Does Builder need to pay HOA fees?

Just an intro real quick... The PM of our 4 year old community is passing the HOA over to residents, and though we're completely new to this we have a great board who's determined to make it work for the better of the community. So hopefully you guys don't mind some questions as we try to sort out all this.

So my first question The current PM sent us a list of properties they're collecting dues for, but it has a few properties excluded, including all the properties still owned by the developer. Our neighborhood has about 130 lots, but the developer still owns about 15 in various stages of development -- some empty lots, some with homes started, and some with completed homes still for sale. Our CCR's state that owning a lot within the neighborhood makes them members of the Association, and there is only one class of members. From this I assume that all lots, including those owned by the developer, should pay HOA dues. Is this correct? I haven't read anything else that states otherwise, but the PM hasn't been collecting dues from the builder if this is the case. And I'd assume there are no 'unspoken rules' that would allow the builder to not pay since this is a legal document.

And if the builder is required to pay would it be feasible to have them pay past dues? 15 Lots at $150 a year is a substantial chunk of revenue, even if we are only able to collect for 2013.

Thanks for any insight on this.

Thanks I'll check our state laws, but there's nothing in the ByLaws or Deed Restrictions that state the developer is excluded from paying HOA dues. If anything it says there's only one class of Membership, so I'd assume if they wanted to exclude the developer they would've created a second membership class for them with exclusions to the dues.

We're just in the early stages of going through all the paperwork the PM is giving us since they're dropping us (they said, and I quote, "your small community wasn't worth their time"), so we're not sure if we'll try to self manage or find another PM... but either way we're planning on finding a lawyer who can hopefully answer some of these questions and get us started on a sound note. Honesty we're being passed an utter mass, so I'll have lots more questions very soon

Take care.

Well here is a list of things (see attached MSWord document) you should check on when transitioning control of the Association from the developer to the membership.

Also, these articles may be helpful:

Homeowner & Condominium Association Transition by Jim Slaughter, Attorney

Transistion a 52 page manual (in pdf format) by the Foundation for Community Association Research

Developer/Homeowner Transition: A Guide To Success

Tripless HOA Transition

Association Transition Checklist

Transition Document Checklist a MSWord document from CAI

Hope these help

Keep in mind your lawyer gets paid if you win or loose. So he will always suggest anything that will take lots of time because he will make a ton of money, even if he looses.

Builders typically setup the paperwork so they don't have to pay dues until the lots are sold. If this is in your paperwork (deeds, CCR, bylaws, etc) then you really have no case. But a lawyer will gladly take your case and take your money.

Typically your builder doesn't pay fees on property. If he transfers them to another developer, he probably won't pay fees either. Just once an actual homeowner gets his certificate of occupancy. It should be in your CC&Rs. They will be the "declarant". I have learned a lot about this because our builder is selling the last of their lots to another builder.

Was the property manager an employee of the developer? We have 236 units, and we have a property management company. With 130 units, I can't believe a property manager would say it wasn't worth his time, unless he was under the employ of the builder.

A Big Red Flag! A development with 130 homes is nothing to sneeze at and most management companies would jump at the chance to take over.

What changed to suddenly make the management company decide you are not worthy of their time? I dunno but my first step would be to have a full audit of the books. Expensive, but you will likely find they owe you more money than the audit costs. No one bails out on a paying job unless they are afraid of getting caught for doing something they should not have done.

Hey guys .. Sorry this got WAY longer than I expected, but here's what we're going through, though it may be abit off topic to my original question... but i thought i'd explain incase someone had insight.

Our neighborhood was developed by an out of town developer (based about 150 miles away) in 2005, and the builder ran the HOA with their representative in the model home handling most things like organizing community events, doing yard of the month, a monthly newsletter, and so forth to keep folks in the loop on neighborhood affairs. But in 2011 the HOA was passed to a local PM who pretty much became invisible except for sending out Dues notices in Dec 2011 and Dec 2012. In the letter in Dec 2012 they stated the builder was passing the HOA to the home owners and they scheduled a board meeting fir the first week of this month.

Only about 10 families showed up, and the two ladies from the PM who appeared just seemed very unorganized and they weren't familiar at all with the CCR's as we started asking questions. Then they said they'd sent out about 10 flyers to the community since they took over in 2011, but no one has ever received any except for the notices on Dues. Plus some families said they tried to contact the PM asking about getting involved with the HOA or asking for more info on where our dues were being spent, but again no one ever got a reply back. A couple of families said they even received notices of deed violations that didn't make sense, and when they tried to contact the PM again no replies so they just ignored the violations ... what else could be done?

So needless to say most of the folks at the meeting were rather sharp to the ladies from the PM office when they talked about how well they communicated when they hadn't. So we elected the board, which were basically 6 volunteers, everyone exchanged info, and the next day everyone on the board got an email from the PM saying they were putting in their 60 days notice to pull out and sent some PDF's with property info and dues owed. One of our board members talked to the PM, and they told him they were only charging us half what they charge other HOA's, which we're paying them $650/month, so they said after the rough first meeting it's "just not worth their time". Very unprofessional.

Also we asked the PM for a list of homes, and comparing it back to the list from the Appraisal District's website we found MANY discrepancies, like homes in the neighborhood not on their list, one home on their list that doesn't even exist, and many names that are incorrect. So this is rather worrisome as well. Also they have no contracts with any of the maintenance companies who take care of the lawn or landscaping, and they've yet to give us a contract between them and the builder so we know exactly what they've agreed to do. Again, very unprofessional.

And the finances are a mess, from what we've seen the HOA is already in debt and 1/5 of the homes owe back dues, mostly because they thought the HOA had dissolved due to the non-existent communication from the PM. I mean if someone gets a bill for $160 and has no luck contacting the folks who sent it and no way to verify the PM is legit, I can see why many didn't pay it.

So now here we are... we have a very dedicated group of folks in the neighborhood who want to get the HOA going strong and we hope to build confidence back in it from the point of view of the neighbors. We passed out flyers door to door this weekend talking to neighbors and telling them about the change over and about a board meeting we're having this week, so hopefully we'll get some good response from that. The PM will be at the meeting too, so that should be interesting.

We'll see how it pans out, but though we have the potential to have an amazing HOA and do some great things in the neighborhood, I think it will be very rough until we get off our feet and get the house in order.

Sam

As said, just start from scratch. Send a polite/introductory letter to all owners keeping them informed and asking for their coorporation and aid.

I would try and piece together any records concering back dues and "politely" try and collect them. As to having "bad" records, there might well be a issue with persuing back dues to collection so I might not get to tough/legal about it.

If you start honestly, open, candid, keeping all informed, hiding nothing, etc. then I expect you will do well.

Best of luck.