Sue developer for control of HOA?

I am a resident and the bookkeeper (for 2 years)for a neighborhood that has approximately 67% of the lots sold (only 35 houses built so far). The neighborhood is about 15 years old. The developer is still in control and is "acting" as the HOA board. We have a neighborhood clubhouse/pool that is still owned by the developer, but is leased to the HOA so that the HOA could purchase liability insurance (the developer signed both sides of the lease.) The HOA has been paying all bills related to the maintenance of the clubhouse and pool (utilities, pool service,etc.) along with other neighborhood common expenses. The clubhouse was not built correctly (developer built it), and not maintained adequately and is in major need of repair. Our rough estimates are anywhere from $25K to over $100K. The developer is saying that he will not assume any responsibility for repairing the clubhouse -- that the clubhouse, while officially still his, has always belonged to the community, and that the residents should have been checking on it to see that it was being properly maintained. No resident was ever given any authority or responsibility to look after the clubhouse. Until I became the bookkeeper two years ago, no resident even had a key to the clubhouse -- only the developer and his admin. assistant. (Every resident/lot owner has been able to use the pool.) Several residents are trying to decide whether or not to sue the developer for clubhouse repair money and/or control of the HOA. Any advice?

I am not an attorney but your post interests me. Does the Lease itself specify who is responsible for repair, maintenance items, etc? With something like a pool / clubhouse facility, it's hard for me to imagine the Lease not addressing this.

Aside from Tim's suggestion re the possible bond, there should be state statutes that address 'developer completion' issues. It seems to me that you are in a strong position if the developer has not formally 'transitioned' control to the members.

I question this 'Lease' business. Seems to me the 'insurance issue' is a lame reason for creating an entire separate Lease contract. (Our insurance is just a HOA budget line item and paid from regular HOA assessments.)

Also out of curiousity, was the clubhouse / pool part of the original subdivision plan submitted to the approving municipal authority? If so, I might question the validity of the Lease at all. There is a contract common law concept called 'pre-exisiting duty' which basically says that you can't charge someone for something you were obligated to provide anyway. The fact that the developer signed as both Lessor and Leasee underscores the improper nature of this Lease IMO. (I think you're saying that the Declarant entered into a Lease with itself! How's that work?)

I'm not saying that the members should not be paying regular assessments for expenses for running the pool etc. But I think a Lease contract is questionable, and members surely should not be paying for the developer's construction costs.

Ray, thank you for your post. The lease does say, "The tenant shall be solely responsible for the maintenance of the exterior walls, foundation and roof of the Premises." in addition to other things for which the tenant is responsible. Our HOA used to pay insurance and just have a line item, like you said. The issue arose because the clubhouse/pool was not in the HOA's name, yet the HOA was carrying insurance. It was thought by some residents that having a formal lease in place would cover the HOA and make it "legal" for the fact that we paid for insurance. Yes, the developer entered into the lease with himself. Crazy, I know. I am not sure about the original plan and whether or not the clubhouse/pool was included. I will try to find that out. You also mentioned bonds that Tim mentioned. Will you please explain them to me? Yes, I think we may have a very good case for the developer not "finishing" the construction.

No, the residents never signed any lease document, although it was the residents (maybe just two or three) that started the process. Those few residents thought that in the case of a lawsuit (maybe an accident at the pool), we might be at risk because the HOA was carrying an insurance policy on property that we do not own. That's the only reason some residents asked for a lease to be in place. Very few of the residents have even seen the lease. I am certainly not alone. There will be some that want to join in a legal battle, some will not. Do you have any thoughts about our chances if we pursue the legal route?

"Do you have any thoughts about our chances if we pursue the legal route?"

This question can only be answered by an attorney who knows association law and whom you trust. My feeling is that the residents are in a strong position since:

1) the developer has not transitioned the community to HOA control

2) the developer has not completed the promised pool /clubhouse per the plan

3) the developer is the owner and 'lessor' of the pool /clubhouse

To me it would be worth the relatively nominal amount to have the attorney 'assess' the entire situation and outline options. And while at it, I'd have the attorney look hard at the Lease. It really does sound to me like a couple residents' concern over an insurance question opened the door for the developer to find a way to extract more money from the residents.