No Board, No Articles of Incorporation

Started by DavidC33 • 7 replies • 1229 views

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DavidC33 (California)
Posts: 4

Posted:

I am in escrow to buy a unit in a 10-united Planned Urban Development in California. I have just received the HOA documents and find that there are CCRs but there is no operating Board of Directors (because of apparent apathy among owers) and that no Articles of Incorporation have been recorded, and there is a 1-person management company in charge whose viability is questionable. The person running the management company has presented states he has been "taking care of the required business of the Association as instructed by the departing Board." He has presented a Balance Sheet that shows an adequate reserve and all expenses and income (from the $200 per month, per unit HOA fees) meeting what has been budgeted for, although I have not been able to verify if this is accurate. The complex is in fair shape, with a fairly new roof, but other maintenance seems to be lacking.

What am I getting myself into? I am willing to step up and be on the HOA board if I end up buying the unit, but I am questioning the financial viability of the HOA and the management company (who has not returned my phone call.) How can I even know if there really is any money in the HOA account or whether the management company is on the up-and-up?

I plan to knock on some doors at the complex and ask questions, but I'm imagining some of the residents will be clueless, as they simply send in their checks to the 1-person management company each month and figure everything must be ok. (There were several foreclosures in the complex in the past few years, so I'm guessing "institutional memory" among the residents is slight.

Any help/advice would be appreciated.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

It sounds like your buying into a condo that is not incorporated. They have decided to be managed by a management company. My suspicions would be that it is because of apathy of the owners. The lack of some maintenance or care is a clear sign of that. Plus the fact they most likely just blindly pay their dues and have someone else handle it is what is truly happening.

I'd suggest lowering your amount of expectations. Which may be odd advice for sure. However, in some cases that may just be the right amount. Meaning that as long as you see a new roof, lawncare, and other good maintenance routines your doing good. If it's just superficial stuff like weeds growing in cracks or something could be made a bit "prettier" what is stopping you from doing that? There's no reason you can't organize a volunteer day to straighten up the place a bit or do it yourself. (With permission and no money reimbursement most likely). I used to go out and clean up our front entrance everyday. That's where I'd suggest you do instead of banging your head and hand against a door that won't open. It will if you go outside and do the work yourself.

Former HOA President

RogerB (Colorado)
Posts: 5,067

Posted:

Quote:

Posted By DavidC33 on 05/11/2013 7:34 AM
I am in escrow to buy a unit in a 10-united Planned Urban Development in California. I have just received the HOA documents and find that there are CCRs but there is no operating Board of Directors (because of apparent apathy among owers) and that no Articles of Incorporation have been recorded, and there is a 1-person management company in charge whose viability is questionable. The person running the management company has presented states he has been "taking care of the required business of the Association as instructed by the departing Board." He has presented a Balance Sheet that shows an adequate reserve and all expenses and income (from the $200 per month, per unit HOA fees) meeting what has been budgeted for, although I have not been able to verify if this is accurate. The complex is in fair shape, with a fairly new roof, but other maintenance seems to be lacking.

What am I getting myself into? I am willing to step up and be on the HOA board if I end up buying the unit, but I am questioning the financial viability of the HOA and the management company (who has not returned my phone call.) How can I even know if there really is any money in the HOA account or whether the management company is on the up-and-up?

I plan to knock on some doors at the complex and ask questions, but I'm imagining some of the residents will be clueless, as they simply send in their checks to the 1-person management company each month and figure everything must be ok. (There were several foreclosures in the complex in the past few years, so I'm guessing "institutional memory" among the residents is slight.

Any help/advice would be appreciated.

before committing to buy I would:
a) Since the MC acknowledged there was a "departing Board" I would ask the MC for a copy of the Bylaws
b) I would get a copy of the CC&Rs from the County;
c) find out if the HOA was previously incorporated with the Secretary of State and if so there would be Bylaws filed with the SOS;
d) visit with homeowners and determine the level of interest in reactivating the HOA and a Board of Directors.

I would not buy unless there was the probability of an active HOA and a Board of Directors established.

GlenL (Ohio)
Posts: 5,491

Posted:

Run away - don't walk, as fast as you can. I don't care how good the deal or the location, it's not worth it. If you'll go back a page or three and look for posts by TammyI, you will see the hoops she's had to jump through for a HOA in a similar condition.

Studies show that 5 out of 4 people have problems with fractions

DavidC33 (California)
Posts: 4

Posted:

Thank you for your reply Glen. I could not find the posts by Tammy you mentioned. Can you direct me to them or elaborate on your reasoning for your dire warning. Thank you!

DavidC33 (California)
Posts: 4

Posted:

I found the postings by Tammy that you were referring to. I have yet to read through them all, but I see that she is having to jump through a lot of hoops to get her HOA into shape.

Still, it seems potentially do-able, and if I get a good deal on the unit, it could still be worth it, I think. But you seem to have a different opinion, which I welcome you to elaborate upon. Thanks!

GlenL (Ohio)
Posts: 5,491

Posted:

OK here goes, it is improper in the extreme for a MC to act in place of a Board, which automatically makes me question their integrity. What the MC should have done when the Board abrogated their responsibility was to go to court and ask that a receiver be appointed to oversee the HOA.

While the Board can delegate certain powers to the MC, they cannot delegate their responsibility. Add to that, that out of ten units you can't get three people willing to give up a couple three hours a month to maintain what is probably the most significant investment of their lives.

Now while I appreciate your enthusiasm to set things right; if your fellow perspective homeowners aren't willing to do it for themselves, what makes you think they will help you??? I foresee them coming to a couple of meetings before leaving you to hold the bag. So unless you are a glutton for punishment or a megalomaniac bent on world...er HOA domination, you can kiss your home life goodby.

Plus California has some of the most detailed HOA statutes which you will need to follow. Even if they are not being followed now, once someone responsible is in charge, I'll bet at least one of your prospective neighbors will expect you to follow them to the letter.

You can read the Davis-Stirling Act at davis-stirling.com - it is an attorney website that specializes in HOA law.

Studies show that 5 out of 4 people have problems with fractions

DavidC33 (California)
Posts: 4

Posted:

Thank you, GlenL

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