only the developer wants/needs the HOA to be incorporated

Thanks for the help with the tax questions. Now I have another question – annual corporate paperwork hasn’t been filed for many years. When discussing it, a board member suggested the developers incorporate to avoid risk during construction, but once the developer is gone there isn’t a reason to keep up the corporation, so most HOAs don’t.

Doing a bit of googling, I found this: https://www.dailyrepublic.com/all-dr-news/wires/business/does-a-hoa-need-to-be-incorporated/
(quote from link)
No, I guess an HOA doesn’t technically need to be incorporated.

If the C,C&Rs lay out the existence of the HOA, and each homeowner’s deed requires the homeowner to adhere to the C,C&Rs, then it’s
possible to have a defacto association that operates without the benefit of the corporate structure or protections. But I can’t
imagine why anyone would want to do so.

Without being a corporation, what you’re left with is one big partnership. That means each homeowner is individually liable for
anything the HOA does. If an employee, for example, sues the HOA for back pay or sexual harassment or discrimination, then every
homeowner is equally liable as if they had been the employer. That’s because, just like in any business partnership, they are.
That’s the nature of partnerships. Everybody is responsible for every other partner’s actions.

If I were you I would look closely at the C,C&Rs and see if they don’t require the HOA to be incorporated. My hunch is they do.

If so, ultimately, the homeowners can sue the officers to make them incorporate.
(end of quote)

According to what I'm finding online, we all are likely exposed to liability, and the covanent's statement that we're all freed from liabilty might not be worth anything.

Who's correct?

BTW, our covenants Article 1 Section 1.01 says our HOA is required to be incorporated:
"The "Association" shall be organized as a nonprofit corporation for a perpetual term under the laws of the State of Kansas."

Thanks! I'll try to find records with the state.

I'm pretty sure it was incorporated at one time. I have a copy of the articles of incorporation, bylaws, and covenants.

https://www.kansas.gov/bess/flow/main?execution=e2s3

I've never heard of "most HOAs" deciding not to remain incorporated. That's silly. That means the individual board members can be sued for anything that the HOA (as an unincorporated association) did, and they'd be liable much more so than if the HOA were incorporated.

As I understand it, the corpoaration was for all of "Green Valley Homeowner's Association". The subdivision went in by various stages, and my HOA is "Green Valley 4th". I'm just guessing here, but it appears to me that the developer set up one corporation for all of the "Green Valley" developments, but then established separate HOAs (boards, covanents, etc) for each subdivision.

For example, our's (4th), owns no longer owns any common property, has vitually no expenses, and our dues are $20 a year.
There are a couple pools in other parts of Green Valley. Their dues are much higher dues.

Each subdivision of Green Valley has its own board, covenants, enforcement actions, etc.

The ones with the pools are spending some real money and having real liability. I'm shocked that they don't have a legit corporation (or maybe there was a separate corporation created for them later, they are newer than us).

But regarding GV 4 not being on top of things, that's no surprise.

It sounds like your HOA has what I call a "Mothership". You may have a "Master" HOA of which everyone else is a sub to that. That "Master" HOA may be incorporated. It's hard to tell. You all may fall under this umbrella.

The state is usually where you would know for sure if incorporated or not. HOA's tend to be non-profit but NOT charitable ones. So if your HOA isn't make a profit not much to report.

You can't just decide to disband a HOA by getting rid of it's board. There's more to it than that. So I would ask a real attorney more familiar with corporate or HOA law. You don't need a Real Estate lawyer. They may be able to give the proper advice than someone on the web.

MelissaP1 - I believe it is the "mothership" who's status is forfeited. The Articles of Incorporation we all have is for "Green Valley Homeowners Association" it says nothing of being the 4th edition.

About disolving, the articles states:
The association my be disolved with the ascent given in writing and signed by not less than two-thirds (2/3) of each class of members. Upon disolution of the association, other than incident to a merger or consolidation the assets of the Association shall be dedicated to an appropriate public agency to be used purposes similar to those for which this Association was created. In the event that such dedication is refused acceptance, such assets shall be granted, conveyed, and assigned to any non-profit corporation, association, trust, or other organization devoted to such similar purposes.

In the articles, by-laws, and covenants, that is the only commentary on disolving.

Can a subdivision under the "mother ship" disolve using this process, without disolving the mothership?

JoeB20, why not just re-file your deed without restrictions?

The HOA is now not a corporation. Its corporate status was forfeited. It's unclear if the HOA would need to go through the voluntary dissolution process in the governing documents because its charter was involuntarily forfeited. (The voluntary dissolution process in the governing documents is, to be inelegant and offensive in my description, like corporate suicide, but your HOA was murdered.)

If I were you I'd jump at the chance to refile your deed. Talk to the lawyer about doing it and also talk to a title company about doing it.

People may balk at refiling your deed without restrictions but I believe that the HOA has no authority to enforce any rule whatsoever since its charter was forfeitures. So the HOA can’t do anything about it if you do refile your deed.

How exactly do you re-file a deed without restrictions?

I can only assume the the original CC&Rs for the entire development were filed prior to your lot being sold. How does one remove a constraint without going through the steps prescribed?

If you sell you house, is this self-removal something that would need to be disclosed? How would that affect a potential buyer's attitude?

JoeB20, I'm not a real estate lawyer, but I would think that including some kind of official confirmation of the HOA's forfeiture of its charter, as part of the deed documentation that is filed, would be helpful. For example, you could order a "good standing certificate" from the Secretary of State. This is an official document that shows that the HOA is valid and existing. Since it forfeited its charter, the Secretary of State wouldn't give a "good standing certificate", but it would in its place perhaps give a certification that the charter has been forfeited. I would include something like that in your deed filing, as proof that the HOA is "dead" and can't enforce any restrictions against you.

A bit too cavalier for me. If I was a potential buyer, and you said "oh, you don't have to be concerned about that," I don't think I would make an offer on the house.

In this thread, I see too much discussion about the legitimacy of the corporate entity, and not enough about the covenants that potentially bind your association. Even if the corporation loses status, the restrictions can still bind the owners to each other.

The CC&Rs are restrictions that every purchaser can claim a right to enforce at some time in the future so long as the covenants still apply to the property.

If you have that many people ready to bail on the CC&Rs, then why not go through the formal process of having the appropriate % or owners sign the necessary documents to dissolve?

No matter how you slice it, I think you can run into problems if you attempt to self-remove restrictions. Just my 2 cents.

Here is a link to several attorneys commenting on an HOA's ability to enforce when when the corporation is forfeited:
https://www.avvo.com/legal-answers/does-an-hoa--cease-to-exists--following-the-forfei-1800101.html

Note the last response (saying they can't enforce in that situation), which got a thumbs up from another attorney.

That discussion is specific to Texas, so it doesn't help me specifically, but is an interesting datapoint for the general legal principles involved.

I think that the legal issue then is:

If a HOA has forfeited its charter:

* Can the HOA itself enforce restrictions, including, without limitation, restrictions that on land use?

The answer is likely NO.

* Can individual persons who are members of the HOA enforce restrictions?

I would think that the answer is no unless the governing documents give individual members the right to stand in place of the HOA and enforce its rules. I'd be surprised if the HOA had given individual owners rights to do so.

So, original poster: if you want to try to escape restrictions of the HOA, applicable to your deed or otherwise, now's the time.

Well, NpS (aka Albert Einstein), then tell me who can enforce the restrictions set forth in the documents that affect the land? Neither the HOA itself nor individual owners can. The government won't care.

And, Albert Einstein, as I know (do you?), to make a derivative action (which is an action on behalf of a corporation) first requires making a demand on a corporation. Only then can an individual proceed with an action on behalf of the corporation.

Here, though, there is no corporation to make a derivative action against, and no corporation on whose behalf an owner can proceed with an action.

So your arguments are as sharp as those of the board member who made the claims in the OP's first post.

So when the corporation is gone, so are its rights.

Joe
To be on the safe side, you might want to talk with a title company about it. Probably won't cost you anything for the conversation.

Best of luck.

And to add:

If forfeiture of a charter of a corporation results in nobody having rights under the corporation's governing documents, then it doesn't matter what's on file with the land registry, and those references to the CC&Rs and the like would be irrelevant.

Only if forfeiture of a charter terminates only the HOA's rights under its governing documents, but not the enforcement rights of a third party, would the CC&R references be relevant.

Also, since the HOA forfeited its charter around 2000, arguably anyone who bought into the HOA-governed properties might not be deemed to be a member of the HOA, and thus unable to enforce the CC&Rs.

I don't know the answers to these questions but it's the analysis that I'd do.

NpS:

I've stated many times that I am NOT a real estate lawyer. Plus, it's been made clear that this is NOT legal advice. Only someone without common sense would think otherwise.

You're the one who is not thinking analytically here. In your view, if someone files something with a land registry, even if the person is defunct and has no rights whatsoever, in your view, the filing still matters. You're looking at form over substance and are not thinking logically. So would a racist long-gone property developer who put nonsense in deeds in the 1930s still be able to enforce them? In your view, yes.

Your claims about derivative actions show know knowledge whatsoever of how derivative actions work, or even what they are (they're based on rights derived from a corporation--thus the name).

Your claims also show little knowledge of people buying into HOAs. Plenty of people don't want them but buy into them because the purchase comes subject to them.

Finally, I checked the governing documents for 3 HOAs where I have properties and none of them allow individual members of the HOA to enforce the restrictions.

So you can take your claims of "common sense" and try to get some of that.

Also, NpS: you base many of your claims on "common sense".

As you should know, "common sense" to one person is nonsense to another.

What matters for anything legal are the actual words on a page (of a filing, a statute, a contract or the like). Not one person's view of "common sense".

For example, you state why you think people want HOAs--in, of all things, a thread by someone who's trying to get out of being bound by a HOA. Common sense?

Here is my tentative list of questions for an attorney. Hopefully the attorney and I can run through most of them without spending an hour on each, and then have general discussion on options.

Am I missing anything from this list?

1) Confirm we have no protection from liability while the corporation is forfeited (for the board & members)
2) Can I refile my deed/title without conditions since corporation is forfeited? What extra documentation can/should we include beyond what the title company may require (e.g. documenting forfeited status)?
3) If I did get the deed refiled, and the HOA sued, does title insurance paid on the reissuance of the deed cover it? Or does my umbrella insurance?
4) Can HOA enforce articles/by-laws/CC&R while its corporation is forfeited?
5) Since the charter has been forfeited, do persons other than the corporation who were given rights under its governing documents still have them? (i.e. can residents take enforcement action)
6) What legal action can I take to force HOA to clean up taxes, corporate status, etc? Cost? What would that procedure look like? If pursued, this would be a strategy to force the HOA into costs it cannot afford for the purpose of forcing dissolution. Is this a viable strategy?
7) If the articles are for the GV overall, can dissolution be specific to GV4?
8) Specific process for dissolution? One sentence in articles seems to govern, right? It appears that the additional restrictions are for disposing of assets (i.e. just a problem for the board while winding it down, with no impact on the decision to dissolve – right?) What about recording? Then what, refile deed? What about residents who don’t refile deed?
9) Any conflict of interest concerns regarding me trying to dissolve it? (e.g. don’t say anything that could be construed as trying to scare people while taking signatures to dissolve)
10) May I generally assume as long as I do not act maliciously, any liability I incur in this activity will be covered by my umbrella liability insurance?
11) CC&R Section 11.01 says:
Covenants Running With the Land. The covenants and restrictions of this Declaration shall run with and bind the land for a term of twenty (20) years from the date this Declaration is recorded, after which time they shall be automatically extended for successive periods of ten ( 10) years.

>>since the corporation was forfeited when the 20 years passed, did it still automatically extend? (or can we declare it invalid on the grounds it did not extend?)
12) Can anyone (me?) reincorporate the HOA? What would that look like? Is it for all of GV, or just GV4?
13) The HOA cannot directly contact tenants for enforcement actions, true? Can the landlord sue for interference if the HOA does?
14) Since I bought after the HOA corporation was forfeited, must I be a member? Is there an angle of attack here?

JoeB20, I just saw your list of questions. They're good. It might be worth checking with the title company first since the title company may be able to answer your questions about the deed filing (such as if you can file a deed with no restrictions, and with an official record from the Secretary of State that the HOA forfeited its charter included). That way, you can have those questions cleared out first and the lawyer wouldn't need to be spend time on them. The lawyer might not know the deed-specific questions anyway.

From PA's Uniform Planned Community Act (UPCA):

§ 5201. Creation of planned community

A planned community may be created pursuant to this subpart only by recording a declaration executed in the same manner as a deed by all persons whose interests in the real estate will be conveyed to unit owners and by every lessor of a lease, the expiration or termination of which will terminate the planned community or reduce its size. ... The declaration must be recorded in every county in which any portion of the planned community is located, must be indexed in the same records as are notarized for the recording of a deed and shall identify each declarant as the grantor and the name of the planned community as grantee.

§ 5220. Termination of planned community

(A) NUMBER OF VOTES REQUIRED.-- ... a planned community may be terminated only by agreement of unit owners of units to which at least 80%, or such larger percentage specified in the declaration, of the votes in the association are allocated. ...

(B) EXECUTION AND RECORDING AGREEMENT AND RATIFICATIONS.-- An agreement to terminate must be evidenced by the execution or ratification of a termination agreement, in the same manner as a deed, by the requisite number of unit owners who are owners of record as of the date preceding the date of recording of the termination agreement. ...

While PA's version might be a bit different than yours, if yours is based on the UPCA, it should be similar.

Two things are notable:

1. Nowhere does it say that these laws only apply to a corporation. It speaks in the language of "all persons" which can mean a corporation or any other entity (like a partnership or cooperative) or an actual person.

2. The only way to create an HOA or to terminate an HOA is with the filing of the appropriate documents "in the same manner as a deed." The requirements are spelled out.

As I have been saying all along, this is a title issue, not a corporate issue.

Joe, you might learn a lot by speaking with a title company.

John, I think Joe is now in a better position to pursue viable and safe options. I have no desire to engage in a pissing contest. I'm done.

And, NpS, overlooking the corporate aspects of this- that the HOA forfeited its charter- is overlooking a critical aspect of the analysis. Obviously the fact that the HOA is “void” is important.

JoeB20, please let us know how this turns out.

Joe,

You are confusing incorporation versus 'existence'.

You have Covenants and Restrictions 'attached' to your deed. These 'run with the land'.

Said CCRs reference a HOA.

Most HOAs are incorporated else no 'corporate shield' for their membership.

Even if corporate status is 'lost' the HOA may, or may not, still exist.

Even if the HOA no longer exists the CCRS will remain UNLESS y'all obtain 100% agreement to abolish same from ALL HOMES REFERENCED.

The CCRs themselves will definition of membership in the HOA.

You need COMPETENT legal advice, not internet babbling.

JohnS111 - yes, I'll update you as I learn more.

NpS - A couple days ago I read the Kansas Homeowners Bill Of Rights, but I had not found that summary doc. Thanks for that, its shorter and more to the point.

RoyalP - the articles of incorporation state that written ascent given by 2/3 of the members can disolve it. I can find no higher threshold required by KS law. Why do you say 100% agreement is required? Am I missing something?