HOA corporation status dissolved

Started by JackB7 • 5 replies • 161 views

💬 Join us to post & get advice from 50,000 HOA & Condo leaders.

⚡ Takes 30 seconds

Already a member? Log in

JackB7 (Georgia)
Posts: 2

Posted:

Homeowners in my community received a notification from our HOA yesterday that because of a long-ago mistake when the developer transferred the HOA to us resulting in annual filings lapsing, etc, the state of Georgia has dissolved our non-profit corporation status. The current HOA leadership is asking us to vote on whether to reincorporate as a successor to the original corporation (transferring original corporation's assets, articles of incorporation, and existing bylaws.)
FWIW, our current HOA is fine. No serious complaints about power struggles, mismanagement, or any other shenanigans.
The vote sounds innocuous to me, but I'm wondering what happens if the majority rejects this? If the HOA doesn't exist in the eyes of the state, who would own and maintain the pool, etc? And what's the downside to voting "yes"?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

There are many things can happen. I would vote for what they want. It is reasonable and intelligent. Otherwise could be stirring up dirt that does not need stirring.

Corporation status means your HOA can collect dues. The non profit status is important as it is not a charitable non profit. Taxes are the major factor in that. The IRS may determine the non profit status. Collect as much as spends.

HOA are not home values but to keep the neighborhood attractive to potential buyers to pay sales prices. A HOA give the neighbors power to keep things neat and tidy plus paid for capital items.

Former HOA President

CathyA3 (Ohio)
Posts: 6,299

Posted:

You should check your state's laws to see if they require community associations to be incorporated. This is not unusual, and the vast majority of HOAs and condo associations are incorporated. So this may not be up for debate. Presumably the HOA's leadership is aware of this, but if they've allowed their corporate status to lapse, this suggests that they may not be aware of some important facts.

Incorporating has a number of benefits. For one thing, the corporation can obtain insurance in its name, so individual owners aren't personally liable if someone is hurt on HOA-owned property. Obviously this is an issue if the HOA has common areas. Does it? Does it own any green space or sidewalks or streets? In addition to insuring the common area, a corporation can also obtain something called Directors & Officers insurance, which will protect board members, officers, and often committee members as well. Without this insurance, these volunteers are putting their personal assets at risk.

I would hope the board has discussed this with the HOA attorney. Generally re-instating an HOA's corporate status just involves filing some paperwork with the Secretary of State and paying a filing fee and isn't that big a deal. But it may depend on how long ago the status lapsed.

JackB7 (Georgia)
Posts: 2

Posted:

Thanks! We do have a pool and playground. Sounds like voting yes is in everyone's best interest.

CathyA3 (Ohio)
Posts: 6,299

Posted:

Also, since you mentioned articles of incorporation, bylaws, and other governing documents, these legal provisions typically "run with the land". This means they don't expire unless there is language in them saying that they do, and if you sold your home the new buyer would be subject to the same provisions. These things are what define an HOA as a legal entity, and they don't go away if a past board allowed the corporate status to lapse - they're different things. An HOA would have to be legally dissolved, which means disposing of any jointly owned assets and filing legal paperwork. (A lawyer has to be involved in this process.)

If the governing docs have truly expired, then that would require a homeowner vote, as would amending them. As I mentioned in the previous post, re-instating the HOA's corporate status generally isn't a voting matter unless some law or regulation says it has to be. (In my state, we simply scare the bejeebers out of the board by explaining the risks they've been taking and get them to file the necessary paperwork.)

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By JackB7 on 02/21/2024 7:07 AM
Homeowners in my community received a notification from our HOA yesterday that because of a long-ago mistake when the developer transferred the HOA to us resulting in annual filings lapsing, etc, the state of Georgia has dissolved our non-profit corporation status. The current HOA leadership is asking us to vote on whether to reincorporate as a successor to the original corporation (transferring original corporation's assets, articles of incorporation, and existing bylaws.)

I suspect reinstating the corporation requires a board vote, not an owners' vote. In fact I think the board may have a fiduciary duty to do so.

A few of the reasons why I believe this:

-- The governing documents give a great deal of authority to the board. By contrast the governing documents give owners only a few rights, albeit highly important ones that must be respected. The most important right owners have is to elect a board.

-- The Georgia Property Owners Act, if applicable, requires the HOA to be incorporated. The Declaration might very well require this as well. The Board is obliged to comply with both the statute and the Declaration.

Quote:

Posted By JackB7 on 02/21/2024 7:07 AM
FWIW, our current HOA is fine. No serious complaints about power struggles, mismanagement, or any other shenanigans.
The vote sounds innocuous to me, but I'm wondering what happens if the majority rejects this? If the HOA doesn't exist in the eyes of the state, who would own and maintain the pool, etc?

"Doesn't exist" is likely inaccurate. It's guaranteed that the HOA still owns common area titled to it. It's guaranteed that the association can still be sued for say a pool accident where negligence yada was involved. The insurer will use any pretext it can to deny claims. I would not put it past an insurer to get all huffy when it learns the HOA's corporate status is in question. In short, the Board is playing with fire here.

If you want more information on exactly what rights your HOA corporation forfeits by being in a suspended (or similar) status, then please post back exactly what the Georgia SOS states the status is.

Even if the corporation does 'not exist,' as long as owners are deriving a benefit from the pool et cetera, the owners have to pay. Make clear to owners that they cannot get out of paying dues just because the corporation is suspended or similar.

🎯 You've read this entire discussion

Join the conversation with 50,000 HOA & Condo Leaders:

✓ Ask follow-up questions
✓ Share your experience
✓ Get expert advice
✓ Access 350,000 discussions

Create Free Account →

⚡ Takes 30 seconds

Already a member? Log in here