Developer running HOA

KirkK (Indiana)
Posts: 4

Posted:

We have an issue in our neighborhood where the developer is suffering financially so he refuses to do anything HOA related.

1) Havent had a meeting going on 4 years now, though required.

2) Says he doesn't pay for his lots , only the people with lots or houses (55lots 23 occupied)

3) Some of us moved in under a document called Covenants & Restrictions, he then filled/recorded an HOA document 2 years later that has items we disagree with.

4) Now he has moved out of state and left no address but a local phone number to a friend of his who can get hold of him

Any ideas on what/ how to proceed?

Thanks

Kirk

GlenL (Ohio)
Posts: 5,491

Posted:

The owners should get together and pony up a few dollars and hire an attorney to explore your rights. Usually there is a clause for turnover to the homeowners after X% of lots are sold or after X number of years.

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

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By KirkK on 10/25/2012 9:01 PM

1) Havent had a meeting going on 4 years now, though required.

Technically the Association should have an annual meeting. However, it is typical (not right, just typical) that when the Association is under declarant control that these meetings are not held. This is because the declarant typically controls the votes and even if a meeting was held, the vote would go the way the declarant wanted.

The best you could do for this, if the developer isn't willing to listen, is to seek legal action to compel the declarant to go through the process. It likely won't change the outcome of what is voted on and will certainly cost time, energy and money to make happen. Because of this reality, many members do not fight this issue.

Quote:

Posted By KirkK on 10/25/2012 9:01 PM

2) Says he doesn't pay for his lots , only the people with lots or houses (55lots 23 occupied)

This is typical of the way the governing documents are written. The developer doesn't pay assessments for unsold lots.

Quote:

Posted By KirkK on 10/25/2012 9:01 PM

3) Some of us moved in under a document called Covenants & Restrictions, he then filled/recorded an HOA document 2 years later that has items we disagree with.

The Covenants & Restrictions (also known as the Declaration of Covenants, Conditions and Restrictions or CC&Rs) are actually deed restrictions and is the main governing document. The CC&Rs may be amended by membership vote. Typically, since the Declarant controls the votes, the declarant can change the CC&Rs as they wish.

I think that what you refer to as an HOA document may actually be the Bylaws or the Articles of Incorporation. These are additional documents to the CC&Rs.
The Bylaws typically establish specific procedures on how to do things. The Articles of Incorporation makes the HOA a legal entity under the law. This is typically a good thing to do.

These documents may also be amended by membership vote. Again, since the Declarant controls the votes, the declarant can change them as they desire.

Quote:

Posted By KirkK on 10/25/2012 9:01 PM

4) Now he has moved out of state and left no address but a local phone number to a friend of his who can get hold of him

If you were incorporated, there must be a registered agent identified (someone who can be contacted for legal purposes). This may be the friend you mention or an attorney.

Quote:

Posted By KirkK on 10/25/2012 9:01 PM

Any ideas on what/ how to proceed?

As Glen suggested, gather the owners together and seek legal advice. It's possible that the Developer will willingly turn over control of the Association to the membership if asked. If he doesn't and the membership wants to gain control due to concerns of the financial solvency of the developer, they will need to seek a court order.

A local attorney will likely provide you with your best options.

Hope this helps,

Tim

KirkK (Indiana)
Posts: 4

Posted:

Tim

Thanks for the info

Any idea if we the owners could pursue these actions in small claims court we do not have lots of money to hire attorneys and our neighborhood is going downhill quickly, I just found out this am the empty lots are going up for auction soon(some absolute auction)

TimB4 (Tennessee)
Posts: 21,059

Posted:

I don't know. From what I understand, small claim courts is not for what you are looking for.

You would be asking for a court order to change the terms of the contract (Your CC&Rs and other governing documents) and turn over control of the membership to the membership earlier than the contract calls for.

An initial consultation with an attorney shouldn't cost that much ($300 - $600 depending on time spent). This would at least provide you with the legal options available to you.

KirkK (Indiana)
Posts: 4

Posted:

Quote:

Posted By GlenL on 10/25/2012 11:19 PM
The owners should get together and pony up a few dollars and hire an attorney to explore your rights. Usually there is a clause for turnover to the homeowners after X% of lots are sold or after X number of years.

Glen

Thanks, unfortunately the developer wrote the HOA to say he gets 3 votes for a lot he owns while we only get a single vote so the HOA is controlled by him with as few as 9 lots that he has and he had HOA say he has control for 10 years as a minimum.

He further states since the current lot owners dont cover the actual HOA expenses and that he makes the difference up each year out of his pocket (he doesn't pay for his lots though) so we the lot owners will owe him the money he loans each year once the HOA has enough to cover the expenses we will then start paying him back.

Kirk

BradP (Kansas)
Posts: 2,640

Posted:

Quote:

Posted By KirkK on 10/26/2012 6:24 AM

Posted By GlenL on 10/25/2012 11:19 PM
The owners should get together and pony up a few dollars and hire an attorney to explore your rights. Usually there is a clause for turnover to the homeowners after X% of lots are sold or after X number of years.

Glen

Thanks, unfortunately the developer wrote the HOA to say he gets 3 votes for a lot he owns while we only get a single vote so the HOA is controlled by him with as few as 9 lots that he has and he had HOA say he has control for 10 years as a minimum.

He further states since the current lot owners dont cover the actual HOA expenses and that he makes the difference up each year out of his pocket (he doesn't pay for his lots though) so we the lot owners will owe him the money he loans each year once the HOA has enough to cover the expenses we will then start paying him back.

Kirk

Kirk

The 10 years seems long, is that in your documents? the 3 votes actually is less than what we had, ours had six per lot.

He statement about loaning money to the HOA in my opinion is BS...he is the developer, he is the HOA right now so in terms of you having to pay him back that is a pipe dream i believe.

KirkK (Indiana)
Posts: 4

Posted:

Quote:

Posted By BradP on 10/26/2012 9:05 AM

Posted By KirkK on 10/26/2012 6:24 AM

Posted By GlenL on 10/25/2012 11:19 PM
The owners should get together and pony up a few dollars and hire an attorney to explore your rights. Usually there is a clause for turnover to the homeowners after X% of lots are sold or after X number of years.

Glen

Thanks, unfortunately the developer wrote the HOA to say he gets 3 votes for a lot he owns while we only get a single vote so the HOA is controlled by him with as few as 9 lots that he has and he had HOA say he has control for 10 years as a minimum.

He further states since the current lot owners dont cover the actual HOA expenses and that he makes the difference up each year out of his pocket (he doesn't pay for his lots though) so we the lot owners will owe him the money he loans each year once the HOA has enough to cover the expenses we will then start paying him back.

Kirk

Kirk

The 10 years seems long, is that in your documents? the 3 votes actually is less than what we had, ours had six per lot.

He statement about loaning money to the HOA in my opinion is BS...he is the developer, he is the HOA right now so in terms of you having to pay him back that is a pipe dream i believe.

Glen

Yes unfortunately he wrote the 10 years thing, the document was created by him personally he said then he filed it with the county after some of us had moved in and now he claims it applies to us even though it didn't exist when we bought the house. he seems to be a less than honest person and know you can't even get ahold of him for any issues like the empty lots needing mowed etc.

Just a bad deal all around.

Kirk

TimB4 (Tennessee)
Posts: 21,059

Posted:

Kirk,

What is the name of the Document he changed and filed?

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By KirkK on 10/26/2012 9:26 AM

Yes unfortunately he wrote the 10 years thing, the document was created by him personally he said then he filed it with the county after some of us had moved in and now he claims it applies to us even though it didn't exist when we bought the house. he seems to be a less than honest person and know you can't even get ahold of him for any issues like the empty lots needing mowed etc.

I have known a few people who called themselves developers and I found that every one of them knew nothing about the law because they truly believed they were immune from it. Nothing you have posted here surprises me.

Covenants must be recorded before a property is sold. Look at the deed to your lot and see if there is some reference to other recorded documents. Typically, a deed in an HOA will state something like, "subject to the restrictions recorded in book xxx, page yyy, records of zzz county." If you find language similar to that, get a copy of what was recorded. If similar language is not present on your deed, then your property may not be subject to the CC&R's that the developer recorded later but you will need to consult with an attorney before moving forward.

I would suggest that when you consult an attorney that you and your neighbors gather up copies of all deeds, recorded deed restrictions, articles of incorporation for your association and it bylaws, plus any other written documents or statements from the developer. The attorney will need all of these documents to make a recommendation on a course of action.