Transfer HOA from Declarant to HOs

As Developer/Declarant of s/d, we have maintained HOA responsibilities to date; however, ready to turn over to HOs. Several potential problems: HOA has not been formally registered w/SOS. Initial Protective Covenants of S/D address auto membership into HOA by virtue of buying a lot. Covenants also outline much of the By-Law type language such as dues payable, voting rights, majority needed, etc... Now that I want to move this baby to HOs, I will register with SOS, create skeleton By-Laws to jump start their efforts and step away. I have several homeowners that have not paid dues...some are several years old. I feel it's my duty to collect these funds before handing this thing off; however, without the official SOS status, do I have a leg to stand on? Or by virtue of purchase per the covenants (also their deeds are subject to this covenant language), are they required to pay up? Not sure if I've lost leverage by not filing for my status.

Further info...in view of the non-status, I've been careful to only pay for entrance lights, street lights with the HOA dues collected. All taxes on Common Areas, maintenance of entrance, gazebo area, etc... have been paid out of my pocket.

Any thoughts appreciated -
Ann

Ann,

My advice is to change your name and move to a foreign country with no forwarding address.

You sold property with a requirement for the buyers to join an incorporated association that has never existed. You got in a little deeper by collecting assessments in the name of this non-existent entity. Now you are planning to go whole hog and try to collect unpaid assessments using the name of a non-existent corporation. These are not "potential problems." These are real problems that exist right now.

Any sober attorney would have advised you to incorporate the homeowner's association before selling the first lot. You now have a mess on your hands. Your only saving grace is that most homeowners do not know their rights well enough to sue.

That one sentence would have be very concerned if I were in your Association.

It's not your money.
It's the Associations money.

As the trustee (or only Director serving), you might not have had authority to waive assessments (normally, waiving of assessments isn't allowed as the contract, aka CC&Rs or deed restriction, require that members pay them. Unless the CC&Rs authorized you to waive those assessments,you exceeded your authority as a trustee.

Additionally, you likely did a disservice to the members of the Association by keeping the assessments artificially lower then they should have been and the failure to establish a Reserve fund. This will require a hefty increase in assessments.

There are unincorporated HOAs. It's not smart to do that, but they do exist.
I expect that you have a TIN for the Association (otherwise, you wouldn't have been able to open a bank account in the name of the HOA).

My advice, obtain the services of an attorney versed in HOA and corporate law to aid you in transitioning control to the members.

As for reference material on transitioning control, see the following threads:

Subject: HOA transition from developer control to homeowner control 2008 thread

Subject: HOA Transition from developer

Additionally, see:

Best Practices Report #7 - Transition a 55 page pdf document from the Foundation for Community Association Research

Developer/Homeowner Transition: A Guide To Success from Neighborhood link

TRANSITION PLAN a 10 page pdf document developed by an HOA (specifically for their HOA but still good info)

For the future:

Best Practices Reports links to all the reports by the Foundation for Community Association Research