HOA dissolved due to lack of interest

Started by KarL • 20 replies • 2171 views

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KarL (Missouri)
Posts: 19

Posted:

I hope someone can help me.

My friend bought a piece of property in a subdivision a few years back, which transferred ownership to him.

He is the owner of a "common" area, which requires mowing, trash pickup and etc. All of the water from the homes flow into this storm drainage lot.

The articles in the covenants and restrictions state that the owner/developer intends to establish a HOA. (that was in 1986) In 2002 a HOA was formed, but nobody was interested, so it was dissolved due to not sending in an annual report, and lack of interest by the home owners.

The covenant states that the Association, developer or any owner shall have the right to enforce all restrictions. Also to collect a fee of $100.00 per year. It also allows for a temporary trustee to collect the assessments. It runs for a term of 20 years, which will be up in 2021, then automatically extends for 10 year periods.

Since no one wants to be a board member or etc., does he have to try to for another HOA? The covenant & restrictions are very specific, so every one knows and keeps the rules.

Since the owner has to pay for mowing, trash pickup, and etc., is it legal for him to collect the annual dues without forming another HOA, and if necessary put liens on their property?

Or does he have to try to form another HOA in order to legally collect the fees?

Some people have been paying...some not. Currently there is around $10,000 due.

Thanks for you help.

SheliaH (Indiana)
Posts: 6,964

Posted:

Your friend needs to consult an attorney since these are all legal questions (we're not attorneys and don't have access to any of the documents). If the other homeowners aren't interested in forming a HOA, he may be responsible for taking care of this "common area" himself.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

KarL (Missouri)
Posts: 19

Posted:

Thank you for your reply. The property is a storm drain ditch only, with no home on it. It was designed that way for all of the homes. I am wondering if it is ok to collect the fee that was stated in covenants & restrictions to pay for the mowing of it, and keeping it in good repair. The piece of property cannot be used for anything else.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Kafl,

Legal questions indeed.

One thing to point out.

The CC&Rs (deed restrictions) created the Association.
Filing paperwork created a corporation known as Association INC.

The State dissolved the corporation.
It did not dissolve the Association.
The Association is simply dormant.

To dissolve the Association, the CC&Rs must be amended.

Again, something to ask an attorney about.
Once you get the attorney's opinion, then your friend needs to call a neighborhood meeting and explain what is going on.

Options:

A) Get the owners to reactivate the Association with volunteers
B) Petition the court to place the Association under receivership
C) Petition the city/County to take over control of the storm drain and create a special tax district (the development) to pay for it.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By KarL on 06/21/2017 6:51 AM
I hope someone can help me.

My friend bought a piece of property in a subdivision a few years back, which transferred ownership to him.

He is the owner of a "common" area, which requires mowing, trash pickup and etc. All of the water from the homes flow into this storm drainage lot. All of the lots are responible for this common area property expense as defined in your documents. Do you think they are to be provided for FREE?

The articles in the covenants and restrictions state that the owner/developer intends to establish a HOA. (that was in 1986) In 2002 a HOA was formed, but nobody was interested, so it was dissolved due to not sending in an annual report, and lack of interest by the home owners. It is still CCR's attached to the property title. If you do not want an HOA then take the appropriate steps within your CCR' and State Laws to make any change.

The covenant states that the Association, developer or any owner shall have the right to enforce all restrictions. Also to collect a fee of $100.00 per year. It also allows for a temporary trustee to collect the assessments. It runs for a term of 20 years, which will be up in 2021, then automatically extends for 10 year periods. Typical verbiage for most HOA's. LOL ... for what you have already described as far as mowing, trash pickup, etc. I can tell you $100 per year is "DIRT CHEAP"!!! So what is your complaint?

Since no one wants to be a board member or etc., does he have to try to for another HOA? The covenant & restrictions are very specific, so every one knows and keeps the rules. If your friend would like to own a home in an HOA then he will be subject to the CCR's which are attached to and can affect his property. If everyone knows and keep to the rules ... there is little to dispute in future. Also, if he purchased in an HOA he needs to at some point be willing to step up to the plate and serve his term for the benefit of all owners. Yep ... it is all for one and one for all!!!

Since the owner has to pay for mowing, trash pickup, and etc., is it legal for him to collect the annual dues without forming another HOA, and if necessary put liens on their property? Again ... are you stating you should not PAY for these serviced rendered??? There is already an HOA as a Non-Profit corporation already attached to the property title. Any payment to the HOA not paid can have a lien attached.

Or does he have to try to form another HOA in order to legally collect the fees? IMO ... NO

Some people have been paying...some not. Currently there is around $10,000 due. .Potentially those not paid should have a lien attached until in future current..

Thanks for you help.

KarL (Missouri)
Posts: 19

Posted:

Thank you so much. I really appreciated your answers.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Is the $100 collection rate just created from the air? What justifies that each member needs to contribute $100 a year to meet the HOA's bills? A HOA typically is a non-profit. It's to collect enough money in as it pays out. (Simple terms). So the question is: Does the $100 cover the bills divided equally amongst all the owners? If not, then need to change the amount. If it's too much, does not mean a "Refund". It should also be changed to reflect expenses. Otherwise could face paying taxes or more demands on where to spend the "extra" money.

Former HOA President

RichardP13 (California)
Posts: 3,868

Posted:

Quote:

Posted By MelissaP1 on 06/22/2017 2:33 PM
A HOA typically is a non-profit.

Technically, it is a "Not For Profit"

KarL (Missouri)
Posts: 19

Posted:

The $100.00 fee was set years ago. By the CCR rules, it can be raised by 10% per year.
Today this could/ would amount to a fee of $400.00+ per year for each household.

The storm drainage lot is large and must be mowed. He owns this lot as stated in the CCR. It cannot have a house on it.

There is a section that assigns a temporary trustee... that can exercise all powers that an HOA would, including collection of dues and placing liens, if necessary.

He is going to go to each household personally and send out another letter (by mail), asking the home owners if anyone would like to volunteer to be on the board. If not, then he will be the temporary trustee until people show interest.

The homes are very nice, but the entrance is where the catch basin is located. It is ugly. I think that if they put in rock landscaping...like a river snaking through this large lot, landscaped it with low maintenance planting, perhaps a fence, and a Beautiful Sign at the entrance, it would improve their property values immensely. It would also eliminate need for constant mowing and maintenance.

Also, he should not have to do all of this for free. Is there a fair fee that he sould be charging for his services? It looks like placing a lien is very easy to do, if it is necessary. He would not need a lawyer, if he chose to do this. It looks like a HOA billing company's fees and lawyer fees would be overwhelming for this small community. It is only 50-60 homes.

Thanks for your opinions. This board has been like a breath of fresh air.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Do not know if you understand you don't just randomly "lien". Liens for HOA's are for unpaid dues. Since it's not been established anyone actually owes dues or back dues, then liens in the way stated is more like extortion. Pay up or we lien isn't how it's done.

What your wanting to do is more along the lines of a "Special Assessment". Which would collect money amongst all the owners equally to share the cost of the project. Let's say it's going to cost $25K to do the improvements/repairs. If you have 25 owners then each one kicks in $1K a piece. This has to be agreed upon to have the special assessment FIRST.

This does NOT effect anyone's "home values". It effects home "ATTRACTIVENESS". Home values are based on REAL numbers NOT perceptions. Again, I did not buy a house cause I hated the wallpaper. Did that make the house less valuable? No. It just made it less ATTRACTIVE for me to buy.

Seems to me, this is a project the entire neighborhood should take part in. However, the person trying to do this project is taking way too many shortcuts or not understanding the entire process. Which will get one in some serious trouble. If it were me, I would just poll the neighbors to see who would be interested in contributed money, time, or labor to the project. Work with that group of people and get what you get.

Former HOA President

DouglasM6 (Arizona)
Posts: 724

Posted:

Quote:

Posted By KarL on 06/23/2017 1:33 PM

The $100.00 fee was set years ago. By the CCR rules, it can be raised by 10% per year.
Today this could/ would amount to a fee of $400.00+ per year for each household.

The storm drainage lot is large and must be mowed. He owns this lot as stated in the CCR. It cannot have a house on it.

There is a section that assigns a temporary trustee... that can exercise all powers that an HOA would, including collection of dues and placing liens, if necessary.

He is going to go to each household personally and send out another letter (by mail), asking the home owners if anyone would like to volunteer to be on the board. If not, then he will be the temporary trustee until people show interest.

The homes are very nice, but the entrance is where the catch basin is located. It is ugly. I think that if they put in rock landscaping...like a river snaking through this large lot, landscaped it with low maintenance planting, perhaps a fence, and a Beautiful Sign at the entrance, it would improve their property values immensely. It would also eliminate need for constant mowing and maintenance.

Also, he should not have to do all of this for free. Is there a fair fee that he sould be charging for his services? It looks like placing a lien is very easy to do, if it is necessary. He would not need a lawyer, if he chose to do this. It looks like a HOA billing company's fees and lawyer fees would be overwhelming for this small community. It is only 50-60 homes.

Thanks for your opinions. This board has been like a breath of fresh air.

Please explain this statement: "He owns this lot.... it cannot have a house on it"

Does he own a lot that has a house on it AND he is part owner of this lot? Or is he somehow the owner of this lot that sounds like a common area.

If it's a common area, then all of the owners should be responsible for it's up keep. If your friend is the titled owner of this lot, then it's his to maintain.

I'm certain I'm just not following this properly.

You need to establish a board of directors first. However, if your friend has bought into an association that has decided it no longer wants and/or will no longer support a BOD, then it's going to be a long hard battle.

There is nothing easy about liens. You have to be able to prove the money is owed. If there is no treasurer or secretary then I would say there are probably no records. In AZ, the lien is automatically attached tot he deed. When a house is sold the title company verifies all dues and assessments are paid.
Reviving the HOA and collecting dues going forward may be your friends only decision.

KarL (Missouri)
Posts: 19

Posted:

First of all, I would like to thank each one of you for all of the information that you have provided. As you can tell, I am struggling, trying to figure out what the owner can and cannot do.\

I now have more complete information.

The owner does not own a home in the sub-division, only a 3 lot property, which is a common area. The CCR states that he has all rights to enforce rules, bill, and etc. if there is no active HOA.

The lot is a common area and all storm water from the homes run into this area. He has been paying for the billing, hiring it mowed, taxes, & etc (It has to be mowed 2 times a month, and trash pickup, and etc. …$100.00 a year is not much.) This CCR states that this a shared expense to be paid by all home owners.

(Oh…He would not start a project of making the area more attractive unless there was an interest to do so and home owners were willing to pay for it.)

He acquired the property in 2014, and billed all of the home owners $100.00 each year. He billed them in 2014, 2015, and 2016. He is now ready to bill them again for 2017. Each year that they are late, a 10% fee can be added on the balance.

Now they owe about $475.00 per home.

He has only collected $500.00 in total from two home-owners. He is not trying to collect before 2014, (when he did not own the property.) At this point, there are only 2 homes that are in good-standing on their payments.

From 1995 - 2002, the owner acted as a trustee, who collected dues, maintained the common area, and etc. In 2002 a HOA was formed, but was dissolved by 2004 because of no one filed paperwork. …and no one was interested in being a member. It looks like to me, that the Pres. & board members were related to each other? I thought this looked odd?

The CCR agreement says that in this case of an HOA failure, the owner will act as a trustee and perform all duties that a HOA would/could perform, evidently in 2004, the last owner became the trustee, once again. These duties pass to any new owner.

The CCR says that it remains in force until 2021, then will automatically renew for 10 year periods.

I was told that a small group of people formed an HOA so they could get rid of the CCR. A lady went to each homeowner and told them that the HOA no longer exist, as of 2004. I guess she did not read the CCR. It is very specific. She told everyone that they were under no obligation to pay a cent. So no one has, except one person and an out of state real estate company who owns two homes.

I am getting ready to bill for the sub division for the year of 2017. I also want to bill for 2014, 2015, & 2016, including the 10% interest penalty. I will also include a letter explaining what they agreed upon when they bought their homes, and that the current owner is acting as trustee as stated in their CCR.

Does this sound right to you?

Thanks so much to all of you. I am trying to get up to speed on HOA’s. There are only about 50 homes, so getting a lawyer and/or a property manager would be too great of an expense for the owner and the home owners.

If they don’t pay, we should seek a lien against them, right?
Can we learn how to do these ourselves?
Our court system provides forms, but what kind of lien is it?

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By KarL on 07/19/2017 9:39 AM

From 1995 - 2002, the owner acted as a trustee, who collected dues, maintained the common area, and etc. In 2002 a HOA was formed, but was dissolved by 2004 because of no one filed paperwork. …and no one was interested in being a member.

As Tim mentioned upthread, the HOA does not cease to exist because the corporation is deactivated by the state for lack of filing:

Quote:

Posted By TimB4 on 06/21/2017 8:00 AM
Kafl,
The CC&Rs (deed restrictions) created the Association.
Filing paperwork created a corporation known as Association INC.

The State dissolved the corporation.
It did not dissolve the Association.
The Association is simply dormant.

To dissolve the Association, the CC&Rs must be amended.

Quote:

Posted By KarL on 07/19/2017 9:39 AM

I am getting ready to bill for the sub division for the year of 2017. I also want to bill for 2014, 2015, & 2016, including the 10% interest penalty. I will also include a letter explaining what they agreed upon when they bought their homes, and that the current owner is acting as trustee as stated in their CCR.

Does this sound right to you?

Yes, but for past years it shouldn't be a new billing, it should be a statement showing the past due billings.

Quote:

Posted By KarL on 07/19/2017 9:39 AM

Thanks so much to all of you. I am trying to get up to speed on HOA’s. There are only about 50 homes, so getting a lawyer and/or a property manager would be too great of an expense for the owner and the home owners.

If they don’t pay, we should seek a lien against them, right?
Can we learn how to do these ourselves?
Our court system provides forms, but what kind of lien is it?

Once your friend starts filing liens, I would be surprised if none of the 50 owners decides to lawyer up and potentially sue your friend. It would be a lot better if your friend spends a few hundred on legal advice now to do things right than much more to clean up a mess later.

Escaped former treasurer and director of a self managed association.

DouglasM6 (Arizona)
Posts: 724

Posted:

How did he "acquire" the property? If it's no longer a common area, then he cannot charge the other homeowners for the maintenance.

I would check with the county assessor's office to see who is listed as the owner of that parcel.

It really sounds like your friend is becoming the BOD of the association. If so, he better get some legal advice and do it right. To go up against a neighborhood full of apathetic residents is no easy task.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Karl

Why did he buy such a piece of property?

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By JohnC46 on 07/19/2017 5:47 PM
Karl
Why did he buy such a piece of property?

If I had to take a wild guess, I would say he probably bought it a tax deed sale, for what reason, I don't know. Maybe he is hoping to make money by taking in more in dues than he is paying to maintain. Or maybe he had no clue and thought he could build on it and then found out after the fact that he couldn't.

Luckily in my area common areas have an assessed value of $100 and the resulting property taxes are waived because the amount is below some threshold.

Escaped former treasurer and director of a self managed association.

SueW6 (Michigan)
Posts: 814

Posted:

"He owns this lot as stated in the CCR."

So someone sold this property to him? H-m-m-m- wonder who did that.

Does he have a deed to the property?

I'd say he bought an ugly lot, is the sole owner, and now is stuck with it.

Buyer Beware, as they say.

DouglasM6 (Arizona)
Posts: 724

Posted:

Since we're guessing, I'm going to guess that he is "part owner" of the lot since he is part of the association. He may simply be trying to get the common area cleaned up. maybe his house is the first one that will flood if this is not taken care of.

RobertP27 (Florida)
Posts: 11

Posted:

The operative word here is EASEMENT!

JanetB2 (Colorado)
Posts: 4,219

Posted:

He needs to talk to an attorney ... because If he purchased a "common area" lot previously owned by the Association, then the Association potentially gave up any and all rights to said "common area" and therefore would it potentially no longer be a part of the association? I would say an attorney needs to look at the documents and State Laws. It would be an interesting question to have answered

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