Feel scammed by developer & HOA

The developer of our townhome complex (small 16 units) called a meeting with homeowners and HOA requesting to turn the HOA over to the homeowners. The HOA who had been working with the developer prior to this 'forgot' to bring any financials telling us instead we could look it up online later. The developer mentioned a problem they had prior, where the incorrect lift stations were installed by the contractor but said it had been quite an ordeal, but had all been taken care of. Correct lift stations now in. Developer requested to turn HOA over to homeowners.

Since only 3 HO showed up for the meeting they are now Board of Directors. Now we find out there was emergency lift stations installed & developer never paid plumber $2,000. Developer's phones have been disconnected & mail is returned. Plumber now says he will lein each townhome. Can he do this?

HOA now says it 'just discovered' the developer owes $6000 in assessments (from the past year). Claims they didn't know this at the time of our meeting when homeowners took over.

HOA does not inforce rules. The 'one time' it did when a board member filed a complaint about a renter, they hand carried a letter to the renter telling them who filed a complaint. Which has now started a rif between neighbors. The renters in question are squatting in a foreclosed property (no HOA fees being paid), and our HOA is giving them advice on how to stay there rent free, use the pool and other facilities that we fee paying HO's pay for.

What do we need to do to replace this HOA? Do we need a majority vote? Several units are unoccupied due to recent foreclosures & 4 are owned by developer & partners. Other owners are out of state. This HOA seems to be in tight with developer.

For $2K, the plumber should take the HOA to small claims court.

Did you have a transition team or a consultant take you through the transfer. Someone really dropped the ball, since this Developer has left you in the lurch.

Do you have the money to pay him? Do that and then turn around and sue the Developer - IF you can find him.

No, we didn't have a transition team or consultant. As far as I know none of us have ever been involved in an HOA before, and didn't know we should have a transition team or consultant. This was thrown at us quickly. I think we are all still in a daze.

Thank you both for answering.

Diane - the HOA means Homeowner's Association. That IS the Board-run corporation, with the members being the homeowners.

Are you talking about a Management Company that is in tight with the Developer?

Yes. Sorry to confuse the two, but we are green to this & overwhelmed. The HOA management company seems to be in tight with the developer & partners. The person in charge of handling our small complex doesn't seem to know anything. Indicates she will inforce the R&R, but doesn't. Paid a $4K bill to put down pine straw that was not put down (Not at our complex anyway. Maybe at one of the developer's other complexes, but we paid the bill).

How do we go about getting rid of this mgt co?
Thank you...

BrianB,
Oh my gosh... the appointed BOD's didn't sign a contract with the management company. The developer was dealing with this company b4 HO's took over. (I need to read the HOA's again to establish what the quorum is to see if we had a legitimate meeting). Assuming the quorum was met; does this mean we have 'no contract' with the mgt. co. at this time?

Diane, the Management Company may have a valid contract with the HOA even if it was signed by the developer and the HOA should have a copy of it or they can request a copy from the MC. It should detail the duties of the MC and should have spelled out in it exactly how to terminate the contract. Typically most can be terminated without cause by notifying the MC in writing usually 30 to 90 days in advance. However some contracts, especially multi-year contracts require the payment of a penalty if they are terminated early or without cause, this is usually X number of months payments.

Another place to look is in your (HOA) documents to see that any Covenants concerning MC's are being carried out; ours for instance prohibits a contract with a MC longer than three years. In addition Ohio law prohibits a contract with a MC longer than 90 days after transition without the approval of a majority of homeowners in a COA.

5311.25 Required provisions for condominium instruments.
(D) Unless a contract or other agreement is renewed by a vote of the unit owners exercising a majority of the voting power of the unit owners association, neither the unit owners association nor the unit owners shall be subject to either of the following:

(1) For more than ninety days subsequent to the date that the unit owners other than the developer assume control of the unit owners association, any management contract executed prior to that assumption of control;

(2) For more than one year subsequent to an assumption of control, any other contract executed prior to that assumption of control, except for contracts for necessary utility services.

KirkW1: I find nothing in our doc's regarding how many members represents a quorum. (having someone else read to see if I missed it).

However, I have found another issue we need clarified. It does mention that there are 2 types of members. Class A members (home owners) have one vote per townhome owned, Class B (Declarant) have 3 votes per townhome. It states who the Declarant is a LLC. This LLC still owns 3 units.

As we understand it, the ‘Declarant/Developer’ consists of 3 people under this LLC. One of the 3 people purchased one unit under a different LLC. Since it was purchased under a different LLC is this member no longer a Class B member?

Thank you all for responding to these questions.

Diane,

You asked: "One of the 3 people purchased one unit under a different LLC. Since it was purchased under a different LLC is this member no longer a Class B member?"
As long as this declarant is still an owner of the LLC that controls the assn he is still a Class B member. However, the declarant is considered a Class A member for any units he purchases whether purchased while the s/d is still under declarant control or not. He is only a Class B member for the unsold units. Once the declarant (developer) has turned over the assn to the members there are no longer Class B members. While the assn is under declarant control this particular declarant would have 3 votes for each unsold unit and 1 vote for the unit he owns. After turnover he will have only 1 vote for the unit he owns.

Diane,

I want to clarify a remark I made in an earlier response "While the assn is under declarant control this particular declarant would have 3 votes for each unsold unit and 1 vote for the unit he owns." You stated the declarant is an LLC made up of 3 individuals. Each of these individuals does not get 3 votes per unsold lot, instead the LLC gets 3 votes per unsold lot. However, the one declarant who also owns a unit gets 1 vote for that unit. So if he is voting on behalf of the LLC he can cast 3 votes for each unsold lot plus 1 vote for his own lot.

1st) Yes Diane, i was refering to any penalty clauses in a contract/early termination fees for firing the company before the end of the contract terms. there may or may not be any in place, just something the board needs to know and consider (cost of continued business versus penalty for severing contract early).

2nd) Yes, the HOA can do a lot about squatters. First, they can follow their procedures for penalizing the owner for any violations of the CC&rs the renters/squatters are committing. The bank can say "but we dont... " but hold them to it. the property is theirs, they have an obligation to secure it, police it, etc.
then, you can call the police on them for trespassing in the common areas. those areas are for owners use only, and unless they can show their names on the deeds (or other legal proof), they are trespassing. If you suspect illegal activities, call the police. the Police enforce City, COunty and State/federal laws, not the HOA.

They may or may not be squatters, one thing that has been catching on around my area is companies that hire people (after an extensive background check) to move into vacant properties. The theory being that a "lived in" home will sell faster and for more money than an empty one.

I'd say it is high time to go to an attorney but only one who has experience with hoas. Being told the developer cannot be served suonds just like more baloney.

'One' of the reasons the HOA has a problem with these people is because they have trashed the common areas of our complex. Is that 'none of our business'?

Diane - I think Kirk's point was that the status of their residency is none of your business. If they are trashing your common areas, then that is what you enforce. You need to follow the same enforcement procedures regardless of if they are the owners, renters or squatters. Your first step should be to contact the owner (even if it is the bank) and let them know that the residents are causing problems. If they are illegal squatters, then it is up to the owner to have them removed.