HOA abolishment

Started by LindaD4 • 14 replies • 3639 views

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LindaD4 (South Carolina)
Posts: 12

Posted:

I need someone who may have knowledge in South Carolina.
We have a board member who has expressed that he will run for President of the Association in order to abolish the HOA. My question, can this be done and if so what procedure would he need to follow to obtain this goal

SusanW1 (Michigan)
Posts: 5,202

Posted:

He wants to "dissolve" the HOA? Well, he can't do it by himself, for sure.

Check your own CCRs or state statutes for the proceedure. The votes needed are very high for this very important gesture.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

#1 The common areas would need to be sold.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Linda,

"Abolishing", or correctly stated, "dissolving" the HOA is really a two step process. First step would be to attain the required number of votes, per your CCRs for "termination of HOA". Usually this requires a rather high % of votes, usually 60% and greater. I've heard of some CCRs that require a 100% vote. After this is accomplished, the corp needs to be dissolved. This process must be carried out in accordance with state statutes. In AZ these statutes are contained in the Nonprofit Corp Act. I don't know where you would find them in SC but you could call the Corp. Commission. The process of dissolving the corp most likely requires the BOD to adopt articles of dissolution and also a plan of dissolution indicating how the assests of the corp will be distributed and make certain all creditors have been paid. This dissolution process is coordinated through the corp. commission, or whatever state agency oversees corps in SC.

Your gov. docs. must be thoroughly researched to determine the exact process for dissolving the HOA. The CCRs of my former assn stated maint. of the common areas could not be terminated w/o the approval of the city. A little thing like this makes it impossible for that assn to dissolve because the city will NOT take over maint of the common areas.

This guy mistakenly thinks it's not a big deal to just "abolish" the HOA, but that is definitely not the case.

BrianB (California)
Posts: 2,820

Posted:

yes it can be done (in theory), and the rules to do it are in your by-laws, as well as with whatever government office regulates HOAs, businesses, etc. (varies by state, likely a corporation commissioner, etc. see mary's note).

The big question: Do you have common areas? if the answer is no, you stand a chance of success. If you do, then who's going to buy them, pay the taxes on them, maintain them, and what will they do with them if they do buy them? You can't stop being an HOA until someone else owns your common areas.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

If no one wants to buy it and the city doesn't want it, sell it to another HOA owner for $1.

SusanW1 (Michigan)
Posts: 5,202

Posted:

By the way, he would not have to hold the office of president to begin working to dissolve the HOA.

He could organize a Special Meeting for the purpose of holding a vote on dissolution of the HOA, if he goes thru the steps that members must follow.

GeorgerwilliamsW (Indiana)
Posts: 975

Posted:

Mary is incorrect in her assertion that the corporation would have to be dissolved as part of the dissolution of the homeowners association. A homeowners association may exist independent of a corporate form of organization. State laws may not require that the association be incorporated. In addition, the corporation could continue in existence, apart from the association although it would have no powers and no effect. The form of organization is incidental to dissolving the association.

Likely, 100 percent of the mortgagees would have approve of the association's dissolution. Given the economic climate, that would be a challenge, since the existence of a homeowners association may appear to be instrumental in the protection of mortgagees.

SusanW1 (Michigan)
Posts: 5,202

Posted:

I believe that the corporation would just go into an "inactive" state. It is no longer conducting business, i.e. its mission. Letters would be written to the state and of course the IRS would be notified.

From what I have seen, those HOA that are not incorporated are small and more recreation/social clubs, rather than entities that own common property and conduct more business-like activites, including payroll.

I would not be part of a board if our HOA were not Inc.'ed.

The liability is too great, for me personally and for the residents.

MaryA1 (Arizona)
Posts: 7,043

Posted:

George,

Do you lie awake at night hoping Michele or I will post a message you can claim is false? Your antics are getting tiring to say the least, as is your grandiloquent attitude!!!. I won't even comment on your "opinion".

KirkW1 (Texas)
Posts: 1,665

Posted:

Quote:

...Likely, 100 percent of the mortgagees would have approve of the association's dissolution. Given the economic climate, that would be a challenge, since the existence of a homeowners association may appear to be instrumental in the protection of mortgagees. ...

This part is a guessing game and I choose to guess the opposite. The thing is that in this area a rider stating that the borrower will not vote to abolish, or remove professional management would seem harder then ever to enforce. Give the already high rate of foreclosures, I doubt that banks are eager to foreclose just because someone voted to scuttle the HOA.

But for that being said, you would surely need to amend the CC&Rs to actually get rid of the HOA. But is would typically be far easier to amend the by-laws to ensure that it holds no real power until enough people want to amend them again.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Of interest is another active Post. HOA running out of money.

Looking at both and remembering some previous postings, are we, on this site, able to give any real constructive advise to an individual poster?

I can't see it if we can. Maybe the answer is that we should advise any association to hire a competent lawyer to do the job. We sure can't lead each association throught the morass that is generated by the individual state and city and God knows what else is going to have to be filed to appease the individual courts and the individual judges. Tack on the financial status of the association, maybe liens against the associations, any misconduct by Board Members or PM or employees. How can we help here?

Every group has a point that is limiting, maybe we have reached our limit.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Or, constructively,
Should we draft a short 1 paragraph statement that might contain at tops three suggestion to start this process? Beyond that? There is no beyond that, that is as far as we go.

DonnaS (Tennessee)
Posts: 5,671

Posted:

Linda,
All of the Mortgage holders would have to approve the dissolution of the HOA as well as the owners. By what percent will be in your State laws and your governing documents.

So Mr. President wants to run with that as his campaign slogan "DOWN WITH THE HOA? He sounds like he has no clue as to what is involved. The issue of common property must be taken care of. Who will buy that?. South Carolina may have less stringent Non Profit Corp laws but those will have to be addressed before the Corp is dissolved, after a vote by the members and the lenders get their two cents worth in. Sounds like another disgruntled homeowner thinking that the solution to his unhappiness is to just throw in the HOA towel.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Linda,
To supplement Donna's remarks this thought may be considered.

Now, I am not sure about how this is all connected but this site has direct links to CAI. I think that an arm of CAI is actively involved in the current legislation about HOA/condos in SC. Now I don't know if this proposed legislation has anything at all to do with dissolving an HOA. But, I am convinced if you or anyone is going to try and dissolve an HOA or Condo and there are any significant members involved I would suggest legal help. Therefore, why don't you contact the legal arm of CAI and see if they can provide a paid service that would do this job cleanly and swiftly.

Certainly, do not support some candidate that runs on a "Dissolve the HOA platform". He may feel that way and he may be right, but that don't make him the Associations authority or spokesperson. If he gets elected and if he get elected president of the board he will have certain authoritative latitude, but he still is going to have to count votes of the members, and be beholden to the Board. IMHO I would not consider this kind of platform.

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