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Original Developer sold 20 lots with no deed restrictions

Started by BrentS4 • 24 replies • 1754 views

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BrentS4 (North Carolina)
Posts: 7
Posted:
Thanks for setting up this site and having an active community. I greatly appreciate it!

This April, I was elected President of a small POA in NC. The original developer of our neighborhood sold 20 lots without deed restrictions to a builder. After speaking with the builder, he said the lots on the outside of our neighborhood that don't use our roads or common areas were exempted from our rules by the developer. Our covenants state the original developer can change anything without notification. The builder said he knew once he started building within our neighborhood, he had to follow the rules and pay dues. However, the builder hasn't paid dues in the past two years and the neighborhood wants action.

I'm new to all of this and am requesting assistance. I need to know my options in dealing with this situation.

Some known facts:

1. The covenants state the original developer can change anything without notification to anyone as long as he owns a single lot in the development. He still owns 7. He has not in the past and does not if requested communicate with the POA.
2. The deeds of any lot purchased after the POA was formed contains deed restrictions and makes note of our covenants.
3. The deeds of any lot purchased before the POA was formed do not contain deed restrictions.

Some lingering questions:

1. Can I enforce covenants on lots that do not contain the restrictions in their deed?

Thanks,
Brent
PitA
Posts: 1,416
Posted:

1. Can I enforce covenants on lots that do not contain the restrictions in their deed?


NO, YOU CAN NOT ENFORCE CONTRACTUAL RESTRICTIONS WHEN THEY DO NOT MUTUALLY EXIST

A thousand times NO

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MarkM31 (Washington)
Posts: 351
Posted:
Isn't that 1001?
NpS (Pennsylvania)
Posts: 4,216
Posted:
Quote:
Posted By MarkM31 on 06/02/2016 1:21 PM
Isn't that 1001?

Dalmatians?
Sikubali jukumu. Read all posts at your own risk.
BrentS4 (North Carolina)
Posts: 7
Posted:
So, what do I do? Go after the developer for not including these lots have to follow our rules? Go after the lawyer that wrote the deeds and didn't include the restrictions? These lots are all over my neighborhood. It's the end of the HOA and any kind of protections against trailers etc.
BrentS4 (North Carolina)
Posts: 7
Posted:
Their deed states: the Grantor will warrant and defend against the lawful claims of all persons whomsoever, other than the following exceptions: easements, restrictions, and rights of way of record.

That is the only mention of "restrictions" in their deed. I don't know lawyer-speak. Does this mean the seller of the land is verifying the land is free and clear EXCEPT it has easements and restrictions on it?

The rest of the deeds sold after 2010 when the HOA was formed specifically call out that the lot is subject to our covenants and list the book and page number our covenants can be found.
MarkM31 (Washington)
Posts: 351
Posted:
If CC&Rs are not attached and recorded to the deed, they do not legally exist.

As to the question of "who do you go after"? Nobody. Go after for what? The owners of those properties have suffered no damages, and your only thread is you as a third party and a series of contracts which you are not party to. It's rough, but that is the way it is.
PitA
Posts: 1,416
Posted:
Quote:
Posted By NpS on 06/02/2016 1:44 PM
Posted By MarkM31 on 06/02/2016 1:21 PM
Isn't that 1001?


Nope, it is actually 1002
PitA
Posts: 1,416
Posted:
Set you up, then reeled you in
LarryB13 (Arizona)
Posts: 4,099
Posted:
Quote:
Posted By BrentS4 on 06/02/2016 2:12 PM
So, what do I do? Go after the developer for not including these lots have to follow our rules? Go after the lawyer that wrote the deeds and didn't include the restrictions? These lots are all over my neighborhood. It's the end of the HOA and any kind of protections against trailers etc.


In my state the courts would tell you that if property restrictions and an HOA were material to you then you should have verified that they existed on all the lots in the neighborhood.
DouglasK1 (Florida)
Posts: 2,046
Posted:
Quote:
Posted By BrentS4 on 06/02/2016 2:12 PM
So, what do I do?

It's very possible you have no recourse against anyone. Have you talked to a lawyer to get their opinion?
Escaped former treasurer and director of a self managed association.
PitA
Posts: 1,416
Posted:
Quote:
Posted By DouglasK1 on 06/03/2016 5:22 AM
Posted By BrentS4 on 06/02/2016 2:12 PM
So, what do I do?


It's very possible you have no recourse against anyone. Have you talked to a lawyer to get their opinion?

Pay taxes, then, eventually, die.

Same as us.
BrentS4 (North Carolina)
Posts: 7
Posted:
Alright. I appreciate the help. We can't afford lawyers who want 250/hr just to give a yes/no answer.

I will call a meeting and ask to disband the HOA. 78% of the neighborhood will not pay dues or follow rules when 22% of the neighborhood doesn't have to. I'm not sure who will provide insurance on the road or maintain it.

The original developer has basically ruined the hopes and dreams of 20 families and I have to be the one to tell them the neighborhood they bought into will now consist of trailers and renters instead of two story homes.
TimB4 (Tennessee)
Posts: 21,059
Posted:
Brent,

If you have a private road, or other common area/amenities, you likely can not disband the Association without seeing if the City will take it over.

Another option is to see if the city will take over responsibility and set up a special tax district to pay for it. The tax district will likely include all homes adjacent to the roads regardless if there are restrictions or not.
MarkM31 (Washington)
Posts: 351
Posted:
Quote:
Posted By TimB4 on 06/03/2016 6:27 AM
Brent,

If you have a private road, or other common area/amenities, you likely can not disband the Association without seeing if the City will take it over.

Another option is to see if the city will take over responsibility and set up a special tax district to pay for it. The tax district will likely include all homes adjacent to the roads regardless if there are restrictions or not.

Yea that.

You generally can't end a HOA by fiat or even a vote, this to must be registered.

Tp have a vote and say the HOA is over, yet the roads are still in existance could open the individual homeowners up to liability in the case of an accident or other claim.

Much as you don't want to, consult a good lawyer.
DouglasK1 (Florida)
Posts: 2,046
Posted:
Quote:
Posted By BrentS4 on 06/03/2016 6:00 AM
Alright. I appreciate the help. We can't afford lawyers who want 250/hr just to give a yes/no answer.

While a lawyer might tell you you're out of luck, they might also give you positive options, you won't know without taking that step. In any case, I doubt that there are any DIY options. Assuming you did take some action and it was challenged via lawsuit, you'd end up needing a lawyer anyway for a lot more than $250, better to pay a little before than a lot after.

Are you on the board? Unless your budget is very small, $250 does not seem like a budget buster. Alternatively, if you are doing this personally, are there other owners who are concerned? Getting a few to chip in $40 or $50 to explore options to protect their investment of 100s of thousands of $ in their property seems a no-brainer.

Attempting a DIY disbanding could also be a legal time bomb that could end up costing you a lot of money down the road if challenged.
Escaped former treasurer and director of a self managed association.
ChesterB
Posts: 63
Posted:
Quote:
Posted By BrentS4 on 06/03/2016 6:00 AM
Alright. I appreciate the help. We can't afford lawyers who want 250/hr just to give a yes/no answer.

I will call a meeting and ask to disband the HOA. 78% of the neighborhood will not pay dues or follow rules when 22% of the neighborhood doesn't have to. I'm not sure who will provide insurance on the road or maintain it.

The original developer has basically ruined the hopes and dreams of 20 families and I have to be the one to tell them the neighborhood they bought into will now consist of trailers and renters instead of two story homes.

Maybe not so doom and gloom. Check your local zoning laws. Trailers may not be allowed per those. As far as rentals that would probably not be a local zoning code. Some zoning laws are pretty strict. I believe mine are pretty strict and I live in a small housing area in rural Iowa. We have no active covenants as per Iowa law they must be renewed after 21 years. No renewal took place but we do have an Association because we have a common sanitary sewer to maintain. No trailer homes allowed where I live though but there are no rental restrictions. Home plans must be approved by the county engineer and he is known to be very strict about home owners adhering to the zoning laws. Our roads were turned over to the County years ago but there is a common law that if one uses it one must pay a portion for maintenance. I am speaking of your roads as well as any other common element maintained by a group such as an HOA. In my Association, its the sanitary sewer. In your situation it would be the roads. If you use it, you have to pay for it. No free rides.

I agree though, that an opinion from an attorney might be money well spent.
DouglasK1 (Florida)
Posts: 2,046
Posted:
Quote:
Posted By BrentS4 on 06/03/2016 6:00 AM

I will call a meeting and ask to disband the HOA. 78% of the neighborhood will not pay dues or follow rules when 22% of the neighborhood doesn't have to.

Just out of curiosity, are you saying nobody is paying dues? The lots with the restrictions recorded are still subject to them and proper collection procedures should be used if needed. The owners who bought the lots should have known when they bought them that they were part of an HOA and subject to paying dues and following rules.

If owners without the restrictions are willing to voluntarily add the restrictions and become HOA members, then that could probably happen with the correct procedure being followed.

If the HOA is responsible for roads, it might have some ability to collect money from the non-members for the maintenance of those roads. I don't have the thread handy, but I seem to recall that some poster (possibly Larry) wrote something to that effect here on hoatalk previously.

Escaped former treasurer and director of a self managed association.
MarkM31 (Washington)
Posts: 351
Posted:
Quote:
Posted By DouglasK1 on 06/03/2016 12:08 PM


If owners without the restrictions are willing to voluntarily add the restrictions and become HOA members, then that could probably happen with the correct procedure being followed.


Or they could at least cut you a check to help out on the roads
BrentS4 (North Carolina)
Posts: 7
Posted:
Guys thanks for the replies. Answering your questions below.

I am the President of my HOA.
We have a budget of 3,000$ a year.
The 250/HR lawyers around us would budget bust.
As far as who pays dues, it will be a hard convo but I will try to remind current and future owners their deeds are subject to the HOA.
As far as disbanding the HOA, thanks for the replies. It sounds like I need to get the town involved first.

The lots that are apparently exempted from our rules due to their deeds now having no restrictions thanks to the original developer executing his right to exempt anything will not have owners. The developer formed an LLC that will build crappy houses or trailers and rent them. There will be no owners to request a voluntary contribution from.

This is why my neighborhood is on the brink of everyone selling and moving away. We feel helpless.
PitA
Posts: 1,416
Posted:
Y'all ARE helpless.

Y'all did NOT read what y'all signed for.

Y'all signed said documents with attorneys at law present to act as witnesses.

The only smart ones were the 20 without Covenants attached to their homes.

however

If they use the privately owned roads they are legally required to pay their fair share.

Let the attorneys order the new Porches now.

next time: CAVEAT EMPTOR
TimB4 (Tennessee)
Posts: 21,059
Posted:
Brent,

Even if not subject to your use restrictions, there should be a private road agreement. Otherwise, the roads are to be individually maintained by those who abut them. Check with an attorney versed in private road law (ask how many cases they have had concerning private road maintenance and how many they won).

MarkM31 (Washington)
Posts: 351
Posted:
Quote:
Posted By TimB4 on 06/05/2016 3:32 AM
Brent,

Even if not subject to your use restrictions, there should be a private road agreement.


Unless the roads are a separate legal parcel deeded to the HOA, or an un maintained county road and easement.
BrentS4 (North Carolina)
Posts: 7
Posted:
To answer your question about who owns the road. The road was deeded to the HOA back in 2010 when the HOA was formed.

Also, WE did not sign anything. WE were NOT at the closing of these 20 lots. The original developer did this without HOA knowledge, approval, etc. but according to our covenants he does not need to notify us or request our approval.

So, I'm having to showcase these revelations to my neighborhood. Tell them this developer has screwed our hopes of having a nice neighborhood all because he wants to rent crappy houses. The kicker is he's not paying dues to help with road maintenance and I can't imagine any of his renters will, either.

These 20 lots are owned by an LLC the developer formed with the intention of renting them all. The developer did not include the restrictions in the deeds or notify us he was selling the lots without restrictions.
BobD4 (up north)
Posts: 1,002
Posted:
Quote:
Posted By BrentS4 on 06/07/2016 8:09 AM

. . . . We can't afford lawyers who want 250/hr just to give a yes/no answer.
. . . . To answer your question about who owns the road. The road was deeded to the HOA back in 2010 when the HOA was formed.

Brent S4 N Carolina : 1- Respectfully, "if you think lawyers cost too much, just hire or rely on amateurs".

2 - If you have correctly summarized your legal situation, you are exploring how well a Balkanized subdivision or Balkanized building scheme can function.

Private road insurance, maintenance & replacement costs are going to require cost-sharing by owners of non-HOA properties within the subdivision. Or will they get a free ride ?

In the interim how will HOA-encumbered lot owners handle occupier liability or other road liability as soon as there are claims for injuries or loss ? Home insurance may ( ? ) not cover pro-rata insurance liability downloadable from teh private road system unless expressly contracted with each insurerer. And there maybe another Balkanized insurance umbrella . . .

3 - Carolina posters may know whether your jurisdiction allows the contributors to litigate successfully - against non contributors - for contribution under undue enrichment aka equitable enrichment headings. See consumer protection/deadbeat partnership laws.

4 - With lots unsold and if your declarant or assignee is victimizing consumers - IF - wouldn't it be a good idea to file with your state or local business regulators ( that is if there are any in your state ? ). Balkanized building schemes and Balkanized insurance umbrellas are unlikely what the planning approvers & local government contemplated when private roads were allowed. . .

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