Escrow account for projects not completed

Started by DennisK • 6 replies • 1484 views

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DennisK (Michigan)
Posts: 4

Posted:

The main developer in the subdivision I live is going to be turning over responsibility to a HOA that is just getting established. On May 1st, there will have been 54 months elapsed since the first sale.

Our concern is that there are a few projects and subsequent concerns that are still not completed, and will not be by the time this May 1st deadline rolls around.

These projects range from sidewalks to park areas to a lighted mailbox area. Also, there is a concern with an erosion issue near the roadside that could turn into a high-dollar repair after the turnover to a HOA.

The projects were covered in the bylaws of the subdivision but have not been acted on. The issue is that the developer still owns 20 lots in the subdivision that are undeveloped.

We don't want to be forced to pay for things that our developer agreed to do, nor do we want to take a chance on other issues.

Any advice would be appreciated.

RogerB (Colorado)
Posts: 5,067

Posted:

Dennis, you may get some ideas by searching for and reading the posts on transition audit.

PaulM (Pennsylvania)
Posts: 1,347

Posted:

DennisK:
Our experience with this issue in state of PA---We formed a Committee to work with the municipality in which our community resides...this Committee created a list of unfinished projects which the developer was to complete (we sought input from unit owners as well if they had issues with drainage, etc.) and the Committee, in turn, made an appt. with the muncipality's Code Enforcer to ensure these items would be done. A 'punch list' was created for the developer to work on. It's important to note to you and residents,
the concerns are not UNIT-related issues--they are issues of capital expenditures: sidewalks, streets, park, drainage/erosion, etc.

We learned that there is an escrow $-amount the developer is required to turn over to the municipality to ensure that he will complete all that is required, and there is a time limit on when these projects must be done 'according to municipal code'. If, once inspected, they are not up to par, they must be redone until made right. Only when all is done accordingly, is the escrow money returned to the developer.

So, you do have recourse in your situation. Check with your town's gvt. office, find out if they would be willing to work with you to create a list and ensure all is done properly. There is the matter of timing, as well; I believe the developer is given quite a lengthy time to complete projects, but obviously he wants his escrow money returned ASAP. So, he's going to make it happen.

Good Luck to you and your fellow residents! Let us know how you make out. It is good to post so we can all learn further about community living and the resources we do have available to us.
PaulM

LindaC3 (Florida)
Posts: 526

Posted:

DennisK--- PaulM is quite right....Here in florida most HOA'S are Planned Urban Developments ( PUD ) for short and they have STRICT RULES OF COMPLIANCE when they submit to the counties for these subdivisions.... You would be well advised like Paul states to check with your local Growth management office and inquire as to their rules for completion...Also check with your Zoning and Road Engineering Depts especially the Road Dept.....Also see if there is a financial institution that has been lending money to the developer as this may also be a requirement of his loan...Here in Fla we would check this thru the clerk of courts to see who the bank is as these documents would have been filed at the clerks office..Seems time be of essence to you ---- Keep us in the loop.....LindaC

DennisK (Michigan)
Posts: 4

Posted:

Thank you all. We have checked with the township and there was an escrow account set up, but it was for the township to draw on for inspections and such.

The good news is that the township is already aware of the non-completed items and we plan on bringing it to their attention again during the township meeting next week.

We just want to make sure what was promised is taken care of. We are supposed to be a community of 58 houses, but only about 12 houses are occupied (there are another 10 that are built, but empty and some are in foreclosure).

KevinC2 (Michigan)
Posts: 15

Posted:

Dennis,

I know this has been discussed in quite a few other threads, but make sure when you take-over the association that the developer has included adequate reserves for replacement of the common areas. Since 54 months have passed (4.5 years) there has been some depreciation already that the developer should compensate the association for (i.e. common roads, etc.). Within your association bylaws should also state certain requirements that the developer must meet prior to turning over control of the association. In most of the new developments that I have looked at, the developer typically wants control for a substantial amount of time, so it is interesting that they are willing to turn over control of the association when there is so much work still to be completed (i.e. red flag). Out of curiosity, where are you located Dennis? Sounds a lot like the things that are going on where I live!

Kevin
Board President
The Courtyards Association

DennisK (Michigan)
Posts: 4

Posted:

Kevin -

I live in Michigan, more specifically Springfield Township in Oakland County (about 60 miles North of Detroit city).

There has been a significant downturn in the real estate market since we purchased our home, so there has been no new construction in the subdivision and the spec homes that were built (over 10) are in varying stages of foreclosure.

The way the development worked is that one main person (the developer) owns the property and single investors came in to fund the building of a home, hoping to cash in on the profits after a quick sale. Unfortunately with everything going on with the auto industry (and the rest of the Michigan economy) new home sales have pretty much stalled, hence the foreclosures.

Our hands are seemingly tied because he still owns 24 undeveloped lots in the sub - so he has a vested interest in its success, but also sees that the timeline for payback on his investment is now much longer than planned. In reality if each lot were a vote, he has double the votes than the occupied houses have.

Our township has its monthly meeting tonight and we plan on attending as 'new business' to at least let the board know of our concerns.

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