The Truth About Disbanding a Homeowners Association in Texas
Technically, it is possible to disband a Homeowners Association (HOA) in Texas, but it is so difficult in practice that it is often not a realistic option. There are both legal and practical considerations that most homeowners should be aware of and consider before trying to disband their HOA. Before starting the process, it is highly recommended that homeowners consult with a Texas-licensed attorney.
In Texas, HOAs are typically non-profit corporations that are responsible for managing and enforcing the governing documents of a common interest development. These governing documents include the Declaration of Covenants, Conditions, and Restrictions (CC&Rs), which place obligations and encumbrances on each lot and parcel of land within the development.
Even if the HOA as a legal entity is dissolved, the common interest development and the CC&Rs will continue to exist and may still create practical problems for homeowners.
How to Dissolve an HOA in Texas: The process of dissolving an HOA in Texas requires the approval of numerous interested parties and can be difficult to achieve.
First, the board of directors must adopt a resolution to dissolve the HOA.
Second, 100% of the members of the HOA must approve of and consent to the dissolution.
Third, if the HOA manages, maintains, or controls common areas, someone will need to take over these responsibilities. If the homeowners are unable or unwilling to do so, this may require obtaining the agreement of the local government to take over these responsibilities. The governing documents of the HOA may also require the approval of certain government entities.
Finally, the governing documents of the HOA or an individual homeowner’s mortgage agreement may require the approval of the lenders to the individual homeowners before the HOA can be dissolved.
Assuming that all approvals are obtained, the next step is to wind up the HOA’s corporate and legal affairs. This includes, among other things, giving notice of the dissolution to creditors, paying all known liabilities and debts, selling assets, and distributing any remaining assets to homeowners.
Tax-related issues may also arise during the winding-up process.
The HOA is Dissolved and Wound Up: Now What? Once the HOA is dissolved and wound up, homeowners may face many practical issues that were previously handled by the HOA. For example, who will maintain the structural and exterior portions of the buildings? Who will pay for the costs of maintenance and how will that money be collected? Who will be responsible for repairing damage to the common areas of the development? These are just a few of the questions that homeowners may need to consider and address.
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