What Happens to the Common Areas when MARTA Expires?

Started by GlenL • 13 replies • 3401 views

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GlenL (Ohio)
Posts: 5,491

Posted:

The question is pretty self explanatory, we have had posters here that have had their deed restrictions expire either through the Board not acting in a timely manor to renew them, through ignorance of the Florida MARTA statute or maybe by Boards hoping to quietly dissolve the HOA. Now this isn't a big thing if the HOA has few or no amenities but what if they do? What happens to the pool, clubhouse, tennis courts etc. when the deed restrictions expire?

In most CC&R's that I've seen, a homeowner owns their lot and X (where X is the number of homes) undivided percentage of the common areas. If MARTA expires your deed restrictions what happens to your interest in the common areas? Are they sold (if they'll sell) and the money divided among the homeowners? Does the corporation (in most cases) that is the HOA retain ownership? Now I'm not an attorney but usually HOA corporations are formed with the specific mandate to administer the legal and business practices of the HOA, would a second corporation need to be formed and the HOA corporation transfer the common areas to the new corporation. Could the new corporation then charge the homeowners for use of the pool etc.? Along those lines what would happen to any monies, such as reserves held by the HOA not to mention any limited common areas.

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

SallyR3
Posts: 113

Posted:

Would you mind explaining MARTA ... I didn't find anything in an Internet search that explain it relating to an HOA.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

I hate when people assume everyone knows what an acronym means. Spend 7 seconds and type it out if you want to communicate to others. When I think of marta, I think of the Atlanta subway system.

GlenL (Ohio)
Posts: 5,491

Posted:

Sorry, its been talked about on the forum before but I guess I too got it wrong although I guess it's pronounced MARTA it is actually MRTA This is from a HOA blog:

The Marketable Record Title Act (or "MRTA") has been on the books in the state of Florida since 1963. This law was originally created at the behest of title insurance agents who were understandably frustrated with having to go back to the Spanish Land Grants when writing title insurance policies. These folks asked for a cutoff date beyond which they needn't go when searching title.

This is yet another example of a good law with a bad unintended consequence. It was presumably never the Florida Legislature's intention to make trouble for HOA's but that is exactly what happened. If you create a cutoff date for the viability of restrictions at 30 years from the root of title that will impact the Declaration of Covenants and Restrictions recorded for homeowners' associations.

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

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By SallyR3 on 06/16/2014 5:47 AM
Would you mind explaining MARTA ... I didn't find anything in an Internet search that explain it relating to an HOA.

Sally,

MRTA is unique to FL. However, there are similar situations when covenants have an expiration date or require refiling to remain active.

MRTA, or The Marketable Record Title Act (specifically addressed in FL 712) came about because title researchers were finding it difficult to research land titles completely. Basically what this act did, as I understand it, was say that any title prior to mm/dd/yyyy was no longer valid unless the claim was refiled within x years.

The unintended consequence of this resulted in HOA deed restrictions becoming invalid. The legislature, realizing this after the initial bill was passed, adopted additional legislation, that allowed Associations to have additional time to revitalize (their word) the covenants. Even with this additional time, some Boards were unaware of this requirement and did nothing. This resulted in the CC&Rs becoming expired by act of legislation.

Here are some news articles about the issue:

The Reinstatement of Covenants, Conditions, and Restrictions Extinguished by the Marketable Record Title Act from a lawyers web site

MATISSEK v. WALLER court case concerning MRTA

MRTA and Revitalization of Covenants – what do these mean for HOAs? 2012 Sun Sentinal Newspaper article

Hope this helps,

Tim

BanksS
Posts: 403

Posted:

Very good explanations about MRTA from Glen and Tim. Not to be too repetitive but Iowa has a similar law but the time limit to renew is only 21 years. These laws definitely create some interesting consequences. In my situation the previous nonprofit corporation was dissolved and a new one formed. The common elements were sold to the new corporation for $1.00. These consisted of a sanitary sewer, a well, and the roads. The roads were taken over by the County and the wells became obsolete as the water services are now provided by a rural water association. What remains is a nonprofit corporation to manage the sanitary sewer, the entrance to the development, a fence and two ponds. The BOD is required to follow the Iowa nonprofit code to manage these elements among other environmental laws pertaining to the ponds and the sanitary sewer. There are no architectural guidelines and no rules for the BOD to enforce regarding parking, garbage cans, noise, dogs, etc. It does simplify things but as with all organizations there are conflicts and there are many. Some on the BOD want to continue to try to exert authority where none exists.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Glen,

Without a detailed knowledge of MRTA, my guess is that even if the covenants expire the HOA corporation would continue to exist but without the power to assess, enforce, or foreclose as those powers derive from the covenants.

If common areas were deeded to the HOA they would remain association property. A homeowner would likely have the right to continue to use the common areas and an obligation to continue to pay for maintenance. Presumably, the owner could opt out and even demand payment from the association for his share of the value of the common areas should he not wish to participate. The other side of the coin is that the association might be able to compel members to reinstate the former CC&R's as a condition of membership.

If the owners collectively own an undivided share of the common areas I would assume that expiration of the covenants would not effect that ownership. The association would continue to exist for the limited purpose of maintaining the common areas. In this situation the association would not be able to blackmail owners into reinstating the covenants as the owners already own the property; the association would have no legal basis to deprive the owners of their property.

I have read at least one court opinion regarding the common use of roads and the court held that those who use them have a legally enforceable obligation to contribute to their maintenance. I see no reason why other common use areas would not be treated similarly.

BTW, I like Iowa's statutes much better because it allows the owners to reinstate their covenants but requires recording the reinstatements in a special book at the recorder's office. I recall reading an Iowa court opinion that stated the reason for this is so that if one looks for a reinstatement and it is not recorded in that special book that he may then assume that the reinstatement did not occur.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

If common areas were deeded to the HOA they would remain association property. A homeowner would likely have the right to continue to use the common areas and an obligation to continue to pay for maintenance. Presumably, the owner could opt out and even demand payment from the association for his share of the value of the common areas should he not wish to participate. The other side of the coin is that the association might be able to compel members to reinstate the former CC&R's as a condition of membership.

Kevin will love this......LOL

BanksS
Posts: 403

Posted:

Quote:

Posted By LarryB13 on 06/16/2014 8:19 AM
Glen,

Without a detailed knowledge of MRTA, my guess is that even if the covenants expire the HOA corporation would continue to exist but without the power to assess, enforce, or foreclose as those powers derive from the covenants.

If common areas were deeded to the HOA they would remain association property. A homeowner would likely have the right to continue to use the common areas and an obligation to continue to pay for maintenance. Presumably, the owner could opt out and even demand payment from the association for his share of the value of the common areas should he not wish to participate. The other side of the coin is that the association might be able to compel members to reinstate the former CC&R's as a condition of membership.

If the owners collectively own an undivided share of the common areas I would assume that expiration of the covenants would not effect that ownership. The association would continue to exist for the limited purpose of maintaining the common areas. In this situation the association would not be able to blackmail owners into reinstating the covenants as the owners already own the property; the association would have no legal basis to deprive the owners of their property.

I have read at least one court opinion regarding the common use of roads and the court held that those who use them have a legally enforceable obligation to contribute to their maintenance. I see no reason why other common use areas would not be treated similarly.

BTW, I like Iowa's statutes much better because it allows the owners to reinstate their covenants but requires recording the reinstatements in a special book at the recorder's office. I recall reading an Iowa court opinion that stated the reason for this is so that if one looks for a reinstatement and it is not recorded in that special book that he may then assume that the reinstatement did not occur.

Larry,
This is a bit off topic but somewhat related to your post. There is no mandatory membership in the nonprofit corp. where I live but the caveat to that is if a property owner chooses to be a nonmember the sanitary sewer fees are 3 times the amount as that of members. I have asked two local attorneys if the corporation can legally do this. They both said they did not know. This is our only option for sewer service. We cannot install a private septic tank per Iowa code. There is a similar Iowa Supreme Court case that addresses this and the court ruled that the corporation can charge more for services to nonmembers but that the fees have to be "reasonable."

KevinK7 (Florida)
Posts: 1,343

Posted:

My understanding is one of three things.

1. The HOA loses all authority to enforce anything and essentially becomes another non - profit corporation. People can voluntarily join and be members and if there is common property they can utilize it.

2. The HOA fights the expiration, either by ignoring the law or actually suing homeowners and hoping purple never question them or hope a judge rules in their favor.

3. They disband. Sell off all assets and disperse all funds to property owners.

KevinK7 (Florida)
Posts: 1,343

Posted:

Quote:

Posted By JohnC46 on 06/16/2014 8:58 AM
If common areas were deeded to the HOA they would remain association property. A homeowner would likely have the right to continue to use the common areas and an obligation to continue to pay for maintenance. Presumably, the owner could opt out and even demand payment from the association for his share of the value of the common areas should he not wish to participate. The other side of the coin is that the association might be able to compel members to reinstate the former CC&R's as a condition of membership.

Kevin will love this......LOL

Lol. I am pretty safe. The original covenants had nothing about a HOA so revitalization would have minimum effect. Of course that wont stop people from trying.

When my neighborhood converted they kept raising prices. That angered a lot of people. Plus me telling everyone they don't have to join and you have a drop in membership. My thoughts are a bit more free market on this. Want the HOA to survive? Adapt the business model.

PitA1
Posts: 222

Posted:

don't forget about your engineered storm water retention facilities

a/k/a PONDS

they are NOT amenities but Federally REQUIRED utilities

y'all do have the option of forming a 'special tax district' to pay for the upkeep

KevinK7 (Florida)
Posts: 1,343

Posted:

Quote:

Posted By PitA1 on 06/17/2014 6:29 AM
don't forget about your engineered storm water retention facilities

a/k/a PONDS

they are NOT amenities but Federally REQUIRED utilities

y'all do have the option of forming a 'special tax district' to pay for the upkeep

There are some HOAs down here that have actually tried creating special tax districts to maintain their flowers and entrance way beautification projects. One local real estate agent who is involved in a lot of the local HOAs got to a county commissioner and tried to get them to place a tax on thousands of homes so that a strip of road in front of subdivisions he was part of the BoD or owned homes would have grass or flowering trees.

My other HOA also used Municipal Service Benefit Units (MSBUs, or temporary local taxes) to pass their pet projects, the reason being they had a lower threshold for passage. The HOA couldn't get a single project passed so they went to the county to set up a MSBU to pay for things like a wall or speed humps. They were able to do these things with less than 20% support of the neighborhood because of how the county tallies votes.

MSBUs are a great tool for homeowners who are not in a HOA but would like to do something for their neighborhood, like walls or special projects that would benefit everyone.

Luckily all my retention ponds and drainage ditches are controlled by the county. When a blockage occurred I called my county commissioner and he got Storms and Drainage out right away. After several months they came back again and replaced a lot of the drainage that ran underneath homeowners driveways - all covered by our tax dollars.

PitA1
Posts: 222

Posted:

Luckily all my retention ponds and drainage ditches are controlled by the county. When a blockage occurred I called my county commissioner and he got Storms and Drainage out right away. After several months they came back again and replaced a lot of the drainage that ran underneath homeowners driveways - all covered by our tax dollars.

I am soooooooo jealous! Sounds like Utopia compared to my HOA's mess!

25+ years of 'why should I pay, I may not be here tomorrow'

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