Power of HOA after covenants expire

by Cyn
(Newport, NC )

Visitor Question: Where does an HOA derive its authority/powers? Does the HOA have any authority or powers if the land covenants expired?
Specifically, can a HOA post-expired covenants subsequently levy and collect assessments based on contract law (such as implied contract)?

Editor Replies: As stated in several ways on this website, we are not attorneys and thus cannot give legal advice. What we can do instead is make some observations that you may want to think about in preparation for consulting an attorney, which is what you should do if the answer to the question means enough to you.

In broad brush, it is very likely that an HOA is no longer in effect after covenants have been allowed to expire, and therefore would have no power to levy or collect assessments.

The variables in what the answer might be include your state's laws governing condominiums and HOAs, case law in your state as indicated in court rulings, and the governing documents of your specific HOA.

Usually the method of setting up an HOA is included in the covenants, or in a master deed containing covenants, conditions, and restrictions. Most are unfortunately silent on what exactly happens when state law or the CCRs themselves set up an automatic expiration date. You can read through your own copy of the master deed, and in fact all paperwork you received when you purchased your residence, to see if this topic is addressed.

It is also possible that state law, or case law established by the courts, will answer the question for you. In the states that have an automatic sunset for covenants, unless they are affirmatively renewed, we would expect that this question has arisen before and that courts would have ruled on it. States also might have anticipated the situation and addressed it in their statutes. This is where you will need an attorney to sort through that information.

Everywhere that we know of has some provision for lapsed covenants to be reinstated. Often this requires notice to every property owner, an open meeting of the property owners, and usually a vote of the membership. Sometimes a supermajority is even required. You did not tip your hand as to whether you would like the HOA to be able to continue levying assessments, or whether you are opposed. But in case you want the HOA to continue in force, explore state law to understand the procedure.

Another wrinkle is that most, but not all, HOAs are set up as nonprofit corporations. This means they have filed articles of incorporation with your state government, which has approved them as to form. Usually the state will not approve the incorporation without a proposed set of bylaws that delineate how the corporation will operate; bylaws too could give you a clue as to what was originally intended. So another avenue to investigate is whether your particular HOA is a nonprofit corporation, and if so, whether it is still a corporation in good standing in your state.

Having said that, though, a nonprofit corporation, even one that is active and in good legal standing, does not have any power or authority whatsoever to levy mandatory assessments. It certainly could request and even expect payment of dues, as do most nonprofit corporations that have members, but you and other property owners would be under no legal obligation to pay and no legal obligation to become or remain a member.

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