Developer in default

I live in a 118 home POA restricted community. At this time 104 of the properties are owned by individuals and not the original developer. The developer has a long history of not following through on his obligations and most recently got a loan from a third party lender to continue to operate. At this time the developer and the lender are engaged in legal action where the developer is claiming "wrongful lending practices" and the lender is claiming default. One of the items securing the debt is the rights as the developer. So at this moment who is running the show is in legal limbo.

There are MANY issues within the community. Our declaration does not give a time for the control of the association to be turned over to a community board. In this state, there is no specific HOA/POA law, instead non-profit law is controlling. The title of the community property is encumbered by the mortgage (which is in the developers name) and the property taxes are not being paid in a timely manner.

Until the court proceeding plays out we are stuck in the middle. The non-profit law allows member corporations to call for special meetings by submitting a request signed by 5% of the voting members. Our plan is to submit a request for a special meeting to elect officers to both the lender and the original developer. They have 30 days to hold the meeting or we can do it.

I am hoping that electing a board will allow us to begin to work together and figure out how exactly to move forward as a community instead of a few people working in different directions. We need a group that can talk on behalf of the neighborhood and potentially obtain legal counsel to represent our interests in the suit.

Does anyone have any experience with forming a board where there are no property rights involved?? I understand in most cases, that each owner owns a share of the common areas. In this case the developer still owns the common areas. I believe the board may be able to collect the dues from the association because the association is the nonprofit that we all are members of, but the stuff that needs maintaining isn't ours at this time.

There are HUGE issues with transparency and as members we have no idea where the money is going. I have no doubt that running the neighborhood takes more than the $50,000 that is due through dues, but there is no accounting available to review. After the taxes went unpaid, and the legal action was filed, most of the residents did not pay their 2015 assessment. Any thoughts on how to move forward to protect our interests and at least establish some voice for the residents of the community?

It is indeed a mess. Several of us have tried to fund an attorney. Of 104 owners, 10 contributed to the tune of $2500. The attorney has quoted needing $3000-5000 just to sort through the mess. At this point it may take a car wash and bake sale. The other issue is who that attorney would represent, having some elected body would at least sort that part out. Right now they are talking to me and my neighbor. But if a decision needs to me made I don't have any authority to make it, and neither does anyone else.

Our declaration, is at best, a masterful attempt to avoid any specific obligation or concrete direction. About the only thing that is clear is that you can't have a clothesline or solar panels. Pretty much everything else, may or may not get done. It was really a brilliant use of 40 pages of very small print to pretty much say absolutely nothing. It does say that you will pay your assessment, but it does not say what that money will be used for. Pretty much every time an attorney has reviewed it they agree that it is a brilliant work of non commitment.

I'm also sorry to hear about your troubles, it sounds very disconcerting. Look closely at your other governing documents as well as the declaration. The Articles of Incorporation and the Bylaws might hold some clue as to voting interests and how many votes the develeoper has vs how many the homeowners have. The developer owns less than 12% of the lots and it doesn't seem right that his financial problems should put over 100 homeowners, who bought in good faith, in the middle of his legal battle. See if there's anything at all in the Bylaws that talks about who gets to elect the board of directors. Many times developers will reserve the right to just appoint people to the board before turnover. There has to be something in there about that.

If the taxes aren't being paid then you want to make sure that the owners aren't on the hook for back taxes if his legal battle drags on for a few years. Then there's the matter of reserves, which probably aren't being set aside at the moment, which means you'll be playing catch-up with those whenver turnover finally does occur. Does your state law give you any rights at all to inspect the yearly budget? That would be another good place to start if you can get your hands on it.

Unfortunately, my gut tells me you're going to need a judge somewhere to side with you in the interest of fair play. Good luck to you.