Community Building/Reserves

Started by BeckyV • 3 replies • 2480 views

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BeckyV (Michigan)
Posts: 43

Posted:

Our association just transitioned from the developer in Sept. The developer had no financial records and has admitted to co-mingling
developer and assocaition funds. He says there is no money in the resrve fund and he does not have to make up the short fall (even though Michigan stautes clearly state that he does)because he paid for repairs to a broken water main and improved the pond area. Shouold he still have to give the association the 10% required by Michigan law at transition?
Also the new board has decided that there isn't enough money in the budget the support the community building so they are allowing the developer to have sole use of the building for payment of insurance and utilities to the building. The master deed clearly shows the building as common element. Can the board do this?

StevenB (Pennsylvania)
Posts: 7

Posted:

Wow, sounds like you have a real mess.
I would reccomend getting a lawyer involved, ASAP, one who is knowlegable about HOA issues.
Also, go to your local township and talk with them. Usually the builder has to dedicate the roads and sewers to the township and they require those things be in good condition.
You should also consider having a transition study performed. Finally, hire a management company to help the assn.
You need to have a community meeting to air all of this and then the Board needs to determine costs and adjust dues accordingly.

BeckyV (Michigan)
Posts: 43

Posted:

There was a group of homeowners who contacted the state regarding the developer. The state did send the developer notice of items he needs to respond to. So some action has been taken. However the greater problem is now the new baord. The developer is the president with one of the other 4 members in his pocket, so to speak. The new board does not feel that there is any money for attornies, studies or management componies and are not worried about reaserves as the average age of an owner is 75. The members of the board have not read the condo document(the developer says they put him to sleep). Co owners have not been allowed in the board meetings etc,etc etc. I have served on two other boards and am trying to respond to all board actions by quoting bylaws that contradict their actions. Two members are starting to come around. I am considering hiring an attorney on my own. Any wisdom in this?

RogerB (Colorado)
Posts: 5,067

Posted:

"considering hiring an attorney on my own. Any wisdom in this?" Becky, IMHO not much. You could start by asking an honest attorney specializing in HOA matters if there is anything they can do which would accomplish your goals and what the potential total cost to you could be.

The developer prepares the controlling documents, within the limits provided by law, to protect their investment by controlling the development until most if not all units are sold. They control the Board and usually everything that is done by the HOA. Apathy of owners/members allows their actions to go unchallenged.

I would suggest three approaches. First, review the controlling documents to determine what actions the members can force the Board to take. For example, if you want an audit, it is sometimes required upon a vote of XX% of the members. And that vote may be allowed by a petition. If so, you can draft the petition and get owners signatures. Second, get some help - organize the owners and brainstorm actions to take as a group. There is strength and influence in numbers. The developer may listen to the requests of a large number of owners. A tool to hold in reserve until needed is: PUBLICITY. The developer will not want negative publicity while trying to sell out the development. The third approach is: ASAP get the owners to take control of the HOA.

Apathy of owners makes these actions difficult but they are achievable with perserverance.

Good Luck,
Roger

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