developer not maintaining CC&Rs now selling to new developer and unilaterally changing bylaws

I tried to make the subject descriptive but here's what's happened and I wonder if we've got any recourse. Any advice would be appreciated.

We bought a house in a new development, 3 years ago. Signed a CC&R. The neighborhood never developed, of 30 lots only 7 we're occupied, the rest are empty lots. In year 2 we got a letter from the developer asking for HOA dues to beautify the sign area and enforce CC&R. I wrote a letter stating that the CC&Rs stated he had to have an annual meeting plus show us a budget for the assessments, but paid at the last minute anyway to avoid any problems. He planted a few things and then left them to wither and die, most of the other neighbors didn't pay him because this letter was the only communication they had ever received from the developer regarding the CC&Rs.

Fast forward to this year, they sell the remaining lots to a NEW developer. The new developer is building like CRAZY and selling houses left and right. We contact the old developer who is still in charge of maintaining the CC&Rs under his for-profit incorporation, and tell him because he has never followed ANYTHING set forth in the covenants we feel that he is in breech of contract and that we would either like our money back for the assessments OR to be released from the CC&R's completely.

The new developer wants to transfer the enforcement of the CC&Rs to a management company completely eliminating the old developer from everything. He has NOW informed us of a meeting in which he will completely change the bylaws to state that the declarant(developer) can change anything in the CC&R without any meeting/notice/permission/vote as long as the declarant owns at least ONE lot. He's doing this so he can change it completely to the new developers standard CC&R and then transfer it over to the management company.

The new developer has given him 80 percent of the vote while we have only 7 or 8 votes at this point.

My big question is, is what he did considered a breech of contract. Does that type of thing even exist when it comes to CC&Rs? There is a law going through the SC legislature that would protect us but it hasn't passed and probably won't for a while, so as far as SC laws goes I think there's very little to protect us.

Any advice?

You would need a real lawyer to tell you your legal rights to suit.

I am incredulous about any HOA or developer becoming a 501(3)C non-profit charity, however. Those are typically reserved for "real" charities, not just not-for-profit organizations.

It sounds very unusual.

Many of the answers to your questions will be found in your CC&R's. It is quite common for a developer to write the CC&R's in such a way that he remains in control of the association until most or all of the lots are sold. One of the risks of buying into a development with unsold lots is that the developer may remain in control of the association for quite some time into the future.

The developer can also assign his rights to another person and it is possible that the new developer is now in possession of those rights. Because either the old developer or the new one is in control, they can change the bylaws pretty much at will.

Depending on the percentage of owners who must agree, the developer may even be able to amend the CC&R's without your permission. Your best hope is that new developer will sell all the lots quickly.

Your association is most likely incorporated as a non-profit corporation. It is not likely that the IRS would grant it charitable status under section 501(c)(3) as HOA's are not charities. Many people mistake non-profit to mean charity. Not always the same thing.

JN

A declarant still in control can do pretty much what they want to change CC&R's, Bylaws, and Rules and Regulations.

In the end if all the changes help them sell all the homes then the Homeowners will take charge so maybe it is not a bad thing.

Does there exist a determination letter from the IRS stating the organization has been approved as a 501(c)(3) organization? Have you asked? Have you seen it? Or, is your statement based on what someone has told you.

To become a 501(c)(3) recognized charity the organization must apply to the IRS on Form 1023. After review by the IRS, the organization will receive a determination letter from the IRS either approving or denying the application. The rules for obtaining 501(c)(3) status are well defined and only the following types of organizations normally qualify: Religious, Charitable, Scientific, Testing for Public Safety, Library, Educational. Fostering national or international sports competitions (very strict additional rules here), or prevention of cruelty to children or animals. Homeowners organizations are none of these and typically will not qualify. A homeowners organization may qualify for a different 501(c) status, but the IRS typically discourages this.

Ahh shoot.

AnthonyD11 reactivated the thread and I failed to catch it prior to making my comments.

Anthony, please read the posting rules as the listing of the legal services (or other companies) is not allowed and could be interpreted as SPAM.