Can Developer Sell Common Areas?

I have a lot in a subdivision that has approximately 30 lots. Most of the lots were sold in 2007 for $250,000 to $350,000 to out-of-state buyers who intended to flip the lots, but as the economy turned bad, they simply stopped making payments and walked aware from their 3-year ARM loans, and the lenders foreclosed on approximately half of the lots, and we are concerned that if the developer runs into financial problems he might sell the common property, which is all still titled to his company, as it was never transferred to the HOA, which was dissolved in 2010.

The lot owners have been paying the taxes, insurance and maintenance costs for the common properties, which includes a clubhouse and pool, with the belief that the common areas were owned by the HOA. Can the developer sell the common property and leave us with no clubhouse, pool or well for water?

Those are amenities of the HOA and they won't go no where. He can sell the empty lots which the HOA does not own.

re-read your OP

ATTORNEY REQUIRED

I still think your confused on where a HOA comes from and what it is. A HOA does stand for "HomeOwners Association". However, they are first formed by the Developer. It is a SALES TOOL for the developer to get people to purchase into their development. It sells people on the idea that the community will be restricted and rules enforced to keep the place looking good.

So when the Developer is in ownership of the HOA, they are in charge. Most even have their own voting rights separate from the homowners in a different class. That keeps them in power until that day they decide to turn over to the homeowners to run within themselves. Which could be a long time or whatever is written in the rules at what percentage point.

Now a Developer will put in amenities like pools, clubhouses, tennis courts, or other private roads. The money they collect in assessments from the owners go to pay for these things. The checks are written to the developer or in the HOA name. Since HOA's are non-profit whatever money the Developer collects gets spent into the maintenance of these items. Later when it is turned over to the owners, this will be what the owners will pay assessments for to maintain plus insurance. A HOA is ONLY funded by it's owner's FOR it's owners. So what you and the other owners kick in right now is funneling through the Developer for those amenities.

Those amenities are owned by the HOA in essence but the lots the developer has are NOT. The amenities are on common property and are considered a common shared asset of the HOA. The empty lots for sale are NOT common property yet and are for the Developer to sale and make profit on. They are his and NOT the HOA's. So the clubhouse/pool what have you should always be the HOA's and your dues maintain it. The empty lots your HOA's money does NOT maintain nor does it contribute to those. That is all the developers.

Look at the plats and see if these common areas are dedicated for such use by the association and/or its members. If so, it really does not matter who actually holds title as the dedications create a permanent easement for their use.

Larry

On one hand are you saying you want to be sure some stuff is common property (owned/shared by all ownwers) yet on the other hand are you saying you do not want the responsibilty for such stuff?

Is this a have and eat your cake situation?

With command, comes responsibility.

Larry, get your neighbors together to pony up a little cash, and hire an attorney, versed in real estate and contract law. This is not the time for self help. Chances are he can't sell the amenities unless the HOA is dissolved, which from your description I doubt has happened. More than likely the corporation which administers the HOA has been declared inactive / dissolved by the state for not filing something or paying an annual fee. The deed restrictions which require an HOA probably still exist. Especially since you are still paying fees.

Sound of my head bouncing off Brick wall - THUD!

Insurance would cover any incidents that need covering. Whoever has that policy which sounds like the Developer would cover it. Which he is paying from the dues money you as HOA members are paying for. He's just in control and owns it and not you as individual owners. Money still goes to pay for the common elements.

What do you have against this developer anyways? Seriously it just sounds like you don't like the developer and come up with a bunch of reasons/questions because of it. The fact is your a HOA that is owned and operated by the Developer. That is your situation until the developer decides to turn it over to just you homeowners. Not that complicated...

With Larry13 and JohnB26, get thee an attorney! Time's a wastin'!!

I don't have anything against the developer personally, but he won't answer any of our questions. Since the HOA has been dissolved, I'm not sure that we will have corporate indemnification, and if the insurance policy only lists the developer as the named insured, then there's no guarantee that we will have coverage under the general liability policy. In theory the general liability policy might respond, but if there were a claim that involved multi-million dollar damages, I wouldn't want to count on theory to pay my legal bills. I'm more accustomed to running businesses, not HOAs, and I can tell you that the two have nothing in common.

Oh, and an attorney is drafting an opinion letter this weekend. Thanks again!

I am not so sure that it is such a bad situation.

If the common areas were dedicated as such, no matter who owns it they cannot do anything with the property that prevents that use. And they would owe taxes on a parcel they cannot use. Under those circumstances, who would buy it? This may be the very reason your developer stopped paying taxes on the property.

If the property is going up for sale because of unpaid taxes, why is your association not buying the property at the tax sale? It's doubtful that anyone else will bid on it and your association would get a clear title to the property. If that happens, your association will be responsible for future taxes.

Does anyone know why the developer did not deed the common areas over to your association before letting the taxman come knocking?

Something I left out about the GA question and the possibility of the HOA bidding for the common property land or lot at a tax deed sale. The way is handled in Florida, is for the board at a duly called boad meeting to pass a resolution officially incorporating the piece of land or lot(s) to the HOA. Once Minutes are approved an officer of the HOA (or manager if professionally managed) can take this Minutes as evidence to the county Court house and register the parcel under the HOA's name. In Florida, the HOA will no longer have to pay county property taxes for the vacant parcel/land because it is not considered "developed."

Mark,

You will need to do some research as there is more than one way to create deed restrictions.

Most developments begin by recording a plat showing the location of lots, roads, and other features. The plat may also include the dedication of easements. Then a declaration is recorded that will reference the recorded plat. From that point forward, all the lots on the plat are subject to whatever terms and conditions are specified in the declaration.

Worst case would be where no plat is recorded and the developer records deed restrictions as an addendum to the deed of each lot as it is sold. This is bad because it is possible that each lot has different restrictions and there are no restrictions at all on unsold lots.

Start by reading your own deed. If it says something like "subject to the restrictions recorded at ..." then locate that document and see if it makes reference to a recorded plat. If so, those deed restrictions should apply to the vacant lots you described.

You also need to read your deed restrictions to see how they may be amended. Normally it takes a majority or more of the property owners to amend. Even though the declarant may have given himself extraordinary voting rights, that will not apply to amendments. One catch is that developers often do not record deeds until they sell a lot. If the developer sold only 16 of 32 lots and there are no deeds recorded for the unsold lots, my personal opinion is that those 16 owners represent 100% of the property owners and may amend the declaration at will. I would, however, consult with an attorney before going down that road.

Doug-

Pls start a new thread for this question. The documents should explain how the hand over of amenities will take place.