restructure an informal HOA

Started by DietmarW • 9 replies • 2079 views

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DietmarW (California)
Posts: 21

Posted:

hello!

current situation in california: 5 unit condo complex, "self-managed", we pay our bills somehow and we are just getting by... we don't have CCR's, we don't have any legal paper work at all (except the deeds for each of our homes)

however the insurance for the complex and the bank account is just under one persons name... the person who manages the bills

i don't want a full blown HOA, but i want to make some things more neutral (bank account under hoa's name / insurance under hoa's name) and i am also willing (and want to) take over the accounting part and shed some more light on where the money goes...

however my bank tells me i need a EIN. in order to get a EIN i need to form an LLC or some sort of cooperation...

can i just do that? or am i suddenly bound to have a book of CCR's, board meetings etc?

thank you so much for your help!

RichardP13 (California)
Posts: 1,767

Posted:

You can get a EIN from the IRS. It is a very easy process and you don't need to form a special LLC or anything. Here is the IRS link http://www.irs.gov/businesses/small/article/0,,id=98350,00.html

DietmarW (California)
Posts: 21

Posted:

Quote:

Posted By RichardP13 on 12/07/2009 10:05 PM
You can get a EIN from the IRS. It is a very easy process and you don't need to form a special LLC or anything. Here is the IRS link http://www.irs.gov/businesses/small/article/0,,id=98350,00.html

line 9a in form SS-4 is asking for the type of entity...

HB (Oregon)
Posts: 143

Posted:

Make sure you understand what taxes you will be responsible for after forming an LLC. We are in Oregon, but our taxes for the LLC are a minimum $150. We also are responsible for a transportation tax, etc. just because we exist and ALL corporations are taxed.

DietmarW (California)
Posts: 21

Posted:

wow... thank you for the heads up on that... the taxes for an LLC in CA are actually $800.- even if they don't do any bussiness at all...

so that's out

can i form a non-profit? or how can i get an EIN without forming some kind of corp? what other choices do i have to have banking and insurance under everyones name?

thanks !

MaryA1 (Arizona)
Posts: 7,043

Posted:

Dietmar,

I'm thinking your deed says there are restrictions on your property, but since CCRs were never filed the requirement for an HOA does not exist. Because of this, all property owners are not obligated to belong to your group, right? Exactly what type expenses do you have -- are there common areas the property owners are obligated to maintain? And, if you do have common areas, who are they deeded to if there is no HOA?

Your Sec of State should have info on forming a corp, including a nonprofit. The IRS has special filing rules for HOAs that exempt them from paying tax on assessment income. But, if your "group" is not an HOA I don't know that you could take advantage of that. Otherwise you would file the regular corp. tax return and have to pay taxes on all your assessment income. Forming an HOA may be the more practicle way to go. When you say you don't want a "full blown" HOA, exactly what do you mean?

DietmarW (California)
Posts: 21

Posted:

Quote:

Posted By MaryA1 on 12/08/2009 7:33 AM
Dietmar,

I'm thinking your deed says there are restrictions on your property, but since CCRs were never filed the requirement for an HOA does not exist. Because of this, all property owners are not obligated to belong to your group, right? Exactly what type expenses do you have -- are there common areas the property owners are obligated to maintain? And, if you do have common areas, who are they deeded to if there is no HOA?

Your Sec of State should have info on forming a corp, including a nonprofit. The IRS has special filing rules for HOAs that exempt them from paying tax on assessment income. But, if your "group" is not an HOA I don't know that you could take advantage of that. Otherwise you would file the regular corp. tax return and have to pay taxes on all your assessment income. Forming an HOA may be the more practicle way to go. When you say you don't want a "full blown" HOA, exactly what do you mean?

- the deed says 1/5 interest in the lot except the portions shown as unit 1-5 on the condo plan (i have yet to see that plan...)
- shared expenses are trash, water (we have one meter for ALL units and gardening !), electric for exterior lighting, insurance, gardening for thecomon areas
- forming a corp (unless its non-profit) seems to be NOT the way to go because of the $800.- minimum tax
- what i mean with "full blown" hoa is: we don't have bylaws, we don't have ccr's, i don't want to hire a lawyer and right a book of bylaws etc... plus as mention somewhere to become an 'true' HOA we need 100% approval... there is that one black sheep right now (which happens to have all the power over our finances right now too...)

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Dietmar,
How did you get in this shape? What really is your budget (approx)?
Who holds the deed to this common land. Have you checked that out at the court house.
How did this one person get named Big Honcho? Did you vote him in? Where are the records? How do you know you are getting by with no reports or records?

May I suggest you make a trip to the court house, visit planning section, assessors office, property records and find out some stuff, good or bad, you need some answers. Then do an online search of your state business licenses or non profits, etc, anything with the associations name. I would also on line the court dockets for as far back as you can go to establish a Historical record, if any court cases are there. You will want to be right about what you are claiming, if anything.

If this Honcho has been in charge a while search his name at court documents, in fact you can search all your twelve property records sitting right at your desk. Find out stuff. It is all Public information or you couldn't get it.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Dietman,

With no CCRs and/or bylaws I don't see how you can obligate anyone to pay for the water, trash, elec, insurance, gardening, etc. Certainly the deed doesn't require this. I'm thinking there are CCRs and bylaws floating around somewhere; perhaps in the same place as that condo plan! Whose name are all those services in? If they are in the name of one of the property owners, then I would say he's an idiot! I certainly wouldn't be responsible for paying for all those services for every property owner.

If the unit owners each have a 1/5 interest in the lot (I'm thinking the lot upon which the condo stands, right?), who owns the portions shown as unit 1-5 on the condo plan. Is there a deed for that?

True, you would need a 100% approval to form a mandatory HOA. However, a voluntary HOA could be formed in which case the property owners are not obligated to join. As it stands right now, that's what you have in a sense.

DietmarW (California)
Posts: 21

Posted:

Wow, we really are in a mess here... How did we get there? Most are original owners for 10 Years or so an noone knew any better...
How did this person get in charge? I'm not sure but (as so often) no one cared and just kept paying into the funds...

This will change, I will find solutions and be activley involved in it to fix it too.

I will take all suggestions, clear up things with the planing office etc... It's scary what's going on right now... Liabilty and other things... It will not be an easy task, but on that has to be done because I care about this place.

I'll start digging in and I appreciate everyones input and help... I am sure I will be back with more questions soon!

Thanks!

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