HOA Turnover - Deficit funding

Started by RobertW35 • 12 replies • 563 views

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RobertW35 (Florida)
Posts: 48

Posted:

Our Community HOA Turnover is December 18th. We are a community of 577 homes in Central Florida. We have had a bad sod issue for the last 3 years. The Developer had chosen to Deficit Fund the Budget instead of Funding Reserves. I am told that is his choice. The developer has deficit funded sod replacement for the front yards of the homes in the past. Has increased the yearly budget for sod replacement each year. The Developer then asked for the Landscaping Company to give a quote on replacing sod in backyards, since the community has been complaining about also for years. The sod issues are due to multiple reasons. Some can be the homeowner's fault, some can be insect control, but the biggest problem has been irrigation issues in the community, which is an ongoing problem. At yesterdays Board of Directors meeting the President (Developer) said that he received a quote for $149,000 worth of sod which also includes labor. He informed the community members at the meeting that since he is deficit funding the budget and are so close to turnover he can do 2 things. He claimed that he asked his auditor to perform a quick audit of the financials and extrapolate the audit up to Turnover Date. He informed us that right now if we did not install the sod the community would be due approximately $35,000 dollars from him. If we want to proceed with the sod replacement then the auditor feels the community will owe the developer approximately $115,000. I think he is strong arming us. Are there any regulations on how an auditor figures out these plus and minuses during a Turnover? Is the Developer entitled to collect after the Audit if the figures say we owe ? Thank you all !!!

CathyA3 (Ohio)
Posts: 6,299

Posted:

It sounds like you may have a couple of overlapping problems: a specific one (the sod) and a general one (deficit or inadequate funding of the community).

First off, it's not unusual for developers to set assessments unrealistically low in order to promote sales. It's unfortunate, and it can mislead owners about the true cost of ownership. Then the owners take control of the HOA and have a rude awakening. As far as I know this isn't illegal unless something else is going on - but that's a question for a lawyer.

What I would learn/do in your place:

* Is your community an HOA (FS 720) or are you in a condo community (FS 718)? Different laws apply. Florida Homeowners’ Guide to HOA Laws

* Read your community's governing documents (Declaration/CC&Rs and the Bylaws) thoroughly. Pay attention to what it says about homeowner responsibility vs. HOA responsibility, especially as relates to yards/sod. In many HOAs, if you personally own your lot, you're responsible for maintaining the yard - but this isn't always the case. You have to know how your particular community operates.

* What is the current makeup of your board? Are any homeowners on it? Or is it still completely controlled by the developer and his agents?

* I suspect you'll need to talk to a lawyer who's well-versed in HOA/condo issues. I don't know enough about your community's governing documents and the state of the HOA's financing to know how big of a problem your community has. Transition to homeowner control can be bumpy, and some law firms deal with it as one of their areas of practice - they'll spot red flags before others will and can give you good advice on how to proceed.

NA1 (Massachusetts)
Posts: 190

Posted:

What happened to the warranty? He never made it work and he’s been charging the association for repairs

ElleN (Idaho)
Posts: 4,420

Posted:

Quote:

Posted By RobertW35 on 09/29/2023 4:51 AM
The sod issues are due to multiple reasons. Some can be the homeowner's fault, some can be insect control, but the biggest problem has been irrigation issues in the community, which is an ongoing problem. At yesterdays Board of Directors meeting the President (Developer) said that he received a quote for $149,000 worth of sod which also includes labor.

I appreciate your honesty in noting the problems might very well be due to homeowners' malfeasance.

You would have to quote verbatim (no paraphrasing) the section of the covenants on who is responsible for maintenance of the sod (in both the front yards and back yards) for me to even begin to offer a cogent opinion.

LoriM15 (Florida)
Posts: 1,009

Posted:

I agree with ElleN. We need more information.

Does your HOA fee include lawn maintenance (including pest control)?
Are the homes have individual irrigation systems or is the system community wide? Does each homeowner pay for their own irrigation water or is the cost of water included in the HOA fee?

If the HOA fee includes all lawn maintenance and irrigation - in other words a bulk contract for services - then it might make sense to install the sod. However, if each individual homeowner controls their own lawn maintenance and irrigation, why would the community pay for new sod? The HOA would be unable to control the conditions of the new sod and you don't want to set a precedent in the future for having to continually replace sod for people who won't water because it costs too much money (that happens in my community).

The other issue I see is that the developer is offering you one bid from one landscaper. Once you hit turnover, you could control the number of bids you receive and have a choice.

Finally, we are just about out of rainy season here in Florida. If the developer is going to strong arm you into paying for the sod anyway, why not wait until next summer when the water is free?

RobertW35 (Florida)
Posts: 48

Posted:

Thank you Cathy
I am well aware that HOA fees were very low when we purchased and that they would more than likely increase quite a bit. Thanks. We are an HOA (FS 720). I will review the Guide to HOA Laws. Thank you. I will review the CCR's & By Laws again. The CCR's call for a 3 person Board which is what was in place when we bought. Obviously it was a Developer Board. At 50% of the properties being sold we were allowed to vote a resident community member on to the Board. So then there was a four member Board. We also found out just this Thursday at the Board Meeting that one Board member has resigned. I was told by management that the Developer's lawyer said that she needed to resign now because it is a 3 member Board. But we have been running under a Four member Board since the point where 50% of the homes were sold. Probably another matter to look into.
Thank you for your input !!!!

RobertW35 (Florida)
Posts: 48

Posted:

Thank you Ellen. I will try to get back to you with that info. You also have given good advice to me in the past.

RobertW35 (Florida)
Posts: 48

Posted:

Thank you Ellen. I will try to get back to you with that info. You also have given good advice to me in the past.

KerryL1 (California)
Posts: 14,550

Posted:

Yes, need more info.Please break up into paragraphs. Please reply to Lori's questions about the irrigation.

Re: the irrigation system. How is it listed in the reserve study? Is it just one large component? Or are there different parts to it? What is the estimated lifespan? And, yes, what about warranty on the irrigation system?

RobertW35 (Florida)
Posts: 48

Posted:

Hi Lori. Thank you for your input.
Lawn maintenance is included in the HOA fee as is Lawn pest control and fertilization.
The irrigation systems in each home in the community are the same but they are controlled by the Landscaping Company where the control boxes are located throughout the community for a group of houses or zones. Each Homeowner is responsible for the water used in there home as well as the irrigation system. I understand your point on this. Thanks.

RobertW35 (Florida)
Posts: 48

Posted:

Hi Kerry. Thank you for your reply.
Turnover has not happened yet. It is scheduled for December 18th. We were informed that a Reserve study would be performed at that time.

KerryL1 (California)
Posts: 14,550

Posted:

In Calif., an HOA isn't approved by the state without a reserve study done by the developer. Are you sure the Fla. Dept of Real estate or some other entity doesn't require it??

How did the developer set dues without a reserve study?? About 30% of my dues go to reserves. Apparently, you're saying that there is no contribution into reserves within your dues????? If true, then definitely your dues will increase!!! Maybe, a lot!

I'm also curious about this: You wrote that the "CC&Rs" require 3 board members. But with the size of your HOA three seems too few. What do your Bylaws say, which is where such info usually is?? What about your Articles of Incorporation.

I'm feeling that you residential owners, once a majority on the Board, should immediately retain an HOA attorney who's NOT the developer's attorney.

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Robert

Avoid turnover that comes with a deficit. Fight it legally if you have to.

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