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A homeowners association (HOA) is a legal entity, with an identity that is more than its homeowner members. Legal entities can be difficult to dissolve. Depending on state laws, a homeowners association (HOA) is usually either a corporation or a nonprofit organization.
Members Must Consent
Because an HOA technically consists of two parts, the legal entity plus its membership, one part usually needs the consent and approval of the other in order to take an extreme action like dissolution.
The first step in dissolving an HOA is to get the consent of every homeowner or member, although some states require less than a unanimous decision. When a homeowner does not vote, it often counts as a vote against dissolution.
HOA Dissolution Rules
After you get the consent of the required number of homeowners, you must address the specifics of closing down the legal entity of your HOA. Many HOAs include terms for dissolution in their documentation, including specific steps and requirements.
Depending on whether the association is a corporation or a nonprofit, the state government also will have certain requirements for shutting it down.
New Deeds May Be Required
The deeds to each homeowner’s property may include reference to the HOA. If the HOA no longer exists, the deeds may have to be redrafted and rerecorded. This could involve working with the mortgage lenders for each property. This is often a stumbling block to dissolution, because some owners without serious grievances with the HOA might not want to go through the trouble and expense.
Someone Must Take Over
Your HOA probably owns at least some of the development’s property, such as the common areas. If the development is a condominium complex, it most likely owns the entire building.
Title to the HOA-owned portions of the development must usually be transferred to another legal entity when the HOA is dissolved. You might be able to sell them to an investor who is willing to take over maintenance of these areas. Most investors will expect some profit in return.
A Real Estate Lawyer Can Help
The law surrounding dissolving an HOA is complicated. Plus, the facts of each case are unique. This article provides a brief, general introduction to the topic. For more detailed, specific information, please contact a real estate lawyer.