Problems with deadbeat developer

JB4 (North Carolina)
Posts: 2

Posted:

i will try to make this as brief as possible with just highlights. 1st problem: developer basically sold lots in development promising and advertising amenities such as pool and clubhouse. Never happened. The developer let everyone know that the remaining lots were in risk of going into forclosure. We began to act and found questionable accounting when it was FINALLY given to us. Problems 2, and 3: After mailing certified letters of request( per NC planned community act) and handing copies of the request at a community meeting several months ago we still have not recieved accounting from 2006-2008. The accounting we did receive showed that he was using HOA funds to BUILD the ammenities. This is before a board was ever elected and any meeting ever occured.....ever. We also found out that when the % if lots sold in which he became a general lot owner that dues were never paid by him. Problem 4: At the last second before foreclosure he transitioned all common areas and unfinished ammenities to the HOA without any notice, gathered a group of investors and settled with the bank. We were never able to accept or deny the transition. Problem 5: He has become a 'voice' of the unknown investors, and ran for the executive board winning the last spot because the amount of votes they had. We have since found out that he is NOT an owner of any of the lots. Problem 6: he has made it known that he is getting a kickback from the corporation that bought out the remaining lots even though he is not a licensed real estate agent. Problem 7: He is putting flyers up at the community gates advertising his lots for sale and listing all others 'SOLD' even those that are trying to sell there properties to get out of dodge. Any suggestions.

DanielH1 (California)
Posts: 482

Posted:

Some developers are scum. You just have to fight them issue-by-issue and do your best to force them to do the right thing.

You should hire a lawyer to examine your problems and figure out whether any of them is (A) illegal and (B) illegal such that a lawsuit would improve your situation.

False advertising (Problem #1), sloppy accounting (Problem #2, #3), being inconsiderate (Problem #4), commercial bribery maybe (Problem #6) and lying (Problem #7) show that he is scumbag, more than a criminal. He's probably going broke and he is hussling to make the best out of a development that is a financial disaster for him.

Try to wrestle HOA control completely away from him, keep hounding him for documents, ignore his false advertising and bribery to other people (that's not an HOA issue). Just keep fighting and, over time, you'll figure things out and figure out a way to move forward.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By JB4 on 09/20/2010 11:35 AM
i will try to make this as brief as possible with just highlights. 1st problem: developer basically sold lots in development promising and advertising amenities such as pool and clubhouse. Never happened. The developer let everyone know that the remaining lots were in risk of going into forclosure. We began to act and found questionable accounting when it was FINALLY given to us. Problems 2, and 3: After mailing certified letters of request( per NC planned community act) and handing copies of the request at a community meeting several months ago we still have not recieved accounting from 2006-2008. The accounting we did receive showed that he was using HOA funds to BUILD the ammenities. This is before a board was ever elected and any meeting ever occured.....ever. We also found out that when the % if lots sold in which he became a general lot owner that dues were never paid by him. Problem 4: At the last second before foreclosure he transitioned all common areas and unfinished ammenities to the HOA without any notice, gathered a group of investors and settled with the bank. We were never able to accept or deny the transition. Problem 5: He has become a 'voice' of the unknown investors, and ran for the executive board winning the last spot because the amount of votes they had. We have since found out that he is NOT an owner of any of the lots. Problem 6: he has made it known that he is getting a kickback from the corporation that bought out the remaining lots even though he is not a licensed real estate agent. Problem 7: He is putting flyers up at the community gates advertising his lots for sale and listing all others 'SOLD' even those that are trying to sell there properties to get out of dodge. Any suggestions.

Problem 1 would possibly depend on statute of limitations in filing against the declarant. Be sure to check and see what your time limit is for possible filing of a lawsuit.

Problem 2 & 3: This is sticky as initially the declarant has a great amount of control; however, depending on your state statutes this is usually not the complete control that others believe. For example in Colorado the declarant MUST reserve certain rights he would want, and those not reserved he does not control. Again, read all your state HOA statutes and your other HOA documents. You should be able to pursue him even with possible lien just like everyone else for possible non payment of dues.

Problem 4: Depending on the time frame you may want to check with an attorney as if there are any issues you may be able to file something even if it is against his insurance company. Also, check with your city as usually there are fees and deposits paid until certain work on subdivisions by developers is complete. You may be able to hinder any release of funds pending from the local government agencies.

Problem 5: Check your HOA documents. If he does not own any lots then more than likely he cannot be a board member or officer of the association. However, you contradict yourself here as in Problem 7 you state advertising HIS lots; therefore, if he owns lots then he could be a board member.

Problem 6: No idea as this is not fully clear ... they could be paying him a salary to "market" the properties. This would not be considered a kick back.

Problem 7: He needs to be careful here as someone could claim "false advertising" or some other claim. I'm not an attorney, but if he is marketing then this could be an issue.