Developer handing over HOA to homeowners

I wonder if someone here can give us some advice. I live in a neighborhood that was begun in 2004 with covenants filed for the HOA. The developer went broke a few years later, and the incomplete subdivision was bought by another builder. The builder added a second phase to the neighborhood and a clubhouse, pool, and tennis court. He intended on adding a third phase but then the real estate market crisis prevented it. There were only a few homes in phase 1 at the time the second builder took it over. They did not want the clubhouse/pool/tennis courts, but the builder put them in anyway, and raised their yearly assessments from $90/year to $350/year, filing a new covenant for the second phase that included this higher assessment.
The subdivision is still incomplete. There are only 41 homes out of 112 lots. The empty lots are overgrown and are eyesores to say the least. We have tried reviewing the covenants to see what it says about empty lots - do they have to pay the assessment or not? We live in Georgia, by the way. The way the covenants read, I think the empty lot owners do not have to pay if they specifically request to be excluded, and they forfeit their right to vote. So, without the lot owners paying, not enough money is being collected to pay for the clubhouse, pool, and other costs, from what we are told. The builder has not supplied us with any financial statements in the last two years that I have lived here.
But recently, the builder has informed us that he intends to hand over the HOA to us. Most of the residents are concerned about this. Mostly because they have no idea what the financial stability of the HOA is. The pool is in disrepair - the water went from green to a murky brown. The electricity and water to the clubhouse and pool have been long ago shut off, and the tennis court is falling into a stream because no retention wall was ever built to prevent it from eroding.
Does anyone have any words of wisdom for us? This whole situation has caused fights between neighbors, from those neighbors who refuse to pay the higher assessments to those neighbors who think we have a choice and should not take over the HOA from the builder. Some of the residents think the builder is corrupt and don't like him, but they still think that he should run the HOA.
What are we getting into here?

Carolyn,

My only recommendation is to contact a few attorneys and ask for one hour free consultation. Most attorneys should do that and outline how you ought to proceed for some fixed $ amount.

Clearly, the developer has not maintained the property and did not give you any financial reports even though you were obligated to pay assessments? I am also totally surprised that the lot owners are not required to maintain their lots or pay something to HOA to maintain the lots. You ought to clarify the obligations of ALL home owners and ALL lot owners because these could be based on the date of purchse. You should also know if the Assocaition has any financial obligations you may not be aware of. I would compile the following documents for an attorney to review:

--Phase I & Phase II Articles of Incorporations (providing you are incorporated) ;
--Phase I & Phase II Covenants and all amendments
--Certified plat of your subdivision
--Current insurance policies
--Agreements with utility companies, county, etc
-- All current contracts
--Deeds of lot and home owners

Carolyn,

You might want to check with the city/county to see if there is any bond money left. As I understand it, a developer typically has to put up x dollars as a bond for the city to grant permits. The Association might be entitled to some of that bond money if the development is handed over prior to everything being completed.

Here are some links to checklists to follow when a development is turned over:

Developer Turnover Checklist from the Virginia Community Association Network

Transistion by the Foundation for Community Association Research

Checklist of Records for Turnover from Developer to Community Association

Hope this helps.

Tim