Dirt Law at Ground Level
October 17-23, 2016
Subdivide and conquer
By W. Christopher Barrier
Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C.
One fine Monday morning, Coon Dog Twichell arrived at his Pike City Law Office to find Ashley Chester already there and in a state of high agitation.
“What can I do for you, Ash?” asked Twichell. Chester was having yet another kerfuffle with Crit Roberts, this time with regard to Black Acre Estates, a small single-family subdivision just inside the Pike City city limits, which Chester had platted.
Crit had purchased a lot in the subdivision and shortly thereafter had received a notice of an annual maintenance assessment by the Black Acre Estates Home Owners Association (POA).
“Crit says the POA was never incorporated and never adopted articles and bylaws, hence, there is no entity to impose the assessment. He also says he never agreed to any such assessment. And he is stirring up other property owners to refuse to pay their assessments!”
Chester gave Twichell a few minute to review the Black Acre Estates Bill of Assurances.
“Well, first off,” Twichell said, “the POA is called for right here in your Bill of Assurance, as are the maintenance assessments. And it looks like your POA comes squarely within the Revised Uniform Unincorporated Nonprofit Association Act (RUUNAA), which took effect in January of 2011, codified as Ark. Code Annotated Section 4-28-601 and following. That statute fits your POA like a glove!”
Twichell went on to explain that the Bill of Assurance constituted “governing principles”, as contemplated by the statutes, and described the POA and its power to impose assessments in some detail.
According to Chester, three of the lot owners had called a meeting of all the owners not long after the Bill of Assurance was recorded and lots were sold. At the meeting, officers were elected and, by a two-thirds majority as called for by the Bill of Assurance, the members approved the assessments. They also approved opening a bank account for the POA.
By the time Crit Roberts bought his lot, nearly all of the subdivision had been sold out, and three annual meetings had been had at which the officers were reelected and assessments re-authorized. “Those things probably amount to established practices under the statute,” said Twichell.
Chester wondered aloud how the POA was able to open a bank account. “According to the statute,” Twichell explained, “the POA is a legal entity, separate and apart from the lot owners, capable of doing what it needs to do to fulfill its purposes.” The members could resolve to open a bank account with a resolution similar to those used by LLC members and partnerships. That ought to be sufficient, Twichell mused.
“What about getting a taxpayer ID and so forth?” asked Chester. “Well, the POA is not likely to have any net income, so those things may not be necessary. Talk to your accountant about simple informational filings. More elaborate entities, such as business condominiums, are another matter.” responded Twichell.
“The statute really addresses almost any question a residential POA might have, such as mergers with other associations, and member access to financial information. There are other issues which the members might want to address in bylaws, such as meeting notices and quorums and officers and directors insurance. But the statute just keeps things simple and inexpensive for the POA members.”
“But, do they need to adopt articles and incorporate, as Crit claims?”, asked Chester. “No, absolutely not,” responded Twichell.
[Chris Barrier is a Little Rock real estate lawyer. He suggests that anyone interested in RUUNAA generally should take a look at Elizabeth Miller’s comprehensive article at 38 William Mitchell L. Rev. 852 (2012)]