Developer controlled HOA refusing to issue documents (TN)

Started by KenM16 • 3 replies • 614 views

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KenM16 (Tennessee)
Posts: 1

Posted:

Hey everyone, new here and looking for advice. Our community is still under development, approximately 65%. We were one of the first to buy, so have now paid 2 years worth of dues. As the community has grown, more people are trying to get the developer to give everyone/anyone: Financial documents (a summary of the association's reserves, the annual budget report, financial statement reviews, and audits). Unfortunately he is ignoring all requests. We have a couple of common areas but with no amenities, so in reality, mowing the grass is the only thing that should be costing money.
We have filed a complaint with TN Consumer Affairs but they don’t seem to be able to do anything so we are looking for advice on where to go next. Initial complaint was sent to TN Board of Contractors, but they kicked it to Consumer Affairs.
Any help would be greatly appreciated.

SheliaH (Indiana)
Posts: 6,964

Posted:

Unfortunately, there may be little you can do at the moment because the community is still controlled by the developer. Until it gets turned over to the homeowners, they may be able to do whatever they want.

If they're not giving you any financial documents, that may be an indicator of trouble, so you may end up having to get with your neighbors and all of you chip in some money to hire a lawyer to blast the documents out of them. It's also possible media attention could also compel the developer to act - if the community's still being built out, it won't be a good thing for the public (and potential buyers) to find out this developer isn't sharing information the homeowners will need before they take over.

But first, check your sales documents to see what it says about the HOA and your rights to financial information - if there's language stating you're entitled to it, you may be able to take legal action because the developer isn't complying with the contracts. Take the documents to your attorney to see what your options are, and also start meeting with your neighbors to come up with a basic strategy to deal with this. Good luck!.

If it is not right do not do it; if it is not true do not say it. Marcus Aurelius

AugustinD
Posts: 5,144

Posted:

If this is a subdivision of stand-alone homes, then unfortunately, Tennessee has no specific HOA statute. (Tennessee does have a condominium statute.) Tennessee, like all states, does have a nonprofit corporation statute. Check that your HOA's Declaration makes reference to the state's nonprofit corporation statute. Find a copy of the statute online and go to section 48-66-102. Or you can use the following for now:
http://lakesedge.info/TN%20Non-Profit%20Corp%20Act.pdf . See also section 48-66-201. It talks about what financial reports members are owed.

Write the developer a letter like the following:

=== Start Draft 'Demand Letter Lite' ===

Dear ___ Corporation,

Pursuant to the Tennessee Nonprofit Corporation Act sections 48-66-101 through 48-66-201, please provide me with a time, within the next two weeks, when I may "inspect and copy" the following records:

[list records specifically mentioned in the statute]

My proper purpose is to become acquainted with the accounting of the HOA.

Sincerely,

Ken _____
address
phone
email
==== End Draft ===

Send the letter registered mail, return receipt requested. If more than ten business days pass without a response, report back.

Save copies of every single communication you have with the developer. Keep a log of any phone conversations you have.

One of the top complaints of HOA members is that the board or developer will not share records.

TimB4 (Tennessee)
Posts: 21,059

Posted:

Quote:

Posted By KenM16 on 04/15/2020 12:18 PM

We have a couple of common areas but with no amenities, so in reality, mowing the grass is the only thing that should be costing money.

Actually, there are likely many things that would be costing money:

Insurance (Liability, D&O and (perhaps) crime - which acts as a fidelity bond)
Bank fees
Admin fees (P.O. box rental, printing, postage, etc.)
Salaries (if any)
Management Company (as many developers don't directly manage the HOA)
Legal
Common area maint (mowing)
Electricity (if there are street lights)
Any services that might be provided (garbage/recycling pickups)

That said, I agree that financials should be provided.

Quote:

Posted By KenM16 on 04/15/2020 12:18 PM

We have filed a complaint with TN Consumer Affairs but they don’t seem to be able to do anything so we are looking for advice on where to go next. Initial complaint was sent to TN Board of Contractors, but they kicked it to Consumer Affairs.
Any help would be greatly appreciated.

Realistically, you may need to file a court case.
At the very least, you might want to have an attorney write a letter on your behalf (or a groups behalf).
This can demonstrate that you are serious about the issue.

Many municipalities require a developer to post a bond with the city/county to make sure that what was promised is actually done. Consult with an attorney, you (or the members) might be able to make a claim on the bond.

Hope this helps,

Tim

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