Developer/HOA Fees

Started by JeffG8 • 3 replies • 1970 views

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JeffG8 (Ohio)
Posts: 9

Posted:

I'm a homeowner in a 50 unit condomium in Ohio which is only partially completed (10 are homowner occupied, 6 are rented and 4 are vacant). The condominium was opened in early 2000. The developer, who still controls the HOA, claims the HOA operating costs significantly exceed revenue. He wants to increase the HOA fee substantially or implement menu based pricing. We don't doubt the operating costs exceed revenue; although he's never provided verifiable financial information.

Questions:

1. Under the Ohio condo law "The developer shall assume the rights and obligations of a unit owner in the developer’s capacity as owner of condominium ownership interests not yet sold, including the obligation to pay common expenses attaching to those interests, from the date the declaration is filed for record even if the construction of the units and the appurtenant common elements subject to the condominium ownership interests has not started or is not complete."

Doesn't this mean that the developer is required to fund the HOA for all of the unconstructed units? If so, isn't the developer required to make an accounting for those monthly HOA fees due from the developer?

2. The developer (as head of the HOA) has never established any reserve accounts for future expenses.

Can we require/force the developer to fund the reserves retroactively?

3. Are reserve funds taxable to the HOA?

RogerB (Colorado)
Posts: 5,067

Posted:

Quote:

Posted By JeffG8 on 04/04/2012 9:25 AM
I'm a homeowner in a 50 unit condomium in Ohio which is only partially completed (10 are homowner occupied, 6 are rented and 4 are vacant). The condominium was opened in early 2000. The developer, who still controls the HOA, claims the HOA operating costs significantly exceed revenue. He wants to increase the HOA fee substantially or implement menu based pricing. We don't doubt the operating costs exceed revenue; although he's never provided verifiable financial information.

Questions:

1. Under the Ohio condo law "The developer shall assume the rights and obligations of a unit owner in the developer’s capacity as owner of condominium ownership interests not yet sold, including the obligation to pay common expenses attaching to those interests, from the date the declaration is filed for record even if the construction of the units and the appurtenant common elements subject to the condominium ownership interests has not started or is not complete."

Doesn't this mean that the developer is required to fund the HOA for all of the unconstructed units? If so, isn't the developer required to make an accounting for those monthly HOA fees due from the developer?

2. The developer (as head of the HOA) has never established any reserve accounts for future expenses.

Can we require/force the developer to fund the reserves retroactively?

3. Are reserve funds taxable to the HOA?

1. Yes and Yes
2. No to require reserves unless state statute or CC&Rs require a reserve fund be establish. However assessment payments for all units owned by the developer are due since early 2000
3. No, only "outside" income is taxable.

GlenL (Ohio)
Posts: 5,491

Posted:

2. The developer (as head of the HOA) has never established any reserve accounts for future expenses.

Can we require/force the developer to fund the reserves retroactively?

Ohio law requires at least 10% of the annual budget be placed into reserves UNLESS a majority of members voting each year waive the requirement. Since the Declarant still has the majority of votes, the answer is no as long as he holds the required vote.

5311.081 Powers and duties of board of directors.

(A) Unless otherwise provided in the declaration or bylaws, the unit owners association, through the board of directors, shall do both of the following:

(1) Adopt and amend budgets for revenues, expenditures, and reserves in an amount adequate to repair and replace major capital items in the normal course of operations without the necessity of special assessments, provided that the amount set aside annually for reserves shall not be less than ten per cent of the budget for that year unless the reserve requirement is waived annually by the unit owners exercising not less than a majority of the voting power of the unit owners association;

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

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Jeff

Your development is under declarant (probably the developer) control. As the majority, he can pretty well do as he desires. As will the unit owners be able to do when they are in control.

As usual, the minority will be forced to accept what the majority does in this type "sharing" arrangement.

Now if the developer is still solvent and trying to sell units, they will probably keep the place looking good even if you have issues as with somethings they are doing. In the long run, it will be in your best interest to get more units sold so you owners can take control and/or you can sell and move on down the road. The worst thing you can do to your own self interest is to hurt/stop other sales from being made. This would be cutting your nose off to spite your face.

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