Municipal Custodianship for Dissolved HOAs
What happens when a Nebraska homeowners’ association is administratively dissolved and nobody reinstates it — a city can be appointed custodian, step into the board’s place with all of the association’s powers, and charge its costs as a lien on every lot. The full statutory text, hosted for reference, with a plain-language guide for homeowners.
The Municipal Custodianship for Dissolved Homeowners Associations Act (Neb. Rev. Stat. §§ 18-3101 to 18-3105, enacted in 2015) answers a question that is easy to overlook until it arrives: who looks after the common areas when the association that owned them stops existing?
What it actually does. Under § 18-3103, where a homeowners’ association has been dissolved under § 21-19,138 of the Nebraska Nonprofit Corporation Act and not reinstated, a municipality may bring an action to be appointed custodian to manage the association’s affairs as set out in § 18-3104. The consequence is larger than a city mowing the common area: the appointing order must provide that the custodian may exercise all of the powers of the homeowners association, through or in place of its board of directors or officers, to the extent necessary to manage its affairs in the members’ best interests; the appointing district court takes exclusive jurisdiction over the association and all of its property wherever located; and the custodian is not liable for the association’s acts or omissions and keeps every immunity municipalities have by law (§ 18-3104(2), (3)).
The four findings — and the six-month window
A court cannot appoint a custodian out of the blue. § 18-3104(1) requires four findings: (a) the association has been administratively dissolved by the Secretary of State under § 21-19,138; (b) it has failed to maintain the common area as the municipality’s plat or subdivision conditions of approval required, or to maintain the common area or private improvements outside it under an agreement with the municipality, or to comply with laws on that maintenance in a way adverse to the municipality’s interests; (c) the municipality has made a demand on the members to hold a special meeting to remove and elect new directors and approve an application for reinstatement; and (d) “the members have failed to reinstate the homeowners association within six months after the demand.”
That six-month window is the owners’ opportunity to keep control, and § 18-3105 is how they use it — see below. Before appointing, the court must hold a hearing on written notice from the petitioner to all parties and any interested persons the court designates, with proof of service; first-class mail is sufficient service (§ 18-3104(2)).
The part that lands on your lot
If the court awards the custodian compensation or reimbursement of costs, § 18-3104(4) makes those amounts “a lien on each and all of the lots”, and the order must identify each lot and the amount charged against it. You are entitled to notice of the hearing that sets those amounts — it goes to all owners and interested parties. Once the award is made and a notice containing the dollar amount is recorded where mortgages or deeds of trust are recorded, the municipality may foreclose that lien in like manner as a mortgage, on reasonable notice to other affected lienholders, and the lien is prior to all other liens and encumbrances except (i) those recorded before the declaration or agreement, (ii) a first mortgage or deed of trust recorded before that notice, and (iii) liens for real estate taxes (§ 18-3104(5)). Note how narrow that third carve-out is: real estate taxes only, where § 52-2001(2)(c) also protects other governmental assessments and charges.
§ 18-3105 is the owners’ remedy
Reinstatement is one section of five, but it is the section an owner can act on. Notwithstanding any contrary provision in the Nebraska Nonprofit Corporation Act, the articles or the bylaws, an association dissolved under § 21-19,138 may apply to the Secretary of State for reinstatement either through an officer or director under § 21-19,139, or — and this is the useful route when the board is gone — three or more members may, at any time after dissolution, call a special meeting to remove and elect new directors and approve the reinstatement application. Those members may set the time and place; notice goes out under § 21-1955; three members eligible to vote are a quorum, and the matter carries on the affirmative vote of those present and voting.
Two further points. There is no five-year cutoff here as there is for ordinary nonprofit reinstatement — an association dissolved more than five years simply pays a one-hundred-dollar reinstatement fee, and nothing in that subsection abolishes or modifies any restrictive covenant or other benefit or obligation of membership (§ 18-3105(2)). And when reinstatement takes effect it relates back to the effective date of the administrative dissolution, so the association resumes “as if the administrative dissolution had never occurred” (§ 18-3105(5)).
Who counts, under the Act’s own definitions
§ 18-3102 is unusually specific, and the definitions decide whether any of this reaches you:
- A homeowners association means a nonprofit corporation duly incorporated under Nebraska law for the purpose of enforcing the restrictive covenants on the real property described in its articles, located within the corporate limits of a municipality, each member of which owns a lot and is obligated by membership or ownership to pay costs for administering, maintaining and caring for the common area. It expressly includes associations of residential homeowners, nonresidential property owners, or both. An unincorporated association, or one whose covenanted property lies outside city limits, is outside the Act.
- Real property means the property described in the articles of incorporation which is located within — or to be located within — a plat or subdivision approved by a municipality, subject to restrictive covenants the association enforces and filed of record with the register of deeds. Both of those are gates, not description.
- Common area means a lot or outlot within the plat or subdivision, including improvements, owned or otherwise maintained, cared for, or administered by the association for the common use, benefit and enjoyment of its members. An outlot the association merely administers still counts.
- Lot means any designated parcel of land within the plat or subdivision to be separately owned, used, developed or built upon — the unit the custodian’s lien attaches to.
- A member is an owner qualified to be a member by virtue of owning a lot covered by the declaration and articles of an association dissolved under § 21-19,138.
- An owner is the owner of a lot within the plat or subdivision, but does not include someone whose interest is solely as security for an obligation — a mortgagee is not an owner here.
- Municipality means any city or incorporated village of this state.
How it fits with Nebraska’s other community laws
The dissolution this Act responds to happens under the Nebraska Nonprofit Corporation Act. While an association is alive, what it may charge comes from its recorded declaration, and its assessment lien from § 52-2001 — but only where its members are fee simple owners of residential real estate, so the nonresidential owners associations this Act also covers fall outside that section. For a condominium the lien comes from the Nebraska Condominium Act instead. Return to the Nebraska HOA laws hub for the full set.
Contents · 5 sections ▾
- § 18-3101 Act, how cited
- § 18-3102 Terms, defined
- § 18-3103 Municipality; action to be appointed custodian
- § 18-3104 Appointment of municipality as custodian; findings; hearing; powers; compensation; costs; lien; recording; foreclosure; termination of custodianship; withdrawal or termination of custodianship
- § 18-3105 Dissolved homeowners association; reinstatement; procedure; fee; Secretary of State; duties; effect of reinstatement
Sections 18-3101 to 18-3105 shall be known and may be cited as the Municipal Custodianship for Dissolved Homeowners Associations Act.
Source: Laws 2015, LB304, § 1.
For purposes of the Municipal Custodianship for Dissolved Homeowners Associations Act, unless the context otherwise requires:
(1) Common area means lot or outlot within a plat or subdivision of real property including the improvements thereon owned or otherwise maintained, cared for, or administered by the homeowners association for the common use, benefit, and enjoyment of its members;
(2) Homeowners association means a nonprofit corporation duly incorporated under the laws of the State of Nebraska for the purpose of enforcing the restrictive covenants established upon the real property legally described in the articles of incorporation which is located within the corporate limits of a municipality, each member of which is an owner of a lot located within the plat or subdivision and, by virtue of membership or ownership of a lot, is obligated to pay costs for the administration, maintenance, and care of the common area within the plat or subdivision. Homeowners association includes associations of residential homeowners, nonresidential property owners, or both;
(3) Lot means any designated parcel of land located within a plat or subdivision to be separately owned, used, developed, or built upon;
(4) Member means an owner that is qualified to be a member of a homeowners association by virtue of ownership of a lot covered by the property described in the declaration and articles of incorporation of a homeowners association dissolved under section 21-19,138;
(5) Municipality means any city or incorporated village of this state;
(6) Owner means the owner of a lot within the plat or subdivision, but does not include a person who has an interest in a lot solely as security for an obligation; and
(7) Real property means the real property described in the articles of incorporation which is located within or to be located within a plat or subdivision approved by a municipality and which is subject to restrictive covenants to be enforced by the homeowners association and filed of record in the office of the register of deeds of the county in which the real property is located.
Source: Laws 2015, LB304, § 2.
In the event a homeowners association is dissolved pursuant to section 21-19,138 and not reinstated pursuant to the Nebraska Nonprofit Corporation Act, any municipality may bring an action to be appointed as custodian to manage the affairs of the homeowners association as set forth in section 18-3104.
Source: Laws 2015, LB304, § 3.
Cross references: Nebraska Nonprofit Corporation Act, see section 21-1901.
(1) The district court of the county in which a dissolved homeowners association was previously existing shall, in a proceeding brought by a municipality by petition to the district court, appoint the municipality as custodian to manage the affairs of the homeowners association upon a finding that:
(a) The homeowners association has been administratively dissolved by the Secretary of State pursuant to section 21-19,138;
(b) The homeowners association has failed in one or more of the following ways:
(i) To maintain the common area as required by the municipality’s conditions of approval for the plat or subdivision of real property;
(ii) To maintain the common area or private improvements located outside of the common area on the real property in the plat or subdivision in accordance with all terms and conditions of any agreement with the municipality; or
(iii) To comply with any applicable laws, rules, or regulations pertaining to maintenance of the common area or private improvements located outside of the common area on the real property in the plat or subdivision such that the noncompliance is adverse to the interests of the municipality and may result in expenditures by the municipality not otherwise required;
(c) The municipality has made a demand on the members to hold a special meeting to remove and elect new directors and to approve a submission of an application to the Secretary of State for reinstatement pursuant to the Municipal Custodianship for Dissolved Homeowners Associations Act or the Nebraska Nonprofit Corporation Act; and
(d) The members have failed to reinstate the homeowners association within six months after the demand.
(2) The district court shall hold a hearing, after written notification thereof by the petitioner to all parties to the proceeding and any interested persons designated by the court, before appointing a custodian, and the petitioner shall provide sufficient proof of service to the court. Service by first-class mail shall be deemed sufficient service. The district court appointing the custodian shall have exclusive jurisdiction over the homeowners association and all of its property wherever located.
(3) The district court shall describe the powers and duties of the custodian in its appointing order, which order may be amended upon motion and notice to the parties from time to time. Among other powers, the appointing order shall provide that the custodian may exercise all of the powers of the homeowners association, through or in place of its board of directors or officers, to the extent necessary to manage the affairs of the association in the best interests of its members. The custodian shall not be liable for the actions or inactions of the homeowners association and shall maintain all immunities granted to municipalities by applicable law.
(4) Upon application of the custodian, the district court from time to time during the custodianship may order compensation paid and expense disbursements or reimbursements made to the custodian from the assets of the association or proceeds from the sale of the assets. Notice of a hearing to determine compensation and costs shall be provided to all owners and interested parties by the custodian as set forth in subsection (2) of this section, with proof of service provided by the custodian. In the event the district court awards compensation or reimbursement of costs, all such compensation and costs shall be a lien on each and all of the lots in the manner as set forth in subsection (5) of this section. Any court order awarding compensation or reimbursement of costs herein shall identify each lot and the amount of compensation or reimbursement of costs each lot shall be charged as a lien.
(5)(a) A lien created under subsection (4) of this section shall be effective from the time the district court awards the compensation or reimbursement of costs and a notice containing the dollar amount of the lien is recorded in the office where mortgages or deeds of trust are recorded. The lien may be foreclosed in like manner as a mortgage on real estate but the municipality shall give reasonable notice of its action to all other lienholders whose interest would be affected.
(b) A lien created under subsection (4) of this section is prior to all other liens and encumbrances on real estate except (i) liens and encumbrances recorded before the recordation of the declaration or agreement, (ii) a first mortgage or deed of trust on real estate recorded before the notice required under subdivision (5)(a) of this section has been recorded, and (iii) liens for real estate taxes.
(6) In the event the homeowners association is reinstated after appointment of a custodian, any interested party may make a request to the district court for termination of the custodianship.
(7) A custodian may be allowed to withdraw from or terminate the custodianship upon an order from the district court permitting such withdrawal or termination following a hearing for which notice is provided to all owners and interested parties by the custodian.
Source: Laws 2015, LB304, § 4.
Cross references: Nebraska Nonprofit Corporation Act, see section 21-1901.
(1) Notwithstanding any provision to the contrary in the Nebraska Nonprofit Corporation Act or the articles of incorporation or bylaws of a homeowners association, a homeowners association dissolved pursuant to section 21-19,138 may, in addition to any other procedure allowed by law, apply to the Secretary of State for reinstatement in one or more of the following ways:
(a) An application for reinstatement may be brought at any time after dissolution by an officer or director of the dissolved homeowners association pursuant to section 21-19,139; or
(b) Three or more members of such homeowners association may, at any time after dissolution, call a special meeting to (i) remove and elect new directors and (ii) approve the submission of an application to the Secretary of State for reinstatement. Such members may set the time and place of the meeting. Notice of the meeting shall be given pursuant to section 21-1955. For purposes of this section only and notwithstanding the declaration, the articles of incorporation, or the bylaws of a dissolved homeowners association, action on matters described in this subsection shall be approved by the affirmative vote of the voters present and voting on the matter. Three members eligible to vote on the matter shall constitute a quorum.
(2) Upon action being taken to apply for reinstatement as set forth in subdivision (1)(a) or (b) of this section, the process for reinstatement set forth in section 21-19,139 shall apply, except that the reinstatement fee for a homeowners association dissolved more than five years shall be one hundred dollars. Nothing in this subsection shall be construed to abolish, modify, or otherwise change any restrictive covenant or other benefit or obligation of membership in a homeowners association.
(3) The application for reinstatement must:
(a) Recite the name of the homeowners association and the effective date of its administrative dissolution;
(b) State that the ground or grounds for dissolution either did not exist or have been eliminated; and
(c) State that the homeowners association’s name satisfies the requirements of section 21-1931.
(4) If the Secretary of State determines that the application contains the information required by subdivisions (1)(a) and (b) of this section and that the information is correct, the Secretary of State shall cancel the certificate of dissolution and prepare a certificate of reinstatement reciting that determination and the effective date of reinstatement, file the original of the certificate, and serve a copy on the homeowners association under section 21-1937.
(5) When reinstatement is effective, the reinstatement shall relate back to and take effect as of the effective date of the administrative dissolution, and the homeowners association shall resume carrying on its activities as if the administrative dissolution had never occurred.
Source: Laws 2015, LB304, § 5.
Cross references: Nebraska Nonprofit Corporation Act, see section 21-1901.
General information, not legal advice. Statutory text is reproduced from the Nebraska Revised Statutes and may not reflect the most recent amendments.