New HOA run by developer & broker

Started by GaryS13 • 5 replies • 1334 views

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GaryS13 (Tennessee)
Posts: 2

Posted:

We purchased our house in Apison Tn less than a year ago. It is a brand new development with a clubhouse and pool. It is ungated. The HOA fees are $700 a year and there are now 36 homes in a development of 101 lots. This sounds great but here is the problem.
The developer does not want the HOA to take over until 51 houses have been built and sold. The HOA is being run by the broker as the property manager. The clubhouse is not to be used by any resident without a reservation and cleaning fee of $250 (refundable). The broker (property management) is paying all of the bills and none of the homeowners have seen any bills, ie the clubhouse has a cleaning fee paid in the amount of $440 per month but the residents are not allowed inside, the clubhouse has a internet/tv service in the amount of $216 per month but the residents are not allowed inside. The broker has a small office inside the clubhouse that her staff uses on weekends for open house and the builders use the clubhouse for lunch and meetings. But the residents are not allowed inside and were told in email that this is standard among a lot of communities
The streetlight bill we are told is over $1700 per month but 8 of 16 streetlights do not work. The landscaping around the front of the entrance and around the clubhouse/pool area plus 3 common areas (undeveloped) is $991 per month year round.
The residents, broker, developer had a meeting and the gates to the pool were discussed as not being locked. About a month after the meeting the residents discovered that the gates had been replaced with card reading gates but no one received a card and the gates were not locked. One of the residents was told that the card reading gates and cards was at the expense range of $17000 but no resident was informed of this. The developer is paying anything over the amount of the resident's fees but that is a loan and will have to be repaid. There are plenty of expenditures the residents are not informed of and there is not "books" showing where the money went.
The clubhouse has a video system set up so that the pool and front entrance can be monitored but the residents have been informed that one of the builders is the only person that can access the video.
I guess my question is "Does anyone other than me see a problem here?" I am not sure why we are paying anything when there is absolutely no control of the homeowners' money. Is this even legal?

Thanks
Gary

RayC4 (Virginia)
Posts: 173

Posted:

Gary, you have moved into a situation in which the developer has significant (though imo not unfettered) power. Though you have been there less than one year, I assume the 36 home development has been in operation at least several years. It is interesting to me that you do not even mention the Declaration of Covenants (CC&R's) that presumably exist. That's where I'd begin.

The Covenants are going to specify what (how) assessments are paid and what amenities / services you are paying for. The word 'covenant' implies a two-way street. If you're paying for stuff you can't use, there's a problem. You need to gather some like-minded homeowners and have a polite conversation with the broker and/or developer.

Also, have there been HOA meetings? At least annual (i.e. budget focused) meetings? There's supposed to be and that should be in your Bylaws Covenants too. You should be getting financial statements from the Board (who is still now the developer) which you can then refer to in discussions. (And I would hang on to any financials you obtain -- you may need them later.)

In short, you need solid documentation to serve as a basis for some direct discussion with these guys. Keep it polite -- you want to avoid getting these guys riled up. If they blow you off, you're going to need to consult an attorney (also as a group of members, not just yourselves).

GaryS13 (Tennessee)
Posts: 2

Posted:

That is good advice. The development was started in Feb 2013. I am not sure the developer (a surgeon) is aware of what is going on. I will hang onto any financial paperwork I can get from the broker (property manager)

BruceF1 (Connecticut)
Posts: 2,535

Posted:

Quote:

Posted By GaryS13 on 06/10/2014 1:22 PM
That is good advice. The development was started in Feb 2013. I am not sure the developer (a surgeon) is aware of what is going on. I will hang onto any financial paperwork I can get from the broker (property manager)

That's a very young development. Our development was started in 2004 and wasn't turned over to the homeowners until 2007. We are now completely built and there are 88 homes. So, that should give you some idea of timing. Our documents required that the development be turned over to the homeowners within a certain period once 2/3 of the homes to be built had been built and sold.

As far as when the development is to be turned over to the homeowners, that should be in your documents (CCRs or Declaration). It was mentioned that document is a two-way street, but you must remember, it is a legal and binding agreement that is attached to your deed. Whether or not you realized it at the time, you agreed to abide by the terms of that document when you purchased your home.

As for the use of the clubhouse, without reading your documents there is no way for me to judge what right homeowners have.

To be honest, I think you may be a bit premature and you need to be more patient. To determine whether or not everything is being done properly you will need to study your documents and any applicable state laws before rushing to judgement.

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

Quote:

I guess my question is "Does anyone other than me see a problem here?"

The developer owns and controls your HOA. Until he hands the HOA over to you, the members, its probable he can legally do this. He owns it. Like others said, check your CCR/Bylaws and if you dont understand them, get a bunch of owners together to hire a lawyer. It will be cheap if you all pitch in.

CarolR11 (Colorado)
Posts: 2,563

Posted:

All good advice to you, Gary. They direct you to two of your "governing documents": your Conditions, Covenants, and Restrictions and your bylaws (if you're incorporated). The first is often called CC&Rs or Covenants or the Declaration. It is recorded. It is not "financial paperwork. Bylaws are the organization of meetings, elections, etc.

As Steve suggest, if you cannot understand them--they're often full of legalese, get a group together to have an HOA attorney guide you or one who specializes in HOA legal docents.

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