QUESTION: In four years our association will vote to either keep it or dissolve. The community is split so it will certainly be heated. The board says it is impossible to dissolve it. Answers are hard to come by.

ANSWER: Most homeowners associations are incorporated as Nonprofit Mutual Benefit Corporations under California's Corporations Code. To find out what type of corporation your association is, check your Articles of Incorporation. As provided for in Corporations Code §8724, any owners association for a planned development, condominium, stock cooperative or community apartment project of five or more units that is responsible for managing, maintaining, preserving or controlling any lot, unit or other area cannot be dissolved unless 100% of the members consent.

Governing Documents. Your association’s articles, bylaws and CC&Rs may also establish limits and procedures on dissolution. The Corporations Code establishes additional procedures for dissolving all corporations, such as electing to wind up and dissolve, adopting a plan of dissolution, and filing a certificate of dissolution with the California Secretary of State. Final federal and state tax returns must also be filed.

Taking Over Maintenance. As a practical matter, it may be impossible to dissolve an association if no entity can be found to take over the association's maintenance responsibilities. One of our readers wrote that their HOA wanted to dissolve and asked the County to take over the common areas. The County's letter in response is instructive. Also of interest is the paragraph on taxes. If owners think they can escape maintenance costs by transferring their obligations to a governmental entity, they are in for a surprise. 

RECOMMENDATION: Any association considering dissolution or reorganization should do so with the advice of legal counsel and tax counsel.