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Started by RayC4 • 28 replies • 1926 views

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RayC4 (Virginia)
Posts: 173

Posted:

We live in a small Declarant-controlled lot subdivision with common space which the health dept has 'locked down' (due to 'bedroom' circumstances eerily similar to Mike's septic issues). There are also many other HOA issues that have gone off the rails.

Certain homeowners have sued the Developer/Declarant and the HOA. The HOA has counter-sued the members. The Declarant has sued the HOA and the homeowners individually over assessment issues. The health dept is a party (defendant) to the original suit. To quote a Tommy Lee Jones movie line: "If it's not a mess, it'll due till the mess gets here."

Here's our issue: A settlement agreement has been floated which the majority of homeowners support, but which we will not sign onto. Because the HOA joins everyone at the hip, this has created consternation, and pressure on us to sign.

My wife and I are on the receiving end of a barrage of 'legal threats' (e.g. original plaintiffs will non-suit just my wife and me, then reach the settlement with the other members; the Declarant will withdraw his suit against all the members except for us; they will dissolve the HOA out from under us and come after us individually, etc.) All this is putting severe pressure on us. However, we think these threats bring 'selective enforcement' issues into play, etc. But our heads are spinning wondering what they can and cannot do.

There is no question we have a legitimate HOA. Our deed refers to the Declaration (CCR's). The Declaration forms an HOA (POA) requiring members to pay assessments. We'd appreciate any and all thoughts, but will not take posts on this forum as any formal legal advice. Thanks!

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By RayC4 on 01/12/2015 1:58 PM
We live in a small Declarant-controlled lot subdivision with common space which the health dept has 'locked down' (due to 'bedroom' circumstances eerily similar to Mike's septic issues). There are also many other HOA issues that have gone off the rails.

What does locked down mean?

Certain homeowners have sued the Developer/Declarant and the HOA. The HOA has counter-sued the members. The Declarant has sued the HOA and the homeowners individually over assessment issues. The health dept is a party (defendant) to the original suit. To quote a Tommy Lee Jones movie line: "If it's not a mess, it'll due till the mess gets here."

If declarant controlled are they not the HOA so how can they sue themselves?

Here's our issue: A settlement agreement has been floated which the majority of homeowners support, but which we will not sign onto. Because the HOA joins everyone at the hip, this has created consternation, and pressure on us to sign.

Need more info as to why you will not sign on. In an HOA, by the nature of the beast you are joined at the hip.

My wife and I are on the receiving end of a barrage of 'legal threats' (e.g. original plaintiffs will non-suit just my wife and me, then reach the settlement with the other members; the Declarant will withdraw his suit against all the members except for us; they will dissolve the HOA out from under us and come after us individually, etc.) All this is putting severe pressure on us. However, we think these threats bring 'selective enforcement' issues into play, etc. But our heads are spinning wondering what they can and cannot do.

You need to hire your own lawyer to represent/protect yourself.

There is no question we have a legitimate HOA. Our deed refers to the Declaration (CCR's). The Declaration forms an HOA (POA) requiring members to pay assessments. We'd appreciate any and all thoughts, but will not take posts on this forum as any formal legal advice. Thanks!

RayC4 (Virginia)
Posts: 173

Posted:

John, 'locked down means: no new building permits. There are now six homes in the 30 lot subdivision.

The Declarant is the Developer. That is a different corporation than the non-stock corp which is the HOA. One guy wears two hats.

Don't think it's in our best interests to sign.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Hi Ray

If I hear you correctly, 6 out of 30 homes were built and the other 5 owners want to go along with a settlement agreement that the developer floated. HOs want septic system issue and other problems resolved. Building has been halted by the local authorities.

Some HOs filed suit against developer, HOA, the health department, and maybe others. The developer counter-sued the HOA and the HOs for assessments.

Quick Q&As:

1. Can developer settle with the other HOs and pursue claims against just you? Sure.

2. Would this be selective enforcement? No. I assume that all HOs were originally named parties in the developer's counter-claims. Those who settle get dropped from the suit. Those who don't continue as parties to the lawsuit. Would be selective enforcement only if original counter-claim named some but not all HOs.

3. What happens if someone attempts to dissolve the HOA? Don't know. Too little information provided about what it would take to do this under your CC&Rs and state law.

4. Can you keep the other HOs tied into the lawsuit even if they settle? Maybe. Again too little info. But if HOA is defendant, you could object to HOA being dropped from the lawsuit (which could possibly keep your "hip action" going with your other HOs). All very hypothetical due to sparseness of info.

5. Did health department file an answer to the original lawsuit? What did they say?

Sikubali jukumu. Read all posts at your own risk.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Ray :

Would need more info to properly give thoughts. Your thread raises more questions than potential answers. Major questions:

1. What is in the settlement agreement?
2. Is it just for developer assessment issue?
3. What issue do you have with settlement agreement?

If it is just the developer willing to take less money for current unpaid assessments and if according to docs and your State Laws are to be paid. Then I would most likely jump onto that band wagon. In my state the developer is to pay expenses and maintain any property he reserved right to utilize while he is in the picture building homes and has "Declarant rights" and for any property developer owns. Without more info then how can I give you an opinion on what I would do if walking in your shoes?

RayC4 (Virginia)
Posts: 173

Posted:

Quote:

Posted By NpS on 01/12/2015 5:07 PM
Hi Ray

If I hear you correctly, 6 out of 30 homes were built and the other 5 owners want to go along with a settlement agreement that the developer floated. HOs want septic system issue and other problems resolved. Building has been halted by the local authorities.
All correct.

Some HOs filed suit against developer, HOA, the health department, and maybe others. The developer counter-sued the HOA and the HOs for assessments.

Quick Q&As:

1. Can developer settle with the other HOs and pursue claims against just you? Sure.

The reason this seems problematic to me is that ALL HO's were named "defendants and necessary parties" in the original suit (by one HO)against the Declarant. Why "necessary"? Because all HOA members have to live with the RESULTS of the action. If my wife and I were "necessary at the start, how can we suddenly become 'unnecessary' now (i.e. be 'unsuited out')?

2. Would this be selective enforcement? No. I assume that all HOs were originally named parties in the developer's counter-claims. Those who settle get dropped from the suit. Those who don't continue as parties to the lawsuit. Would be selective enforcement only if original counter-claim named some but not all HOs.

It named all HO's and had to do with assessments that all HO's paid the same. So by unsuting them (but not us), the Declarant is filing a claim about assessments to just us, and not the others though we all paid exactly the same amounts, etc.

3. What happens if someone attempts to dissolve the HOA? Don't know. Too little information provided about what it would take to do this under your CC&Rs and state law.

4. Can you keep the other HOs tied into the lawsuit even if they settle? Maybe. Again too little info. But if HOA is defendant, you could object to HOA being dropped from the lawsuit (which could possibly keep your "hip action" going with your other HOs). All very hypothetical due to sparseness of info.

5. Did health department file an answer to the original lawsuit? What did they say?

The health dept demmurred (asked to be let out) but the judge denied their request. Only my opinion, but the judge may have wanted them as both witnesses and 'overseers' if the developer is ordered to fix utilities issues at trial end.

RayC4 (Virginia)
Posts: 173

Posted:

Quote:

Posted By JanetB2 on 01/12/2015 5:51 PM
Ray :

Would need more info to properly give thoughts. Your thread raises more questions than potential answers. Major questions:

1. What is in the settlement agreement?
2. Is it just for developer assessment issue?
3. What issue do you have with settlement agreement?

If it is just the developer willing to take less money for current unpaid assessments and if according to docs and your State Laws are to be paid. Then I would most likely jump onto that band wagon. In my state the developer is to pay expenses and maintain any property he reserved right to utilize while he is in the picture building homes and has "Declarant rights" and for any property developer owns. Without more info then how can I give you an opinion on what I would do if walking in your shoes?

Janet, thank you for responding but these actions have been percolating for over four years now, and there's no way I can do the "more info" thing here (not enough gigabytes!)

As to the settlement agreement, it covers everything. My issue is that (IMO) it is not in our interests. My questions refer only to our balking on it. (Not the reasons why.)

JanetB2 (Colorado)
Posts: 4,219

Posted:

Ray:

It potentially does not take gigabytes to answer three simple questions. Again, main issue is what in the settlement agreement would not be in your interest?

From your answers to NpS it appears your main issue is potentially assessments. With regards to his statements you answered:

Quote:

Posted By RayC4 on 01/12/2015 7:03 PM

Posted By NpS on 01/12/2015 5:07 PM

Quick Q&As:

1. Can developer settle with the other HOs and pursue claims against just you? Sure.

The reason this seems problematic to me is that ALL HO's were named "defendants and necessary parties" in the original suit (by one HO) against the Declarant. Why "necessary"? Because all HOA members have to live with the RESULTS of the action. If my wife and I were "necessary at the start, how can we suddenly become 'unnecessary' now (i.e. be 'unsuited out')?

2. Would this be selective enforcement? No. I assume that all HOs were originally named parties in the developer's counter-claims. Those who settle get dropped from the suit. Those who don't continue as parties to the lawsuit. Would be selective enforcement only if original counter-claim named some but not all HOs.

It named all HO's and had to do with assessments that all HO's paid the same. So by unsuting them (but not us), the Declarant is filing a claim about assessments to just us, and not the others though we all paid exactly the same amounts, etc.

5. Did health department file an answer to the original lawsuit? What did they say?

The health dept demmurred (asked to be let out) but the judge denied their request. Only my opinion, but the judge may have wanted them as both witnesses and 'overseers' if the developer is ordered to fix utilities issues at trial end.

1. You were potentially “necessary” in the beginning because the Owner who filed the lawsuit needed to add everyone affected, for the reason you stated … because all are affected by the same result. If the Owner had not added then most likely the Court would have added … this is similar in my State.

If my wife and I were "necessary at the start, how can we suddenly become 'unnecessary' now (i.e. be 'unsuited out')?

I have already explained why you were potentially necessary in beginning. You did not file said lawsuit and the individual who did and their attorney has control over that particular lawsuit. Keep in mind an HOA is in essence “majority rules”. If the majority of owners including developer agree on something … unless you can PROVE said action would violate your governing documents or any Laws, then majority rules. The individual and their attorney who filed the lawsuit can settle for anything they choose, most especially if they were paying all legal costs. Therefore, you can be as you stated “unsuited out”. If you disagree with what is being done and can prove your rights …. you then have the right to file your own personal lawsuit.

2. Even if you are as you have stated “unsuited” … all owners share equally in HOA dues and you will pay same as all “majority” have agreed. You should not potentially be forced to pay more even if you did not agree to sign any settlement agreement.

5. If the Judge did not let the Health Department out of lawsuit … there most likely is a very valid reason. The reason is most likely based on LAWS and not for reason as noted in your opinion. In a court case items are based on facts and laws not on possibly wanting someone to oversee in the future.

NpS (Pennsylvania)
Posts: 4,216

Posted:

Posted By RayC4 on 01/12/2015 7:03 PM

1. Can developer settle with the other HOs and pursue claims against just you? Sure.

The reason this seems problematic to me is that ALL HO's were named "defendants and necessary parties" in the original suit (by one HO)against the Declarant. Why "necessary"? Because all HOA members have to live with the RESULTS of the action. If my wife and I were "necessary at the start, how can we suddenly become 'unnecessary' now (i.e. be 'unsuited out')?

*** You are necessary because - if the case went to trial - the ruling could directly affect your rights - and you cannot have rights taken away from you if you are not a party to the case.

2. Would this be selective enforcement? No. I assume that all HOs were originally named parties in the developer's counter-claims. Those who settle get dropped from the suit. Those who don't continue as parties to the lawsuit. Would be selective enforcement only if original counter-claim named some but not all HOs.

It named all HO's and had to do with assessments that all HO's paid the same. So by unsuting them (but not us), the Declarant is filing a claim about assessments to just us, and not the others though we all paid exactly the same amounts, etc.

*** I assume that the other HOs are agreeing to pay some amount but less that the developer claimed was owed to him. The other HOs have decided that they don't want to roll the dice. You have decided that you do. Your choice. But since the developer is offering you the same deal, there is nothing selective about the way he is treating you.

5. Did health department file an answer to the original lawsuit? What did they say?

The health dept demmurred (asked to be let out) but the judge denied their request. Only my opinion, but the judge may have wanted them as both witnesses and 'overseers' if the developer is ordered to fix utilities issues at trial end.

*** Judge doesn't make decisions based on wanting witnesses or overseers. Can be called as witnesses without being parties. HIghly unlikely that judge would order DOH to take responsibility for enforcement.

Sikubali jukumu. Read all posts at your own risk.

AmandaR2 (South Carolina)
Posts: 566

Posted:

Quote:

Posted By RayC4 on 01/12/2015 7:13 PM

I think it's almost impossible to give an opinion with all the unknowns. I understand your questions refer only to your "balking on it (not the reasons why). However what they may or may not be able to do to you, may depend on the reasons why your not going along with the deal. If you can prove you have reasonable and valid concerns that the deal is not in your best interest then hopefully the courts will see it your way. You need real legal advice for sure. You need to find out what rights you actually have in the matter. An attorney needs to determine what areas are black and white and which may be left up to a judges discretion if you should end up in court. Your need to weigh the risks involved. Sounds multi-layered and complicated. Wish you luck.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Ray

It is impossible to give advice without knowing all facts and even then it is not legal advice, just advice based on experience.

Time for you to lawyer up.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

This is a Declarant owned HOA correct? The HOA was NOT turned over to the owners? So you do have a HOA, but it's NOT your or your neighbor's HOA. I bet your documents has the Declarant/builder's name all in it. This is important to note.

It sounds like the Health Department "closed" the building plans for the Declarant. They were then unable to develop the lots as planned. Which then means the planned subdivision and available properties have been effected the homeowners. It can not be "built out".

The owners being upset by this decided they were part of a HOA, and decided to sue the declarant. Hence the HOA lawsuit against the declarant. The owners I am sure also decided out of "frustration" to stop paying their assessments to the Declarant. Who is also the true owner of the HOA. So the Declarant has a right to collect those unpaid assessments. It is those assessments that are funding the legal battle for the Declarant/HOA.

It now appears the HOA is going to be dissolved by the declarant. With the Declarant doing so, then that means they can individually sue each owner. This settlement sounds more like part of a "Class action lawsuit" type. Which means if you do not agree to sign with the "group" settlement, then you take on the responsibility of you portion of the suit upon yourself.

This is a big mess... When I always say "Suing your HOA is suing yourself and your neighbors..." This is a good example of that and beyond...

Former HOA President

RayC4 (Virginia)
Posts: 173

Posted:

Quote:

Posted By NpS on 01/12/2015 8:19 PM

Posted By RayC4 on 01/12/2015 7:03 PM

But since the developer is offering you the same deal, there is nothing selective about the way he is treating you.

NpS, thanks for all your thoughts. It is complicated, and of course we'll be seeking counsel. Right now, I still suspect it's 'selective' because of what we're LEFT WITH when the dust settles. And that is: a claim against one member/homeowner over a dispute about regular assessment amounts, which all homeowners paid identically over the relevant timeframe (several years).

As to the Developer offering us the 'same deal', it is a multi-issue settlement and OTHER aspects of it we object to.

Naturally I was hoping for some confirmation here, but you (and others)have given us some different perspectives / food for thought which is even more valuable and I thank you.

RayC4 (Virginia)
Posts: 173

Posted:

Quote:

Posted By MelissaP1 on 01/13/2015 8:58 AM

It now appears the HOA is going to be dissolved by the declarant.

Melissa, you put your finger on my key question in all this 'mess'. I thought we bought into a subdivision with Covenants, an HOA, common space, etc. I always thought 'Covenants' were treated as binding contracts. You are suggesting that the Declarant can just wave a wand and make all that 'go away'?

(As a BTW, our water/septic infrastructure is located on the common space. The health dept will not permit more 'build out' until the Developer/Declarant remedies some capacity irregularities there.)

MelissaP1 (Alabama)
Posts: 13,836

Posted:

The Declarant is in charge they pretty much have carte blanche on their HOA. They have all the voting rights in majority. This became a mess because some misunderstood what a HOA is and what kind they are in. It is NOT an owner owned one. That means the Declarant can dissolve the HOA they set up. Which may mean additional monies to keep the sewer system by you all the owners when the Declarant skips out....

Former HOA President

AmandaR2 (South Carolina)
Posts: 566

Posted:

Dissolving an HOA is very complicated, someone would have to take over the common areas, among many other legalities. (IMO in your case that would be impossible, without a "magic wand".) I do hope things work out for you, sounds like your in a very stressful position, I don't envy you.

AmandaR2 (South Carolina)
Posts: 566

Posted:

IMO, the declarant cannot just pass a problem over to you, and get away scot-free. IMO if problems occurred when under his control he will have responsibility to fix them or face legal ramifications. IMO Seek legal opinions now, even just free consultations will help you get a feel for which direction to go in.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Ray

As asked before:

Here's our issue: A settlement agreement has been floated which the majority of homeowners support, but which we will not sign onto. Because the HOA joins everyone at the hip, this has created consternation, and pressure on us to sign.

Need more info as to why you will not sign on. In an HOA, by the nature of the beast you are joined at the hip.

Why will you not sign on?

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By RayC4 on 01/13/2015 9:30 AM

Posted By MelissaP1 on 01/13/2015 8:58 AM

It now appears the HOA is going to be dissolved by the declarant.

Scenario: Builder set up separate Corporation (let's call it Upyers Corp) to develop your development. Builder stopped by authorities. Builder collects what he can in assessments. Then Upyers Corp files for bankruptcy. Builder moves on to develop next community. Magic wand goes poof. HOs now stuck with HOA.

Sikubali jukumu. Read all posts at your own risk.

RayC4 (Virginia)
Posts: 173

Posted:

Quote:

Posted By NpS on 01/13/2015 10:00 AM

Posted By RayC4 on 01/13/2015 9:30 AM

Then Upyers Corp files for bankruptcy. Builder moves on to develop next community. Magic wand goes poof. HOs now stuck with HOA.

Don't I wish! There are no other amenities aside from the utilities, which are in fact working ok for current residents. These are just private wells & septic (only on common space instead of one's lot). The residents could take over the six-home HOA, no problem imo. The care & feeding of the W/S is simply contracted out to a certified water firm.

Sure, the bankruptcy scenario is a real possibility. But then remaining lots (the only assets) would be auctioned off (maybe a real developer would engage in some bottom-feeding and actually come in and get the subdivision off the ground). I'll take that scenario all day long vs. what we have now.

AmandaR2 (South Carolina)
Posts: 566

Posted:

Your right, I'm sure situations have happened that way NPS. Every situation is unique. In your hypothetical doesn't involve a HOA being dissolved though, which is what OP is being threatened will happen, if he doesn't go along with the other owners and take the deal.

JanetB2 (Colorado)
Posts: 4,219

Posted:

State laws vary regarding dissolving HOA. As Tim is from Virginia will be interesting to see if he responds. He would probably be able to provide a link to the state statute to reference. In some all owners would have to agree to dissolve.

MarkM31 (Washington)
Posts: 556

Posted:

How can you dissolve a HOA which owns common property and presumably a utility?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

What may happen here is the Declarant dissolves their own HOA. Better yet, may even just turn-over the HOA to the owner's altogether. Which means the owners will truly be an owner owned HOA and in charge of the utility. This is the direction would not be surprised if the builder does this.

Remember this is a DECLARANT OWNED/FORMED HOA. They are the ones who filed the HOA paperwork and can most likely dissolve it. The result is going to be messy...

I would start pricing out your own septic system. That way you all will not be stuck with a shared amenity on common property you all have to keep paying for. It may be a better option in the end if it is possible.

Former HOA President

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By MelissaP1 on 01/13/2015 1:37 PM
What may happen here is the Declarant dissolves their own HOA. Better yet, may even just turn-over the HOA to the owner's altogether. Which means the owners will truly be an owner owned HOA and in charge of the utility. This is the direction would not be surprised if the builder does this.

Remember this is a DECLARANT OWNED/FORMED HOA. They are the ones who filed the HOA paperwork and can most likely dissolve it. The result is going to be messy...

I would start pricing out your own septic system. That way you all will not be stuck with a shared amenity on common property you all have to keep paying for. It may be a better option in the end if it is possible.

While the HOA may be declarant controlled … the declarant potentially would not have single authority to defraud consumers and their secured creditors who spend or lend money based on what has been implied and expressed.

This is the VA POA Act: https://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+TOC55000000026000000000000

I do not see anything about dissolving an HOA … and which as noted by Larry would be difficult with shared utilities.

55-515.2 makes following statement:

A. All provisions of a declaration shall be deemed severable, and any unlawful provision thereof shall be void.

F. (Just states the only time a Declarant or others can "unilaterally amend".)

The only section which is what maybe the Court is looking at would be:

55-515.2:1 - Reformation of declaration; judicial procedure

Maybe the court is looking at making it a smaller HOA with only the current homes constructed.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Sorry meant to say as noted by Mark, instead of Larry.

RayC4 (Virginia)
Posts: 173

Posted:

Quote:

Posted By JanetB2 on 01/13/2015 11:25 AM
State laws vary regarding dissolving HOA. As Tim is from Virginia will be interesting to see if he responds. He would probably be able to provide a link to the state statute to reference. In some all owners would have to agree to dissolve.

CfD (Virginia)
Posts: 265

Posted:

You may wish to look to the non stock corporation act Ray.

https://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+13.1-902

TimB4 (Tennessee)
Posts: 21,059

Posted:

In general, my understanding of dissolving an HOA would be that the following would need to occur:

1) Common land sold or transferred to some entity.
2) Requirements for provided services be transferred to county, city, personal homeowners or other private entity.
3) Deed Restrictions (CC&Rs) amended to either remove the restrictions completely or to remove mandatory membership. You would also need amendments to remove required services, common areas, etc.

Keep in mind that interpretation of any statute can vary by County.
Additionally, if the land and/or services are simply transferred to another private entity, you may have only traded one association for another.

Now, in Rays situation, since he has indicated it's a septic issue, the county health department is involved and the Declarant is still in control, it doesn't sound like a simple issue.

My suggestion to Ray is similar to what others have suggested. Obtain a private attorney to review the offer made by the Declarant. Then have a meeting with all parties of the suit who are looking to compromise (county health board, all land owners and Ray's attorney) and discuss concerns, benefits, risks, etc.

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