HOA Dissolved & Renting Common Property

The developers in our subdivision allowed the HOA to go into inactive status in 2010. They continued collecting dues in the name of the HOA. Some of our members have asked the developers to reinstate file the appropriate annual reports and reinstate the HOA and provide the property owners with a budget, as we would like some accountability regarding the use of our dues. If the HOA is dissolved, can the developers still collect dues? Wouldn't a lien against a member for nonpayment be without merit since the covenants say members pay dues to the XYZ Homeonwers Association? We don't mind paying dues, but we wanted collected by the entity that is described in the covenants.

The properties were sold as if we would have access to a clubhouse, pool and other common property, but the developer never transferred it to the HOA, and now he wants the members to lease the clubhouse from the developers rather than reinstating the HOA and transferring the title to the HOA. The developers have been using our dues to pay for the insurance, taxes and maintenance for the clubhouse, pool and "common" properties since 2007, so it seems unfair to change the rules midstream. Is it normal for members to pay a fee in addition to their dues to use property that was presented as amenities when the lots were sold?

The reality is that there has not been an Association in the form of a not for profit corporation since August 2010. Moreover, the only actions an administratively dissolved corporation can take are (1) to formally dissolve the corporation or (2) to reinstate the corporation. [T.C.A. § 48-64-202(c)] During administrative dissolution, a corporation may take no other actions. But it sounds like you are suggesting that the developer can stand in the shoes of the association and make decisions about collecting dues and filing liens.

Proper function of the HOA under Developer Control T.C.A. § 48-58-101(a) requires that each corporation must have a board of directors. T.C.A. §
48-58-103(a) requires a minimum of 3 directors to serve on the board. T.C.A. § 48-58-104(a) requires that directors be elected at the first annual meeting of the members. T.C.A. § 48-58-105(a) requires one year terms unless the charter or by-laws indicate differently.

John,

I was hoping someone would be able to comment on the information that I posted.

It seems like someone said that although the corporation is dissolved, the association still exists, so the question is, "Can the developer act on behalf of the association, which is in fact the dissolved corporation.

Aren't all the comments what someone "thinks the answers are?"

Thanks

Larry,

I am not an attorney and I do not work in the legal profession. This advice is based on experience and research. As John said, every State has different laws and every Association has different language in their governing documents. Therefore, you should read and understand you governing documents and applicable State laws. If you desire legal advice, you should seek out a local attorney. I would suggest one versed in Contract law.

The TN law you cite is part of the Tennessee Nonprofit Corporation Act.

TN does not have any HOA laws. They do have COA (Condominium) laws. I am of the impression that your development is not in a COA. If this impression is correct, there are no applicable (because you are unincorporated) TN laws except contract law. The contract is your CC&Rs. Therefore, unless the CC&Rs require the Association to be incorporated, then it can function as an unincorporated entity. As an unincorporated entity, the Association can still collect assessments and pay the bills.

CC&Rs, along with the Bylaws, typically specify that the Developer (Declarant) is in control of the Association until certain conditions are met (typically an amount of time or percentage of lots sold). The Declarant typically has this control because they usually have multiple votes per lot they own vs. the normal 1 vote per lot other members own.

As long as the Declarant is complying with your governing documents (CC&Rs, Bylaws and any additional rules/regs adopted by resolution) there is little that can be done until control of the Association transitions from the developer to the membership. If the Declarant isn't complying with the governing documents it's up to the membership to bring them into compliance either though agreements or legal action. However, due to the expense of legal actions, most members wait until the transition if the developer is refusing to comply.

Larry since you didn't like the very sound advice to collect money from your neighbors and hire an attorney to represent you all because I'm sure the developer doesn't have an attorney representing his-self. I would suggest you contact your local Zoning Board, developers have to file with the ZB and get approval a plan of the development before they turn a spadeful of dirt.

NOW HERE'S THE RUB. WHEN YOU BUY INTO A DEVELOPMENT BEFORE IT IS TURNED OVER TO THE HOMEOWNERS, THE DEVELOPER WITH FEW EXCEPTIONS CAN CHANGE THE CC&R'S AND IF YOU'RE NOT PAYING ATTENTION CAN GO TO THE ZB ASK NICE AND CHANGE WHAT THE ZB ORIGINALLY APPROVED.

Oh, and like Tim I'm not an attorney nor do I play one on the interweb, but you and your neighbors got your mortgages based on the offering plan. If the conditions for which the money was loaned materially change, your mortgages may be in jeopardy.