Transfer of HOA to POA

This is my second experience with a home owners association. The first was perfect and this association is a complete nightmare since it is Developer controlled.

There is a possibility our Developer will transfer the home owner's association to the property owners soon. We are a small community and our location is perfect and we love our homes. The Developer has a four vacant lots for sale remaining. We suspect he has run out of money. After a little research, this is how I understand the turnover will go:

A. Developer contacts home owners and requests to transfer hoa to poa. Both parties sign document.
B. Home owners elect Board of Directors.
C. Home owners obtain an attorney to represent the Association.
D. The attorney for the home owners meets with the Developer's attorney to examine the Developer's books. In the event, the Developer has: co-mingled dues, kept inadequate accounting records, failed to produce a budget in seven years, failed to hold a hoa meeting in seven years, refused to collect dues from all members and refused to communicate via telephone or email regarding any issue with any home owner and refused to advise how much money is in our Reserve Fund, it will be ugly!

Please be so kind to tell me what will happen if the attorney for the home owners discovers the Developer has over the course of seven years: co-mingled dues, kept inadequate accounting records, no budget or projections for the Reserve Fund and discovers several home owners have refused to pay dues for several years because the Developer refused to provide a budget. Also, the Developer's records will show he provides a quality maintenance yard landscaping crew for "everyone" and has never, ever filed a lien on deliquent property owners nor has he collected money for late dues or associated interest for the late dues. The Developer used our dues to pay for several members that did not pay and those members never complained or asked the yard crew to leave.

The Developer lives in another town and "refuses" to return telephone calls or reply to emails from home owners. He is the only Officer for our small hoa community.

Will the attorney for us home owners force him produce a budget, account for money that is owed to us (never collected a late fee/interest) and put money in our Reserve Fund? Can our Attorney prosecute him for negligence and recoup our money? If so, will our attorney charge us home owners for legal fees or will the attorney make the Developer pay?

I'm sure that you will respond and advise me to contact an attorney - three of us have. In the real world, a home owner or an individual can ask for one half hour free advice from a local attorney. One attorney spoke with me for 45 minutes. I personally paid an attorney for a half hour session and she kept repeating "He can't do that" and it would cost us home owners a lot of money to hire her to go after him.

Your advice will be greatly appreciated!

Hi Margo:

Need clarification please …

1) What do your governing documents state with regards to turnover from developer, such as when X number of units sold, by X date, etc.?

2) Did the developer collect HOA dues from the property owner’s while in charge of the HOA and board?

Some of the information you are asking about will be contained in your POA documents and which we cannot view, unless you post the exact verbiage.

Regarding your in essence overall question:

States vary regarding HOA’s or POA’s along with transition from developer to homeowner. Potentially if the developer collected fees and has stuck his finger in the pie above and beyond paying for proper common expenses then he could possibly be liable. I am not an attorney, but it also appears that in your state the developer also is suppose to pay assessments along with everyone else for lots owned, except for maybe under 4(b) yet that would also mean giving up voting rights. Interesting … as then if he potentially did not pay assessments under this statute, how could he conduct HOA business with no voting rights.

As you guessed I do highly recommend the homeowner’s pitch in and have an attorney on hand for the transition. An attorney will insure you are hopefully protected and if there are any improprieties. If you end up needing to take the developer to court due to improprieties and if you win, then potentially you will be awarded your attorney fees. So in essence you may need to pay up front unless the attorney will take the case on contingency basis, but which does not happen often unless they think it is a total slam dunk win-win situation. We did have a poster on here not too long ago and the attorney for them is apparently doing contingency as they are not being charged up front for fees.

There will be some items you can do yourself to help reduce attorney fees such as researching the County Records to determine if there have been any amendments to your documents that you may not be aware of at this time (you need to do this anyway). Also, check to see if the developer conducted business transactions when selling properties in the company name or if he also did any in his personal name. Our developer did this and opened the door for not only business liability but also personal liability.

According to Georgia statutes the following is stated regarding assessments:

TITLE 44. PROPERTY
CHAPTER 3. REGULATION OF SPECIALIZED LAND TRANSACTIONS
ARTICLE 6. PROPERTY OWNERS' ASSOCIATIONS

§ 44-3-225. Assessment of expenses; exemption from liability; liability for unpaid assessments

(a) To the extent that the instrument expressly so provides:

(1) Any common expenses benefiting less than all of the lots shall be specially assessed equitably among all of the lots so benefited, as determined by the board;

(2) Any common expenses occasioned by the conduct of less than all of those entitled to occupy all of the lots or by the licensees or invitees of any such lot or lots shall be specially assessed against the lot or lots, the conduct of any occupant, licensee, or invitee of which occasioned any such common expenses;

(3) Any common expenses significantly disproportionately benefiting all of the lots shall be assessed equitably among all of the lots in the development as determined by the board; and

(4) Other than for limited common areas expressly designated as such in the instrument and assigned to fewer than all lots, nothing contained in paragraph (1) or (3) of this subsection shall permit an association to specially or disproportionately allocate common expenses for periodic maintenance, repair, and replacement of any portion of the common area or the lots which the association has the obligation to maintain, repair, or replace.

(b) No lot owner other than the association shall be exempted from any liability for any assessment under this Code section or under any instrument for any reason whatsoever, including, without limitation, abandonment, nonuse, or waiver of the use or enjoyment of his or her lot or any part of the common area except to the extent that any lot, upon request by the owner of the lot, expressly may be made exempt from assessments and thus denied voting rights of the lot under the instrument until a certificate of occupancy is issued by the governing authority for a dwelling on such lot.

(c) Unless otherwise provided in the instrument and except as provided in subsection (d) of this Code section, the grantee in a conveyance of a lot shall be jointly and severally liable with the grantor thereof for all unpaid assessments against the latter up to the time of the conveyance without prejudice to the grantee's right to recover from the grantor the amounts paid by the grantee; provided, however, that if the grantor or grantee shall request a statement from the association as provided in subsection (d) of Code Section 44-3-232, such grantee and his or her successors, successors-in-title, and assigns shall not be liable for nor shall the property owners' association lot conveyed be subject to a lien for any unpaid assessments against such grantor in excess of any amount set forth in the statement.

(d) In the event that the holder of a first priority mortgage or secondary purchase money mortgage of record, provided that neither the grantee nor any successor grantee on the secondary purchase money mortgage is the seller of the lot, or in the event that any other person acquires title to any lot as a result of foreclosure of any such mortgage, such holder or other person and his or her successors, successors-in-title, and assigns shall not be liable for nor shall the lot be subject to any lien for assessments under this Code section or under any instrument chargeable to the lot on account of any period prior to the acquisition of title; provided, however, that the unpaid share of an assessment or assessments shall be deemed to be a common expense collectable from all of the lot owners, including such holder or other person and his or her successors, successors-in-title, and assigns.

Hello Janet B2:

Thanks! You have more knowledge than me but I am quickly learning.

We contacted two lawyers.

MargoT