Developer Refuses to Turn HOA over to Owners

Started by NicoleL3 • 15 replies • 1632 views

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NicoleL3 (Minnesota)
Posts: 4

Posted:

I am part of a 13 lot Common Interest Community (CIC) with an HOA which was filed with the State of Minnesota by the developer in 2005. He never filed renewal paperwork or paid fees and the HOA was Involuntarily Dissolved by the state in 2007. I understand that although dissolved it is still legal documents that must be adhered to. My question comes from the fact that the Developer never formed a board and has never held meetings. According to the Declarations and By-Laws, the Association should have been turned over to the owners no later than 2008. This is a unique situation due to out of the 13 lots, there are only 3 houses. Our Common area is a private road on 1000ft of shoreline and a government lot which is designated as a protected wetland. We are not paying any dues and the developer mows the road and puts in the small dock, yet without a functioning HOA and owners paying dues, our hands are tied to make any improvements or amend any by-laws or declarations. Also- our declarations state that the developer was to provide a 13 slip dock and he would assign specific slips to each owner as lots were sold. He supplied a small dock which allows 4 boats to be docked. I have sent two separate letters to all lot/home owners requesting input and email addresses in hopes to eventually schedule a "take over" meeting. Of the 13 lots, the developer still owns 2 lots and his family owns another 5, so my hope for a quorum is fading. I have heard from all of the non-family lot owners and they all want the HOA to be made current and functioning so that we can build a beach and make other improvements to the lakeshore. I have asked our developer twice now to help facilitate the turnover so that the owners could start making improvements. He will not respond to me and I feel that our hands are now tied. This developer has made several of this style of CIC's in the area and none of them have been turned over to the owners nor have they been kept current at the state level. I am trying to sell my home and this HOA disaster is not only negatively affecting my ability to sell my home, it is causing the value of my home to drop due to the lack of functioning HOA and undesirable lakeshore which I have no ability to improve without simply paying out of my pocket for all to enjoy. Personally- I am extremely disappointed in the lack of developer responsibility laws; as a homeowner who bought with the thought I would be paying dues and in return I would have a nice lakefront and central dock to enjoy without the headache of the upkeep, I feel I have been taken advantage of and from I can find- there is no legal repercussions for being a crooked developer. I would appreciate any input anyone has regarding my situation, truly at my wits end.

Thanks!!!

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I don't see how this is effecting your home value. Being in a HOA or not should make no difference. A HOA is there only to make the home more attractive to potential buyers. Your still developer controlled and not much you can do. Just make sure you live in a state that requires the owner to turn over the HOA documents over to a new owner. Otherwise, it's the owner's responsibility to inform themselves of the HOA by going to the court house.

If your selling, then why care? It's the next person's problem. The price you put on your house is based on what other homes sell for in your area. Someone is always going to have a reason why they don't buy your home. It doesn't effect the "value" of it. I may not like that being close to water causes a too many mosquitos. Did the HOA do that? Nope.

Developer is in control and that is that.

Former HOA President

NicoleL3 (Minnesota)
Posts: 4

Posted:

You did not understand my post and your response is in no way is helpful. My realtor and the tax assessor are who I received my information from regarding my value being negatively affecting. Thanks but no need for any more replies.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Realtor's are used car salespeople and Tax Accessors???? Why? There are many factors going into the sale of a home. Are you going to sue the HOA because your house doesn't sell at your asking price? Sale prices rise and fall. It's life. Good luck! Your going to need it if you can't listen to other people who may be trying to help you.

Former HOA President

AugustinD
Posts: 5,144

Posted:

Hi Nicole, from experience, first I would go see your County Clerk and see what covenants are recorded for the land. Then see whether the covenants have a provision for enforcement. Second, you wrote that the HOA was dissolved. To me, this complicates things enough that I would pay an attorney a few thousand dollars. Have a list of questions for the attorney to research. Maybe you and your neighbors can chip in to pay the cost.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

Wow - Melissa - what has gotten you so upset and negative?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Sorry but when see people say that their HOA is hurting their "Home Values" or "I Can't sell because of my HOA" it's just like nails on a chalk board. A HOA is a "Club" of your neighbors. If it's NOT owned by you and your neighbors, then its still under the Developer. You can't do much if it's Developer as they own/control it. You think the developer cares and your going to change their mind? No.

So if you want to sell your house, don't blame the neighbors (HOA) or your Developer. You bought did you not? House sales change depending on many factors. Yes, the area looking crappy around it may put off some potential buyers. The fact it's in a HOA may turn off buyers. The house isn't "New" will turn someone off. That is NOT home "Value". Values are based on REAL numbers.

A developer refusing to turn over to owners? Must be a financial reasons behind it. A developer doesn't really want to keep such developments unless there is some kind of benefit for them. So highly doubt one is going to change their developer's mind or force them into doing anything. Once whatever factor is removed for the developer to turn over the HOA to members, that is when turn over will happen.

Former HOA President

NicoleL3 (Minnesota)
Posts: 4

Posted:

Thank you for your reply. I do have a copy of the covenants, but have not gone through them close enough to check for enforcement. I have been focusing on the declarations and by-laws(which I kindly received from another owner because I was only given covenants and declarations by my realtor). I will check with the county clerk to see what has been recorded and then have that piece of information to add to my files. I have visited with a lawyer and I do hope to get several of the other owners to agree to move forward legally so things can be properly organized and begin functioning as a true HOA. I am totally guilty of not understanding CIC's and HOA's and I kick myself everyday that I didn't ask more questions. It's my fault for trusting that my realtor was looking out for my best interest and assuming I was being told all pertinent information. Hind sight is always 20/20 and this has definitely been a life lesson. I would never be able to sleep at night selling my home without either giving 100% full disclosure of the defunct HOA or having things functioning the way they were intended. Integrity can't be taught - one either has it or they don't. Thank you for your suggestions!

NicoleL3 (Minnesota)
Posts: 4

Posted:

Quote:

Posted By MelissaP1 on 06/23/2018 8:20 PM
Sorry but when see people say that their HOA is hurting their "Home Values" or "I Can't sell because of my HOA" it's just like nails on a chalk board. A HOA is a "Club" of your neighbors. If it's NOT owned by you and your neighbors, then its still under the Developer. You can't do much if it's Developer as they own/control it. You think the developer cares and your going to change their mind? No.

So if you want to sell your house, don't blame the neighbors (HOA) or your Developer. You bought did you not? House sales change depending on many factors. Yes, the area looking crappy around it may put off some potential buyers. The fact it's in a HOA may turn off buyers. The house isn't "New" will turn someone off. That is NOT home "Value". Values are based on REAL numbers.

A developer refusing to turn over to owners? Must be a financial reasons behind it. A developer doesn't really want to keep such developments unless there is some kind of benefit for them. So highly doubt one is going to change their developer's mind or force them into doing anything. Once whatever factor is removed for the developer to turn over the HOA to members, that is when turn over will happen.

Once again- your response is not helpful. Please ignore my post.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

Melissa,

I completely disagree with you concerning the purpose of an HOA.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

The purpose of a HOA has always been a "Sales tool" for developers. It's a way for developers to sell property to potential buyers. It promises that your HOA will continue to be an attractant to potential buyers because there are "Rules" that can be enforced upon the community to keep it in good appearance. What sounds better on the house tour? "You know there are rules that you can enforce to make sure the community stays in good shape".

The hard reality is that after that developer leaves, it's now upon YOU and your neighbors to enforce, collect, and maintain the HOA. How well that is done is subjective to every HOA. Developer controlled HOA's don't always fair much better. Especially if you have a developer who is financially struggling, out of touch, or doesn't really care.

The effort of a HOA isn't done by a "They or Them". It's done by "YOU and YOUR neighbors". Yeah I would love my HOA to have a beautiful flower garden at the front entrance. The reality is that in some HOA's that may be paid for through the landscaping company you hire. Other HOA's that's done by the Developer. Yet some HOA's it's just the membership who puts in a garden.

You may not agree with me on how HOA's work. That is fine. Not every HOA works the same. The concept has always been it was a sales tool. The ability to keep the neighborhood attractive to potential buyer either by crook or neighbor. If the rules were not in place, a HOA (Club of owners) not formed, and it wasn't incorporated to collect money, then there could be chaos. The neighborhood I live in now is a non-HOA one. No one can enforce someone to mow their yard except by going to the city. We have a few neighbors it looks like a long term yard sale in the front yard. If we were in a HOA? We could clean that up and/or pay for lawncare.

The OP doesn't understand what a HOA is. The reality is that once a "Proper HOA" is formed in their minds, it means ALL the neighbors are now in charge. Do you really think ALL the neighbors are going to agree to the same standard of care or participation? Welcome to living in a HOA...

Former HOA President

GeorgeS21 (Florida)
Posts: 3,808

Posted:

Melissa,

It would take waaay too long for me to be as specific to show how much I disagree.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Basically a HOA is a club of homeowners. The purpose of the club is to keep the neighborhood in good shape. It is in incorporated so that it can collect it's money via dues to pay for it's expenses. Unless your HOA has super powers to stop home foreclosures or other factors that go into how a house is assessed for value, then it's just there to make thing "attractive" and maintain amenities.

Former HOA President

RichardP13 (California)
Posts: 3,868

Posted:

Many of us can read Wikipedia. Here is what else it says:

For the municipality
Many municipalities have welcomed HOAs in the belief that they may reduce operational costs for the local government. Since the homeowners sometimes pay for roads, parks, and other services within the development, the local government may believe it can gain revenue from property taxes from owners in a development that costs the municipality little or nothing.[27]

A 2009 study of California HOAs suggested that this assumption was partially true, but that the overall effect of HOAs on municipalities was mixed. While HOAs did offset the costs of city governments to a small degree, they also reduced overall tax revenues because their members, insulated from the larger community, tended to vote down taxes that the city required to fund services. This led to an overall decrease in government expenditures that disproportionately affected those citizens who did not reside in an HOA.

As the study noted,

"...critics of private governments claim that HOAs erode support for public institutions. Those who join can bypass the public system: homeowners who fear crime do not have to vote for tax dollars to attack the root of the problem; they can build a gate to keep the criminals out. Opponents maintain that the erosion of public support, reflected at the ballot box, leads to further deterioration of municipal services and reductions in local revenues. Nonmembers experience a reduction in public service levels and may be worse off. At the extreme, homeowners associations may contribute to sentiments of secession and withdrawal from the public sector."[28]

For real estate developers
Real estate developers establish HOAs in the belief that they can contribute to the developer's ability to build and sell units profitably. Providing common amenities may enable developers to build at a higher density, if the local government has encouraged such results. In addition, by relieving municipalities of the costs of road and utility maintenance, developers may obtain more favorable terms.[27] Ordinarily, the developer retains some control over the HOA until a specified number of units are sold, and the covenants, conditions, and restrictions of the HOA are put in place to further this goal.[29]

The potential disadvantage to a developer is that they may be exposed to liability to the HOA for poor construction, misleading marketing, or other problems. In these cases, the HOA may sue the developer.

KerryL1 (California)
Posts: 14,550

Posted:

Like George, I disagree with most of what Melissa writes. But, also like George, I don't have time to refute her point by point.

JanetB2 (Colorado)
Posts: 4,219

Posted:

Quote:

Posted By NicoleL3 on 06/23/2018 3:02 PM
I am part of a 13 lot Common Interest Community (CIC) with an HOA which was filed with the State of Minnesota by the developer in 2005. He never filed renewal paperwork or paid fees and the HOA was Involuntarily Dissolved by the state in 2007. I understand that although dissolved it is still legal documents that must be adhered to. My question comes from the fact that the Developer never formed a board and has never held meetings. According to the Declarations and By-Laws, the Association should have been turned over to the owners no later than 2008. This is a unique situation due to out of the 13 lots, there are only 3 houses. Our Common area is a private road on 1000ft of shoreline and a government lot which is designated as a protected wetland. We are not paying any dues and the developer mows the road and puts in the small dock, yet without a functioning HOA and owners paying dues, our hands are tied to make any improvements or amend any by-laws or declarations. Also- our declarations state that the developer was to provide a 13 slip dock and he would assign specific slips to each owner as lots were sold. He supplied a small dock which allows 4 boats to be docked. I have sent two separate letters to all lot/home owners requesting input and email addresses in hopes to eventually schedule a "take over" meeting. Of the 13 lots, the developer still owns 2 lots and his family owns another 5, so my hope for a quorum is fading. I have heard from all of the non-family lot owners and they all want the HOA to be made current and functioning so that we can build a beach and make other improvements to the lakeshore. I have asked our developer twice now to help facilitate the turnover so that the owners could start making improvements. He will not respond to me and I feel that our hands are now tied. This developer has made several of this style of CIC's in the area and none of them have been turned over to the owners nor have they been kept current at the state level. I am trying to sell my home and this HOA disaster is not only negatively affecting my ability to sell my home, it is causing the value of my home to drop due to the lack of functioning HOA and undesirable lakeshore which I have no ability to improve without simply paying out of my pocket for all to enjoy. Personally- I am extremely disappointed in the lack of developer responsibility laws; as a homeowner who bought with the thought I would be paying dues and in return I would have a nice lakefront and central dock to enjoy without the headache of the upkeep, I feel I have been taken advantage of and from I can find- there is no legal repercussions for being a crooked developer. I would appreciate any input anyone has regarding my situation, truly at my wits end.

Thanks!!!

Have you looked at your State Statutes: https://www.revisor.mn.gov/statutes/cite/515B

Keep in mind that the State Statutes depending on what they state can OVER RIDE your CCR’s. A Developer can put anything they want under the sun into their CCR’s; however, they cannot override your State Law’s. I would recommend printing a copy of your CCR’s and the State Statues. Then READ them many times with different colored highlighters. I used for example an orange highlighter for developer. Every time I saw the word Developer or Declarant I highlighted that word in orange. I then read my documents and State Statutes again and every time I saw the word Owner I highlighted in another different color. I then looked at areas regarding any issues I had and highlighted those issues in another color.

I have read my State Statutes potentially a hundred time or more and can quote many parts by heart. Knowledge is Power when it comes to dealing with a Developer. In my state some developers will claim that because they own the majority of lots they can make changes as they please which is a LIE. They are limited because under my States Statute of Real Estate Frauds no entity can change the CCR’s at will. So that is another area of your State Statutes to potentially look at for reference.

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