Residents push back on HOA demand they join the golf club - it's expensive, hinders sales

Residents push back on HOA demand they join the golf club – it’s expensive, hinders sales

Posted by author September 1, 2024 Golf

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Ryan Poliakoff
| Special to the Palm Beach Post

Live in a home governed by a condominium, co-op or homeowner’s association? Have questions about what they can and cannot do? Ryan Poliakoff, an attorney and author based in Boca Raton, has answers.

Question: Our association mandates that every homeowner join the golf club. How can the residents do anything to change this ruling when so many do not want to belong to the club? It is expensive and makes it difficult to sell our condominiums. Signed, A.T.

Dear A.T.,

If you are saying that you are obligated to join a private country club, that obligation is established in some set of covenants — either your master association declaration, or in your declaration of condominium. The provision establishing mandatory membership would have to be removed by amendment. That might take a membership vote, or, in a master association, it might take a vote of people representing the owners’ votes (often the president of each sub-association).

While this type of amendment is unusual, it does happen — I am familiar with at least one community that established mandatory membership by amendment and then later re-amended their declaration when the owners decided they didn’t want it, after all.

Our community has a governing board, but are we an HOA?

Question: I live in a small residential community that has operated as a non-profit corporation without an HOA for 50 years. The articles of incorporation and bylaws were filed in 1974 and we are registered with the IRS. Recently, a newly elected board proposed a plan to create an HOA, suggesting this was a legal requirement. This plan was rejected by the community, but it raises some issues. Do Florida statutes require an HOA for communities that were incorporated as non-profit corporations (501(c)(3))? Would the articles and bylaws still apply? What are the risks of continuing to operate without an HOA? Signed, G.P.

Dear G.P.,

Your question doesn’t give me sufficient information to give you a complete answer, but I think I can get you going in the right direction.

Most planned developments are restricted by a declaration of covenants that establishes the rights and obligations of owners. The declaration typically provides that a corporation will be responsible for maintaining and governing the community (and, in most communities, owning the common property), and that corporation is itself governed by articles of incorporation and bylaws (which are the documents that establish how any corporation must operate).

If you are a “Florida corporation responsible for the operation of a community or a mobile home subdivision in which the voting membership is made up of parcel owners or their agents, or a combination thereof, and in which membership is a mandatory condition of parcel ownership, and which is authorized to impose assessments that, if unpaid, may become a lien on the parcel,” you are, by definition, an HOA (these definitions are found in Section 720.301, Fla. Stat.).

You say that you are in a community that has operated as a non-profit corporation without an HOA. First, the community itself is not the corporation—the community is the lands and houses. Your corporation serves some purpose, and I don’t have enough information to know exactly what it does.

I am aware of communities governed by corporations where membership is voluntary, and so they are, by definition, not HOAs and not governed by the HOA Act. By the same token, if you fit the definition of an HOA in the Act, then you in fact are an HOA, regardless of the type of corporation you have (and assuming it’s a Florida corporation, which seems to be required by the statute).

You further say that your corporation is registered as a 501(c)(3). Internal Revenue Code Section 501(c)(3) provides a tax exemption for certain types of corporations, including charitable, religious, educational, scientific, literary, public safety, fostering national or international amateur sports, and preventing cruelty to children and animals.

It’s hard for me to understand how your corporation, which has some role related to your community, fits in one of those categories such that it is in fact tax exempt. It’s possible you’re confusing the term “non-profit” with a true tax-exempt entity under 501(c)(3).

The vast majority of homeowner’s associations are “corporations not for profit” governed by Chapter 617 of the Florida statutes. This does not mean that they are 501(c)(3) entities (and in fact I’ve never encountered an HOA that was); instead, it means that they are organized without an intent to make a profit. This seems to be more likely, but I can’t really say — perhaps the purpose of your corporation is charitable in some way and so it in fact is tax-exempt. Ordinary not for profit corporations are not tax exempt — they just rarely generate a profit.

If what you are saying is that your community has a voluntary association without covenants, and that the board wanted to bind the entire community to formal restrictions and have membership in the corporation be mandatory, that would likely require a 100% owner vote (or at least, no home that did not consent to the covenants could be bound by them).

Hopefully the above advice puts you in the right direction, although the board should certainly be getting more specific advice from its attorney.

Ryan Poliakoff, a partner at Poliakoff Backer, LLP, is a Board Certified specialist in condominium and planned development law. This column is dedicated to the memory of Gary Poliakoff. Ryan Poliakoff and Gary Poliakoff are co-authors of “New Neighborhoods — The Consumer’s Guide to Condominium, Co-Op and HOA Living.” Email your questions to condocolumn@gmail.com. Please be sure to include your location.