to make the name change was decided by only the Board of Directors and not by the vote of the homeowners. The new name will only be a DBA and not a change in the legal name as recorded with the Arizona Corporation Commission. I cannot find anything in our By-Laws providing a procedure for changing the community name whether the legal recorded name or to DBA. My thought on this matter is that the Board cannot unilaterally make the name change and that it first must but voted for by the required majority of the homeowners.

Any thoughts, experience with such, or legal opinions?

LawrenceC1 (Georgia)
Posts: 480

Posted:

Quote:

Posted By RalphH2 on 04/28/2012 5:37 PM
An HOA in Arizona wants do business and advertise using a new name.

Do business? Advertise? Most homeowners associations are a non-profit that collects dues and maintains common facilities while maintaining a very low profile. How is it that your Association needs to advertise?

Are you changing the name of your Community or the name of the Homeowners' Association?

What is the reason being given by the board for making this change?

LarryB13 (Arizona)
Posts: 4,099

Posted:

Ralph,

Your board of directors derives its powers from statutes and common law. Your bylaws and CC&R's normally serve only to limit the power of the board. Therefore, if your community documents do not prevent the board from exercising a particular power, then the board may do so. In this example, since the documents do not prevent the board from doing business under another name and/or require a vote of the members, the board may do so.

Changing legal name of your association would be difficult. First, your CC&R's most likely state the name of the association, so it would require amending the CC&R's to change the association's name. If that was approved, the association would then have to file amended articles of incorporation. Arizona also requires that articles of incorporation, whether new or amended, be published in a newspaper, thereby adding to the costs.

Doing business under another name (DBA - doing business as) is fairly easy and more common than most of us realize. The entity is supposed to record a notice with the county recorder. They can also register a "trade name" with the secretary of state.

I am curious as to why the board wants a new name. I have seen many developers saddle subdivisions with cutesy poo Spanish or Indian names that most residents can never pronounce. (My personal favorite was the fictional Los Ranchitos Grande in Too Far From Heaven. This means Big (singular) Little Ranches (plural).)

Advertising an HOA sounds unusual, however it may be a good idea to fill those vacant foreclosed homes with dues-paying members or to bring the public to the golf course.

Bottom line is that it is within the board's discretion to do business under a different name.

RalphH2 (Arizona)
Posts: 12

Posted:

It is written in the newsletter, the Board is changing the name of the "Community". It is an "Active Adult Community" that claims it need to "compete" with other similar communities to attract people to our facilities, golf course, and buy resale homes. The HOA is not in the real estate business yet, but is considering the possibility. The change will include the name of the town to provide a connection with its location within the state.

LawrenceC1 (Georgia)
Posts: 480

Posted:

Quote:

Posted By RalphH2 on 04/29/2012 7:05 AM
...the Board is changing the name of the "Community".

Now this makes sense. The developer named the subdivision something like "Reclaimed Landfill Homes for the Elderly" and your board thought it might be better to attract buyers if it was called "Whispering Pines Senior Living". This really has nothing to do with the name of the incorporated entity that is the homeowners association. It is also not a "doing business as" (DBA) in the way this term is normally used, since it is not a corporation doing business that is taking on a new name.

In many places, renaming a subdivision must be cleared through the city or county government. You should check with them to see what they require. It is unlikely that your governing documents have anything to say about this, but you can certainly check them, too.

Whatever the legal requirements, the fiduciary responsibility of the Board to represent the homeowners ought to require community involvement in something that so strongly affects every member of the Association. I recommend that you make sure the Community is aware of what is going on, and demand input to the decision -- even going so far as forcing a special meeting of the membership to discuss the name change.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By RalphH2 on 04/29/2012 7:05 AM
The HOA is not in the real estate business yet, but is considering the possibility.

That could pose a problem. Arizona court decisions have held that an HOA cannot impose new obligations on its members. In a 2010 case the court held that an HOA could not force members to join an activities center, even though a majority of owners approved an amendment to their CC&R's. In essence, the court ruled that the CC&R's are a notice of what the owner is obligating himself to do and the obligations cannot be expanded after-the-fact.

Click here for complete opinion in Dreamland v. Raimey.

Unless your CC&R's specifically permit the association to engage in the real estate business, my opinion is that doing so would impose a risk upon the members and additional obligations that would not be upheld in court.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Ralph

Is this not a "marketing/sales" approach versus anything more sinister?

What is your issue? The end game or their method to achieve such

Thanks

RalphH2 (Arizona)
Posts: 12

Posted:

John,

The Association Board of Directors chartered the Name Change Committee in March 2010. The mission of the Committee was to make a recommendation to the Board regarding the name of our community. The task given to the committee was to evaluate our current name and determine, to the best of our ability, if it is relevant in the market place for the next generation of homebuyers. If it is not, then bring them an alternative name that is relevant. The Committee's objective is to recommend a name that will assist in continuing to attract active people as residents for our community.

After two years the Committee provided seven reasons for a minor name change that includes "The name will take advantage of the community that surrounds us in a positive way, and will more clearly identify our location" and "A new brand name used as a "dba" will limit our legal costs". The Name Change Committee was of the opinion, “We believe our legal documents would not need to be amended".

While I personally don't necessarily agree with all the reasons the Committee cited for the need to recommend the name change of our community and don't find the name disagreeable, I do anticipate there will be both foreseen and unforeseen costs that will not be recaptured by the benefits. While our homes sale prices have declined over the past few years, the decline has been less than our neighboring subdivisions which do not the amenities we have. Total annual sales over the past few years have remained about the same as they were at the peak of the real estate market when there were fewer homes on the market. Home sales just this past month have been more than any month in the past few years and may be a record for one month using the same "old" name.

My issue is questioning whether or not the Board of Directors has the power to unilaterally make the decision to change our community name without a vote by the homeowners. Our By-Laws don't seem to address the issue. However, I should soon get a response from our General Manager after apparently just now "consulting with legal counsel". In the meantime I was wondering if anyone out there, particularly in AZ had past experience with this issue and the outcome.

RalphH2 (Arizona)
Posts: 12

Posted:

The Committee that worked on the name change project for two years did check with the Town Mayor. The Mayor approved the proposed and now Board approved name change.

Thank you for your suggestions!

RalphH2 (Arizona)
Posts: 12

Posted:

Thank you for the opinion. The next question I will be posting is for HOAs that have knowledge, are, and/or were, in the real estate business.

GenoS (Florida)
Posts: 4,276

Posted:

5-year-old thread re-activated by spammer.

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