Developer's responsiblity & delinquent fees

My board does little to nothing and conspired against my running for office upon voicing concerns about not following the bylaws. They seem to be friendly with the developer who they even tried to allow to vote during elections (which our bylaws specifically state is not allowed). The developer even stores junk in our storage space which was supposed to be handed over to the association 60 days after majority control of the board by unit-owners which was 1 year ago.

What a few of us are trying to figure out is if the developer is responsible for any common expense fees since we are in severe deficit.

Our bylaws state as follows:

6.06 Allocation of Common Expenses; Obligations of the Developer.

The annual Common Expense assessment shall be allocated among all Units incorporated within the Condominium and for which an initial Certificate of Occupancy has been issued with respect to such Unit(s). Each such Unit shall be assessed a proportionate share of the annual Common Expense assessment determined by the Unit's then current proportionate interest in the Common Elements as set forth on Exhibit "F" hereof and as same may be amended. Until the conveyance of title to the first unit, the developer shall be solely responsible for all Common Expenses. Following the first conveyance, the owners of the units to whom title has been conveyed shall be responsible for their proportionate share of all common expenses and the developer shall be responsible for payment of any operating deficit in the association budget. It means that the developer shall pay the difference between the total amount assessed and due from unit owners other than the developer and the actual amount of operating expenses incurred during the association's fiscal year under the budget. The developer will also pay the amount of reserves for replacement assessed against each unit with a certificate of occupancy if not yet conveyed to a third party. In case of stacked units, for each unit on each floor where at least one certificate has been issued. The Developer covenants (promises) that for so long as it appoints a majority of the Directors serving on the Board of Directors of the Condominium Association, it shall not cause the Common Expense assessment to be artificially low."

6:
Until the conveyance of title to the first unit, the developer shall be solely responsible for all Common Expenses. Following the first conveyance, the owners of the units to whom title has been conveyed shall be responsible for their proportionate share of all common expenses and the developer shall be responsible for payment of any operating deficit in the association budget. It means that the developer shall pay the difference between the total amount assessed and due from unit owners other than the developer and the actual amount of operating expenses incurred during the association's fiscal year under the budget. The developer will also pay the amount of reserves for replacement assessed against each unit with a certificate of occupancy if not yet conveyed to a third party.

Our budget and deed specifically say the amount of monthly assessment due to each unit owner and we've been paying more, the difference supposing to go into a reserve account. The developer, being in charge of all finances, never deposited any reserve money into a separate account. This reserve account, amounting to that difference, should total about $7,000 at this point after three years. The board still insists on leaving financials in the developer's hands even though he does not have official books to show us and the spreadsheets he provides us indicate the shortfall. I see a similarity between or dilemma and OCEAN CLUB CONDOMINIUM ASSOCIATION INC v. GARDNER MLM, December 16, 1998.

Your association needs its own lawyer. Not just for this. As long as the developer is in control of your finances, there is the real possibility of a conflict of interest, at the very least. Just keep in mind that when the developer has sold all of the units, he's going to be gone. You will be left to deal with whatever he leaves behind. If I were you, knowing what I know, I would get together with your fellow homeowners, find an attorney with a good reputation who specializes in common interest developments in your area, and meet with him or her. Prepare a list of questions that you want answered, to minimize the hours involved.

Rob

Hi Alessandro:

1. Even though you met with an attorney … it would potentially be less expense in the long run for everyone to pitch in a little to have one review your documents and the financial information or the attorney may have a CPA review this information for the homeowners. Any homeowner can consult an attorney, so if the one you initially spoke with made the statement needing a “resolution from the board of directors stating he has authority to pursue this matter” then you may want to get a second or third opinion. Many attorneys will usually offer a “free” consultation, so check around and see what 2-3 attorney’s state during the free consultation. Get quotes for reviewing the documents.

2. The board needs to take control of the finances now and insure that everything is proper before the developer disappears. In some states this is something that could come back on them with regards to fiduciary duty in performing their duties for the benefit of the HOA because they did not fulfill their duty as Board/Officers with regards to handling of the HOA monies.

3. Check with your local city planning to see if an “initial Certificate of Occupancy” has been issued for the units in question.

4. The developer no longer appoints a majority of Directors; therefore, the last sentence in the By-Law you posted above would also potentially be in effect.

5. Check your state statutes and HOA documents … homeowners can request and view HOA documentation including financial information. Ask for this information via letter sent return receipt to your Board of Directors.

This is the area of the By-Law that stands out and you need to verify with an attorney:

Following the first conveyance, the owners of the units to whom title has been conveyed shall be responsible for their proportionate share of all common expenses and the developer shall be responsible for payment of any operating deficit in the association budget. It means that the developer shall pay the difference between the total amount assessed and due from unit owners other than the developer and the actual amount of operating expenses incurred during the association's fiscal year under the budget. The developer will also pay the amount of reserves for replacement assessed against each unit with a certificate of occupancy if not yet conveyed to a third party. In case of stacked units, for each unit on each floor where at least one certificate has been issued.

That stood out with me also ... along with the following regarding reserves. Take note of what I have in bold:

The developer will also pay the amount of reserves for replacement assessed against each unit with a certificate of occupancy if not yet conveyed to a third party. In case of stacked units, for each unit on each floor where at least one certificate has been issued.

It appears for stacked units ... only one needs to have the certificate issued. This would also be something to double check with your attorney.

I would think that "stacked units" are those where you have a ground floor unit below and a second floor unit above.