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Can a private homeowner petition a court send an HOA into receivership?

Started by MichaelT21 • 9 replies • 452 views

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MichaelT21 (Arkansas)
Posts: 462
Posted:
I'm wondering if a private homeowner, who lives in a community with an inept HOA, can petition a court to send the HOA into receivership?

I think I should have done this with our HOA years ago. The previous board was failing to properly execute projects, failing to maintain the property, and consistently refused to send delinquent accounts to collections. While you can't change the past, I'm wondering if I could have tried to have a court send the HOA into receivership as a member of the HOA?
DouglasK1 (Florida)
Posts: 2,046
Posted:
Sure, who else would do it? Receivership is often called for when there is no functioning board.
Escaped former treasurer and director of a self managed association.
MaxB4
Posts: 3,513
Posted:
Quote:
Posted By MichaelT21 on 10/27/2022 12:08 PM
I'm wondering if a private homeowner, who lives in a community with an inept HOA, can petition a court to send the HOA into receivership?

I think I should have done this with our HOA years ago. The previous board was failing to properly execute projects, failing to maintain the property, and consistently refused to send delinquent accounts to collections. While you can't change the past, I'm wondering if I could have tried to have a court send the HOA into receivership as a member of the HOA?

You can still do it!
AugustinD
Posts: 1,027
Posted:
For the state of Washington, I think a private homeowner can petition the court to send a HOA into receivership. I do not see this discussed in the Washington HOA statute. Instead, I think this statute explains the private homeowner's rights: RCW 7.60.025, especially section (1) (a). The private homeowner would be the party with "a probable right to or interest in property that is a subject of the [petition for receivership]."

See https://app.leg.wa.gov/RCW/default.aspx?cite=7.60.025

(Nationwide I believe it's universally acknowledged that statutes provide thusly.)

AugustinD
Posts: 1,027
Posted:
Quote:
Posted By MichaelT21 on 10/27/2022 12:08 PM
The previous board was failing to properly execute projects, failing to maintain the property, and consistently refused to send delinquent accounts to collections. While you can't change the past, I'm wondering if I could have tried to have a court send the HOA into receivership as a member of the HOA?
Some to all of what you describe may not be enough for a court to agree to receivership. Maybe especially if no debts are owed to any vendor. In other words, if the board gets lawfuly re-elected year after year, then this is the owners saying they do not want to spend money on the place. Nor is a board required to send delinquent accounts to "collections," as you call it.
MichaelT21 (Arkansas)
Posts: 462
Posted:
Quote:
Posted By AugustinD on 10/27/2022 12:30 PM
Posted By MichaelT21 on 10/27/2022 12:08 PM
The previous board was failing to properly execute projects, failing to maintain the property, and consistently refused to send delinquent accounts to collections. While you can't change the past, I'm wondering if I could have tried to have a court send the HOA into receivership as a member of the HOA?
Some to all of what you describe may not be enough for a court to agree to receivership. Maybe especially if no debts are owed to any vendor. In other words, if the board gets lawfuly re-elected year after year, then this is the owners saying they do not want to spend money on the place. Nor is a board required to send delinquent accounts to "collections," as you call it.

I call it collections, but I mean legal attorneys. Ours first pursue collections and then file foreclosure lawsuits.

We had over $50,000 owed to the HOA because the previous refused to pursue foreclosure lawsuits. One homeowner hadn't paid dues in the entire time since she moved in, which at the time was 9 years! Isn't this grounds for having a court-appointed receiver handle the affairs of the assocation?

With regards to maintenance, isn't there a requirement that the parks be maintained to avoid safety hazards and potential lawsuits? I think that negligently failing to maintain property would be grounds for receivership. If they don't want to do their job, the court can find someone who will.

In reality, the threat of receivership wouldn't be for actual receivership. Just a way to get the Boards attention (by holding a community wide Zoom meeting) to point out that they need to do their jobs or the court will find someone who will.

Of course, this is all the past....I do own 60 acres of vacant land with no HOA that I plan to retire on, so probably will never deal with a derelict HOA Board again.
AugustinD
Posts: 1,027
Posted:
Quote:
Posted By MichaelT21 on 10/27/2022 12:36 PM
We had over $50,000 owed to the HOA because the previous refused to pursue foreclosure lawsuits. One homeowner hadn't paid dues in the entire time since she moved in, which at the time was 9 years! Isn't this grounds for having a court-appointed receiver handle the affairs of the assocation?
If either the covenants provide for an 'automatic lien' or the HOA placed liens, then I think your argument would not be enough. Why? Because I think many boards figure they get the money (every cent) when the house goes up for sale. And they're right. Why have to deal with attorneys, collection agencies and the courts? So will the boards argue when you petition for receivership on this point.
Quote:
With regards to maintenance, isn't there a requirement that the parks be maintained to avoid safety hazards and potential lawsuits?
I think the correct way to address this is more appropriately (compared to petitioning for receivership) by suing the HOA for failure to comply with the covenants.
Quote:
In reality, the threat of receivership wouldn't be for actual receivership. Just a way to get the Boards attention (by holding a community wide Zoom meeting) to point out that they need to do their jobs or the court will find someone who will.
This is one strategy to employ. You would have to spend money on an attorney in my opinion (if only to protect yourself from even more costs), but sure, this might get the board moving.

Of course, as we say all the time around here, competent HOA/COA attorneys say the best and easiest way to cause change is to change the board. Granted it's not "easy." It's just easier than suing. And the courts know it, IMO.
Quote:
Of course, this is all the past....I do own 60 acres of vacant land with no HOA that I plan to retire on, so probably will never deal with a derelict HOA Board again.
Your preference is the preference of like everyone here, isn't it? Reading this forum keeps me from ever considering a HOA/COA again.
LetA (Nevada)
Posts: 2,679
Posted:
Why would you want to do it? Just sign the nomination form to become a board member.
A receivership is just giving the receiver a blank check to do whatever whenever and constant raised of assessments.
CathyA3 (Ohio)
Posts: 6,299
Posted:
I agree with LetA. Receivership is an *expensive* necessity for associations that can't form a functioning board. Receivers are well paid and can earn more per hour than attorneys do. They answer to the courts, not the homeowners - and why not, if the homeowners knew what they were doing, they wouldn't have gotten themselves into this mess. Among other things, receivers will set assessments at whatever level they believe is necessary, and it's not unusual for assessments to double.

In addition, if you're planning to sell your home any time soon, receivership is bad news. Nobody in their right mind would want to buy in this community, and the banks may refuse to lend to potential buyers. This can make the community vulnerable to investors who like to snap up distressed properties and who can often afford to pay cash.

And when all is said and done, after the receiver rights the ship, the homeowners are still going to have to elect a functioning board if they want this painful state of affairs to end. You may as well have a "come to Jesus" meeting with your neighbors and see if y'all can't act responsibly before you spend all that money.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Quote:
Posted By CathyA3 on 10/28/2022 7:05 AM
I agree with LetA. Receivership is an *expensive* necessity for associations that can't form a functioning board. Receivers are well paid and can earn more per hour than attorneys do. They answer to the courts, not the homeowners - and why not, if the homeowners knew what they were doing, they wouldn't have gotten themselves into this mess. Among other things, receivers will set assessments at whatever level they believe is necessary, and it's not unusual for assessments to double.

In addition, if you're planning to sell your home any time soon, receivership is bad news. Nobody in their right mind would want to buy in this community, and the banks may refuse to lend to potential buyers. This can make the community vulnerable to investors who like to snap up distressed properties and who can often afford to pay cash.

And when all is said and done, after the receiver rights the ship, the homeowners are still going to have to elect a functioning board if they want this painful state of affairs to end. You may as well have a "come to Jesus" meeting with your neighbors and see if y'all can't act responsibly before you spend all that money.

Well said.

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