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Can homeowners get rid of their HOA?

By Deborah Goonan

Roberts Rules of Order

If you are in a HOA and you need to know more about Robert's Rules of Order, click here. There is a chapter in the book just for HOA's.

The issue of terminating or dissolving existing HOAs (including Condominiums) has been discussed at length on various attorney web pages, blogs, and news articles. Do a Google search on “HOA dissolution” or “condo termination” or even “how to get rid of HOA” to read some of the finer details.

While I am not an attorney, I have reviewed many publicly available attorney summaries, and have participated in several discussion forums on this very topic.

The short answer is yes, it’s theoretically possible to put an end to your HOA. That generally involves legally dissolving the corporation, but the process is not easy or straightforward by any means. The complexity of the process depends on the nature of the community and the people who own the property. The process always involves at least one attorney with specialized knowledge of real estate law, corporate law, and with knowledge of community association law. Sometimes developers, landowners, and/or lien holders must also consent to the terms of dissolution, also known as termination, and each interested party will be represented by legal counsel.

In general, in order to officially terminate the HOA, unit owners and other interested stakeholders must agree by way of voting. The governing documents of each particular HOA must be carefully reviewed for the process, and the percentage of votes required. Some HOAs will require unanimous consent for dissolution, and others might require a majority or super majority (80% is somewhat typical).

Before the HOA can be officially terminated, it must somehow dispose of its common areas. This is the tricky part, and can be exceedingly difficult for larger planned developments with elaborate recreational amenities or private roads. In the case of a condominium the entire multifamily structure, one or several buildings, are common areas, with owners’ financial interests decided in the plan of termination.

Some HOAs have minimal - what I call contrived - common areas: an entry wall and a light pole, or perhaps a single retention pond or a small, unusable strip of lawn. These are relatively easily relinquished to the county, city, or perhaps private owners with adjacent lots seeking more yard space.

Quite often, however, the local city, town, or county is unwilling to acquire property that would require extensive maintenance, repair or upgrade, particularly in the case of recreational facilities.

Unused golf courses can be a big albatross for some communities, as they are costly to maintain, and there are not enough golfers and buyers for golf course businesses. Stories of abandoned courses are becoming more common in the US, including golf courses that end up sold to the county or city by default, and then converted to green space. If the city purchases the golf course, it becomes public property, and that may increase traffic in the neighborhood, particularly if the community was once gated with private roads. If the city cannot cover its operating costs, the course may end up being resold or closed. Then there are times when the land is sold to a new developer, to be rezoned for more homes, single or multifamily, often to create another unnecessary HOA, with a small contrived common area.

The rezoning process can be a messy one that often spans months or years.  Inevitably, a new developer wants to make a profit, but adjacent homeowners want to retain their view lots or privacy. Homeowners often lose in this battle, because the alternative to redevelopment is abandoned land and facilities that fall into a state of unsightliness. The land often becomes an attraction for four-wheelers and dirt bikes, an unauthorized campsite, or a dumping ground that poses health and safety concerns.

Privately owned water and sewer utilities or wells can be another concern. Sometimes the HOA owns the facilities, and sometimes the Developer or another private investor owns them, but has a voting interest in the termination process.

I lived in one HOA where the county ended up acquiring our decrepit, obsolete water utility – a fairly common occurrence in Florida with aging HOAs and privately owned utilities that have never been properly maintained. The necessary result for owners was a 47% increase in utility bills, to cover the cost of basically rebuilding the system over a four-year period.

Private roads (common in gated communities) and storm water ponds and canals are the most troublesome to relinquish, because no one wants to bear the cost. But it has been done in some cases, because HOA residents simply lacked the resources to do the repairs, and there were health and safety issues that required the local government to intervene. Unfortunately, conditions have to be quite dire before that happens.

If there are still a lot of homes owned in the subdivision, the local city or county will often require the HOA to bring roads, retention ponds, and other major infrastructure up to current building codes, before they will agree to acquire them and maintain them with public tax dollars. The catch is that communities usually don’t have the huge amounts of money in their HOA reserves to do the necessary work – that is the reason they want to relinquish ownership in the first place. The local government often needs to arrange for financing and create a tax assessment district for (former) HOA owners to pay back the cost over time.

If no one will take the HOA common areas, or if owners and stakeholders cannot agree on termination plans, the only viable option is to dispose of common areas to the maximum extent possible. If the HOA cannot find a buyer for their facilities, pools might need to be closed and filled in, and tennis and basketball courts torn out. Sometimes the HOA can find buyers for the equipment, if it is still in good condition. At that point, owners might deactivate the HOA Board. The HOA can stop collecting assessments, or collect a minimal amount through an appointed receiver. Technically, the HOA still exists, but becomes inactive.

 

Keep in mind that even though the HOA may be inactive, covenants and restrictions remain on the deed and "run with the land." (Meaning they pass onto future deed holders) Except for certain restrictive covenants that have been deemed unenforceable (such as racial or ethnic restrictions on sale or residency), or that are precluded by state or local laws, any neighboring owner retains the right to individually enforce the covenants and restrictions in civil court.

Additionally, as long as the HOA is not officially terminated, it can be revived by the efforts of a group of interested owners. If the Covenants and Restrictions have been allowed to expire (usually after 30 years, but sometimes longer), depending on state law, they can be reinstated with written approval of a majority of property owners. Consult a real estate attorney in your state to evaluate your specific situation.

How does establishment and termination of HOAs affect homeowners and taxpayers? 

Note that your local government approved HOA development in the first place, and allowed the builder to put in roads and other infrastructure that did not meet municipal or county standards, under the condition that private owners would be responsible to pay for maintenance! Read between the lines: the city or county didn’t care that much about higher quality construction standards at the time, since construction and ongoing maintenance wasn’t going to be paid for with tax revenues anyway.

Yet, years later, if your HOA finds itself woefully underfunded to do the necessary work, the same city or county will generally balk at what should now be its civic duty to taxpaying homeowners. Local officials will at first attempt to avoid involvement. When enough homeowners and residents file complaints, the attitude then transforms to the need to “rescue” taxpaying homeowners from their circumstance. In the end, the homeowners pay, whether it’s the HOA through assessments or the local government through tax dollars. The advantage of converting to public governance is that there is the possibility of state or federal grant money to defray some of the costs.

Ironically, it is very likely that taxpayers who have never owned a home in a now-defunct HOA will indirectly end up paying part of the cost of its failure. 

So what’s the bottom line?

It would seem that homeowners need a tighter legal process for reinstatement of expired restrictions. Think about it. What if you were one of the people who did NOT want an expired HOA revived? What if you bought a property specifically because there was NO HOA, only to have it rise from the dead like a zombie? 

On the other hand, for homeowners that cannot or do not want to completely dissolve their HOA, there are surely certain provisions in CC&Rs that are obsolete, unconstitutional, or unconscionable. Those specific provisions should be invalidated, but there is no clear legal mechanism for challenging these, other than the amendment process in the CC&Rs. This is why legislative changes are necessary to override certain CC&R provisions that unduly infringe upon the rights of owners and residents in the HOA.