Can HOA buy vacant lot from developer without my approval?

Started by VincentL4 • 11 replies • 2009 views

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VincentL4 (Delaware)
Posts: 2

Posted:

Here's the situation. I own a townhouse/condo in a small development planned for 28 townhouses. To date, only 3 of the 4 seven unit buildings have been completed and sold (21 units have been built and sold). The developer has been approached by a number of members of the HOA asking the developers to sell the last portion of the property where the 4th building is supposed to be built. They want to buy it so they can turn it into a parking lot for boats and additional cars.

A few owners have no interest in being included in any sale by the developer to the HOA. Can the HOA commit us financially to purchasing the rest of the property? Please help.

LarryB13 (Arizona)
Posts: 4,099

Posted:

Vincent,

This site is full of complaints from condo dwellers who discovered too late that their parking is insufficient for the number of units. Not adding seven more units but adding additional parking would add to the value of the 21 existing units.

My question is what is it that the association would be purchasing? Unless this lot is platted separately, the members already own the ground. They would essentially be paying the developer to abandon his plans to build the fourth unit. This could get messy, though, since you probably now own an undivided 1/28th share of everything and this would have to be changed to 1/21st share.

GeorgeR8 (Arizona)
Posts: 182

Posted:

I would check the CC&Rs about the boats being kept on condo property. More parking for cars is almost always needed.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

What will happen is your HOA will shrink down to the size of 21. Which then you all will have to change your documents and collections. Plus you all will have to pay for the actual work for the parking lot to be installed and maintained.

If the developer is still owner and operator of the HOA, you may suggest that the developer change their plans for the lot. If the developer is wanting out, they may want to cut out. Which if done properly can ask them to instead provide the parking lot as a "parting gift". Basically, have the developer provide the amenity the majority wants and then turn over everything to the HOA owners.

Depending on if the developer is making a profit by saving the property or turning over the investment to the owners, the developer may accept this offer. It does them a favor by offering an extra sales feature. Which may a plus for them to consider. This will save you the homeowner's money from the purchase and work...

Former HOA President

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Vincent's question is:

Can the HOA commit us financially to purchasing the rest of the property? Please help.

My first blush is the Covenants/Bylaws probably have the answer and that answer will more than likely be yes if a specific amount of owners agree to do so. I doubt it would require 100% agreement. I expect it will be more like 2/3rds or maybe 75%. It is possible but highly doubtful it would be 100% required to approve. Could be tricky with the developer having some votes. Could also be even trickier if the association has not been turned over to the owners.

Were I one not liking the idea of it, I would be rallying like thinking owners to build a legal war chest to hire an attorney to look into it.

TimB4 (Tennessee)
Posts: 21,061

Posted:

As others have said, the answer will be within your Governing documents ( CC&Rs, Articles of Incorporation or Bylaws).

Typically, the Board may buy and sell without a vote. However, documents vary by Association.

BanksS
Posts: 403

Posted:

Quote:

Posted By MelissaP1 on 04/22/2016 11:48 AM
What will happen is your HOA will shrink down to the size of 21. Which then you all will have to change your documents and collections. Plus you all will have to pay for the actual work for the parking lot to be installed and maintained.

If the developer is still owner and operator of the HOA, you may suggest that the developer change their plans for the lot. If the developer is wanting out, they may want to cut out. Which if done properly can ask them to instead provide the parking lot as a "parting gift". Basically, have the developer provide the amenity the majority wants and then turn over everything to the HOA owners.

Depending on if the developer is making a profit by saving the property or turning over the investment to the owners, the developer may accept this offer. It does them a favor by offering an extra sales feature. Which may a plus for them to consider. This will save you the homeowner's money from the purchase and work...

I think this a good suggestion. Ask the developer to change the planned unit building to a parking lot instead.

VincentL4 (Delaware)
Posts: 2

Posted:

OP here, thanks for the replies so far, I'll have to fish out the CC&R's I guess. HOA was turned over to owners by developer 3 months ago, when 75% of the units were sold. I know HOA's have a lot of latitude when it comes to maintaining the community but didn't realize they could commit me to a land purchase contract against my wishes. 21 units/ $250,000 geez

LarryB13 (Arizona)
Posts: 4,099

Posted:

Vincent,

I believe what your association is purchasing is the builder's rights develop the property further with the addition of seven more units. My guess is that your association, being the skilled negotiators that boards usually are, is over-paying for those rights.

The price should be the net profit that the developer would realize if the seven units were completed and sold. I do not know what that number is but $250,000 divided by the seven units works out to $35,714 each. To me, that sounds like a lot of profit per unit but I am not in the real estate development business.

It might be worthwhile to find someone who is knowledgeable in that business and see what they think of the deal.

DouglasK1 (Florida)
Posts: 2,046

Posted:

Quote:

Posted By VincentL4 on 04/24/2016 10:32 AM
OP here, thanks for the replies so far, I'll have to fish out the CC&R's I guess. HOA was turned over to owners by developer 3 months ago, when 75% of the units were sold. I know HOA's have a lot of latitude when it comes to maintaining the community but didn't realize they could commit me to a land purchase contract against my wishes. 21 units/ $250,000 geez

How does the board intend to pay for this expense? If they are planning a special assessment or dues increase, check your documents to see if there are any limits on what they can do without member approval.

Escaped former treasurer and director of a self managed association.

GlenL (Ohio)
Posts: 5,491

Posted:

Douglas in addition to reading your CC&Rs, I would suggest you read the Delaware Condo Statutes which can be found at: http://delcode.delaware.gov/title25/c081/sc03/

Now I didn't read the whole statute but under: § 81-302 Powers of unit owners' association.
it appears they can.

(5) May make contracts and incur liabilities;

(6) May regulate the use, maintenance, repair, replacement, and modification of common elements;

(7) May cause additional improvements to be made as a part of the common elements;

(8) May acquire, hold, encumber, and convey in its own name any right, title, or interest to real estate or personal property, but: (i) common elements in a condominium or planned community may be conveyed or subjected to a security interest only pursuant to § 81-312 of this title and (ii) part of a cooperative may be conveyed, or all or part of a cooperative may be subjected to a security interest, only pursuant to § 81-312 of this title;

Now § 81-312 has specific requirements which may come into play, especially if the Board intends to take out a mortgage to pay for the property, so you should contact an attorney for specific legal advice in this matter.

Studies show that 5 out of 4 people have problems with fractions

NpS (Pennsylvania)
Posts: 4,216

Posted:

Quote:

Posted By GlenL on 04/25/2016 10:11 PM
Douglas in addition to reading your CC&Rs, I would suggest you read the Delaware Condo Statutes which can be found at: http://delcode.delaware.gov/title25/c081/sc03/

Now I didn't read the whole statute but under: § 81-302 Powers of unit owners' association.
it appears they can.

(5) May make contracts and incur liabilities;

(6) May regulate the use, maintenance, repair, replacement, and modification of common elements;

(7) May cause additional improvements to be made as a part of the common elements;

(8) May acquire, hold, encumber, and convey in its own name any right, title, or interest to real estate or personal property, but: (i) common elements in a condominium or planned community may be conveyed or subjected to a security interest only pursuant to § 81-312 of this title and (ii) part of a cooperative may be conveyed, or all or part of a cooperative may be subjected to a security interest, only pursuant to § 81-312 of this title;

Now § 81-312 has specific requirements which may come into play, especially if the Board intends to take out a mortgage to pay for the property, so you should contact an attorney for specific legal advice in this matter.

Adding to what Glen said:
81-312 require 80% approval by the homeowners (independently of the declarant).

With 21 units, I would read that to mean that 17 units must approve.

But definitely check with a lawyer.

Sikubali jukumu. Read all posts at your own risk.

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