Georgia HOA & Community Association Law Resources

Decoding the Complexity of Dissolving a Homeowners Association (HOA)

Decoding the Complexity of Dissolving a Homeowners Association (HOA)

It’s a rarity to compare a homeowners association to an indestructible fictional character. However, terminating a homeowners association might be almost as formidable as taking on the Terminator. The complexity arises from two intricate steps: 1) terminating the Declaration of Covenants, and 2) dissolving the corporation.

The Role of the Declaration of Covenants

The Declaration of Covenants (“Declaration”) encompasses restrictions and obligations binding both the community association and individual owners. These covenants cover assessments and architectural controls that limit lot modifications. Absent a termination provision in the Declaration, courts rule that abolishing it requires a unanimous vote of all owners. While amendments can be made with a percentage vote, removing covenants isn’t considered an amendment; it’s an elimination. Courts believe every owner bought property with some covenant reliance, necessitating unanimous approval.

Mortgage Holder Influence

Adding complexity, most mortgage holders possess the right to vote on abolishing covenants. Covenants directly affect lot value, crucial to lenders. Complete covenant removal mandates mortgage holder consent.

Survival of the Association Entity

Even with unanimous lot owner and mortgage-holder votes, the association as a corporate entity persists. Georgia homeowners associations exist as non-profit corporations. If dissolution is desired alongside covenant abolishment, the Georgia Non-Profit Corporation Code regulates dissolution through membership votes. Consider that common areas owned by the association could be sold during dissolution, potentially leading to complete amenity destruction or new ownership.

A Complex Process

The termination process for a homeowners association involves intricate steps, as daunting as confronting the Terminator. Note that this article focuses on homeowners association termination, not condominium associations, which have distinct termination procedures under the Georgia Condominium Act.