TX Builder went under and owned the HOA

Started by DerekM2 • 3 replies • 1379 views

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DerekM2 (Texas)
Posts: 1

Posted:

Our community seems to be in a bit of a bind here. About two years ago the builder went under which also owned the HOA. He filed Chapter 7. Since the lots were not all built out we as a community went through a bit of a rough patch of time. Generally we got by pretty well. Some smaller items got turned off (IE street lights, general upkeep) most of us took care of things that needed to be done when we had some spare time. Our community only has an area near the front that needs to be mowed (No pools, ect)

Current Day: A builder comes in and buys the 17 empty lots and builds houses on them (Phase 1). Then then proceed to setup a HOA meeting with a company that they use. We (community) had around a 30% turnout at the meeting and were going to listen to what they had to say as most of us had no ideal. Come to find out they managed to get a Board "elected" after doing what I would call a Sales pitch on us and telling us we by law were required to have a HOA. Baiscally we are part of a manditory HOA that must be in place.

I am very confused at this time. Being that the builder (which no longer exists) owned the HOA (which also no longer exists according to Court Docs) how can we be part of a manditory HOA? Are we? I suspect that the new company that bought the lots has something in mind (they bought 67 lots for phase 2 as well) that we do not know about.

What can or should our next steps be?

GlenL (Ohio)
Posts: 5,491

Posted:

If it were me; I would pass the hat between the people who are living there and hire an attorney to explain your rights and responsibilities to you before the new builder pulls a fast one on you. Yes, even though the old builder controlled the HOA, it probably still exists and you are bound to it.

Studies show that 5 out of 4 people have problems with fractions

TimB4 (Tennessee)
Posts: 21,061

Posted:

Derek,

Obviously, follow Glens advise and consult with an attorney.

I am not an attorney and I do not work within the legal profession. However, as I understand it:

The Declaration of Covenants, Conditions and Restrictions (CC&Rs), a type of Deed Restriction, are attached to your deed. Even if the Builder went bankrupt, the CC&Rs would not have been abolished.

The CC&Rs typically state that an association will be formed to maintain the common area and enforce the covenants. Since your deed has the CC&Rs attached to it, you would typically be mandated to be a member of any Association performing those duties.

When the new builder purchased the available lots, his properties also had these CC&Rs attached to them. I suspect that since he acquired the previous builders lots, he also acquired the votes that went with those lots. Typically those votes are more than 1 per lot and would give him controlling authority within the Association. This is probably why he called the meeting.

As Glen said, verify all of this with a local attorney who would also have access to any required documents to research the issue.

Tim

JanetB2 (Colorado)
Posts: 4,219

Posted:

Hi Derek:

To help you understand the situation, votes, declarant/developer rights reserved in your documents I suggest you make an extra copy of all your governing documents. Place them in a binder with tabs for Articles of Incorporation, Bylaws, Declaration of Covenants, etc. Then read through them thoroughly with different colored highlighters. Highlight any declarant/developer rights with (i.e., orange) and homeowner rights (i.e., yellow). Make a list of any concerns or questions you may have regarding your documents. This way if or when you do consult an attorney it will be easier to reference certain items in your documents.

If you pull out and look at your Warranty Deed sent to you after you closed on your home it will potentially reference Covenants as attached to or running with the property. Now … I am not positive about TX; however, in some other states declarant/developer control must be passed via legal instrument filed to be legal. So before you consult an attorney you might also go out to County Records website or physically and get copies of any documents regarding your subdivision which you may not already have on hand. Also, get a copy of the Warranty Deed when the new developer bought the lots and see if it mentions any developer rights included in the purchase or any other documents referenced.

I also agree with both Glen and Tim, if needed be sure to consult an attorney. A local attorney will also be able to let you know for sure regarding transfer of declarant rights. I recommend having a consultation with 2-3 attorneys (many will do short consultation for free) and compare responses and options.

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