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Missouri Supreme Court throws a lifeline to an HOA


If a homeowner association doesn’t have the power to impose liens to collect delinquent assessments for common expenses, the HOA is unable to perform its responsibilities. Often, no other entity has the legal authority to fill the gap in insuring, maintaining, repairing and replacing common properties such as streets, water and sewer facilities, clubhouses and pools, etc., which were the responsibility of the original HOA.

Many Missouri HOAs are dissolved by operation of law, having failed to file annual reports with the Missouri Secretary of State. Often a new HOA is formed, but a series of Missouri court decisions have made clear that the new HOAs lack any authority to perform the functions of the old HOA, unless there is an assignment of the old HOA’s powers to the new entity. I’ve summarized those court opinions here, including an update on Debaliviere Place Association v. Steven Veal, in which the Missouri Supreme Court reviewed a lower appellate court decision on April 12, 2011, changing the result and remanding the case for a new trial.

The Missouri Supreme Court’s opinion, written by Judge Michael A. Wolff, clarifies that a defunct HOA, even though it has been dissolved for more than 10 years, still has the power to assign its rights to collect assessments, impose liens and enforce covenants. This new opinion overruled a court of appeals opinion that had indicated that a defunct corporate HOA was a non-entity after it had been dissolved for 10 years, lacking the power to do anything. This new opinion is based on Missouri’s statute 355.691, which allows a dissolved non-profit corporation to “wind up and liquidate its affairs,” transferring its assets and liabilities.

Judge Wolff’s analysis limited the effect of a now repealed Missouri statute (section 355.507), which prohibited any non-profit corporation from coming back to life after it had been dissolved for at least 10 years, at which time its corporate charter is permanently forfeited. Even though the 10-year limit has been repealed, it still applies to many HOAs that had been dissolved before its repeal.

For new HOAs which need to establish their authority, the recording in the county land records of an assignment from the old HOA to the new HOA of the old HOAs powers will be effective, unless the objecting owner can prove that the assignment is made without authority, an a contention that Veal did not assert against Debaliviere.

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About Harry Styron

I'm a lawyer who lives in Branson, Missouri, whose professional interests involve real estate, construction and local government.

12 responses »

  1. Carol Bronson

    Our developer moved to another state, we have been without water several times, all the water lines are breaking because he used sewer pipe instead of water connections! There are several leaks in the pipes that bring water from the well to our home. The leak on the lot next to us looks like it is going to blow at any time. We are the only house in the neighborhood, one other lot is owned.

    Reply
    • Carol,
      Your story points out the risks of buying property in a subdivision in which there aren’t enough residents to economically pay the costs of repairing and maintaining a water system. Even though state and federal regulations establishing construction standards for drinking water systems, inspection and enforcement procedures are not adequately funded.

  2. Pingback: Missouri | Homeowners Associations

  3. Our developer just sent us information that he went ahead and created a homes association. There are only 7 homes at this time in our estate acreage subdivision. None of the homeowners or land owners knew he was doing it. He wants $400 per year to pay for the entrance to be mowed. This is his property. Why should we have to pay for him to get his land mowed. It is not a common area. We have no sidewalks or pool. We have our local town remove snow and ice on our road. What can we do to stop his authority. He also put people on the board that do not live here or own land. Please help!

    We live near Lee’s Summit.

    Reply
    • Tina,
      You need to consult with a lawyer in your community. Determination of the extent of the developer’s powers requires an examination of recorded documents and familiarity with local planning and zoning regulations.

      Harry

  4. Our HOA was administratively dissolved in the early 1980 (and only existed for that one year despite the subdivision being turned over to the trustees in the 70’s). For some reason the trustees back then filed the subdivision as a non-profit but never followed up in subsequent years of fling. The indentures do NOT require that we file with the state or that we exist as a HOA. Our indentures were filed years ago with the county as well as any subsequent changes to the indentures. We’ve been able to file suits for liens and otherwise enforce the terms of the indentures. Do we have to file as a HOA? Even if the indentures give the power to the trustees?

    Reply
  5. I live in wentzville mo. The original builder for my neighborhood went bankrupt there have been at least 4 additional builders to own and lose lots in my neighborhood. Currently there are two builders in my neighborhood finishing up the last of the lots. One builder, Fischer and Fritchell bills is for our HOA dues yearly. I called the builder with some concerns earlier this year. My concerns were 1- why hasn’t the HOA elected resident members? We are over 90% full with no residents on the board. 2- why aren’t repairs being made to street signs and walking paths? And 3- why isn’t our common ground being mowed? Currently each resident has been maintaining the common area behind their home. The response I got really left us with more questions than answers. The builder told me that the original builder still holds the HOA and they must get his signature to sign over control to the new builder. He said currently our HOA is not recognized by the state of Missouri ( our HOA and subdavision is less than 10 years old). The builder says he pays for things the city requires like mowing the entrance and empty lots and insurance on the common ground. Other than that he is hesitant to make repairs because he legally does not control the HOA. So now all of us residents are wondering if he has the right to bill us and collect our money? Should we be paying him if he doesn’t control the HOA? He says he has a lawyer working to resolve the issue but he is unable to give us a time line as to when he expects to take control of the HOA. Many residents have chosen to withhold payment until the issue is resolved. What is our next step? Should we be paying? What is the likely hood of the courts re recognizing our HOA?

    Reply
  6. You need to hire a lawyer in your area that is experienced with HOA issues. Nobody can advise you with reviewing the declaration of covenants for your subdivision and corporate documents for your HOA.

    Reply
  7. Dale A. Lewis & Helen G. Lewis

    Our HOA is a Public Benefit Not For Profit Corporation governed by Missouri Statute 355, which mentions only 2 documents for its incorporation, the “Articles of Incorporation” and the “By-laws” which we have on file with the county. We also have a “Declaration of Covenants and Restrictions” on file with the county. Does this mean we are also subject to RSMo 448 which is the state’s “Condominium Property Law”?

    Reply
  8. Your HOA is not subject to Chapter 448 of the Missouri Revised Statutes unless the recorded plat and covenants create a condominium.

    Reply
  9. I live in a so called HOA. We moved here 10yrs ago. It was a new subdivision. There still isn’t a HOA. We pay dues every year, that go up every year by the way. I call the builder who we pay the dues and they say that until a point that so many houses are sold, then we won’t have an HOA. They send a so-called ledger of what says legal, accounting, mowing & maintenance. I ask how do we know that this is actually what is paid and not a number that was pulled out of thin air. I then get transferred to different people who can’t answer. I know that the neighborhood doesn’t get cleared of snow, or places that should be mowed don’t. We don’t know what to do

    Reply
    • Holly,
      The situation that you describe is common in southern Missouri. The declaration of covenants establishes when the HOA is required to be in place. You should ask a real estate lawyer in your community to review it and advise you.

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