Massachusetts condominium developer did not contribute to common expenses and trying to fill budget deficit using special assessment

Started by BorisG • 12 replies • 492 views

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BorisG (Massachusetts)
Posts: 5

Posted:

We purchased a condominium in Massachusetts earlier this year. A few weeks ago, the developer let the unit owners know of a special assessment of around 20 000 dollars split across 9 units. After a closer look at the financials, it turns out that the developer did not contribute at all to the expenses of the association while the units were unsold. The assessment covers costs from before we owned the unit. The association is still under developer control and will likely remain so for a while.

Is this allowed in Massachusetts? I checked the CC&Rs of the association and there's nothing in there that exempts the developer from contributing.

What's the best way to fight this? Can we simply refuse payment?

WendyM5 (North Carolina)
Posts: 1,522

Posted:

sue her is the best way to get their attention. WIthout a lawsuit i doubt anything will change.
But before you do that please post or get feedback from a lawyer if your suit has any chance of winning.

vis ta vie

JohnT38 (South Carolina)
Posts: 1,631

Posted:

Quote:

Posted By WendyM5 on 12/19/2022 2:46 PM
sue her is the best way to get their attention. WIthout a lawsuit i doubt anything will change.
But before you do that please post or get feedback from a lawyer if your suit has any chance of winning.

Sue, sue, sue. It's America's favorite past time now. It would be nice to know what the governing documents say and what specifically is the assessment for? Is it for something unexpected or is it for a new amenity or is it for repairs, etc.

Unless you have your ducks in a row you are in danger of having a lien slapped on your property if you refuse to pay. If you are going to go this route consult with a lawyer first.

MichaelS56 (Minnesota)
Posts: 858

Posted:

Get an attorney that specializes in HOA issues and go after a settlement with the developer.

BorisG (Massachusetts)
Posts: 5

Posted:

It is to repay the developer for loans that were used to pay for utilities, etc. of the building. The association's income through monthly fees contributed by the sold units was not enough to cover the expenses. This was necessary since the units that were unsold at the time the expenses occurred were not contributing to their share of the expenses and that caused a deficit.

BorisG (Massachusetts)
Posts: 5

Posted:

Since our liability is only a few thousand dollars, would this be something that could be handled through small claims court?

SheliaH (Indiana)
Posts: 6,964

Posted:

What John said. Whatever you do, keep paying assessments- you REALLY don't want to step in the pile of dookey you'd ccreate if you don't pay.

In addition to the CCRs, check your declaration, bylaws and even your sales documents. There may be some fine print somewhere that allows this. If you notice that the documents seem to skew in favor of the developer, that's not your imagination - many of them are written like this. Developers also have a bad habit of keeping assessments artificially low so people will buy.

After the homeownwer take over, they find out the hard way that expenses are a lot higher than they thought and assessments have to increase a lot. Or the developer uses the current owners to prop up the community until they can get out - what's probably what's happening here. Or they go bankrupt and homeowners find there are amenities that weren't built or are half built and then need a special assessment to finish everything.

I wish you well - this may get ugly and you need to get together with your neighbors right now to see what you can do.

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

NA1 (Massachusetts)
Posts: 190

Posted:

Do the owners control the board yet? Sounds like they don’t.

How old is the association? Your condo docs should specify turnover and how fees are allocated. You can get them from the local registry of deeds.

Who is managing the property?

MelissaP1 (Alabama)
Posts: 13,836

Posted:

A HOA is only funded by it's members for it's members. If you are still under developer control and ownership, not much can be done. Just make sure at transition you all know what expenses to be incurred and plan accordingly.

Former HOA President

CathyA3 (Ohio)
Posts: 6,299

Posted:

If the assessment is to repay the developer for expenses incurred, that sounds legit to me. It's not unusual for home prices and assessments in communities that are under development to be artificially low. If the developer hadn't taken out the loan and had paid the costs out of pocket, that would have been reflected in a higher home price and higher assessments from the get-go (which you would have paid).

If homeowners were in control of the association, the board could negotiate with the developer and come to a settlement if one is warranted. But if the developer is still in control, he essentially *is* the board.

I agree with others about talking to a lawyer who is knowledgeable about HOAs. People who contemplate legal actions in civil (not criminal) matters need to understand that these things can cost ridiculous amounts of money, can drag on forever, and there is no guaranteed outcome. In addition, I'm not sure you have standing to go after the developer. You have a legal relationship with the HOA, not with the developer. You'd have to try to sue the HOA itself, and you're unlikely to get far with that.

NA1 (Massachusetts)
Posts: 190

Posted:

BorisG check the governing docs and 183A. I'm pretty sure once the operating event happens, the developer is just another unit owner who must pay their condo fees.

183A section 7 would seem to apply, but you really need a lawyer to answer your question. I am aware of a building near here that is suing the developer over various issues, including fees, and another that eventually got partial payment through the bankruptcy court.

BorisG (Massachusetts)
Posts: 5

Posted:

Quote:

Posted By NA1 on 12/20/2022 6:41 AM
Do the owners control the board yet? Sounds like they don’t.

How old is the association? Your condo docs should specify turnover and how fees are allocated. You can get them from the local registry of deeds.

Who is managing the property?

A bit over a year now. The turnover will occur once one more unit sells, or 2 years after the first sale.

The developer is managing the property.

BorisG (Massachusetts)
Posts: 5

Posted:

Quote:

Posted By CathyA3 on 12/20/2022 8:10 AM
If the assessment is to repay the developer for expenses incurred, that sounds legit to me. It's not unusual for home prices and assessments in communities that are under development to be artificially low. If the developer hadn't taken out the loan and had paid the costs out of pocket, that would have been reflected in a higher home price and higher assessments from the get-go (which you would have paid).

If homeowners were in control of the association, the board could negotiate with the developer and come to a settlement if one is warranted. But if the developer is still in control, he essentially *is* the board.

I agree with others about talking to a lawyer who is knowledgeable about HOAs. People who contemplate legal actions in civil (not criminal) matters need to understand that these things can cost ridiculous amounts of money, can drag on forever, and there is no guaranteed outcome. In addition, I'm not sure you have standing to go after the developer. You have a legal relationship with the HOA, not with the developer. You'd have to try to sue the HOA itself, and you're unlikely to get far with that.

I spoke with my closing attorneys, and they said that in Massachusetts the developer doesn't need to pay monthly association fees, but they do need to pay their share of the total yearly expenditure.

I then had a chat with a litigator, and they said that I could sue the Trustees/developer under breach of fiduciary duty since they mismanaged the association, enriched themselves, and me and my spouse as unit owner then experienced damages due to their actions.

The problem is that even getting a litigator to initiate the case would cost more than what it would cost to just pay the special assessment. That's also why I'm wondering whether it's worth a shot to try to resolve this via small claims court.

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