Developer doesn't pay dues but votes

Started by EllieR • 20 replies • 2754 views

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EllieR (Maryland)
Posts: 8

Posted:

I am a homeowner in a Maryland HOA. Our developer is still overly involved in our development. She owns 20 lots however doesn't pay dues and votes at our annual meetings. I know the Maryland HOA act states that owners must pay dues but isn't clear on if this includes lots still owned by the developer. When she votes she always wins due to her large number of votes including who is on our Board, some of which are very much on her side. Any thoughts?

JoeW1 (New York)
Posts: 728

Posted:

EllieR - typically the developer is entitled to cast one vote for any unclosed unit. your by-laws may not require the developer pay dues on any unclosed unit. how many units in total are there?

EllieR (Maryland)
Posts: 8

Posted:

20...we have two documents that we look at with regards to this..the first is the Declaration of Covenants, conditions and restrictions.

"Membership - Every owner of a lot which is subject to assessment shall be a "Member" of the Association. Membership shall be appurtenant to and may not be separated from ownership of any Lot which is subject to assessment.

there were class A and class B members... we are now at the point that there is only class A members.

"Class A members shall be all owners with the exception of the Declarant and shall be entitled one vote for each lot owned.

"Class B members shall be the Declarant and shall be entitled to 3 votes for each lot owned. Class B membership shall cease, ..............and be converted to Class A membership etc etc etc...

Also in this document, the declarant is exempt from paying dues, assessments etc. \

The second is our By-laws which are silent on this issue

HaroldS1 (Arizona)
Posts: 314

Posted:

Ellie - sad but true. Until the developer transitions over to the members, they control the HOA and you are at their total mercy. This fact is seldom disclosed by the sales people when you buy into an early HOA. Your documents should disclose the declarant's role (including if they need pay dues on unsold lots) until turnover. But if they are not following their own documents, your only recourse is to sue.
They can also change the rules anytime they want, even after you agreed to the rules in place when you bought, because they control enough votes to do as they want. I've said before: It is better to wait to buy into an HOA until after the developer is no longer in control. At least then it will take the required % of your member neighbors to change the rules on you, and not just on the whim of the developer.

JM2 (Oregon)
Posts: 439

Posted:

Hi Ellie:

I'm not sure how many lots there are overall in your development. However, if turnover has already occurred, then the best way to proceed is to get more people involved in the annual meetings - either in person or by proxy. This is the only way to then vote people onto the board who have the HOA's best interests at heart, rather than the developer's interests. You may need to find qualified people interested in running for the Board, and also be willing to go out and get proxies so that there are enough votes to counter the developer's block of 20 votes.

It's not unusual that developers write or have docurments written that exclude them from paying assessments. This may be perceived by some as unfair. However, it's just the way life is sometimes.

Best of luck in your HOA.

J. Patrick Moore, CMCA

JoeW1 (New York)
Posts: 728

Posted:

EllieR - You state there are 20 in response to my question how many units in total are there? Yet you own a lot, as do other owners. So the Developer cannot own 20 lots, nor cast 60 votes. The Declaration says it all. What are you looking for the by-laws to add to the issue?

EllieR (Maryland)
Posts: 8

Posted:

Sorry, I misunderstood the question...there are 144 lots total in the HOA 20 of which are owned by the developer.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

It doesn't sound like your HOA has been turned over to the homeowner's yet. We would need more information on that before giving an appropriate response. I don't believe a developer has to pay dues if they are still in control. That would paying themselves. The developer is already footing the bill for all the other projects and amenities still in development.
Find out if your HOA is being running by the homeowners or the developer and then repost. I think we can better answer your question here.

Former HOA President

EllieR (Maryland)
Posts: 8

Posted:

No the HOA pays for everything thru our dues for the last two years. The HOA is being run by the homeowners. The developer has deeded pretty much everything to the HOA, though there is still alot of developing going on around us our development is finished.

JoeW1 (New York)
Posts: 728

Posted:

Quote:

Posted By EllieR on 04/09/2007 12:48 PM
Sorry, I misunderstood the question...there are 144 lots total in the HOA 20 of which are owned by the developer.

Thanks EllieR - 20 unclosed is 60 votes. Not a majority but given what you've posted it's understandable how owner (non-board) apathy has led to your current situation. In order to defeat the developer you'd have to have a strong board and 84 owners to vote. The later of which is historically difficult regarding owner turnout. IMO, the odds are stacked against you but all is not lost. Take a few deep breaths, gather supporters, patiently wait, and keep yourself abreast of association business (with factual information on the sidelines until all units are closed.

BradP (Kansas)
Posts: 2,640

Posted:

Ellie:

Our developer didn't have to pay dues on any lot he still had, plus he had six votes per lot. I don't know if I would push that issue, with 60 votes the developer in your neighborhood still has a lot of power. And there may come a time down the road where you go back to them for something and you don't want to strain that relationship. Unless they are just sitting on the lots I don't know if it is worth it.

PaulM (Pennsylvania)
Posts: 1,347

Posted:

Ellie:
"Class B members shall be the DECLARANT and shall be entitled to
3 VOTES FOR EACH LOT OWNED. Class B membership shall cease, ..............and be converted to Class A membership etc etc etc...". as you stated.

Clearly your docs state the Declarant as Class B member holds 3 votes per unit UNTIL......when? this is the important part and what you need to understand at what point the Declarant reverts to Class A membership. Until the Declarant turns over the 'association' to the unit owners, he still has a hand in it and has the authority. Your docs will state when he is to withdraw, usually when there is a percentage of units sold.

The Declarant usually is responsible for monies deposited to a
Capital Expense Fund which he sets up for long term expenses: roadways, sidewalks, water retention, etc., depending again on your documents. Once he withdraws, the members are to continue with funding this account as part of their assessment fee.

EllieR (Maryland)
Posts: 8

Posted:

Hi: We are beyond that point. The Class B membership has converted to Class A. As far as I know there is no Capital Expense Fund but I'll double check. In the meantime we the homeowners pay for everthing and the Declarant pays nothing. We have a total of 144 lots/homes and they still own 20, 15 of which they are developing as we speak. I wondering if they can still be considered members since Class A is everyone but the declarant....thanks

DouglasD (Texas)
Posts: 8

Posted:

EllieR
The way it was done in our COA was once the developer had sold 75% of the units then they were obligated to pay the COA fee’s on all unsold units. This is a Texas law but you will need to check the laws in your state. Now they still have 25% or what ever percent of unsold units voting power. Our votes were weighted on how many square foot you own just like the way the COA fee’s were calculated. So someone who had 1000sqft condo vote would mean more then two people that had 300sqft.

After 50% of the condos were sold the first board member was voted in and after 75% the last of the board members were voted in.

RogerB (Colorado)
Posts: 5,067

Posted:

Ellie, if there is a state law requiring all owners to pay assessments then this overrides your Declaration of CC&Rs. So if the Developer owns the lots they are delinquent and depending on what your By-laws state may not be eligible to vote.

EllieR (Maryland)
Posts: 8

Posted:

Hello: This is what our state HOA laws state: "primary development means a development such that the purchaser of a lot will pay fees directly to its homeowners association" Related development means a development such that the purchaser of a lot will pay fees to the homeowners association of such a development through the homeowners associaiton of a primary developmet or another developmen" In my mind this says that they should pay dues however legalese can be tricky and I'm not a lawyer. In our association if you are behind in your dues you cannot vote. thank you

KimB4 (California)
Posts: 1

Posted:

I live in Oxnard, CA. Our neighborhood is comprised of 415 homes and is 4 years old. There are an additional 25 homes in development that will complete our neighborhood eventually. Our current Board is made up of 5 members. 3 are in business together (actually sharing the same business address) in real estate and development. For two years I have watched these three work the system to their advantage. Coveniently one of these 3 (holds the VP position) is the developer of the remaining 25 homes. The President of our HOA is in Real Estate (owns a company) and our Secretary works for the President's real estate company. The subject of conflict of interest has come up on numerous occasions and these 3 refuse each time to sign off on a code of ethics or conflict of interest statement. They vote together as a majority on most every issue. The VP/Developer has removed approximately $20,000 worth of Palm Trees to make room for his development and, as you might guess, there will be no reimbursement to our HOA. They have censored the neighborhood newsletter and will not allow any information that speaks to the reality of their actions and how they vote together for their own benefit most of the time. (The palm trees are one of about 30 similar incidences where the 3 are using HOA funds to improve their personal financial situation). By the way, did I mention that our HOA VP and Secretary don't live in our neighborhood, although our Secretary does have a rental home here.

We have an election coming up and hopefully these three will not win re-election. One of the challenges (and how they won last time) is that they will wage a full on election campaign as if they were running for City Council. During the previous election, they did several mass mailings and went door to door passing out literature that misrepresented the facts (accused the seated Treasurer of misusing funds). My point is they can commit an inordinate amount of time to their campaign b/c their Board Seats are directly tied to their personal weatlh. The decisions they make as a Board majority favor their ability to conduct their own business over what is best for the community.

Has anyone else out there been in a situation like this?

Thank you!

Kim

PaulM (Pennsylvania)
Posts: 1,347

Posted:

Ellie:
If you re-read the portion you have posted...
"Class B members shall be the Declarant and shall be entitled to 3 votes for each lot owned. Class B membership shall cease, ..............and be converted to Class A membership etc etc etc...
- This states that the Declarant (Developer/Builder) as Class B member is entitled to 3 votes per each lot owned --while there are still lots to be sold.
The covenant should also dictate at what point (what percentage of lots sold), the association 'government' is to revert to the homeowners.

In addition, to quote..."there were class A and class B members... we are now at the point that there is only class A members.
- To have only class A members means...ALL or the appropriate percentage of lots have been sold and the Declarant is no longer a Class B member.

Since you state the Developer still votes (3-votes per lot owned) and is exempt from paying dues, assessments, the situation implies he is still under control since the correct number of lots have not been sold and the assn. has not been turned over.

RogerB (Colorado)
Posts: 5,067

Posted:

Kim, your best chance to remove these Board members is to collect enough voters and votes to elect others as Board members. You will have that chance during the upcoming election so start working on it immediately!

BradD2 (Florida)
Posts: 418

Posted:

Kim, if proxies are allowed then gather as many as you can.

GloriaM (North Carolina)
Posts: 829

Posted:

Ellie:

In your original post you state that your governing documents read: the declarant is exempt from paying dues. Is the developer the builder as well? If they are not the same then once the lot is sold to the builder, the builder would be obligated to pay the dues.

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