HOA Lost Common Property to Tax Lien

Started by MichelM • 5 replies • 1940 views

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MichelM (Colorado)
Posts: 2

Posted:

A previous (Colorado) HOA Board failed to complete the transfer of the clubhouse/ pool/ recreation facility and other common property from the builder to the HOA as stated in the plat. Subsequently, the taxes were unpaid and publicly sold. Now at the first opportunity for redemption, the HOA is buying the property from these several investors. The HOA did not have in-force D&O Insurance at the time they dropped the ball (2007). Are the individual board members exempt from lawsuits for failure to perform their fiduciary duties?

BrianB (California)
Posts: 2,820

Posted:

obviously, you can sue anyone for anything. You can sue the board, (previous board) which would be suing the HOA itself... so while you might collect, you collect from yourself and neighbors, because the board would use HOA funds to defend and pay (ie, they wouldn't use D&O insurance because it isn't applicable to them)

You can try an individual suit on each director personally, and maybe stand a chance there. Maybe. It's hard to tell what a judge will allow.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Michel,

If the developer failed to deed over these common areas (amenities) to the HOA then he is the one who dropped the ball. If the HOA did not own these properties then they were not liable to pay the prop taxes. IMO, if anyone is to blame it should be the developer. I will agree that the board members should have know to ask for these deeds, but not all board members are saavy to these things and they cannot always be blamed for not knowing. Oftentimes there is no state agency to go to for help.

MichelM (Colorado)
Posts: 2

Posted:

The developer declared bankruptcy in 2006. The board had the attorney draw up transfer papers and commissioned the property management company with taking them to the developer for signature. The developer never signed, and subsequently the issue just fell by the wayside and was forgotten. The total bill will be about $85k and take another year to resolve. The community is about 45 single-family homes, 86 townhomes, and 26 vacant lots.

MaryA1 (Arizona)
Posts: 7,043

Posted:

Michel,

So the developer never deeded over the common areas to the HOA???? That is what you need to know. If he didn't then those properties may have been disposed of during the bankruptcy trial. If he did deed them over then the HOA would have been receiving tax bills and should have paid them. Sorry, Michel, but we really need more info to totally understand this problem. IMO, there are just too many holes in the story.

RogerB (Colorado)
Posts: 5,067

Posted:

MichelM, often Board members are well meaning but I doubt the Board members knowingly failed to perform their fiduciary duty. Therefore forget about winning a law suit because they probablly would not be held liable. Obviously you did not hire professional management. So now you are paying the price. HOAs pay for the knowledge of professional managers as well as their services. I can not begin to list all the ways we have helped HOAs stay out of trouble and saved them more than we are paid.

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