Why Your HOA’s Corporate “Good Standing” Matters

Homeowner’s associations and condominium associations (collectively “HOAs”) are usually organized as nonprofit mutual benefit corporations under state law. Like any corporation, they must maintain “good standing” with their state by filing required reports, paying franchise taxes or fees, and complying with statutory obligations. Unfortunately, it’s easy to overlook these administrative tasks, and it is not uncommon for HOAs to be “suspended” by their state’s Secretary of State and/or Franchise Tax Board for failing to comply with required filings. A corporation that is suspended loses its “good standing” and a loss of good standing can create serious legal and financial problems for the HOA, its board, and its members.

What Does “Good Standing” Mean?

An HOA is in good standing when it has: (i) filed all required annual or biennial Statements of Information with the Secretary of State; (ii) paid any state franchise taxes, penalties, or fees; (iii) kept its registered agent information current; and (iv) complied with other statutory requirements specific to nonprofit corporations. When an HOA falls behind, the Secretary of State or Franchise Tax Board can “suspend” or “forfeit” its corporate powers.

Consequences of an HOA’s Loss of Powers.

If an HOA’s powers are suspended or forfeited, the consequences can be severe and include: