Developer refuses to pay HOA dues

I live in a neighborhood where the infrastructure has not been completed to 19 lots. The HOA owns and maintains the roads and water lines to the developed lots, and it is the developer's responsibility to install infrastructure to the undeveloped 19 lots. None of the 19 lots can be sold until all infrastructure is complete. The question is -- the HOA feels that the developer should pay HOA fees for the roads and water because we use those fees to improve and maintain the roads that everyone (including the developer) drives on and to improve and maintain the water system for the developer's future use. He is contesting, saying that he shouldn't have to pay because the roads and water lines don't yet extend to his lots. Does anyone have experience with this sort of situation? Thanks!

Likely an attorney is the first step - but, you docs should note how many votes the developer gets per lot ...probably good to know who actually has control?

Just to clarify -- this is a bit of a complicated situation in that the current developer is not the original developer. Streets, water, and all undeveloped lots were in foreclosure for about five years and this is the second developer since then. After coming out of foreclosure, the owners of the 35 developed lots formed an HOA with CC&Rs that apply to ALL 54 lots. Even those owned by the developer. Nothing in our CC&Rs says that the developer is exempt from paying HOA fees and certainly nothing in our newly formed Water District exempts the developer from paying water fees.

I don't think this is a legal issue. I was wondering if anyone else had ever experienced a developer refusing to pay HOA fees. Our situation is a little different in that the developer-owned lots cannot be sold until all infrastructure is put in by him, but the HOA does own the rights-of-way for streets and we own the existing water distribution system that he will be connecting to. Our position is that he will be using our HOA-maintained streets to access his part of the subdivision, so he should be paying his share of HOA fees. Regarding water, our position is that we are maintaining a water distribution system that he will be tying into and ensuring that the water meets all state criteria, so he should be paying his share to use this system.

thanks to everyone who has responded. Your ideas are helpful.

Ellen, everyone offers some great advice, you really should consult with a real estate attorney. I can tell you from experience that the HOA I moved into The initial developer went BK and the second developer stalled because of the 2008 depression. The second developer split the project with a third developer and the last house closed in April of 2013. I can tell you first hand that for a while we paid a higher assessment because all the lots were not developed. Once the last house closed then our assessments went down.

You can do some legwork yourself by checking your local county court docket to see if he has any pending lawsuits against him or the company. find out what the main parcel number is and look it up on the county accessors and recorders office to see if there are any notes to the deeds or titles.

Might even have a bigger issue. The 35 lots may be in the new "fake" Hoa with its new rules, dues, etc that everyone volunteered to join, and still have the developer HOA which people are legally required to pay its dues, rule, etc. Which will be turned over at a later date.

Ellen,

Does the developer get more votes per lot than the individual property owners?

George, every lot gets one vote no matter who owns the lot. However, if the owner is in arrears on their dues, then they don't get to vote in an election.

Melissa, the HOA does not have the responsibility of putting in the infrastructure to the developer-owned lots. Our CC&Rs say that we will not maintain the roads until they are improved by the developer and approved by the County. The previous developer (who worked with us on writing the CC&Rs) bought the lots out of foreclosure. He just never got around to installing the infrastructure. So that's not an issue. So, what you are saying is that, even though our CC&Rs state that all lots must pay HOA fees, the developer is exempt until the lots are sold?

I hsve contacted our Association Attorney to clarify for us as he is the one who helped us write the CC&Rs.

OMG

It appears Melissa is correct.

however

Let your attorney advise further.

@Melissa ->

My guess is....if you do nothing, the infrastructure will never be built. Houses will ever be built. If you have legally removed the "developer" status, no one is going to touch it.

thanks for replying, Melissa, but your statements don't apply to us.

The history of our little 54-lot subdivision is convoluted and unfortunate. However, we are well on the way to making everything right. The original developer (lets call him Mr. Smith) went into foreclosure and the undeveloped lots in filings 3 and 4 and unsold lots in filings 1 and 2 (where the infrastructure was complete), as well as the roads and the private water system, were owned by the bank for many years. Then Mr. Jones bought all of this but never put in the infrastructure for filings 3 and 4. But Mr. Jones continued to sell the lots he owned in filings 1 and 2 and now all 35 lots are privately owned. Mr. Jones has now sold his 19 lots in filings 3 and 4 to Mr. Williams. Mr. Williams cannot sell any lots in filings 3 and 4 until he installs the infrastructure. The HOA dues that we collect from the 35 lots are sufficient to maintain our existing roads and we have formed our own water system that collects its own fees. We have a two-tier fee system with the lots in filings 3 and 4 paying less than the lots in filings 1 and 2. At such time that the lots in filings 3 and 4 are sold, then they will pay the same as the rest of the subdivision.

At the point that private owners owned more than 50% of the lots in the subdivision, we approached Mr. Jones with the idea of forming an HOA. This was of great benefit to us, as Mr. Jones felt that he did not have to be fiscally accountable to the property owners and would raise dues at his whim. He also took really poor care of the roads and water system. The property owners bought the roads and the water system from the bank so that we could properly maintain them. So, the homeowners of the 35 lots in filings 1 and 2 worked with Mr. Jones to form a homeowners association and CC&Rs were written with the help of an attorney. The attorney helped us with wording so that the CC&Rs apply to all 54 lots and also so that the HOA would not accept the new infrastructure until completed and inspected by the County. At the time of adoption of the new CC&Rs, all 54 properties had equal votes - one for each lot.

Mr. Williams, the new owner, has already acknowledged that he is responsible for installing the new roads and other infrastructure. In fact, the excavators are out there already. So that's not an issue for the HOA to worry about.

The "cannot sell lots" is a requirement of our ruling jurisdiction (County government). They placed this restriction on the original Developer, Mr. Smith, because he wanted to start selling lots in filings 1 and 2 before the infrastructure had been completed for filings 3 and 4. The County's approval of the subdivision plat specifically states that no lots can be sold in filings 3 and 4 until all infrastructure has been built and approved. In fact, in order for Mr. Williams to buy the 19 lots from Mr. Jones, he had to go to the County and put up escrow money for the infrastructure. So this is not a requirement of the HOA. Mr. Williams cannot sell them individually nor could a bank should he go bankrupt. No-one can.

Thank you, Sue. We have the same categories, and our intentions for collecting on the unimproved lots are similar to yours. We are maintaining the water system in good condition so that Mr. Williams will have good water to his lots, and we are maintaining the entry roads that go to his part of the subdivision.