Monies Collected by Developer

Started by CathyT1 • 7 replies • 1234 views

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CathyT1 (Washington)
Posts: 68

Posted:

We are a community of 75 sfh. Our community transitioned in Nov., 2006.
When homeowners were in escrow, they had to supply to the developer
a start-up contribution fee of $350.00. Per CC&R's: "Said start-up contribution shall be paid to Developer for the est. and development of common areas, and at developer's discretion, can be used to cover maintenance & operating expenditures. Said contribution shall be used at the developer's sole discretion and shall not be subject to review by the Association." So that would be 75 x $350.00 = $26,250.00

Also, at time of escrow, homeowner had to pay initial HOA dues of $450.00. So that would be 75 x $450.00 = $33,750.00.

Unfortunately, the previous board has left us with no monies, and we have to use monies from reserves, which leaves us with nothing.
Shouldn't the monies of $26,250.00 + $33,750.00 = $60,000.00 have been used solely for the Association? Something here does not seem right to me. Did we just give monies to the Developer and that's it? Just trying to find answers and find out where all of our monies have gone. Thanks.

GloriaM (North Carolina)
Posts: 829

Posted:

Cathy:

Yes, all monies collected from the owners should have been used for HOA expenditures only. The Developer could use it for water/sewer, insurance, landscaping, etc. He could not/should not have used it to cover any of his own expenses.

The funds should have been held in an account with the HOA's name and Tax ID #, unless he held it in a trust account. Either way he should have presented to the Owners a financial statement and a year end statement.

JoeW1 (New York)
Posts: 728

Posted:

CathyT1 - If monies were used from Reserves, how much was used? Seems to me it was a portion of the $26,250.00 + $33,750.00 that was collected from the initial HOA dues plus the start-up contribution. So you can't really say that the previous board left you with nothing. You may be able to say that the developer/previous board provided you a budget that was not realistic. However, stand in line and now join the rest of us in HOA/COA land. We're all in or have all been in that boat and must find a way to not ride the coatails of developer contribution. Get a Capital Reserve Replacement Analysis and Transition Study from an independent Transition Engineering Firm on the HOA and find out what should be budgeted. It will be eye-opening.

CathyT1 (Washington)
Posts: 68

Posted:

We had $4,400.00. Roughly every month our MC put in a contribution to the reserves. We had zero when we started. Now, we're using that in October to pay bills until to the end of the year. If you have no money, do you think we can afford a reserve analysis? We're looking into the one the developer was to have conducted.

Poor management of monies - yes. Okay to ask questions about it - yes. Did developer/board provide unrealistic budget - no. We would have been on track if it wasn't for poor management of money. Am I trying to ride the coat-tails of the developer? No. I actually believe it's an excellent question and position to look into.

DJ1 (Ontario)
Posts: 798

Posted:

per your CCR's "shall not be subject to review by the Association"

Like many here often say, you agreed to the CCR's when you bought and that was the time to question this potentially pocket lining clause by the developer.

per your CCR's "for the est(ablishment) of common areas"

Pretty broad but again, his sole discretion not subject to REVIEW!

While good business practise would be to present the HOA with a financial statement/year end statement as Gloria mentioned, there is no obligation on his part since the CCR's say "shall not be subject to review".

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Cathy,
Hang in there, some times we go around the bush to get to the problem.
If I understand correctly, you are asking what to do NOW.
There should be several ways to get you going in right direction. I will input my two cents when I get free this morning. Not free from jail, just free of day to day stuff.

PaulM (Pennsylvania)
Posts: 1,347

Posted:

CathyT1: Perhaps your only recourse at this time is to review your state law on what the developer must turn over to you--documents, etc.
You can download it from Comm.Assoc.Network (left/yellow on this page); key in your state and look for Community Law or Condo law.

The developer is bound by these docs to provide exactly, and no less, than what is stated.

RobertR1 (South Carolina)
Posts: 5,164

Posted:

Cathy,
First, I suggest you go to Court house and dig up your original CC&r's or as far back as you can, certainly you will need the turn over documents from developer and any meetings that took place before the turn-over. Then try to work forward and develop a chronological history of what has happened to your CC&r's. If there a clearly missing documents, try to find them, they could be anyqwhere. Get some support and make a plan for the future and set out certain goals you want to accomplish. Anyone that tells you anything about your HOA is valuable, old sales brochures, newspaper articles, anything the longest homeowner has can be helpful.
Check state business licences, corp listings, any PM arggreements and documents. Knowledge is power.
Once you get your feet on the ground you will realize what you can do and what don't matter and that will be your biggest pile of discards.

Then convince yourselve you can do better and do it. You will not find every answer, you will not find laws that you think should be there, you and all other HOAs are left in the lurch of when and who is going to enforce your documents. The courts have a place in the field of criminal law. The states by and large want HOA's to be self governing. It is the truth. It is just a matter of who is steering the ship, the owners steering the ship can run you aground by trying to do what they have decreed is right. That's wrong. The good managers are just like good company leaders, they lead towards making a company profitable and have a real value. Who runs your HOA should do the same. If they don't the onus falls on the remaining owners, not the ones that are going down the wrong road.
The best real advice I can give to any up and coming owner in an HOA that wants things run right: never get in the game of personal agendas, it is alive and thriving at all associations, stay out of it.

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