Any recourse against the Develper?

Started by MerrillM • 2 replies • 1319 views

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MerrillM (Illinois)
Posts: 1

Posted:

My HOA is in the process of starting to take over a very small HOA (8 units total) here in Chicago. We will be conducting a financial audit for the last 18 months since the closing of the first unit and I am pretty confident that we will find some serious financial issues.

One that is pretty evident is that there is a janitorial charge of $270 a month for the developer himself to vacuum the front steps, once. And then a management fee of $200. The homeowners have tried several times over the last year and a half to curb the spending and get some input as to how the money is spent, to no avail. The developer has controlled the HOA with out homeowner influence since the start and now that all the units have closed he is ready to transfer the HOA.

Do we have any recourse if he can not produce evidence for the charges to sue him for the "missing" money? Can we assume control of the HOA and the money and still be able to go after him? This could potentially equate to 10k and for our size association it is pretty good chunk of change.

Thanks for your help!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

You know your going to have more issues when you finally get the HOA together, that pursuing the developer isn't that important. Your HOA isn't going to get left any money for the most part once transition is over. A HOA is ONLY funded by it's members for the members. I'd concentrate more on examining the costs of running the place to get an idea of how much to set the dues.

It's kind of like buying a used race car. The owner of the race car got all the sponsorships, maintained the vehicle, and may have paid you to drive it. Now your driving in the ownership seat of that vehicle. Can you go back to the previous owner and sue for all the maintenance costs he paid on the vehicle before you got it? He may have paid 1K to replace a radiator but you find out you could replace it for $500. Do you sue for the difference?

Make sure once those documents are signed and the developer is gone, the documentation is changed to reflect the developer is no longer involved in your HOA. It's best to do it early.

Former HOA President

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

Do we have any recourse if he can not produce evidence for the charges to sue him for the "missing" money?

Depends. His paperwork might be legit. If you want to peruse this and know nothing about the laws that govern this and the court system you will need to hire a lawyer. This will likely exceed $10k. Sooo..... its up to you.

Got deep pockets if you loose?

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