Are there penalties for an HOA not complying with the law? (Virginia)

I recently discovered that our HOA is not complying with several things: no identified budget, no reserve study, no reserve fund, no D & O liability insuranceno license, not filing an annual Real Estate Board report. Not sure if we are or should be filing taxes. Before new officers are elected, and hopefully restore the HOA to a fully functioning and law abiding entity, we'd like to know what we are getting into.

The HOA is responsible for common area maintenance, but no other structures or equipment.

Does anyone know if there are financial penalties for not complying with any or all of the above? Or if we need to be filing taxes?

Thanks for any insight!

Heidi,

Boy does this ever sound familiar! If VA is like most states, there is no state agency governing HOAs, so, unless the homeowner wants to spend thousands and take them to court, they tend to get away with a lot of things.

As for filing income taxes, definitely Yes. The HOA is required to file a federal tax return and perhaps a state income tax return. I doubt you will incur any penalties for not filing as most likely you will have no taxable income to report. The assessment income is classified as "exempt" income and not taxable. The IRS has a specific tax form for HOAs -- 1120H. However, the regular corporate form -- 1120, can also be used but that decision is best left up to a CPA.

I would suggest you thoroughly review all your gov. docs. and also research state law. This will give you a lot of insight as to what is required of the BOD in operating the HOA and also to "what you are getting into".

Good luck!

VA does have POAVA..the laws which regulate property owners associations. To date there is no penalty, but the VA legislature has passed a bill, and it's waiting the signature of the Govenor..there will be financial fines for the BOD's who don't conform to POAVA. ..reserve studies, etc. Currently there is no penalty. An owner can indeed take the issue to court and it's very, very expensive.
MaryN

Heidi,

It is my understanding that board members can be held personally liable for inaction after they have been made aware of that they are violating the law and/or governing documents and do not take corrective action. I would suggest that you send them a registered letter notifying them of the provisions they have failed to comply with and informing them that they may be held personally liable. If that doesn't get them to act, as others have said here, you will need to hire an attorney.

Dave

Well, good advice was given and maybe the real issue was skirted around.
Push comes to shove the responsible people is the owners. They allowed this kind of conduct to proceed and when the correction is made (if necessary) it is the owners that will pony up. You make be able to make a case against some individuals but you better be able to back it up with some evidence the owners tried to change the system. The judge will surely wonder how this was allowed to continue. Criminal conduct is different and a very hard point to prove, especially by a concerned owner. Most of what we see here regards mismanagement is settle among the associations and changes are made like accounting procedures, maybe a MC fired, more than likely it is a democratic precess of getting new leaders or if you can build the support recall part or all the board. In most documents there are directions for changing your BOD if that is the problem or part of the problem. So look first at the owners for blame.

This thread is 2 years old. Its dead.

HeidiS1 posted her questions 2 years ago. I doubt she even lives there anymore. Hehe.