We are having an EXTREME issue and I need some advice.

Started by MikeD17 • 20 replies • 1181 views

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MikeD17 (Texas)
Posts: 9

Posted:

What type of recourse do we have? We are in a fairly new community in McKinney Texsd. We are declarant controlled and are only halfway into phase 2 of 3 total phases. We were informed today that the declarant will not be piping anymore money into the shortfall we are incurring and that we are having a one time assessment of $450 due by next month and our dues will be going up next year from $650 to $845. Is there anything we can do or should we just move?

TimB4 (Tennessee)
Posts: 21,059

Posted:

Realistically, there is nothing that can be done.

The Declarant tends to artificially keep assessments lower then they should be to encourage sales and makes up the difference. I suspect that your declarant is having financial issues and, as you stated, won't make up the shortfall anymore.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A HOA is ONLY funded by it's members FOR it's members. Where do you think the money comes from? The declarant controlled you don't have much choice. Your HOA isn't owned by the owners yet. So your choice is to pay the money owed. Should always have factored in the HOA dues and/or special assessments when purchasing in a HOA. Those dues can vary over time. Buyer Be Aware...

Former HOA President

GeorgeS21 (Florida)
Posts: 3,808

Posted:

This does not sound unusual ... perhaps the developer is starting to increase dues to baseline for the time when they are complete and the HOA is taken over by the owners?

How many units? Single family? How much common area and equipment? What kind of amenities?

This will like turn out just fine when the community takes over the HOA and can decide what level of funding is appropriate.

And, btw, that level of dues increase does not sound EXTREME, just painful if one hasn’t planned for contingencies in a new neighborhood.

ND (PA)
Posts: 792

Posted:

Not sure I'd panic quite yet. Certainly you could put the house up for sale, but what you are looking at right now is $450 out of pocket right away and a $16.25 monthly increase. Going through the home sale process is quite a bit more expensive and inconveniencing than that. But only you can see what's happening with the neighborhood as a whole and the direction things may be heading.

I might try to first find out more info behind the annual dues increase and special assessment. Seek to obtain the financial documents if you don't already have them that show the current annual budget, what the budget is proposed at next year (necessitating increase from $650 to $845), and documentation of need for the $450 special assessment.

While you probably don't have a whole lot of choice other than to pay the special assessment and increased annual assessment, I'd personally like to see the details that prove to me it is necessary before I start handing over the money. The developer is likely permitted to do exactly as he is doing; however, if enough homeowners band together and peacefully confront the developer, perhaps there are other things that can be done. Maybe homeowners can take over some things currently being paid for by the association. And the developer still wants to sell homes in the neighborhood. Having disgruntled owners in the neighborhood doesn't make that easy. However, the existing owners want the houses sold too so the neighborhood gets completed and more people are paying their assessments. It's something that you all would need to work together on, thus my suggestion that you peacefully confront the developer.

Good luck!

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By TimB4 on 11/05/2018 8:28 PM
Realistically, there is nothing that can be done.

The Declarant tends to artificially keep assessments lower then they should be to encourage sales and makes up the difference. I suspect that your declarant is having financial issues and, as you stated, won't make up the shortfall anymore.

I agree.

AugustinD
Posts: 5,144

Posted:

Mike, as others wrote, there is probably nothing you can do but maybe chalk this up to your first lesson in buying into a HOA. In the future, try to read the governing documents before buying. If the HOA is still Declarant controlled, increase the study you do by a factor of five (vis-a-vis buying into a HOA that is member controlled).

I realize you think this is an extreme situation. If I were new to HOAs, I too would be angry as all get out, at least until I broke out the "contract" (the covenants) and read it (them). I think what you are facing is par for the course with a Declarant-controlled HOA and minuscule compared to issues that come up here regarding member-controlled HOAs.

Your post will be helpful to others. Good luck.

BarbaraT1 (Texas)
Posts: 821

Posted:

I'd certainly be curious as to what the special assessment and increase are for, so you should ask to see the budget. My other thought is that perhaps sales are slowing down or they've lost a contract with a builder and won't be adding as many new homes as they had planned for.

You could move, but that won't guarantee this kind of thing never happens again if you move to another community with an HOA.

HOA assessments are simply the annual budget divided by the number of homeowners. The annual budget will increase over time, because the cost of services will increase over time. It's just math.

BillH10 (Texas)
Posts: 1,217

Posted:

Mike

You should have been given copies of association documents, such as the Covenants, Conditions, and Restrictions, the Bylaws, and a proposed budget within several days of signing the contract for sale when you purchased the home. Were these documents provided?

If not, you are well within your rights to ask for them. You also have the right to ask for an updated budget. Since you are under declarant control, you may not receive much more than a piece of information with three lines of information: assessment income, association expenses, shortfall.

Hopefully the declarant is a bit more responsible and will have a breakdown of association income and expenses so you can see the situation for yourself.

However, regardless of what was suggested in a previous post, do not, repeat do not withhold payment of any assessments until you receive the information you seek. Not paying the assessments can quickly lead to very expensive collection charges and attorney expenses. Pay the assessment and continue to ask for the information you would like to see.

I do not recommend you consider placing your home on the market over this. As ND (PA) noted above, the increased expense is not very large. If you live in a near new development in McKinney, your property would list for $300,000 or more--possibly much more (we live in McKinney). A 6% commission on a $300K sale would be $18,000. You would have moving and other expenses. Please just set that idea aside for the moment.

If your development is approaching 66% built out and sold, even though sales have cooled off a bit in this area, you should soon be approaching the turnover percentage when the developer has to turn the association over to the owners. Has the developer approached the owners to begin talks leading to the turnover?

MikeD17 (Texas)
Posts: 9

Posted:

Quote:

Posted By BarbaraT1 on 11/06/2018 2:06 PM
I'd certainly be curious as to what the special assessment and increase are for, so you should ask to see the budget. My other thought is that perhaps sales are slowing down or they've lost a contract with a builder and won't be adding as many new homes as they had planned for.

You could move, but that won't guarantee this kind of thing never happens again if you move to another community with an HOA.

HOA assessments are simply the annual budget divided by the number of homeowners. The annual budget will increase over time, because the cost of services will increase over time. It's just math.

This isn’t my first hoa. The one I just moved from went up maybe $60 in the 12 years I lived there. I’ve lived here 2 years and going up $200 is normal?

MikeD17 (Texas)
Posts: 9

Posted:

Quote:

Posted By MikeD17 on 11/06/2018 7:44 PM

This isn’t my first hoa. The one I just moved from went up maybe $60 in the 12 years I lived there. I’ve lived here 2 years and going up $200 is normal?

No, he hasn’t approached us because we are only halfway into phase 2 of 3-4 phases. I am in Erwin Farms if you’ve heard of it.

MikeD17 (Texas)
Posts: 9

Posted:

Quote:

Posted By BillH10 on 11/06/2018 4:30 PM
Mike

You should have been given copies of association documents, such as the Covenants, Conditions, and Restrictions, the Bylaws, and a proposed budget within several days of signing the contract for sale when you purchased the home. Were these documents provided?

If not, you are well within your rights to ask for them. You also have the right to ask for an updated budget. Since you are under declarant control, you may not receive much more than a piece of information with three lines of information: assessment income, association expenses, shortfall.

Hopefully the declarant is a bit more responsible and will have a breakdown of association income and expenses so you can see the situation for yourself.

However, regardless of what was suggested in a previous post, do not, repeat do not withhold payment of any assessments until you receive the information you seek. Not paying the assessments can quickly lead to very expensive collection charges and attorney expenses. Pay the assessment and continue to ask for the information you would like to see.

I do not recommend you consider placing your home on the market over this. As ND (PA) noted above, the increased expense is not very large. If you live in a near new development in McKinney, your property would list for $300,000 or more--possibly much more (we live in McKinney). A 6% commission on a $300K sale would be $18,000. You would have moving and other expenses. Please just set that idea aside for the moment.

If your development is approaching 66% built out and sold, even though sales have cooled off a bit in this area, you should soon be approaching the turnover percentage when the developer has to turn the association over to the owners. Has the developer approached the owners to begin talks leading to the turnover?

The special assessment is for like $100K in vendor bills they couldn’t pay. Irrigation, pool cleaning, landscaping, water, etc. The reason for our increase in dues is that the declarant isn’t going to help us with the shortfall anymore. Which seems odd to me when we aren’t even halfway to total build out.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

I usually dislike jumping attorneys because they just bleed HOAs slowly, but ....if you could get a large enough percentage of the home owners to agree to contribute, it might make sense to try an end run in thus guy .... just to bleed him a bit and let him know you are not going down quietly.

I don’t think it’s likely you’ll win much concession except to draw attention ... which may hurt attraction of prospective owners.

BarbaraT1 (Texas)
Posts: 821

Posted:

Sounds like your developer is running out of money. You should do a google search of them, you might find a couple reasons why that might be.

Check the governing docs - see if they have any language regarding the declarants obligation (or not) to pay shortfalls. Your remedy would still be through the courts but at least you’d know if there is a remedy.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

What is the relationship with the developers? Reason asked is they are telling you all that they are no longer going to "Float" the HOA money. That makes me think that your HOA may be turned over to the owners? If there are 3 sections, is each section their own HOA with 1 master HOA for all 3?

Former HOA President

MikeD17 (Texas)
Posts: 9

Posted:

The hoa will not be turned over until the neighborhood is completed. All 3 phases will be in the same hoa. The board is currently controlled by the developer/declarant and all board members are employees of the developer.

MikeD17 (Texas)
Posts: 9

Posted:

Quote:

Posted By BarbaraT1 on 11/07/2018 6:47 AM
Sounds like your developer is running out of money. You should do a google search of them, you might find a couple reasons why that might be.

Check the governing docs - see if they have any language regarding the declarants obligation (or not) to pay shortfalls. Your remedy would still be through the courts but at least you’d know if there is a remedy.

Our developer is Centurion American..they have plenty of money.

MikeD17 (Texas)
Posts: 9

Posted:

Quote:

Posted By GeorgeS21 on 11/06/2018 10:31 PM
I usually dislike jumping attorneys because they just bleed HOAs slowly, but ....if you could get a large enough percentage of the home owners to agree to contribute, it might make sense to try an end run in thus guy .... just to bleed him a bit and let him know you are not going down quietly.

I don’t think it’s likely you’ll win much concession except to draw attention ... which may hurt attraction of prospective owners.

The hoa is run by the developer’s management company, we’d need to hire our own, on our own.

GeorgeS21 (Florida)
Posts: 3,808

Posted:

Mike,

Yep ... that was my point ...you and other owners will need to contribute if you choose to fight.

BarbaraT1 (Texas)
Posts: 821

Posted:

We’re not supposed to name names on the board but since you did, you should google. One of their partners was investigated for being involved in a Ponzi scheme.

BarbaraT1 (Texas)
Posts: 821

Posted:

We’re not supposed to name names on the board but since you did, you should google. One of their partners was investigated for being involved in a Ponzi scheme.

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