LLC not allowed- questions

Please cite the exact "rule" wording that prohibits LLCs from owning condo units. Make sure you include the name of the document in which this is stated.

Are you on the Board?

How is an LLC banned? That makes no sense.

With the others, where is the rule defined in your governing documents? Is it in the CCRs or just a board passed rule? If the latter, I doubt that a court would uphold that limitation.

An LLC is just a particular form of corporation, it would be interesting to know if OP's association bans all corporate ownership, or just LLCs in particular. Either way I would be curious if such a ban would hold water legally.

Thanks for the replies. I am the board President, hoping to educate myself & save some money on attorney fees.
I'm referencing the CERTIFICATE OF AMENDMENTS TO THE DECLARATIONS OF CONDOMINIUM.

Attachment is tough to read- it says

In as much as the condominium is used for residential purposes, corporate ownership is not allowed.

Such a restriction is beyond ridiculous, LLC's are used to set up a trust in lieu of a will.
I'm with a previous poster that said this could be pertaining to corporate ownership owning multiple
units to gain enough stake to buy out the COA.

Thanks for the replies and infos, very helpful. I have a better idea of the probable outcomes. Will now approach our lawyer…

I'm wondering if this restriction is not legally out of date. If state law allows a person to own residential real estate through an entity, how could HOA prevent it?

Post-o. See bolded correction above.

If it's only an HOA rule, does your Declaration say anything about who can own property in the development? If your state law allows an entity such as a corporation to hold title to residential property, your rule is probably unenforceable. If your goal is to limit rentals and your Declaration discusses rental restrictions, you can probably make a rule limiting rentals.

?

Covenants that restrict membership and do not violate fair housing law or statutes are perfectly lawful.

The question here is when this covenant amendment was recorded and when the LLC took ownership.

Yup. There is no conflict here.

The ownership was changed. I am not sure a purchase was involved.

But I agree this should be contemplated. Start by reading http://www.leg.state.fl.us/Statutes/index.cfm?App_mode=Display_Statute&URL=0000-0099/0095/Sections/0095.11.html

That is surprising, but another reason the association might try to ban them is thinking ahead to legal webs due to foreclosure or holding owner/landlords responsible for tenant misconduct. It's one thing to sue an individual homeowner and file a lien against the house in a foreclosure, but then there's the issue of collection.

In my community, we found many of these LLCs had the house as its only asset and because we couldn't hold the individual owners responsible (the purpose of setting this up in the first place), it was nearly impossible to collect damages. With many of the LLCs, they weren't paying taxes either and then the city or county would swoop it up and whoever paid them off got the house. The house would then wind up in another LLC and the mess would start anew. Also, it's very difficult to find someone to call when tenants act crazy - we saw a lot of "someone comes by every month to collect the rent - I don't know who he/she is". Usually, they were lying but didn't want to cough up the information. When you looked up the LLC information, you'd see an out-of-state address, and it's very difficult and expensive to serve them.

That is why I say an LLC is the short straw catches jail time...

Let's get back to the original OP's questions. They wanted to know about the HOA suing the LLC. Does the HOA not have a fining schedule or the ability to fine? A court can ONLY make one "Whole". What damages is this LLC causing the HOA if it's paying it's dues? All your HOA has is this restriction that LLC's can't own in your HOA. That is a CC&R infraction. What can your HOA do about those? Lawsuit is bad idea.

Unless that LLC is NOT paying it's dues, not much else can do. It's when you get into lien and foreclosure territory with an LLC is when things get sticky. It's hard to explain until you have to deal with collections.

wrong. HOAs go to court all the time for injunctive relief, meaning a court order for the defendant to do xyz, having zero to do with the pursuit of damages.

You post this nonsense about what the courts can do all the time.

The board here has voted & we are consulting with our very expensive but scary good lawyer so it will be interesting to see how it plays out. I'll update you when there's some news.

Thanks all for the replies.

I think your example and writing above are superb.

I have seen enough to say that the amendment is too vague. In my opinion trying to apply the amendment to an LLC owner is a field of legal land mines. Too expensive to pursue. At present I advise dropping this.

If this HOA wants to prohibit LLC-ownership, then a covenant (or amendment to same) needs to say more than "corporate ownership" is not allowed. And no, the phrase about the condo being used for residential purposes counts for squat. Why? Because tenants use condo units for residential purposes.

FYI

A limited liability company (LLC) is a business structure that protects its owner(s) from personal responsibility for its debts or liabilities. Limited liability companies are hybrid entities that combine the characteristics of a corporation with those of a partnership or sole proprietorship.

I had a one man business and I was an LLC to protect myself.

So you can technically put anything you want in the bylaws but it DOES NOT mean it is enforceable in a court of law. I highly doubt this one would hold up in court and the HOA would loose and owe the homeowner lawyer fees and expenses they paid to fight you. This could easily cost the HOA $100,000. And basically ......... for nothing.

Interesting fact: Some HOA's still have bylaws that say: "None of said land may be conveyed to, used, owned, or occupied by [censored] (black) as owners or tenants"

Definitely one of those things that is not enforceable, but still in writing after all these years.