Mortages & High Rentals

I am going to try to write this is a 'nutshell"

I live in a townhome development in PA. Our builder promised that he would only keep 10 percent of the homes or less. He kept 15 and recently sold them to investors for 200,000 less than what other homeonwers orignally paid. Also, we are in transition and had an engineering study performed which reported many deficiences and of course the Builder is not correcting them, nor is he taking responsibilty (per attorney letter to our attorney).

The Board was not aware of the transfer of these homes to investors. We are at 40-45 percent rentals. Recently the board received emails from homeowners that were not able to refinance due to the high percent of rentals and one entitity owning more than 10 percent of homes. The investors said they would restructure their homes so that not one entity owned more than 10 percent.

In the meantime we consulted with the VP of a large bank in our area. She said that two years ago a potential homeowner tried to get a loan for our development but at that time our BUILDER owned and rented too many and had the homes all in his relatives names.

She said the only way we would be able to sell our homes is to have buyer with cash or a small bank may write a mortgage , otherwise we would be stuck with our homes or we would have to rent.

We have consulted with our attorney and he is looking into the matter for us. Our builder had his own mortgage company at the time when he was selling homes and some residents went through him.

I cannot believe that we would have no recourse with the situation our builder put us in. He is now building a 55 and over a few miles from our development. Our bylaws give the boasrd authority to amend when it affects Federal Mortgages, etc.

Some of the board members are suggesting we have the homeowners come together and sue. I don't want our builder to get away with this but I don't want to get into thousands of dollars fighting him. He has ALOT more money and power than us. He left us with gates that are inadequate that we are spending 30,000 to replace and had to close one of our gates because we could not afford to get both done.

Just when I think we are getting ahead in this development with our transition, etc. we always have a setback. Any advice you can give me would be appreciated.

Maureen,

I understand your frustration; however I don’t think you have much recourse.

This sounds like the developer kept his pledge to retain no more than 10% of the homes, since it sounds like he now owns none.

No one is obligated to sell properties for a minimum price. He sold the homes for what the market would bear.

Unless there is some agreement that specifies particular aspects of construction, it is entirely up to the buyer to inspect the property before the sale.

Unless your governing documents have some ceiling for rentals, any homeowner – even investors – can rent their property without interference. You may want to amend your documents to establish a ceiling if there is not one now in force.

From what you write, it doesn’t appear that you have much of a case and a lawsuit would be an expensive futility.
IMHO, the best and only thing that you can do is to hope the market gets better and home prices rise, and in the meantime tighten up your governing documents to prevent some of the conditions that are currently depressing prices.