Changing a HOA to a NA or other?

Started by LeslieB3 • 7 replies • 1948 views

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LeslieB3 (Texas)
Posts: 11

Posted:

Hi! I have a meeting on August 12 to present the "State of the HOA" to our community here in Texas. Since we are a Voluntary/non mandatory HOA we are having a heck of a time bringing in enough memberships to take care of our 3 acres of land with swimming pool and tennis/basketball court. As you know HOA's are limited in streams of revenue other than memberships.

Since I've looked for this situation on google and can't find anything, I thought I'd ask here if anyone knows if there is another business entity like a NA (Neighborhood Association) that might be easier to fund or run than an HOA?

Our original Articles Of Incorporation were very limited to just running a pool and tennis courts so we need some more flexibility to attract members, especially since the mentioned pool and tennis courts are falling apart. However we were dissolved as a corporation by the State of Texas and now operate as a non incorporated HOA so I'm not even sure if we are bound by the original AOI? Such a mess!

The other option is to shut down the HOA and sell/divest/donate the land but I'd really hate to see it go.

Thoughts?

TimB4 (Tennessee)
Posts: 21,062

Posted:

Leslie,

It has been a couple of months since you first brought this issue to the forum. I suspect that little has changed in that time frame.

Business entities are business entities and regardless of what they are called, would still be ran similar. A Board of Directors (or the owner) makes the major decisions. The Officers of the company implement those decisions.

I would urge you to reestablish your corporate status. Otherwise, there is no corporate shield to protect the members from any litigation. Being administratively dissolved is normally due to failure to file annual reports (which are typically just naming the Directors and Officers of the corporation - perhaps also including a financial report) along with the filing fee. This can be easily corrected providing it's done within the a specific time frame (check with your State corporation commission to identify that time frame).

As for ways to increase funds, you may want to contact day care providers and see if they would be interested in utilizing the facility one day a week or so for a special fee.

As for the flexibility, what type of flexibility are you looking for?
Articles of Incorporation can always be amended but, if they are tied to authority granted by deed restrictions, you may be limited on what amendments can be made.

LeslieB3 (Texas)
Posts: 11

Posted:

Hi Tim and thanks for the reply.

We are looking into these options:

1) Continue as is and hope for the best which will not bode well historically
2) Re-invent ourselves as another entity, one which may have more options for revenue including possibly for profit
3) Closing down and calling it quits

There are no viable fast or easy revenue sources from the pool or property as is as it is basically unusable without a substantial investment. We seriously doubt the pool will pass city inspection without massive repair and we have no one at the moment who even knows how to run the pumps.

We are not interested in reincorporation as frankly it gives us no benefits that would bring in money and would open the ugly can of worms of possible past non filed 1120's. That will have to be addressed but we'd like to have a better idea of what our next step is before we go there.

So just curious to see if anyone has heard of a HOA changing it's business structure to continue as a viable community organization.

Thanks

GlenL (Ohio)
Posts: 5,491

Posted:

Leslie, I've never heard of it but it may be a question best answered by an attorney versed TX property law. In most cases it is tied to the deed and the language in the deed as to what can be done to the property. Since your corporate status has lapsed, does your property have any insurance and if so in who's name is it in? The reason I ask is that pool, the one you say you don't think will pass inspection is what they call an attractive nuisance and if someone, say a teenager were to climb the fence and become injured or killed, all of the property owners could be on the hook for it.

From what you described in both of your posts, it seems time to have a "Come to Jesus" meeting with all of the homeowners. If you don't have the funds to maintain the pool, then it is time to close it and fill it in, same with the tennis/basketball courts. That way you can enjoy the property such as it is or an even better option, depending on the deeds may be to sell out to a developer, take the money if any and run.

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

LeslieB3 (Texas)
Posts: 11

Posted:

Thanks for the reply.

I've looked through the CCRs and there is no mention of the HOA since it was formed as non-mandatory and the voting on HOA matters comes from the membership, not the community BUT we want the community to have one last - as you said - Come to Jesus meeting so they don't freak when something like filling in the pool happens or we sell the property.

I have found that many people who were members in the past still feel they have a say in what's going on today even though they are not currently members.

However, if we do fill in the pool then my question is do we want to stay an HOA or form a NA and merge. We can form new documents that include community based activities not contingent on the pool or tennis courts although we could probably do that now as an HOA I know that many people have never felt comfortable with the term HOA since it usually is associated with a mandatory system.

Any way you slice it though someone has to come up with some money as we currently have about $150.00 left in the bank!

LeslieB3 (Texas)
Posts: 11

Posted:

Oh and to clarify: the deed only outlines the property lines - some kind of survey code, but the terms of selling the property are in the original Articles of Incorporation and we do have the right to sell-divest-donate the property. Of course this would have to be checked over by a lawyer, wonder how many hot dogs one has to sell to cover that cost?

Thanks

GlenL (Ohio)
Posts: 5,491

Posted:

The original AIC which one could argue are now invalid since the Corporation they empower to act has been administratively dissolved for ten years. Usually the AIC will name the specific corporation that is to be formed i.e. The Happy Daze Social Club, inc., now if someone really wanted to mess with you they could form a corporation, name it the same as yours and really screw things up. And if you don't think it can happen, there was a poster here a year or so ago that discovered the HOA corporation was AD and claimed the name just to screw with them since they were in a dispute.

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

LeslieB3 (Texas)
Posts: 11

Posted:

In Texas as far as I understand we have standing as an unincorporated HOA and I did get to ask a Texas HOA Lawyer if we still had the rights to the deed and we do.

On the other hand if they wanted to go through all that for this mess, well I guess the community gets what they deserve!

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