COMMUNITY CENTER LEASE WITH DEVELOPER

The HOA of my 55+ community plans to enter a lease with the developer on a community center which was originally to be conveyed to the HOA.
The operational expenses for this CC will be approximately $42,000 per year.
A balanced budget for 2009 was submitted to the board. The board ,in turn, made
changes to the budget to accomodate the CC expenses. Our total income is
$100,000 per year, expenses are now $116,000. As you can figure we have now a negative balance. The Board now wants to take money from the retained earnings
(approx. $85,000) to off set the $16000 or to raise dues or have a special
assessment. Dues would have to be increased from $60.00 (we also pay an additional
$37.50 to the main subdivision HOA) to $75.00 per month.
Originally, the President of the HOA stated and reiterated that the membership will have a vote to accept or reject the lease and the Board will abide by the membership's vote. Now, the membership will not have a vote on the matter. I could write a book on this lease and you would shake your head as to the insanity
of agreeing to this lease.
The 55+ community was to have 400 homes. Presently, we have 120 homes and 400 homes
is out of the question. All amenities and conveyances finances were based on the
400 homes.
If the CC is rented the developer receives 50% according to the lease. The HOA
reimbuses the developer for property taxes and the developer can utilize the facility whenever the need arises.

Any thoughts as to argue the refusal of this lease agreement? Excepting the obvious
reasons the board seems not to understand.

What can one do?

If you have a NEW building expenditure of $42,000 each year,(just for opertational costs) you'd BETTER have a plan for it at least to break even.

Does it have ANY revenue coming in? Swimming pool, bar, rentals? ANYTHING?

Since this is a HUGE undertaking for your HOA, you'd really better have a business plan in place.

If I were a homeowner, I'd vote against this. The numbers just don't add up!

Well, "renting" and "leasing" are different things.

Who is supposed to cover the estimated operational costs?

Daniel,

You wrote:

>>>The HOA of my 55+ community plans to enter a lease with the developer on a community center which was originally to be conveyed to the HOA.<<<

Could you give us more info on the "was originally" part? Somewhere in your docs?

1.....The HOA of my 55+ community plans to enter a lease with the developer on a community center which was originally to be conveyed to the HOA.

2.The operational expenses for this CC will be approximately $42,000 per year.

3. Originally, the President of the HOA stated and reiterated that the membership will have a vote to accept or reject the lease and the Board will abide by the membership's vote. Now, the membership will not have a vote on the matter.

4..... The 55+ community was to have 400 homes. Presently, we have 120 homes and 400 homes is out of the question. All amenities and conveyances finances were based on the
400 homes.

5.........If the CC is rented the developer receives 50% according to the lease. The HOA
reimbuses the developer for property taxes and the developer can utilize the facility whenever the need arises.

All of the above are reasons to reject the developers offer. Who is on your BOD, and there any holdovers from the developers Board. Is you Lawyer different and by the bye, what does he say. How about your management company? What are comparable HOA in the area paying?
Is there a written statement by the president about the turnover of the Community Center? Is there a written statement now?

Look at it this way, if your son or daughter came to you with this proposal and asked for your advice, what would you tell them. Is the CC debt free, I bet it isn't. Who owns this Community Center? I mean who REALLY owns this place and what are the finances? How does the developers finances look, is he in debt big time? Have you gone on-line and searched the court house for any legal problems this developer may have? What kind of a record does he have? If you are going to evewn think about this deal you must know the answers to most of these questions. Is this the kind of a deal you personally would commit your finances to? It may be it is a hell of a deal, I don't know, but it is still a business deal and not a chairitable contribution. It don't look good to me before and it don't look good now.

One last comment.........Go back and take a good look at all the advertizing the developer put out when you were thinking about buying. See what he has commited himself to in this material. Has he made promises he can't keep? Look close.