Builder-Owned Rentals

Our development is still under construction and the HOA is still primarily run by the builder. The build-out is over two years behind schedule due to the economy and the builder has just recently started building again. Here’s the rub … they’ve started directly renting these newly built units as sales in our area are way down. To make matters worse the builder isn’t paying the HOA dues for these rented units stating that they’re “not yet sold.”

We’ve approached our property management company about this issue, but as they’re the ones hired by the builder to act as the rental agents they don’t seem overly responsive to our concerns.

I realize as a board member and a homeowner I have a decidedly homeowner-slant to my way of thinking, but this just doesn’t seem legit. Is it??

Here's the verbiage from the HOA Covenant:

"Personal Obligation for Assessments. Each Owner, including Declarant and each Builder, by acceptance of deed therefore, whether or not it shall be so expressed in such deed, covenants and agrees and shall be personally obligated to pay to the Association: annual assessments or charges, special assessments, and other charges, fines, fees, interest, late charges, and other amounts, all as provided in this Declaration, with such assessments and other amounts to be established and collected as hereinafter provided."

I'm no lawyer, but it seems that if a deed is issued, the holder of that deed is obligated to pay the HOA dues. Is it possible to rent a unit without a deed being issued??

Any thoughts would be greatly appreciated.

Thanks, Roger.

It does mention elsewhere in our covenants about assessments being paid on undeveloped lots, but at a “reduced rate.” Doesn’t specify what that reduced rate might be.

The developer is currently in control of the HOA Board and they hand selected the current HOA Management Company. The position stated by the HOA Management company is that the builder only starts paying HOA dues on vacant units once the first unit in a building is sold … then the builder assumes the assessment for the vacant units until they are sold. However, if a building has 4 units and each of those units is being rented out (by the builder), then no HOA dues (assessment) are being collected for those units.

This situation happens more than once. Just today, here in VA, I read the Covenants of another HOA which specifically allows exactly what you describe and generally totally excuses the Declarant (builder) from any and all assessments until divested of Class B shares (i.e., owned by the builder). On the other hand until such time as that occurred they were more or less totally responsible for all utilities, grounds fees, development costs, etc. (there was a prorate mechanism tied to the number of lots that were A or B) so that the HOA had few bills until the percentage number of Class A shares (i.e., sold to a new owner) grew large. There may be something similar inside your own Covenants or By-Laws.