Homeowners Associations (HOAs) are integral to many California communities, overseeing property maintenance, enforcing community standards, and managing shared amenities. However, circumstances may arise where homeowners consider dissolving their HOA due to various challenges or changing community needs.
Understanding the legal framework, including relevant California real estate and corporate laws, and the procedures involved in dissolving an HOA is important for navigating this complex process. Some homeowners choose to seek guidance from an experienced HOA Attorney California to better understand applicable requirements and documentation.

Understanding The Role Of HOAs In California

An HOA is a nonprofit organization established to manage and govern a residential community, particularly in common interest developments (CIDs) like condominiums and planned unit developments. HOAs are responsible for maintaining common areas, enforcing community rules, and ensuring compliance with the community's governing documents.​

Typical Responsibilities and Powers

HOAs typically have the authority to:​
Collect assessments (dues) from homeowners to fund maintenance responsibilities and operations.
Enforce covenants, conditions, and restrictions (CC&Rs) to maintain community standards.
Manage and maintain common areas such as parks, pools, and clubhouses.
Oversee architectural guidelines and approve modifications to properties.​

Benefits and Challenges of HOA Governance

While HOAs can enhance property values and community cohesion, they may also present challenges, including:​
Disagreements among property owners regarding rules and regulations.
Financial mismanagement or HOA disputes over assessments.
Perceived overreach or lack of transparency by the HOA board.​

The Davis-Stirling Common Interest Development Act

The Davis-Stirling Act, codified in California Civil Code §§ 4000–6150, provides the legal framework for the creation and operation of HOAs in California. It outlines the rights and responsibilities of both the association and its members, covering aspects such as governance, assessments, and dispute resolution.

It is also important to note that dissolving an HOA’s corporate entity and terminating a common interest development (including any recorded declaration/CC&Rs and common area arrangements) can involve related but distinct legal steps.

Key Provisions Relevant to HOA Dissolution

While the Act primarily focuses on the operation of HOAs, it also intersects with the California Corporations Code regarding the dissolution of nonprofit mutual benefit corporations, which many HOAs are classified as. Key considerations can include:​
Requirements for board and member approval of dissolution.
Procedures for winding up the association's affairs.
Distribution of assets and liabilities upon dissolution, subject to the governing documents and applicable law.​

Requirements For Dissolution

Majority Consent from Members

Dissolving an HOA requires adherence to approval thresholds that may be set by the California Corporations Code and the association’s governing documents:​
Board Approval: The board of directors generally begins the process by adopting a resolution to wind up and dissolve. Board quorum and voting requirements are typically governed by the Corporations Code and the association’s bylaws; in some circumstances, unanimous written consent may be used in lieu of a meeting.
Member Approval: California Corporations Code § 8724 generally requires member approval for dissolution when the corporation has members, using the applicable statutory and governing-document voting standards.

Unanimous Consent vs. Supermajority Requirements

In California, the required percentage for member approval may depend on the association’s governing documents and the specific actions needed to dissolve the corporation and address common area and recorded CC&Rs. In some communities, the recorded declaration and ownership interests in common area can make dissolution and related property transfers difficult to accomplish without very high—sometimes unanimous—owner consent.

Procedures for Obtaining Member Votes

To initiate dissolution:​
Review Governing Documents: Examine the HOA's bylaws and CC&Rs for any specific provisions regarding dissolution procedures.​
Conduct a Formal Vote: Organize a meeting or distribute ballots to all members, ensuring compliance with notice requirements and voting procedures outlined in the governing documents and applicable laws.​
Document Approval: Maintain thorough records of the voting process and results, as these may be necessary for filings and future reference.​

Filing Required Documentation

Filing with the California Secretary of State

Once the decision to dissolve the HOA has been approved by the requisite vote(s), the association typically files appropriate documentation with the California Secretary of State. Depending on the circumstances, this may include a certificate of election to wind up and dissolve and a certificate of dissolution (including, where eligible, a short-form dissolution).
Steps to File Articles of Dissolution:
Prepare the Certificate of Dissolution: Complete the necessary form (for example, the Secretary of State’s nonprofit dissolution forms, depending on eligibility), ensuring all information is accurate.​
Submit the Form: File the completed form with the Secretary of State's office, following the Secretary of State’s filing instructions.​
Pay Applicable Fees: Include any required filing fees with your submission.​
Timeline for Processing:
Processing times can vary, and it is generally important to ensure all documentation is complete and accurate to help avoid delays.​

Honoring Third-Party Agreements

Before dissolution, the HOA must address any existing third-party agreements, such as contracts with vendors, service providers, or maintenance companies.​
Key Considerations:
Identify Existing Contracts: Review all current agreements to determine obligations and termination clauses.​
Legal Termination or Transfer: Consider working with counsel as appropriate to terminate or transfer contracts in compliance with contractual terms and to help manage potential liabilities.​
Address Potential Liabilities: Ensure all debts and obligations are addressed to reduce the risk of future disputes.​

Equitable Distribution Of Assets And Liabilities

Upon dissolution, the HOA generally must address its assets and liabilities in accordance with its governing documents and applicable law.​
Process:
Settle Debts and Obligations: Pay off any outstanding debts, including loans and unpaid invoices.​
Distribute Remaining Assets: Allocate any remaining assets, such as funds or property, among members as outlined in the governing documents or applicable law.​
Financial Disclosures and Audits: Consider appropriate financial disclosures and, if necessary, audits to support transparency and compliance.​

Drafting New Deeds For Homeowners

If the HOA holds title to common areas or other properties, it may be necessary to transfer ownership appropriately.​
Steps:
Assess Property Ownership: Determine which properties are owned by the HOA and require deed transfers.​
Draft and Record New Deeds: Work with appropriate professionals to draft new deeds transferring ownership to individual homeowners or another entity, and record these deeds with the appropriate county office.​
Address Challenges: Be prepared to navigate potential challenges, such as obtaining required member consent or addressing disputes among members.​

Alternatives To Full Dissolution

In some cases, homeowners may seek alternatives to dissolving the HOA.​

Amending Governing Documents

Modifying the HOA's bylaws or CC&Rs can address specific concerns without full dissolution.​
Procedures:
Review Current Documents: Identify provisions that may be outdated or problematic.​
Propose Amendments: Draft proposed changes and present them to the membership for approval.​
Secure Member Approval: Follow the procedures outlined in the governing documents to obtain the necessary votes for adoption.

Negotiating with Board Members

Engaging in open dialogue with the HOA board can lead to resolutions without dissolving the association.​
Strategies:
Mediation: Utilize mediation services to facilitate discussions and resolve disputes amicably.​
Conflict Resolution: Implement conflict resolution strategies to address member concerns and improve governance.​

Impact On Property Values And Common Areas

Dissolving an HOA can have significant implications for property values and the maintenance of common areas.​
Considerations:
Property Values: The absence of an HOA may affect property values, either positively or negatively, depending on buyer perceptions and the community's ability to self-manage.​
Common Areas: Responsibility for maintaining common areas may shift to individual homeowners or local governments, potentially leading to challenges in upkeep and funding.​

Engaging Legal Counsel

Given the complexities involved in dissolving an HOA, some homeowners and associations choose to consult with an experienced HOA attorney in California.​
Benefits:
Experienced Guidance: Legal counsel may help explain legal requirements and assist with compliance under California law.
Document Preparation: Attorneys can assist in preparing and filing documents.
Risk Mitigation: Advice tailored to the specific situation may help identify potential risks and liabilities during the dissolution process.​

Potential Legal Disputes and Issues

Dissolving an HOA may lead to legal disputes among members or with third parties.​
Common Challenges:
Member Disagreements: Conflicts may arise over the decision to dissolve, asset distribution, or changes in governance.​
Contractual Obligations: Disputes with vendors or service providers regarding contract terminations can occur.​
Legal Precedents: Being aware of relevant legal authority may help inform the process and reduce avoidable disputes.​

Navigating HOA Dissolution With Confidence

Dissolving a homeowners association (HOA) in California can be legally possible, but it is often complex and time-consuming. In some communities, owners explore whether addressing underlying governance or enforcement concerns—such as contested violation notices or board process issues—may be a more practical alternative to full dissolution.

This article provides general educational information and does not constitute legal advice.