On March 12, 2025, the Indiana Court of Appeals decided an appeal arising from a dispute between a homeowner and a homeowners’ association. In Sandoval v. Willow Lake Estates Home Owners Association, the association failed to comply with laws and rules requiring annual membership meetings and elections. It also did not propose an annual budget. Despite these failures, because it complied with its rules for imposing assessments, the trial and appellate courts sided with the association. As a result, the association can foreclose on a lien resulting from the homeowners’ refusal to pay.

This case presented the Court of Appeals with an opportunity to refer to two statutes for the first time, giving Indiana nonprofit corporations and their members guidance on the consequences of noncompliance and proper remedies. It also reminds homeowners’ associations and all kinds of nonprofit corporations that a court victory may come eventually, but compliance with bylaws, statutes, and other rules can avoid going to court in the first place. Here, the dispute began in 2018, a first suit began in 2020, and a second in 2021, meaning this opinion came seven years into the fight and five years after the parties first went to court.

Most of Indiana’s Homeowners Association Act does not apply to older associations.

The Court of Appeals declined to apply sections of the Indiana’s Homeowners’ Associations Act that would require the association to prepare annual budgets. But the sections the homeowner relied on applies only to associations formed after 2009 and older associations who opt into the statute. Some sections of that law apply to associations regardless of when they were formed, but they would not have assisted the homeowner here.

Indiana’s Nonprofit Corporation Act does not invalidate corporate actions for failure to conduct annual membership meetings.

Instead, Indiana’s Nonprofit Corporation Act governs the association, which was organized as a nonprofit in 1989 and identified that statute as its governing law. That law requires nonprofit corporations with members to hold annual membership meetings. Ind. Code § 23-17-10-1. But it also expressly states failure to hold the required membership meeting won’t invalidate any corporate action. The homeowner attempted to convince the court that this flexibility doesn’t allow nonprofits to ignore the meeting requirement altogether, only that they have some leeway on when to hold the meeting. For example, under the homeowner’s reading, corporate actions wouldn’t become invalid merely because a membership meeting occurred 13 months after the last one rather than within the 12-month window the section’s use of “annually” might otherwise suggest.

The court concluded, however, that Indiana’s General Assembly intended “to assure the continuation of corporate governance despite the procedural laps in failing to hold meetings, not merely failing to hold the meeting on the required date.” It reasoned that the law’s provision for judicially ordered meetings supported this interpretation because it provides a remedy short of invalidating all corporate actions for failure to hold an annual membership meeting. Instead, members may ask a court to “order a meeting to be held.” The court may even “fix the time and place of the meeting.”

This decision marks the first time an appellate court has applied the Nonprofit Corporation Act’s section on time and place of meetings. Similarly, no court has ever cited the section on judicially ordered meetings.

The association’s covenants and bylaws do not provide a homeowner the ability to withhold payment when the board follows on-point provisions.

The court next turned to the association’s covenants and bylaws. The association’s rules require annual membership meetings to elect directors, and they govern the basis for any assessments. But they don’t require the board to prepare a formal budget. (The Homeowners’ Association Act does, at least when that section applies.) Even though the association failed to hold a membership meeting, it complied with the assessment provisions. Because those provisions did not permit withholding assessment payments as a remedy for noncompliance with rules unrelated to the assessments, the homeowner had no legal ability to do so. The court pointed to an earlier decision coming to a different conclusion, explaining that the homeowners’ association there had rules requiring compliance with meeting and budget requirements as a condition for assessments’ validity.

The homeowner here has 30 days (April 11) to ask the Court of Appeals to reconsider its opinion or 45 days (April 28) to ask the Indiana Supreme Court to take on the case.

Lesson: Complying with laws and rules can save time, money, and heartburn even when a court victory likely will follow noncompliance.

Although the association prevailed here, the judges made clear they “disapprove of the HOA’s conduct.” Indeed, had the association complied with its own rules and the applicable statutes, it could have avoided expensive, lengthy litigation. This approach would have saved time, money, and the long-term harm caused by dragged-out litigation among neighbors. The investment of paying a lawyer to advise how to navigate meetings, which sometimes promise awkward, contentious, or worse interaction, or to decipher what the rules require, pale in comparison. 

If you have questions or would like additional information, please contact Josh Tatum.

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Tagged In: Court of Appeals, Homeowners Association Act, Indiana, Nonprofit Corporation Act