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HOA Corporation Suspended. Do we have to pay HOA dues?

Started by JasonP7 • 13 replies • 549 views

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JasonP7 (California)
Posts: 26
Posted:
I am just learning that our HOA Corporate status with the state of CA has been suspended for the last 8 years due to a failure to file Statements of Information. I have also read that if an HOA is a suspended corporation, it loses the right to enforce contracts.

Does anyone know if this mean members do not have to pay HOA dues until the suspension is over?

Thank you.
SheliaH (Indiana)
Posts: 6,964
Posted:
That's a legal question that you should run past your own attorney- you really don't want to rely on whatever you hear from the internet.

Your HOA'S status may be suspended, but there's the matter of common areas that must be cared for and that costs money. If someone were to get injured on the common area and there's no corporate structure, that puts the assets of EVERY homeowner, including you, at risk if there's a lawsuit. Not paying assessments would be the least of your problems if that happens.

What have you and your neighbors been doing for the last 8 years? Were you paying assessments all this time and do you know where the money went? Who filed tax returns? When you you found this out, did you talk to the board (assuming there is one?)

It may be a matter of paperwork being filed to fix this, so if all of you would rather go without one, you need to dissolve correctly and determine what will happen to the common area because someone or someone will have to take care of it. You also need to see what happens to the CCRs. CCRs can be enforced by one homeowner against another, so do they also go away or do you get a free for all?

Sorry to burst your bubble, but life isn't always as simple as we'd like. Hope this works out for you, whatever that is.
If it is not right do not do it; if it is not true do not say it. Marcus Aurelius
CathyA3 (Ohio)
Posts: 6,299
Posted:
Your *corporate status* has been suspended. Your HOA has not unless your CC&Rs say that they expire after some number of years.

What this means for you personally, among other things, is that your common areas, if any, are not insured. If anyone is injured and sues your HOA, homeowners are personally liable for any judgement. If you still have a board, they do not have directors and officers insurance, meaning they're also personally liable. Any financial assets are not protected by fidelity/employee dishonesty insurance (this is what makes you whole if somebody embezzles.

Not good. No board member who knows what they're doing allows such a thing to happen, since everybody's personal assets are at risk. It would be in everyone's best interest if you'd give these folks a heads up because your community is performing without a net or harness.

Fortunately, re-instating your corporate status is usually just a matter of re-filing and paying a few bucks. In my state, we can do this on the Secretary of State's web site.

Since your HOA hasn't gone away, homeowners still have the same rights and obligations that they did before. That includes paying assessments.
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By JasonP7 on 05/30/2023 8:41 PM
I am just learning that our HOA Corporate status with the state of CA has been suspended for the last 8 years due to a failure to file Statements of Information. I have also read that if an HOA is a suspended corporation, it loses the right to enforce contracts.

Does anyone know if this mean members do not have to pay HOA dues until the suspension is over?
I agree that a suspension by the Secretary of State translates to the HOA not being able to enforce contracts.

As for dues not paid during the suspension, I would bet that, after the HOA is re-instated or revived, the HOA has the right to collect these back dues. See https://www.davis-stirling.com/HOME/S/Suspended-Corporation, and especially the Peacock Hills lawsuit discussion.

Suspended or not, unless they are itching for a fight, I advise owners to keep paying their dues.
DouglasK1 (Florida)
Posts: 2,046
Posted:
Quote:
Posted By SheliaH on 05/31/2023 3:59 AM
What have you and your neighbors been doing for the last 8 years? Were you paying assessments all this time and do you know where the money went? Who filed tax returns? When you you found this out, did you talk to the board (assuming there is one?)

In the absence of detail from the OP, my assumption would be that there is a board and they are operating as a board typically would, assessing dues and paying bills. They've just dropped the ball on the corporate filing.

Jason, as has been mentioned, the association and requirement to pay dues is created by the CCRs, which still exist whether the corporation registration is active with the state or not.
Escaped former treasurer and director of a self managed association.
LizD3 (California)
Posts: 200
Posted:
Found this:

"When a corporation is suspended, it has lost all rights and privileges as a corporation and cannot legally operate. In that regard, technically a suspended corporation is required to close its business and stop all business related activity. Moreover, a suspended corporation cannot sue or defend any action in court. Furthermore, a suspended corporation that provides a service, or goods, to third parties while suspended may not be able to collect payment for such services or goods since the suspended corporation technically was not permitted to engage in any business transactions."

Found it here: https://www.calassoc-hoa.com/HOA-Corporation-organization-Administration.aspx

I have no idea if this is a good source.

good luck.
JasonP7 (California)
Posts: 26
Posted:
Thank you everyone for all the info. It has been very helpful.
JohnC46 (South Carolina)
Posts: 14,265
Posted:
Quote:
Posted By DouglasK1 on 05/31/2023 6:45 AM
Posted By SheliaH on 05/31/2023 3:59 AM
What have you and your neighbors been doing for the last 8 years? Were you paying assessments all this time and do you know where the money went? Who filed tax returns? When you you found this out, did you talk to the board (assuming there is one?)


In the absence of detail from the OP, my assumption would be that there is a board and they are operating as a board typically would, assessing dues and paying bills. They've just dropped the ball on the corporate filing.

Jason, as has been mentioned, the association and requirement to pay dues is created by the CCRs, which still exist whether the corporation registration is active with the state or not.

I agree.
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By LizD3 on 05/31/2023 10:17 AM
Found this:

"[snippage by ElleN] a suspended corporation cannot sue or defend any action in court. [snippage by ElleN]"

Found it here: https://www.calassoc-hoa.com/HOA-Corporation-organization-Administration.aspx
Sounds right to me, with one huge caveat: Once the corporation becomes revitalized, off to court it goes to see about collecting assessments owed while it was suspended.

To me: The contract that the covenants are cannot be enforced by a court while suspended. But I do not think this means the contract (covenants) go away. That would require a vote to amend or terminate, wouldn't it? No vote, no termination.
TerriS6 (California)
Posts: 3,284
Posted:
To be safe, you can pay the assessments "under protest." Civil code section 5658.
DeanJ
Posts: 1,786
Posted:
Does an HOA in your state have to be incorporated?
ElleN (Idaho)
Posts: 4,420
Posted:
Quote:
Posted By DeanJ on 06/01/2023 1:59 AM
Does an HOA in your state have to be incorporated?
I see California statutes permit California HOAs to be either incorporated or unincorporated. See https://www.davis-stirling.com/HOME/U/Unincorporated .

I think readers might want to take note of all the rights that California statutes give to unincorporated HOAs.

For me this begs the question: Does a suspended California HOA corporation have the same rights as a California HOA that was never incorporated? Per https://www.davis-stirling.com/HOME/S/Suspended-Corporation, and just my layperson's impression, I think not.
CathyA3 (Ohio)
Posts: 6,299
Posted:
ElleN brings up an important point about the incorporated vs. not incorporated issue.

In some states, other statutes may provide some of the protections that incorporation provides - so the consequences of letting an association's corporate status lapse can depend on where you're located.

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