New investment group charging for land upkeep we don't own.

Started by DaleS7 • 13 replies • 1316 views

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DaleS7 (North Carolina)
Posts: 6

Posted:

The townhome developement I live in is not even 1/2 way finished. The developer went into foreclosure and an investment group purchased it to resell. Now the investment group wants to increase our dues over 50% to pay for the upkeep of lots that haven't been built on which comes to approx. 10,000.00 until they resell whenever they chose. We cannot vote since there are only approx. 20 people living here that have purchased the new homes. Can an investment group legally charge us for upkeep on land that we homeowners don't own? The reasonable dues were the reason we purchased our homes here and a more than half that live here are retired and on fixed incomes and cannot afford such an increase. The original Convenant that we signed stated that the dues would never increase more than 10%. Can new owners just throw out a covenant that we had to sign in order to purchase the homes and charge us as they please? The previous developer paid because he owned the lots and was in the process of building new townhomes before foreclosure. Any help at all would be greatley appreciated!

RogerB (Colorado)
Posts: 5,067

Posted:

Dale, in many townhome associations the owner is only responsible for the unit interior; abd the HOA is responsible for maintenance of the exterior of all units. You stated "legally charge us for upkeep on land that we homeowners don't own?" I believe the WE is the HOA and thus you are part of a common interest ownership. Your HOA appears to still be under control of the developer (Investment Group) and as such the governing documents probalby allow them to legally maintain all the the subdivision.

DaleS7 (North Carolina)
Posts: 6

Posted:

Thank you Roger for your reply. If this were the case, it would seem that the new investment group would abide by the original convenant when purchased from original developer, which would seem appropriate. It is confusing. Maybe that's on purpose lol. Thanks again Roger.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By DaleS7 on 12/09/2012 10:01 AM
Can an investment group legally charge us for upkeep on land that we homeowners don't own?

Yes and no. It depends on what the governing documents specify as the Associations responsibility.

Unfortunately, even if the governing documents didn't allow it, the developer (now the investment group) can typically change the governing documents at will. This is because most documents are written to give the declaration control of the voting power.

Quote:

Posted By DaleS7 on 12/09/2012 10:01 AM

The reasonable dues were the reason we purchased our homes here and a more than half that live here are retired and on fixed incomes and cannot afford such an increase.

This of course brings to question if the members actually investigated the Association finances to see if the assessments were realistic (paying the bills and funding the reserves) or if the members (prior to purchase) based the decision on the assessment rate which may have been kept low artificially by the developer in order to entice buyers.

Quote:

Posted By DaleS7 on 12/09/2012 10:01 AM
The original Convenant that we signed stated that the dues would never increase more than 10%. Can new owners just throw out a covenant that we had to sign in order to purchase the homes and charge us as they please?

No, they can not throw out that covenant. However, they could change it.
If they do chose to ignore that covenant, it will be the responsibility of the membership to challenge the increase. This might require a legal battle.

Now, in reality, even if you win the legal challenge, the developer can then simply change the covenants to eliminate that section as they typically have the voting power to make such a change.

Therefore, the question would be, is the issue worth the legal costs involved?

JohnB26 (South Carolina)
Posts: 1,569

Posted:

CAVEAT EMPTOR

LauraR5 (Tennessee)
Posts: 220

Posted:

If the declarant owns the property and not the association, wouldn't it be the investor's responsibility to keep up the area he owns?

KellyM3 (North Carolina)
Posts: 2,239

Posted:

I smell a rat here and would DEFINITELY follow dollars through the HOA process. This may be one of the instances where citizens might retain an attorney. The investor buys low-bid and dumps maintenance for its investment on the few homeowners. Right. I don't even want to consider that those dues are meant to increase property value for the investor. Oh well.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Quote:

Posted By DaleS7 on 12/09/2012 10:01 AM

The original Convenant that we signed stated that the dues would never increase more than 10%. Can new owners just throw out a covenant that we had to sign in order to purchase the homes and charge us as they please?

Dale,

The 10% limitation is binding on the new developer. Check the covenant to be sure that there is no provision for an override.

DaleS7 (North Carolina)
Posts: 6

Posted:

Thank you all for your replies. We are talking to a laywer at this point but haven't a response. There is nothing that I see as a provision for an override. It just looks to us that the investment group swooped in and bought low from the bank and only going to resale at a higher profit, meanwhile charging the few homeowners to pay for everything until they sell with no cost to them for any upkeep on the vacant lots. If the invvestment group can do this as homeowners we're afraid we will be stuck with outrageous HOA dues from here on out with the new owners that are way out of line with all the other TH developments in the area. This is going to be a hard lesson learned I'm afraid. It's almost as if they're untouchable so far.

DaleS7 (North Carolina)
Posts: 6

Posted:

Hi Laura,
That has been our whole point from the beginning. The homeowners agreed to the 10% increase as stated in the original convenants, but since it is no longer owned by the original owners it seems the new owners can do as they please reguardless of prior convenants. Thx.

DaleS7 (North Carolina)
Posts: 6

Posted:

I fully agree Kelly. It's just the big dogs after us little dogs.....

LauraR5 (Tennessee)
Posts: 220

Posted:

Our builder is transferring our last few lots to another builder. Our attorney says that when ownership transfers from builder to builder, the new builder becomes the declarant. It is not until the units are occupied by homeowners that they become the responsibility of the HOA. This is also when they begin to pay assessments.

Maybe that is specific to our situation, but I wouldn't think so.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Dale

I believe Tim and Rodger pretty much hit the nail on the head. Yopu are at the mercy of the declarant.

If the original developer went broke, one has to ask were they properly charging from the beginning or were they keeping things so low they were losing money.

You say dues can increase 10% a year, if done every year then in 7 years dues would have doubled and I expect some would be up in arms over that.

DaleS7 (North Carolina)
Posts: 6

Posted:

Thanks John,
You're probably right. This is the first time most of us I think have been envolved with an HOA. I guess it's just hard to grasp the understanding that if there's no "home" on the lot then how does it become a HOA issue at all with the few that do have homes on the lots if the declarent has control of the HOA? Besides, HOA does mean Home Owners Association not Vacant Lot Owners Association. We have no problem with upkeep of the regular common areas, it's just the cost of all these vacant lots. This is why we are talking to a legal rep. When all said and done I suppose it will just ba a hard lesson learned.

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