HOA Board law suit against developer for unpaid dues

I am a resident/owner and former board member of our association consisting of 52 building lots, with 34 approx houses some of which are seasonal homes located in northern New Hampshire. New developer bought development due to the bankruptcy of old developer in 2007. He has done extensive repairs to all systems, wells, pumps, water storage tanks to the existing phase I part of the development. Phase II in addition to phase I, also has 53 building lots which when purchased were not improved in any way. After five years, the Phase II lots are now ready and approved by the town and state with all of the agencies such as the EPA, and ready for sale. The BOD has now billed the developer dues for unpaid lots, for all the newly released lots and have gone back five years for unpaid dues. The amount is approximately $170,000. The BOD claims all the dues for the past five years are now due and payable within thirty days. The developer has tried to reason with the BOD that these lots have just now come on line, are not occupied or built on, have never used any of the services the development bills the phase I owners. The developer points out the huge amount he has already paid for the critical needs of the phase I improvements, approximately $3,000,000, and feels that these improvemennts have been made on the common land, common systems for the common good of all owners. The BOD is adament and have filed suit against the developer demanding back dues for these lots, and have now refused to deal with the developer except by legal suit. The developer has answered the BOD of directors suit against him, and has filed a countersuit to claim his damages are in the excess of $3,000,000. The BOD has not informed the owners of this consequence as yet, and will not address any individual concerns. Three owners have had their houses up for sale in the development, and one owner has just lost a sale of his home due to the lawsuits the HOA is involved in. The other two owners who have their houses for sale have been informed by their real estate brokers, to take their homes off of the market until this issue is solved. Needless to say, these owners are outraged and want this whole thing to be solved. Since this has transpired, the countersuit, there has been no commuinication from the Board of any kind to the general ownership. It has been now over three weeks since the countersuit has been filed. Word has gotten out due to the loss of sale by one owner in our development, and the word has spread to a few owners of the issue. This is not a rumor spreading among the owners, it is exact proven fact of which the Board of Directors has not informed the ownership members.

Now the owners want to have a meeting of all interested owners to discuss this matter, then take our findings to the next board meeting to present our concerns. Our CCR's do not say the owers can form a quorum on their own outside the Board of Directors, only the BOD has that power. How can the owners do this within their legal rights? Owners are in fear of huge assessments for this legal suit. The assessments all have agreed to when purchasing our properties are for the general maintenance of systems, grass cutting and landscaping along with snow removal and road maintenance. Legal fees of this proportion will make it very hard to maintain the general maintenance without huge assessments to cover same, putting owners in a financial position they never agreed to, perhaps making is hard to afford the fees, and possible legal repurcussions not yet known. This has already had an impact on the property owners not being able to sell their homes, and all the rest of us, who may have the need to sell our houses for various reasons in life, and being "trapped" by huge legal assessments most owners never agreed to in the first place.

We, the owners are desperate to save our property values, and solve this enormous problem here in our HOA. Would anyone have any solutions or suggestions. Thank you very much.

Brad I'll take a crack at your question, if the man bought the lots in 2007 without getting the Declarant's rights then technically all of the lots were sold and if there are assessments on undeveloped lots then he owes. Do I think this is a stupid move, absolutely but as we tell other posters the devil is in the details.

"Now the owners want to have a meeting of all interested owners to discuss this matter, then take our findings to the next board meeting to present our concerns. Our CCR's do not say the owers can form a quorum on their own outside the Board of Directors, only the BOD has that power. How can the owners do this within their legal rights?"

You can't hold an "official" HOA meeting but you can absolutely hold a meeting with your neighbors to discus this.

Thank you for your comments and suggestion. The reason this Board has decided to sue the developer for past due dues now, is because the president of the BOD wanted to start a CARF account to fund future road repairs, which at this time are not needed. The BOD while spending on legal fees in excess of $50,000 to get in $170,000 or so is so dumb. While a "rainy day fund" already exists, in the HOA, why spend $$ on legal fees, when a small increase in dues could easily accumulate for this fund. However, the BOD does not agree. It seems they want to get money fast in order to payoff an owner's lawsuit againt the HOA because they are using their house as a "vacation rental" for short term rentals under thirty days, which is not allowed per the CCR's. They were caught advertising on a well known vacation rental website and have this winter completely rented up, as well as the past two summers. They are suing because they say that when they purchased the property, a lone member of the BOD told them to go ahead and rent as "don't ask, don't tell" and nothing will happen. They were caught, told to stop with a cease and desist order, but kept on with their rentals anyway and ignored the order. They were fully aware of the CCR's well before they bought the property, but took the chance they would not get caught. Now they want $85,000 if they should win their jury trial case as their aim it to break the covenants. Another reason all the owners are furious. this Board has completely ignored all the owners protests, and will not discuss any questions or comments the owners have on this subject. The HOA did not choose to countersuit these covenant breaking owners, and will not explain why.

Thank you.

I recently researched the history of owners of my home back to its first sale in 1976. While there was a plat recorded two years earlier showing my lot, no deed was ever recorded for my lot until the developer sold it to the first homeowner. Because the developer never had a deed to this property he would never have been liable for assessments (if we had any).

Unless there were deeds recorded in the name of developer for the lots that the BOD is now squabbling over, I do not see where he would normally owe assessments.

Connie, I think you need to hold a recall meeting very quickly. BTW, just because the BOD is being tight-lipped about this lawsuit there is nothing to stop you from informing the other homeowners of what is being done with their money, how it is already impacting them, and what the future holds for them.

Thank you all. We are gathering all those interested owners, so far 24 out of 34 owners will back the recall effort, and stop the madness. The present BOD is seeing those $$$$$ signs, and want to get their hands stained green with the money. This is greed and power at work here in our small development. We, the owners, will speak softly, but will carry a big stick.