Ask the HOA Expert: Registered Agents, Borrowing HOA Equipment, Board Vacancies

Written by Posted On Wednesday, 28 November 2018 05:00

Question: Our homeowner association is properly incorporated with the state. Our attorney is our Registered Agent for the corporation. Can or should we change that?

Answer: The states have different requirements for registered agents. Typically, the agent must be a legal resident of the state in question or, in states that allow entities to serve as registered agents, an entity authorized to do business in the state. All states allow a corporate officer of the corporation to serve and all allow the corporation's lawyer to serve. Most allow business entities to serve as registered agents. Because most states permit one business entity to serve as a registered agent for others, some businesses exist to serve that exact function, charging a fee to act as the registered agent for hundreds or thousands of businesses in a given state. (Information from Wikipedia)

Usually the board president or secretary acts as the registered agent since the state directs the annual report renewal information to that person. This is the recommended so that the corporation files timely annual reports. If you don’t submit and pay for your annual report, your corporate status will lapse and the board will no longer have the corporate shield to protect it. To change registered agent, contact the state agency that handles corporate records (often the Secretary of State’s office) and change your Registered Agent name and contact information to the president or some other board member. This can often be done over the internet.

The HOA has just purchased a ladder and a power washer for our residents to use in and around their units. One of our residents has suggested that the HOA is liable if residents hurt themselves while using this equipment. Do we need to include something in our insurance to cover this or is there a simpler way?


Question: We periodically have members who want to borrow HOA equipment for personal use. Is this advisable?

Answer: It’s not advisable to provide things like HOA owned ladders and power washing equipment to owners. Either one of these could result in serious injury if misused. Members should rent their own equipment or hire a contractor to do the work.


Question: We have a board vacancy that requires an appointment to fill. Our president wants the board to vote by email. Doesn't voting need to be done at a member meeting or a special meeting?

Answer: Board vacancy replacements should be done by at a board meeting. That board meeting should be open to the owners.


Question: Our board wants to build a larger pool and upgrade the clubhouse and is considering borrowing $200,000 and use our $50,000 reserve fund. While the expansion concept is supported by the members, I question the wisdom of borrowing money and using reserves earmarked for other things to do it.

Answer: A homeowner association borrowing money, particularly for discretionary spending like this, is a bad idea. The costs associated with this kind of borrowing are high since it is considered a commercial loan which carries a higher interest rate, shorter term and high closing costs. And the loan must still be repaid by the owners just like any loan but with the added liability of the HOA being responsible to collect the payments. If this project is desirable, the funds to do it should come from the members themselves by whatever means they may have available - cash in savings, home equity loan or Uncle Ralph. That way, the HOA stays out of the loan business and the repayment issue does not impact the fee structure or increase the HOA’s administrative duties.

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